-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KjVyLlWdbEivVgqdm9LrtiBhMWGWPyNQiHgF/8yArV22qSkvsmGncNheB9ApUA7I vZk/T0ZPHoCVL2gffItP+Q== 0000950134-96-000568.txt : 19960229 0000950134-96-000568.hdr.sgml : 19960229 ACCESSION NUMBER: 0000950134-96-000568 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 21 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960228 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BELO A H CORP CENTRAL INDEX KEY: 0000356080 STANDARD INDUSTRIAL CLASSIFICATION: NEWSPAPERS: PUBLISHING OR PUBLISHING & PRINTING [2711] IRS NUMBER: 750135890 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-08598 FILM NUMBER: 96527768 BUSINESS ADDRESS: STREET 1: 400 S RECORD ST STREET 2: COMMUNICATIONS CENTER CITY: DALLAS STATE: TX ZIP: 75202 BUSINESS PHONE: 2149776600 MAIL ADDRESS: STREET 1: P O BOX 655237 CITY: DALLAS STATE: TX ZIP: 75265 10-K 1 FORM 10-K FOR YEAR ENDING DECEMBER 31, 1995 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, 1995 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 the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO ----- ----- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of the registrant's voting stock held by nonaffiliates on January 31, 1996, based on the closing price for the registrant's Series A Common Stock on such date as reported on the New York Stock Exchange, was approximately $1,109,387,351. * Shares of Common Stock outstanding at January 31, 1996: 38,258,754 shares. (Consisting of 28,978,861 shares of Series A Common Stock and 9,279,893 shares of Series B Common Stock.) * For purposes of this calculation the market value of a share of Series B Common Stock was assumed to be the same as the share of Series A Common Stock into which it is convertible. DOCUMENTS INCORPORATED BY REFERENCE: Portions of the registrant's Proxy Statement relating to the Annual Meeting of Shareholders to be held May 8, 1996 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . 8 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters . . . . . . . . . . . 8 Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . 9 Item 8. Financial Statements and Supplementary Data (see Index to Financial Statements below) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . 15 PART III Item 10. Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . . . . 15 Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Item 12. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . . . . . 15 Item 13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . . . . . 15 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K . . . . . . . . . . . . . . 15 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 INDEX TO FINANCIAL STATEMENTS Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Consolidated Statements of Earnings for the years ended December 31, 1995, 1994 and 1993 . . . . . . . 22 Consolidated Balance Sheets as of December 31, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . 23 Consolidated Statements of Shareholders' Equity for the years ended December 31, 1995, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Consolidated Statements of Cash Flows for the years ended December 31, 1995, 1994 and 1993 . . . . . . 26 Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Management's Responsibility for Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . 37
3 PART I ITEM 1. BUSINESS A. H. Belo Corporation (the "Company" or "Belo") owns and operates seven network-affiliated VHF television stations in the top 60 U.S. television markets and the largest daily newspaper in the Dallas-Fort Worth metropolitan area. The Company's broadcast group reaches 8 percent of all U.S. television households and its principal newspaper, The Dallas Morning News, has the country's seventh largest Sunday circulation (800,147) and eighth largest daily circulation (534,197). The Company believes the success of its media franchises is built upon providing local news, information and community service of the highest caliber. These principles have attracted and built relationships with viewers, readers and advertisers and have guided the Company's success for 154 years. Three of the Company's seven stations are in the top 12 television markets: WFAA (ABC) Dallas-Fort Worth; KHOU (CBS) Houston; and KIRO (UPN) Seattle-Tacoma. These major metropolitan areas are among the fastest growing in the country. All of the Company's stations are ranked either number one or two in overall sign-on/sign-off audience delivery, with the exception of KIRO, which was acquired by the Company in 1995. The Company, through its subsidiary Belo Productions, Inc. and a partnership with Universal Press Syndicate, produces and distributes original programming to its station group and to various outside purchasers. The Dallas Morning News is one of the leading newspaper franchises in America. The Dallas Morning News' success is founded upon the highest standards of journalistic excellence, with a special emphasis on local news, information and community service. The newspaper's outstanding reporting and editorial initiatives have earned six Pulitzer Prizes since 1986. As the leading newspaper in the Dallas-Fort Worth market, The Dallas Morning News' success is measured by its high circulation and volume of advertising. In late 1995 and early 1996, the Company expanded its publishing division by acquiring two daily newspapers serving Bryan-College Station, Texas and Owensboro, Kentucky. The Company also publishes nine other community newspapers in the Dallas-Fort Worth suburban area and operates a commercial printing business. Note 13 to the Consolidated Financial Statements contains information about the Company's industry segments for the years ended December 31, 1995, 1994 and 1993. TELEVISION BROADCASTING The Company's television broadcast operations began in 1950 with the acquisition of WFAA in Dallas-Fort Worth shortly after the station commenced operations. In 1984, the Company significantly expanded its television broadcast operations with the purchase of its four stations in Houston, Sacramento, Hampton-Norfolk and Tulsa. In June 1994 and February 1995, the Company acquired its stations in New Orleans and Seattle, respectively. 1 4 The following table sets forth information for each of the Company's stations and their markets:
NUMBER OF STATION COMMERCIAL STATION AUDIENCE MARKET YEAR NETWORK STATIONS IN RANK IN SHARE IN MARKET RANK(1) STATION ACQUIRED AFFILIATION CHANNEL MARKET(2) MARKET(3) MARKET(4) ------ ------- ------- -------- ----------- ------- --------- --------- --------- Dallas-Fort Worth 8 WFAA 1950 ABC 8 13 1 20% Houston . . . . . 11 KHOU 1984 CBS 11 13 1* 16% Seattle-Tacoma . 12 KIRO 1995 UPN 7 8 4* 8% Sacramento . . . 21 KXTV 1984 ABC 10 9 2 14% Hampton-Norfolk . 40 WVEC 1984 ABC 13 7 1* 18% New Orleans . . . 41 WWL 1994 CBS 4 7 1 28% Tulsa . . . . . . 59 KOTV 1984 CBS 6 7 2 19%
- --------------- * Tied with one or more other stations in the market. (1) Market rank is based on the relative size of the television market or Designated Market Area ("DMA") among the 211 generally recognized DMAs in the United States, based on November 1995 Nielsen estimates. (2) Represents the number of television stations (both VHF and UHF) broadcasting in the market, excluding public stations and national cable channels. (3) Station rank is derived from the station's rating which is based on November 1995 Nielsen estimates of the number of television households tuned to the Company's station for the Sunday-Saturday, 7:00 a.m. to 1:00 a.m. period ("sign-on/sign-off") as a percentage of the number of television households in the market. (4) Station audience share is based on November 1995 Nielsen estimates of the number of television households tuned to the Company's station as a percentage of the number of television households with sets in use in the market for the sign-on/sign-off period. 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. Commercial television stations generally fall into one of three categories. The first category of stations historically consisted of stations affiliated with one of the three major national networks (ABC, CBS and NBC). In recent years, Fox has effectively evolved into the fourth major network. The second category is comprised of stations affiliated with newer national networks, such as United Paramount Network ("UPN") and the WB (Warner Brothers) Television Network. The third category includes independent stations that are not affiliated with any network and that rely principally on local and syndicated programming. Three of the Company's stations are affiliated with ABC, three are affiliated with CBS and one is affiliated with UPN. Each of the Company's network affiliation agreements provides the affiliated station with the right to broadcast all programs transmitted by the network with which the station is affiliated. In return, the network has the right to sell most of the advertising time during such broadcasts. Each station receives a specified amount of network compensation for broadcasting network programming, with the exception of the Company's UPN affiliate. To the extent a station's preemptions of network programming exceed a designated amount, such compensation may be reduced. Such payments are also subject to decreases by the network during the term of an affiliation agreement under other circumstances with provisions for advance notice and right of termination by the station in the event of a reduction in such payments. The Company has renegotiated its affiliation agreements with both CBS and ABC, resulting in an increase in the compensation paid by each network to the Company in return for a long-term extension of each of the agreements. Final documentation of the new ABC affiliation agreements has not been completed although the Company is receiving its increased compensation under the new agreements. 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 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. 2 5 NEWSPAPER PUBLISHING The Company's principal newspaper, The Dallas Morning News, was established in 1885. It is published seven days a week. In 1963, the Company acquired its suburban newspaper operation. In late 1991, after years of intense competition, The Dallas Morning News' principal newspaper competitor, the Dallas Times Herald, ceased operations and the Company purchased its assets. In late 1995 and early 1996, the Company expanded its publishing division by acquiring two daily newspapers serving Bryan-College Station, Texas and Owensboro, Kentucky. The following table sets forth information concerning the Company's daily newspaper operations:
CIRCULATION(1) -------------- NEWSPAPER LOCATION DAILY SUNDAY --------- -------- ----- ------ The Dallas Morning News . . . . . . . . . . Dallas, TX 534,197 800,147 Bryan-College Station Eagle . . . . . . . . Bryan-College Station, TX 20,381 26,326 Owensboro Messenger-Inquirer . . . . . . . Owensboro, KY 32,363 33,398
- --------------- (1) Average paid circulation for the six months ended September 30, 1995, according to the unaudited Publisher's Statement of the Audit Bureau of Circulations, an independent agency (the "Audit Bureau"). The Dallas Morning News provides coverage of local, state, national and international news. The Dallas Morning News is distributed throughout the Southwest, though its circulation is concentrated primarily in the twelve counties surrounding Dallas. 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, 1995 was 534,197 daily, up 1.8 percent from the 1994 average daily circulation of 524,567. Sunday's average paid circulation was 800,147, up slightly from the six months ended September 30, 1994 average of 797,206. The basic material used in publishing The Dallas Morning News is newsprint. The average unit cost of newsprint consumed during 1995 was sharply higher than that of the prior year due to market-wide price increases throughout the year. The Company expects the full-year effect of the 1995 newsprint price increases to result in even higher newsprint expense in 1996. The Company cannot predict at this time whether newsprint prices will increase further in 1996. At present, newsprint is purchased from nine suppliers. During 1995, the Company's three largest providers of newsprint supplied approximately one-half of the newspaper's requirements, but the Company is not dependent on any one of them. Management believes its sources of newsprint, along with alternate sources that are available, are adequate for its current needs. DFW Suburban Newspapers, Inc. publishes six paid and two free newspapers for suburban communities in the Dallas-Fort Worth metropolitan area. These publications are delivered either one or two days a week. Each of the Company's community publications has its own sales, circulation, news and editorial personnel, and several of the publications maintain separate offices. All administrative functions 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, is the site of the Company's commercial printing operations. The Company also publishes a newspaper twice-a-week and a free weekly in Rockwall, Texas. COMPETITION The success of broadcast operations depends on a number of factors, including the general strength of the economy, the ability to provide attractive programming, audience ratings, relative cost efficiency in reaching audiences as compared to other advertising media, technical capabilities and governmental regulations and policies. The Company's television broadcast stations compete for advertising revenues directly with other media such as newspapers (including those owned and operated by the Company), other television stations, radio stations, cable 3 6 television systems, outdoor advertising, magazines and direct mail advertising. The four major national television networks are represented in each television market in which the Company has a television broadcast station. Competition for advertising sales and local viewers within each market is intense, particularly among the network-affiliated television stations. The entry of local telephone companies into the market for video programming services, as permitted under the Telecommunications Act of 1996, (the "1996 Act"), can be expected to have a significant impact on competition in the television industry. The Company is unable to predict the effect that these or other technological and related regulatory changes will have on the broadcast television industry or the future results of the Company's operations. The Dallas Morning News 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 other newspapers owned and operated by the Company). Also competing with The Dallas Morning News is the Fort Worth Star-Telegram, owned by The Walt Disney Company. REGULATION OF TELEVISION BROADCASTING The Company's television broadcasting operations are subject to the jurisdiction of the Federal Communications Commission ("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, foreign governments or their representatives, or by corporations formed under the laws of foreign countries. The Act previously would have prohibited the Company's subsidiaries from continuing as broadcast licensees if any officer or more than one-fourth of the directors of the Company were aliens. The 1996 Act, however, eliminated the restriction on alien officers and directors. Prior to the passage of the 1996 Act, television broadcast licenses were granted for a period of five years. Renewal applications were granted without a hearing if there were no competing applications or issues raised by petitioners to deny such applications that would cause the FCC to order a hearing. If competing applications were filed, a full comparative hearing was required. Under the 1996 Act, the statutory restriction on the length of a broadcast term was amended to allow the FCC to grant broadcast licenses for terms of up to eight years. The 1996 Act also requires renewal of a broadcast license if the FCC finds that (1) the station has served the public interest, convenience, and necessity; (2) there have been no serious violations of either the Act or the FCC's rules and regulations by the licensee; and (3) there have been no other serious violations which taken together constitute a pattern of abuse. In making its determination, the FCC cannot consider whether the public interest would be better served by a person other than the renewal applicant. Under the 1996 Act competing applications for the same frequency may be accepted only after the Commission has denied an incumbent's application for renewal of license. An application for renewal of the broadcast license for WFAA, which expired August 1, 1993, is pending before the FCC. The station's license is, by statute, continued pending action thereon. The current license expiration dates for each of the Company's other television broadcast stations are as follows: KHOU, August 1, 1998; KIRO, February 1, 1999; KXTV, December 1, 1998; WVEC, October 1, 1996; WWL, June 1, 1997; and KOTV, June 1, 1998. FCC ownership 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 interest or 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 4 7 stations and daily newspapers serving the same area and (c) television broadcast stations and cable systems serving the same area. The 1996 Act eliminated a statutory prohibition against common ownership of television broadcast stations and cable systems serving the same area, but left the FCC rule in place. The 1996 Act also stipulates that the FCC should not consider the repeal of the statutory ban in any review of its applicable rules. The Company's ownership of The Dallas Morning News and WFAA, which are both located in the Dallas-Fort Worth area and serve the same market area, predates 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. The FCC ownership 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 generally 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 FCC rules in a television station, except that the FCC's rules and policies (as modified in the 1996 Act) provide that waivers of these restrictions would be available to permit the Company's acquisition of radio stations in any of the markets in which the Company currently owns television stations (other than Tulsa) or of "satellite" television stations located within a parent station's grade B service contour which rebroadcast all or most of the parent station's programming. The FCC has instituted proceedings looking toward possible relaxation of certain of its rules regulating television station ownership and changes in the standards used to determine what type of interests are considered to be attributable under its rules. In addition, the 1996 Act directs the FCC to (a) eliminate the restrictions on the number of television stations (nationwide) that a person or entity may directly or indirectly own, operate or control or have a cognizable interest in and raise the limitation on the aggregate audience reach of commonly owned stations from 25 percent to 35 percent of the total national audience, and (b) conduct a rule making proceeding to determine whether to modify its limitations on the number of television stations that one entity may own or have an interest in within the same television market. 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 eliminated its former rules which restricted network participation in program production and syndication. The FCC also recently eliminated the prime time access rule ("PTAR"), effective August 30, 1996. The PTAR currently limits the ability of some stations within the fifty largest television markets to broadcast network programming (including syndicated programming previously broadcast over a network) during prime time hours. The elimination of PTAR could increase the amount of network programming broadcast over a station affiliated with ABC, NBC or CBS. The U.S. Supreme Court refused to review a lower court decision that upheld FCC action invalidating most aspects of the Fairness Doctrine, which had required broadcasters to present contrasting views on controversial issues of public importance. The FCC may, however, continue to regulate other aspects of fairness obligations in connection with certain types of broadcasts. The 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 Commission is currently considering proposals for stricter children's programming requirements. Most significant among the FCC's suggested new rules is a requirement that broadcasters provide a specific hourly minimum amount of children's programming on a regular basis. Although the FCC has not yet proposed an explicit quantitative requirement, it has called for comment on various examples, such as a three to five hour-per-week minimum obligation. The FCC also 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. Moreover, the 1992 Cable Act was amended in certain important respects by the 1996 Act. Most notably, the 1996 Act repeals the cross-ownership ban between cable and telephone entities and 5 8 the FCC's current video dial tone rules. These provisions, among others, foreshadow significant future involvement in the provision of video services by telephone companies. The FCC recently proposed the adoption of rules for implementing digital advanced television ("ATV") service in the United States. Implementation of digital ATV would improve the technical quality of television signals receivable by viewers and give television broadcasters the flexibility to provide new services, including high-definition television ("HDTV") simultaneously with multiple programs of standard definition television ("SDTV") and data transmission. Within the next few months, the FCC is expected to release two additional proposals that address, respectively, the ATV broadcasting standard and an ATV channel allotment and assignment plan. As currently proposed, each existing broadcaster would be loaned, for a finite transition period, a second channel on which to transmit ATV signals simultaneously with the current analog television broadcast. At the end of the transition, analog TV transmissions would cease and the ATV channels might be reassigned to a smaller segment of the broadcasting spectrum, and the vacated spectrum would be reallocated and auctioned for use by other radio services. Recent debates in Congress, however, call into question whether the transition to ATV will proceed as planned. Several senators favor giving the FCC the authority -- or even requiring the Commission -- to auction the second channels. Such authority or direction could be contained in budget legislation or a stand-alone spectrum law. 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. 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. 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. EMPLOYEES As of December 31, 1995, the Company had 3,489 full-time employees. An additional 173 employees were added on January 1, 1996 following the Owensboro acquisition. Of the total workforce of 3,662, Belo has 234 employees, located principally at its Dallas, Texas; Seattle, Washington; and New Orleans, Louisiana television stations, that are represented by various employee unions. The Company believes its relations with all of its employees are good. 6 9 ITEM 2. PROPERTIES The studios and offices of WFAA occupy Company-owned facilities in downtown Dallas. The station's transmitting tower and antennas, which are located in Cedar Hill, Texas, are jointly owned by the Company and the owner and operator of the Fox television affiliate in Dallas. KHOU operates from Company-owned facilities located in Houston. The station's transmitter and tower are located near DeWalt, Texas. KIRO operates from Company-owned facilities located in Seattle, Washington. This property also includes a production facility and other office space. The station's transmitting facility and tower are also located in Seattle. KXTV operates from Company-owned facilities located in Sacramento, California. The station's tower and transmitter building, which are located in Sacramento County, California, are owned by a joint venture between the Company and the owner and operator of the CBS television affiliate in West Sacramento. KXTV leases the transmitter site from the joint venture. WVEC operates from Company-owned facilities in Hampton and Norfolk, Virginia. The transmitting facility in Driver, Virginia includes a tower and antenna. WVEC also leases additional building space adjacent to the Company-owned facilities that is used by the marketing and business departments. WWL operates from Company-owned facilities in New Orleans, Louisiana. The transmitting facility and tower are located in Gretna, Louisiana. WWL also leases space in New Orleans, which is used as an additional broadcast studio. KOTV operates from Company-owned facilities located in Tulsa, Oklahoma. The station's transmitting system is located near Tulsa. The transmitter site and tower are owned by a joint venture between the Company and the owner and operator of the NBC television affiliate in Tulsa. 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. 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. The Bryan-College Station Eagle operates from Company-owned facilities in Bryan, Texas and the Owensboro Messenger-Inquirer's Company-owned facilities are in Owenbsoro, Kentucky. 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 Company also owns a small facility in Rockwall, Texas. The Company's corporate operations, several departments of The Dallas Morning News and certain broadcast administrative functions have offices that are located in downtown Dallas in a portion of a 17-story office building owned by the Company. All of the foregoing operations utilize additional leasehold interests in their respective activities. The Company believes its properties are in good condition and well maintained, and that such properties are adequate for present operations. 7 10 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 would not have a material adverse effect on the consolidated results of 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 shareholders, through the solicitation of proxies or otherwise, during the fourth quarter of the fiscal year covered by this Form 10-K. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's authorized common equity consists of 150,000,000 shares of Common Stock, par value $1.67 per share. The Company has two series of Common Stock outstanding, Series A and Series B. Shares of the two series 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). There is no established public trading market for shares of Series B Common Stock. The Company has also issued certain Preferred Stock Purchase Rights that accompany the outstanding shares of the Company's Common Stock. On February 28, 1996, the Company's Board of Directors authorized the amendment and restatement of the Company's preferred share purchase rights plan which was originally adopted in 1986 and was scheduled to expire in March 1996. See Note 8 to the Consolidated Financial Statements. On June 9, 1995, the Company completed a two-for-one stock split in the form of a stock dividend whereby one additional share of Series A and Series B Common Stock was issued for each share of Series A and Series B Common Stock outstanding on May 19, 1995, the record date for the split. The effect of the stock split was to double the number of shares outstanding and reduce per share amounts by one-half. Total shareholders' equity and the proportionate ownership in the Company of individual shareholders was not affected by the stock split. All earnings and dividends per share, weighted average shares outstanding and share trading prices in this report have been restated to reflect the stock split. The following table lists the high and low trading prices and the closing prices for Series A Common Stock as reported by the New York Stock Exchange for the last two years.
------------------------------------------------------------------------------------- CASH DIVIDENDS HIGH LOW CLOSE DECLARED ------------------------------------------------------------------------------------- 1995 Fourth Quarter $36 3/4 $32 1/2 $34 3/4 $.08 Third Quarter $36 3/4 $29 $34 3/8 $.08 Second Quarter $32 5/8 $28 3/16 $30 5/8 $.08 First Quarter $30 1/4 $27 13/16 $29 $.075 ------------------------------------------------------------------------------------- 1994 Fourth Quarter $28 5/8 $23 3/4 $28 1/4 $.075 Third Quarter $26 1/8 $21 11/16 $25 3/8 $.075 Second Quarter $25 3/16 $21 9/16 $21 9/16 $.075 First Quarter $27 1/2 $23 7/8 $24 $.075 -------------------------------------------------------------------------------------
Effective for the second quarter of 1996, the Company will increase its quarterly dividend to $.11 per share. 8 11 On January 31, 1996, the closing price for the Company's Series A Common Stock, as reported on the New York Stock Exchange, was $35 3/4. The approximate number of shareholders of record of the Series A and Series B Common Stock at the close of business on such date was 684 and 549, respectively. ITEM 6. SELECTED FINANCIAL DATA The following table presents selected financial data of the Company for each of the five years in the period ending December 31, 1995. For a more complete understanding of this selected financial data, please see Management's Discussion and Analysis of Financial Condition and Results of Operations and the Consolidated Financial Statements, including the Notes thereto.
- ------------------------------------------------------------------------------------------------------------- In thousands, except per share amounts 1995 1994 1993 1992 1991 - ------------------------------------------------------------------------------------------------------------- Broadcasting revenues (A) $ 322,642 $ 258,040 $ 209,083 $ 201,241 $ 181,848 Newspaper publishing revenues (B) 409,099 369,366 335,651 314,701 249,737 Other (C) 3,602 719 101 - - - ------------------------------------------------------------------------------------------------------------- Net operating revenues $ 735,343 $ 628,125 $ 544,835 $ 515,942 $ 431,585 ============================================================= Net earnings (D) $ 66,576 $ 68,867 $ 51,077 $ 37,170 $ 12,392 ============================================================= Per share amounts (E): Net earnings per common and common equivalent share $ 1.68 $ 1.70 $ 1.26 $ .95 $ .32 Cash dividends declared $ .315 $ .30 $ .28 $ .27 $ .26 - ------------------------------------------------------------------------------------------------------------- Total assets $1,154,022 $ 913,791 $ 796,156 $ 758,527 $ 746,384 Long-term debt $ 557,400 $ 330,400 $ 277,400 $ 302,151 $ 337,100 - -------------------------------------------------------------------------------------------------------------
(A) Broadcasting revenues for 1995 include 11 months of KIRO, which was purchased by the Company on February 1, 1995. Broadcasting revenues for 1994 include seven months of WWL, which was purchased by the Company on June 1, 1994. (B) In December 1991, the Company purchased substantially all of the operating assets of the Dallas Times Herald newspaper. (C) Other includes revenues associated with the Company's television production subsidiary and programming distribution partnership. The Company sold its interest in the partnership in February 1996. (D) Net earnings for 1993 include an increase of $6,599,000 (16 cents per share) representing the cumulative effect of adopting Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," effective January 1, 1993. (E) Per share amounts have been adjusted to reflect the two-for-one common stock split effected as a stock dividend on June 9, 1995. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Company is an owner and operator of seven network-affiliated television stations and an established newspaper publisher. The Company's television broadcast operations began in 1950 with the acquisition of WFAA in Dallas. In 1984, the Company expanded its broadcast operations through the acquisition of four television stations in Houston, Sacramento, Hampton-Norfolk and Tulsa. In June 1994 and February 1995, the Company acquired television stations in New Orleans and Seattle, respectively. The Company's principal newspaper is The Dallas Morning News. In December 1995, the Company purchased a daily newspaper in Bryan-College Station, Texas. Comparability of year-to-year results and financial condition are affected by these acquisitions. In the first quarter of 1996, the Company acquired a daily newspaper in Owensboro, Kentucky and sold its interest in its programming distribution partnership, Maxam Entertainment. The Company depends on advertising as its principal source of revenues. As a result, the Company's operations are sensitive to changes in the economy, particularly in the Dallas-Fort Worth metropolitan area. The Company also derives revenues, to a much lesser extent, from the circulation revenue of its newspaper operations and from compensation paid by the networks to its television stations for broadcasting network programming. 9 12 CONSOLIDATED RESULTS OF OPERATIONS 1995 Compared to 1994 The Company recorded 1995 net earnings of $66,576,000 or $1.68 per share, compared to $68,867,000 or $1.70 per share in 1994. Results for 1995 include a non-recurring charge for early retirement costs of $1,254,000 (2 cents per share) and a non-recurring gain of $2,406,000 ($1,564,000 after tax, or 4 cents per share) on the sale of the Company's remaining investment in Stauffer Communications, Inc. ("Stauffer") stock. Excluding these non-recurring items, 1995 adjusted net earnings were $1.66 per share. Net earnings for 1994 included the reversal of $631,000 of accrued music license fees (1 cent per share) and a net after-tax charge of $1,567,000 (4 cents per share) for the donation of Stauffer stock to a charitable foundation. The donation of Stauffer stock included a $9,271,000 gain on the write-up of the shares to fair market value, less a charge of $16,675,000 for the subsequent donation of the shares, and a related income tax benefit of $5,837,000. Excluding these non-recurring items, adjusted 1994 net earnings were $1.73 per share. Interest expense in 1995 was $29,987,000 compared to $16,112,000 in 1994. A significant portion of this increase resulted from the increase in average interest rates in 1995 to approximately 6.3 percent from 4.8 percent in 1994. Additionally, higher debt levels as a result of the two recent broadcast acquisitions (KIRO in Seattle, Washington in February 1995 for $162,500,000 and WWL in New Orleans, Louisiana in June 1994 for $110,000,000) contributed to the increase in 1995 interest expense. Other, net for 1995 included the gain on the sale of the Company's remaining investment in Stauffer stock while 1994 included the charge for the donation of Stauffer shares to a charitable foundation. The effective tax rate for 1995 of 40 percent is higher than the 1994 effective tax rate of 36.2 percent due to the tax benefit associated with the Stauffer stock donation in 1994. 1994 Compared to 1993 The Company recorded 1994 net earnings of $68,867,000 or $1.70 per share, compared to $51,077,000 or $1.26 per share in 1993. Results for 1993 included a $6,599,000 increase (16 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 the Company recorded a $2,249,000 (6 cents per share) adjustment to deferred taxes following an increase in the federal income tax rate. Earnings in 1993 also included a $5,822,000 (9 cents per share) non-recurring restructuring charge related primarily to the write-off of goodwill and a reduction in the carrying value of production assets associated with the Company's suburban newspaper operations. The Company also recorded a reversal of accrued music license fees in 1993 of $3,349,000 (5 cents per share). Excluding these items, adjusted net earnings for 1993 were $1.20 per share. Interest expense in 1994 was $16,112,000 compared to $15,015,000 in 1993. The increase from 1993 to 1994 was due primarily to higher debt levels associated with the purchase of the New Orleans station, offset by savings from lower interest rates. Average interest rates on total debt were 4.8 percent and 5.4 percent in 1994 and 1993, respectively. Other, net for 1994 included the net charge for the Stauffer transaction while 1993 included a gain on the sale of two parcels of non-operating real estate. The effective tax rate for 1994, including the tax benefit from the Stauffer stock donation, was 36.2 percent. The 1993 effective rate of 41.1 percent included the increase in deferred tax expense associated with the increase in the federal income tax rate, partially offset by the reversal of certain tax accruals due to other aspects of the tax legislation. Excluding these unusual items, the comparable effective tax rates for 1994 and 1993 were 38.9 percent and 39.5 percent, respectively. BROADCASTING 1995 Compared to 1994 Broadcast revenues in 1995, which include 11 months of revenue for the Seattle station, were $322,642,000. These revenue totals represent an increase of 25 percent (3.3 percent on a same-station basis) over 1994 revenues of $258,040,000, which included seven months of revenue for the New Orleans station. The Company's television broadcast subsidiaries contributed 43.9 percent of total 1995 revenues compared to 41.1 percent in 1994. Revenues in all broadcast advertising categories, with the exception of political advertising, were higher during 1995 compared to 1994, both as reported and on a same-station basis. Political advertising revenues in 1994 were 10 13 strong due to several active gubernatorial and senate races, while 1995 political activity was relatively slow. Local advertising revenues increased by 28.5 percent overall (6.8 percent on a same-station basis), primarily due to increases at the Dallas, Hampton-Norfolk and New Orleans stations. The Company's Sacramento station, which changed its network affiliation during 1995 and experienced a sizable shift from local to national advertising, showed a slight decline in local advertising revenues. Automobile advertising was a significant factor in the stations' local market gains. National advertising revenues increased in 1995 over 1994 as well, primarily during the first half of the year. However, the majority of the 20.6 percent increase in national advertising in 1995 was due to the addition of the Seattle station in February and a full-year effect of the New Orleans station. On a same-station basis, national revenues were up 2.1 percent year-to-year. The most significant increases in national advertising occurred at the Sacramento and Hampton-Norfolk stations, although all other Company stations demonstrated a slight increase in national advertising revenues as well. Network compensation payments increased in 1995 following the renegotiation of the Company's network affiliation contracts in the latter part of 1994. Broadcast earnings from operations were $83,921,000 in 1995 compared to $81,319,000 in 1994, an increase of 3.2 percent (2.7 percent on a same-station basis). Broadcast earnings from operations in 1995 included 11 months of the Seattle station's operations while 1994 results included seven months of the New Orleans station's operations. Operating margins in 1995 and 1994 were 26 percent and 31.5 percent, respectively. On a same-station basis, margins in 1995 and 1994 were 32.1 percent and 32.3 percent, respectively. Higher 1995 operating costs and lower margins were due in part to significant increases in news and programming costs as the Seattle station began developing a new format when its affiliation changed from CBS to UPN. Salaries, wages and employee benefits increased 35.7 percent over 1994 due to the addition of the Seattle station and the full-year effect of the New Orleans station. On a same-station basis, these costs increased 4.7 percent due to merit increases and more employees. Other production, distribution and operating costs for 1995 increased only marginally over 1994 on a same-station basis. Depreciation and amortization expenses increased in 1995 due to the broadcast acquisitions in mid-1994 and early 1995. 1994 Compared to 1993 Broadcast revenues in 1994, which included seven months of revenue for the New Orleans station were $258,040,000, an increase of 23.4 percent over 1993 revenues of $209,083,000. The Company's television broadcast subsidiaries contributed 41.1 percent of total 1994 revenues compared to 38.4 percent in 1993. Each station contributed to the increase in revenues during 1994 with improvement in every revenue category. Local advertising revenues, which improved 25.5 percent overall (12.7 percent on a same-station basis), were up most significantly at the Dallas, Houston and Tulsa stations. Automobile advertising was a significant factor in each of the stations' local market gains in 1994. National revenues benefited from the broadcast of the 1994 Winter Olympics on the Company's CBS-affiliated stations, but were offset somewhat by revenue losses associated with the baseball strike and the move of NFL Football from CBS to the Fox network. Political revenues were up considerably in 1994 due to active gubernatorial and senate races in several states. Network compensation increases from the renegotiation of the Company's network affiliation agreements began in the third quarter of 1994. Broadcast earnings from operations were $81,319,000 in 1994 compared to $63,317,000 in 1993. Broadcast earnings from operations in 1994 included seven months of the New Orleans station's operations. Also included in broadcast earnings from operations in 1994 and 1993 were increases in earnings of $631,000 and $3,349,000, respectively, for the reversal of certain music license fee accruals from previous years. Excluding the music license fee adjustments, broadcast earnings from operations for 1994 and 1993 were $80,688,000 and $59,968,000, respectively. The increase was due to revenue improvements, partially offset by higher operating costs. Salaries, wages and employee benefits were higher in 1994 due to increases in sales commissions, more employees, merit increases, higher performance-based bonuses and an increase in benefit costs. Other production, distribution and operating costs were higher in 1994 than in 1993 (excluding the music license fee adjustments) due primarily to increased contract rates for several syndicated program packages and costs to produce a new local morning show and weekly news show at the Dallas station. Advertising and promotion costs, as well as repair and maintenance expenses, were also higher in 1994. These increases were slightly offset by lower bad debt and outside services expense. Depreciation and amortization expenses increased as a result of the acquisition of the New Orleans station. 11 14 NEWSPAPER PUBLISHING 1995 Compared to 1994 In 1995, newspaper publishing revenues represented 55.6 percent of total revenues, compared to 58.8 percent in 1994. Although publishing revenues increased 10.8 percent in 1995 from 1994, they decreased as a percent of total revenues due to broadcast acquisitions. Advertising revenues account for approximately 88 percent of publishing revenues, while circulation revenues represent approximately 10 percent. Other publishing revenues, primarily commercial printing, contribute the remainder. Newspaper advertising volume for The Dallas Morning News, the Company's principal newspaper, is measured in column inches. Volume for the last three years was as follows:
Years Ended December 31, ------------------------------------------------------------------------ In thousands 1995 1994 1993 ------------------------------------------------------------------------ Full-run ROP inches (1): Classified 2,125 2,189 2,069 Retail 1,429 1,524 1,661 General 254 271 262 ------------------------------------------------------------------------ Total 3,808 3,984 3,992 ------------------------------------------------------------------------
(1) Full-run ROP inches refers to the number of column inches of display and classified advertising that is printed and distributed in all editions of the newspaper. Revenues from newspaper publishing in 1995 were $409,099,000, an increase of 10.8 percent over 1994 revenues of $369,366,000. Due to dramatically higher newsprint prices in 1995, a series of advertising rate increases were put into effect during the year at The Dallas Morning News. These rate increases resulted in higher revenues in the three major advertising categories despite the volume declines that resulted from the higher rates. Classified advertising linage was down 2.9 percent from 1994 while revenues were up 18.6 percent. Retail advertising revenues increased 4.2 percent due to higher rates, while volumes were lower by 6.2 percent. General advertising revenues improved 7.9 percent, although auto and bank advertising volumes decreased significantly, contributing to the overall 6.3 percent decline in linage. Preprint revenues increased 9.3 percent in 1995 from 1994 due to increased activity from electronics retailers. The Dallas Morning News' circulation revenues increased 8.8 percent over 1994 due to an increase in daily single copy prices and the full-year effect of 1994 increases in home delivery and Sunday single copy prices. Circulation volume increased slightly in 1995 over 1994. Despite significant increases in newsprint prices, newspaper publishing earnings from operations for 1995 were $69,999,000, up 5.2 percent over 1994 earnings of $66,568,000. Operating margins were 17.1 percent in 1995 compared to 18 percent in 1994. Revenue increases were partially offset by total operating costs that were 12 percent higher than 1994. Newsprint, ink and other supplies expense in 1995 increased 29.2 percent over last year. Driving this increase were market-wide newsprint price increases. The average cost per ton in 1995 at The Dallas Morning News increased 44.2 percent over 1994. A reduction in tons used during 1995 helped offset the effect of these price increases to some extent. Reductions in newsprint usage came as a result of better waste control, fewer news columns, lower ad linage and promotional space and the elimination of a marginally profitable Sunday magazine. All other cost categories for the newspaper publishing segment increased only slightly due to efforts to control costs to offset the effect of the newsprint price increases. The Company expects 1996 newsprint, ink and other supplies expense to increase over 1995, due to the full-year effect of the 1995 newsprint price increases. The Company anticipates that the higher expense will be offset by advertising rate increases implemented in the second half of 1995 and at the beginning of 1996. The Company cannot predict at this time the effect of proposed newsprint price increases for 1996. 1994 Compared to 1993 Revenues from newspaper publishing in 1994 were $369,366,000, an increase of 10 percent over 1993 revenues of $335,651,000. Classified and general advertising revenues at The Dallas Morning News contributed the majority of the increase in year-to-year revenue gains. Linage in these two categories increased 5.8 percent and 3.3 percent, 12 15 respectively, which, combined with rate increases, resulted in an increase in classified and general advertising revenues of $27,580,000. Strong demand for employment advertising and a strong automotive market accounted for the improvement in classified linage. The telecommunications industry was a significant component of the general advertising increase. Retail ROP revenues for 1994 decreased slightly when compared to 1993 due to volume declines of 8.3 percent, offset by a rate increase. The retail volume declines were primarily attributable to a shift by certain department stores to preprints, revenues from which increased 15.6 percent over 1993. Circulation revenues in 1994 were up 2.1 percent from 1993 despite a slight decrease in the Sunday average circulation due to price increases in April and July. Newspaper publishing earnings from operations in 1994 were $66,568,000 compared to $44,293,000 in 1993. Earnings from operations in 1993 included the $5,822,000 restructuring charge related to the Company's suburban newspaper operations. Excluding this one-time charge, comparable 1993 earnings from operations were $50,115,000. The 32.8 percent increase in 1994 from adjusted 1993 earnings from operations was due to the revenue increase, partially offset by a 6 percent increase in operating expenses. Salaries, wages and employee benefits increased in 1994 due to more employees, merit increases, higher performance-based bonuses and an increase in related benefit costs. Other production, distribution and operating costs were also higher due to increased distribution and outside solicitation expenses associated with circulation efforts and higher advertising and promotion expense. Rack conversion costs to accommodate a Sunday single copy price increase also contributed to higher 1994 expense. Depreciation expense increased due to a full year's depreciation of The Dallas Morning News' North Plant expansion project that was completed in late 1993. Newsprint expense was only slightly higher in 1994 compared to 1993. The increase was primarily due to slightly higher consumption, which was offset somewhat by lower average prices. LIQUIDITY AND CAPITAL RESOURCES Net cash provided by operations is the Company's primary source of liquidity. During 1995, net cash provided by operations was $96,601,000, compared to $138,785,000 in 1994. The decrease was due primarily to changes in working capital. One of the most significant working capital changes was in the value of on-hand inventory at the end of 1995, due to both higher newsprint tonnage in inventory and substantially higher prices. The timing of accounts payable and income tax payments also contributed significantly to the decrease in 1995 net cash provided by operations. Net cash provided by operations was sufficient to fund capital expenditures, common stock dividends and a portion of current year stock repurchases. On February 1, 1995, the Company acquired KIRO in Seattle, Washington. The purchase price was $162,500,000 in cash, plus transaction costs. KIRO was purchased using funds from the Company's revolving credit agreement described below. On December 26, 1995, the Company again used the revolving credit agreement to complete the acquisition of the Bryan-College Station Eagle. On January 1, 1996, the Company acquired the Owensboro Messenger-Inquirer by issuing notes payable to the seller. These notes are due in various installments over the next four years. At December 31, 1995, the Company had access to an $800,000,000 variable rate revolving credit agreement, on which borrowings at that time were $480,000,000. The agreement expires and the debt thereunder matures on July 28, 2000 with an extension to July 28, 2001 at the request of the Company and with the consent of the participating banks. From time to time, short-term unsecured notes are also used as a source of financing. Based on the Company's intent and ability to renew short-term notes through the revolving credit facility, short-term borrowings are classified as long-term. At December 31, 1995, $71,000,000 in short-term notes were outstanding. Total debt outstanding increased by $227,000,000 from December 31, 1994, primarily due to acquisitions and share repurchases. Because substantially all of the Company's outstanding debt is currently at floating interest rates, the Company is subject to interest rate volatility. Weighted average interest rates at the end of 1995 were approximately 6.1 percent. During 1995, the Company spent $63,400,000 to repurchase treasury stock at an average price of $31.28 per share. The Company has in place a stock repurchase program authorizing the purchase of up to $2,500,000 of Company stock annually, and the Company has authority to purchase an additional 3,591,200 shares under another Board authorization. 13 16 At December 31, 1995, the Company's ratio of long-term debt to total capitalization was 58.9 percent, compared to 46.3 percent at the end of 1994. The change during 1995 was due to additional borrowings to finance acquisitions and the effect on debt and shareholders' equity of the share repurchases. Capital expenditures in 1995 were $40,830,000. Capital projects included additional production equipment and major building renovations at The Dallas Morning News, the completion of a building and studio remodeling project at the Company's Houston station and the purchase of broadcast equipment for other stations. The Company expects to finance future capital expenditures using cash generated from operations and, when necessary, borrowings under the revolving credit agreement. Total capital expenditures in 1996 are expected to be approximately $45,000,000 and relate primarily to additional newspaper publishing equipment, the renovation of certain operating facilities and the purchase of certain broadcast equipment. As of December 31, 1995, required future payments for capital expenditures in 1996 were $7,881,000. The Company paid dividends of $12,279,000 or 31 1/2 cents per share on Series A and Series B Common Stock outstanding during 1995 compared to $11,984,000 or 30 cents per share in 1994. The Company expects to pay higher dividends in 1996 due to an increase in the quarterly dividend rate beginning in the second quarter of 1996 and an increase in shares outstanding upon consummation of an equity offering discussed below. The Company believes its current financial condition and credit relationships are adequate to fund current obligations and near-term growth. The Company has filed a registration statement relating to a public offering of 5,000,000 shares of Series A Common Stock. It is expected that the net proceeds from the offering will be used to repay existing debt to provide liquidity for general corporate purposes, including possible future acquisitions. OTHER MATTERS In early 1996, Congress passed the Telecommunications Act of 1996 (the "1996 Act"), the most comprehensive overhaul of the country's telecommunications laws in more than 60 years. The Company cannot predict the effect on its business of the 1996 Act or of proposed or possible future legislation, regulations and policies. During the debate prior to the passage of the 1996 Act, Congress considered whether to grant the FCC authority to auction the second channels necessary for the implementation of digital advanced television. The 1996 Act did not grant the FCC such authority, but such authority could be contained in future budget legislation or in a stand-alone spectrum law. See "Regulation of Television Broadcasting". NEW ACCOUNTING STANDARD In March 1995, the Financial Accounting Standards Board issued SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of". This Statement established accounting standards for the impairment of long-lived assets, certain identifiable intangibles and goodwill related to those assets to be held and used and for long-lived assets and certain identifiable intangibles to be disposed of. SFAS No. 121 will be effective beginning in 1996. Management does not anticipate that the adoption of SFAS No. 121 will have any effect on the consolidated financial position of the Company. 14 17 INFLATION The net effect of inflation on the Company's revenues and earnings from operations has not been material in the last few years. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The Consolidated Financial Statements, together with the report of independent auditors, are included elsewhere in this document. Financial statement schedules have been omitted because the required information is contained in the Consolidated Financial Statements or related notes, or because 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, Certain Executive Officers 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 8, 1996, 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 8, 1996, 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, Certain Executive Officers and Principal Shareholders" contained in the definitive Proxy Statement for the Company's Annual Meeting of Shareholders to be held on May 8, 1996, 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 8, 1996, 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 included in the Table of Contents are filed as part of this report. (2) The financial schedules required by Regulation S-X are either not applicable or are included in the information provided in the Notes to Consolidated Financial Statements, which are filed as part of this report. 15 18 (3) Exhibits Exhibits marked with an asterisk (*) are incorporated by reference to documents previously filed by A.H. Belo Corporation with the Securities and Exchange Commission, as indicated. Exhibits marked with a tilde (~) are management contracts or compensatory plan contracts or arrangements filed pursuant to Item 601 (b)(10)(iii)(A) of Regulation S-K. All other documents are filed with this report.
EXHIBIT NUMBER DESCRIPTION ------- ----------- 3.1 * Certificate of Incorporation of the Company (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 (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 (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 (Exhibit 3.4 to the 1992 Form 10-K) 3.5 Certificate of Amendment of Certificate of Incorporation of the Company dated May 3, 1995 3.6 * Amended Certificate of Designation of Series A Junior Participating Preferred Stock of the Company dated May 4, 1988 (Exhibit 3.5 to the 1992 Form 10-K) 3.7 * Certificate of Designation of Series B Common Stock of the Company dated May 4, 1988 (Exhibit 3.6 to the 1992 Form 10-K) 3.8 * Bylaws of the Company, effective February 22, 1995 (Exhibit 3.7 to the Company's Annual Report on Form 10-K dated March 8, 1995 (the "1994 Form 10-K")) 4.1 Certain rights of the holders of the Company's Common Stock are set forth in Exhibits 3.1-3.8 above 4.2 * Specimen Form of Certificate representing shares of the Company's Series A Common Stock (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 (Exhibit 4.3 to the Company's Annual Report on Form 10-K dated March 20, 1989) 4.4 Form of Rights Agreement as Amended and Restated, as of February 28, 1996 between the Company and Chemical Mellon Shareholder Services, L.L.C., a New York banking corporation 10.1 Contracts relating to television broadcasting: (1) Form of Agreement for Affiliation between WFAA-TV in Dallas, Texas and ABC (2) Form of Agreement for Affiliation between KXTV in Sacramento, California and ABC (3) Contract for Affiliation between KHOU-TV in Houston, Texas and CBS (4) Contract for Affiliation between WWL-TV in New Orleans, Louisiana and CBS
16 19
EXHIBIT NUMBER DESCRIPTION ------- ----------- 10.2 Financing agreements: * (1) Loan Agreement dated October 1, 1985, between City of Arlington Industrial Development Corporation and Dallas-Fort Worth Suburban Newspapers, Inc. (Exhibit 10.5(2) to the 1991 Form 10-K) * (2) 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 (Exhibit 10.5(3) to the 1991 Form 10-K) * (3) Credit Agreement dated as of August 5, 1994 among the Company and Citicorp Securities, Inc., as Syndication Agent, The First National Bank of Chicago, as Administrative Agent, Texas Commerce Bank National Association, as Documentation Agent and The Banks Listed Therein, as Lenders (Exhibit 10.4(1) to the Second Quarter 1994 Form 10-Q) * (4) First Amendment to Credit Agreement dated as of July 28, 1995 (Exhibit 10.4(1) to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1995) * (5) Amendment and Waiver Agreement dated as of August 5, 1994, by and between the Company and The Sanwa Bank, Limited, Dallas Agency (Exhibit 10.4(4) to the 1994 Form 10-K) 10.3 Compensatory plans: *~(1) Management Security Plan (Exhibit 10.4(1) to the 1991 Form 10-K) *~(2) 1986 Long-Term Incentive Plan (Exhibit 10.4(7) to the 1991 Form 10-K) *~(3) Amendment No. 1 to 1986 Long-Term Incentive Plan (Exhibit 10.4(8) to the 1991 Form 10-K) *~(4) Amendment No. 2 to 1986 Long-Term Incentive Plan (Exhibit 10.3(9) to the 1992 Form 10-K) *~(5) Amendment No. 3 to 1986 Long-Term Incentive Plan (Exhibit 10.3(10) to the 1993 Form 10-K) *~(6) Amendment No. 4 to 1986 Long-Term Incentive Plan (Exhibit 10.3(11) to the 1993 Form 10-K) *~(7) Amendment No. 5 to 1986 Long-Term Incentive Plan (Exhibit 10.3(12) to the 1993 Form 10-K) *~(8) Amendment No. 6 to 1986 Long-Term Incentive Plan (Exhibit 10.3(13) to the 1992 Form 10-K) ~(9) Amendment No. 7 to 1986 Long-Term Incentive Plan ~(10) The A. H. Belo Corporation Employee Savings and Investment Plan Amended and Restated February 2, 1996 ~(11) The G. B. Dealey Retirement Pension Plan (as Amended and Restated Generally Effective January 1, 1989) *~(12) Master Trust Agreement, effective as of July 1, 1992, between A. H. Belo Corporation and Mellon Bank, N. A. (Exhibit 10.3(26) to the 1993 Form 10-K)
17 20
EXHIBIT NUMBER DESCRIPTION ------- ----------- *~(13) A. H. Belo Corporation Supplemental Executive Retirement Plan (Exhibit 10.3(27) to the 1993 Form 10-K) *~(14) Trust Agreement dated February 28, 1994, between the Company and Mellon Bank, N. A. (Exhibit 10.3(28) to the 1993 Form 10-K) ~(15) Summary of A. H. Belo Corporation Executive Compensation Plan ~(16) A. H. Belo Corporation 1995 Executive Compensation Plan ~(17) A. H. Belo Corporation Employee Thrift Plan, effective January 1, 1995 ~(18) First Amendment to A.H. Belo Corporation Employee Thrift Plan ~(19) Second Amendment to A. H. Belo Corporation Employee Thrift Plan ~(20) Master Defined Contribution Trust Agreement by and between A. H. Belo Corporation and Mellon Bank, N.A. ~(21) First Amendment to Master Defined Contribution Trust Agreement ~(22) Second Amendment to Master Defined Contribution Trust Agreement 21 Subsidiaries of the Company 23 Consent of Ernst & Young LLP 27 Financial Data Schedule (filed electronically with the Securities and Exchange Commission)
(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 Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. A. H. BELO CORPORATION By: /s/ Robert W. Decherd ----------------------------------- Robert W. Decherd Chairman of the Board, President & Chief Executive Officer Dated: February 28, 1996 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 February 28, 1996 - ---------------------------------- & Chief Executive Officer Robert W. Decherd /s/ Ward L. Huey, Jr. Vice Chairman of the February 28, 1996 - ---------------------------------- Board and President, Ward L. Huey, Jr. Broadcast Division /s/ Burl Osborne Director, President, Publishing February 28, 1996 - ---------------------------------- Division and Publisher and Editor, Burl Osborne The Dallas Morning News /s/ John W. Bassett, Jr Director February 28, 1996 - ---------------------------------- John W. Bassett, Jr. /s/ Judith L. Craven, M.D., M.P.H. Director February 28, 1996 - ---------------------------------- Judith L. Craven, M.D., M.P.H. /s/ Roger A. Enrico Director February 28, 1996 - ---------------------------------- Roger A. Enrico /s/ Dealey D. Herndon Director February 28, 1996 - ---------------------------------- Dealey D. Herndon /s/ Lester A. Levy Director February 28, 1996 - ---------------------------------- Lester A. Levy /s/ Arturo Madrid, Ph.D. Director February 28, 1996 - ---------------------------------- Arturo Madrid, Ph.D.
19 22
SIGNATURE TITLE DATE --------- ----- ---- /s/ James M. Moroney, Jr. Director and Former February 28, 1996 - ---------------------------------- Chairman of the Board James M. Moroney, Jr. /s/ Hugh G. Robinson Director February 28, 1996 - ---------------------------------- Hugh G. Robinson /s/ William T. Solomon Director February 28, 1996 - ---------------------------------- William T. Solomon /s/ Thomas B. Walker, Jr. Director February 28, 1996 - ---------------------------------- Thomas B. Walker, Jr. /s/ J. McDonald Williams Director February 28, 1996 - ---------------------------------- J. McDonald Williams /s/ Michael D. Perry Senior Vice President and February 28, 1996 - ---------------------------------- Chief Financial Officer Michael D. Perry /s/ Dunia A. Shive Vice President/Finance February 28, 1996 - ---------------------------------- 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, 1995 and 1994, and the related consolidated statements of earnings, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with 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, 1995 and 1994, and the consolidated results of their operations and cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. As discussed in Note 4 to the consolidated financial statements, effective January 1, 1993, the Company changed its method of accounting for income taxes. /S/ERNST & YOUNG LLP Dallas, Texas January 24, 1996 21 24 CONSOLIDATED STATEMENTS OF EARNINGS A. H. BELO CORPORATION AND SUBSIDIARIES
Years ended December 31, ============================================================================================================ In thousands, except per share amounts 1995 1994 1993 - ------------------------------------------------------------------------------------------------------------ NET OPERATING REVENUES Broadcasting (Note 2) $322,642 $ 258,040 $209,083 Newspaper publishing 409,099 369,366 335,651 Other 3,602 719 101 - ------------------------------------------------------------------------------------------------------------ Total net operating revenues 735,343 628,125 544,835 - ------------------------------------------------------------------------------------------------------------ OPERATING COSTS AND EXPENSES Salaries, wages and employee benefits (Notes 5 and 6) 204,833 178,264 161,170 Other production, distribution and operating costs (Note 7) 196,506 166,187 145,310 Newsprint, ink and other supplies 137,994 106,270 105,395 Depreciation 42,270 32,854 25,281 Amortization 17,177 13,551 12,383 Restructuring charge (Note 9) - - 5,822 - ------------------------------------------------------------------------------------------------------------ Total operating costs and expenses 598,780 497,126 455,361 - ------------------------------------------------------------------------------------------------------------ Earnings from operations 136,563 130,999 89,474 - ------------------------------------------------------------------------------------------------------------ OTHER INCOME AND EXPENSE Interest expense (Note 3) (29,987) (16,112) (15,015) Other, net (Note 10) 4,438 (6,990) 1,119 - ------------------------------------------------------------------------------------------------------------ Total other income and expense (25,549) (23,102) (13,896) - ------------------------------------------------------------------------------------------------------------ EARNINGS Earnings before income taxes and cumulative effect of change in accounting 111,014 107,897 75,578 Income taxes (Note 4) 44,438 39,030 31,100 - ------------------------------------------------------------------------------------------------------------ Earnings before cumulative effect of change in accounting 66,576 68,867 44,478 Cumulative effect of change in accounting for income taxes (Note 4) - - 6,599 - ------------------------------------------------------------------------------------------------------------ Net earnings $ 66,576 $ 68,867 $ 51,077 ====================================== EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE Earnings before cumulative effect of change in accounting $ 1.68 $ 1.70 $ 1.10 Cumulative effect of change in accounting $ - $ - $ .16 Net earnings $ 1.68 $ 1.70 $ 1.26 ====================================== Weighted average common and common equivalent shares outstanding 39,646 40,446 40,408 ======================================
See accompanying Notes to Consolidated Financial Statements. 22 25 CONSOLIDATED BALANCE SHEETS A. H. BELO CORPORATION AND SUBSIDIARIES
ASSETS December 31, - ------------------------------------------------------------------------------------------------------------- In thousands 1995 1994 - ------------------------------------------------------------------------------------------------------------- Current assets: Cash and temporary cash investments $ 12,846 $ 9,294 Accounts receivable (net of allowance of $4,164 and $3,959 in 1995 and 1994, respectively) 120,541 99,825 Inventories 20,336 9,439 Deferred income taxes (Note 4) 5,223 7,641 Other current assets 6,360 4,138 - ------------------------------------------------------------------------------------------------------------- Total current assets 165,306 130,337 - ------------------------------------------------------------------------------------------------------------- Property, plant and equipment, at cost: Land 26,708 19,803 Buildings 155,877 126,632 Broadcast equipment 159,909 118,816 Newspaper publishing equipment 210,362 188,006 Other 51,156 40,369 Advance payments on plant and equipment expenditures (Note 7) 6,479 28,352 - ------------------------------------------------------------------------------------------------------------- Total property, plant and equipment 610,491 521,978 Less accumulated depreciation 248,650 209,824 - ------------------------------------------------------------------------------------------------------------- Property, plant and equipment, net 361,841 312,154 - ------------------------------------------------------------------------------------------------------------- Intangible assets, net (Note 2) 571,060 422,217 Other assets, at cost (Note 5) 55,815 49,083 - ------------------------------------------------------------------------------------------------------------- Total assets $1,154,022 $913,791 - -------------------------------------------------------------------------------------------------------------
23 26 CONSOLIDATED BALANCE SHEETS (CONTINUED) A. H. BELO CORPORATION AND SUBSIDIARIES
LIABILITIES AND SHAREHOLDERS' EQUITY December 31, - ---------------------------------------------------------------------------------------------------------------- In thousands, except share data 1995 1994 - ---------------------------------------------------------------------------------------------------------------- Current liabilities: Accounts payable $ 28,569 $ 27,308 Accrued compensation and benefits 24,773 26,170 Advance subscription payments 9,392 7,935 Other accrued expenses 7,483 5,203 Income taxes payable (Note 4) 4,836 10,074 Property taxes payable 4,214 3,909 Accrued interest payable 2,401 3,138 - ---------------------------------------------------------------------------------------------------------------- Total current liabilities 81,668 83,737 - ---------------------------------------------------------------------------------------------------------------- Long-term debt (Note 3) 557,400 330,400 Deferred income taxes (Note 4) 114,729 110,324 Other liabilities 11,761 6,795 Commitments and contingent liabilities (Note 7) Shareholders' equity (Notes 6 and 8): 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 28,961,753 and 14,238,888 shares at December 31, 1995 and 1994, respectively; 48,366 23,779 Series B: Issued 9,280,179 and 5,621,988 shares at December 31, 1995 and 1994, respectively. 15,498 9,389 Additional paid-in capital 97,930 124,431 Retained earnings 230,203 230,959 - ---------------------------------------------------------------------------------------------------------------- Total 391,997 388,558 Less deferred compensation -- restricted shares 3,533 6,023 - ---------------------------------------------------------------------------------------------------------------- Total shareholders' equity 388,464 382,535 - ---------------------------------------------------------------------------------------------------------------- Total liabilities and shareholders' equity $1,154,022 $913,791 - ----------------------------------------------------------------------------------------------------------------
See accompanying Notes to Consolidated Financial Statements. 24 27 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY A. H. BELO CORPORATION AND SUBSIDIARIES
- -------------------------------------------------------------------------------------------------------------- In thousands, except share and per share amounts Three years ended December 31, 1995 - -------------------------------------------------------------------------------------------------------------- COMMON STOCK Additional Shares Shares Paid-in Retained Series A Series B Amount Capital Earnings - -------------------------------------------------------------------------------------------------------------- BALANCE AT DECEMBER 31, 1992 13,433,969 6,157,489 $32,718 $94,005 $161,297 Exercise of stock options 505,295 87,326 990 16,252 Restricted shares awarded 37,192 62 1,830 Change in restricted share valuation 746 Amortization of restricted shares Forfeiture of restricted shares (10,990) (18) (450) Tax benefit from long-term incentive plan 4,068 Net earnings 51,077 Cash dividends declared ($.28 per share) (11,128) Conversion of Series B to Series A 501,716 (501,716) - -------------------------------------------------------------------------------------------------------------- BALANCE AT DECEMBER 31, 1993 14,467,182 5,743,099 $33,752 $116,451 $201,246 Exercise of stock options 234,545 12,500 412 7,240 Restricted shares awarded 48,360 81 2,576 Change in restricted share valuation 188 Amortization of restricted shares Forfeiture of restricted shares (810) (1) (25) Tax benefit from long-term incentive plan 1,828 Purchase of treasury stock Retirement of treasury stock (644,000) (1,076) (3,827) (27,170) Net earnings 68,867 Cash dividends declared ($.30 per share) (11,984) Conversion of Series B to Series A 133,611 (133,611) - -------------------------------------------------------------------------------------------------------------- BALANCE AT DECEMBER 31, 1994 14,238,888 5,621,988 $33,168 $124,431 $230,959 Exercise of stock options 405,448 18,590 708 8,674 Amortization of restricted shares Forfeiture of restricted shares (27,905) (48) (917) Change in restricted share valuation 698 Tax benefit from long-term incentive plan 3,427 Two-for-one stock split 15,137,977 4,709,794 33,146 (32,618) Purchase of treasury stock Retirement of treasury stock (1,862,848) (3,110) (5,765) (55,053) Net earnings 66,576 Cash dividends declared ($.315 per share) (12,279) Conversion of Series B to Series A 1,070,193 (1,070,193) - -------------------------------------------------------------------------------------------------------------- BALANCE AT DECEMBER 31, 1995 28,961,753 9,280,179 $63,864 $97,930 $230,203 - -------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- In thousands, except share and per share amounts Three years ended December 31, 1995 - ----------------------------------------------------------------------------------------------- TREASURY STOCK Deferred Compensation- Shares Restricted Series A Amount Shares Total - ----------------------------------------------------------------------------------------------- BALANCE AT DECEMBER 31, 1992 - $ - $(6,778) $281,242 Exercise of stock options 17,242 Restricted shares awarded (1,892) - Change in restricted share valuation (746) - Amortization of restricted shares 3,781 3,781 Forfeiture of restricted shares 285 (183) Tax benefit from long-term incentive plan 4,068 Net earnings 51,077 Cash dividends declared ($.28 per share) (11,128) Conversion of Series B to Series A - - ----------------------------------------------------------------------------------------------- BALANCE AT DECEMBER 31, 1993 - $ - $(5,350) $346,099 Exercise of stock options 7,652 Restricted shares awarded (2,657) - Change in restricted share valuation (188) - Amortization of restricted shares 2,166 2,166 Forfeiture of restricted shares 6 (20) Tax benefit from long-term incentive plan 1,828 Purchase of treasury stock (644,000) (32,073) (32,073) Retirement of treasury stock 644,000 32,073 - Net earnings 68,867 Cash dividends declared ($.30 per share) (11,984) Conversion of Series B to Series A - - ----------------------------------------------------------------------------------------------- BALANCE AT DECEMBER 31, 1994 - $ - $(6,023) $382,535 Exercise of stock options 9,382 Amortization of restricted shares 2,718 2,718 Forfeiture of restricted shares 470 (495) Change in restricted share valuation (698) - Tax benefit from long-term incentive plan 3,427 Two-for-one stock split (316,000) (528) - Purchase of treasury stock (1,546,848) (63,400) (63,400) Retirement of treasury stock 1,862,848 63,928 - Net earnings 66,576 Cash dividends declared ($.315 per share) (12,279) Conversion of Series B to Series A - - ----------------------------------------------------------------------------------------------- BALANCE AT DECEMBER 31, 1995 - $ - $(3,533) $388,464 - -----------------------------------------------------------------------------------------------
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 1995 1994 1993 - -------------------------------------------------------------------------------------------------------------- OPERATIONS Net earnings $66,576 $68,867 $ 51,077 Adjustments to reconcile net earnings to net cash provided by operations: Depreciation and amortization 59,447 46,405 37,664 Deferred income taxes 6,823 1,428 10,969 Non-cash adjustments and allowances 205 1,842 209 Cumulative effect of change in accounting (Note 4) - - (6,599) Restructuring charge (Note 9) - - 5,822 Other, net (4,012) 1,549 1,262 Net change in current assets and liabilities: Accounts receivable (19,732) (20,067) (5,211) Inventories and other current assets (12,918) 8,234 (6,685) Accounts payable 1,270 10,187 (1,338) Accrued compensation and benefits (2,043) 5,554 2,466 Other accrued liabilities 3,533 (2,815) (5,518) Income taxes payable (1,811) 16,682 4,362 Accrued interest payable (737) 919 (3,662) - -------------------------------------------------------------------------------------------------------------- Net cash provided by operations 96,601 138,785 84,818 - -------------------------------------------------------------------------------------------------------------- INVESTMENTS Capital expenditures (40,830) (47,371) (62,130) Acquisitions (Note 2) (217,428) (110,058) - Asset dispositions 4,506 2,400 2,458 - -------------------------------------------------------------------------------------------------------------- Net cash used for investments (253,752) (155,029) (59,672) - -------------------------------------------------------------------------------------------------------------- FINANCING Borrowings for acquisitions 216,934 110,000 - Net proceeds from (payments on) debt 10,066 (57,000) 175,000 Repayment of long-term notes - - (200,000) Payments of dividends on stock (12,279) (11,984) (11,128) Net proceeds from exercise of stock options 9,382 7,652 17,242 Purchase of treasury stock (63,400) (32,073) - - -------------------------------------------------------------------------------------------------------------- Net cash provided by (used for) financing 160,703 16,595 (18,886) - -------------------------------------------------------------------------------------------------------------- Net increase in cash and temporary cash investments 3,552 351 6,260 - -------------------------------------------------------------------------------------------------------------- Cash and temporary cash investments at beginning of year 9,294 8,943 2,683 Cash and temporary cash investments at end of year $12,846 $ 9,294 $8,943 - -------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DISCLOSURES (Note 11) - --------------------------------------------------------------------------------------------------------------
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) Statements 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 classified as available for sale and carried at fair value. C) Accounts Receivable Accounts receivable are net of a valuation reserve that represents an estimation of amounts considered uncollectible. Expense for such uncollectible amounts, which is included in other production, distribution and operating costs, was $5,888,000, $4,506,000 and $4,617,000 in 1995, 1994 and 1993, respectively. Accounts written off during these years were $5,683,000, $4,231,000 and $4,408,000, respectively. D) Inventories Inventories, consisting primarily of newsprint, ink and other supplies used in printing newspapers, are stated at the lower of average cost or market value. E) Property, Plant and Equipment Depreciation of property, plant and equipment is provided principally on a straight-line basis over the estimated useful lives of the assets as follows:
------------------------------------------------------------ ESTIMATED USEFUL LIVES ------------------------------------------------------------ Buildings and improvements 5-20 years Newspaper publishing equipment 5-20 years Broadcast equipment 7-15 years Other 3-10 years ------------------------------------------------------------
F) Intangible Assets, Net Intangible assets, net consists of excess cost over values assigned to tangible assets of purchased subsidiaries and is amortized primarily on a straight-line basis over 40 years. At December 31, 1995 and 1994, approximately $27,683,000 and $18,949,000, respectively, of intangible assets, net is attributable to subscriber lists associated with certain newspaper transactions. These assets are carried at their appraised values and are amortized on a straight-line basis over estimated useful lives of 18 years. The carrying value of intangible assets is periodically reviewed to determine whether impairment exists. In 1993, the Company determined that excess cost associated with its suburban newspaper operations was not recoverable. (See Note 9). Accumulated amortization of intangible assets was $143,503,000 and $126,326,000 at December 31, 1995 and 1994, respectively. G) Stock options Stock options granted to employees are accounted for using the intrinsic value of the options granted. Because it is the Company's policy to grant stock options at market price on the date of the grant, the intrinsic value is zero and therefore, no compensation expense is recorded. H) 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. Earnings per share and certain other share amounts have been restated to reflect a two-for-one stock split. (See Note 8). 27 30 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A. H. BELO CORPORATION AND SUBSIDIARIES I) Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. NOTE 2: ACQUISITIONS - -------------------------------------------------------------------------------- On June 1, 1994, Belo acquired the assets of television station WWL-TV, the CBS affiliate in New Orleans, Louisiana, for $110,000,000 in cash plus transaction costs. On February 1, 1995, Belo acquired television station KIRO-TV in Seattle, Washington. The purchase price was $162,500,000 in cash plus transaction costs. These acquisitions have been accounted for as purchases. The costs of the acquisitions have been allocated on the basis of the estimated fair market value of the assets acquired. These allocations resulted in intangibles of $81,673,000 for WWL-TV and $122,753,000 for KIRO-TV. These amounts are being amortized on a straight-line basis over 40 years. The pro forma financial results of operations below assume the transactions were financed with the revolving credit facility at the average rates paid in each of these periods, and include certain other purchase price adjustments regarding depreciation, amortization and income taxes. The pro forma financial results further assume the transactions were completed at the beginning of January 1994:
----------------------------------------------------------------------------- In thousands, except per share amounts 1995 1994 ----------------------------------------------------------------------------- Net operating revenues $ 738,338 $ 689,023 Net earnings $ 65,812 $ 68,453 Net earnings per common and common equivalent share $ 1.66 $ 1.69 -----------------------------------------------------------------------------
A change of .125 percent in revolving debt rates would affect the pro forma net earnings by $215,000. The pro forma financial information is provided for informational purposes only and is not necessarily representative of the operating results that would have occurred had the acquisitions been completed as of the indicated date, nor are they indicative of future operating results. On December 26, 1995, Belo completed the acquisition of the Bryan-College Station Eagle, a daily newspaper serving Bryan-College Station, Texas. The acquisition, which was financed with the revolving credit facility, has been accounted for as a purchase. The pro forma financial information above does not include the operations of this acquisition due to immateriality. NOTE 3: LONG TERM DEBT - -------------------------------------------------------------------------------- Long-term debt consists of the following:
-------------------------------------------------------------------------------- In thousands 1995 1994 -------------------------------------------------------------------------------- Revolving credit agreement $480,000 $305,000 Short-term unsecured notes classified as long-term debt 71,000 19,000 Industrial Revenue Bonds 6,400 6,400 -------------------------------------------------------------------------------- Total $557,400 $330,400 --------------------------------------------------------------------------------
At the end of 1995, the Company had a revolving credit facility for $800,000,000. Borrowings of revolving debt were $480,000,000 and $305,000,000 at December 31, 1995 and 1994, respectively. Loans under the revolving credit agreement bear interest at a rate based, at the option of the Company, on the bank's alternate base rate, LIBOR or competitive bid. The rate obtained through competitive bid is either a Eurodollar rate or a rate agreed to by the Company and the bank. At December 31, 1995, the weighted average borrowing rate was 6.1 percent. The agreement also provides for a facility fee of .125 percent on the total commitment. Borrowings 28 31 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A. H. BELO CORPORATION AND SUBSIDIARIES under the agreement mature upon expiration of the agreement on July 28, 2000, with an extension to July 28, 2001, at the request of the Company and with the consent of the participating banks. 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, 1995. During 1995, the Company used various short-term unsecured notes as an additional source of financing. For the years ended December 31, 1995 and 1994, the average interest rate on this debt was slightly lower than the revolving debt rate. 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, $71,000,000 and $19,000,000 of short-term notes outstanding at December 31, 1995 and 1994, respectively, have been classified as long-term. In 1995, 1994 and 1993, the Company incurred interest costs of $30,944,000, $16,250,000 and $16,976,000, respectively, of which $957,000, $138,000 and $1,961,000, respectively, were capitalized as components of construction cost. Average interest rates on total debt were approximately 6.3 percent, 4.8 percent and 5.4 percent during 1995, 1994 and 1993, respectively. At December 31, 1995, the Company had outstanding letters of credit of $7,708,000 issued in the ordinary course of business. 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 4: 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 were not restated to reflect the change. The cumulative effect of adopting SFAS No. 109 as of January 1, 1993 increased 1993 net earnings by $6,599,000 or 16 cents per share. Income tax expense for the years ended December 31, 1995, 1994 and 1993 consists of the following:
--------------------------------------------------------------------------------------------- In thousands 1995 1994 1993 --------------------------------------------------------------------------------------------- Current Federal $ 32,094 $32,548 $17,385 State 5,521 5,054 2,746 --------------------------------------------------------------------------------------------- Total current 37,615 37,602 20,131 Deferred 6,823 1,428 10,969 --------------------------------------------------------------------------------------------- Total $ 44,438 $39,030 $31,100 --------------------------------------------------------------------------------------------- Effective tax rate 40.0% 36.2% 41.1% ---------------------------------------------------------------------------------------------
29 32 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A. H. BELO CORPORATION AND SUBSIDIARIES Income tax provisions for the years ended December 31, 1995, 1994 and 1993 differ from amounts computed by applying the applicable U.S. federal income tax rate as follows:
-------------------------------------------------------------------------------------------- In thousands 1995 1994 1993 -------------------------------------------------------------------------------------------- Computed expected income tax expense $ 38,855 $37,764 $26,452 Amortization of excess cost 2,235 2,235 2,235 State income taxes 3,692 3,494 2,601 Stock donation (Note 10) - (3,245) - Effect of 1% rate increase on deferred taxes - - 2,249 Reduction for change in law regarding amortization of acquired intangible asset - - (1,000) Other (344) (1,218) (1,437) -------------------------------------------------------------------------------------------- $ 44,438 $39,030 $31,100 --------------------------------------------------------------------------------------------
Significant components of the Company's deferred tax liabilities and assets as of December 31, 1995 and 1994, are as follows:
------------------------------------------------------------------------------------ In thousands 1995 1994 ------------------------------------------------------------------------------------ Deferred tax liabilities: Excess tax depreciation and amortization $ 105,035 $ 103,621 Deferred gain on sale of assets 4,294 4,751 Loss on investment 10,867 7,730 Expenses deductible for tax purposes in a year different from the year accrued 6,211 5,053 Other 463 464 ------------------------------------------------------------------------------------ Total deferred tax liabilities $ 126,870 $ 121,619 ------------------------------------------------------------------------------------ Deferred tax assets: State taxes $ 4,620 $ 4,541 Deferred compensation 5,126 4,490 Expenses deductible for tax purposes in a year different from the year accrued 3,200 5,887 Other 4,418 4,018 ------------------------------------------------------------------------------------ Total deferred tax assets $ 17,364 $ 18,936 ------------------------------------------------------------------------------------ Net deferred tax liability $ 109,506 $ 102,683 ------------------------------------------------------------------------------------
NOTE 5: 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 consecutive 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. 30 33 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A. H. BELO CORPORATION AND SUBSIDIARIES 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, 1995 and 1994:
------------------------------------------------------------------------------------ In thousands 1995 1994 ------------------------------------------------------------------------------------ Actuarial present value of benefit obligation: Vested benefit obligation $ (82,119) $ (64,476) Accumulated benefit obligation $ (84,597) $ (66,378) Projected benefit obligation for service rendered to date $ (107,817) $( 86,462) Plan assets at fair value, invested primarily in equity securities 95,291 75,709 ------------------------------------------------------------------------------------ Plan assets less than projected benefit obligation (12,526) (10,753) Unrecognized net loss 34,350 30,285 Unrecognized net transition asset being recognized over 12.3 years (2,837) (4,069) Unrecognized prior service cost (2,866) (2,241) ------------------------------------------------------------------------------------ Prepaid pension cost $ 16,121 $ 13,222 ------------------------------------------------------------------------------------
The net periodic pension cost (benefit) for the years ended December 31, 1995, 1994 and 1993 includes the following components:
--------------------------------------------------------------------------------------------- In thousands 1995 1994 1993 --------------------------------------------------------------------------------------------- Service cost - benefits earned during the period $ 3,697 $3,666 $ 2,284 Interest cost on projected benefit obligation 7,331 6,461 5,782 Actual return on plan assets (17,035) (604) (9,294) Net amortization and deferral 9,498 (6,563) 1,784 --------------------------------------------------------------------------------------------- Net periodic pension cost $ 3,491 $2,960 $ 556 ---------------------------------------------------------------------------------------------
Assumptions used in the accounting for the defined benefit plan are as follows:
--------------------------------------------------------------------------------------------- 1995 1994 1993 --------------------------------------------------------------------------------------------- Discount rate in determining benefit obligation 7.25% 8.50% 7.50% Discount rate in determining net periodic pension cost 8.50% 7.50% 9.00% Expected long-term rate of return on assets 10.25% 10.25% 10.25% Rate of increase in future compensation 5.50% 6.00% 5.00% ---------------------------------------------------------------------------------------------
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 $3,170,000, $2,568,000 and $1,825,000 in 1995, 1994 and 1993, respectively. The Company also sponsors non-qualified retirement plans for key employees. Expense for the plans recognized in 1995, 1994 and 1993 was $1,089,000, $1,232,000 and $1,412,000, respectively. 31 34 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A. H. BELO CORPORATION AND SUBSIDIARIES NOTE 6: LONG TERM INCENTIVE PLANS - -------------------------------------------------------------------------------- The Company has long-term incentive plans under which awards may be granted to employees in the form of incentive stock options, non-qualified stock options, restricted shares or performance units, the values of which are based on 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. Cash-based bonus awards are also available under one of the plans. The plans also provide for grants of non-qualified stock options to non-employee directors. Stock-based activity in the long-term incentive plans is summarized in the following table:
LONG TERM INCENTIVE PLANS ============================================================================================================= NON-QUALIFIED STOCK OPTIONS RESTRICTED SHARES OPTION SHARES SHARES PRICE SHARES PRICE SERIES A SERIES B PER SHARE SERIES A PER SHARE - ------------------------------------------------------------------------------------------------------------- Outstanding at Jan. 1, 1993 1,618,517 145,436 $20-40 291,815 $29-42 Granted 317,955 - 40-49 37,192 49-53 Exercised (505,295) (87,326) 20-40 - - Vested - - - (106,225) 29-53 Canceled (61,285) - 29-40 (10,990) 29-49 - ------------------------------------------------------------------------------------------------------------- Outstanding at Dec. 31, 1993 1,369,892 58,110 $22-49 211,792 $29-53 Granted 322,795 - 50-53 48,360 53-57 Exercised (234,545) (12,500) 22-49 - - Vested - - - (46,971) 30-57 Canceled (7,002) - 29-49 (810) 29-43 - ------------------------------------------------------------------------------------------------------------- Outstanding at Dec. 31, 1994 1,451,140 45,610 $24-53 212,371 $29-57 Two-for-one stock split 1,310,337 41,570 12-30 211,891 15-31 Granted 474,300 225,000 30-35 - - Exercised (405,448) (18,590) 12-27 - - Vested - - - (117,261) 15-35 Canceled (26,142) - 15-27 (27,905) 15-35 - ------------------------------------------------------------------------------------------------------------- Outstanding at Dec. 31, 1995 2,804,187 293,590 $12-35 279,096 $15-35 - -------------------------------------------------------------------------------------------------------------
The non-qualified options granted to employees under the Company's long-term incentive plans become exercisable in cumulative installments over a period of three years. On December 31, 1995, of the 3,097,777 options outstanding, 1,827,884 were exercisable at prices ranging from $12 to $27. Shares of Common Stock reserved for grants under the plans were 3,849,727 and 250,531 at December 31, 1995 and 1994 respectively. A provision for the restricted shares is made ratably over the restriction period. Expense recognized under the plans for restricted shares was $2,223,000, $2,146,000 and $3,598,000 in 1995, 1994 and 1993, respectively. NOTE 7: 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 would not have a material adverse effect on the consolidated financial position or results of operations of the Company. Commitments for the purchase of broadcast film contract rights totaled approximately $131,383,000 at December 31, 1995 for broadcasts scheduled through August 2000. Advance payments on plant and equipment expenditures at December 31, 1995 primarily relate to newspaper production equipment, broadcast equipment and building renovations and improvements. Required future payments for capital expenditures for 1996 and 1997 are $7,881,000 and $2,275,000, respectively. 32 35 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A. H. BELO CORPORATION AND SUBSIDIARIES Total lease expense for property and equipment was $3,435,000, $3,131,000 and $5,447,000 in 1995, 1994 and 1993, respectively. Lease expense was lower in 1994 following the Company's 1993 purchase of the building in which it had been leasing office space. Future minimum rental payments for operating leases are not material. NOTE 8: 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 1/100 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. At such time, each holder of a right (other than the acquiring person or group) will have the right to purchase common stock of the Company with a value equal to two times the exercise price of the right, which is initially $150 (subject to adjustment). In addition, if the Company is acquired in a merger or business combination, each right can be used to purchase the common stock of the surviving company having a market value of twice the exercise price of each right. Once a person or group has acquired 30 percent of the common stock but before 50 percent of the voting power of the common stock has been acquired, the Company may exchange each right (other than those held by the acquiring person or group) for one share of Company common stock (subject to adjustment). The Company may reduce the 30 percent threshold or may redeem the rights. The number of shares of Series A Junior Participating Preferred Stock reserved for possible conversion of these rights is equivalent to 1/100 of the number of shares of common stock issued and outstanding plus the number of shares reserved for options outstanding and for grant under the 1995 Executive Compensation Plan. The rights will expire in 2006, unless extended. On June 9, 1995, the Company completed a two-for-one stock split in the form of a dividend, issuing one additional share of Series A and Series B common stock for each corresponding share outstanding, as of the May 19, 1995 record date. The effect of the stock split was to double the number of shares outstanding and reduce per share amounts by one-half. All earnings and dividends per share, weighted average shares outstanding and share trading prices in this report have been restated to reflect the stock split. The Company has in place a stock repurchase program authorizing the purchase of up to $2,500,000 of Company stock annually, and the Company has authority to purchase an additional 3,591,200 shares under another Board authorization. NOTE 9: RESTRUCTURING CHARGE - -------------------------------------------------------------------------------- The Consolidated Statement of Earnings for 1993 includes a $5,822,000 (9 cents per share) 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 10: OTHER INCOME AND EXPENSE - -------------------------------------------------------------------------------- In 1994, Belo donated 58,835 shares of Stauffer Communications, Inc. stock to The A. H. Belo Corporation Foundation. The fair market value of the shares at the time of the transfer, as determined by an outstanding tender offer from a third party, exceeded the carrying value of the stock, resulting in a gain of $9,271,000, which was offset by a charge for the charitable contribution of the shares in the amount of $16,675,000. The transaction, net of a $5,837,000 income tax benefit, resulted in a decrease in 1994 net earnings of $1,567,000 (4 cents per share). In 1995, Belo sold its remaining investment in Stauffer Communications, Inc., resulting in a gain of $2,406,000 ($1,546,000 after-tax or 4 cents per share). 33 36 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A. H. BELO CORPORATION AND SUBSIDIARIES NOTE 11: SUPPLEMENTAL CASH FLOW INFORMATION - -------------------------------------------------------------------------------- Net cash provided by operations reflects cash payments for interest and income taxes during the years ended December 31, 1995, 1994 and 1993 as follows:
------------------------------------------------------------------------------------------- In thousands 1995 1994 1993 ------------------------------------------------------------------------------------------- Interest paid, net of amounts capitalized $30,724 $14,564 $18,677 Income taxes paid, net of refunds $39,427 $26,618 $15,679 -------------------------------------------------------------------------------------------
NOTE 12: SUBSEQUENT EVENTS - -------------------------------------------------------------------------------- Effective January 1, 1996, the Company acquired the Owensboro Messenger-Inquirer, a daily newspaper serving Owensboro, Kentucky. Notes payable, which are due in various installments over the next four years and are backed by letters of credit, were issued to complete the transaction. The acquisition was accounted for as a purchase. Subsequent to year-end, Belo completed the sale of its interest in its programming distribution partnership, Maxam Entertainment. The Company will record a gain on the transaction in the first quarter of 1996. NOTE 13: INDUSTRY SEGMENT INFORMATION - -------------------------------------------------------------------------------- The Company operates in two primary industries: television broadcasting and newspaper publishing. Operations in the broadcast industry involve the sale of air time for advertising and the broadcast of entertainment, news and other programming. The Company's television stations are located in Dallas and Houston, Texas; Seattle, Washington; Sacramento, California; Norfolk, Virginia; New Orleans, Louisiana; and Tulsa, Oklahoma. Operations in the newspaper publishing industry, which are located primarily in the Dallas-Fort Worth metropolitan area, involve the sale of advertising space in published issues, the sale of newspapers to distributors and individual subscribers and commercial printing. The Company's other industry segment is comprised of miscellaneous operating ventures associated primarily with television production and distribution. Prior to 1995, these operations were grouped with the broadcasting segment. Information for periods prior to 1995 has been reclassified to conform to the current year presentation. 34 37 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A. H. BELO CORPORATION AND SUBSIDIARIES Selected segment data for the years ended December 31, 1995, 1994 and 1993 is as follows:
----------------------------------------------------------------------------------------------- In thousands 1995 1994 1993 ----------------------------------------------------------------------------------------------- Net operating revenues Broadcasting (A) $ 322,642 $ 258,040 $ 209,083 Newspaper publishing 409,099 369,366 335,651 Other 3,602 719 101 ----------------------------------------------------------------------------------------------- $ 735,343 $ 628,125 $ 544,835 ----------------------------------------------------------------------------------------------- Earnings from operations Broadcasting (A) $ 83,921 $ 81,319(C) $ 63,317(B) Newspaper publishing 69,999 66,568 44,293(C) Other (3,972) (874) (77) Corporate expenses (13,385) (16,014) (18,059) ----------------------------------------------------------------------------------------------- $ 136,563 $ 130,999 $ 89,474 ----------------------------------------------------------------------------------------------- Identifiable assets Broadcasting (A) $ 726,766 $ 566,766 $ 444,940 Newspaper publishing (D) 341,025 271,179 263,855 Other 8,126 1,381 1,235 Corporate 78,105 74,465 86,126 ----------------------------------------------------------------------------------------------- $1,154,022 $ 913,791 $ 796,156 ----------------------------------------------------------------------------------------------- Depreciation and amortization Broadcasting (A) $ 37,795 $ 25,077 $ 20,039 Newspaper publishing 20,916 20,716 17,374 Other 31 2 - Corporate 705 610 251 ----------------------------------------------------------------------------------------------- $ 59,447 $ 46,405 $ 37,664 ----------------------------------------------------------------------------------------------- Capital expenditures Broadcasting (A) $ 19,605 $ 24,561 $ 16,996 Newspaper publishing 19,217 22,227 36,765 Other 154 62 - Corporate 1,854 521 8,369 ----------------------------------------------------------------------------------------------- $ 40,830 $ 47,371 $ 62,130 -----------------------------------------------------------------------------------------------
(A) In 1995, Broadcasting segment data includes the operations of KIRO-TV, which Belo purchased on February 1, 1995. Results for 1994 include the operations of WWL-TV, which Belo purchased on June 1, 1994. (See Note 2). (B) Broadcasting earnings from operations include the reversal of certain music license fee accruals of $631,000 (1 cent per share) in 1994 and $3,349,000 (5 cents per share) in 1993. (C) Included in Newspaper publishing earnings from operations in 1993 is a $5,822,000 (9 cents per share) 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 9). (D) Publishing assets at December 31, 1995 include the assets of the Bryan-College Station Eagle, which was purchased by the Company on December 26, 1995. 35 38 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A. H. Belo Corporation and Subsidiaries NOTE 14: QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) - -------------------------------------------------------------------------------- Following is a summary of the unaudited quarterly results of operations for 1995 and 1994:
- ------------------------------------------------------------------------------------------------------------- In thousands, except per share amounts 1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER - ------------------------------------------------------------------------------------------------------------- 1995 Net operating revenues Broadcasting (A) $ 69,689 $ 88,276 $ 78,678 $ 85,999 Newspaper publishing 93,300 101,166 102,433 112,200 Other 50 327 1,340 1,885 - ------------------------------------------------------------------------------------------------------------- $163,039 $ 189,769 $ 182,451 $ 200,084 - ------------------------------------------------------------------------------------------------------------- Earnings from operations Broadcasting (A) $ 15,234 $ 26,526 $ 17,311 $ 24,850 Newspaper publishing 15,468 17,919 15,767 20,845 Other (1,094) (922) (1,025) (931) Corporate expenses (4,097) (3,879) (3,928) (1,481) - ------------------------------------------------------------------------------------------------------------- $ 25,511 $ 39,644 $ 28,125 $ 43,283 - ------------------------------------------------------------------------------------------------------------- Net earnings $ 11,443 $ 21,198(B) $ 12,792 $ 21,143 - ------------------------------------------------------------------------------------------------------------- Net earnings per common and common equivalent share $ .28 $ .53 $ .33 $ .54 - ------------------------------------------------------------------------------------------------------------- 1994 Net operating revenues Broadcasting (A) $ 49,101 $ 63,208 $ 66,265 $ 79,466 Newspaper publishing 82,921 91,107 93,262 102,076 Other 25 622 55 17 - ------------------------------------------------------------------------------------------------------------- $132,047 $ 154,937 $ 159,582 $ 181,559 - ------------------------------------------------------------------------------------------------------------- Earnings from operations Broadcasting (A) $ 11,712 $ 21,052 $ 19,257 $ 29,298 Newspaper publishing 10,908 17,716 18,220 19,724 Other (214) (3) (174) (483) Corporate expenses (3,222) (3,361) (4,618) (4,813) - ------------------------------------------------------------------------------------------------------------- $ 19,184 $ 35,404 $ 32,685 $ 43,726 - ------------------------------------------------------------------------------------------------------------- Net earnings $ 10,038 $ 19,511 $ 15,748(B) $ 23,570 - ------------------------------------------------------------------------------------------------------------- Net earnings per common and common equivalent share: $ .24 $ .48 $ .39 $ .59 - -------------------------------------------------------------------------------------------------------------
(A) Broadcasting results include the operations of KIRO-TV since February 1, 1995 and WWL-TV since June 1, 1994. (See Note 2.) (B) Net earnings for the third quarter of 1994 include the net charge of $1,567,000 related to the Stauffer Communications, Inc. stock donation (see Note 10). A corresponding after-tax gain of $1,564,000 related to the sale of Belo's remaining investment in Stauffer Communications, Inc. is reflected in second quarter 1995 net earnings. 36 39 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. This 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, 1995, 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. This statement of business conduct addresses, among other things, the necessity for due diligence and integrity, avoidance of potential conflicts of interest, compliance with all applicable laws and regulations, and the confidentiality of proprietary information. /s/ Robert W. Decherd Robert W. Decherd Chairman of the Board, President and Chief Executive Officer /s/ Michael D. Perry Michael D. Perry Senior Vice President and Chief Financial Officer 37 40
EXHIBIT SEQ. NUMBER DESCRIPTION PAGE NO. - ------ ----------- -------- 3.1 Certificate of Incorporation of the Company (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 (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 (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 (Exhibit 3.4 to the 1992 Form 10-K) N/A 3.5 Certificate of Amendment of Certificate of Incorporation of the Company dated May 3, 1995 --- 3.6 Amended Certificate of Designation of Series A Junior Participating Preferred Stock of the Company dated May 4, 1988 (Exhibit 3.5 to the 1992 Form 10-K) N/A 3.7 Certificate of Designation of Series B Common Stock of the Company dated May 4, 1988 (Exhibit 3.6 to the 1992 Form 10-K) N/A 3.8 Bylaws of the Company, effective February 22, 1995 (Exhibit 3.7 to the Company's Annual Report on Form 10-K dated March 8, 1995 (the "1994 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 4.2 Specimen Form of Certificate representing shares of the Company's Series A Common Stock (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 (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 as Amended and Restated, as of February 28, 1996 between the Company and Chemical Mellon Shareholder Services, L.L.C, a New York banking corporation --- 10.1 Contracts relating to television broadcasting: (1) Form of Agreement for Affiliation between WFAA-TV in Dallas, Texas and ABC --- (2) Form of Agreement for Affiliation between KXTV in Sacramento, California and ABC (3) Contract for Affiliation between KHOU-TV in Houston, Texas and CBS ---
41
EXHIBIT SEQ. NUMBER DESCRIPTION PAGE NO. - ------ ----------- -------- (4) Contract for Affiliation between WWL-TV in New Orleans, Louisiana and CBS --- 10.2 Financing agreements: (1) Loan Agreement dated October 1, 1985, between City of Arlington Industrial Development Corporation and Dallas-Fort Worth Suburban Newspapers, Inc. (Exhibit 10.5(2) to the 1991 Form 10-K) N/A (2) 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 (Exhibit 10.5(3) to the 1991 Form 10-K) N/A (3) Credit Agreement dated as of August 5, 1994 among the Company and Citicorp Securities, Inc., as Syndication Agent, The First National Bank of Chicago, as Administrative Agent, Texas Commerce Bank National Association, as Documentation Agent and The Banks Listed Therein, as Lenders (Exhibit 10.4(1) to the Second Quarter 1994 Form 10-Q) N/A (4) First Amendment to Credit Agreement dated as of July 28, 1995 (Exhibit 10.4(1) to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1995) N/A (5) Amendment and Waiver Agreement dated as of August 5, 1994, by and between the Company and The Sanwa Bank, Limited, Dallas Agency (Exhibit 10.4(4) to the 1994 Form 10-K) N/A 10.3 Compensatory plans: (1) Management Security Plan (Exhibit 10.4(1) to the 1991 Form 10-K) N/A (2) 1986 Long-Term Incentive Plan (Exhibit 10.4(7) to the 1991 Form 10-K) N/A (3) Amendment No. 1 to 1986 Long-Term Incentive Plan (Exhibit 10.4(8) to the 1991 Form 10-K) N/A (4) Amendment No. 2 to 1986 Long-Term Incentive Plan (Exhibit 10.3(9) to the 1992 Form 10-K) N/A (5) Amendment No. 3 to 1986 Long-Term Incentive Plan (Exhibit 10.3(10) to the 1993 Form 10-K) N/A (6) Amendment No. 4 to 1986 Long-Term Incentive Plan (Exhibit 10.3(11) to the 1993 Form 10-K) N/A
42
EXHIBIT SEQ. NUMBER DESCRIPTION PAGE NO. - ------ ----------- -------- (7) Amendment No. 5 to 1986 Long-Term Incentive Plan (Exhibit 10.3(12) to the 1993 Form 10-K) N/A (8) Amendment No. 6 to 1986 Long-Term Incentive Plan (Exhibit 10.3(13) to the 1992 Form 10-K) N/A (9) Amendment No. 7 to 1986 Long-Term Incentive Plan --- (10) The A. H. Belo Corporation Employee Savings and Investment Plan Amended and Restated February 2, 1996 --- (11) The G. B. Dealey Retirement Pension Plan (as Amended and Restated Generally Effective January 1, 1989) --- (12) Master Trust Agreement, effective as of July 1, 1992, between A. H. Belo Corporation and Mellon Bank, N.A. (Exhibit 10.3(26) to the 1993 Form 10-K) N/A (13) A. H. Belo Corporation Supplemental Executive Retirement Plan (Exhibit 10.3(27) to the 1993 Form 10-K) N/A (14) Trust Agreement dated February 28, 1994, between the Company and Mellon Bank, N.A. (Exhibit 10.3(28) to the 1993 Form 10-K) N/A (15) Summary of A. H. Belo Corporation Executive Compensation Plan --- (16) A. H. Belo Corporation 1995 Executive Compensation Plan --- (17) A. H. Belo Corporation Employee Thrift Plan, effective January 1, 1995 --- (18) First Amendment to A.H. Belo Corporation Employee Thrift Plan --- (19) Second Amendment to A. H. Belo Corporation Employee Thrift Plan --- (20) Master Defined Contribution Trust Agreement by and between A. H. Belo Corporation and Mellon, Bank, N.A. --- (21) First Amendment to Master Defined Contribution Trust Agreement --- (22) Second Amendment to Master Defined Contribution Trust Agreement --- 21 Subsidiaries of the Company --- 23 Consent of Ernst & Young LLP --- 27 Financial Data Schedule (filed electronically with the Securities and Exchange Commission) N/A
EX-3.5 2 CERTIFICATE OF AMEND. CERTIFICATE OF INCORPORATION 1 EXHIBIT 3.5 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION A. H. Belo Corporation, a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: FIRST: That at a meeting of the Board of Directors of the corporation held on February 22, 1995, resolutions were duly adopted setting forth a proposed amendment of the Certificate of Incorporation of the corporation, declaring said amendment to be advisable and calling a meeting of the stockholders of the corporation for consideration thereof. The proposed amendment, in the form adopted by the Board of Directors of the corporation, is as set forth in Appendix A to this Certificate. SECOND: That at the next annual meeting of the stockholders of the corporation thereafter duly convened and held, upon notice in accordance with Section 222 of the General Corporation Law of the State of Delaware, the necessary number of shares as required by statute and by the corporation's Certificate of Incorporation were voted in favor of the amendment. THIRD: That said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. FOURTH: That the capital of the corporation shall not be reduced under or by reason of said amendment. IN WITNESS WHEREOF, the corporation has caused this Certificate to be duly executed by its Chairman of the Board and attested to by its Secretary, and caused its corporate seal to be affixed hereto as of the 3rd day of May, 1995. A. H. BELO CORPORATION By: /s/ ROBERT W. DECHERD --------------------------------- Chairman of the Board [Corporate Seal] ATTEST: /s/ MICHAEL J. MECARTHY ----------------------------- Secretary 2 THE STATE OF TEXAS Section Section COUNTY OF DALLAS Section On the ______ day of __________________, 1995, before me personally appeared Robert W. Decherd, the Chairman of the Board of A. H. Belo Corporation, to me known to be the person described in and who executed the foregoing instrument, and acknowledged that he executed the same in the capacity indicated, that it is the act and deed of such corporation, and that the facts stated therein are true. ---------------------------------- Notary Public My Commission Expires: - ------------------------- ---------------------------------- Print Name 3 APPENDIX A AMENDMENT TO THE CERTIFICATE OF INCORPORATION OF A. H. BELO CORPORATION The third paragraph of Article Four, Section 1, shall be deleted and replaced with the following: If the shares are issued in two or more series, the remaining shares of Common Stock may be issued by the Board of Directors as shares of Series A Common Stock (herein called "Series A Stock"), and/or designated and issued as shares of Series B Common Stock (herein called "Series B Stock"), and/or as shares of Series C Common Stock (herein called "Series C Stock"). After completion of the initial distribution of Series B Stock, the corporation shall not issue any additional shares of Series B Stock if such issuance would result in the Series A Stock being excluded from trading on the New York Stock Exchange, the American Stock Exchange, and other national stock exchanges and also being excluded from quotation on the NASDAQ (as defined herein) or any other national quotation system then in use. Subject to the foregoing, the Board of Directors shall have the authority to fix the number of shares constituting any such series, and to increase or decrease the number of shares of any series prior to or after the issuance of shares of that series, but not below the number of shares of such series then outstanding. In case the number of shares of any series shall be so decreased, the shares constituting such decrease shall resume the status of authorized but unissued shares of Common Stock. EX-4.4 3 AMENDED & RESTATED RIGHTS AGREEMENT 1 EXHIBIT 4.4 AMENDED AND RESTATED RIGHTS AGREEMENT Agreement, dated as of March 10, 1986, as amended and restated as of February 28, 1996, between A.H. Belo Corporation, a Delaware corporation (the "Company"), and Chemical Mellon Shareholder Services, L.L.C., a New York banking corporation (the "Rights Agent"). The Board of Directors of the Company has authorized and declared a dividend of one preferred share purchase right (a "Right") for each Common Share (as hereinafter defined) of the Company outstanding on March 20, 1986, each Right representing the right to purchase one one-hundredth of a share of Series A Junior Participating Preferred Stock of the Company having the rights and preferences set forth in the form of Certificate of Designations attached hereto as Exhibit A, upon the terms and subject to the conditions herein set forth, and has further authorized the issuance of one Right with respect to each Common Share that shall become outstanding between March 20, 1986 and the earlier of the Distribution Date, the Redemption Date and the Final Expiration Date (as such terms are defined in Sections 3 and 7 hereof). This Agreement has been amended from time to time in accordance with the terms hereof by Supplements Nos. 1, 2, 3, 4, 5, and 6. The Board of Directors of the Company has determined to further amend this Agreement to extend the term of the Rights authorized hereunder for a period of 10 years and to include certain features intended to increase the effectiveness hereof. In addition, the Board of Directors of the Company has determined to restate this Agreement such that all amendments hereto, including certain amendments effected as of the date hereof, are reflected herein. 2 Accordingly, in consideration of the premises and the mutual agreements herein set forth, the parties hereby agree as follows: Section 1. Certain Definitions. For purposes of this Agreement, the following terms have the meanings indicated: (a) "Acquiring Person" shall mean any Person (as such term is hereinafter defined) who or which, together with all Affiliates and Associates (as such terms are hereinafter defined) of such Person, shall be the Beneficial Owner (as such term is hereinafter defined) of 30% or more of the total number of Common Shares then outstanding, but shall not include the Company, any wholly-owned Subsidiary (as such term is hereinafter defined) of the Company or any employee benefit plan of the Company or any Subsidiary of the Company or any entity holding Common Shares for or pursuant to the terms of such plan. Notwithstanding the foregoing, no Person shall become an "Acquiring Person" as the result of an acquisition of Common Shares by the Company which, by reducing the number of shares outstanding, increases the proportionate number of shares beneficially owned by such Person to 30% or more of the Common Shares of the Company then outstanding; provided, however, that if a Person shall become the Beneficial Owner of 30% or more of the Common Shares of the Company then outstanding by reason of share purchases by the -2- 3 Company and shall, after such share purchases by the Company, become the Beneficial Owner of any additional Common Shares of the Company, then such Person shall be deemed to be an "Acquiring Person." Notwithstanding the foregoing, if the Board of Directors of the Company determines in good faith that a Person who would otherwise be an "Acquiring Person," as defined pursuant to the foregoing provisions of this paragraph (a), has become such inadvertently, and such Person divests as promptly as practicable a sufficient number of Common Shares so that such Person would no longer be an "Acquiring Person," as defined pursuant to the foregoing provisions of this paragraph (a), then such Person shall not be deemed to be an "Acquiring Person" for any purposes of this Agreement. (b) "Affiliate" shall have the meaning ascribed to such term in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as in effect on March 10, 1986. "Associate," used to indicate a relationship with any Person, shall mean (i) any corporation or organization (other than the Company or a direct or indirect subsidiary of the Company) of which such Person is an officer or partner or is, directly or indirectly, the beneficial owner of 10 percent or more of any class of equity securities, (ii) any trust or other estate in which such Person has a substantial beneficial interest or as to which such Person serves as a trustee or in a similar fiduciary capacity, and (iii) any relative or -3- 4 spouse of such Person, or any relative of such spouse, who has the same principal residence as such Person. (c) A Person shall be deemed the "Beneficial Owner" of and shall be deemed to "beneficially own" any securities: (i) which such Person or any of such Person's Affiliates or Associates beneficially owns, directly or indirectly; (ii) which such Person or any of such Person's Affiliates or Associates has (A) the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding, or upon the exercise of conversion rights, exchange rights, rights (other than these Rights), warrants or options, or otherwise; provided, however, that a Person shall not be deemed the Beneficial Owner of, or to beneficially own, securities tendered pursuant to a tender or exchange offer made by or on behalf of such Person or any of such Person's Affiliates or Associates until such tendered securities are accepted for purchase or exchange; or (B) the right to vote pursuant to any agreement, arrangement or understanding; provided, however, that a Person shall not be deemed the Beneficial Owner of, or to beneficially own, any security if the agreement, arrangement or understanding to vote such security (1) arises -4- 5 solely from a revocable proxy or consent given to such Person in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable rules and regulations of the Exchange Act and (2) is not also then reportable on Schedule 13D under the Exchange Act (or any comparable or successor report); or (iii) which are beneficially owned, directly or indirectly, by any other Person with which such Person or any of such Person's Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting (except to the extent contemplated by the proviso to Section 1(c)(ii)(B)) or disposing of any securities of the Company. (d) "Business Day" shall mean any day other than a Saturday, Sunday, or a day on which banking institutions in the State of Texas are authorized or obligated by law or executive order to close. (e) "Close of business" on any given date shall mean 5:00 P.M., Dallas, Texas time, on such date; provided, however, that if such date is not a Business Day it shall mean 5:00 P.M., Dallas, Texas time, on the next succeeding Business Day. (f) "Common Shares" when used with reference to the Company shall mean shares of Series A Common Stock, Series B Common Stock, and/or Series C Common -5- 6 Stock. "Common Shares" when used with reference to any Person other than the Company shall mean the capital stock (or equity interest) with the greatest voting power of such other Person or, if such other Person is a Subsidiary of another Person, the Person or Persons which ultimately controls such first-mentioned Person. (g) "Person" shall mean any individual, firm, corporation or other entity, and shall include any successor (by merger or otherwise) of such entity. (h) "Preferred Shares" shall mean shares of Series A Junior Participating Preferred Stock of the Company. (i) "Shares Acquisition Date" shall mean the first date of public announcement by the Company or an Acquiring Person that an Acquiring Person has become such. (j) "Subsidiary" of any Person shall mean any corporation or other entity of which a majority of the voting power of the voting equity securities or equity interest is owned, directly or indirectly, by such Person. Section 2. Appointment of Rights Agent. The Company hereby appoints the Rights Agent to act as agent for the Company and the holders of the Rights (who, in accordance with Section 3 hereof, shall prior to the Distribution Date also be the holders of the Common Shares) in accordance with the terms and conditions hereof, and the Rights Agent hereby accepts -6- 7 such appointment. The Company may from time to time appoint such co-Rights Agents as it may deem necessary or desirable. Section 3. Issue of Right Certificates. (a) Until the earlier of (i) the tenth day after the Shares Acquisition Date or (ii) the tenth day after the date of commencement of, or first public announcement of the intent of any Person (other than the Company, any wholly-owned Subsidiary of the Company, any employee benefit plan of the Company or of any Subsidiary of the Company or any entity holding Common Shares for or pursuant to the terms of any such Plan) to commence, a tender or exchange offer the consummation of which would result in beneficial ownership by a Person of 30% or more of the total number of the outstanding Common Shares (including any such date which is after the date of this Agreement and prior to the issuance of the Rights; the earlier of such dates being herein referred to as the "Distribution Date"), (x) the Rights will be evidenced (subject to the provisions of paragraph (b) of this Section 3) by the certificates for Common Shares registered in the names of the holders thereof (which certificates shall also be deemed to be Right Certificates) and not by separate Right Certificates, and (y) the right to receive Right Certificates will be transferable only in connection with the transfer of Common Shares. As soon as practicable after the Distribution Date, the Rights Agent will send, by first-class, insured, postage-prepaid mail, to each record holder of Common Shares as of the close of business on the Distribution Date, at the address of such holder shown on the records of the Company, a Right Certificate, in substantially the form of Exhibit B hereto (a "Right Certificate"), -7- 8 evidencing one Right for each Common Share so held. As of the Distribution Date, the Rights will be evidenced solely by such Right Certificates. (b) On March 20, 1986 or as soon as practicable thereafter, the Company will send a copy of a Summary of Rights to Purchase Preferred Shares, in substantially the form attached hereto as Exhibit C (the "Summary of Rights"), by first-class, postage-prepaid mail, to each record holder of Common Shares as of the close of business on March 20, 1986, at the address of such holder shown on the records of the Company. With respect to certificates for Common Shares outstanding as of March 20, 1986, until the Distribution Date, the Rights will be evidenced by such certificates registered in the names of the holders thereof together with a copy of the Summary of Rights. Until the Distribution Date (or the earlier of the Redemption Date or Final Expiration Date (as such terms are defined in Section 7 hereof)), the surrender for transfer of any certificate for Common Shares outstanding on March 20, 1986, with or without a copy of the Summary of Rights attached thereto, shall also constitute the transfer of the Rights associated with the Common Shares represented thereby. (c) Certificates for Common Shares issued after March 20, 1986 but prior to the earlier of the Distribution Date or the Redemption Date or the Final Expiration Date (as such terms are defined in Section 7) shall have impressed on, printed on, written on or otherwise affixed to them a legend in substantially the following form: -8- 9 This certificate also evidences and entitles the holder hereof to certain Rights as set forth in a Rights Agreement between A.H. Belo Corporation and Chemical Bank, dated as of March 10, 1986, amended and restated as of February 28, 1996 (the "Rights Agreement"), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal executive offices of A.H. Belo Corporation. Under certain circumstances, as set forth in the Rights Agreement, such Rights will be evidenced by separate certificates and will no longer be evidenced by this certificate. A.H. Belo Corporation will mail to the holder of this certificate a copy of the Rights Agreement without charge after receipt of a written request therefor. Under certain circumstances, Rights beneficially owned by Acquiring Persons (as defined in the Rights Agreement) may become null and void. With respect to such certificates containing a legend in substantially the foregoing form, until the Distribution Date, the Rights associated with the Common Shares represented by such certificates shall be evidenced by such certificates alone, and the surrender for transfer of any such certificate shall also constitute the transfer of the Rights associated with the Common Shares represented thereby. Section 4. Form of Right Certificates. The Right Certificates (and the forms of election to purchase Preferred Shares and of assignment to be printed on the reverse thereof) shall be substantially the same as Exhibit B hereto and may have such marks of identification or designation and such legends, summaries or endorsements printed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any applicable law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on -9- 10 which the Rights may from time to time be listed, or to conform to usage. Subject to the provisions of Section 22 hereof, the Right Certificates, in each such case, on their face shall entitle the holders thereof to purchase such number of Preferred Shares as shall be set forth therein at the price per one-hundredth of a Preferred Share set forth therein (the "Purchase Price"), but the number of such Preferred Shares and the Purchase Price shall be subject to adjustment as provided herein. Section 5. Countersignature and Registration. The Right Certificates shall be executed on behalf of the Company by its Chairman of the Board, its President or any Executive Vice President, Senior vice President or Vice President, and by the Secretary, an Assistant Secretary, Treasurer or an Assistant Treasurer of the Company, either manually or by facsimile signature, and have affixed thereto the Company's seal or a facsimile thereof. The Right Certificates shall not be valid for any purpose unless countersigned. In case any officer of the Company who shall have signed any of the Right Certificates shall cease to be such officer of the Company before counter-signature by the Rights Agent and issuance and delivery by the Company, such Right Certificates, nevertheless, may be countersigned by the Rights Agent, and issued and delivered by the Company with the same force and effect as though the person who signed such Right Certificates had not ceased to be such officer of the Company; and any Right Certificate may be signed on behalf of the Company by any person who, at the actual date of the execution of such Right Certificate, shall be a proper officer -10- 11 of the Company to sign such Right Certificate, although at the date of the execution of this Agreement any such person was not such an officer. Following the Distribution Date, the Rights Agent will keep or cause to be kept, at its principal offices, books for registration and transfer of the Right Certificates issued hereunder. Such books shall show the names and addresses of the respective holders of the Right Certificates, the number of Rights evidenced on its face by each of the Right Certificates and the date of each of the Right Certificates. Section 6. Transfer, Split Up, Combination and Exchange of Right Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates. Subject to the provisions of Section 14 hereof, at any time after the close of business on the Distribution Date, and at or prior to the close of business on the earlier of the Redemption Date or the Final Expiration Date (as such terms are defined in Section 7 hereof), any Right Certificate or Right Certificates (other than Right Certificates representing Rights that have become void pursuant to Section 11(a)(ii) hereof or that have been exchanged pursuant to Section 24 hereof) may be transferred, split up, combined or exchanged for another Right Certificate or Right Certificates, entitling the registered holder to purchase a like number of Preferred Shares as the Right Certificate or Right Certificates surrendered then entitled such holder to purchase. Any registered holder desiring to transfer, split up, combine or exchange any Right Certificate shall make such request in writing delivered to the Rights Agent, and shall -11- 12 surrender the Right Certificate or Right Certificates to be transferred, split up, combined or exchanged at the principal office of the Rights Agent. Thereupon the Rights Agent shall countersign and deliver to the person entitled thereto a Right Certificate or Right Certificates, as the case may be, as so requested. The Company may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer, split up, combination or exchange of Right Certificates. Upon receipt by the Company and the Rights Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of a Right Certificate, and, in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to them, and, at the Company's request, reimbursement to the Company and the Rights Agent of all reasonable expenses incidental thereto, and upon surrender to the Rights Agent and cancellation of the Right Certificate if mutilated, the Company will make and deliver a new Right Certificate of like tenor to the Rights Agent for delivery to the registered owner in lieu of the Right Certificate so lost, stolen, destroyed or mutilated. Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights. (a) The registered holder of any Right Certificate may exercise the Rights evidenced thereby (except as otherwise provided herein) in whole or in part at any time after the Distribution Date upon surrender of the Right Certificate, with the form of election to purchase on the reverse side thereof duly executed, to the Rights Agent at the principal office of the Rights -12- 13 Agent, together with payment of the Purchase Price for each one one-hundredth of a Preferred Share as to which the Rights are exercised, at or prior to the close of business on the earlier of (i) the close of business on March 20, 2006 (the "Final Expiration Date"), or (ii) the date on which the Rights are redeemed as provided in Section 23 hereof (the "Redemption Date"), or (iii) the time at which such Rights are exchanged as provided for in Section 24 hereof. (b) The Purchase Price for each one one-hundredth of a Preferred Share pursuant to the exercise of a Right shall be, as of February 28, 1996, $150, shall be subject to adjustment from time to time as provided in Sections 11 and 13 hereof and shall be payable in lawful money of the United States of America in accordance with paragraph (c) below, and as of February 28, 1996 each Right shall entitle the holder thereof to purchase one one- hundredth of a Preferred Share, subject to the terms and conditions herein set forth. (c) Upon receipt of a Right Certificate representing exercisable Rights, with the form of election to purchase duly executed, accompanied by payment of the Purchase Price for the shares to be purchased and an amount equal to any applicable transfer tax required to be paid by the holder of such Right Certificate in accordance with Section 9 in cash, or by certified check or cashier's check payable to the order of the Company, the Rights Agent shall thereupon promptly (i) (A) requisition from any transfer agent of the Preferred Shares certificates for the number of Preferred Shares to be purchased and the Company -13- 14 hereby irrevocably authorizes its transfer agent to comply with all such requests, or (B) requisition from the depositary agent depositary receipts representing such number of one one-hundredths of a Preferred Share as are to be purchased (in which case certificates for the Preferred Shares represented by such receipts shall be deposited by the transfer agent with the depositary agent) and the Company hereby directs the depositary agent to comply with such request, (ii) when appropriate, requisition from the Company the amount of cash to be paid in lieu of issuance of fractional shares in accordance with Section 14, (iii) promptly after receipt of such certificates or depositary receipts, cause the same to be delivered to or upon the order of the registered holder of such Right Certificate, registered in such name or names as may be designated by such holder and (iv) when appropriate, after receipt, promptly deliver such cash to or upon the order of the registered holder of such Right Certificate. (d) In case the registered holder of any Right Certificate shall exercise less than all the Rights evidenced thereby, a new Right Certificate evidencing Rights equivalent to the Rights remaining unexercised shall be issued by the Rights Agent to the registered holder of such Right Certificate or to his duly authorized assignee, subject to the provisions of Section 14 hereof. Section 8. Cancellation and Destruction of Right Certificates. All Right Certificates surrendered for the purpose of exercise, transfer, split up, combination or exchange shall, if surrendered to the Company or to any of its agents, be delivered to the -14- 15 Rights Agent for cancellation or in cancelled form, or, if surrendered to the Rights Agent, shall be cancelled by it, and no Right Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Agreement. The Company shall deliver to the Rights Agent for cancellation and retirement, and the Rights Agent shall so cancel and retire, any other Right Certificate purchased or acquired by the Company otherwise than upon the exercise thereof. The Rights Agent shall deliver all cancelled Right Certificates to the Company, or shall, at the written request of the Company, destroy such cancelled Right Certificates, and in such case shall deliver a certificate of destruction thereof to the Company. Section 9. Reservation and Availability of Preferred Shares. The Company covenants and agrees that it will cause to be reserved and kept available out of its authorized and unissued Preferred Shares or any Preferred Shares held in its treasury, the number of Preferred Shares that will be sufficient to permit the exercise in full of all outstanding Rights. So long as the Preferred Shares issuable upon the exercise of Rights may be listed on any national securities exchange, the Company shall use its best efforts to cause, from and after such time as the Rights become exercisable, all shares reserved for such issuance to be listed on such exchange upon official notice of issuance upon such exercise. The Company covenants and agrees that it will take all such action as may be necessary to ensure that all Preferred Shares delivered upon exercise of Rights shall, at the -15- 16 time of delivery of the certificates for such Preferred Shares (subject to payment of the Purchase Price), be duly and validly authorized and issued and fully paid and nonassessable shares. The Company further covenants and agrees that it will pay when due and payable any and all federal and state transfer taxes and charges which may be payable in respect of the issuance or delivery of the Right Certificates or of any Preferred Shares upon the exercise of Rights. The Company shall not, however, be required to pay any transfer tax which may be payable in respect of any transfer or delivery of Right Certificates to a person other than, or the issuance or delivery of certificates for the Preferred Shares in a name other than that of, the registered holder of the Right Certificate evidencing Rights surrendered for exercise or to issue or deliver any certificates for Preferred Shares upon the exercise of any Rights until any such tax shall have been paid (any such tax being payable by the holder of such Right Certificate at the time of surrender) or until it has been established to the Company's satisfaction that no such tax is due. Section 10. Preferred Shares Record Date. Each person in whose name any certificate for Preferred Shares is issued upon the exercise of Rights shall for all purposes be deemed to have become the holder of record of the Preferred Shares represented thereby on, and such certificate shall be dated, the date upon which the Right Certificate evidencing such Rights was duly surrendered and payment of the Purchase Price (and any applicable transfer -16- 17 taxes) was made; provided, however, that if the date of such surrender and payment is a date upon which the Preferred Shares transfer books of the Company are closed, such person shall be deemed to have become the record holder of such shares on, and such certificate shall be dated, the next succeeding business day on which the Preferred Shares transfer books of the Company are open. Prior to the exercise of the Rights evidenced thereby, the holder of a Right Certificate shall not be entitled to any rights of a holder of Preferred Shares for which the Rights shall be exercisable, including, without limitation, the right to vote, to receive dividends or other distributions or to exercise any preemptive rights, and shall not be entitled to receive any notice of any proceedings of the Company, except as provided herein. Section 11. Adjustment of Purchase Price, Number of Shares or Number of Rights. The Purchase Price, the number of Preferred Shares covered by each Right and the number of Rights outstanding are subject to adjustment from time to time as provided in this Section 11. (a) (i) In the event the Company shall at any time after the date of this Agreement (A) declare a dividend on the Preferred Shares payable in Preferred Shares, (B) subdivide the outstanding Preferred Shares, (C) combine the outstanding Preferred Shares into a smaller number of Preferred Shares or (D) issue any shares of its capital stock in a reclassification of the Preferred Shares (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing or surviving corporation), -17- 18 except as otherwise provided in this Section 11(a), the Purchase Price in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination or reclassification, and the number and kind of shares of capital stock issuable on such date, shall be proportionately adjusted so that the holder of any Right exercised after such time shall be entitled to receive the aggregate number and kind of shares of capital stock which, if such Right had been exercised immediately prior to such date and at a time when the Preferred Shares transfer books of the Company were open, he would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision, combination or reclassification. If an event occurs which would require an adjustment under both Section 11(a)(i) and Section 11(a)(ii), the adjustment provided for in this Section 11(a)(i) shall be in addition to, and shall be made prior to, any adjustment required pursuant to Section 11(a)(ii). (ii) Subject to Section 24 of this Agreement, in the event any Person becomes an Acquiring Person, each holder of a Right shall thereafter have a right to receive, upon exercise thereof at a price equal to the then current Purchase Price multiplied by the number of one one-hundredths of a Preferred Share for which a Right is then exercisable, in accordance with the terms of this Agreement and in lieu of Preferred Shares, such number of Common Shares of the Company as shall equal the result obtained by (x) multiplying the then current Purchase Price by the number of one one-hundredths of a Preferred Share for which a Right is then exercisable and dividing that product by (y) 50% of the then current per -18- 19 share market price of the Company's Common Shares (determined pursuant to Section 11(d) hereof) on the date of the occurrence of such event. In the event that any Person shall become an Acquiring Person and the Rights shall then be outstanding, the Company shall not take any action which would eliminate or diminish the benefits intended to be afforded by the Rights. From and after the occurrence of such event, any Rights that are or were acquired or beneficially owned by any Acquiring Person (or any Associate or Affiliate of such Acquiring Person) shall be void and any holder of such Rights shall thereafter have no right to exercise such Rights under any provision of this Agreement. No Right Certificate shall be issued pursuant to Section 3 that represents Rights beneficially owned by an Acquiring Person whose Rights would be void pursuant to the preceding sentence or any Associate or Affiliate thereof; no Right Certificate shall be issued at any time upon the transfer of any Rights to an Acquiring Person whose Rights would be void pursuant to the preceding sentence or any Associate or Affiliate thereof or to any nominee of such Acquiring Person, Associate or Affiliate; and any Right Certificate delivered to the Rights Agent for transfer to an Acquiring Person whose Rights would be void pursuant to the preceding sentence shall be cancelled. (iii) In the event that there shall not be sufficient Common Shares issued but not outstanding or authorized but unissued to permit the exercise in full of the -19- 20 Rights in accordance with the foregoing subparagraph (ii), the Company shall take all such action as may be necessary to authorize additional Common Shares for issuance upon exercise of the Rights. (b) In case the Company shall fix a record date for the issuance of rights, options or warrants to all holders of Preferred Shares entitling them (for a period expiring within 45 calendar days after such record date) to subscribe for or purchase Preferred Shares (or shares having the same rights, privileges and preferences as the Preferred Shares ("equivalent preferred shares")) or securities convertible into Preferred Shares or equivalent preferred shares at a price per Preferred Share or equivalent preferred share (or having a conversion price per share, if a security convertible into Preferred Shares or equivalent preferred shares) less than the current per share market price of the Preferred Shares (as defined in Section 11(d)) on such record date, the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the number of Preferred Shares outstanding on such record date plus the number of Preferred Shares which the aggregate offering price of the total number of Preferred Shares and/or equivalent preferred shares so to be offered (and/or the aggregate initial conversion price of the convertible securities so to be offered) would purchase at such current market price and the denominator of which shall be the number of Preferred Shares outstanding on such record date plus the -20- 21 number of additional Preferred Shares and/or equivalent preferred shares to be offered for subscription or purchase (or into which the convertible securities so to be offered are initially convertible). In case such subscription price may be paid in consideration part or all of which shall be in a form other than cash, the value of such consideration shall be as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent. Preferred Shares owned by or held for the account of the Company shall not be deemed outstanding for the purpose of any such computation. Such adjustment shall be made successively whenever such a record date is fixed; and in the event that such rights or warrants are not so issued, the Purchase Price shall be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed. (c) In case the Company shall fix a record date for the making of a distribution to all holders of the Preferred Shares (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing corporation) of evidences of indebtedness or assets (other than a regular quarterly cash dividend or a dividend payable in Preferred Shares) or subscription rights or warrants (excluding those referred to in Section 11(b)), the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the current per share market price of the Preferred Shares (as defined in Section 11(d)) on such record date, less -21- 22 the fair market value (as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent) of the portion of the assets or evidences of indebtedness so to be distributed or of such subscription rights or warrants applicable to one Preferred Share and the denominator of which shall be such current per share market price of the Preferred Shares. Such adjustments shall be made successively whenever such a record date is fixed; and in the event that such distribution is not so made, the Purchase Price shall again be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed. (d) (i) For the purpose of any computation hereunder, the "current per share market price" of the Common Shares on any date shall be deemed to be the average of the daily closing prices per share of such Common Shares for the 30 consecutive Trading Days (as such term is hereinafter defined) immediately prior to such date; provided, however, that in the event that the current per share market price of the Common Shares is determined during a period following the announcement by the issuer of such Shares of a dividend or distribution on such Common Shares payable in such Common Shares or securities convertible into such Common Shares, and prior to the expiration of 30 Trading Days after the ex-dividend date for such dividend or distribution, then, and in each such case, the current market price shall be appropriately adjusted to reflect the current market price per Common Share equivalent. The closing price for each day shall be the last sale price, regular way, or, -22- 23 in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the Common Shares are not listed or admitted on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Common Shares are listed or admitted to trading, or, if the Common Shares are not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the Nasdaq National Market ("NASDAQ") or such other system then in use, or, if on any such date the Common Shares are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Common Shares selected by the Board of Directors of the Company. The term "Trading Day" shall mean a day on which the principal national securities exchange on which the Common Shares are listed or admitted to trading is open to the transaction of business or, if the Common Shares are not listed or admitted to trading on any national securities exchange, a Monday, Tuesday, Wednesday, Thursday or Friday on which banking institutions in the State of Texas are not authorized or obligated by law or executive order to close. For purposes of this Section 11(d)(i), the term "Common Shares", when used with reference to the Company, shall mean shares of Series A Common Stock. -23- 24 (ii) For the purpose of any computation hereunder, the "current per share market price" of the Preferred Shares shall be determined in the same manner as set forth above for Common Shares in clause (i) of this Section 11(d). If the current per share market price of the Preferred Shares cannot be determined in the manner provided above, the "current per share market price" of the Preferred Shares shall be conclusively deemed to be the current per share market price of the Common Shares (approximately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof), multiplied by one hundred. If neither the Common Shares nor the Preferred Shares are publicly held or so listed or traded, "current per share market price" shall mean the fair value per share as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent. (e) No adjustment in the Purchase Price shall be required unless such adjustment would require an increase or decrease of at least 1% in the Purchase Price; provided, however, that any adjustments which by reason of this Section 11(e) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 11 shall be made to the nearest cent or to the nearest ten-thousandth of a common share or other share or one-millionth of a Preferred Shares as the case may be. Notwithstanding the first sentence of this Section 11(e), any adjustment required by this Section 11 shall be made no later than the earlier of (i) three years -24- 25 from the date of the transaction which requires such adjustment or (ii) the date of the expiration of the right to exercise any Rights. (f) If as a result of an adjustment made pursuant to Section 11(a), the holder of any Right thereafter exercised shall become entitled to receive any shares of capital stock of the company other than Preferred Shares, thereafter the number of such other shares so receivable upon exercise of any Right shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the shares contained in Section 11(a) through (c), inclusive, and the provisions of Section 7, 9, 10 and 13 with respect to the Preferred Shares shall apply on like terms to any such other shares. (g) All Rights originally issued by the Company subsequent to any adjustment made to the Purchase Price hereunder shall evidence the right to purchase, at the adjusted Purchase Price, the number of Preferred Shares purchasable from time to time hereunder upon exercise of the Rights, all subject to further adjustment as provided herein. (h) Unless the Company shall have exercised its election as provided in Section 11(i), upon each adjustment of the Purchase Price as a result of the calculations made in Section 11(b) and (c), each Right outstanding immediately prior to the making of such adjustment shall thereafter evidence the right to purchase, at the adjusted Purchase Price per -25- 26 one one-hundredth of a Preferred Share, that number of one one-hundredths of a Preferred Share (calculated to the nearest one one-millionth of a Preferred Share) obtained by (i) multiplying (x) the number of one one-hundredths of a share covered by a Right immediately prior to this adjustment by (y) the Purchase Price in effect immediately prior to such adjustment of the Purchase Price and (ii) dividing the product so obtained by the Purchase Price in effect immediately after such adjustment of the Purchase Price. (i) The Company may elect on or after the date of any adjustment of the Purchase Price to adjust the number of Rights, in substitution for any adjustment in the number of Preferred Shares purchasable upon the exercise of a Right. Each of the rights outstanding after such adjustment of the number of Rights shall be exercisable for the number of one one-hundredths of a Preferred Share for which a Right was exercisable immediately prior to such adjustment. Each Right held of record prior to such adjustment of the number of rights shall become that number of Rights (calculated to the nearest one ten-thousandth) obtained by dividing the Purchase Price in effect immediately prior to adjustment of the Purchase Price by the Purchase Price in effect immediately after adjustment of the Purchase Price. The Company shall make a public announcement of its election to adjust the number of Rights, indicating the record date for the adjustment, and, if known at the time, the amount of the adjustment to be made. This record date may be the date on which the Purchase Price is adjusted or any day thereafter, but, if the Right Certificates have been issued, shall be at -26- 27 least 10 days later than the date of the public announcement. If Right Certificates have been issued, upon each adjustment of the number of Rights pursuant to this Section 11(i), the Company shall, as promptly as practicable, cause to be distributed to holders of record of Right Certificates on such record date Right Certificates evidencing, subject to Section 14 hereof, the additional Rights to which such holders shall be entitled as a result of such adjustment, or, at the option of the Company, shall cause to be distributed to such holders or record in substitution and replacement for the Right Certificates held by such holders prior to the date of adjustment, and upon surrender thereof, if required by the Company, new Right Certificates evidencing all the Rights to which such holders shall be entitled after such adjustment. Right Certificates so to be distributed shall be issued, executed and countersigned in the manner provided for herein and shall be registered in the manner provided for herein and shall be registered in the names of the holders of record of Right Certificates on the record date specified in the public announcement. (j) Irrespective of any adjustment or change in the Purchase Price or the number of Preferred Shares issuable upon the exercise of the rights, the Right Certificates theretofore and thereafter issued may continue to express the Purchase Price per one one-hundredth of a share and the number of shares which were expressed in the initial Right Certificates issued hereunder. -27- 28 (k) Before taking any action that would cause an adjustment reducing the Purchase Price below one one-hundredth of the then par value, if any, of the Preferred Shares issuable upon exercise of the Rights, the Company shall take any corporate action which may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue fully paid and nonassessable Preferred Shares at such adjusted Purchase Price. (l) In any case in which this Section 11 shall require that an adjustment in the Purchase Price be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event the issuing to the holder of any Right exercised after such record date of the Preferred Shares and other capital stock or securities of the Company, if any, issuable upon such exercise over and above the Preferred Shares and other capital stock or securities of the Company, if any, issuable upon such exercise on the basis of the Purchase Price in effect prior to such adjustment; provided, however, that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holder's right to receive such additional shares upon the occurrence of the event requiring such adjustment. (m) Anything in this Section 11 to the contrary notwithstanding, the Company shall be entitled to make such reductions in the Purchase Price, in addition to those adjustments expressly required by this Section 11, as and to the extent that it in it sole discretion shall determine to be advisable in order that any consolidation or subdivision of the -28- 29 Preferred Shares, issuance wholly for cash if any of Preferred Shares at less than the current market price, issuance wholly for cash of Preferred Shares or securities which by their terms are convertible into or exchangeable for Preferred Shares, dividends on Preferred Shares payable in Preferred Shares or issuance of rights, options or warrants referred to hereinabove in subsection (b) of this Section 11, hereafter made by the Company to holders of its Preferred Shares shall not be taxable to such shareholders. (n) In the event that at any time after the February 28, 1996 and prior to the Distribution Date, the Company shall (i) declare or pay any dividend on the Common Shares payable in Common Shares or (ii) effect a subdivision combination or consolidation of the Common Shares (by reclassification or otherwise than by payment of dividends in Common Shares) into a greater or lesser number of Common Shares, then in any such case (i) the number of one one-hundredths of a Preferred Share purchasable upon proper exercise of each Right shall be determined by multiplying the number of shares so purchasable immediately prior to such event by a fraction, the numerator of which is the number of Common Shares outstanding immediately before such event and the denominator of which is the number of Common Shares outstanding immediately after such event, and (ii) each Common Share outstanding immediately after such event shall have issued with respect to it that number of Rights which each Common Share outstanding immediately prior to such event had issued with respect to it. The adjustments provided for in this Section 11(n) shall be made -29- 30 successively whenever such a dividend is declared or paid or such a subdivision, combination or consolidation is effected. If an event occurs which would require an adjustment under Section 11(a)(ii) and this Section 11(n), the adjustments provided for in this Section 11(n) shall be in addition and prior to any adjustment required pursuant to Section 11(a)(ii). Section 12. Certificate of Adjusted Purchase Price or Number of Shares. Whenever an adjustment is made as provided in Sections 11 and 13 hereof, the Company shall (a) promptly prepare a certificate setting forth such adjustment, and a brief statement of the facts accounting for such adjustment, (b) promptly file with the Rights Agent and with each transfer agent for the Common Shares and the Preferred Shares a copy of such certificate and (c) mail a brief summary thereof to each holder of a Right Certificate in accordance with Section 26 hereof; provided, however, that no failure to prepare or file such certificate, or to mail such summary thereof, shall void or impair the effectiveness of any adjustment referred to herein. Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power. In the event, directly or indirectly, (a) the Company shall consolidate with, or merge with and into, any other Person (other than (x) any employee benefit plan of the Company, or any entity holding Common Shares for or pursuant to the terms of any such plan or (y) a wholly-owned Subsidiary of the Company, and pursuant to such consolidation or merger all of the Common Shares of the Company are converted into the right to receive Common -30- 31 Shares of such Subsidiary on a share-for-share basis), (b) any Person (other than any employee benefit plan of the Company, or any entity holding Common Shares for or pursuant to the terms of any such plan) shall consolidate with the Company, or merge with and into the Company and the Company shall be the continuing or surviving corporation of such merger and, in connection with such merger, all or part of the Common Shares shall be changed into or exchanged for stock or other securities of any other Person (or the Company) or cash or any other property, or (c) the Company shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise transfer), in one or more transactions, assets or earning power aggregating more than 50% of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to any other Person other than the Company or one or more of its wholly-owned Subsidiaries, then, and in each such case, proper provisions shall be made so that (i) each holder of a Right (except as otherwise provided therein) shall thereafter have the right to receive, upon the exercise thereof in accordance with the terms of this Agreement, such number of Common Shares of such other Person (including the Company as successor thereto or as the surviving corporation) as shall be equal to the result obtained by (X) multiplying the then current Purchase Price by the number of one one-hundredths of a Preferred Share for which a Right is then exercisable (without taking into account any adjustment previously made pursuant to Section 11(a)(ii)) and dividing that product by (Y) 50% of the current per share market price of the Common Shares of such other Person (determined pursuant to Section 11(d)) on the date of consummation of such -31- 32 consolidation, merger, sale or transfer; (ii) the issuer of such Common Shares shall thereafter be liable for, and shall assume, by virtue of such consolidation, merger, sale or transfer, all the obligations and duties of the Company pursuant to this Agreement; (iii) the term "Company" shall thereafter be deemed to refer to such issuer; and (iv) such issuer shall take such steps (including, but not limited to, the reservation of a sufficient number of shares of its Common Shares in accordance with Section 9) in connection with such consummation as may be necessary to assure that the provisions hereof shall thereafter be applicable, as nearly as reasonably may be practicable, in relation to the shares of its Common Shares thereafter deliverable upon the exercise of the Rights. The Company shall not enter into any transaction of the kind referred to in this Section 13 if at the time of such transaction there are any rights, warrants, instruments or securities outstanding or any agreement or arrangements which, as a result of the consummation of such transaction, would substantially diminish or otherwise eliminate the benefits intended to be afforded by the Rights. The Company shall not consummate any such consolidation, merger, sale or transfer unless prior thereto the Company and such issuer shall have executed and delivered to the Rights Agent a supplemental agreement so providing. The provisions of this Section 13 shall similarly apply to successive mergers or consolidation or sales or other transfers. In the event the Company shall consolidate with, or merge with and into, a wholly-owned Subsidiary of the Company and pursuant to such consolidation or merger all -32- 33 of the Common Shares of the Company are converted into the right to receive Common Shares of such Subsidiary on a share-for-share basis, then proper provision shall be made so that (i) each holder of a Right (except as otherwise provided herein) shall thereafter have the right to receive, upon the exercise thereof in accordance with the terms of this Agreement, the same number of one one-hundredths of a Preferred Share of such Subsidiary (which Preferred Shares shall be as nearly identical as practicable to the Preferred Shares as defined herein) as the number of one one-hundredths of a Preferred Share of the Company for which a Right is then exercisable; (ii) such Subsidiary shall thereafter be liable for, and shall assume, by virtue of such consolidation or merger, all the obligations and duties of the Company pursuant to this Agreement; (iii) the term "Company" shall thereafter be deemed to refer to such Subsidiary; and (iv) such Subsidiary shall take such steps (including, but not limited to, the reservation of a sufficient number of its Preferred Shares in accordance with Section 9) in connection with such consummation as may be necessary to assure that the provisions hereof shall thereafter be applicable, as nearly as reasonably may be practicable, in relation to its Preferred Shares thereafter deliverable upon exercise of the Rights. The Company shall not consummate any such consolidation or merger unless prior thereto the Company and such Subsidiary shall have executed and delivered to the Rights Agent a supplemental agreement so providing. -33- 34 Section 14. Fractional Rights and Fractional Shares. (a) The Company shall not be required to issue fractions of Rights or to distribute Right Certificates which evidence fractional Rights. In lieu of such fractional Rights, there shall be paid to the registered holders of the Right Certificates with regard to which such fractional Rights would otherwise be issuable, an amount in cash equal to the same fraction of the current market value of a whole Right. For the purposes of this Section 14(a) the current market value of a whole Right shall be the closing price of the Rights for the Trading Day immediately prior to the date on which such fractional Rights would have been otherwise issuable. The closing price for any day shall be the last sale price, regular way, or, in case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the Rights are not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Rights are listed or admitted to trading or, if the Rights are not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by NASDAQ or such other system then in use or, if on any such date the Rights are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Rights selected by the Board of Directors of the Company. If on any such date no such market maker is -34- 35 making a market in the Rights the fair value of the Rights on such date as determined in good faith by the Board of Directors of the Company shall be used. (b) The Company shall not be required to issue fractions of Preferred Shares (other than fractions which are integral multiples of one one-hundredth of a Preferred Share) upon exercise of the Rights or to distribute certificates which evidence fractional Preferred Shares (other than fractions which are integral multiples of one one-hundredth of a Preferred Share). Fractions of Preferred Shares in integral multiples of one one-hundredth of a Preferred Share may, at the election of the company, be evidenced by depositary receipts, pursuant to an appropriate agreement between the Company and a depositary selected by it, provided that such agreement shall provide that the holders of such depositary receipts shall have all the rights, privileges and preferences to which they are entitled as beneficial owners of the Preferred shares. In lieu of fractional Preferred Shares that are not integral multiples of the one-hundredth of a Preferred Share, the Company shall pay to the registered holders of Right Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the current market value of the Preferred Share. For purposes of this Section 14(b), the current market value of a Preferred Share shall be the closing price of a Preferred Share (as determined pursuant to the second sentence of Section 11(d)) for the Trading Day immediately prior to the date of such exercise. -35- 36 (c) The holder of a Right by the acceptance of the Rights expressly waives his right to receive any fractional Rights or any fractional shares upon exercise of a Right. Section 15. Rights of Action. All rights of action in respect of this Agreement, excepting the rights of actions given to the Right Agent under Section 18 hereof, are vested in the respective registered holders of the Right Certificates (and, prior to the Distribution Date, the registered holders of the Common Shares); and any registered holder of any Right Certificate (or, prior to the Distribution Date, of the Common Shares), without the consent of the Right Agent or of the holder of any other Right Certificate (or, prior to the Distribution Date, of the Common Shares), may, in his own behalf and for his own benefit, enforce, and may institute and maintain any suit, action or proceeding against the Company to enforce, or otherwise act in respect of, his right to exercise the Rights evidenced by such Right Certificate in the manner provided in such Right Certificate and in this Agreement. Without limiting the foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights would not have an adequate remedy at law for any breach of this Agreement and will be entitled to specific performance of the obligations under, and injunctive relief against actual or threatened violations of, the obligations of any Person subject to this Agreement. -36- 37 Section 16. Agreement of Right Holders. Every holder of a Right, by accepting the same, consents and agrees with the Company and the Rights Agent and with every other holder of a Right that: (a) prior to the Distribution Date, the Rights will be transferable only in connection with the transfer of the Common Shares; (b) after the Distribution Date, the Right Certificates are transferable only on the registry books of the Rights Agent if surrendered at the principal office of the Rights Agent duly endorsed or accompanied by a proper instrument of transfer; and (c) the Company and the Rights Agent may deem and treat the person in whose name the Right Certificate (or, prior to the Distribution Date, the associated Common Shares certificate) is registered as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on the Right Certificates or the associated Common Shares certificate made by anyone other than the Company or the Rights Agent) for all purposes whatsoever, and neither the Company nor the Rights Agent shall be affected by any notice to the contrary. Section 17. Right Certificate Holder Not Deemed a Shareholder. No holder, as such, of any Right Certificate shall be entitled to vote, receive dividends or be deemed for any purpose the holder of the Preferred Shares or any other securities of the Company which -37- 38 may at any time be issuable on the exercise of the Rights represented thereby, nor shall anything contained herein or in any Right Certificate be construed to confer upon the holder of any right Certificate, as such, any of the rights of a shareholder of the Company or any right to vote for the election of directors or upon any matter submitted to shareholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting shareholders (except as provided in Section 25), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by such Right Certificate shall have been exercised in accordance with the provisions hereof. Section 18. Concerning the Rights Agent. The Company agrees to pay to the Rights Agent reasonable compensation for all services rendered by it hereunder and, from time to time, on demand of the Rights Agent, its reasonable expenses and counsel fees and other disbursements incurred in the administration and execution of this Agreement and the exercise and performance of its duties hereunder. The Company also agrees to indemnify the Rights Agent for, and to hold it harmless against any loss, liability, or expense, incurred without negligence, bad faith or willful misconduct on the part of the Rights Agent, for anything done or omitted by the Rights Agent in connection with the acceptance and administration of this Agreement, including the costs and expenses of defending against any claim of liability in the premises. -38- 39 The Rights Agent shall be protected and shall incur no liability for, or in respect of any action taken, suffered or omitted by it in connection with, its administration of this Agreement in reliance upon any Right Certificate or certificate for the Preferred Shares or Common Shares or for other securities of the Company, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, direction, consent, certificate, statement, or other paper or document believed by it to be genuine and to be signed, executed and, where necessary, verified or acknowledged, by the proper person or persons, or otherwise upon the advice of its counsel as set forth in Section 20 hereof. Section 19. Merger or Consolidation or Change of Name of Rights Agent. Any corporation into which the Rights Agent or any successor Rights Agent may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Rights Agent or any successor Rights Agent shall be a party, or any corporation succeeding to the corporate trust business or stock transfer business of the Rights Agent or any successor Rights Agent, shall be the successor to the Rights Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto, provided that such corporation would be eligible for appointment as a successor Rights Agent under the provisions of Section 21. In case at the time such successor Rights Agent shall succeed to the agency created by this Agreement, any of the Right Certificates shall have been countersigned but not delivered, any such successor Rights Agent may adopt -39- 40 the countersignature of the predecessor Rights Agent and deliver such Right Certificates so countersigned; and in case at that time any of the Right Certificates shall not have been countersigned, any successor Rights Agent may countersign such Right certificates either in the name of the predecessor Rights Agent or in the name of the successor Rights Agent; and in all such cases such Right Certificates shall have the full force provided in the Right Certificates and in this Agreement. In case at any time the name of the Rights Agent shall be changed and at such time any of the Right Certificates shall have been countersigned but not delivered, the Rights Agent may adopt the countersignature under its prior name and deliver Right Certificates so countersigned; and in case at that time any of the Right Certificates shall not have been countersigned, the Rights Agent may countersign such Right Certificates either in its prior name or in its changed name; and in all such cases such Right Certificates shall have the full force provided in the Right Certificates and in this Agreement. Section 20. Duties of Rights Agent. The Rights Agent undertakes the duties and obligations imposed by this Agreement upon the following terms and conditions, by all of which the Company and the holders of Right Certificates by their acceptance thereof, shall be bound: -40- 41 (a) The Rights Agent may consult with legal counsel (who may be legal counsel for the Company), and the opinion of such counsel shall be full and complete authorization and protection to the Rights Agent as to any action taken or omitted by it in good faith and in accordance with such opinion. (b) Whenever in the performance of its duties under this Agreement the Rights Agent shall deem it necessary or desirable that any fact or matter be proved or established by the Company prior to taking or suffering any action hereunder such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by any one of the Chairman of the Board, the President, any Vice President, the Treasurer or the Secretary of the Company and delivered to the Rights Agent, and such certificate shall be full authorization to the Rights Agent for any action taken or suffered in good faith by it under the provisions of this Agreement in reliance upon such certificate. (c) The Rights Agent shall be liable hereunder to the Company and any other Person only for its own negligence bad faith or willful misconduct. (d) The Rights Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the Right Certificates (except -41- 42 its countersignature thereof) or be required to verify the same, but all such statements and recitals are and shall be deemed to have been made by the Company only. (e) The Rights Agent shall not be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof (except the due execution hereof by the Rights Agent) or in respect of the validity or execution of any Right Certificate (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Right Certificate; nor shall it be responsible for any change in the exercisability of the Rights (including the Rights becoming void pursuant to Section 11(a)(ii) hereof) or any adjustment in the terms of the Rights (including the manner, method or amount thereof) provided for in Section 3, 11, 13, 23 or 24, or the ascertaining of the existence of facts that would require any such change or adjustment (except with respect to the exercise of Rights evidenced by Right Certificates after actual notice that such change or adjustment is required); nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any Preferred Shares to be issued pursuant to this Agreement or any Right Certificate or as to be issued pursuant to this Agreement or any Right Certificate or as to whether any Preferred Shares will, when issued, be validly authorized and issued, fully paid and nonassessable. -42- 43 (f) The Company agrees that it will perform, execute acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by the Rights Agent for the carrying out or performing by the Rights Agent of the provisions of this Agreement. (g) The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder from any one of the Chairman of the Board, the President, any Vice President, the Secretary or the Treasurer of the Company, and to apply to such officers for advice or instructions in connection with its duties, and it shall not be liable for any action taken or suffered to be taken by it in good faith in accordance with instructions of any such officer. (h) The Rights Agent and any shareholder, director, officer or employee of the Rights Agent may buy, sell or deal in any of the Rights or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not the Rights Agent under this Agreement. Nothing herein shall preclude the Rights Agent from acting in any other capacity for the Company or for any other legal entity. -43- 44 (i) The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its attorneys or agents, and the Rights Agent shall not be answerable or accountable for any act, default, neglect or misconduct of any such attorneys or agents or for any loss to the Company resulting from any such act, default, neglect or misconduct, provided reasonable care was exercised in the selection and continued employment thereof. Section 21. Change of Rights Agent. The Rights Agent or any successor Rights Agent may resign and be discharged from its duties under this Agreement upon 30 days' notice in writing mailed to the Company and to each transfer agent of the Common Shares and Preferred Shares by registered or certified mail, and to the holders of the Right Certificates by first-class mail. The Company may remove the Rights Agent or any successor Rights Agent upon 30 days' notice in writing, mailed to the Rights Agent upon 30 days' notice in writing, mailed to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent of the Common Shares and Preferred Shares by registered or certified mail, and to the holders of the Right Certificates by first-class mail. If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the Rights Agent. If the Company shall fail to make such appointment within a period of 30 days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated -44- 45 Rights Agent or by the holder of a Right Certificate (who shall, with such notice, submit his Right Certificate for inspection by the Company), then the registered holder of any Right Certificate may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Company or by such a court, shall be, or shall be affiliated with, a corporation organized and doing business under the laws of the United States or of the State of Texas or of the State of New York or of the State of Delaware (or of any other state of the United States so long as such corporation is authorized to do business as a banking institution in the State of Texas or the State of New York or the State of Delaware), in good standing, having a principal office in the State of Texas or in the State of New York or in the State of Delaware, which is authorized under such laws to exercise corporate trust or stock transfer powers and is subject to supervision or examination by federal or state authority and which has at the time of its appointment as Rights Agent a combined capital and surplus of at least $50 million. After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent without further act or deed; but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Not later than the effective date of any such appointment the Company shall file notice thereof in writing with the predecessor Rights Agent and each transfer agent of the Common Shares and Preferred Shares, and mail a notice thereof in writing to the registered holders of the -45- 46 Right Certificates. Failure to give any notice provided for in this Section 21, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be. Section 22. Issuance of New Right Certificates. Notwithstanding any of the provisions of this Agreement or of the Rights to the contrary, the Company may, at its option, issue new Right Certificates evidencing Rights in such form as may be approved by its Board of Directors to reflect any adjustment or change in the Purchase Price per share and the number of kind or class of shares or other securities or property purchasable under the Right Certificates made in accordance with the provisions of this Agreement. Section 23. Redemption. (a) The Board of Directors of the Company may, at its option, at any time prior to such time as any Person becomes an Acquiring Person redeem all but not less than all the then outstanding Rights at a Redemption price of $.01 per right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the February 28, 1996 (such redemption price being hereinafter referred to as the "Redemption Price"). (b) Immediately upon the action of the Board of Directors of the Company ordering the redemption of the Rights, and without any further action and without any notice, the right to exercise the Rights will terminate and the only right thereafter of the -46- 47 holders of Rights shall be to receive the Redemption Price. Within 10 days after the action of the Board of Directors ordering the redemption of the Rights, the Company shall give notice of such redemption to the holders of the then outstanding Rights by mailing such notice to all such holders at their last addresses as they appear upon the registry books of the Rights Agent or, prior to the Distribution Date, on the registry books of the Transfer Agent for the Common Shares. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of redemption will state the method by which the payment of the Redemption Price will be made. Neither the Company nor any of its Affiliates or Associates may redeem, acquire or purchase for value any Rights at any time in any manner other than that specifically set forth in this Section 23 or in Section 24 hereof, and other than in connection with the purchase of Common Shares prior to the Distribution Date. Section 24. Exchange. (a) The Board of Directors of the Company may, at its option, at any time after any Person becomes an Acquiring Person, exchange all or part of the then outstanding and exercisable Rights (which shall not include Rights that have become void pursuant to the provisions of Section 11(a)(ii) hereof) for shares of Series A Common Stock or Series B Common Stock at an exchange ratio of one share of Series A Common Stock or Series B Common Stock, as determined by the Board of Directors, per Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction -47- 48 occurring after the date hereof (such exchange ratio being hereinafter referred to as the "Exchange Ratio"). Notwithstanding the foregoing, the Board of Directors shall not be empowered to effect such exchange at any time after any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or any such Subsidiary, or any entity holding Common Shares for or pursuant to the terms of any such plan), together with all Affiliates and Associates of such Person, becomes the Beneficial Owner of 50% or more of the voting power of the Common Shares then outstanding. Section 25. Notice of Certain Events. In case the Company shall propose (a) to pay any dividend payable in stock of any class to the holders of its Preferred Shares or to make any other distribution to the holder of its Preferred Shares (other than a regular quarterly cash dividend) or (b) to offer to the holder of its Preferred Shares rights or warrants to subscribe for or to purchase any additional Preferred Shares or shares of stock of any class or any other securities, rights or options, or (c) to effect any reclassification of its Preferred Shares (other than a reclassification involving only the subdivision of outstanding Preferred Shares), or (d) to effect any consolidation or merger into or with, or to effect any sale or other transfer (or to permit one or more of its subsidiaries to effect any sale or other transfer), in one or more transactions, of more than 50% of the assets or earning power of the Company and its subsidiaries (taken as a whole) to, any other Person, or (e) to effect the liquidation, dissolution or winding up of the Company, then, in each such case, the Company -48- 49 shall give to each holder of a Right Certificate, in accordance with Section 26 hereof, a notice of such proposed action, which shall specify the record date for the purposes of such stock dividend, or distribution of rights or warrants, or the date on which such reclassification, consolidation, merger, sale, transfer, liquidation, dissolution, or winding up is to take place and the date of participation therein by the holders of the Common Shares and/or Preferred Shares, if any such date is to be fixed, and such notice shall be so given in the case of any action covered by clause (a) or (b) above at least 20 days prior to the record date for determining holders of the Preferred Shares for purposes of such action, and in the case of any such other action, at least 20 days prior to the date of the taking of such proposed action or the date of participation therein by the holders of the Common Shares and/or Preferred shares, whichever shall be the earlier. In case any of the events set forth in Section 11(a)(ii) of this Agreement shall occur, then, in any such case, the Company shall as soon as practicable thereafter give to each holder of a Right Certificate, in accordance with Section 26 hereof, a notice of the occurrence of such event, which shall specify the event and the consequences of the event to holders of rights under Section 11(a)(ii) hereof. Section 26. Notices. Notices or demands authorized by this Agreement to be given or made by the Rights Agent or by the holder of any Right Certificate to or on the -49- 50 company shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Rights Agent) as follows: A.H. Belo Corporation Communications Center Dallas, Texas Attention: Secretary Subject to the provisions of Section 21 hereof, any notice of demand authorized by this Agreement to be given or made by the Company or by the holder of any Right Certificate to or on the Rights Agent shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Company) as follows: Chemical Mellon Shareholder Services, L.L.C. 85 Challenger Road, Overpeck Centre, 4th Floor Ridgefield, New Jersey 07660 Attention: Vice President/Administration Notices or demands authorized by this Agreement to be given or made by the Company or the Rights Agent to the holder of any right Certificate shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed to such holder at the address of such holder as shown on the registry books of the Company. Section 27. Supplements and Amendments. The Company and the Rights Agent may from time to time supplement or amend this Agreement without the approval of any holders of Right Certificates in order to cure any ambiguity, to correct or supplement any -50- 51 provision contained herein which may be defective or inconsistent with any other provisions herein, or to make any other provisions in regard to matters or questions arising hereunder, which the Company and the Rights Agent may deem necessary or desirable, including but not limited to extending the Final Expiration Date and, provided that at the time of such amendment there is no Acquiring Person, the period of time during which the Rights may be redeemed, and which shall not adversely affect the interests of the holders of Right Certificates. Without limiting the foregoing, the Company may at any time prior to such time as any Person becomes an Acquiring Person amend this Agreement to lower the thresholds set forth in Sections 1(a) and 3(a) to not less than the greater of (i) the sum of .001% and the largest percentage of the outstanding Common Shares then known by the Company to be beneficially owned by any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or any Subsidiary of the Company, or any entity holding Common Shares for or pursuant to the terms of any such plan) and (ii) 10%. Section 28. Successors. All the covenants and provisions of this Agreement by or for the Benefit of the Company or the Rights Agent shall bind and inure to the benefit of their respective successors and assigns hereunder. Section 29. Benefits of this Agreement. Nothing in this Agreement shall be construed to give to any person or corporation other than the Company, the Rights Agent and the registered holders of the Right Certificates (and, prior to the Distribution Date, the -51- 52 Common Shares) any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company, the Rights Agent and the registered holders of the Right Certificates (and, prior to the Distribution Date, the Common Shares). Section 30. Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. Section 31. Governing Law. This Agreement and each Right Certificate issued hereunder shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be governed by and construed in accordance with the laws of such State applicable to contracts to be made and performed entirely within such State, except that the rights, duties and obligations of Chemical Mellon Shareholder Services, L.L.C. under this Agreement shall be governed by the laws of the State of New York without reference to the choice of law doctrine of such state. Section 32. Counterparts. This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. -52- 53 Section 33. Descriptive Headings. Descriptive headings of the several sections of this Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof. -53- 54 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. A.H. BELO CORPORATION Attest: By By ------------------------------ ------------------------------ Title: [Name and Title] CHEMICAL MELLON SHAREHOLDER SERVICES, L.L.C. Attest: By By ------------------------------ ------------------------------ Title: [Name and Title] -54- EX-10.1(1) 4 ABC TELEVISION NETWORK AFFILIATION AGRMNT. (WFAA) 1 EXHIBIT 10.1(1) CONTRACTS RELATING TO TELEVISION BROADCASTING The Company has renegotiated its affiliation agreements with ABC (the "Network"), resulting in an increase in the compensation paid by the Network to the Company in return for long-term extension of each of the agreements. Final documentation of the new ABC agreements has not been completed, although the Company is receiving its increased compensation under the new agreements. Attached is the most recent draft of the renegotiated Agreement for Affiliation (the "Agreement") between WFAA-TV in Dallas, Texas and ABC. The Company anticipates that the final version of the Agreement will not materially differ from the attached draft. 2 PRIMARY TELEVISION AFFILIATION AGREEMENT WFAA-TV, Inc. Communications Center 606 Young Street Dallas, TX 75202-4810 TELEVISION STATION: WFAA - Dallas, TX Gentlemen: The following shall constitute the agreement between American Broadcasting Companies, Inc. ("ABC" or "we") and WFAA-TV, Inc. ("you"), in order that your station may continue to serve the public interest, convenience and necessity. We and you hereby mutually agree upon the following plan of network cooperation which shall replace the affiliation agreement between WFAA Television, Inc. and us dated September 21, 1989 (and subsequently assigned to WFAA-TV, Inc.), as amended: I. NETWORK AFFILIATION AND PROGRAM SERVICE A. PRIMARY AFFILIATION. You agree to serve as our primary affiliate to broadcast Network Television Programs, in the community to which your station is licensed by the Federal Communications Commission, subject to the conditions and limitations set forth herein. As used in this Agreement, Network Television Programs means television programs which are part of the network schedule for the then current September to September television season, broadcast on a national television basis and in the time period established for such broadcast by ABC. (Network 3 2 Television Programs will also be referred to herein as "network programs," "television programs," "programs" or "programming" or in the singular of such terms.) B. FIRST CALL RIGHTS. To enable you to serve as our primary affiliate, we agree to offer you first call on the right to broadcast Network Television Programs, in the time period established by ABC for their broadcast, in the community to which your station is licensed by the Federal Communications Commission ("First Call Rights"), for reception by the general public in places to which no admission is charged. Notwithstanding the foregoing, ABC shall have the right to authorize any television broadcasting station regardless of the community to which it is licensed by the FCC, to broadcast any network presentation of a subject we deem to be of immediate national significance including, but not limited to, a Presidential address. 1. You agree that, within 15 days of the date of our offer of a First Call Right to a regularly scheduled network program, you will advise us of your acceptance (if requested to do so by the terms of our offer) or rejection. With respect to any network program not regularly scheduled, you will advise us of your acceptance or rejection of our offer of a First Call Right within 72 hours (exclusive of Saturdays, Sundays and holidays) after such offer has been received at your 4 3 station. However, if the first broadcast referred to in our offer is scheduled to occur within less than 15 days after the date of our offer with respect to regularly scheduled network programs or less than 72 hours after our offer has been received at your station with respect to network programs not regularly scheduled, you shall notify us of your acceptance or rejection of such offer as promptly as possible, but in no event after the first broadcast time specified in such offer. Acceptance by you of our offer of a First Call Right shall constitute your agreement to broadcast subject network program in accordance with the terms of this Agreement and of our offer to you. As an ABC primary affiliate, you are obligated to accept the substantial majority of the ABC network programs offered to you. Your failure to do so shall constitute a material breach of this Agreement entitling ABC, in addition to all other remedies, to terminate this Agreement on fourteen (14) days written notice to you. 2. You will be offered "First Call Rights" with respect to: a. Network Sponsored Programs. "Network sponsored programs", as used in this Agreement, shall mean those Network Television Programs which contain one or more commercial announcements paid for by or on behalf of one 5 4 or more ABC Network advertisers. You agree to broadcast network sponsored programs in their entirety, including but not limited to the network commercial announcements ordered for your station, network identifications, program promotional material or credit announcements contained in such programs which you accept, without interruption or deletion or addition of any kind. Notwithstanding the foregoing, you may substitute other ABC promotional announcements in lieu of program promotional material which is inaccurate as it pertains to your station. It is also understood that no commercial announcement, promotional announcement or public service announcement will be broadcast by you during any interval within a network program designated by ABC as being for the sole purpose of making a station identification announcement. b. Network Sustaining, Cooperative and Spot Carrier Programs. i) We will from time to time offer you live or recorded Network Television Programs identified as sustaining programs, cooperative programs or spot carrier programs. Except as set forth below in subparagraphs (ii) and (iii), you agree to 6 5 broadcast such programs which you accept in their entirety without interruption or deletion or addition of any kind. ii) The network sustaining programs which we may offer to you may not, without our prior written consent, be sold by your station for commercial sponsorship or interrupted for commercial announcements or used for any purpose other than sustaining broadcasting. iii) You may carry the cooperative or spot carrier programs on the same basis as regular sustaining programs or you may offer them for commercial sponsorship on terms and conditions specified by us at the time such programs are offered to you. C. PROGRAM DELIVERY. By means satisfactory to us, we will arrange, at our own expense, for programs to be delivered to your station. II. TERM This agreement shall become effective at 3:00 AM, NYT, on the 1st day of September, 1994, and shall continue until [ * ]. * Confidential information has been omitted and filed separately with the SEC. 7 6 III. NETWORK STATION COMPENSATION A. You will be entitled to receive an Annual Compensation Guarantee (net of affiliation fees and payable monthly in equal installments) as set forth in subparagraph B for (i) the first year of this agreement and (ii) for each year thereafter during the term hereof provided that the following conditions are satisfied in the year immediately preceding each such year including the first year (subject to your station's rights to reject or substitute programming pursuant to paragraphs VI(C) (a) and (b) of this Agreement): 1. your station maintains the same level of clearances of ABC network programs as it maintained in the 1993-1994 television season (i.e., the last two quarters of 1993 and the first two quarters of 1994) (the "1994 Season"); 2. your station's preemption levels for network programming do not exceed such preemption levels during the 1994 Season; and 3. Nightline will be cleared on a "live" basis beginning no later than January 2, 1995; B. The Annual Compensation Guarantee shall be [ * ] Dollars, provided, that for any period when Nightline is cleared on a live basis, the Annual * Confidential information has been omitted and filed separately with the SEC. 8 7 Compensation Guarantee shall be [ * ] Dollars. C. Your entitlement to the annual compensation guarantee in any particular year after the first year hereof is dependent on your satisfaction for the immediately preceding year (including the first year hereof) of the conditions set out immediately above in subparagraph A. For any year following a year in which such conditions have been satisfied, your compensation will be in the amount of the guarantee (plus any additional compensation due under subparagraph D immediately below). For any year following a year in which such conditions have not been satisfied, your compensation will be determined instead solely by the formula set forth in Schedule A attached hereto and made a part hereof. D. For any year (including the first year hereof) in which your annual compensation will be in the amount of the guarantee, your compensation under the formula set forth in Schedule A will be compared with the guarantee and if such compensation is greater than such guarantee, you will be paid the difference as additional compensation for that year. E. During any year in which the annual compensation guarantee set forth in subparagraphs A and B above does not apply, we reserve the right to reevaluate and change at any time (a) the network station rate set forth in Schedule A, (b) the percentage(s) * Confidential information has been omitted and filed separately with the SEC. 9 8 set forth in the Table in Schedule A, or (c) your network weekly deduction, by notice to you in writing to such effect ninety (90) days prior to the effective date of any such change. If the effect of such changes would be to decrease your annual network compensation under Schedule A by more than 25%, you may, if you so elect, terminate this affiliation agreement by giving us prior written notification within forty-five (45) days after the date of our notice to you. IV. NETWORK NON-DUPLICATION PROTECTION You shall be entitled to network non-duplication protection provided as and to the extent set forth in Rider One to this Agreement, which is attached hereto and made a part hereof. V. CUT-IN ANNOUNCEMENTS AND LOCAL TAG SERVICES A. CUT-IN ANNOUNCEMENTS. "Cut-In Announcements", as used herein, shall mean the substitution of a special commercial in place of a regularly scheduled network commercial. 1. Upon at least twenty-four (24) hours' notice, you shall, at our request, furnish such personnel and equipment as may be necessary to (a) broadcast cut-in announcements from your station alone, or (b) originate from your station cut-in announcements to one or more other stations, without regard to whether or not your station is requested to broadcast said cut-in announcement(s). Notwithstanding anything contained in 10 9 this Agreement, you may refuse to broadcast any such cut-in announcement in the community to which your station is licensed by the FCC if, in your opinion, it is not in the public interest, convenience or necessity, but you shall nevertheless furnish such personnel and equipment as may be necessary to originate such cut-in announcement(s) from your station to one or more other stations. 2. Cut-in announcements shall be broadcast only when authorized by us and then only in accordance with the instructions furnished to you. You will be supplied, as promptly as possible, with the material and instructions for these announcements. 3. We may cancel any order for cut-in announcements without liability on our part, provided we do so upon not less than twenty-four (24) hours' notice to you, failing which, we will pay you the compensation you would have received if the announcement(s) had continued as scheduled for twenty-four (24) hours following receipt by you of such notice of cancellation. 4. For each program during which such cut-in announcements are included, we shall pay you in accordance with the applicable table set forth in Schedule B hereto and hereby made a part hereof. 11 10 B. LOCAL TAG SERVICES. "Local Tag Announcements", as used herein, shall mean a visual commercial announcement, made by you on behalf of a local dealer of a network advertiser, not exceeding ten seconds of a one-minute network commercial announcement or five seconds of a thirty-second network commercial announcement projected by means of a slide and not utilizing more than two (2) slides. 1. Upon at least twenty-four (24) hours' notice, you shall, at our request, furnish such personnel and equipment as may be necessary to broadcast "local tag announcements". 2. Local tag announcements shall be broadcast in accordance with our instructions. The network advertiser shall supply to you or purchase from you, as promptly as possible, the slide(s) for each local tag announcement. Local tag announcements shall not be accompanied by oral announcements unless the network advertiser shall make direct requests of you therefor and shall have assumed sole responsibility for payment of such oral announcements. 3. We may cancel any order for local tag announcements without liability on our part provided we do so upon not less than twenty-four (24) hours' notice to you, failing which we will pay you the compensation you would have received if the local tag announcement(s) had continued as scheduled for 12 11 twenty-four (24) hours following receipt by you of such notice of cancellation. 4. For each local tag announcement which you broadcast, we shall compensate you in accordance with the applicable table set forth in Schedule B hereto and hereby made a part hereof. VI. GENERAL A. We may at any time, upon notice to you, substitute for any scheduled network program another network program, except that if such other network program in our judgment involves a special event of public interest or importance, no such notice is required. No compensation will be paid to you for the scheduled program or for the substitute program unless such substitute program is a network sponsored program in which event you shall be compensated in accordance with Section III of this Agreement. B. Nothing contained in this Agreement shall be construed to prevent or hinder us, at any time upon notice to you as soon as practicable, from cancellling one or more network programs, whether sponsored or sustaining, in which event you shall receive no compensation for any such canceled network sponsored program(s). C. With respect to network programs offered or already accepted pursuant to this Agreement, nothing herein contained shall be construed to prevent or hinder you from exercising your rights 13 12 under Federal Communications Commission rules to: a) reject or refuse network programs which you reasonably believe to be unsatisfactory, unsuitable or contrary to the public interest; or b) substitute a program, which in your good faith opinion, is of greater local or national importance. We shall not compensate you for any such program you have refused or rejected or for which you have substituted a program which is of greater local or national importance. With respect to programs already accepted hereunder, you shall give us prompt telegraphic notification of any such refusal, rejection or substitution no later than fourteen (14) days prior to the air date of such programming, except where the nature of the substitute program makes such notice impracticable (e.g., coverage of breaking news or other unscheduled events), in which case you agree to give us as much advance notice as possible under the circumstances. Such notice shall include a statement of the reason(s) you believe that a rejected or refused network program is unsatisfactory, unsuitable or contrary to the public interest, and/or that a substituted program is of greater local or national importance. In addition to all other remedies, we shall have the right, upon thirty (30) days' notice, to terminate your "First Call 14 13 Rights" on any series of Network programs already accepted hereunder and withdraw all future episodes of that series if one or more individual program episode(s) is pre-empted by you for any reason other than those set forth in (a) and (b) above. We shall also have the right, upon thirty (30) days' notice, to terminate your "First Call Rights" concerning any series of Network programs already accepted hereunder and to withdraw all future episodes of that series if three or more individual program episodes are pre-empted by you in any thirteen-week period, whether or not such pre-emptions are for the reasons set forth in (a) and (b) above. Such thirteen-week periods shall be measured consecutively from the first broadcast date of the program series in question. We reserve the right not to offer you the "First Call Rights" for the next broadcast season on any series of Network program as to which we have terminated your "First Call Rights" and withdrawn future episodes of that series pursuant to this Paragraph and which has been placed by ABC on another station serving your market. D. You will submit to us in writing, upon forms provided by us for that purpose, such reports covering network programs broadcast by your station as ABC may request from time to time. To verify your carriage of network commercial announcements, identifications and program promotional material, we may require 15 14 delivery by you, within five (5) days of our request, copies of your official station logs, air checks or broadcast tapes. E. Neither you nor we shall incur any liability hereunder because of our failure to deliver, or your failure to broadcast, any or all network programs due to: (a) failure of facilities (b) labor disputes, or (c) causes beyond the control of the party so failing to deliver or broadcast. F. You agree to notify us of any application made to the Federal Communications Commission to modify your station's transmitter location, power, frequency or hours of operation within ten (10) days of the filing of such application. In the event that the transmitter location, power, frequency or hours of operation of your station are changed at any time so that your station is of less value to us as a network outlet than it is as of the effective date of this agreement, including but not limited to, as a result of additional overlap of your station's broadcast signal with that of another ABC affiliate, we will have the right to terminate this Agreement upon thirty (30) days' advance written notice. G. Unless we exercise our right of termination set forth in this paragraph, this Agreement shall be binding on any assignee or transferee of your station's license. You agree not to assign or 16 15 to transfer any of the rights or privileges granted to you under this Agreement without our prior consent in writing, which consent shall not be unreasonably withheld. You also agree that if any application is made to the Federal Communications Commission pertaining to an assignment or a transfer of control of your license, or any interest therein, you shall notify us in writing immediately of the filing of such application. Except as to assignments or transfers of control comprehended by Section 73.3540(f) of the Rules and Regulations of the Federal Communications Commission, we shall have the unilateral right to terminate this Agreement effective as of the effective date of any assignment or transfer of control (voluntary or involuntary) of your license or any interest therein, provided ABC shall have given you notice in writing of such termination within thirty (30) days after we have been advised that such application for assignment or transfer has been filed with the Federal Communications Commission. If you fail to notify us of the assignment or transfer of control of your station's license, we shall have the unilateral right, as a non-exclusive remedy, to terminate this Agreement within thirty (30) days of receiving notice of said assignment or transfer or control. You agree that you shall not consummate any assignment or transfer of control of your station's license until you have procured and delivered to us, in form satisfactory to us, the acknowledgment of the proposed assignee or transferee that, upon 17 16 consummation of the assignment or transfer of control of your station's license, the assignee or transferee will assume and perform this Agreement in its entirety without limitation of any kind. You agree that in view of the uniqueness of the plan of network cooperation set forth in this Agreement and the fact that money damages would be inadequate to compensate ABC for the breach of your obligations hereunder, in addition to all other remedies, ABC shall be entitled to obtain equitable relief to enforce the obligations set forth in this paragraph. H. Your rights under this Agreement are limited to the First Call Rights to Network Television Programs pursuant to the terms herein. You agree not to authorize, cause, permit or enable the use of any program which we supply to you herein for any purpose other than broadcasting by your station pursuant to the terms herein, in the community to which your station is licensed by the Federal Communications Commission, for reception by the general public in places to which no admission is charged. You agree when you are authorized to tape a program for subsequent broadcast that the recording will be broadcast not more than once in its entirety and will be erased within six (6) hours of use. All rights not specifically granted to you by this Agreement with respect to the broadcast, exhibition or use of Network Television Programs shall be retained by ABC. 18 17 I. ABC will continue to offer your station substantially the same local commercial availabilities at substantially the same times as are presently offered to ABC affiliates generally, or will provide a comparable economic benefit to the station. J. Except with our prior written consent and except upon such terms and conditions as we may impose, you agree not to authorize, cause, permit or enable anything to be done whereby a recording on film, tape or otherwise is made or a recording is broadcast, of a program which has been, or is being, broadcast on our network, or a rebroadcast is made of the broadcast transmission of your station during any hours when your station is broadcasting a program provided by ABC. K. With respect to any and all promotional material issued by you or under your direction or control, you agree to abide by any and all restrictions of which we advise you pertaining to the promotion of a network program(s) scheduled to be broadcast by you in your community, including, but without limitation, on-the-air promotion, billboards, and newspaper or other printed advertisements, announcements or promotions. L. You agree to maintain for your television station such licenses, including performing rights licenses as now are or hereafter may be in general use by television broadcasting stations and necessary for you to broadcast the television programs which we 19 18 furnish to you hereunder. We will clear all music in the repertory of ASCAP and of BMI used in our network programs, thereby licensing the broadcasting of such music in such programs over your station. You will be responsible for all music license requirements for any commercial or other material inserted by you within or adjacent to our network programs in accordance with this agreement. M. The furnishing of film or tape recorded programs hereunder is contingent upon our ability to make arrangements satisfactory to us for the film or tape recordings necessary to deliver the programs to you. Such film or tape recorded programs shall be used only for a single television broadcast over your station. Positive prints of film or tape recorded programs are to be shipped by us, shipping charges prepaid, and you agree to return to us or to forward to such television station as we designate, shipping charges prepaid, each print or copy of said film or tape recording received by you hereunder, together with the original reels and containers furnished therewith. You will return or forward all prints in the same condition as received by you, ordinary wear and tear excepted, immediately after a single TV broadcast over your station. In the event you damage a print of any film or tape recorded program which is delivered to you, or fail to return or forward the original reels and containers furnished therewith, as aforesaid, you agree to pay the cost of replacing the complete print, original reels and/or containers as and when billed by us. 20 19 N. No inducements, representations or warranties except as specifically set forth herein have been made by any of the parties to this Agreement. This Agreement constitutes the entire contract between the parties hereto and no provision thereof shall be changed or modified, nor shall this Agreement be discharged in whole or in part, except by an agreement in writing, signed by the party against whom the change, modification or discharge is claimed or sought to be enforced; nor shall any waiver of any of the conditions or provisions of this Agreement be effective and binding unless such waiver shall be in writing and signed by the party against whom the waiver is asserted, and no waiver of any provision of this Agreement shall be deemed to be a waiver of any preceding or succeeding breach of the same or of any other provision. O. All notices, demands, requests or other communications which may be or are required to be given or made by ABC or you pursuant to this Agreement (except for our program offers and your notices of acceptance or rejection, if required, of such offers and any other program information or program administration communications) shall be delivered (postage or fee prepaid) by first-class mail, express mail, express delivery service or by facsimile transmission addressed as follows: (a) If to you: [station or owner] [address, phone and fax numbers] with a copy (which shall not constitute notice) to: 21 20 [station attorney] [address, phone and fax numbers] (b) If to ABC: Ms. Maureen Lesourd Senior Vice President Affiliate Relations ABC Television Network 77 West 66 Street, 2nd Floor New York, NY 10023-6298 Phone: 212-456-6493 / Fax: 212-456-7450 with a copy (which shall not constitute notice) to: Roger Goodspeed, Esq. Capital Cities/ABC, Inc. Law & Regulation Department 77 West 66 Street, 16th Floor New York, NY 10023-6298 Phone: 212-456-7593 / Fax: 212-456-6202 or to such other person, address or facsimile number as you or ABC may designate by written notice. P. This Agreement and all questions relating to its validity, interpretation, performance, and enforcement (including, without limitation, provisions concerning limitations of action), shall be governed by and construed in accordance with the laws of the State of New York, notwithstanding conflict-of-laws doctrines of any state or other jurisdictions to the contrary. Q. Upon termination of this Agreement, the consent theretofore granted to broadcast our network programs or use ABC logos or trademarks shall be deemed immediately withdrawn and you shall have no further rights of any nature whatsoever in such 22 21 programs, logos or trademarks. R. The parties hereto acknowledge that, in view of the uniqueness of the plan of network cooperation set forth in this Agreement, in the event that one party's obligations under this Agreement are not performed in accordance with its terms, the other party would not have an adequate remedy at law and therefore agree that each party hereto shall be entitled to specific performance of the terms hereof in addition to any other remedy to which it may be entitled at law or in equity. S. You agree to indemnify and hold ABC and its parent corporation, subsidiaries and their respective officers, directors, agents and employees, successors and assigns harmless from and against any and all claims made against us and all damages, liabilities, costs and expenses incurred as a result of such claims, including reasonable attorney's fees, arising out of the broadcast by ABC of any material supplied by you to ABC in accordance with this Agreement, and we agree to indemnify and hold you harmless from and against any and all claims made against you and all damages, liabilities, costs and expenses incurred as a result of such claims, including reasonable attorney's fees, arising out of the broadcast by you of any material provided by ABC to you in accordance with this Agreement. It is understood that the foregoing indemnities shall apply only with respect to materials that are broadcast without change from the form and content in which such materials were originally provided and in 23 22 strict conformance to any instructions or limitations given by the party providing the material. Each party will notify the other promptly of any litigation or claim to which such indemnity applies and will cooperate fully in the defense at the other party's request. The provisions of this paragraph shall survive the expiration or sooner termination of this agreement. T. Nothing in this Agreement shall create any partnership, association, joint venture, fiduciary or agency relationship between ABC and you. If, after examination, you find that the arrangement herein proposed is satisfactory to you, please indicate your acceptance on the copy of this letter enclosed for that purpose and return that copy to us. Very sincerely yours, AMERICAN BROADCASTING COMPANIES, INC. By: ---------------------------------- Accepted this day of ----- , 19 - ------------------ --- Licensee: WFAA-TV, Inc. By: -------------------------------- Name: ------------------------------ Title: ----------------------------- 24 RIDER ONE You shall be entitled to network non-duplication protection, as defined by Rule 76.92 of the Federal Communications Commission Rules, as follows: a. The geographic zone of network non-duplication protection shall be the Area of Dominant Influence ("ADI") (as defined by Arbitron) in which your station is located, or any lesser zone pursuant to any geographic restrictions contained in the Federal Communications Commission rules and regulations, now or as subsequently modified. b. Network non-duplication protection shall extend to all ABC television network programs that you broadcast in accordance with this agreement. Protection shall not extend to individually pre-empted programs of an otherwise cleared series. c. Network non-duplication protection shall begin 48 hours prior to the live time period designated by us for broadcast of that network program by your station, and shall end at 12:00 Midnight on the seventh day following that designated time period. You are under no obligation to exercise in whole or in part the network non-duplication rights granted under this agreement. 25 SCHEDULE A STATION COMPENSATION (a) We will pay you within a reasonable period of time after the close of each four or five week accounting period, as the case may be, for broadcasting each network sponsored program or portion thereof hereunder, except those specified in paragraph (b) hereof, which is broadcast over your station during the live time period* therefor, the amount resulting from multiplying the following: (i) Your network station rate of (1) [ * ] Dollars during any period when your annual compensation guarantee of [ * ] Dollars is in effect, (2) [ * ] Dollars during any period when your annual compensation guarantee of [ * ] Dollars is in effect, or (3) such other applicable rate, pursuant to the terms of Section III of the Agreement; by (ii) the percentage set forth in the table below opposite such applicable time period or such other percentage applicable pursuant to the terms of Section III of the Agreement; by * Confidential information has been omitted and filed separately with the SEC. 26 (iii) the fraction of an hour substantially occupied by such program or portion there; of; by (iv) the fraction of the aggregate length of all commercial availabilities** during such program or portion thereof occupied by network commercial announcements***. * Live time period, as used herein, means the time period or periods as specified by us in our initial offer of a network program for the broadcast of such program over your station. ** Commercial availability, as used herein, means a period of time made available by us during a network sponsored program for one or more network commercial announcements or local cooperative commercial announcements. *** Network commercial announcement, as used herein, means a commercial announcement broadcast over your station during a commercial availability and paid for by or on behalf of one or more of our network advertisers, not including, however, announcements consisting of billboards, credits, public service announcements, promotional announcements, and announcements required by law. 27 For each network sponsored program or portion thereof, except those specified in paragraph (b) hereof, which is broadcast by your station during a time period other than the live time period therefor, we will pay you as if your station had broadcast such program or portion thereof during such live time period, except that: (i) if the percentage set forth above opposite the time period during which your station broadcast such program or portion thereof is less than that set forth opposite such live time period, then we will pay you on the basis of the time period during which your station broadcast such program or portion thereof. (b) Payment For Other Programs We will establish such compensation arrangements as we and you shall agree upon prior to the expiration of the applicable periods of time for program acceptance, as set forth in Paragraph I(B) of this affiliation agreement, for all network sponsored programs broadcast by your station consisting of: (i) Sports programs; (ii) special events programs (including, but not limited to, special news programs, awards programs, entertainment specials and miniseries); 28 (iii) programs for which we specified a live time period, which time period straddles any of the time period categories in the table in paragraph (a) above; and (iv) any other programs which we may designate from time to time. (c) Deductions (i) From the amounts we are to pay you for station compensation hereunder, we shall throughout the term of this affiliation agreement deduct during each accounting period a sum equal to 168% of your station's network rate, or such other percentage applicable pursuant to the terms of Section III of the Agreement, for each week of said period. (ii) We will deduct a sum equal to the total of whatever fees, if any, may have mutually been agreed upon by you and us with respect to local cooperative commercial announcements broadcast during the applicable accounting period for which your station is being compensated. 29 SCHEDULE B COMPENSATION FOR CUT-IN AND LOCAL TAG ANNOUNCEMENT(S) A. CUT-IN ANNOUNCEMENTS I. With respect to programs broadcast by you during the time period(s) specified by us in our initial offer for such programs. For each local cut-in announcement you broadcast within a program, which program is broadcast during the time period(s) specified by us in our initial offer for such program, we will pay you the amount resulting from multiplying your network station rate (set forth in Section II of the agreement) by the percentage for cut-in announcement(s) set forth in the applicable Table in Section C below opposite such applicable time period. II. With respect to programs broadcast by you with our consent during time period(s) other than that specified by us in our initial offer of such programs. For each local cut-in announcement you broadcast within a program, which program is broadcast by you with our consent during a time period other than that specified by us in our initial offer of such program, we will pay you an amount as set forth in Section A.I. above, except that: 30 (i) if the percentage set forth in the applicable Table in Section C below for cut-in announcement(s) opposite the time period during which your station actually broadcast the program in which you broadcast or originated such cut-in announcement(s) is less than that set forth opposite the applicable time period specified in our initial offer of such program, then we will pay you for each cut-in announcement(s) on the basis of the time period during which your station actually broadcast such program. III. With respect to programs broadcast by you in a time period which straddles any of the time period categories set forth in the applicable Table in Section C below. In the event that we offer you a program for broadcast in a time period which straddles any of the time period categories set forth in the applicable Table in Section C below, and you broadcast such program within which you also broadcast or originate one or more cut-in announcement(s), we will pay you such amounts as we and you shall have agreed upon prior to your broadcast or 31 origination of such cut-in announcement(s). B. LOCAL TAG ANNOUNCEMENTS I. With respect to programs broadcast by you during the time period(s) specified by us in our initial offer for such programs. For each local tag announcement you broadcast within a program, which program is broadcast during the time period(s) specified by us in our initial offer for such program, we will pay you the amount resulting from multiplying your network station rate (set forth in Section II of the agreement) by the percentage for each local tag announcement set forth in the applicable Table in Section C below opposite such applicable time period. II. With respect to programs broadcast by you with our consent during time Period(s) other than that specified by us in our initial offer of such programs. For each local tag announcement you broadcast within a program, which program is broadcast by you with our consent during a time period other than that specified by us in our initial offer of such program, we will pay you an amount as set forth in Section B.I. above, except that: 32 (i) if the percentage set forth in the applicable Table in Section C below for each local tag announcement opposite the time period during which your station actually broadcast the program in which you broadcast such local tag announcement is less than that set forth opposite the applicable time period specified in our initial offer of such program, then we will pay you for each local tag announcement on the basis of the time period during which your station actually broadcast such program. III. With respect to programs broadcast by you in a time period which straddles any of the time period categories set forth in the applicable Table in Section C below. In the event that we offer you a program for broadcast in a time period which straddles any of the time period categories set forth in the applicable Table in Section C below, and you broadcast such program within which you also broadcast one or more local tag announcement(s), we will pay you such amounts as we and you shall have agreed upon prior to your broadcast of such local tag announcement(s). EX-10.1(2) 5 ABC TELEVISION NETWORK AFFILIATION AGRMNT. (KXTV) 1 EXHIBIT 10.1(2) CONTRACTS RELATING TO TELEVISION BROADCASTING The Company has renegotiated its affiliation agreements with ABC (the "Network") with respect to its Sacramento, California station (KXTV), resulting in an increase in the compensation paid by the Network to the Company in return for long-term extension of the agreement. Final documentation of the new ABC agreement has not been completed, although the Company expects the agreement to be substantially in the form of the WFAA agreement except for the compensation provisions which are peculiar to KXTV. The final documents will be filed upon completion. EX-10.1(3) 6 CBS TELEVISION NETWORK AFFILIATION AGRMNT. (KHOU) 1 EXHIBIT 10.1(3) CBS TELEVISION NETWORK A Division of CBS Inc. AFFILIATION AGREEMENT ------------- CBS TELEVISION NETWORK, A Division of CBS Inc., 51 West 52 Street, New York, New York 10019 ("CBS"), and KHOU-TV, INC., P.O. Box 11, Houston, Texas 77001 ("Broadcaster"), licensed to operate television station KHOU-TV at Houston, Texas on channel number 11 ("Affiliated Station"), hereby mutually covenant and agree, as of the 9th day of December, 1994, as follows: 1. Offer, Acceptance and Delivery of Network Programs. Broadcaster shall have a "first call" on CBS network television programs ("Network Programs") as follows: (a) Offer of Network Programs. CBS shall offer to Broadcaster for broadcasting by Affiliated Station those Network Programs which are to be broadcast on a network basis by any television broadcast station licensed to operate in Affiliated Station's community of license. (See Rider I.) (b) Acceptance of Network Programs. As to any offer described in Paragraph 1(a) of this Agreement, Broadcaster may accept such offer only by notifying CBS, by means of CBS's computer-based communications system, of such acceptance within 72 hours (exclusive of Saturdays, Sundays and holidays), or such longer period as CBS may specify therein, after such offer; provided, however, that, if the first broadcast referred to in such offer is scheduled to occur less than 72 hours after the making of the offer, Broadcaster shall notify CBS of the acceptance or rejection of such offer as promptly as possible and in any event prior to the first broadcast time specified in such offer. Such acceptance shall constitute Broadcaster's agreement that Affiliated Station will broadcast such Network Program or Programs in accordance with the terms of this Agreement and of such offer, and so long, as Affiliated Station so broadcasts such Network Program or Programs, CBS will not, subject to its rights in the program material, authorize the broadcast thereof on a network basis by any other television broadcast station licensed to operate in Affiliated Station's community of license; provided, however, that CBS shall have the right to authorize any television broadcast station, wherever licensed to operate, to broadcast any Network Program consisting of an address by the President of the United States of America on a subject of public importance or consisting of coverage of a matter of immediate national concern. If, as to any Network Program offered hereunder, Broadcaster does not notify CBS as provided for in this Paragraph l(b), Broadcaster shall have no rights with respect to such Network Program, and CBS may offer such Network Program on the same or different terms to any other television broadcast station or stations licensed to operate in Affiliated -1- 2 Station's community of license; provided, however, that, if any Network Program offered hereunder is accepted, by Affiliated Station, upon any other terms or conditions to which CBS agrees in writing, then the provisions of this Agreement shall apply to the broadcast of such Network Program except to the extent such provisions are expressly varied by the terms and conditions of such acceptance as so agreed to by CBS. (c) Delivery of Network Programs. Any obligation of CBS to furnish Network Programs for broadcasting by Affiliated Station is subject to CBS's making of arrangements satisfactory to it for the delivery of Network Programs to Affiliated Station. 2. Payment to Broadcasters. (a) Definitions. (i) "Live Time Period" means the time period or periods specified by CBS in its initial offer of a Network Program to Broadcaster for the broadcast of such Network Program over Affiliated Station; (ii) "Affiliated Station's Network Rate" shall be $ [ ** ] and is used herein solely for purposes of computing payments by CBS to Broadcaster; (iii) "Commercial Availability" means a period of time made available by CBS during a Network Commercial Program for one or more Network Commercial Announcements or local cooperative commercial announcements; and (iv) "Network Commercial Announcements" means a commercial announcement broadcast over Affiliated Station during a Commercial Availability and paid for by or on behalf of one or more CBS advertisers, but does not include announcements consisting of billboards, credits, public service announcements, promotional announcements and announcements required by law. (b) Payment for Broadcast of Programs. For each Network Commercial Program or portion thereof, except those specified in Paragraph 2(c) hereof, which is broadcast over Affiliated Station during the Live Time Period therefor and the Live Time Period for which is set forth in the table below, CBS shall pay Broadcaster the amount resulting from multiplying the following: (i) Affiliated Station's Network Rate; by (ii) the percentage set forth below opposite such time period (which, unless otherwise specified, is expressed in Affiliated Station's then-current local time); by (iii) the fraction of an hour substantially occupied by such program or portion thereof; by (iv) the fraction of the aggregate length of all Commercial Availabilities during such program or portion thereof occupied by Network Commercial Announcements. * Effective February 2, 1996 Affiliated Station's Network Rate will be increased to $ [ ** ]. (See Rider II.) ** Confidential information has been omitted and filed separately with the SEC. -2- 3 Table Monday through Friday 6:00 a.m. - 9:00 a.m . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.2% 9:00 a.m. - 11:00 a.m . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15% 11:00 a.m. - 3:00 p.m . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6% 3:00 p.m. - 5:00 p.m . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12% 5:00 p.m. - 7:00 p.m . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15% 7:00 p.m. - 10:00 p.m . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28% 10:00 p.m. - 11:00 p.m . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15% Saturday 7:00 a.m. - 8:00 a.m. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7% 8:00 a.m. - 5:00 p.m. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12% 5:00 p.m. - 7:00 p.m. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15% 7:00 p.m. - 10:00 p.m. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28% 10:00 p.m. - 11:00 p.m. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15% Sunday 10:30 a.m. - 5:00 p.m. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12% 5:00 p.m. - 6:00 p.m. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15% 6:00 p.m. - 10:00 p.m. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28% 10:00 p.m. - 11:00 p.m. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15%
For each Network Program or portion thereof, except those specified in Paragraph 2(c) hereof, which is broadcast by Affiliated Station during a time period other than the Live Time Period therefor and the Live Time Period for which is set forth in the table above, CBS shall pay Broadcaster as if Affiliated Station had broadcast such program or portion thereof during such Live Time Period, except that: (i) if the percentage set forth above opposite the time period during which Affiliated Station broadcast such program or portion thereof is less than that set forth opposite such Live Time Period, then CBS shall pay Broadcaster on the basis of the time period during which Affiliated Station broadcast such program or portion thereof; and (ii) if the time period or any portion thereof during which Affiliated Station broadcast such program is not set forth in the table above, then CBS shall pay Broadcaster in accordance with Paragraph (c) hereof. (c) Payment or Broadcast of Other Programs. For the following programs, the percentages listed below (rather than those daypart percentages set forth in the table in Paragraph 2(b) hereinabove) shall be used in computing payment to Affiliated Station: -3- 4 Monday-Friday Daytime Game shows . . . . . . . . . . . . . . . . . 15% Monday-Friday Continuing Dramas . . . . . . . . . . . . . . . . . 6% Monday-Friday Late Night Daypart . . . . . . . . . . . . . . . . . 47.8% per telecast for live clearance or 12.8% per telecast for delayed clearance Monday-Friday CBS EVENING NEWS . . . . . . . . . . . . . . . . . . 5% CBS Sports programs . . . . . . . . . . . . . . . . . . . . . . . 0% CBS SUNDAY MORNING and FACE THE NATION . . . . . . . . . . . . . . 8%
Notwithstanding the payment obligations set forth in Paragraph 2(b) above, CBS shall pay Broadcaster such amounts as specified in CBS's program offer for Network Programs broadcast by Affiliated Station consisting of (i) special event programs (including, but not limited to, such programs as awards programs, mini-series, movie specials, entertainment specials, special-time- period broadcasts of regularly-scheduled series, and news specials such as political conventions, election coverage, presidential inaugurations and related events), (ii) paid political programming, and (iii) programs for which CBS specified a Live Time Period, or which Affiliated Station broadcast during a time period, any portion of which is not set forth in the table above. (d) Deduction. From the amounts otherwise payable to Broadcaster hereunder, there shall be deducted, for each week of the term of this Agreement, a sum equal to 168% of Affiliated Station's Network Rate. (e) Changes in Rate. CBS may reduce Affiliated Station's Network Rate in connection with a re-evaluation and reduction of the Affiliated Station Network Rate of CBS's affiliated stations in general, by giving Affiliated Station at least thirty- days' prior notice of such reduction in Affiliated Station's Network Rate in which event Broadcaster may terminate this Agreement, effective as of the effective date of any such reduction, on not less than fifteen-days' prior notice to CBS. In order to reflect differences in the importance of compensation payments to stations in markets of varying size, the size of any general reduction of the Network Rate of CBS's affiliated stations pursuant to this Paragraph 2(e) may vary to a reasonable degree according to each station's market-size category (i.e., 1-50, 51-100, 101-150 or 151+) Further, CBS agrees that in the event of such an across-the-board rate reduction, Affiliated Station's Network Rate shall be reduced according until thirty days after the effective date of the reduction, at which time, unless an additional corresponding benefit of equal value has accrued to the station, the Network Rate shall be restored to the previous level and a retroactive adjustment shall be made to make up the compensation difference. (f) Time of Payment. CBS shall make the payments hereunder reasonably promptly after the end of each four-week or five-week accounting period of CBS for Network Commercial Programs broadcast during such accounting period. -4- 5 (g) Reports. Broadcaster shall submit to CBS in the manner requested by CBS such reports as CBS may reasonably request concerning the broadcasting of Network Programs by Affiliated Station. 3. Term and Termination. (a) Term. The term of this Agreement shall be the period commencing on October 4, 1994 and expiring on [ ** ] provided; however, that, unless Broadcaster or CBS shall notify the other at least six months prior to the expiration of the original period or any subsequent five-year period that the party giving such notice does not wish to have the term extended beyond such period, the term of this Agreement shall be automatically extended upon the expiration of the original period and each subsequent extension thereof for an additional period of five years. Notwithstanding any provision of any offer or acceptance under Paragraph 1 hereof, upon the expiration or any termination of the term of this Agreement, Broadcaster shall have no right whatsoever to broadcast over Affiliated Station any Network Program. (b) Termination on Transfer of License or Interest in Broadcaster. Broadcaster shall notify CBS forthwith if any application is made to the Federal Communications Commission relating to a transfer either of any interest in Broadcaster or of Broadcaster's license for Affiliated Station. In the event that CBS shall reasonably disapprove of the proposed transferee, CBS shall have the right to terminate this Agreement effective as of the effective date of any such transfer (except a transfer within the provisions of Section 73.3540(f) of the Federal Communications Commission's present Rules and Regulations) by giving Broadcaster notice thereof, and of its reasons for disapproving of the proposed transferee, within thirty days after the date on which Broadcaster gives CBS notice of the making of such application. If CBS does not so terminate this Agreement, Broadcaster shall, prior to the effective date of any such transfer of any interest in Broadcaster or of Broadcaster's license for Affiliated Station, and as a condition precedent to such transfer, procure and deliver to CBS, in form reasonably satisfaction to CBS, the agreement of the proposed transferee that, upon consummation of the transfer, the transferee will unconditionally assume and perform all obligations of Broadcaster under this agreement. Upon delivery of said agreement to CBS, in form satisfactory to it, the provisions of this Agreement applicable to Broadcaster shall, effective upon the date of such transfer, be applicable to such transferee. Broadcaster's obligations to procure the assumption of this Agreement by any transferee of Affiliated Station as a condition precedent to such transfer shall be deemed to be of the essence of this Agreement; further, Broadcaster expressly recognizes that money damages will be inadequate to compensate CBS for the breach of such obligation, and that CBS shall accordingly be entitled to equitable relief to enforce the same. (c) Termination on Change of Transmitter Location, Power, Frequency or Hours of Operation of Affiliated Station. ** Confidential information has been omitted and filed separately with the SEC. -5- 6 Broadcaster shall notify CBS forthwith if application is made to the Federal Communications Commission to modify the transmitter location, power or frequency of Affiliated Station or Broadcaster plans to modify the hours of operation of Affiliated Station. CBS shall have the right to terminate this Agreement, effective upon the effective date of such modification, by giving Broadcaster notice thereof within thirty (30) days after the date on which Broadcaster gives CBS notice of the application or plan for such modification. If Broadcaster fails to notify CBS as required herein, then CBS shall have the right to terminate this Agreement by giving Broadcaster thirty (30) days' notice thereof within thirty (30) days of the date on which CBS first learns of such application. (d) Termination in the Event of Bankruptcy. Upon one (1) month's notice, CBS may terminate this Agreement if a petition in bankruptcy is filed by or on behalf of Broadcaster, or Broadcaster otherwise takes advantage of any insolvency law, or an involuntary petition in bankruptcy if filed against Broadcaster and not dismissed within thirty (30) days thereafter, or if a receiver or trustee of any of Broadcaster's property is appointed at any time and such appointment is not vacated within thirty (30) days thereafter (it being understood that Broadcaster will have a similar right of termination upon the occurrence of any such event with respect to CBS). (e) Termination in the Event of Breach. Each party, effective upon notice to the other, may, in addition to its other rights, terminate this Agreement if any material representation, warranty or agreement of the other party contained in this Agreement has been breached. 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 -6- 7 announcement or news bulletin; (ii) a promotional announcement for a Network Program not to be broadcast over Affiliated Station (provided that Affiliated Station shall broadcast an alternative promotional announcement for CBS network 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 by such service to television home outside of Affiliated Station's television market other than "unserved household(s)," as that term is defined in Section 119(d) of Title 17, -7- 8 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. (c) Taped Recordings of Network Programs. When authorized to make a taped delayed broadcast of a Network Program, Broadcaster shall use Broadcaster-owned tape to record the Network Program when transmitted by CBS only for a single broadcast by Affiliated Station and shall erase the Program recorded on the tape within 24 hours of broadcasting the Network Program and observe any limitations which CBS may place on the exploitation of the Network Program so recorded and erased. 5. Rejection, Refusal, Substitution and Cancellation of Network Programs. (a) Rights of Broadcaster and CBS. With respect to Network Programs offered to or already accepted hereunder by Broadcaster, nothing in this Agreement shall be construed to prevent or hinder: (i) Broadcaster from rejecting or refusing any such Network Program which Broadcaster reasonably believes to be unsatisfactory or unsuitable or contrary to the public interest, or from substituting a program which, in Broadcaster's opinion, is of greater local or national importance; or (ii) CBS from substituting one or more other Network Programs, in which event CBS shall offer such substituted program or programs to Broadcaster pursuant to the provisions of Paragraph 1 hereof; or (iii) CBS from canceling one or more Network Programs. (b) Notice. In the event of any such rejection, refusal, substitution or cancellation by either party hereto, such party shall notify the other thereof as soon as practicable by telex or by such computer-based communications system as CBS may develop for notifications of this kind. Notice given to CBS shall be addressed to CBS Affiliate Relations. 6. Disclosure of Information. CBS shall endeavor in good faith, before furnishing any Network Program, to disclose to Broadcaster information of which CBS has knowledge concerning the inclusion of any matter in such Network Program for which any money, service or other valuable consideration is directly or indirectly paid or promised to, or charged or accepted by, CBS or any employee of CBS or any other person with whom CBS deals in connection with the production or preparation of such Network Program. As used in this Paragraph 6, the term "service or other valuable consideration" shall not include any service or property furnished without charge or at a nominal charge for use in, or in connection with, any Network Program -8- 9 "unless it is so furnished in consideration for an identification in a broadcast of any person, product, service, trademark, or brand name beyond an identification which is reasonably related to the use of such service or property on the broadcast," as such words are used in Section 317 of the Communications Act of 1934 as amended. The provisions of this Paragraph 6 requiring the disclosure of information shall not apply in any case where, because of a waiver granted by the Federal Communications Commission, an announcement is not required to be made under said Section 317. The inclusion in any such Network Program of an announcement required by said Section 317 shall constitute the disclosure to Broadcaster required by this Paragraph 6. 7. Indemnification. CBS will indemnify Broadcaster from and against any and all claims, damages, liabilities, costs and expenses arising out of the broadcasting, pursuant to this Agreement, of Network Programs furnished by CBS to the extent that such claims, damages, liabilities, costs and expenses are (i) based upon alleged libel, slander, defamation, invasion of the right of privacy, or violation or infringement of copyright or literary or dramatic rights; (ii) based upon the broadcasting of Network programs as furnished by CBS, without any deletions by Broadcaster; and (iii) not based upon any material added by Broadcaster to such Network Programs (as to which deletions and added material Broadcaster shall, to the like extent, indemnify CBS, all network advertisers, if any, on such Network Program, and the advertising agencies of such advertisers). Furthermore, each party will so indemnify the other only if such other party gives the indemnifying party prompt notice of any claim or litigation to which its indemnity applies; it being agreed that the indemnifying party shall have the right to assume the defense of any or all claims or litigation to which its indemnity applies and that the indemnified party will cooperate fully with the indemnifying party in such defense and in the settlement of such claim or litigation. Except as herein provided to the contrary, neither Broadcaster nor CBS shall have any rights against the other party hereto for claims by third persons or for the non-operation of facilities or the non-furnishing of Network Programs for broadcasting if such non-operation or non-furnishing is due to failure of equipment, action or claims by any third person, labor dispute or any cause beyond such party's reasonable control. 8. News Reports Included in Affiliated Station's Local News Broadcasts. As provided in the agreements pertaining to CBS Newsnet and CBS regional news cooperatives (but as a separate obligation of this Affiliation Agreement as well), Broadcaster shall make available, on request by CBS News, coverage produced by Affiliated Station of news stories and breaking news events of national and/or regional interest, to CBS News and to regional news cooperatives operated by CBS News. Affiliated Station shall be compensated at CBS News' then-prevailing rates for material broadcast by CBS News or included in the national Newsnet service. 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 -9- 10 points; provided, however, that in no case shall the "Network Exclusivity Zone" include an area within the Designated Market Area ("DMA"), as most recently determined by the A.C. Nielsen Company, 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 named 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. 10. Assignment, Conveyance and Conditions for Use of Descramblers. (a) For value received, CBS hereby conveys, transfers, and assigns to Broadcaster, all of its rights, title and interest in and to the tangible personal property consisting of two (2) Videocipher 1B Descramblers (the "Descramblers") subject to the following conditions: (i) Broadcaster may not assign its rights in the Descramblers to any party without CBS's written approval. (ii) At the termination or expiration of this Agreement, Broadcaster's rights in the Descramblers shall cease and Broadcaster shall take appropriate steps to assign the Descramblers to CBS. (b) Broadcaster shall use Descramblers solely in connection with the broadcast rights granted and specified in the Agreement. -10- 11 (c) CBS makes no warranties whatsoever, either express or implied, in respect of the equipment including, but not limited to, any warranties of merchantability or fitness for a particular purpose. (d) Broadcaster shall be solely responsible for any and all installation and other related costs or charges in connection with the use and installation of the Descramblers. Broadcaster shall at all times use and maintain the Descramblers as instructed by CBS and the manufacturer and shall use its best efforts to assure that the Descramblers are kept in good condition and that no tampering with the Descramblers or other breach of security, as defined in subparagraph (g) below, occurs. Broadcaster shall promptly notify the CBS Satellite Management Center by telephone of any defect or failure in the operation of the Descramblers and shall follow such procedures as are established by CBS for the replacement or repair of the Descramblers. CBS shall be responsible for the cost of correcting any defect or of rectifying any failure of the Descramblers to operate during the Term of the Agreement, provided that Broadcaster shall be responsible for any costs associated with its failure to follow the prescribed procedures. (e) In addition to its rights under paragraph 7 of the Agreement, CBS will not be liable for any damages resulting from the operation of the Descramblers or from the failure of the Descramblers to function properly or, any loss, cost or damage to Broadcaster or others arising from defects or non-performance of the Descramblers. (f) If Broadcaster makes any use of the Descramblers in violation of the terms and conditions of this Agreement, said use shall be a material breach of this Agreement. (g) Should Broadcaster's willful acts or negligence result in any breach in the security of the two Descramblers covered by this Agreement, such breach of security shall be a material breach of this Agreement. Breach of security shall include but not be limited to any theft of all or part of the Descramblers, any unauthorized reproduction of all or part of the Descramblers, any unauthorized reproduction of the code involved in descrambling the network feed from CBS to Broadcaster, or any related misappropriation of the physical property or intellectual property contained in the Descramblers. 11. General. (a) As of the beginning of the term hereof, this Agreement takes the place of, and is substituted for, any and all television affiliation agreements heretofore existing between Broadcaster and CBS concerning Affiliated Station, subject only to the fulfillment of any obligations thereunder relating to events occurring prior to the beginning of the term hereof. This Agreement cannot be changed or terminated orally and no waiver by either Broadcaster or CBS of any breach of any provision hereof shall be or be deemed to be a waiver of any preceding or subsequent breach of the same or any other provision of this Agreement. (b) The obligations of Broadcaster and CBS under this Agreement are subject to all applicable federal, state and local law, rules and regulations (including but not limited to the Communications Act of 1934 as amended and the Rules and Regulations of the Federal Communications Commission) and this -11- 12 Agreement and all matters or issues collateral thereto shall be governed by the law of the State of New York applicable to contracts performed entirely therein. (c) Neither Broadcaster nor CBS shall be or be deemed to be or hold itself out as the agent of the other under this Agreement. (d) Unless specified otherwise, all notices given hereunder shall be given in writing, by personal delivery, mail, telegram, telex system or private wire at the respective addresses of Broadcaster and CBS set forth above, unless either party at any time or times designates another address for itself by notifying the other party thereof by certified mail, in which case all notices to such party shall thereafter be given at its most recently so designated address. Notice given by mail shall be deemed given on the date of mailing thereof with postage prepaid. Notice given by telegram shall be deemed given on delivery of such telegram to a telegraph office with charges therefor prepaid or to be billed to the sender thereof. Notice given by private wire shall be deemed given on the sending thereof. (e) The titles of the paragraphs in this Agreement are for convenience only and shall not in any way affect the interpretation of this Agreement. (f) In the event that CBS enters into an affiliation agreement with respect to any other station (including a CBS Owned television station) which contains terms more favorable to such other station than those afforded to Affiliated Station in this Agreement with respect to exclusivity to be provided against the distribution and exhibition of Network Programs within such other station's Designated Market Area (as defined by A.C. Nielsen Company) by any cable television system, MMDS, SMATV, DBS, satellite distribution system, video dialtone system, telephone company system or any other non-broadcast distribution or exhibition system now known or hereafter developed, then CBS shall promptly offer in writing to amend this Agreement to conform to such more favorable terms. It is expressly understood that this subparagraph shall have no application to terms in any other CBS affiliation agreement dealing with matters other than the program exclusivity discussed in the preceding sentence. It is further understood that, within a reasonable time of the execution hereof, the CBS Television Network will enter an affiliation agreement with each of the CBS Owned television stations. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. KHOU-TV, INC. CBS TELEVISION NETWORK A Division of CBS Inc. By: /s/ WARD L. HUEY, JR. By: /s/ [ILLEGIBLE] -------------------------- ------------------------------ -12- 13 RIDER I Subject to Section 73.658 of the FCC's rules, Broadcaster agrees that Affiliated Station will (i) broadcast LATE SHOW WITH DAVID LETTERMAN in the live time period offered by CBS effective January 2, 1995; (ii) broadcast LATE, LATE SHOW WITH TOM SNYDER upon its premiere on January 9, 1995 on no more than a half hour delay from the live time period in which the program is offered by CBS; (iii) limit one-time-only preemptions of primetime Network programs to no more than 25 hours per year; and (iv) maintain its clearance of other Network programs at the level existing as of the date hereof. RIDER II It is expressly understood that such Network Rate of $ [ ** ] will generate $ [ ** ] in annual net compensation at full live clearance of the existing Network program schedule (which shall be understood to exclude twenty five (25) hours of one-time-only primetime preemptions per year) and normal full sellout of Network inventory. ** Confidential information has been omitted and filed separately with the SEC. EX-10.1(4) 7 CBS TELEVISION NETWORK AFFILIATION AGRMNT. (WWL) 1 EXHIBIT 10.1(4) CBS TELEVISION NETWORK A Division of CBS Inc. AFFILIATION AGREEMENT ------------- CBS TELEVISION NETWORK, A Division of CBS Inc., 51 West 52 Street, New York, New York 10019 ("CBS"), and WWL-TV, INC., 1024 NORTH RAMPART STREET, NEW ORLEANS, LOUISIANA 70116 ("Broadcaster"), licensed to operate television station WWL-TV at NEW ORLEANS, LOUISIANA on channel number 4 ("Affiliated Station"), hereby mutually covenant and agree, as of the 9TH day of DECEMBER, 1994, as follows: 1. Offer, Acceptance and Delivery of Network Programs. Broadcaster shall have a "first call" on CBS network television programs ("Network Programs") as follows: (a) Offer of Network Programs. CBS shall offer to Broadcaster for broadcasting by Affiliated Station those Network Programs which are to be broadcast on a network basis by any television broadcast station licensed to operate in Affiliated Station's community of license. (See Rider I.) (b) Acceptance of Network Programs. As to any offer described in Paragraph 1(a) of this Agreement, Broadcaster may accept such offer only by notifying CBS, by means of CBS's computer-based communications system, of such acceptance within 72 hours (exclusive of Saturdays, Sundays and holidays), or such longer period as CBS may specify therein, after such offer; provided, however, that, if the first broadcast referred to in such offer is scheduled to occur less than 72 hours after the making of the offer, Broadcaster shall notify CBS of the acceptance or rejection of such offer as promptly as possible and in any event prior to the first broadcast time specified in such offer. Such acceptance shall constitute Broadcaster's agreement that Affiliated Station will broadcast such Network Program or Programs in accordance with the terms of this Agreement and of such offer, and so long, as Affiliated Station so broadcasts such Network Program or Programs, CBS will not, subject to its rights in the program material, authorize the broadcast thereof on a network basis by any other television broadcast station licensed to operate in Affiliated Station's community of license; provided, however, that CBS shall have the right to authorize any television broadcast station, wherever licensed to operate, to broadcast any Network Program consisting of an address by the President of the United States of America on a subject of public importance or consisting of coverage of a matter of immediate national concern. If, as to any Network Program offered hereunder, Broadcaster does not notify CBS as provided for in this Paragraph l(b), Broadcaster shall have no rights with respect to such Network Program, and CBS may offer such Network Program on the same or different terms to any other television broadcast station or stations licensed to operate in Affiliated -1- 2 Station's community of license; provided, however, that, if any Network Program offered hereunder is accepted, by Affiliated Station, upon any other terms or conditions to which CBS agrees in writing, then the provisions of this Agreement shall apply to the broadcast of such Network Program except to the extent such provisions are expressly varied by the terms and conditions of such acceptance as so agreed to by CBS. (c) Delivery of Network Programs. Any obligation of CBS to furnish Network Programs for broadcasting by Affiliated Station is subject to CBS's making of arrangements satisfactory to it for the delivery of Network Programs to Affiliated Station. 2. Payment to Broadcasters. (a) Definitions. (i) "Live Time Period" means the time period or periods specified by CBS in its initial offer of a Network Program to Broadcaster for the broadcast of such Network Program over Affiliated Station; (ii) "Affiliated Station's Network Rate" shall be $ [ ** ] and is used herein solely for purposes of computing payments by CBS to Broadcaster; (iii) "Commercial Availability" means a period of time made available by CBS during a Network Commercial Program for one or more Network Commercial Announcements or local cooperative commercial announcements; and (iv) "Network Commercial Announcements" means a commercial announcement broadcast over Affiliated Station during a Commercial Availability and paid for by or on behalf of one or more CBS advertisers, but does not include announcements consisting of billboards, credits, public service announcements, promotional announcements and announcements required by law. (b) Payment for Broadcast of Programs. For each Network Commercial Program or portion thereof, except those specified in Paragraph 2(c) hereof, which is broadcast over Affiliated Station during the Live Time Period therefor and the Live Time Period for which is set forth in the table below, CBS shall pay Broadcaster the amount resulting from multiplying the following: (i) Affiliated Station's Network Rate; by (ii) the percentage set forth below opposite such time period (which, unless otherwise specified, is expressed in Affiliated Station's then-current local time); by (iii) the fraction of an hour substantially occupied by such program or portion thereof; by (iv) the fraction of the aggregate length of all Commercial Availabilities during such program or portion thereof occupied by Network Commercial Announcements. * Effective February 2, 1996 Affiliated Station's Network Rate will be increased to $ [ ** ]. (See Rider II.) ** Confidential information has been omitted and filed separately with the SEC. -2- 3 Table Monday through Friday 6:00 a.m. - 9:00 a.m . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7% 9:00 a.m. - 11:00 a.m . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15% 11:00 a.m. - 3:00 p.m . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6% 3:00 p.m. - 5:00 p.m . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12% 5:00 p.m. - 7:00 p.m . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15% 7:00 p.m. - 10:00 p.m . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28% 10:00 p.m. - 11:00 p.m . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15% Saturday 7:00 a.m. - 8:00 a.m. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7% 8:00 a.m. - 5:00 p.m. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12% 5:00 p.m. - 7:00 p.m. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15% 7:00 p.m. - 10:00 p.m. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28% 10:00 p.m. - 11:00 p.m. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15% Sunday 10:30 a.m. - 5:00 p.m. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12% 5:00 p.m. - 6:00 p.m. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15% 6:00 p.m. - 10:00 p.m. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28% 10:00 p.m. - 11:00 p.m. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15%
For each Network Program or portion thereof, except those specified in Paragraph 2(c) hereof, which is broadcast by Affiliated Station during a time period other than the Live Time Period therefor and the Live Time Period for which is set forth in the table above, CBS shall pay Broadcaster as if Affiliated Station had broadcast such program or portion thereof during such Live Time Period, except that: (i) if the percentage set forth above opposite the time period during which Affiliated Station broadcast such program or portion thereof is less than that set forth opposite such Live Time Period, then CBS shall pay Broadcaster on the basis of the time period during which Affiliated Station broadcast such program or portion thereof; and (ii) if the time period or any portion thereof during which Affiliated Station broadcast such program is not set forth in the table above, then CBS shall pay Broadcaster in accordance with Paragraph (c) hereof. (c) Payment or Broadcast of Other Programs. For the following programs, the percentages listed below (rather than those daypart percentages set forth in the table in Paragraph 2(b) hereinabove) shall be used in computing payment to Affiliated Station: -3- 4 Monday-Friday Daytime Game shows . . . . . . . . . . . . . . . . . 15% Monday-Friday Continuing Dramas . . . . . . . . . . . . . . . . . 6% Monday-Friday Late Night Daypart . . . . . . . . . . . . . . . . . 10.0% per telecast for live clearance or 12.8% per telecast for delayed clearance Monday-Friday CBS EVENING NEWS . . . . . . . . . . . . . . . . . . 5% CBS Sports programs . . . . . . . . . . . . . . . . . . . . . . . 0% CBS SUNDAY MORNING and FACE THE NATION . . . . . . . . . . . . . . 8%
Notwithstanding the payment obligations set forth in Paragraph 2(b) above, CBS shall pay Broadcaster such amounts as specified in CBS's program offer for Network Programs broadcast by Affiliated Station consisting of (i) special event programs (including, but not limited to, such programs as awards programs, mini-series, movie specials, entertainment specials, special-time- period broadcasts of regularly-scheduled series, and news specials such as political conventions, election coverage, presidential inaugurations and related events), (ii) paid political programming, and (iii) programs for which CBS specified a Live Time Period, or which Affiliated Station broadcast during a time period, any portion of which is not set forth in the table above. (d) Deduction. From the amounts otherwise payable to Broadcaster hereunder, there shall be deducted, for each week of the term of this Agreement, a sum equal to 168% of Affiliated Station's Network Rate. (e) Changes in Rate. CBS may reduce Affiliated Station's Network Rate in connection with a re-evaluation and reduction of the Affiliated Station Network Rate of CBS's affiliated stations in general, by giving Affiliated Station at least thirty- days' prior notice of such reduction in Affiliated Station's Network Rate in which event Broadcaster may terminate this Agreement, effective as of the effective date of any such reduction, on not less than fifteen-days' prior notice to CBS. In order to reflect differences in the importance of compensation payments to stations in markets of varying size, the size of any general reduction of the Network Rate of CBS's affiliated stations pursuant to this Paragraph 2(e) may vary to a reasonable degree according to each station's market-size category (i.e., 1-50, 51-100, 101-150 or 151+) Further, CBS agrees that in the event of such an across-the-board rate reduction, Affiliated Station's Network Rate shall be reduced according until thirty days after the effective date of the reduction, at which time, unless an additional corresponding benefit of equal value has accrued to the station, the Network Rate shall be restored to the previous level and a retroactive adjustment shall be made to make up the compensation difference. (f) Time of Payment. CBS shall make the payments hereunder reasonably promptly after the end of each four-week or five-week accounting period of CBS for Network Commercial Programs broadcast during such accounting period. -4- 5 (g) Reports. Broadcaster shall submit to CBS in the manner requested by CBS such reports as CBS may reasonably request concerning the broadcasting of Network Programs by Affiliated Station. 3. Term and Termination. (a) Term. The term of this Agreement shall be the period commencing on October 4, 1994 and expiring on [ ** ] provided; however, that, unless Broadcaster or CBS shall notify the other at least six months prior to the expiration of the original period or any subsequent five-year period that the party giving such notice does not wish to have the term extended beyond such period, the term of this Agreement shall be automatically extended upon the expiration of the original period and each subsequent extension thereof for an additional period of five years. Notwithstanding any provision of any offer or acceptance under Paragraph 1 hereof, upon the expiration or any termination of the term of this Agreement, Broadcaster shall have no right whatsoever to broadcast over Affiliated Station any Network Program. (b) Termination on Transfer of License or Interest in Broadcaster. Broadcaster shall notify CBS forthwith if any application is made to the Federal Communications Commission relating to a transfer either of any interest in Broadcaster or of Broadcaster's license for Affiliated Station. In the event that CBS shall reasonably disapprove of the proposed transferee, CBS shall have the right to terminate this Agreement effective as of the effective date of any such transfer (except a transfer within the provisions of Section 73.3540(f) of the Federal Communications Commission's present Rules and Regulations) by giving Broadcaster notice thereof, and of its reasons for disapproving of the proposed transferee, within thirty days after the date on which Broadcaster gives CBS notice of the making of such application. If CBS does not so terminate this Agreement, Broadcaster shall, prior to the effective date of any such transfer of any interest in Broadcaster or of Broadcaster's license for Affiliated Station, and as a condition precedent to such transfer, procure and deliver to CBS, in form reasonably satisfaction to CBS, the agreement of the proposed transferee that, upon consummation of the transfer, the transferee will unconditionally assume and perform all obligations of Broadcaster under this agreement. Upon delivery of said agreement to CBS, in form satisfactory to it, the provisions of this Agreement applicable to Broadcaster shall, effective upon the date of such transfer, be applicable to such transferee. Broadcaster's obligations to procure the assumption of this Agreement by any transferee of Affiliated Station as a condition precedent to such transfer shall be deemed to be of the essence of this Agreement; further, Broadcaster expressly recognizes that money damages will be inadequate to compensate CBS for the breach of such obligation, and that CBS shall accordingly be entitled to equitable relief to enforce the same. (c) Termination on Change of Transmitter Location, Power, Frequency or Hours of Operation of Affiliated Station. ** Confidential information has been omitted and filed separately with the SEC. -5- 6 Broadcaster shall notify CBS forthwith if application is made to the Federal Communications Commission to modify the transmitter location, power or frequency of Affiliated Station or Broadcaster plans to modify the hours of operation of Affiliated Station. CBS shall have the right to terminate this Agreement, effective upon the effective date of such modification, by giving Broadcaster notice thereof within thirty (30) days after the date on which Broadcaster gives CBS notice of the application or plan for such modification. If Broadcaster fails to notify CBS as required herein, then CBS shall have the right to terminate this Agreement by giving Broadcaster thirty (30) days' notice thereof within thirty (30) days of the date on which CBS first learns of such application. (d) Termination in the Event of Bankruptcy. Upon one (1) month's notice, CBS may terminate this Agreement if a petition in bankruptcy is filed by or on behalf of Broadcaster, or Broadcaster otherwise takes advantage of any insolvency law, or an involuntary petition in bankruptcy if filed against Broadcaster and not dismissed within thirty (30) days thereafter, or if a receiver or trustee of any of Broadcaster's property is appointed at any time and such appointment is not vacated within thirty (30) days thereafter (it being understood that Broadcaster will have a similar right of termination upon the occurrence of any such event with respect to CBS). (e) Termination in the Event of Breach. Each party, effective upon notice to the other, may, in addition to its other rights, terminate this Agreement if any material representation, warranty or agreement of the other party contained in this Agreement has been breached. 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 -6- 7 announcement or news bulletin; (ii) a promotional announcement for a Network Program not to be broadcast over Affiliated Station (provided that Affiliated Station shall broadcast an alternative promotional announcement for CBS network 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 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, -7- 8 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. (c) Taped Recordings of Network Programs. When authorized to make a taped delayed broadcast of a Network Program, Broadcaster shall use Broadcaster-owned tape to record the Network Program when transmitted by CBS only for a single broadcast by Affiliated Station and shall erase the Program recorded on the tape within 24 hours of broadcasting the Network Program and observe any limitations which CBS may place on the exploitation of the Network Program so recorded and erased. 5. Rejection, Refusal, Substitution and Cancellation of Network Programs. (a) Rights of Broadcaster and CBS. With respect to Network Programs offered to or already accepted hereunder by Broadcaster, nothing in this Agreement shall be construed to prevent or hinder: (i) Broadcaster from rejecting or refusing any such Network Program which Broadcaster reasonably believes to be unsatisfactory or unsuitable or contrary to the public interest, or from substituting a program which, in Broadcaster's opinion, is of greater local or national importance; or (ii) CBS from substituting one or more other Network Programs, in which event CBS shall offer such substituted program or programs to Broadcaster pursuant to the provisions of Paragraph 1 hereof; or (iii) CBS from canceling one or more Network Programs. (b) Notice. In the event of any such rejection, refusal, substitution or cancellation by either party hereto, such party shall notify the other thereof as soon as practicable by telex or by such computer-based communications system as CBS may develop for notifications of this kind. Notice given to CBS shall be addressed to CBS Affiliate Relations. 6. Disclosure of Information. CBS shall endeavor in good faith, before furnishing any Network Program, to disclose to Broadcaster information of which CBS has knowledge concerning the inclusion of any matter in such Network Program for which any money, service or other valuable consideration is directly or indirectly paid or promised to, or charged or accepted by, CBS or any employee of CBS or any other person with whom CBS deals in connection with the production or preparation of such Network Program. As used in this Paragraph 6, the term "service or other valuable consideration" shall not include any service or property furnished without charge or at a nominal charge for use in, or in connection with, any Network Program -8- 9 "unless it is so furnished in consideration for an identification in a broadcast of any person, product, service, trademark, or brand name beyond an identification which is reasonably related to the use of such service or property on the broadcast," as such words are used in Section 317 of the Communications Act of 1934 as amended. The provisions of this Paragraph 6 requiring the disclosure of information shall not apply in any case where, because of a waiver granted by the Federal Communications Commission, an announcement is not required to be made under said Section 317. The inclusion in any such Network Program of an announcement required by said Section 317 shall constitute the disclosure to Broadcaster required by this Paragraph 6. 7. Indemnification. CBS will indemnify Broadcaster from and against any and all claims, damages, liabilities, costs and expenses arising out of the broadcasting, pursuant to this Agreement, of Network Programs furnished by CBS to the extent that such claims, damages, liabilities, costs and expenses are (i) based upon alleged libel, slander, defamation, invasion of the right of privacy, or violation or infringement of copyright or literary or dramatic rights; (ii) based upon the broadcasting of Network programs as furnished by CBS, without any deletions by Broadcaster; and (iii) not based upon any material added by Broadcaster to such Network Programs (as to which deletions and added material Broadcaster shall, to the like extent, indemnify CBS, all network advertisers, if any, on such Network Program, and the advertising agencies of such advertisers). Furthermore, each party will so indemnify the other only if such other party gives the indemnifying party prompt notice of any claim or litigation to which its indemnity applies; it being agreed that the indemnifying party shall have the right to assume the defense of any or all claims or litigation to which its indemnity applies and that the indemnified party will cooperate fully with the indemnifying party in such defense and in the settlement of such claim or litigation. Except as herein provided to the contrary, neither Broadcaster nor CBS shall have any rights against the other party hereto for claims by third persons or for the non-operation of facilities or the non-furnishing of Network Programs for broadcasting if such non-operation or non-furnishing is due to failure of equipment, action or claims by any third person, labor dispute or any cause beyond such party's reasonable control. 8. News Reports Included in Affiliated Station's Local News Broadcasts. As provided in the agreements pertaining to CBS Newsnet and CBS regional news cooperatives (but as a separate obligation of this Affiliation Agreement as well), Broadcaster shall make available, on request by CBS News, coverage produced by Affiliated Station of news stories and breaking news events of national and/or regional interest, to CBS News and to regional news cooperatives operated by CBS News. Affiliated Station shall be compensated at CBS News' then-prevailing rates for material broadcast by CBS News or included in the national Newsnet service. 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 -9- 10 points; provided, however, that in no case shall the "Network Exclusivity Zone" include an area within the Designated Market Area ("DMA"), as most recently determined by the A.C. Nielsen Company, 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 named 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. 10. Assignment, Conveyance and Conditions for Use of Descramblers. (a) For value received, CBS hereby conveys, transfers, and assigns to Broadcaster, all of its rights, title and interest in and to the tangible personal property consisting of two (2) Videocipher 1B Descramblers (the "Descramblers") subject to the following conditions: (i) Broadcaster may not assign its rights in the Descramblers to any party without CBS's written approval. (ii) At the termination or expiration of this Agreement, Broadcaster's rights in the Descramblers shall cease and Broadcaster shall take appropriate steps to assign the Descramblers to CBS. (b) Broadcaster shall use Descramblers solely in connection with the broadcast rights granted and specified in the Agreement. -10- 11 (c) CBS makes no warranties whatsoever, either express or implied, in respect of the equipment including, but not limited to, any warranties of merchantability or fitness for a particular purpose. (d) Broadcaster shall be solely responsible for any and all installation and other related costs or charges in connection with the use and installation of the Descramblers. Broadcaster shall at all times use and maintain the Descramblers as instructed by CBS and the manufacturer and shall use its best efforts to assure that the Descramblers are kept in good condition and that no tampering with the Descramblers or other breach of security, as defined in subparagraph (g) below, occurs. Broadcaster shall promptly notify the CBS Satellite Management Center by telephone of any defect or failure in the operation of the Descramblers and shall follow such procedures as are established by CBS for the replacement or repair of the Descramblers. CBS shall be responsible for the cost of correcting any defect or of rectifying any failure of the Descramblers to operate during the Term of the Agreement, provided that Broadcaster shall be responsible for any costs associated with its failure to follow the prescribed procedures. (e) In addition to its rights under paragraph 7 of the Agreement, CBS will not be liable for any damages resulting from the operation of the Descramblers or from the failure of the Descramblers to function properly or, any loss, cost or damage to Broadcaster or others arising from defects or non-performance of the Descramblers. (f) If Broadcaster makes any use of the Descramblers in violation of the terms and conditions of this Agreement, said use shall be a material breach of this Agreement. (g) Should Broadcaster's willful acts or negligence result in any breach in the security of the two Descramblers covered by this Agreement, such breach of security shall be a material breach of this Agreement. Breach of security shall include but not be limited to any theft of all or part of the Descramblers, any unauthorized reproduction of all or part of the Descramblers, any unauthorized reproduction of the code involved in descrambling the network feed from CBS to Broadcaster, or any related misappropriation of the physical property or intellectual property contained in the Descramblers. 11. General. (a) As of the beginning of the term hereof, this Agreement takes the place of, and is substituted for, any and all television affiliation agreements heretofore existing between Broadcaster and CBS concerning Affiliated Station, subject only to the fulfillment of any obligations thereunder relating to events occurring prior to the beginning of the term hereof. This Agreement cannot be changed or terminated orally and no waiver by either Broadcaster or CBS of any breach of any provision hereof shall be or be deemed to be a waiver of any preceding or subsequent breach of the same or any other provision of this Agreement. (b) The obligations of Broadcaster and CBS under this Agreement are subject to all applicable federal, state and local law, rules and regulations (including but not limited to the Communications Act of 1934 as amended and the Rules and Regulations of the Federal Communications Commission) and this -11- 12 Agreement and all matters or issues collateral thereto shall be governed by the law of the State of New York applicable to contracts performed entirely therein. (c) Neither Broadcaster nor CBS shall be or be deemed to be or hold itself out as the agent of the other under this Agreement. (d) Unless specified otherwise, all notices given hereunder shall be given in writing, by personal delivery, mail, telegram, telex system or private wire at the respective addresses of Broadcaster and CBS set forth above, unless either party at any time or times designates another address for itself by notifying the other party thereof by certified mail, in which case all notices to such party shall thereafter be given at its most recently so designated address. Notice given by mail shall be deemed given on the date of mailing thereof with postage prepaid. Notice given by telegram shall be deemed given on delivery of such telegram to a telegraph office with charges therefor prepaid or to be billed to the sender thereof. Notice given by private wire shall be deemed given on the sending thereof. (e) The titles of the paragraphs in this Agreement are for convenience only and shall not in any way affect the interpretation of this Agreement. (f) In the event that CBS enters into an affiliation agreement with respect to any other station (including a CBS Owned television station) which contains terms more favorable to such other station than those afforded to Affiliated Station in this Agreement with respect to exclusivity to be provided against the distribution and exhibition of Network Programs within such other station's Designated Market Area (as defined by A.C. Nielsen Company) by any cable television system, MMDS, SMATV, DBS, satellite distribution system, video dialtone system, telephone company system or any other non-broadcast distribution or exhibition system now known or hereafter developed, then CBS shall promptly offer in writing to amend this Agreement to conform to such more favorable terms. It is expressly understood that this subparagraph shall have no application to terms in any other CBS affiliation agreement dealing with matters other than the program exclusivity discussed in the preceding sentence. It is further understood that, within a reasonable time of the execution hereof, the CBS Television Network will enter an affiliation agreement with each of the CBS Owned television stations. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. WWL-TV, INC. CBS TELEVISION NETWORK A Division of CBS Inc. By: /s/ WARD L. HUEY, JR. By: /s/ [ILLEGIBLE] -------------------------- ------------------------------ -12- 13 RIDER I Subject to Section 73.658 of the FCC's rules, Broadcaster agrees that Affiliated Station will (i) broadcast LATE SHOW WITH DAVID LETTERMAN in the live time period offered by CBS effective September, 1995; (ii) broadcast LATE, LATE SHOW WITH TOM SNYDER upon its premiere on January 9, 1995 on no more than an hour and a half delay from the live time period in which the program is offered by CBS, and will broadcast SNYDER by September, 1996, or earlier should the time period become available, on no more than a half hour delay from the live time period in which the program is offered by CBS; (iii) limit one-time-only preemptions of primetime Network programs to no more than 10 hours per year; and (iv) maintain its clearance of other Network programs at the level existing as of the date hereof. RIDER II It is expressly understood that such Network Rate of $ [ ** ] will generate $ [ ** ] in annual net compensation at full live clearance of the existing Network program schedule (which shall be understood to exclude CBS THIS MORNING, Monday - Friday, 7am - 9am, CNYT and ten (10) hours of one-time-only primetime preemptions per year) and normal full sellout of Network inventory. ** Confidential information has been omitted and filed separately with the SEC. EX-10.3(9) 8 AMEND. #7 TO AH BELO 1986 LONG TERM INCENTIVE PLAN 1 Exhibit 10.3(9) AMENDMENT NO. 7 TO THE A. H. BELO CORPORATION 1986 LONG TERM INCENTIVE PLAN WHEREAS, A. H. Belo Corporation (the "Company") has heretofore adopted THE A. H. BELO CORPORATION 1986 LONG TERM INCENTIVE PLAN (the "1986 Plan"); and WHEREAS, pursuant to the provisions of paragraph 18 of the 1986 Plan, the Board of Directors of the Company desires herein to amend the 1986 Plan. NOW, THEREFORE, the 1986 Plan is hereby amended as follows: 1. Paragraph 7(c) of the 1986 Plan is amended by adding the following sentence at the end of such paragraph: "Payment of the exercise price may also be made, in the discretion of the Committee, by delivery (including by telecopy) to the Corporation or its designated agent of an executed irrevocable option exercise form together with irrevocable instructions to a broker-dealer to sell (or margin) a sufficient portion of the shares of Common Stock and to deliver the sale (or margin loan) proceeds directly to the Corporation to pay the exercise price." IN WITNESS WHEREOF, the Company has caused this instrument to be executed in its name and on its behalf by the officer thereunto duly authorized as of the 25th day of October, 1995. A. H. BELO CORPORATION By: /s/Robert W. Decherd ------------------------------------ Chairman of the Board, President and Chief Executive Officer ATTEST: /s/Michael J. McCarthy - ------------------------------- Secretary EX-10.3(10) 9 AH BELO CORP. EMPLOYEE SAVINGS & INVESTMENT PLAN 1 Exhibit 10.3(10) A. H. BELO CORPORATION EMPLOYEE SAVINGS AND INVESTMENT PLAN As Amended and Restated Effective October 1, 1989 2 A. H. BELO CORPORATION EMPLOYEE SAVINGS AND INVESTMENT PLAN A. H. Belo Corporation, a Delaware corporation, amends and completely restates the A. H. Belo Corporation Employee Savings and Investment Plan effective October 1, 1989. The Plan is a profit sharing plan with a cash or deferred arrangement intended to qualify under Code section 401(a) and to meet the requirements of Code section 401(k). The Company has entered into trust agreements with Fidelity Management Trust Company and Mellon Bank, N.A. that provide for the investment and reinvestment of the assets of the Plan. Words and phrases with initial capital letters used throughout the Plan are defined in Article 1. 3 TABLE OF CONTENTS
Page ---- ARTICLE 1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE 2 PARTICIPATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 ARTICLE 3 CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 ARTICLE 4 ALLOCATIONS TO PARTICIPANTS' ACCOUNTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 ARTICLE 5 VESTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 ARTICLE 6 DISTRIBUTIONS TO PARTICIPANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 ARTICLE 7 DISTRIBUTIONS TO BENEFICIARIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 ARTICLE 8 PROVISIONS REGARDING COMPANY STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 ARTICLE 9 ADMINISTRATION OF THE PLAN AND TRUST AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 ARTICLE 10 LIMITATIONS ON CONTRIBUTIONS AND ALLOCATIONS TO PARTICIPANTS' ACCOUNTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 ARTICLE 11 RESTRICTIONS ON DISTRIBUTIONS TO PARTICIPANTS AND BENEFICIARIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 ARTICLE 12 TOP-HEAVY PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 ARTICLE 13 ADOPTION OF PLAN BY CONTROLLED GROUP MEMBERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 ARTICLE 14 AMENDMENT OF THE PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 ARTICLE 15 TERMINATION, PARTIAL TERMINATION AND COMPLETE DISCONTINUANCE OF CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 ARTICLE 16 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 APPENDIX A PARTICIPATING EMPLOYERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
(ii) 4 ARTICLE 1 DEFINITIONS 1.1 "Account" means the records, including subaccounts, maintained by the Committee in the manner provided in Article 4 to determine the interest of each Participant in the assets of the Plan and may refer to any or all of the Participant's Deferral Contribution Account, Matching Contribution Account and Transfer Account. 1.2 "Beneficiary" means the one or more persons or entities entitled to receive distribution of a Participant's interest in the Plan in the event of his death as provided in Article 7. 1.3 "Board of Directors" or "Board" means the Board of Directors of the Company. 1.4 "Code" means the Internal Revenue Code of 1986, as amended from time to time. 1.5 "Committee" or "Administrative Committee" means the Committee appointed under Article 9. 1.6 "Company" means A. H. Belo Corporation, a Delaware corporation. 1.7 "Company Stock" means the Series A Common Stock, par value $1.67 per share, and the Series B Common Stock, par value $1.67 per share, of the Company. 1.8 "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, reimbursements for moving expenses and any earnings paid to the Employee in a form other than cash, and also excluding, from and after January 1, 1995, automobile allowances. In addition, Compensation includes any contributions made by the Participating Employers on behalf of an Employee pursuant to a deferral election under the Plan or under any other employee benefit plan containing a cash or deferred arrangement under Code section 401(k) and 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. The annual Compensation of an Employee taken into account for any purpose will not exceed $200,000 for any Plan Year ending before January 1, 1994, as adjusted in regulations prescribed by the Secretary of the Treasury, and will not exceed $150,000 for any Plan Year beginning after December 31, 1993, as adjusted in 5 regulations prescribed by the Secretary of the Treasury. For purposes of applying the $200,000 and $150,000 limits set forth in the preceding sentence, if an Employee is a Highly Compensated Employee (as defined in Section 10.2(m)) who is either (i) a 5-percent owner, determined in accordance with Code section 414(q) and the Treasury Regulations promulgated thereunder or (ii) one of the 10 most highly compensated Employees ranked on the basis of Compensation paid by the Controlled Group during the year, such Highly Compensated Employee and the members of his family (as hereafter defined) will be treated as a single employee and the Compensation of each member of the family will be aggregated with the Compensation of the Highly Compensated Employee. The limitation on Compensation will be allocated among such Highly Compensated Employee and his family members in proportion to each individual's Compensation. For purposes of this Section, the term 'family' means an Employee's spouse and any lineal descendants who are under age 19 at the end of the Plan Year in question. 1.9 "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. 1.10 "Controlled Group Member" means each corporation or unincorporated trade or business that is or was a member of the Controlled Group, but only during such period as it is or was such a member. 1.11 "Deferral Contribution" means the amount of a Participant's Compensation that he elects to have contributed to the Plan by the Participating Employers rather than paid to him directly in cash. 1.12 "Deferral Contribution Account" means the Account established for each Participant, the balance of which is attributable to the Participant's Deferral Contributions and earnings and losses of the Trust Fund with respect to such contributions. 1.13 "Effective Date" means the first day of October, 1989. 1.14 "Employee" means any person who is: (i) employed by any Controlled Group Member if their relationship is, for federal income tax purposes, that of employer and employee, or (ii) "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). -2- 6 1.15 "Entry Date" means January 1, April 1, July 1 and October 1 of each Plan Year. 1.16 "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time. 1.17 "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. (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; -3- 7 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 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 and vesting computation periods in accordance with the provisions of 29 C.F.R. Section 2530.200b-2, which provisions are incorporated in this Plan by reference. 1.18 "Matching Contribution Account" means the Account established for each Participant, the balance of which is attributable to Participating Employer matching contributions -4- 8 made pursuant to Article 3, forfeitures and earnings and losses of the Trust Fund with respect to such contributions and forfeitures. 1.19 [Reserved] 1.20 "One Year Break in Service" means a period of at least 12 consecutive months in which an Employee is absent from service. A One Year Break in Service Year will begin on the Employee's termination date (as defined in Section 1.31) and will end on the day on which the Employee again performs an Hour of Service for a Controlled Group Member. If an 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 his absence, his period of absence, solely for purposes of preventing a One Year Break in Service, will commence on the second anniversary of the first day of his absence from work. The period of absence from work between the first and second anniversaries of the first date of his absence from work will not be taken into account in determining whether the Employee has completed a Year of 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. Notwithstanding the foregoing, if an Employee is classified as a part-time Employee in accordance with standard personnel practices of his Participating Employer and is subject to the 1,000 Hour of Service requirement of Section 1.31, the term 'One Year Break in Service' means a 12 consecutive month computation period (determined under Section 1.31) in which the Employee fails to complete more than 500 Hours of Service. 1.21 "Participant" means an Employee or former Employee who has met the applicable eligibility requirements of Article 2 and who has not yet received a distribution of the entire amount of his vested interest in the Plan. 1.22 "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. -5- 9 1.23 "Plan" means the employee savings and investment plan set forth herein, as amended from time to time. 1.24 "Plan Year" means the period with respect to which the records of the Plan are maintained, which will be the 12-month period beginning on January 1 and ending on December 31. 1.25 "Qualified Plan" means an employee benefit plan that is qualified under Code section 401(a). 1.26 "Transfer Account" means the Account established for each Participant, the balance of which is attributable to the Participant's rollover and transfer contributions made pursuant to Article 3 and earnings and losses of the Trust Fund with respect to such contributions. 1.27 "Trust Agreement" means the agreement or agreements executed by the Company and the Trustee which establishes 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. 1.28 "Trust Fund" means the assets of the Plan held by the Trustee pursuant to the Trust Agreement. 1.29 "Trustee" means the one or more individuals or organizations who have entered into the Trust Agreement as Trustee, and any duly appointed successor. 1.30 "Valuation Date" means the date with respect to which the Trustee determines the fair market value of the assets comprising the Trust Fund or any portion thereof. The regular Valuation Date will be the last day of each Plan Year. However, if the Committee determines that the fair market value of any asset comprising the Trust Fund has changed substantially since the previous Valuation Date, or if the Committee determines it to be in the best interests of the Plan and the Participants to value any asset of the Trust Fund at a time other than the regular Valuation Date, the Committee may fix, in a uniform and nondiscriminatory manner, one or more interim Valuation Dates. 1.31 "Year of Service" means each period of 365 days (determined by aggregating periods of service that are not consecutive) 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 earlier of (i) the date on which the Employee quits, retires, is discharged or dies or (ii) 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 earlier of such dates -6- 10 is hereafter referred to as the Employee's "termination date"). An Employee's period of service for purposes of determining a Year of Service will include each period in which the Employee is absent from service for less than 12 months (measured from the Employee's termination date) 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. Notwithstanding the foregoing, if an Employee is classified as a part-time Employee in accordance with standard personnel practices of his Participating Employer and did not participate in the Company's Employee Stock Purchase Plan immediately before the Effective Date, the term 'Year of Service' means the completion of 1,000 Hours of Service during the 12 consecutive months beginning on the date the Employee first performs an Hour of Service, or during the 12 consecutive months beginning on any anniversary of such date. If a part-time Employee who is subject to the 1,000 Hour of Service requirement of this Section transfers to full-time status, his service for the computation period in which the transfer occurs (but not for prior computation periods) will be determined under the elapsed time method, or if more favorable to the Employee, on the basis of his Hours of Service completed as of the date of such transfer. If a full-time Employee transfers to part-time status and becomes subject to the 1,000 Hour of Service requirement of this Section, he will receive credit for service under the elapsed time method through the date of the transfer, and his service during the computation period in which the transfer occurs will be credited on the basis of Hours of Service (with any fractional year prior to the date of transfer converted to hours on the basis of 190 Hours of Service for each month in which the Employee was credited with at least one Hour of Service). In determining whether an Employee of WWL-TV, Inc., a Delaware corporation ("WWL-TV"), has completed a Year of Service for purposes of eligibility to participate under Section 2.1, each such Employee who became an employee of WWL-TV on June 1, 1994, and who immediately prior to that date was an employee of Rampart Operating Partnership, a partnership organized under the laws of the State of Louisiana ("Rampart"), will receive credit for an Hour of Service for each hour for which the Employee was paid or entitled to payment by Rampart or any affiliate of Rampart determined in accordance with Section 1.17 and will receive credit for his period of employment with Rampart or any affiliate of Rampart calculated in the same manner as if it had been employment with a Controlled Group Member. -7- 11 In determining whether an Employee of Third Avenue Television, Inc., a Delaware corporation ("Third Avenue"), has completed a Year of Service for purposes of eligibility to participate under Section 2.1, each such Employee who became an employee of Third Avenue on February 1, 1995, and who immediately prior to that date was an employee of KIRO, Inc., a Washington corporation ("KIRO"), will receive credit for an Hour of Service for each hour for which the Employee was paid or entitled to payment by KIRO or any affiliate of KIRO determined in accordance with Section 1.17 and will receive credit for his period of employment with KIRO or any affiliate of KIRO calculated in the same manner as if it had been employment with a Controlled Group Member. In determining whether an Employee of Bryan-College Station Eagle, Inc., a Delaware corporation ("Bryan-College Station"), has completed a Year of Service for purposes of eligibility to participate under Section 2.1, each such Employee who became an employee of Bryan-College Station on December 26, 1995, and who immediately prior to that date was an employee of Worrell Enterprises, Inc. ("Worrell") or Eagle Publishing Limited Partnership ("Eagle Publishing"), or any affiliate of either company, will receive credit for an Hour of Service for each hour for which the Employee was paid or entitled to payment by Worrell, Eagle Publishing or any affiliate of either company determined in accordance with Section 1.17 and will receive credit for his period of employment with Worrell, Eagle Publishing or any affiliate of either company calculated in the same manner as if it had been employment with a Controlled Group Member. In determining whether an Employee of Owensboro Messenger-Inquirer, Inc., a Delaware corporation ("Owensboro"), has completed a Year of Service for purposes of eligibility to participate under Section 2.1, each such Employee who became an employee of Owensboro on January 5, 1996, and who immediately prior to that date was an employee of Owensboro Publishing Company ("OPC"), will receive credit for an Hour of Service for each hour for which the Employee was paid or entitled to payment by OPC or any affiliate of OPC determined in accordance with Section 1.17 and will receive credit for his period of employment with OPC or any affiliate of OPC calculated in the same manner as if it had been employment with a Controlled Group Member. -8- 12 ARTICLE 2 PARTICIPATION 2.1 Eligibility to Participate. Each Employee who had both attained age 21 and completed a Year of Service before the Effective Date, or who participated in the Company's Employee Stock Purchase Plan immediately before the Effective Date, will be a Participant as of the first payroll period beginning on or after the Effective Date, if he is then employed by a Participating Employer. Each Employee who is not a Participant as of the Effective Date will become a Participant as of the first payroll period beginning on or after the first Entry Date following the date he has both attained age 21 and completed a Year of Service, if he is then employed by a Participating Employer. Notwithstanding the foregoing: (i) Each Employee of WWL-TV, Inc. who completed a Year of Service on or before May 31, 1994, will become a Participant on June 1, 1994, if he is classified as a full-time Employee in accordance with standard personnel practices of WWL-TV, Inc., and will become a Participant on July 1, 1994, if he is classified as a part-time Employee in accordance with such standard personnel practices. (ii) Each Employee of Third Avenue Television, Inc. who, on January 31, 1995, was making deferral contributions to the section 401(k) plan of KIRO, Inc. will become a Participant on February 1, 1995. Each other Employee of Third Avenue Television, Inc. who on February 1, 1995, had satisfied the age and service requirements of this Section for eligibility to participate will become a Participant as of the first payroll period beginning on or after April 1, 1995. (iii) Each Employee of Bryan-College Station Eagle, Inc. who on December 25, 1995, was making deferral contributions to the section 401(k) plan of Worrell Enterprises, Inc. or Eagle Publishing Limited Partnership will become a Participant on December 26, 1995. Each other Employee of Bryan-College Station Eagle, Inc. who on December 26, 1995, had satisfied the age and service requirements of this Section for eligibility to participate will become a Participant as of the first payroll period beginning on or after April 1, 1996. (iv) Each Employee of Owensboro Messenger-Inquirer, Inc. who on January 4, 1996, was making deferral contributions to the section 401(k) plan of Owensboro Publishing Company will become a Participant on January 5, -9- 13 1996. Each other Employee of Owensboro Messenger-Inquirer, Inc. who on January 5, 1996, had satisfied the age and service requirements of this Section for eligibility to participate will become a Participant as of the first payroll period beginning on or after April 1, 1996. 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) 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 represented by a bargaining representative but is not covered by a collective bargaining agreement, unless the Company and the bargaining representative agree in writing that the Employee will be eligible to participate in the Plan; (iii) 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)); (iv) he is a leased employee required to be treated as an Employee under Code section 414(n) or he is classified by a Participating Employer as an independent contractor whose compensation for services is reported on a form other than Form W-2 or any successor form for reporting wages paid to employees; (v) 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 (vi) he is then on an approved leave of absence without pay or in the service of the armed forces of the United States. (b) Exclusion after Participation. A Participant who becomes ineligible under subsection (a) may not elect to have Deferral Contributions made or continued to the Plan. (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. -10- 14 2.3 Reemployment Provisions. All Hours of Service are counted 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 a number of consecutive One Year Breaks in Service at least equal to the greater of five or his aggregate Years of Service, he will become a Participant on the later of the Entry 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 a number of consecutive One Year Breaks in Service at least equal to the greater of five or his aggregate Years of Service, he will be treated as a new Employee for purposes of the Plan and his Hours of 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 terminates employment will again become an active Participant immediately upon his reemployment by a Participating Employer. -11- 15 ARTICLE 3 CONTRIBUTIONS 3.1 Participant Deferral Contributions. (a) Amount of Deferral Contributions. A Participant may elect, in accordance with procedures established by the Committee from time to time, to have Deferral Contributions made to the Plan by the Participating Employers, provided the amount of a Participant's Deferral Contributions for any Plan Year beginning before January 1, 1996, will not be less than 2% nor more than (i) for payroll periods beginning before July 1, 1993, 10% of his Compensation for the Plan Year and (ii) for payroll periods beginning on and after July 1, 1993, 15% of his Compensation for the Plan Year. For any payroll period beginning on or after January 1, 1996, a Participant may elect to have Deferral Contributions made to the Plan in any amount that does not exceed 15% of his Compensation for the payroll period. (b) Modification and Suspension of Deferral Contributions. A Participant may increase or decrease the amount of his Deferral Contributions during the Plan Year, provided that only one such modification may be made during each calendar quarter of the Plan Year. A Participant may suspend his Deferral Contributions at any time during the Plan Year, and a suspension of his Deferral Contributions will not be considered a modification for purposes of this subsection (b). A Participant who suspends his Deferral Contributions may not again authorize Deferral Contributions to the Plan until the first day of the calendar quarter following such suspension, or such other time as the Committee prescribes. For Plan Years beginning on or after January 1, 1996, if a Participant receives a distribution on account of hardship pursuant to Section 6.3, such Participant's Deferral Contributions will automatically be suspended for a 12-month period following the date on which such Participant receives the hardship distribution. The Committee will adopt from time to time procedures for administering the rules contained in this subsection. (c) Limitations on Deferral Contributions. The sum of a Participant's Deferral Contributions and his elective deferrals (within the meaning of Code section 402(g)(3)) under any other plans, contracts or arrangements of any Controlled Group Member will not exceed $7,000 (as adjusted for cost of living increases in the manner described in Code section 415(d)) for any taxable year of the Participant. A Participant's Deferral Contributions will also be subject to the deferral percentage limitation set forth in Section 10.6. In the event a Participant's Deferral Contributions and other elective deferrals -12- 16 (whether or not under a plan, contract or arrangement of a Controlled Group Member) for any taxable year exceed the foregoing $7,000 limitation, the excess allocated by the Participant to Deferral Contributions (adjusted for Trust Fund earnings and losses in the manner described in Section 10.6(d)) may, in the discretion of the Committee, be distributed to the Participant no later than April 15 following the close of such taxable year. The amount of Deferral Contributions distributed to a Participant for a Plan Year pursuant to this Section will be reduced by any excess Deferral Contributions previously distributed to him pursuant to Section 10.6(c) for the same Plan Year. 3.2 Participating Employer Matching Contributions. (a) Amount of Matching Contributions. (i) Prior to 1995. The Participating Employers will pay to the Trustee as a matching contribution for each Plan Year (A) for payroll periods beginning before July 1, 1993, an amount equal to 30% of each Participant's Deferral Contributions, but only to the extent that the Participant's Deferral Contributions do not exceed 5% of the Participant's Compensation for the Plan Year and (B) for payroll periods beginning on and after July 1, 1993, and prior to January 1, 1995, an amount equal to 50% of each Participant's Deferral Contributions, but only to the extent that the Participant's Deferral Contributions do not exceed 6% of the Participant's Compensation for the Plan Year, excluding in both cases Compensation earned before the Participant was eligible to participate under Section 2.1; provided, however, that the provisions of clause (B) will be effective with respect to Participants who are covered by the Collective Bargaining Agreement between The Dallas Morning News, Inc. and Dallas Typographical Union, No. 173, at such time as the increase in matching contributions is not prohibited by such Collective Bargaining Agreement or any successor agreement. In addition, each Participating Employer may make an additional matching contribution for any Plan Year if authorized by its board of directors, but no Participating Employer will be required to make an additional matching contribution for any Plan Year. Participating Employer matching contributions may be made in cash or in shares of Company Stock or both. (ii) After 1994. Effective with the first payroll period beginning on or after January 1, 1995, the Participating Employers will pay to the Trustee as a matching contribution for each payroll period an amount equal to 50% of each Participant's Deferral Contributions, but only to the extent that the Participant's Deferral Contributions do not -13- 17 exceed 6% of the Participant's Compensation for the payroll period. In addition, each Participating Employer may make an additional matching contribution for any Plan Year if authorized by its board of directors, but no Participating Employer will be required to make an additional matching contribution for any Plan Year. Participating Employer matching contributions may be made in cash or in shares of Company Stock or both. (b) Calculation of Matching Contributions. For Plan Years beginning before January 1, 1995, Participating Employer matching contributions initially will be calculated on the basis of Deferral Contributions and Compensation for each payroll period within the Plan Year. Except as otherwise set forth in Section 3.2(c), as of one or more dates within each Plan Year beginning before January 1, 1995, the Participating Employers will make an additional matching contribution for a Participant to the extent necessary to cause the matching contributions for such Participant for the Plan Year to be equal to the amount required by Section 3.2(a) calculated on the basis of the Participant's Deferral Contributions and Compensation for the entire Plan Year (excluding Compensation earned before the Participant was eligible to participate under Section 2.1). For Plan Years beginning on and after January 1, 1995, Participating Employer matching contributions will be calculated solely on the basis of Deferral Contributions and Compensation for each payroll period within the Plan Year. (c) Calculation of Matching Contributions for the 1993 Plan Year. Notwithstanding the provisions of Section 3.2(b), as of one or more dates within the 1993 Plan Year, the Participating Employers will make an additional matching contribution for a Participant to the extent necessary to cause the total matching contributions for such Participant for the Plan Year to be equal to the sum of (i) 35% of the Participant's Deferral Contributions for the Plan Year to the extent that such Deferral Contributions do not exceed 5% of the Participant's Compensation for the Plan Year, (ii) 15% of the Participant's Deferral Contributions made with respect to payroll periods beginning on and after July 1, 1993, to the extent that such Deferral Contributions do not exceed 5% of the Participant's Compensation for the Plan Year attributable to payroll periods beginning on and after July 1, 1993, and (iii) 50% of the Participant's Deferral Contributions made with respect to payroll periods beginning on and after July 1, 1993, to the extent that such Deferral Contributions are more than 5% and less than 6% of the Participant's Compensation for the Plan Year attributable to payroll periods beginning on and after July 1, 1993. For purposes of this Section 3.2(c), Compensation does not include any wages or other remuneration for services earned before the Participant was eligible to participate under Section 2.1. -14- 18 (d) Participants Ineligible for Matching Contributions. Notwithstanding the foregoing provisions of this Section, (i) no matching contributions will be made for any payroll period beginning on or after April 1, 1994, with respect to any Employee who is employed by DFW Suburban Newspapers, Inc. and (ii) no matching contributions will be made for any payroll period beginning before January 1, 1995, with respect to any Employee who is employed by WWL-TV, Inc. (e) Limitation on Matching Contributions. Participating Employer matching contributions will be subject to the contribution percentage limitation set forth in Section 10.7. 3.3 [Reserved] 3.4 Time of Payment. Deferral Contributions and Participating Employer matching contributions made with respect to payroll periods will be paid to the Trustee as soon as practicable following the close of each calendar month during the Plan Year. Additional matching contributions (including the adjustments described in Section 3.2(b) and (c)) may be paid to the Trustee on any date or dates selected by the Participating Employer, but in no event later than the time prescribed by law (including extensions) for filing the Participating Employer's federal income tax return for its tax year ending with or within the Plan Year. 3.5 Investment of Contributions. Participating Employer matching contributions will be invested by the Trustee pursuant to the Trust Agreement solely in shares of Company Stock, provided, however, that from and after January 1, 1994, a Participant who has attained age 55 may direct the Trustee to transfer all or any portion of his Matching Contribution Account to any other investment fund established under the Trust Agreement. The Deferral Contributions allocated to a Participant's Deferral Contribution Account will be invested by the Trustee in accordance with the Participant's directions in investment funds established pursuant to the Trust Agreement. The Committee from time to time will establish rules and procedures regarding Participant investment directions, including without limitation rules and procedures with respect to the manner in which such directions may be furnished, the frequency with which such directions may be changed during the Plan Year and the minimum portion of a Participant's Account that may be invested in any one investment fund. 3.6 Rollover and Transfer Contributions. Unless directed to do so by the Committee, the Trustee is not authorized to accept (i) any part of the cash or other assets distributed to a Participant from a Qualified Plan or from an individual retirement account or annuity described in Code section 408, or -15- 19 (ii) a direct transfer of assets to the Plan on behalf of a Participant from the trustee or other funding agent of a Qualified Plan. Any amounts contributed to the Plan pursuant to this Section will be allocated to the Participant's Transfer Account. -16- 20 ARTICLE 4 ALLOCATIONS TO PARTICIPANTS' ACCOUNTS 4.1 Establishment of Accounts. The Committee will establish a Deferral Contribution Account and a Matching Contribution Account for each Participant and may establish one or more subaccounts of a Participant's Accounts, if the Committee determines that subaccounts are necessary or desirable in administering the Plan. 4.2 Allocation of Contributions and Forfeitures. Each Deferral Contribution made by a Participating Employer on behalf of a Participant will be allocated by the Committee to the Participant's Deferral Contribution Account. Prior to 1995, each Participating Employer matching contribution made with respect to a Plan Year and all forfeitures arising during that Plan Year will be allocated by the Committee to the Matching Contribution Accounts of Participants employed by that Participating Employer in the ratio that the Deferral Contributions made on behalf of each such Participant for the Plan Year bear to the total Deferral Contributions made on behalf of all such Participants for the Plan Year, taking into account for purposes of this ratio only Deferral Contributions that do not exceed (i) for payroll periods beginning before July 1, 1993, 5% of each Participant's Compensation and (ii) for payroll periods beginning on and after July 1, 1993, 6% of each Participant's Compensation; provided, however, that the provisions of clause (ii) will be effective with respect to Participants who are covered by the Collective Bargaining Agreement between The Dallas Morning News, Inc. and Dallas Typographical Union, No. 173, at such time as the increase in matching contributions is not prohibited by such Collective Bargaining Agreement or any successor agreement. Effective with the first payroll period beginning on and after January 1, 1995, each Participating Employer matching contribution made with respect to a payroll period and all forfeitures will be allocated by the Committee to the Matching Contribution Accounts of Participants employed by that Participating Employer in the ratio that the Deferral Contributions made on behalf of each such Participant for each payroll period in the Plan Year bear to the total Deferral Contributions made on behalf of all such Participants for each such payroll period, taking into account for purposes of this ratio only Deferral Contributions that do not exceed 6% of each Participant's Compensation for the payroll period. 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 -17- 21 Participant will be disregarded for purposes of allocating matching contributions to other Participants. 4.3 Limitation on Allocations. Article 10 sets forth certain rules under Code sections 401(k), 401(m) and 415 that limit the amount of contributions and forfeitures that may be allocated to a Participant's Accounts for a Plan Year. 4.4 Allocation of Trust Fund Income and Loss. (a) Accounting Records. The Committee, through its accounting records, will clearly segregate each Account and subaccount and will maintain a separate and distinct record of all income and losses of the Trust Fund attributable to each Account or subaccount. Income or loss of the Trust Fund will include any unrealized increase or decrease in the fair market value of the assets of the Trust Fund. (b) Method of Allocation. The share of net income or net loss of the Trust Fund to be credited to, or deducted from, each Account will be the allocable portion of the net income or net loss of the Trust Fund attributable to each Account determined by the Committee as of each Valuation Date in a uniform and nondiscriminatory manner, based upon the ratio that each Account balance as of the previous Valuation Date bears to all Account balances after adjustment for withdrawals, distributions and other additions or subtractions that may be appropriate. The share of net income or net loss to be credited to, or deducted from, any subaccount will be an allocable portion of the net income or net loss credited to or deducted from the Account under which the subaccount is established. 4.5 Valuation of Trust Fund. The fair market value of the total net assets comprising the Trust Fund will be determined by the Trustee as of each Valuation Date. 4.6 No Guarantee. The Participating Employers, the Committee and the Trustee do not guarantee the Participants or their Beneficiaries against loss or depreciation or fluctuation of the value of the assets of the Trust Fund. 4.7 Annual Statement of Accounts. The Committee will furnish each Participant and each Beneficiary of a deceased Participant, at least annually, a statement showing (i) the value of his Accounts at the end of the Plan Year, (ii) the allocations to and distributions from his Accounts during the Plan Year, and (iii) his vested and nonforfeitable interest in his Accounts at the end of the Plan Year. No statement will be provided to a Participant or Beneficiary after the Participant's entire vested and nonforfeitable interest in his Accounts has been distributed. -18- 22 ARTICLE 5 VESTING 5.1 Determination of Vested Interest. Except as provided in Section 5.2 or 10.6(e) (with respect to discriminatory Matching Contributions), the interest of each Participant in his Deferral Contribution Account and his Matching Contribution Account will be 100% vested and nonforfeitable at all times. 5.2 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, he will be entitled to receive, as soon as administratively feasible, a benefit in an amount equal to the value of the forfeited benefit on the date of forfeiture. This benefit will be reinstated from Participating Employer contributions made to the Plan for this purpose. 5.3 Application of Forfeited Amounts. The amount of a Participant's Accounts which is forfeited pursuant to Sections 5.2 or 10.6(e) will be applied to reduce Participating Employer contributions pursuant to Article 3. -19- 23 ARTICLE 6 DISTRIBUTIONS TO PARTICIPANTS 6.1 Basic Rules Governing Distributions. (a) Timing of Distributions. Except as set forth in Sections 6.2 and 6.3, distribution of a Participant's vested Account Balances will be made as soon as practicable after the Valuation Date coinciding with or immediately following the Participant's termination of employment, or if earlier, the date on which the Participant becomes eligible to receive benefits under the Social Security Act on account of total and permanent disability. If a loan is outstanding from the Trust Fund to the Participant on the date his vested Account balances become distributable, the amount distributed to the Participant will be reduced by any security interest in his Accounts held by the Plan by reason of the loan. (b) Form of Distributions. Distributions will be made in a single lump sum payment. Shares of Company Stock allocated to a Participant's Accounts will be distributed in the form of whole shares plus cash for any fractional share, unless the Participant elects to receive the cash value of such shares. (c) Participant's Consent to Certain Payments. If the amount of a Participant's vested Account balances exceeds $3,500, the Committee will not distribute the Participant's vested Account balances to him prior to his attainment of age 62 unless he consents to the distribution. The foregoing provision will not apply to any distributions required under Sections 10.6 and 10.7. 6.2 Withdrawals after Age 59-1/2. A Participant who has not terminated employment may request a distribution from his Accounts if he has reached age 59-1/2. A Participant who is a director, officer or principal stockholder of the Company within the meaning of Section 16 of the Securities Exchange Act of 1934 may exercise the foregoing withdrawal right only in accordance with rules and procedures established from time to time by the Committee. All other Participants may exercise their withdrawal rights at any time or times during the Plan Year. 6.3 Hardship Distributions. (a) General Rule. A Participant who has not terminated employment may request a distribution from his Deferral Contribution Account in the event of his hardship. A distribution will be on account of hardship only if the distribution is necessary to satisfy an immediate and heavy -20- 24 financial need of the Participant, as defined below, and satisfies all other requirements of this Section. For Plan Years beginning on or after January 1, 1996, pursuant to Section 3.1(b), a Participant's Deferral Contributions will automatically be suspended for a 12-month period after the date on which such Participant receives a distribution on account of hardship. (b) Deemed Financial Need. For purposes of this Section, a distribution is made on account of an immediate and heavy financial need of the Participant only if the distribution is for (i) the payment of medical expenses described in Code section 213(d) previously incurred by the Participant, the Participant's spouse or any dependents of the Participant (as defined in Code section 152) or necessary for such persons to obtain medical care described in Code section 213(d); (ii) costs directly related to the purchase of a principal residence for the Participant (excluding mortgage payments); (iii) the payment of tuition and related educational fees for the next 12 months of post-secondary education for the Participant, his spouse, children, or dependents (as defined in Code section 152); (iv) payments necessary to prevent the eviction of the Participant from his principal residence or foreclosure on the mortgage of the Participant's principal residence; or (v) the payment of funeral expenses of a family member. (c) Reasonable Reliance Test. A distribution will be considered necessary to satisfy an immediate and heavy financial need of the Participant only if all three of the following requirements are satisfied: (i) the distribution is not in excess of the amount required to relieve the immediate and heavy financial need of the Participant (taking into account the taxable nature of the distribution); (ii) the Participant represents in writing, on forms provided by the Committee, that the need cannot be relieved through reimbursement or compensation by insurance or otherwise, by reasonable liquidation of the Participant's assets, to the extent such liquidation would not itself cause an immediate and heavy financial need, by cessation of Deferral Contributions under the Plan, or by distributions other than hardship distributions or nontaxable (at the time of the loan) loans from the Plan and any other plans maintained by any Controlled Group Member or any other entity by which the Participant is employed, or by borrowing from commercial sources on reasonable commercial terms; and (iii) the Committee determines that it can reasonably rely on the Participant's written representation. (d) Limitation for Loans. No distribution under this Section will be made in an amount that is greater than the excess of the Participant's vested interest in his Accounts over the aggregate amount of outstanding loans, plus accrued interest, secured by the Participant's Accounts. -21- 25 (e) Source of Hardship Distributions. The cumulative amount distributed to a Participant on account of hardship will not exceed the amount of his Deferral Contributions that have not been previously withdrawn (but not the income allocable to his Deferral Contributions) and, with respect to hardship distributions on and after June 1, 1994, the balance, if any, of his Transfer Account. 6.4 Distribution Procedures. Distributions pursuant to Sections 6.2 and 6.3 will be made as soon as practicable following the Committee's approval of the Participant's written request for withdrawal and will be made in the form described in Section 6.1(b). Distributions pursuant to Section 6.2 will be made first from the Participant's Transfer Account, next from the vested portion of his Matching Contribution Account, and last from this Deferral Contribution Account. No distribution under this Section will be made in an amount that is greater than the excess of the Participant's vested interest in the Accounts from which the distributions are made over the aggregate amount of outstanding loans, plus accrued interest, secured by such Accounts. For purposes of determining the amount available for distribution, a Participant's Accounts will be valued as of the Valuation Date immediately preceding the date on which the Participant requests a distribution. 6.5 Loans to Participants. (a) Effective Date. The provisions of this Section will be effective as of a date determined by the Committee in its discretion and communicated to Participants. (b) General Provisions. A Participant may, subject to the provisions of this Section, borrow from the vested interest in his Accounts, provided, however, that no loan may be made from the portion of the Trust Fund that is invested in Company Stock. All such loans will be subject to the requirements of this Section and such other rules as the Committee may from time to time prescribe, including without limitation any rules restricting the purposes for which loans will be approved. The Committee will have complete discretion as to approval of a loan hereunder and as to the terms thereof, provided that its decisions will be made on a uniform and nondiscriminatory basis and in accordance with this Section. If the Committee approves a loan, the Committee will direct the Trustee to make the loan and will advise the Participant and the Trustee of the terms and conditions of the loan. Nothing in this Section will require the Committee to make loans available to Participants. (c) Terms and Conditions. Loans to Participants will be made according to the following terms and conditions and -22- 26 such additional terms and conditions as the Committee may from time to time establish: (i) no loan will be for a term of longer than five years; (ii) all loans will become due and payable in full upon termination (by death or otherwise) of the Participant's employment with the Controlled Group and upon the occurrence of such other events as the Committee may from time to time specify; (iii) all loans will bear a reasonable rate of interest as determined by the Committee from time to time; (iv) all loans will be made only upon receipt of adequate security (the security for a loan will be the Participant's interest in the separate investment fund established under subsection (g) for that loan) in an amount that does not exceed 50% of the Participant's vested interest under the Plan); (v) payments of principal and interest will be made through payroll deductions sufficient to provide for substantially level amortization of principal and interest with payments not less frequently than quarterly, which will be irrevocably authorized by the Participant in writing on a form provided by the Committee at the time the loan is made; (vi) the amount of any indebtedness (including accrued and unpaid interest) under any loan will be deducted from a Participant's interest in the Trust Fund if and only if such indebtedness or any installment thereof is not paid when due (including amounts due by acceleration) unless the Committee determines that there is adequate security for such loan other than the Participant's interest in the Trust Fund; (vii) for Plan Years beginning before January 1, 1996, no more than one outstanding loan will be permitted with respect to a Participant at any time, except that a Participant may have a home loan and a loan which is not a home loan outstanding at the same time; (viii) for Plan Years beginning on or after January 1, 1996, no more than two outstanding loans will be permitted with respect to a Participant at any time; (ix) for Plan Years beginning on or after January 1, 1996, no new home loans will be permitted; and (x) all loans will be evidenced by a note containing such additional terms and conditions as the Committee will determine. Notwithstanding anything in the foregoing to the contrary, no amount of any indebtedness will be deducted pursuant to subsection (vi) above from a Participant's Deferral Contribution Account prior to the time that such Account is otherwise distributable. (d) Maximum Amount of Loans. The amount of any loan made pursuant to this Section, when added to the outstanding balance of all other loans to the Participant from all qualified employer plans (as defined in Code section 72(p)(4)) of the Controlled Group, will not exceed the lesser of (i) one-half of the nonforfeitable interest in his Accounts, or (ii) $50,000 reduced by the excess, if any, of (A) the highest outstanding balance of all other loans from qualified employer plans of the Controlled Group to the Participant during the 1-year period ending on the date on which such loan was made, over (B) the -23- 27 outstanding balance of all loans from qualified employer plans of the Controlled Group to the Participant on the date on which such loan was made. (e) Minimum Loan. The minimum loan permitted under this Section is $1,000. If such minimum amount exceeds the limitations of subsection (d), no loan will be made. (f) Source of Loans. All loans will be made first from a Participant's Transfer Account, next from his Matching Contribution Account, and last from his Deferral Contribution Account. (g) Investment of Loan Payments. All loans will be treated as a separate investment fund of the borrowing Participant. All payments with respect to a loan will be credited to the borrowing Participant's Accounts and will be invested in the investment funds under the Trust Agreement in accordance with the Participant's latest investment directions pursuant to Section 3.5. 6.6 Reemployment of Participant. If a Participant who terminated employment again becomes an Employee before receiving a distribution of his Account balances, no distribution from the Trust Fund will be made while he is an Employee, and amounts distributable to him on account of his prior termination will be held in the Trust Fund until he is again entitled to a distribution under the Plan. 6.7 Valuation of Accounts. A Participant's distributable Account balances will be valued as of the Valuation Date immediately preceding the date the Accounts are to be distributed, except that there will be added to the value of his Accounts the fair market value of any amounts allocated to his Accounts under Article 4 after that Valuation Date. 6.8 Direct Rollovers (a) Distributions after 1992. Notwithstanding any other provision of the Plan, for distributions made on or after January 1, 1993, a Distributee (as hereinafter defined) may elect, at any time and in the manner prescribed by the Committee, to have any portion of an Eligible Rollover Distribution (as hereinafter defined) paid directly to an Eligible Retirement Plan (as hereinafter defined) specified by the Distributee. (b) Eligible Rollover Distribution. An Eligible Rollover Distribution is any distribution of all or any portion of the balance to the credit of the Distributee, except that an Eligible Rollover Distribution does not include (i) any distribution that is one of a series of substantially equal -24- 28 periodic payments (not less frequently than annually) made for the life or life expectancy of the Distributee or the joint lives or life expectancies of the Distributee and the Distributee's designated beneficiary, or for a specified period of ten years or more, (ii) any distribution to the extent such distribution is required by Code section 401(a)(9), and (iii) the portion of any distribution that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities). (c) Eligible Retirement Plan. An Eligible Retirement Plan is an individual retirement account described in Code section 408(a), an individual retirement annuity described in Code section 408(b), an annuity plan described in Code section 403(a), or a qualified trust described in Code section 401(a) that is a defined contribution plan within the meaning of Code section 414(i), that accepts the Distributee's Eligible Rollover Distribution. However, in the case of an Eligible Rollover Distribution to a Participant's surviving Spouse, an Eligible Retirement Plan is an individual retirement account or individual retirement annuity. (d) Distributee. A Distributee includes a Participant, the Participant's Spouse, or a Participant's former spouse who is an alternate payee under a qualified domestic relations order, as defined in Section 414(p) of the Code. 6.9 Restrictions on Distributions. Article 11 sets forth certain rules under various provisions of the Code relating to restrictions on distributions to Participants. -25- 29 ARTICLE 7 DISTRIBUTIONS TO BENEFICIARIES 7.1 Designation of Beneficiary. Each Participant will have the right to designate a Beneficiary or Beneficiaries to receive his vested Account balances upon his death. The designation will be made on forms prescribed by the Committee and will be effective upon receipt by the Committee. A Participant will have the right to change or revoke any designation by filing a new designation or notice of revocation with the Committee, but the revised designation or revocation will be effective only upon receipt by the Committee. 7.2 Consent of Spouse Required. A Participant who is married may not designate a Beneficiary other than, or in addition to, his spouse unless his spouse consents to the designation by means of a written instrument that is signed by the spouse, contains an acknowledgment by the spouse of the effect of the consent, and is witnessed by a member of the Committee (other than the Participant) or by a notary public. The designation will be effective only with respect to the consenting spouse, whose consent will be irrevocable. A Beneficiary designation to which a spouse has consented may not be changed by the Participant without spousal consent (other than to designate the spouse as Beneficiary), unless the spouse's consent expressly permits Beneficiary designations by the Participant without any further consent of the spouse. 7.3 Failure to Designate Beneficiary. In the event a Participant has not designated a Beneficiary, or in the event no Beneficiary survives a Participant, the distribution of the Participant's vested Account balances upon his death will be made (i) to the Participant's spouse, if living, (ii) if his spouse is not then living, to his then living issue by right of representation, (iii) if neither his spouse nor his issue are then living, to his then living parents, and (iv) if none of the above are then living, to his estate. 7.4 Distributions to Beneficiaries. Distribution of a Participant's vested Account balances to the Participant's Beneficiary will be made as soon as practicable after Participant's death. The Participant's vested Account balances will be distributed to the Beneficiary in a single lump sum payment and will be in the same form as provided for Participants in Section 6.1(b). The Participant's Account balances will be valued as of the Valuation Date coinciding with or immediately preceding the date the Accounts are to be distributed to his Beneficiary, except that there will be added to the value of the Participant's Accounts the fair market value of any amounts -26- 30 allocated to his Accounts under Article 4 after that Valuation Date. If a loan is outstanding from the Trust Fund to the Participant on the date of his death, the amount distributed to his Beneficiary will be reduced by any security interest in the Participant's Accounts held by the Plan by reason of the loan. 7.5 Restrictions on Distributions. Article 11 sets forth certain rules under various provisions of the Code relating to restrictions on distributions to Beneficiaries. -27- 31 ARTICLE 8 PROVISIONS REGARDING COMPANY STOCK 8.1 Powers and Duties of the Committee. (a) Committee as Named Fiduciary. Except as otherwise provided in this Section, the Committee will be the named fiduciary within the meaning of ERISA section 402(a)(2) for purposes of all shareholder action authorized or permitted to be taken with respect to Company Stock held in the Trust Fund. The powers and duties of the Committee as named fiduciary for this purpose will include, without limitation, the powers and duties to direct the Trustee with respect to the voting of all shares of Company Stock; to direct the Trustee to accept or reject a tender offer for shares of Company Stock; to direct the Trustee to sell shares of Company Stock under any other circumstances to any person, including the Company, provided that any sale to the Company or other "disqualified person" within the meaning of Code section 4975 or "party in interest" within the meaning of ERISA section 3(14) is made at a price which is not less than adequate consideration as defined in ERISA section 3(18) and no commission is charged with respect to the sale; and to exercise any options, warrants or other rights in connection with shares of Company Stock held in the Trust Fund. The Committee will also have the power, in its discretion, to permit each Participant and Beneficiary to direct the Trustee to take or to refrain from taking any action with respect to the shares of Company Stock allocated to his Accounts that the Committee could have directed the Trustee to take or refrain from taking. If the Committee permits Participants and Beneficiaries to direct the Trustee in connection with any matter relating to Company Stock held in the Trust Fund, each Participant and Beneficiary who furnishes instructions to the Trustee will be a named fiduciary within the meaning of ERISA section 402(a)(2) with respect to such matter, but the Committee will retain the power and duty to direct the Trustee with respect to shares of Company Stock allocated to the Accounts of Participants and Beneficiaries who fail to furnish timely instructions to the Trustee and with respect to any shares of Company Stock that have not been allocated to Participants' Accounts. The Committee will adopt from time to time whatever procedures it determines to be appropriate in order to exercise its powers and duties under this subsection (a) and may retain advisors and consultants (including, without limitation, legal counsel and financial advisors) who are independent of the Company, the Board and the Trustee to the extent the Committee determines such independent advice to be necessary or appropriate. -28- 32 (b) Delegation of Powers and Duties. The Committee may, in its discretion, delegate any power or duty allocated to it pursuant to subsection (a) above to another person or entity, who will act as an independent fiduciary and will exercise such power or duty to the same extent as it could have been exercised by the Committee. The persons or entities to which such powers and duties may be delegated will include, without limitation, the Board or any committee of the Board, the Trustee, any other person or entity that meets the requirements of an investment manager under ERISA section 3(38), or any other person or entity that the Committee determines in good faith has the requisite knowledge and experience concerning the matter with respect to which the delegation is made. The Committee may also remove any fiduciary to whom it has delegated any power or duty and exercise such power or duty itself or appoint a successor fiduciary. For purposes of Sections 8.2 and 8.3, the term "Committee" will also mean any fiduciary to which the Committee has delegated any power or duty pursuant to this subsection (b). 8.2 Voting Company Stock. Unless the Committee determines otherwise pursuant to Section 8.1, voting rights with respect to shares of Company Stock held in the Trust Fund will be exercised by Participants and Beneficiaries and the procedures of this Section will apply. Before each annual or special meeting of its shareholders, the Committee will cause to be sent to each Participant and Beneficiary who has Company Stock allocated to his Accounts on the record date of such meeting a copy of the proxy solicitation material for the meeting, together with a form requesting confidential instructions to the Trustee on how to vote the shares of Company Stock allocated to his Accounts. Upon receipt of such instructions, the Trustee will vote the shares allocated to such Participant's or Beneficiary's Accounts as instructed. The Trustee will vote allocated shares of Company Stock for which it does not receive timely instructions from Participants or Beneficiaries in accordance with the Committee's instructions. A Participant's or Beneficiary's right to instruct the Trustee with respect to voting shares of Company Stock will not include rights concerning the exercise of any appraisal rights, dissenters' rights or similar rights granted by applicable law to the registered or beneficial holders of Company Stock. These matters will be exercised by the Trustee in accordance with the Committee's instructions. 8.3 Tender Offer for Company Stock. Unless the Committee determines otherwise pursuant to Section 8.1, the right to accept or reject a tender offer for shares of Company Stock held in the Trust Fund will be exercised by Participants and Beneficiaries and the procedures of this Section will apply. In the event of a tender offer for shares of Company Stock subject to Section 14(d)(1) of the Securities Exchange Act of 1934 or subject to Rule 13e-4 promulgated under that Act (as those -29- 33 provisions may from time to time be amended or replaced by successor provisions of federal securities laws), the Committee will advise each Participant and Beneficiary who has shares of Company Stock allocated to his Accounts in writing of the terms of the tender offer as soon as practicable after its commencement and will furnish each Participant and Beneficiary with a form by which he may instruct the Trustee confidentially to tender shares allocated to his Accounts. The Trustee will tender those shares it has been properly instructed to tender, and will not tender those shares which it has been properly instructed not to tender. The Committee will also advise Participants and Beneficiaries that the Committee will furnish instructions to the Trustee with respect to allocated shares for which no instructions are received from Participants and Beneficiaries and will furnish such related documents as are prepared by any person and provided to the shareholders of the Company pursuant to the Securities Exchange Act of 1934. The Committee may also provide Participants with such other material concerning the tender offer as the Committee in its discretion determines to be appropriate. The number of shares to which a Participant's instructions apply will be the total number of shares allocated to his Accounts as of the latest date for which Participant statements were prepared. The Committee will advise the Trustee of the commencement date of any tender offer and, until receipt of that advice, the Trustee will not be obligated to take any action under this Section. Funds received in exchange for tendered stock will be credited to the Accounts of the Participant or Beneficiary whose stock was tendered and will be used by the Trustee to purchase Company Stock, if available on a national securities exchange, commencing on the earlier of the following dates: (a) the trading day following the first date on which the closing price of the Company Stock on a national securities exchange on which the Company Stock is then traded is within 20% of the closing price on the tenth trading day preceding the commencement date of the tender offer or (b) the thirtieth trading day after the expiration date of the tender offer, of which date the Committee will advise the Trustee. In the interim, or if Company Stock is not available for purchase, the Trustee will invest such funds in short term investments permitted under the Trust Agreement. -30- 34 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 administering the Plan, including without limitation the expenses of the Committee properly incurred in the performance of its duties under the Plan, will be paid from the Trust Fund, and all such expenses paid by the Participating Employers on behalf of the Plan will be reimbursed from the Trust Fund unless the Participating Employers in their discretion elect not to submit such expenses for reimbursement. Notwithstanding the foregoing, the members of the Committee will not be compensated by the Plan 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 -31- 35 apply their provisions. For purposes of ERISA, the Committee will be the named fiduciary with respect to the operation and 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 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 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. 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 -32- 36 Trust Agreement to delegate discretionary authority respecting the administration of the 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 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 -33- 37 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. 9.12 Correction of Participants' Accounts. If an error or omission is discovered in the Accounts of a Participant, or in the amount distributed to a Participant, the Committee will make such equitable adjustments in the records of the Plan as may be necessary or appropriate to correct such error or omission as of -34- 38 the Plan Year in which such error or omission is discovered. Further, a Participating Employer may, in its discretion, make a special contribution to the Plan which will be allocated by the Committee only to the Account of one or more Participants to correct such error or omission. 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. 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. 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. -35- 39 ARTICLE 10 LIMITATIONS ON CONTRIBUTIONS AND ALLOCATIONS TO PARTICIPANTS' ACCOUNTS 10.1 Priority over Other Contribution and Allocation Provisions. The provisions set forth in this Article will supersede any conflicting provisions of Articles 3 and 4. 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 the sum of the following amounts with respect to all Qualified Plans and Welfare Benefit Funds maintained by the Controlled Group Members: (i) the amount of Controlled Group Member contributions with respect to the Limitation Year 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, if any, carried forward pursuant to Section 10.4 or a similar provision in another Qualified Plan and allocated to the Participant's account; (iv) the amount of a Participant's voluntary nondeductible contributions for the Limitation Year, provided, however, that the Annual Addition for any Limitation Year beginning before January 1, 1987 will not be recomputed to treat all of the Participant's nondeductible voluntary contributions as part of the Annual Addition; (v) the amount allocated after March 31, 1984 to an individual medical benefit account (as defined in Code section 415(l)(2)) which is part of a Defined Benefit Plan or an annuity plan; and (vi) the amount derived from contributions paid or accrued after December 31, 1985 in taxable years ending after such date that 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. A Participant's Annual Addition will not include any nonvested amounts restored to his account following his reemployment before incurring five consecutive One Year Breaks in Service, and a corrective allocation pursuant to Section 9.12 will be -36- 40 considered an Annual Addition for the Limitation Year to which it relates. (b) "Average Contribution Percentage" means the average of the Contribution Percentages of each Participant in a group of Participants. (c) "Average Deferral Percentage" means the average of the Deferral Percentages of each Participant in a group of Participants. (d) "Contribution Percentage" means the ratio (expressed as a percentage) determined by dividing the Matching Contributions made to the Plan on behalf of a Participant who is eligible to receive an allocation of Matching Contributions for a Plan Year (but only to the extent such Matching Contributions are not taken into account in determining the Participant's Deferral Percentage for the Plan Year) by the Participant's Compensation for the Plan Year. A Participant is eligible to receive an allocation of Matching Contributions for purposes of determining his Contribution Percentage even though no Matching Contributions are made to the Plan on his behalf because of the suspension of his Deferral Contributions under the terms of the Plan, because of an election not to participate, or because of the limitations contained in Sections 10.3 through 10.5 of the Plan. (e) "Deferral Percentage" means the ratio (expressed as a percentage) determined by dividing the Deferral Contributions made to the Plan on behalf of a Participant who is eligible to make Deferral Contributions for all or any portion of a Plan Year by the Participant's Compensation for the Plan Year. In addition, if the Matching Contributions to the Plan for any Plan Year satisfy the requirements of Code section 401(k)(2)(B) and (C), a Participant's Deferral Percentage will be determined by aggregating the Deferral Contributions and the Matching Contributions made to the Plan on his behalf for such Plan Year, unless such aggregation is prohibited in regulations prescribed by the Secretary of the Treasury. A Participant is eligible to make Deferral Contributions for purposes of determining his Deferral Percentage even though he does not make Deferral Contributions because of the suspension of his Deferral Contributions under the terms of the Plan, because of an election not to participate, or because of the limitations contained in Sections 10.3 through 10.5 of the Plan. A Deferral Contribution will be taken into account for a Plan Year only if (i) the allocation of such contribution is not contingent on participation in the Plan or the performance of services after the Plan Year, (ii) such contribution is paid to the Trustee within 12 months after the end of the Plan Year, and (iii) such contribution relates to Compensation that either would have been received by the Participant in the Plan Year, or that is -37- 41 attributable to services performed during the Plan Year and that would have been received within two and one-half months after the Plan Year, but for the election to defer. (f) "Defined Benefit Dollar Limitation" means for any Limitation Year, $90,000 or such amount as determined by the Commissioner of Internal Revenue under Code section 415(d)(1) as of the January 1 falling within such Limitation Year. (g) "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. (h) "Defined Benefit Plan" means a Qualified Plan other than a Defined Contribution Plan. (i) "Defined Contribution Dollar Limitation" means for any Limitation Year, $30,000 or, if greater, 25% of the Defined Benefit Dollar Limitation for the same 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 sentences 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. (j) "Defined Contribution Fraction" means a fraction, the numerator of which is the sum of the Annual Additions allocated to the Participant's 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 Participant was an Employee (regardless of whether a Defined -38- 42 Contribution Plan was in existence for such Limitation Year) (i) the Defined Contribution Dollar Limitation (determined for this purpose without regard to the provisions of Code section 415(c)(6)) effective for the Limitation Year multiplied by 125%, or (ii) 35% of the Participant's Includable Compensation for such Limitation Year. (k) "Defined Contribution Plan" means a Qualified Plan described in Code section 414(i). (l) "Family Member" means, with respect to an Employee, the Employee's spouse and lineal ascendants or descendants and the spouses of such lineal ascendants or descendants. (m) "Highly Compensated Employee" means any Employee who performs services for a Controlled Group Member during the determination year (as hereinafter defined) and who during the look-back year (as hereinafter defined): (i) received Compensation from a Controlled Group Member in excess of $75,000 (as adjusted pursuant to Code section 415(d)); (ii) received Compensation from a Controlled Group Member in excess of $50,000 (as adjusted pursuant to Code section 415(d)) and was a member of the top-paid group (as hereafter defined) for such year; or (iii) was an officer of a Controlled Group Member and received Compensation during such year that is greater than 50% of the dollar limitation in effect under Code section 415(b)(1)(A) (but limited to no more than 50 Employees or, if lesser, the greater of three Employees or 10% of the Employees). The term Highly Compensated Employee also includes: (i) an Employee who is both described in the preceding sentence if the term "determination year" is substituted for the term "look-back year" and the Employee is one of the 100 Employees who received the most Compensation from the Controlled Group during the determination year; and (ii) an Employee who is a 5-percent owner at any time during the look-back year or determination year. If no officer has satisfied the Compensation requirement of (ii) above during either a determination year or look-back year, the officer with the highest Compensation for such year will be treated as a Highly Compensated Employee. For purposes of this subsection, the determination year is the Plan Year, and the look-back year is the twelve-month period immediately preceding the determination year. A Highly Compensated Employee also includes any Employee who separated from service (or was deemed to have separated) prior to the determination year, performs no services for a Controlled Group Member during the determination year, and was a Highly Compensated Employee for either the separation year or any determination year ending on or after the Employee's 55th birthday. The term "top-paid group" means that group of Employees consisting of the top 20% of such Employees ranked on the basis of Compensation received during the Plan Year. For purposes of this subsection, Compensation will include Deferral -39- 43 Contributions under the Plan or any other 401(k) arrangement and any amounts that would have been received as cash but for an election to receive benefits under a Code section 125 cafeteria plan. All determinations under this definition will be made in accordance with Code section 414(q) and the Treasury Regulations thereunder. (n) "Includable Compensation" means an Employee's total wages from the Controlled Group 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) contributions of Controlled Group Members to a simplified employee pension plan to the extent such contributions are deductible by the Employee and contributions of Controlled Group Members to any other plan of deferred compensation that 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 that receive special tax benefits within the meaning of section 1.415-2(d)(2) of the Treasury Regulations. The annual Includable Compensation of an Employee taken into account for any purpose for any Plan Year will not exceed $200,000 for any Plan Year ending before January 1, 1994, as adjusted in regulations prescribed by the Secretary of the Treasury, and will not exceed $150,000 for any Plan Year beginning after December 31, 1993, as adjusted in regulations prescribed by the Secretary of the Treasury. For purposes of applying the $200,000 and $150,000 limits set forth in the preceding sentence, if an Employee is a Highly Compensated Employee who is either (i) a 5-percent owner, determined in accordance with Code section 414(q) and the Treasury Regulations promulgated thereunder or (ii) one of the 10 most highly compensated Employees ranked on the basis of Compensation paid by the Controlled Group during the year, such Highly Compensated Employee and the members of his family (as hereafter defined) will be treated as a single employee and the Compensation of each member of the family will be aggregated with the Compensation of the Highly Compensated Employee. The limitation on Compensation will be allocated among such Highly Compensated Employee and his family members in proportion to each individual's Compensation. For purposes of this Section 10.2(u), the term "family" means an Employee's spouse and any lineal descendants who are under age 19 at the end of the Plan Year in question. -40- 44 (o) "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. (p) "Maximum Annual Addition" means with respect to a Participant for any Limitation Year an amount equal to the lesser of (i) the Defined Contribution Dollar Limitation or (ii) 25% of the Participant's Includable Compensation. (q) "Nonhighly Compensated Employee" means an Employee who is neither a Highly Compensated Employee nor a Family Member of a Highly Compensated Employee. (r) "Projected Annual Benefit" means the annual benefit (as defined in Code section 415(b)(2)) to which a Participant would be entitled under the terms of a Defined Benefit Plan maintained by a Controlled Group Member, assuming that the Participant will continue employment until his normal retirement age under the Defined Benefit Plan (or current age, if later) and that the Participant's Includable Compensation for the current Limitation Year and all other relevant factors used to determine benefits under the Defined Benefit Plan will remain constant for all future Limitation Years. (s) "Matching Contribution" means the Participating Employer matching contribution made to the Plan on behalf of a Participant pursuant to Article 3. (t) "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 an 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. (u) "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 a Participant by the Participating Employers. In addition, Compensation includes any contributions made by the Participating Employers on behalf of an Employee pursuant to a deferral election under the Plan or under any other employee benefit plan containing a cash or deferred arrangement under Code section -41- 45 401(k) and 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. The annual Compensation of an Employee taken into account for any purpose will not exceed $200,000 for any Plan Year ending before January 1, 1994, as adjusted in regulations prescribed by the Secretary of the Treasury, and will not exceed $150,000 for any Plan Year beginning after December 31, 1993, as adjusted in regulations prescribed by the Secretary of the Treasury. For purposes of applying the $200,000 and $150,000 limits set forth in the preceding sentence, if an Employee is a Highly Compensated Employee who is either (i) a 5-percent owner, determined in accordance with Code section 414(q) and the Treasury Regulations promulgated thereunder or (ii) one of the 10 most highly compensated Employees ranked on the basis of Compensation paid by the Controlled Group during the year, such Highly Compensated Employee and the members of his family (as hereafter defined) will be treated as a single employee and the Compensation of each member of the family will be aggregated with the Compensation of the Highly Compensated Employee. The limitation on Compensation will be allocated among such Highly Compensated Employee and his family members in proportion to each individual's Compensation. For purposes of this Section 10.2(u), the term "family" means an Employee's spouse and any lineal descendants who are under age 19 at the end of the Plan Year in question. 10.3 General Allocation Limitation. The Annual Addition of a Participant for any Limitation Year will not exceed the Maximum Annual Addition. If, except for the application of this section, the Annual Addition of a Participant for any Limitation Year would exceed the Maximum Annual Addition, the excess Annual Addition attributable to this Plan will not be allocated to the Participant's Account for the Plan Year included in such Limitation Year, but will be subject to the provisions of Section 10.4. The limitations contained in this Article will apply on an aggregate basis to all Defined Contribution Plans and all Defined Benefit Plans (whether or not any of such plans have terminated) established by the Controlled Group Members. 10.4 Excess Allocations. (a) Participants Covered by One Defined Contribution Plan. If the Participant is not covered under another Defined Contribution Plan or a Welfare Benefit Fund maintained by a Controlled Group Member during the Limitation Year and the amount allocated or otherwise allocable to his Account would exceed the Maximum Annual Addition, the Participant's Deferral Contributions will be returned to the Participant (together with earnings, if any, attributable to the returned Deferral Contributions) to the extent necessary to reduce the excess Annual Addition. If an excess Annual Addition -42- 46 remains after the return of such Deferral Contributions plus earnings, the Participating Employer contributions and forfeitures which would continue to cause the Participant's Annual Addition to exceed the Maximum Annual Addition will be successively allocated in the manner described in Section 4.2 among the Accounts of eligible Participants whose Annual Additions do not exceed the Maximum Annual Addition. If, after such allocations have been made, there remain Participating Employer contributions or forfeitures which cannot be allocated without causing the Annual Addition of a Participant to exceed the Maximum Annual Addition, the forfeitures which cause the Annual Addition to exceed the Maximum Annual Addition and the Participating Employer contributions which result from a reasonable error in estimating the Participant's Includable Compensation or from any other limited facts and circumstances which the Commissioner of Internal Revenue finds justifiable under section 1.415-6(b)(6) of the Treasury Regulations and which cause the Participant's Annual Addition to exceed the Maximum Annual Addition will be held in a suspense account in the Trust Fund to be carried forward and used in subsequent Limitation Years to reduce Participating Employer contributions to the Plan. If a suspense account is in existence at any time during a Limitation Year, all amounts in the suspense account must be allocated before any contributions which would constitute Annual Additions will be made to the Plan for that Limitation Year. Such suspense account will not participate in the allocation of the net income or net loss of the Trust Fund. (b) Participants Covered by Two or More Defined Contribution Plans. If, in addition to this Plan, the Participant is covered under another Defined Contribution Plan or a Welfare Benefit Fund maintained by a Controlled Group Member during the Limitation Year, the following provisions will apply. The Annual Addition which may be credited to a Participant's Account under this Plan for any such Limitation Year will not exceed the Maximum Annual Addition reduced by the Annual Addition credited to a Participant's accounts under the other Defined Contribution Plans and Welfare Benefit Funds for the same Limitation Year. If the Annual Addition with respect to the Participant under the other Defined Contribution Plans and Welfare Benefit Funds maintained by a Controlled Group Member is less than the Maximum Annual Addition and the Participating Employer contribution that would otherwise be contributed or allocated to the Participant's Account under this Plan would cause the Annual Addition for the Limitation Year to exceed the Maximum Annual Addition, the amount to be contributed or allocated to the Participant's Account under this Plan will be reduced so that the Annual Addition under all such Defined Contribution Plans and Welfare Benefit Funds for the Limitation Year will equal the Maximum Annual Addition. If the aggregate Annual Addition with respect to the Participant under such other -43- 47 Defined Contribution Plans and Welfare Benefit Funds is equal to or greater than the Maximum Annual Addition, no amount will be contributed or allocated to the Participant's Account under this Plan for the Limitation Year. An excess Annual Addition will be reduced in the manner described in subsection (c). (c) Reduction of Excess Allocations. As soon as is administratively feasible after the end of the Limitation Year, the Maximum Annual Addition for the Limitation Year will be determined on the basis of the Participant's Includable Compensation for the Limitation Year. If a Participant's Annual Addition under this Plan and the other Defined Contribution Plans and Welfare Benefit Funds maintained by Controlled Group Members would result in the Annual Addition exceeding the Maximum Annual Addition for the Limitation Year, the excess amount will be deemed to consist of the Annual Addition last allocated. In making this determination, the Annual Addition attributable to a Welfare Benefit Fund will be deemed to have been allocated first regardless of the actual date of allocation. If an excess amount was allocated to a Participant on an allocation date of this Plan that coincides with an allocation date of another plan, the excess amount attributed to this Plan will be the product of (i) the total excess amount allocated as of such date and (ii) the ratio of the Annual Addition allocated to the Participant for the Limitation Year as of such date under this Plan to the total Annual Addition allocated to the Participant for the Limitation Year as of such date under this and all the other Defined Contribution Plans. Any excess amount attributed to this Plan will be disposed of in the manner described in subsection (a). 10.5 Aggregate Benefit Limitation. If a Controlled Group Member maintains, or at any time maintained, one or more Defined Benefit Plans 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 provisions of the Defined Benefit Plans will govern the order of reduction of Annual Additions or benefit accruals necessary to meet this limitation. If the provisions of the Defined Benefit Plans are silent, the current Annual Addition under this Plan will be reduced first, and then the rate of accrual under the Defined Benefit Plans will be reduced, if necessary to meet this limitation. If the Defined Contribution Plans taken into account in determining the Participant's Annual Addition under this Article satisfied the requirements of Code section 415 as in effect for all Limitation Years beginning before January 1, 1987, an amount will be subtracted from the numerator of the Defined Contribution Fraction (not exceeding such numerator) as prescribed by the Secretary of the Treasury so that the sum of the Defined Contribution Fraction and the Defined Benefit Fraction does not exceed 1.0. For purposes of this -44- 48 Section, a Participant's voluntary nondeductible contributions to a Defined Benefit Plan will be treated as being part of a separate Defined Contribution Plan. 10.6 Limitation on Deferral Contributions. (a) Average Deferral Percentage Test. Notwithstanding any other provision of the Plan, the Average Deferral Percentage for a Plan Year for Participants who are Highly Compensated Employees will not exceed the greater of: (i) the Average Deferral Percentage for Participants who are Nonhighly Compensated Employees multiplied by 1.25; or (ii) the lesser of (A) the Average Deferral Percentage for Participants who are Nonhighly Compensated Employees plus two percentage points or (B) the Average Deferral Percentage for Participants who are Nonhighly Compensated Employees multiplied by 2.0. The multiple use of the alternative test in clause (ii) of this subsection will be restricted as provided in regulations prescribed by the Secretary of the Treasury. (b) Suspension of Deferral Contributions. If at any time during a Plan Year the Committee determines, on the basis of estimates made from information then available, that the limitation described in subsection (a) above will not be met for the Plan Year, the Committee in its discretion may reduce or suspend the Deferral Contributions of one or more Participants who are Highly Compensated Employees to the extent necessary (i) to enable the Plan to meet such limitation or (ii) to reduce the amount of excess Deferral Contributions that would otherwise be distributed pursuant to subsection (c) below. (c) Reduction of Excess Deferral Contributions. If, for any Plan Year, the Average Deferral Percentage for Participants who are Highly Compensated Employees exceeds the limitation described in subsection (a) above, the Deferral Percentage for such Participants will be reduced (in the order of Deferral Percentages, beginning with the highest of such percentages as provided below) until the limitation in subsection (a) is satisfied. The highest Deferral Percentage will be reduced first until the limitation in subsection (a) is satisfied or the percentage equals the next highest percentage, and the process will be repeated until such limitation is satisfied. In order to reduce a Participant's Deferral Percentage, the Participant's excess Deferral Contributions will be distributed to him. All distributions under this subsection will be increased by Trust Fund earnings and decreased by Trust Fund losses for the Plan Year and for the period between the end of the Plan Year and the date of distribution and will be made within two and one-half months following the close of the Plan Year, if practicable, but in no event later than the last day of the immediately following Plan Year. The amount of excess -45- 49 Deferral Contributions distributed pursuant to this Section with respect to a Participant for the Plan Year will be reduced by any Deferral Contributions previously distributed to the Participant for the same Plan Year pursuant to Section 3.1(c). The excess Deferral Contributions of Participants who are subject to the family aggregation rules of Section 10.8(d) will be allocated among the family members in proportion to the Deferral Contributions of the family members. (d) Determination of Earnings and Losses. The earnings and losses of the Trust Fund for the Plan Year allocable to the portion of a Participant's Deferral Contributions that are distributed pursuant to subsection (c) above will be determined by multiplying the Trust Fund earnings or losses for the Plan Year allocable to the Participant's Deferral Contribution Account by a fraction, the numerator of which is the amount of Deferral Contributions to be distributed to the Participant and the denominator of which is the balance of the Participant's Deferral Contribution Account on the last day of the Plan Year, reduced by the earnings and increased by the losses allocable to such Account for the Plan Year. The earnings and losses of the Trust Fund allocable to the Participant's Deferral Contributions that are distributed pursuant to subsection (c) for the period between the end of the Plan Year and the date of such distribution will be determined in accordance with regulations prescribed by the Secretary of the Treasury interpreting Code section 401(k). (e) Discriminatory Matching Contributions. If the allocation of Matching Contributions to a Participant's Matching Contribution Account results in a discriminatory matching contribution (as determined under Code sections 401(a)(4) or 401(m) and the regulations thereunder) for such Participant because the Matching Contribution relates to a Deferral Contribution that exceeds the limitations described in Section 3.1(c) or this Section 10.6, or because of any other reason, and such discriminatory matching contribution cannot be distributed as an excess Matching Contribution pursuant to Section 10.7, such discriminatory matching contribution, or the portion thereof that results in prohibited discrimination, will be forfeited notwithstanding any other provision of the Plan to the contrary. 10.7 Limitation on Matching Contributions. (a) Average Contribution Percentage Test. Notwithstanding any other provision of the Plan, the Average Contribution Percentage for a Plan Year for Participants who are Highly Compensated Employees will not exceed the greater of: (i) the Average Contribution Percentage for Participants who are Nonhighly Compensated Employees multiplied by 1.25; or (ii) the lesser of (A) the Average Contribution Percentage Test for Participants who are Nonhighly Compensated Employees plus two -46- 50 percentage points or (B) the Average Contribution Percentage for Participants who are Nonhighly Compensated Employees multiplied by 2.0. The multiple use of the alternative test contained in clause (ii) of this subsection will be restricted as provided in regulations prescribed by the Secretary of the Treasury. (b) Reduction of Excess Matching Contributions. If, for any Plan Year, the Average Contribution Percentage for Participants who are Highly Compensated Employees exceeds the limitation described in subsection (a) above, the Contribution Percentage for each such Participant will be reduced (in the order of Contribution Percentages, beginning with the highest of such percentages as provided below) until the limitation in subsection (a) is satisfied. The highest Contribution Percentage will be reduced first until the limitation in subsection (a) is satisfied or the percentage equals the next highest percentage, and the process will be repeated if necessary until such limitation is satisfied. In order to reduce a Participant's Contribution Percentage, the Participant's excess Matching Contributions (increased by Trust Fund earnings and decreased by Trust Fund losses for the Plan Year and for the period between the end of the Plan Year and the date of distribution) will be distributed to the Participant within two and one-half months following the close of the Plan Year, if practicable, but in no event later than the last day of the immediately following Plan Year. The excess Matching Contributions of Participants who are subject to the family aggregation rules of Section 10.8(d) will be allocated among the family members in proportion to the Matching Contributions made on behalf of the family members. (c) Determination of Earnings and Losses. The earnings and losses of the Trust Fund for the Plan Year allocable to the portion of a Participant's Matching Contributions that are forfeited pursuant to Section 10.6 or distributed pursuant to subsection (b) above will be determined by multiplying the Trust Fund earnings or losses for the Plan Year allocable to the Participant's Matching Contribution Account by a fraction, the numerator of which is the amount of Matching Contributions to be distributed or forfeited and the denominator of which is the balance of the Participant's Matching Contribution Account on the last day of the Plan Year, reduced by the earnings and increased by the losses allocable to such Account for the Plan Year. The earnings and losses of the Trust Fund allocable to a Participant's Matching Contributions that are forfeited pursuant to Section 10.6 or distributed pursuant to subsection (b) above for the period between the end of the Plan Year and the date of such distribution or forfeiture will be determined in accordance with regulations prescribed by the Secretary of the Treasury interpreting Code sections 401(k) and 401(m). -47- 51 10.8 Aggregation Rules. (a) Code Section 415. For purposes of the allocation limitations under Code section 415 set forth in this Article, (i) 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, and (ii) Controlled Group Members will be determined in accordance with the 50% control rule of Code section 415(h). (b) Code Section 401(k). For purposes of the limitation on Deferral Contributions set forth in this Article, the Average Deferral Percentage for any Participant who is a Highly Compensated Employee for the Plan Year and who is eligible to have deferral contributions allocated to his account under two or more plans or arrangements described in Code section 401(k) that are maintained by the Company or any Controlled Group Member will be determined as if all such deferral contributions were made under a single arrangement (unless such plans or arrangements may not be permissively aggregated under applicable regulations). Plans that are aggregated for purposes of satisfying the minimum coverage rules of Code section 410(b) (other than for purposes of the average benefits percentage test) will be treated as a single plan for such purposes. (c) Code Section 401(m). The Contribution Percentage of a Participant who is a Highly Compensated Employee for a Plan Year and who is eligible to make voluntary Employee contributions or receive deferral contributions or matching employer contributions allocated to his account under two or more Defined Contribution Plans maintained by the Company or a Controlled Group Member will be determined as if all such contributions were made to a single plan (unless such plans may not be permissively aggregated under applicable regulations). Plans that are aggregated for purposes of satisfying the minimum coverage rules of Code section 410(b) (other than for purposes of the average benefits percentage test) will be treated as a single plan for such purposes. (d) Family Members. For purposes of determining the Contribution Percentage or the Deferral Percentage of a Participant who is both a Highly Compensated Employee and either (i) a 5-percent owner, determined in accordance with Code section 414(q) and the Treasury Regulations promulgated thereunder or (ii) one of the 10 most highly compensated Employees ranked on the basis of Compensation paid by the Controlled Group during the year, determined in accordance with Code section 414(q) and the Treasury Regulations promulgated thereunder, the Matching Contributions, Deferral Contributions, and Compensation of such -48- 52 Participant will include the Matching Contributions, Deferral Contributions and Compensation of Family Members, and Family Members will be disregarded in determining the Contribution Percentage or the Deferral Percentage of Participants who are not such Highly Compensated Employees. -49- 53 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 6 or Article 7. 11.2 General Restrictions. (a) Distributions Prior to a Separation from Service. Except for distributions permitted under Article 6 with respect to Participants who attain age 59-1/2 or suffer a hardship, a Participant's interest in the Plan will not be distributed before the Participant's separation from service, disability or death unless: (i) the Plan is terminated without the establishment or maintenance by the Participating Employers of another defined contribution plan (other than an employee stock ownership plan as defined in Code section 4975(e)(7)); (ii) a Participating Employer that is a corporation sells all or substantially all of the assets used by the Participating Employer in a trade or business to a person other than a Controlled Group Member and the Participant becomes an employee of the acquiring employer; or (iii) a Participating Employer that is a corporation disposes of its interest in a subsidiary to a person other than an Controlled Group Member but only if the Participant continues employment with the subsidiary. An event will not be treated as described in clause (ii) or (iii) above unless the Participating Employer continues to maintain the Plan after the disposition. (b) Lump Sum Distribution Required. An event described in subparagraph (a) that would otherwise permit distribution of a Participant's interest in the Plan will not be treated as described in subparagraph (a) unless the Participant receives a lump sum distribution by reason of the event. A lump sum distribution for this purpose will be a distribution described in Code section 402(d)(4), without regard to clauses (i), (ii), (iii), and (iv) of subparagraph (A), subparagraph (B), or subparagraph (F) thereof. 11.3 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 62, (ii) the tenth anniversary of the Plan Year in -50- 54 which the Participant began participation in the Plan, or (iii) the Participant's termination of employment. 11.4 Restrictions on Delay of Distributions. The following provisions will apply to limit a Participant's ability to delay the distribution of benefits. (a) General Rule. Distribution of a Participant's entire vested and nonforfeitable interest will be made or commence not later than April 1 following the calendar year in which he attains age 70-1/2. On or before December 31 of such calendar year and of each succeeding calendar year, distribution of the entire amount of any additional balances in the Participant's Accounts (determined as of the preceding Valuation Date) will be made in a lump sum. (b) Rule for Certain Participants Who Attained Age 70-1/2 Before 1988. Notwithstanding subsection (a), if a Participant attained age 70-1/2 before January 1, 1988 and was not a 5-percent owner (as such term is defined in Code Section 416(i)) at any time during the five-plan-year period ending in the calendar year in which he attained age 70-1/2, then distribution of his entire vested and nonforfeitable interest will be made or commence not later than April 1 following the earlier of (i) the calendar year in which his employment with the Controlled Group terminates or (ii) the calendar year in which he becomes a 5-percent owner. (c) Rule for Participants Who Attained Age 70-1/2 in 1988. If a Participant attained age 70-1/2 during 1988 and had not terminated employment with the Controlled Group as of January 1, 1989, distribution of his entire vested and nonforfeitable interest will be made or commence not later than April 1, 1990. 11.5 Limitation to Assure Benefits Payable to Beneficiaries are Incidental. In the event that any payments under the Plan are to be made to someone other than the Participant or jointly to the Participant and his spouse or other payee, such payments must conform to the "incidental benefit" rules of Code section 401(a)(9)(G) and Treasury Regulation section 1.401(a)(9)-2. 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 -51- 55 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. 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). 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). -52- 56 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(f). (b) "Defined Benefit Plan" means the Qualified Plan described in Section 10.2(h). (c) "Defined Contribution Dollar Limitation" means the limitation described in Section 10.2(i). (d) "Defined Contribution Plan" means the Qualified Plan described in Section 10.2(k). (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(n). (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% owner of a Controlled Group Member, or (iv) a 1% owner of a Controlled Group Member who has annual -53- 57 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). For purposes of this subsection, Includable Compensation will include the amount of any salary reduction contributions pursuant to a cash or deferred arrangement meeting the requirements of Code section 401(k) or a cafeteria plan meeting the requirements of Code section 125. (i) "Minimum Allocation" means the allocation described in the first sentence of Section 12.3(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 period ending on the Determination Date), and the denominator of which is the sum of the Present Value of the accrued benefits and -54- 58 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 Minimum Allocation. (a) Calculation of Minimum Allocation. For any Plan Year in which the Plan is a Top-Heavy Plan, each Participant who is not a Key Employee will receive an allocation of Participating Employer contributions and forfeitures of not less than the lesser of 3% of his Includable Compensation for such Plan Year or the percentage of Includable Compensation that equals the largest percentage of Participating Employer contributions (including Deferral Contributions) and forfeitures allocated to a Key Employee. The Minimum Allocation is determined without regard to any Social Security contribution. Deferral Contributions made on behalf of Participants who are not Key Employees will not be treated as Participating Employer -55- 59 contributions for purposes of the Minimum Allocation. Matching Contributions that are allocated to Participants who are not Key Employees and that are taken into account in determining a Participant's Deferral Percentage or Contribution Percentage will not be treated as Participating Employer contributions for such Plan Year for purposes of the Minimum Allocation. The Minimum Allocation applies even though under other Plan provisions the Participant would not otherwise be entitled to receive an allocation, or would have received a lesser allocation for the Plan Year because (i) the non-Key Employee fails to make mandatory contributions to the Plan, (ii) the non-Key Employee's Includable Compensation is less than a stated amount, or (iii) the non-Key Employee fails to complete 1,000 Hours of Service in the Plan Year. (b) Limitation on Minimum Allocation. No Minimum Allocation will be provided pursuant to subsection (a) to a Participant who is not employed by a Controlled Group Member on the last day of the Plan Year. (c) Minimum Allocation When Participant is Covered by Another Qualified Plan. If a Controlled Group Member maintains one or more other Defined Contribution Plans covering Employees who are Participants in this Plan, the Minimum Allocation will be provided under this Plan, unless such other Defined Contribution Plans make explicit reference to this Plan and provide that the Minimum Allocation will not be provided under this Plan, in which case the provisions of subsection (a) will not apply to any Participant covered under such other Defined Contribution Plans. If a Controlled Group Member maintains one or more Defined Benefit Plans covering Employees who are Participants in this Plan, and such Defined Benefit Plans provide that Employees who are participants therein will accrue the minimum benefit applicable to top-heavy Defined Benefit Plans notwithstanding their participation in this Plan, then the provisions of subsection (a) will not apply to any Participant covered under such Defined Benefit Plans. If a Controlled Group Member maintains one or more Defined Benefit Plans covering Employees who are Participants in this Plan, and the provisions of the preceding sentence do not apply, then each Participant who is not a Key Employee and who is covered by such Defined Benefit Plans will receive a Minimum Allocation determined by applying the provisions of subsection (a) with the substitution of "5%" in each place that "3%" occurs therein. (d) Nonforfeitability. The Participant's Minimum Allocation, to the extent required to be nonforfeitable under Code section 416(b) and the special vesting schedule provided in this Article, may not be forfeited under Code section 411(a)(3)(B) (relating to suspension of benefits on reemployment) -56- 60 or 411(a)(3)(D) (relating to withdrawal of mandatory contributions). 12.4 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 10.2(g) and (j). (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 one of the following conditions is met: (i) Employees who are not Key Employees do not participate in both a Defined Benefit Plan and a Defined Contribution Plan which are in the Required Aggregation Group, and the Minimum Allocation requirements of Section 12.3(a) are met when such requirements are applied with the substitution of "4%" for "3%"; (ii) the Minimum Allocation requirements of Section 12.3(c) are met when such requirements are applied with the substitution of "7 1/2%" for "5%"; or (iii) Employees who are not Key Employees have an accrued benefit of not less than 3% of their average Includable Compensation for the five consecutive Plan Years in which they had the highest Includable Compensation multiplied by their Years of Service in which the Plan is a Top-Heavy Plan (not to exceed a total such benefit of 30%), expressed as a life annuity commencing at the Participant's normal retirement age in a Defined Benefit Plan which is in the Required Aggregation Group. 12.5 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 5. The minimum vesting schedule applies to all Account balances including amounts attributable to Plan Years before the effective date of Code section 416 and amounts attributable to Plan Years before the Plan became a Top-Heavy Plan. Further, no reduction in vested Account balances 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 5 will be treated as an amendment subject to Section 14.1(iii). However, this subsection does not apply to the Account balances 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 -57- 61 Account balances will be determined without regard to this Section. (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
-58- 62 ARTICLE 13 ADOPTION OF 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 and the vested and nonforfeitable interest of such Employees in their Account balances provided that such credit will be applied in a uniform and nondiscriminatory manner with respect to all such Employees. -59- 63 ARTICLE 14 AMENDMENT OF THE PLAN 14.1 Right to Amend the Plan. (a) In General. The Company reserves to the Compensation Committee of the Board of Directors the right to amend the Plan at any time and from time to time to the extent it may deem advisable or appropriate, provided 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 will have the effect of reducing the percentage of the vested and nonforfeitable interest of any Participant in his Account nor will the vesting provisions of the Plan be amended unless each Participant with at least three Years of Service (including Years of Service disregarded pursuant to the reemployment provisions (if any) of Article 5) 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; and (iv) no amendment will be effective to the extent that it has the effect of decreasing a Participant's Account balance or eliminating an optional form of distribution as it applies to an existing Account balance. (b) Authority of the Board. The Company also reserves to the Board of Directors the right to amend the Plan at any time and from time to time to the extent it may deem advisable or appropriate, subject to the limitations on amendments set forth in subsection (a). 14.2 Amendment Procedure. Any amendment to the Plan will be made only pursuant to action of the Board or of the Compensation Committee of the Board. A certified copy of the resolutions adopting any amendment and a copy of the executed amendment will be delivered to the Trustee, the Committee and the Company. Upon such action by the Board or the Compensation Committee of the Board, the Plan will be deemed amended as of the date specified as the effective date by such action or in the instrument of amendment. The effective date of any amendment may be before, on or after the date of such action, except as otherwise set forth in Section 14.1. 14.3 Effect on Participating Employers. Unless an amendment expressly provides otherwise, all Participating Employers will be bound by any amendment to the Plan. -60- 64 ARTICLE 15 TERMINATION, PARTIAL TERMINATION AND COMPLETE DISCONTINUANCE OF CONTRIBUTIONS 15.1 Continuance of Plan. The Participating Employers expect to continue the 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 or to completely discontinue contributions thereto at any time. In addition, subject to 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, or if there is a complete discontinuance of contributions to the Plan by the Participating Employers, the amounts allocated or to be allocated to the Accounts of all affected Participants will become 100% vested and nonforfeitable without regard to their Years of 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 or there is a complete discontinuance of Participating Employer contributions will not be an affected Participant entitled to full vesting if the Participant had no vested interest in his Account balance attributable to Participating Employer contributions at his termination of employment. In the event of a partial termination of the Plan, the amounts allocable to the Accounts 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 without regard to their Years of Service. 15.3 Disposition of the Trust Fund. If the Plan is terminated, or if there is a complete discontinuance of contributions to the Plan, the Committee will instruct the Trustee either (i) to continue to administer the Plan and pay benefits in accordance with the Plan until the Trust Fund has been depleted, or (ii) to distribute the assets remaining in the Trust Fund, unless distribution is prohibited by Section 11.2. If the Trust Fund is to be distributed, the Committee will make, after deducting estimated expenses for termination of the Trust Fund and distribution of its assets, the allocations required under the Plan as though the date of completion of the Trust Fund termination were a Valuation Date. The Trustee will distribute to each Participant the amount credited to his Account as of the date of completion of the Trust Fund termination. 15.4 Withdrawal by A Participating Employer. A Participating Employer may withdraw from participation in the -61- 65 Plan or completely discontinue contributions to the Plan only with the approval of the Board. If any Participating Employer withdraws from the Plan or completely discontinues contributions to the Plan, a copy of the 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. -62- 66 ARTICLE 16 MISCELLANEOUS 16.1 Reversion Prohibited. (a) General Rule. Except as provided in subsections (b), (c) and (d), 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 within one year after such determination and the Plan and Trust Agreement will terminate, but only if the application for determination was made within the time prescribed by law for filing the Company's income tax return for the taxable year in which the Plan and the Trust Agreement were adopted, or such later date as the Secretary of the Treasury may prescribe. -63- 67 16.2 Bonding, Insurance and Indemnity. (a) Bonding. To the extent required under ERISA, the Participating Employers will obtain, pay for and 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, transfer or dispose of -64- 68 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). Payment to an alternate payee pursuant to a qualified domestic relations order will be made in an immediate lump sum payment, if the order so provides. 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, INCLUDING WITHOUT LIMITATION, THE TEXAS STATUTE OF LIMITATIONS, BUT WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAWS OF SUCH STATE. Executed at Dallas, Texas, this 2 day of February, 1996. A. H. BELO CORPORATION By /s/ [ILLEGIBLE] -65- 69 APPENDIX A PARTICIPATING EMPLOYERS A. H. Belo Corporation Belo Production, Inc. (as of April 1, 1994) Bryan-College Station Eagle, Inc. (as of December 26, 1995) Dallas-Ft. Worth Suburban Newspapers, Inc. (through March 31, 1994) The Dallas Morning News Company DFW Printing Company, Inc. (as of April 1, 1994) DFW Suburban Newspapers, Inc. (for the period beginning on April 1, 1994 and ending on December 31, 1994) Great Western Broadcasting Corporation Gulf Television Corporation KOTV, Inc. Owensboro Messenger-Inquirer, Inc. (as of January 5, 1996) Third Avenue Television, Inc. (as of February 1, 1995) WFAA Television, Inc. WVEC Television, Inc. WWL-TV, Inc. (as of June 1, 1994) -66- EX-10.3(11) 10 GB DEALEY RETIREMENT PENSION PLAN 1 Exhibit 10.3(11) THE G. B. DEALEY RETIREMENT PENSION PLAN (As Amended and Restated Generally Effective January 1, 1989) 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 generally effective as of January 1, 1989. 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). Except as otherwise specifically provided in the Plan, the provisions of the Plan as amended and restated herein will apply to each Employee who completes an Hour of Service after December 31, 1988; 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, 1988. Words and phrases with initial capital letters used throughout the Plan are defined in Article 1. 3 TABLE OF CONTENTS
Page ---- ARTICLE 1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE 2 PARTICIPATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 ARTICLE 3 CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 ARTICLE 4 RETIREMENT BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 ARTICLE 5 FORMS OF RETIREMENT BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 ARTICLE 6 DEATH BENEFITS FOR SPOUSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 ARTICLE 7 VESTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 ARTICLE 8 ADMINISTRATION OF THE PLAN AND TRUST AGREEMENT . . . . . . . . . . . . . . . . . . . . . . 32 ARTICLE 9 LIMITATIONS ON BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 ARTICLE 10 RESTRICTIONS ON DISTRIBUTIONS TO PARTICIPANTS AND BENEFICIARIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 ARTICLE 11 TOP-HEAVY PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 ARTICLE 12 ADOPTION OF THE PLAN BY CONTROLLED GROUP MEMBERS . . . . . . . . . . . . . . . . . . . . . 54 ARTICLE 13 AMENDMENT OF THE PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 ARTICLE 14 TERMINATION AND PARTIAL TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 ARTICLE 15 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 APPENDIX A PARTICIPATING EMPLOYERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1 APPENDIX B BENEFIT FORMULAS IN EFFECT ON DECEMBER 31, 1988 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1 APPENDIX C DEATH BENEFITS FOR PARTICIPANTS BEFORE JANUARY 1, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-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 total years of Credited Service and the denominator of which is the years of Credited Service the Participant would have earned 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 will be the Pension Benefit Guaranty Corporation immediate annuity rate in effect on the first day of the Plan Year in which the Participant terminates employment. (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 5.1(e), actuarial equivalence will be determined by using the Applicable Interest Rate and, for distributions made pursuant to Section 5.1(e) after December 31, 1995, the applicable mortality table as prescribed by the Secretary of the Treasury under Code section 417(e)(3). The foregoing actuarial assumptions may be changed from time to time by amendment to the Plan. No Participant or 5 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 for distributions made prior to January 1, 1996, 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 lump sum 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. For distributions made pursuant to Section 5.1(e) after December 31, 1995, the Applicable Interest Rate is the annual rate of interest on 30-year Treasury securities for the month of November preceding the Plan Year in which a distribution is made. 1.4 "Beneficiary" means the one or more persons or entities entitled to receive distribution of a benefit (if any) that becomes payable under the Plan in the event of a Participant's death. If a Participant has not designated a Beneficiary or is not survived by a designated Beneficiary, any 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 then living parents, and if none of the above are then living, to his estate. 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 will commence on the first day of an Employee's Period of Absence 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 -2- 6 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 8. 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 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 (other than an annual bonus award) under the Company's 1986 Long Term Incentive Plan, the 1995 Executive Compensation Plan or any successor executive compensation plan, as such plans may be amended and in effect 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. -3- 7 For purposes of determining benefit accruals for any Plan Year beginning after December 31, 1988, and ending before January 1, 1994, the Compensation of an Employee will not exceed $200,000, and for purposes of determining benefit accruals for any Plan Year beginning after December 31, 1993, the Compensation of any Employee will not exceed $150,000, as both such dollar limits are adjusted by the Secretary of the Treasury. 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 or $150,000 limitation, as applicable, 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 or $150,000 limitation, as applicable, 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 Plan Year, the Compensation for such prior Plan 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, 1994, the applicable annual compensation limit is $200,000. In addition, if Compensation for any Plan Year beginning prior to January 1, 1994, is used to determine benefit accruals in a Plan Year beginning on or after January 1, 1994, the annual compensation limit for that prior Plan Year will be $150,000, as adjusted for that prior Plan Year by the Secretary of the Treasury. 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, frozen in accordance with section 1.401(a)(4)-13 of the regulations, plus his Accrued Benefit determined solely with respect to his years of Credited Service after 1993. -4- 8 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 "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 9.2(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. 1.15 "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. Notwithstanding the -5- 9 foregoing, for purposes of determining the amount of an Employee's Accrued Benefit under Article 4, Credited Service earned by an Employee while employed by a Controlled Group Member that is not a Participating Employer will not be taken into account, and Credited Service 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. In determining the Credited Service of an Employee who became an employee of WWL-TV, Inc., a Delaware corporation, on June 1, 1994, and who immediately prior to that date was an employee of Rampart Operating Partnership, a partnership organized under the laws of the State of Louisiana ("Rampart"), such Employee will receive credit for his period of employment with Rampart or any affiliate of Rampart, calculated in the same manner as if it had been employment with a Controlled Group Member, for purposes of eligibility to participate in the Plan under Section 2.1 but not for purposes of determining the amount of his retirement benefit or his vested interest in his retirement benefit or for any other purpose of the Plan. In determining the Credited Service of an Employee who became an employee of Third Avenue Television, Inc., a Delaware corporation, on February 1, 1995, and who immediately prior to that date was an employee of KIRO, Inc., a Washington corporation ("KIRO"), such Employee will receive credit for his period of employment with KIRO or any affiliate of KIRO, calculated in the same manner as if it had been employment with a Controlled Group Member, for purposes of eligibility to participate in the Plan under Section 2.1 and for purposes of his vested interest in his retirement benefit under Article 7 of the Plan, but not for purposes of determining the amount of his retirement benefit or for any other purpose of the Plan. In determining the Credited Service of an Employee who became an employee of Owensboro Messenger- Inquirer, Inc., a Delaware corporation, on January 5, 1996, and who immediately prior to that date was an employee of Owensboro Publishing Company ("OPC"), such Employee will receive credit for his period of employment with OPC or any affiliate of OPC, calculated in the same manner as if it had been employment with a Controlled Group Member, for purposes of eligibility to participate in the Plan under Section 2.1 and for purposes of his vested interest in his retirement benefit under Article 7 of the Plan, but not for purposes of determining the amount of his retirement benefit or for any other purpose of the Plan. 1.16 "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 -6- 10 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. 1.17 "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. 1.18 "Effective Date" means January 1, 1989. 1.19 "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). 1.20 "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. 1.21 "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. 1.22 "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 -7- 11 months of service during such year and multiplying the result by 12. 1.23 "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. (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 -8- 12 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 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. 1.24 "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 4.1. -9- 13 1.25 "Normal Retirement Date" means the first day of the month coincident with or immediately following a Participant's attainment of age 65. 1.26 "Participant" means an Employee or former Employee who has met the applicable participation requirements of Article 2 and who has not yet received a distribution of the entire amount of his vested benefit under the Plan. 1.27 "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. 1.28 "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. 1.29 "Plan" means the defined benefit pension plan set forth herein, as amended from time to time. 1.30 "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. 1.31 "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 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) with respect to married Participant who dies before January 1, 1995, a monthly annuity for the life of the deceased Participant's surviving Spouse that is equal to the Actuarial Equivalent of the Participant's Accrued Benefit determined as of the date of his death and (b) with respect to a married Participant who dies on or after January 1, 1995, a monthly annuity for the life of the deceased Participant's surviving Spouse in the amount described in Section 6.2. 1.34 "Spouse" means the individual to whom a Participant was legally married on the earlier of his Benefit Commencement Date or the date of his death. -10- 14 1.35 "Super Highly Compensated Employee" means an Employee described in Code section 414(q)(1)(A) or (B). 1.36 "Taxable Wage Base" means the contribution and benefit base in effect under section 230 of the Social Security Act at the beginning of the Plan Year. 1.37 "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", "terminated 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. 1.38 "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. 1.39 "Trust Fund" means the assets of the Plan held by the Trustee pursuant to the Trust Agreement. 1.40 "Trustee" means the one or more individuals or organizations who have entered into the Trust Agreement as Trustee(s), and any duly appointed successor. -11- 15 ARTICLE 2 PARTICIPATION 2.1 Eligibility to Participate. Each Employee who was a Participant on December 31, 1988, 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. Notwithstanding the foregoing: (i) Each Employee of WWL-TV, Inc. who completed a year of Credited Service on or before May 31, 1994, will become a Participant on June 1, 1994. (ii) Each Employee of Third Avenue Television, Inc. who completed a year of Credited Service on or before January 31, 1995, will become a Participant on February 1, 1995. (iii) Each Employee of Owensboro Messenger-Inquirer, Inc. who completed a year of Credited Service on or before January 4, 1996, will become a Participant on January 5, 1996. 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) or he is classified by a Participating Employer as an independent contractor whose compensation for services is reported on a form other than Form W-2 or any successor form for reporting wages paid to employees; (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; (v) he is then on an approved leave of absence without pay or in -12- 16 the service of the armed forces of the United States; or (vi) he is employed by DFW Suburban Newspapers, Inc. 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 and Compensation 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. (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. -13- 17 (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. -14- 18 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 4 and, if applicable, Article 11, 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 Code section 412 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. -15- 19 ARTICLE 4 RETIREMENT BENEFITS 4.1 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 and (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, plus, if he is a Participant to whom the provisions of Section B.4 of Appendix B apply, a monthly benefit equal to the benefit described in Section B.4(a)(v) of Appendix B. (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 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) April 30, 1991, 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 B to the Plan. 4.2 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 -16- 20 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 9.2(m)) exceeds age 65. 4.3 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 4.1 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 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)). 4.4 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 4.2 for each month that his Benefit Commencement Date is earlier than his Normal Retirement Date. Appendix B contains special provisions relating to the payment of deferred vested benefits for certain Participants. -17- 21 4.5 Disability Benefit. A Participant who has a Disability prior to attaining age 65 and prior to his termination of employment will continue to accrue a benefit during the period of his Disability only if (i) he returns to regular employment with a Participating Employer immediately following the termination of his Disability or (ii) he has attained Early Retirement Age at the time his Disability terminates and he elects to retire and immediately begin receiving retirement benefits under the Plan. 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 hereinafter defined) before attaining age 65 and before his termination of employment and who 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 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. 4.6 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 7.3 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. -18- 22 4.7 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 ERISA section 4044) 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 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 the first to occur of the events described in (i) through (iv) below, unless the Board has adopted a resolution prior to or promptly following the occurrence of any such event stipulating, conditionally, temporarily or otherwise, that any such event will not result in a change in control of the Company: (i) the commencement of, or first public announcement of the intention of any person or group (within the meaning of Section 3(b) of and Rule 13d-5(b) promulgated under the Securities Exchange Act of 1934, as amended, respectively) to commence, a tender offer or exchange offer (other than an offer by the Company or any Subsidiary) for all, or any part of, the common stock of the Company (including, if issued and outstanding, Series A common stock and Series B common stock, hereinafter referred to as "Common Stock"); -19- 23 (ii) the public announcement by the Company or by any group (as defined in clause (i) above), entity or person (other than the Company, any Subsidiary (as hereinafter defined), or any savings, pension or other benefit plan for the benefit of employees of the Company or any Subsidiary) that such group, entity or person through a transaction or series of transactions has acquired, directly or indirectly, beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended) of more than 30% of the total number of shares of Common Stock; (iii) the approval by the Company's shareholders (or, if such approval is not required, the consummation) of a merger in which the Company does not survive as an independent publicly owned corporation, a consolidation, or a sale, exchange, or other disposition of all or substantially all the Company's assets; or (iv) a change in the composition of the Board during any period of two consecutive years such that individuals who at the beginning of such period were members of the Board 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. For purposes of the foregoing definition, the term "Subsidiary" means any corporation, partnership, joint venture or other entity in which at the time the Company owns or controls, directly or indirectly, not less than 50% of the total combined voting power or equity interests represented by all classes of stock issued by such corporation, partnership, joint venture or other entity. 4.8 Special Benefit Provisions. Appendix B sets forth special provisions affecting the calculation of benefits for certain Participants. 4.9 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 -20- 24 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 4.1 and 4.2, 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 1.22 or the Final Monthly Compensation that would result from including in clause (i) of Section 1.22 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 4.2 will be applied by adding five additional years to the Qualified Participant's age. 4.10 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. [TABLE APPEARS ON FOLLOWING PAGE] -21- 25 Date of Retirement Amount of Adjustment - ------------------ -------------------- Before January 1, 1981 12% On or after January 1, 1981 8% and before January 1, 1986 On or after January 1, 1986 4% and before January 1, 1989
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. 4.11 Direct Rollovers. (a) Distributions after 1992. Notwithstanding any other provision of the Plan, for distributions made on or after January 1, 1993 a Distributee (as hereinafter defined) may elect, at any time and in the manner prescribed by the Committee, to have any portion of an Eligible Rollover Distribution (as hereinafter defined) paid directly to an Eligible Retirement Plan (as hereinafter defined) specified by the Distributee. (b) Eligible Rollover Distribution. An Eligible Rollover Distribution is any distribution of all or any portion of the balance to the credit of the Distributee, except that an Eligible Rollover Distribution does not include (i) any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life or life expectancy of the Distributee or the joint lives or life expectancies of the Distributee and the Distributee's designated beneficiary, or for a specified period of ten years or more, (ii) any distribution to the extent such distribution is required by Code section 401(a)(9), and (iii) the portion of any distribution that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities). (c) Eligible Retirement Plan. An Eligible Retirement Plan is an individual retirement account described in Code section 408(a), an individual retirement annuity described in Code section 408(b), an annuity plan described in Code section 403(a), or a Qualified Plan that is a Defined Contribution Plan, that accepts the Distributee's Eligible Rollover Distribution. However, in the case of an Eligible Rollover Distribution to a Participant's surviving Spouse, an Eligible Retirement Plan is an individual retirement account or individual retirement annuity. -22- 26 (d) Distributee. A Distributee includes a Participant, the Participant's Spouse, or a Participant's former spouse who is an alternate payee under a qualified domestic relations order, as defined in Code section 414(p). 4.12 Limitation on Benefits. Article 9 sets forth certain rules under Code section 415 that limit the amount of a Participant's retirement benefits under the Plan. -23- 27 ARTICLE 5 FORMS OF RETIREMENT BENEFITS 5.1 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 5.2(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 5.2(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 described in Section 5.2(a). (c) Election of Optional Form. Subject to Section 5.2, 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 30 days following the furnishing of all applicable information to the Participant by the Committee and will end not earlier than 90 days before the Participant's Benefit Commencement Date. (d) 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 -24- 28 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). (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 and, for distributions made pursuant to this subsection after December 31, 1995, the applicable mortality table as prescribed by the Secretary of the Treasury under Code Section 417(e)(3). (Section 15.4 contains special rules for single-sum payments to alternate payees under a qualified domestic relations order.) 5.2 Special Annuity Provisions. (a) Qualified Election. For purposes of Section 5.1(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 5.1(c) without the consent of his Spouse, provided his Spouse is 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 -25- 29 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. 5.3 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. 5.4 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 5.2(a)) to the commencement of such payments or the Participant consents to such payments and payments are made in the normal form of payment under Section 5.1. 5.5 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 the Employee is employed in Section 203(a)(3)(B) Service (as hereinafter 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 -26- 30 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 8.10. (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 11. (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)). 5.6 Restrictions on Distributions. Article 10 sets forth certain rules under various provisions of the Code relating to restrictions on distributions to Participants. -27- 31 ARTICLE 6 DEATH BENEFITS FOR SPOUSES 6.1 Application of Article. This Article applies with respect to a Participant (including without limitation a Participant who terminated employment before January 1, 1995) who dies after December 31, 1994. The death benefits payable with respect to a Participant who dies before January 1, 1995, are set forth on Appendix C. 6.2 Death Benefit. The Spouse of a Participant who has a vested interest in his Accrued Benefit and dies prior to his Benefit Commencement Date will receive a Qualified Preretirement Survivor Annuity in an amount determined under this Section. Payments to the Spouse that begin before the Participant's Normal Retirement Date will be actuarially adjusted in the manner set forth in Section 6.3. The death benefit, if any, payable to the Spouse of a Participant who dies after his Benefit Commencement Date will be determined under the form of benefit elected by the Participant with the consent of the Spouse, if required under Section 5.2. (a) Death After Age 55. If a Participant dies after attaining age 55, the payments to his Spouse under the Qualified Preretirement Survivor Annuity will be equal to the greater of (i) the payments the Spouse would have received under the Qualified Joint and Survivor Annuity if the Participant had terminated employment with an immediate Qualified Joint and Survivor Annuity on the day before his death or (ii) if the Participant either (A) had attained age 55 while an Employee on or before December 31, 1994, or (B) had terminated employment before January 1, 1995, but had attained age 55 at the time of his termination of employment, payments that are the Actuarial Equivalent of the Participant's Accrued Benefit determined as of December 31, 1994, or the date of his termination of employment, whichever is earlier. (b) Death On or Before Age 55. If a Participant dies on or before attaining age 55, the payments to his Spouse under the Qualified Preretirement Survivor Annuity will be equal to the payments the Spouse would have received if the Participant (i) had terminated employment on the date of his death (if he was an Employee on the date of his death); (ii) had survived to age 55; (iii) had received at age 55 an immediate Qualified Joint and Survivor Annuity in the amount elected by the Participant prior to his death; and (iv) had died on the day after attaining age 55. -28- 32 (c) Death after Divorce. If a married Participant becomes divorced, he will be treated as having waived the Qualified Preretirement Survivor Annuity with respect to his former spouse, and his former spouse will not be entitled to any death benefit under the Plan except to the extent provided in a qualified domestic relations order described in Code section 414(p). 6.3 Commencement of Benefit. The surviving Spouse may elect to begin receiving payments on the first day of any month following the month in which the Participant died. If the surviving Spouse elects to begin receiving payments as of any date that precedes the Participant's Normal Retirement Date, the monthly amount of the Qualified Preretirement Survivor Annuity will be reduced by applying the early retirement factors set forth in Section 4.2 for any benefit commencement date that begins on or after the first day of the month following the month in which the Participant would have attained age 55. If the surviving Spouse elects to begin receiving payments as of any date that is earlier than the first day of the month following the month in which the Participant would have attained age 55, the monthly amount of the Qualified Preretirement Survivor Annuity will be further reduced to be the Actuarial Equivalent of the benefit payable to the surviving Spouse as of the first day of the month following the month in which the Participant would have attained age 55. 6.4 Form of Benefit. The normal form of death benefit under this Article will be a monthly annuity for the life of the Spouse. If, however, the Actuarially Equivalent present value of the monthly death benefit does not exceed $3,500, then the Committee will distribute the death benefit to the Spouse in the form of an immediate lump sum payment that is the Actuarial Equivalent of the death benefit. 6.5 Certain Spouses. A former spouse will be treated as the current Spouse or the surviving Spouse of a Participant to the extent provided under a qualified domestic relations order as described in Code section 414(p). If, however, the qualified domestic relations order provides for a portion of the Participant's retirement benefit (either through separate accounts or a percentage of the benefit) to be distributed to the former spouse, the Participant will not be deemed to be a married Participant for purposes of this Article with respect to the portion of the benefit awarded to his former spouse. 6.6 Cost of Coverage. The Participant's benefit under the Plan will not be reduced by the cost of providing the death benefits for his Spouse described in this Article. -29- 33 ARTICLE 7 VESTING 7.1 Determination of Vested Interest. (a) Years of Credited Service. The interest of each 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 prior to January 1, 1995, while he is an Employee, or (iii) in the event of a Change in Control (as defined in Section 4.7(b)) while he is an Employee. (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 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 his years of Credited Service. 7.2 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. 7.3 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 -30- 34 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 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. 7.4 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. 7.5 Special Provisions Applicable to Certain Participants. Appendix B contains special vesting provisions applicable to certain Participants. -31- 35 ARTICLE 8 ADMINISTRATION OF THE PLAN AND TRUST AGREEMENT 8.1 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. 8.2 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. 8.3 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. 8.4 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. 8.5 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 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 -32- 36 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. 8.6 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 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. 8.7 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 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 -33- 37 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. 8.8 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. 8.9 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. 8.10 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 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. -34- 38 (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. 8.11 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. 8.12 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. -35- 39 8.13 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. 8.14 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. 8.15 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. 8.16 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 9 LIMITATIONS ON BENEFITS 9.1 Priority Over Other Provisions. The provisions set forth in this Article will supersede any conflicting provisions of Articles 4, 5, 6, Appendix B and Appendix C. 9.2 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(l)(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. (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 -37- 41 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 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. -38- 42 (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 9.3, 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. The Includable Compensation of an Employee for any Plan Year beginning after December 31, 1988, and ending before January 1, 1994, the Compensation of an Employee will not exceed $200,000, and for any Plan Year beginning after December 31, 1993, the Includable Compensation of any Employee will not exceed $150,000, as both such dollar limits are adjusted by the Secretary of the Treasury. 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 Includable Compensation of an Employee for purposes of the adjusted $200,000 limitation or $150,000 limitation, as applicable, 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 -39- 43 the year. If, as a result of the application of such rules, the adjusted $200,000 limitation or $150,000 limitation, as applicable, is exceeded, then (except for purposes of determining the portion of Includable 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. (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. (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. 9.3 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 -40- 44 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 section 415(d)(1)(A)) commencing at Social Security Retirement Age. For Plan Years beginning before January 1, 1995, 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, provided that the interest rate assumption will not be less than the greater of 5% or the Applicable Interest Rate in effect for such Year. For Plan Years beginning on or after January 1, 1995, the adjustment in the Defined Benefit Dollar Limitation provided for in this subsection will be (i) if the Participant's Social Security Retirement Age is 65 and benefits commence on or after age 62, 5/9 of 1% for each month by which benefits commence before the month in which the Participant attains age 65; and (ii) if the Participant's Social Security Retirement Age is greater than 65 and benefits commence on or after age 62, 5/9 of 1% for each of the first 36 months and 5/12 of 1% for each of the additional months by which benefits commence before the month of the Participant's Social Security Retirement Age. If benefits commence before age 62, the Defined Benefit Dollar Limitation will be further reduced to be the actuarial equivalent of the limitation for benefits commencing at age 62 (as determined in the preceding sentence), with the limitation at age 62 reduced for each month by which benefits commence before the month in which the Participant attains age 62. For purposes of the preceding sentence and except as provided in subsection (f), the reduced Defined Benefit Dollar Limitation will be the lesser of (A) the equivalent amount determined by using the factors, if any, for early retirement benefits as set forth in Section 4.2 or (B) the equivalent amount determined by using an interest rate equal to 5% and the applicable mortality table as prescribed by the Secretary of the Treasury under Code section 415(b)(2)(E). For purposes of the adjustments described in this subsection, no adjustments under Code section 415(d)(1) will be taken into account prior to the year for which such adjustment first takes effect. -41- 45 (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. For Plan Years beginning before January 1, 1995, the interest rate assumption used to determine the increased Defined Benefit Dollar Limitation described in the preceding sentence will not be greater than the lesser of 5% or the Applicable Interest Rate in effect for such Year. For Plan Years beginning on or after January 1, 1995, for purposes of this subsection, the increased Defined Benefit Dollar Limitation will be the lesser of (i) the equivalent amount determined by using the factors, if any, for determining late retirement benefits as set forth in Section 4.3 or (ii) the equivalent amount determined by using an interest rate equal to 5% and the applicable mortality table as prescribed by the Secretary of the Treasury under Code section 415(b)(2)(E). For purposes of the adjustments described in this subsection, no adjustments under Code section 415(d)(1) will be taken into account prior to the year for which such adjustment first takes effect. (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. For Plan Years beginning before January 1, 1995, the interest rate assumption used to make the adjustment provided for in the preceding sentence will not be less than the greater of 5% or the Applicable Interest Rate in effect for such Year. For Plan Years beginning on or after January 1, 1995, for purposes of this subsection and except as provided in subsection (f), the adjusted Annual Benefit will be equal to the greater of the (i) the Actuarial Equivalent of the -42- 46 actual form or (ii) the equivalent Annual Benefit determined by using an interest rate equal to 5% and the mortality table as prescribed by the Secretary of the Treasury under Code section 415(b)(2)(E). 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. For purposes of the adjustments described in this subsection, no adjustments under Code section 415(d)(1) will be taken into account prior to the year for which such adjustment first takes effect. (f) Adjustment for Benefits Subject to Code Section 417(e)(3). For Plan Years beginning on or after January 1, 1996, for purposes of adjusting the benefit or limitation under subsections (b) and (e) of any form of benefit subject to Code section 417(e)(3), the annual rate of interest on 30-year Treasury securities for the month of November preceding the Plan Year that contains the Benefit Commencement Date will be substituted for the 5% interest rate in such subsections. (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. -43- 47 (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. 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. In the case of an individual who was a participant in one or more Defined Benefit Plans maintained by a Controlled Group Member before January 1, 1995, 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 December 31, 1994, determined without regard to any amendments to such Plans adopted after December 31, 1994, including optional benefit forms. (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). A Participant's Projected Annual Benefit will be reduced, if necessary, without any further action on the part of the Participating Employers , the Board of Directors or the Committee, to meet this limitation. If the Participant was a participant in one or more Defined Contribution Plans maintained by a Controlled Group -44- 48 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 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. -45- 49 ARTICLE 10 RESTRICTIONS ON DISTRIBUTIONS TO PARTICIPANTS AND BENEFICIARIES 10.1 Priority over Other Distribution Provisions. The provisions set forth in this Article will supersede any conflicting provisions of Article 5, Article 6 and Appendix C. 10.2 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. 10.3 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. 10.4 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. 10.5 Minimum Amounts to be Distributed. If the Participant's entire interest in the Plan is to be distributed in -46- 50 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. 10.6 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. 10.7 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). 10.8 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 -47- 51 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). -48- 52 ARTICLE 11 TOP-HEAVY PROVISIONS 11.1 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. 11.2 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 9.2(c). (b) "Defined Benefit Plan" means the Qualified Plan described in Section 9.2(e). (c) "Defined Contribution Dollar Limitation" means the limitation described in Section 9.2(f). (d) "Defined Contribution Plan" means the Qualified Plan described in Section 9.2(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 9.2(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 (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 -49- 53 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. (i) "Minimum Benefit" means the benefit described in the first sentence of Section 11.4(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 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 -50- 54 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. 11.3 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. 11.4 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 -51- 55 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 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). 11.5 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 9 will be modified by substituting "100%" for "125%" in Sections 9.1(d) and (g). -52- 56 (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. 11.6 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 7. 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 7 will be treated as an amendment subject to Section 13.1(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. (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 12 ADOPTION OF THE PLAN BY CONTROLLED GROUP MEMBERS 12.1 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. 12.2 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 13 AMENDMENT OF THE PLAN 13.1 Right to Amend the Plan. (a) In General. The Company reserves to the Compensation Committee of the Board of Directors the right to amend the Plan at any time and from time to time to the extent it may deem advisable or appropriate, provided 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 will have the effect of reducing the percentage of the vested and nonforfeitable interest of any Participant in his Account 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 disregarded pursuant to the reemployment provisions (if any) of 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; and (iv) 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 by law) or of eliminating or reducing an early retirement benefit or a retirement-type subsidy or eliminating an optional form of benefit. (b) Authority of the Board. The Company also reserves to the Board of Directors the right to amend the Plan at any time and from time to time to the extent it may deem advisable or appropriate, subject to the limitations on amendments set forth in subsection (a). 13.2 Amendment Procedure. Any amendment to the Plan will be made only pursuant to action of the Board or of the Compensation Committee of the Board. A certified copy of the resolutions adopting any amendment and a copy of the executed amendment will be delivered to the Trustee, the Committee and the Company. Upon such action by the Board or the Compensation Committee of the Board, the Plan will be deemed amended as of the date specified as the effective date by such action or in the instrument of amendment. The effective date of any amendment may be before, on or after the date of such action, except as otherwise set forth in Section 14.1. -55- 59 13.3 Effect on Participating Employers. Unless an amendment expressly provides otherwise, all Participating Employers will be bound by any amendment adopted pursuant to this Article 13. -56- 60 ARTICLE 14 TERMINATION AND PARTIAL TERMINATION 14.1 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. 14.2 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. 14.3 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 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 -57- 61 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. 14.4 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. 14.5 Prevention of Discrimination on Early Termination. (a) Limitation Concerning Highly Compensated Employees. In the event that (i) the value of the Accrued Benefit of a Participant who is a Highly Compensated Employee or a Highly Compensated Former Employee (as such terms are hereinafter defined) equals or exceeds 1% of the value of all Accrued Benefits under the Plan on the date payment of such Participant's benefits is to commence, and (ii) after payment of such Participant's Accrued Benefit the value of Plan assets is less than 110% of the value of the Plan's current liabilities as defined in Code section 412(l)(7), such Participant's Accrued Benefit will be paid in a form that produces annual payments not in excess of the payments that would be made under a single life annuity that is the Actuarial Equivalent of such Participant's normal form of Retirement Pension. For purposes of this Section, the term "Highly Compensated Employee" has the meaning set forth in Code section 414(q), and the term "Highly Compensated Former Employee" has the meaning set forth in Code section 414(q)(9). (b) Benefits on Plan Termination. In the event the Plan is terminated, benefits will be paid in a manner that does not violate the nondiscrimination requirements of Code section 401(a)(4) and the applicable regulations. 14.6 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 -58- 62 determined under the provisions of Sections 14.3 and 14.5 will, upon termination of the Plan, be distributed to the Participating Employers as directed by the Board. -59- 63 ARTICLE 15 MISCELLANEOUS 15.1 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. 15.2 Bonding, Insurance and Indemnity. (a) Bonding. To the extent required under ERISA, the Participating Employers will obtain, pay for and 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 -60- 64 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. 15.3 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. 15.4 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, 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). 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. 15.5 Rights of Participants. Participation in the Plan will not give any Participant the right to be retained in the employ -61- 65 of a Controlled Group Member or any right or interest in the Plan or the Trust Fund except as expressly provided herein. 15.6 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. 15.7 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, INCLUDING WITHOUT LIMITATION THE TEXAS STATUTE OF LIMITATIONS, BUT WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAWS PRINCIPLES OF SUCH STATE. Executed this 2 day of February, 1996. A. H. BELO CORPORATION By /s/ MICHAEL J. McCARTHY ---------------------------------- -62- 66 APPENDIX A PARTICIPATING EMPLOYERS A. H. Belo Corporation Belo Production, Inc. (As of April 1, 1994) Dallas-Ft. Worth Suburban Newspapers, Inc. (Through March 31, 1994) The Dallas Morning News Company DFW Printing Company, Inc. (As of April 1, 1994) Great Western Broadcasting Corporation Gulf Television Corporation KOTV, Inc. Owensboro Messenger-Inquirer, Inc. (as of January 5, 1996) Third Avenue Television, Inc. (as of February 1, 1995) WFAA Television, Inc. WVEC Television, Inc. WWL-TV, Inc. A-1 67 APPENDIX B BENEFIT FORMULAS IN EFFECT ON DECEMBER 31, 1988 PART I - Normal Retirement Benefit Formula A Participant's minimum retirement benefit under Section 4.1(b) of the Plan will be determined under the formula set forth below, determined as if the Participant terminated employment on his Benefit Protection Date (as defined in Section 4.1(b)). 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 (as hereinafter defined) 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. As used in this Appendix, the term "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 paragraph, 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. B-1 68 PART II - Special Provisions Affecting Certain Participants B.1 Priority Over Other Provisions. Except as otherwise provided in Section 4.1(a) of the Plan, the provisions of Sections B.2 through B.8 will apply solely to determine the accrued benefit of certain Participants as of their Benefit Protection Date (as defined in Section 4.1(b) of the Plan) and will supersede any conflicting provisions of Articles 4, 5, and 8 of the Plan as in effect on December 31, 1988. The provisions of Sections B.2 through B.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 Appendix 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. B.2 Definitions Used in this Appendix. 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 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 B-2 69 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 of the Plan in effect on December 31, 1988. (c) "Belo Factor" means the factor determined in accordance with the table set forth in Part III of this Appendix. (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 1.15 of the Plan 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 1.15 of the Plan 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 this Appendix. (g) "D&B Plan" means the Master Retirement Plan of The Dun & Bradstreet Corporation as in effect immediately prior to January 30, 1984. (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 1.22, subject to the following B-3 70 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. B.3 Vesting Credit. An Employee's Credited Service for purposes of determining his vested interest in his Accrued Benefit under Article 7 of the Plan 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 1.15 of the Plan during such entire period and (iii) his Credited Service determined under Section 1.15 of the Plan for the period beginning on January 1, 1985. B.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, plus (v) any prior benefits maintained or frozen for the Employee under the D&B Plan; 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 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 his B-4 71 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. B.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 B.4(a) multiplied by the D&B Factor or the benefit described in Section B.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 B.4(d). (b) Belo Benefit. The early retirement benefit under this subsection will be the benefit described in Section B.4(b)(i) multiplied by the Belo Factor minus the lesser of the offset described in Section B.4(b)(ii) multiplied by the Belo Factor or the offset described in Section B.4(b)(iii) multiplied by the D&B Factor. B.6 Late Retirement Benefit. If an Employee had attained age 65 on or before January 30, 1984, his late retirement benefit determined under Section 4.3 will be determined by taking into account the actuarial present value of the Employee's retirement benefit determined under Section B.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, 1988. B-5 72 B.7 Death Benefits. For purposes of the death benefit payable under Section C.1 of Appendix C 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 in Part III of this Appendix. B.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. B.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. B.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. B.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. Part III - ACTUARIAL FACTORS FOR DETERMINING CERTAIN EARLY RETIREMENT BENEFITS The following tables set forth factors for determining early retirement benefits under Section B.5. 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 B-6 73 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%
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%
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. [TABLE APPEARS ON FOLLOWING PAGE] B-7 74
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-8 75 APPENDIX C DEATH BENEFITS FOR PARTICIPANTS BEFORE JANUARY 1, 1995 C.1 Death Benefits. The death benefits provided in this Appendix apply with respect to a Participant who dies before January 1, 1995. (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 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. C.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 5.1(e) of the Plan. (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 5.1(c), subject, however, to the exception for small benefits set forth in Section 5.1(e) of the Plan. C.3 Commencement of Death Benefit. Subject to the exception for small benefits set forth in Section 5.1(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. C-1 76 C.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 C.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 then living parents, and if none of the above are then living, in an Actuarially Equivalent lump sum payment to his estate. C.5 Qualified Designation. For purposes of Section C.4, a "Qualified Designation" means a Participant's 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. C.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). C.7 Minimum Death Benefit. The value of a death benefit payable to a Beneficiary under Section C.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 C-2 77 liabilities on December 31, 1976. In addition, the value of a death benefit payable under Section C.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. C.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 Appendix. C.9 Death Benefits Payable After Benefit Commencement Date. If a Participant dies after his Benefit Commencement Date, the death benefit, if any, payable to his Beneficiary will be determined by the form of the Participant's retirement benefit under Article 5 of the Plan. C-3 EX-10.3(15) 11 AH BELO CORP. EXECUTIVE COMPENSATION PLAN 1 EXHIBIT 10.3(15) A. H. BELO CORPORATION EXECUTIVE COMPENSATION PLAN The Company's Executive Compensation Plan ("ECP") is designed to provide a competitive level of current compensation to Belo's most valued executives, managers and professionals, as well as to afford an opportunity for significant capital accumulation via long-term awards. In order to be effective, any such plan must be well understood by its participants. This description is directed toward achieving that understanding. Anyone having questions about this material or about any other aspect of the Plan is encouraged to discuss them fully with his or her direct superior. The purpose of the ECP is: o To establish a competitive compensation Plan to attract, retain and motivate top people in the jobs that most directly affect the success of the Company. o To encourage coordinated and sustained effort toward enhancing the Company's performance, and maximizing the Company's value to its shareholders. Those eligible to participate in the Executive Compensation Plan are the officers of the Company and of each of its subsidiaries, and other key management or professional employees whose actions and decisions directly influence the success of the Company in a substantial way. Officers of the Company and its subsidiaries automatically participate in the Plan, while other individuals are recommended for participation by both the officer to whom they report and the Chief Executive Officer, subject to the approval of the Compensation Committee of the Board of Directors. These recommendations are reaffirmed annually. The Company's Executive Compensation Plan has the following features: o A competitive base salary adjusted as circumstances warrant. o An annual bonus opportunity. o A long term award of stock options. The following describes each of these features in detail. 2 Base Salary The Company strives to pay base compensation at the seventy-fifth percentile of an annual survey of 25 to 30 media companies deemed to share Belo's financial and qualitative standards. All salary adjustments for ECP participants are normally effective January 1, with appropriate prorations for participants promoted, hired or transferred into their positions during the year. Annual Bonus Opportunity Each participant in the Executive Compensation Plan has an opportunity to earn an annual bonus based upon corporate, group (publishing or broadcasting) or operating unit financial results measured against established minimum, target and maximum performance levels. In the case of ECP participants who are sales managers at television broadcast stations, bonuses are based on sales revenue targets for the applicable operating unit. As part of the compensation planning cycle, each participant is assigned a target bonus opportunity expressed as a percent of base salary. This target bonus percentage is also based on the seventy-fifth percentile as determined from the annual compensation survey. At the end of the year, financial results are tallied, with target achievement representing 100% credit, and maximum representing 175% credit, but performance in excess of minimum will be credited pro rata between 0% and 100%. No bonuses will be paid if minimum financial performance or less is attained. Attachment 1 shows an example of how bonuses are calculated as a result of achieving organizational objectives. Long-Term Awards As with the annual bonus opportunity, each participant in the Executive Compensation Plan is assigned a long-term incentive factor expressed as a percent of base salary. This long-term incentive factor is derived from the Company's survey of competitive compensation practices. Again, the Company strives to pay long-term incentives at the seventy-fifth percentile of that survey. In awarding stock options to participants, an attempt is made to quantify the value of these awards. The total expected value of those long-term awards is equal to the participant's long-term incentive factor times base salary. -2- 3 Stock options are awarded with an option price equal to the closing price of the Company's stock on the date of the awards, and they become exercisable as follows: 40% one year after the award date; 30% two years after the award date; and 30% three years after the award date. The options remain exercisable until ten years after the award date. Conclusion The foregoing summary is intended to cover the basic features of the Company's Executive Compensation Plan. Again, the success of the Plan depends on each participant's understanding it. Participants are therefore encouraged to discuss any questions or concerns about the Plan in detail with their direct superior or with a member of the Management Committee. -3- EX-10.3(16) 12 AH BELO CORP 1995 EXECUTIVE COMPENSATION PLAN 1 EXHIBIT 10.3(16) EXHIBIT A A. H. BELO CORPORATION 1995 EXECUTIVE COMPENSATION PLAN A. H. Belo Corporation, a Delaware corporation (the "Company"), hereby establishes the A. H. Belo Corporation 1995 Executive Compensation Plan (the "Plan"), effective as of January 1, 1995, subject to shareholder approval. 1. Purpose. The purpose of the Plan is to attract and retain the best available talent and encourage the highest level of performance by directors, executive officers and selected employees, and to provide them incentives to put forth maximum efforts for the success of the Company's business, in order to serve the best interests of the Company and its shareholders. 2. Definitions. The following terms, when used in the Plan with initial capital letters, will have the following meanings: (a) "Appreciation Right" means a right granted pursuant to Paragraph 7. (b) "Award" means an Executive Compensation Plan Bonus, an Appreciation Right, a Stock Option, a Performance Unit or a grant or sale of Restricted Stock. (c) "Board" means the Board of Directors of the Company. (d) "Change in Control" means the first to occur of the events described in (i) through (iv) below, unless the Board has adopted a resolution prior to or promptly following the occurrence of any such event stipulating, conditionally, temporarily or otherwise, that any such event will not result in a change in control of the Company: (i) the commencement of, or first public announcement of the intention of any person or group (within the meaning of Section 3(b) of and Rule 13d-5(b) promulgated under the Securities Exchange Act of 1934, as amended, respectively) to commence, a tender offer or exchange offer (other than an offer by the Company or any Subsidiary) for all, or any part of, the Common Stock; (ii) the public announcement by the Company or by any group (as defined in clause (i) above), 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 any Subsidiary) which, through a transaction or series of transactions has acquired, directly or indirectly, beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended) of more than 30% of the total number of shares of Common Stock that such group, entity or person has become such a beneficial owner; (iii) the approval by the Company's shareholders (or, if such approval is not required, the consummation) of a merger in which the Company does not survive as an independent publicly owned corporation, a consolidation, or a sale, exchange, or other disposition of all or substantially all the Company's assets; or (iv) a change in the composition of the Board during any period of two consecutive years such that individuals who at the beginning of such period were members of the Board 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. (e) "Code" means the Internal Revenue Code of 1986, as in effect from time to time. (f) "Committee" means the Compensation Committee of the Board and, to the extent the administration of the Plan has been assumed by the Board pursuant to Paragraph 15, the Board. A-1 2 (g) "Common Stock" means the Series A Common Stock, par value $1.67 per share, and the Series B Common Stock, par value $1.67 per share, of the Company or any security into which such Common Stock may be changed by reason of any transaction or event of the type described in Paragraph 12. Shares of Common Stock issued or transferred pursuant to the Plan will be shares of Series A Common Stock or Series B Common Stock, as determined by the Committee in its discretion. Notwithstanding the foregoing, the Committee will not authorize the issuance or transfer of Series B Common Stock if the Committee determines that such issuance or transfer would cause the Series A Common Stock to be excluded from trading in the principal market in which the Common Stock is then traded. (h) "Date of Grant" means (i) with respect to Participants, the date specified by the Committee on which a grant of Stock Options, Appreciation Rights or Performance Units or a grant or sale of Restricted Stock will become effective (which date will not be earlier than the date on which the Committee takes action with respect thereto) and (ii) with respect to Directors, the date of the applicable annual meeting of shareholders of the Company as specified in Paragraph 6. (i) "Director" means a member of the Board who is not a regular full-time employee of the Company or any Subsidiary. (j) "Executive Compensation Plan Bonus" means the right to receive an annual incentive compensation payment made pursuant to and subject to the conditions set forth in Paragraph 10. (k) "Grant Price" means the price per share of Common Stock at which an Appreciation Right not granted in tandem with a Stock Option is granted. (l) "Management Objectives" means the objectives, if any, established by the Committee for a Performance Period that are to be achieved with respect to an Award granted to a Participant under the Plan. Management Objectives may be described in terms of Company-wide objectives or in terms of objectives that are related to performance of the division, Subsidiary, department or function within the Company or a Subsidiary in which the Participant receiving the Award is employed or on which the Participant's efforts have the most influence. The Management Objectives established by the Committee for any Performance Period under the Plan will consist of one or more of the following: (i) earnings per share and/or growth in earnings per share in relation to target objectives; (ii) cash flow and/or growth in cash flow in relation to target objectives; (iii) net income and/or growth in net income in relation to target objectives, excluding the effect of extraordinary items; (iv) total shareholder return (measured as the total of the appreciation of and dividends declared on the Common Stock) in relation to target objectives; (v) return on invested capital in relation to target objectives; (vi) return on shareholder equity in relation to target objectives; and (vii) return on assets in relation to target objectives. Management Objectives may be established in absolute terms or relative to the performance of a specified group of other companies. The Committee may adjust Management Objectives and any minimum acceptable level of achievement with respect to any Management Objectives if, in the sole judgment of the Committee, events or transactions have occurred after the establishment of the Management Objectives (including without limitation any change in accounting standards by the Financial Accounting Standards Board) which are unrelated to performance and result in a distortion of the Management Objectives or such minimum acceptable level of achievement. (m) "Market Value per Share" means, at any date, the closing sale price of the Common Stock on that date (or, if there are no sales on that date, the last preceding date on which there was a sale) in the principal market in which the Common Stock is traded. A-2 3 (n) "Option Price" means the purchase price per share payable on exercise of a Stock Option. (o) "Participant" means a person who is selected by the Committee to receive benefits under the Plan and who is at that time an executive officer or other key employee of the Company or any Subsidiary. Except for Stock Options granted to Directors pursuant to Paragraph 6, a Director will not receive benefits under the Plan. (p) "Performance Period" means, with respect to an Award, a period of time established by the Committee within which the Management Objectives relating to such Award are to be measured. The Performance Period for an Executive Compensation Plan Bonus will be a period of 12 months. The Performance Period for all other Awards will be a period of not less than three years. (q) "Performance Unit" means a unit equivalent to $100 (or such other value as the Committee determines) granted pursuant to Paragraph 9. (r) "Restricted Stock" means shares of Common Stock granted or sold pursuant to Paragraph 8 as to which neither the ownership restrictions nor the restrictions on transfer referred to therein has expired. (s) "Rule 16b-3" means Rule 16b-3 under the Section 16 of the Securities Exchange Act of 1934, as amended, as such Rule is in effect from time to time. (t) "Spread" means the excess of the Market Value per Share on the date an Appreciation Right is exercised over (i) the Option Price provided for in the related Stock Option or (ii) if there is no tandem Stock Option, the Grant Price provided for in the Appreciation Right, multiplied by the number of shares of Common Stock in respect of which the Appreciation Right is exercised. (u) "Stock Option" means the right to purchase a share of Common Stock upon exercise of an option granted pursuant to Paragraph 5 or Paragraph 6. (v) "Subsidiary" means any corporation, partnership, joint venture or other entity in which the Company owns or controls, directly or indirectly, not less than 50% of the total combined voting power or equity interests represented by all classes of stock issued by such corporation, partnership, joint venture or other entity. 3. Shares Available Under Plan. Subject to adjustment as provided in Paragraph 12, the shares of Common Stock which may be issued or transferred and covered by outstanding Awards granted under the Plan will not exceed in the aggregate 2,000,000 shares. Such shares may be shares of original issuance or treasury shares or a combination of the foregoing. Upon exercise of any Appreciation Rights that are paid in shares of Common Stock, there will be deemed to have been delivered under the Plan for purposes of this Paragraph 3 only the number of shares of Common Stock paid to the Participant, and the balance (if any) of the shares of Common Stock covered by the Appreciation Rights or the related Stock Options will remain available for issuance under the Plan. Upon exercise of any Appreciation Rights that are paid in cash, the total number of shares of Common Stock covered by the Appreciation Rights or the related Stock Options will remain available for issuance under the Plan. Subject to the provisions of the preceding sentences, any shares of Common Stock which are subject to Stock Options or Appreciation Rights or are granted or sold as Restricted Stock that are terminated, unexercised, forfeited or surrendered or which expire for any reason will again be available for issuance under the Plan. 4. Limitations on Awards. Subject to adjustment as provided in Paragraph 12, awards under the Plan will be subject to the following limitations: (a) Of the aggregate 2,000,000 shares reserved for issuance under the Plan, no more than 600,000 shares of Common Stock will be issued or transferred as Restricted Stock. (b) No more than 2,000,000 shares of Common Stock reserved for issuance under the Plan will be issued under Stock Options. (c) The maximum aggregate number of shares of Common Stock that may be subject to Stock Options, Appreciation Rights and Restricted Stock granted to a Participant during any calendar year will A-3 4 not exceed 100,000 shares. The foregoing limitation will apply to the grant of Appreciation Rights whether the Spread on exercise is paid in cash or in shares of Common Stock. (d) The maximum aggregate cash value of payments to any Participant for any Performance Period pursuant to an award of Performance Units will not exceed $3,000,000. (e) The payment of an Executive Compensation Plan Bonus to any Participant will not exceed 100% of the Participant's regular base salary as of the first day of the Performance Period for which the Executive Compensation Plan Bonus is granted, or if less, $1,000,000. 5. Stock Options for Participants. The Committee may from time to time authorize grants to any Participant of options to purchase shares of Common Stock upon such terms and conditions as it may determine in accordance with the following provisions: (a) Each grant will specify the number of shares of Common Stock to which it pertains. (b) Each grant will specify the Option Price, which will not be less than 100% of the Market Value per Share on the Date of Grant. (c) Each grant will specify that the Option Price will be payable (i) in cash or by check acceptable to the Company, (ii) by the transfer to the Company of shares of Common Stock owned by the Participant for at least six months (or, with the consent of the Committee, for less than six months) having an aggregate Market Value per Share at the date of exercise equal to the aggregate Option Price, (iii) with the consent of the Committee, by authorizing the Company to withhold a number of shares of Common Stock otherwise issuable to the Participant having an aggregate Market Value per Share on the date of exercise equal to the aggregate Option Price or (iv) by a combination of such methods of payment; provided, however, that the payment methods described in clauses (ii) and (iii) will not be available at any time that the Company is prohibited from purchasing or acquiring such shares of Common Stock. Any grant may provide for deferred payment of the Option Price from the proceeds of sale through a broker of some or all of the shares to which such exercise relates. (d) Successive grants may be made to the same Participant whether or not any Stock Options previously granted to such Participant remain unexercised. (e) Each grant will specify the required period or periods of continuous service by the Participant with the Company or any Subsidiary and/or the Management Objectives to be achieved before the Stock Options or installments thereof will become exercisable, and any grant may provide for the earlier exercise of the Stock Options in the event of a Change in Control or other similar transaction or event. (f) Stock Options granted under this Paragraph 5 may be (i) options which are intended to qualify under particular provisions of the Code, (ii) options which are not intended to so qualify or (iii) combinations of the foregoing. (g) No Stock Option will be exercisable more than ten years from the Date of Grant. (h) Each grant of Stock Options will be evidenced by an agreement executed on behalf of the Company by the Chief Executive Officer (or another officer designated by the Committee) and delivered to the Participant and containing such terms and provisions, consistent with the Plan, as the Committee may approve. 6. Stock Options for Directors. Each individual who first becomes a Director on or after the date of the 1995 annual meeting of shareholders of the Company will be granted an option to purchase 10,000 shares of Common Stock on the date of election to the Board. Each Director will also be granted an additional option to purchase 2,500 shares of Common Stock on the date of each annual meeting of shareholders following the annual meeting of the individual's initial election to the Board, provided that such individual continues to be a Director at the close of business of each such annual meeting. If a Director is granted an option to purchase shares of Common Stock under the Company's 1986 Long Term Incentive Plan upon initial election to the Board or on the date of an annual meeting of shareholders, the option to be granted pursuant to this A-4 5 Paragraph 6 for the same event will be reduced by the number of shares of Common Stock covered by the option granted pursuant to the 1986 Long Term Incentive Compensation Plan. For purposes of this Paragraph 6, the date of an annual meeting of shareholders of the Company is the date on which the meeting is convened or, if later, the date of the last adjournment thereof. Each Stock Option granted to a Director will contain the following terms and conditions: (a) Each grant will specify the number of shares of Common Stock to which it pertains. (b) Each grant will specify the Option Price, which will be 100% of the Market Value per Share on the Date of Grant. (c) Each grant will specify that the Option Price will be payable (i) in cash or by check acceptable to the Company, (ii) by the transfer to the Company of shares of Common Stock owned by the Director for at least six months having an aggregate Market Value per Share at the date of exercise equal to the aggregate Option Price, (iii) by authorizing the Company to withhold a number of shares of Common Stock otherwise issuable to the Director having an aggregate Market Value per Share on the date of exercise equal to the aggregate Option Price or (iv) by a combination of such methods of payment; provided, however, that the payment methods described in clauses (ii) and (iii) will not be available at any time that the Company is prohibited from purchasing or acquiring such shares of Common Stock. Any grant may provide for deferred payment of the Option Price from the proceeds of sale through a broker of some or all of the shares to which such exercise relates. (d) Each grant will specify that the Stock Option may not be exercised until the first anniversary of the Date of Grant and will be fully exercisable thereafter, without regard to whether the Director continues to be a member of the Board on such first anniversary, until the Stock Option expires by its terms. (e) Each grant of Stock Options will be evidenced by an agreement executed on behalf of the Company by the Chief Executive Officer (or another officer designated by the Committee) and delivered to the Director and containing such terms and provisions, consistent with the Plan, as the Committee may approve. 7. Appreciation Rights. The Committee may also from time to time authorize grants to any Participant of Appreciation Rights upon such terms and conditions as it may determine in accordance with this Paragraph 7. Appreciation Rights may be granted in tandem with Stock Options or separate and apart from a grant of Stock Options. An Appreciation Right will be a right of the Participant to receive from the Company upon exercise an amount which will be determined by the Committee at the Date of Grant and will be expressed as a percentage of the Spread (not exceeding 100%) at the time of exercise. An Appreciation Right granted in tandem with a Stock Option may be exercised only by surrender of the related Stock Option. Each grant of an Appreciation Right may utilize any or all of the authorizations, and will be subject to all of the limitations, contained in the following provisions: (a) Each grant will state whether it is made in tandem with Stock Options and, if not made in tandem with any Stock Options, will specify the number of shares of Common Stock in respect of which it is made. (b) Each grant made in tandem with Stock Options will specify the Option Price and each grant not made in tandem with Stock Options will specify the Grant Price, which in either case will not be less than 100% of the Market Value per Share on the Date of Grant. (c) Any grant may specify that the amount payable on exercise of an Appreciation Right may be paid by the Company in (i) cash, (ii) shares of Common Stock having an aggregate Market Value per Share equal to the percentage of the Spread to be paid to the Participant or (iii) any combination thereof, as determined by the Committee in its sole discretion at the time of payment. (d) Any grant may specify that the amount payable on exercise of an Appreciation Right may not exceed a maximum amount specified by the Committee at the Date of Grant (valuing shares of Common Stock for this purpose at their Market Value per Share at the date of exercise). A-5 6 (e) Each grant will specify the required period or periods of continuous service by the Participant with the Company or any Subsidiary and/or Management Objectives to be achieved before the Appreciation Rights or installments thereof will become exercisable, and will provide that no Appreciation Right may be exercised except at a time when the Spread is positive and, with respect to any grant made in tandem with Stock Options, when the related Stock Option is also exercisable. Any grant may provide for the earlier exercise of the Appreciation Rights in the event of a Change in Control or other similar transaction or event. (f) Each grant of an Appreciation Right will be evidenced by an agreement executed on behalf of the Company by the Chief Executive Officer (or another officer designated by the Committee) and delivered to and accepted by the Participant receiving the grant, which agreement will describe such Appreciation Right, identify any Stock Option granted in tandem with such Appreciation Right, state that such Appreciation Right is subject to all the terms and conditions of the Plan and contain such other terms and provisions, consistent with the Plan, as the Committee may approve. 8. Restricted Stock. The Committee may also from time to time authorize grants or sales to any Participant of Restricted Stock upon such terms and conditions as it may determine in accordance with the following provisions: (a) Each grant or sale will constitute an immediate transfer of the ownership of shares of Common Stock to the Participant in consideration of the performance of services, entitling such Participant to voting and other ownership rights, but subject to the restrictions hereinafter referred to. Each grant or sale may limit the Participant's dividend rights during the period in which the shares of Restricted Stock are subject to any such restrictions. (b) Each grant or sale will specify the Management Objectives, if any, that are to be achieved in order for the ownership restrictions to lapse. (c) Each such grant or sale may be made without additional consideration or in consideration of a payment by such Participant that is less than the Market Value per Share at the Date of Grant. (d) Each such grant or sale will provide that the shares of Restricted Stock covered by such grant or sale will be subject, for a period to be determined by the Committee at the Date of Grant, to one or more restrictions, including, without limitation, a restriction that constitutes a "substantial risk of forfeiture" within the meaning of Section 83 of the Code and the regulations of the Internal Revenue Service thereunder, and any grant or sale may provide for the earlier termination of any such restrictions in the event of a Change in Control or other similar transaction or event. (e) Each such grant or sale will provide that during the period for which such restriction or restrictions are to continue, the transferability of the Restricted Stock will be prohibited or restricted in a manner and to the extent prescribed by the Committee at the Date of Grant (which restrictions may include, without limitation, rights of repurchase or first refusal in the Company or provisions subjecting the Restricted Stock to continuing restrictions in the hands of any transferee). (f) Each grant or sale of Restricted Stock will be evidenced by an agreement executed on behalf of the Company by the Chief Executive Officer (or another officer designated by the Committee) and delivered to and accepted by the Participant and containing such terms and provisions, consistent with the Plan, as the Committee may approve. 9. Performance Units. The Committee may also from time to time authorize grants to any Participant of Performance Units, which will become payable upon achievement of specified Management Objectives, upon such terms and conditions as it may determine in accordance with the following provisions: (a) Each grant will specify the number of Performance Units to which it pertains. (b) Each grant will specify the Management Objectives that are to be achieved. (c) Each grant will specify the time and manner of payment of Performance Units which have become payable, which payment may be made in (i) cash, (ii) shares of Common Stock having an A-6 7 aggregate Market Value per Share equal to the aggregate value of the Performance Units which have become payable or (iii) any combination thereof, as determined by the Committee in its sole discretion at the time of payment. (d) Each grant of a Performance Unit will be evidenced by an agreement executed on behalf of the Company by the Chief Executive Officer (or another officer designated by the Committee) and delivered to and accepted by the Participant and containing such terms and provisions, consistent with the Plan, as the Committee may approve, including provisions relating to a Change in Control or other similar transaction or event. 10. Executive Compensation Plan Bonuses. The Committee may from time to time authorize payment of annual incentive compensation in the form of an Executive Compensation Plan Bonus to a Participant, which will become payable upon achievement of specified Management Objectives. Executive Compensation Plan Bonuses will be payable upon such terms and conditions as the Committee may determine in accordance with the following provisions: (a) The Committee will specify the Management Objectives that are to be achieved by the Participant in order for the Participant to receive payment of the Executive Compensation Plan Bonus. (b) The Committee will specify the time and manner of payment of an Executive Compensation Plan Bonus which becomes payable, which payment may be made in (i) cash, (ii) shares of Common Stock having an aggregate Market Value per Share equal to the aggregate value of the Executive Compensation Plan Bonus which has become payable or (iii) any combination thereof, as determined by the Committee in its sole discretion at the time of payment. (c) As soon as practicable after the beginning of a Performance Period, the Committee will notify each Participant of the terms of the Executive Compensation Plan Bonus program for that Performance Period, which notification will state that such Executive Compensation Plan Bonus is subject to all the terms and conditions of the Plan, and contain such other terms and provisions, consistent with the Plan, as the Committee may approve. 11. Transferability. Except as otherwise provided in the agreement evidencing a Participant's Award, (i) no Stock Option, Appreciation Right, Performance Unit that has not become payable or Executive Compensation Plan Bonus that has not become payable will be transferable by the Participant other than by will or the laws of descent and distribution and (ii) no Stock Option or Appreciation Right granted to the Participant will be exercisable during the Participant's lifetime by any person other than the Participant, the Participant's guardian or legal representative. Stock Options granted to Directors under Paragraph 6 will not be transferable other than by will or the laws of descent and distribution. 12. Adjustments. The Committee may make or provide for such adjustments in the maximum number of shares specified in Paragraphs 3 and 4, in the numbers of shares of Common Stock covered by outstanding Stock Options and Appreciation Rights granted hereunder, in the Option Price or Grant Price applicable to any such Stock Options and Appreciation Rights, and/or in the kind of shares covered thereby (including shares of another issuer), as the Committee in its sole discretion, exercised in good faith, may determine is equitably required to prevent dilution or enlargement of the rights of Participants that otherwise would result from any stock dividend, stock split, combination of shares, recapitalization or other change in the capital structure of the Company, merger, consolidation, spin-off, reorganization, partial or complete liquidation, issuance of rights or warrants to purchase securities or any other corporate transaction or event having an effect similar to any of the foregoing. 13. Fractional Shares. The Company will not be required to issue any fractional share of Common Stock pursuant to the Plan. The Committee may provide for the elimination of fractions or for the settlement of fractions in cash. 14. Withholding Taxes. To the extent that the Company is required to withhold federal, state, local or foreign taxes in connection with any payment made or benefit realized by a Participant or other person under A-7 8 the Plan, or is requested by a Participant to withhold additional amounts with respect to such taxes, and the amounts available to the Company for such withholding are insufficient, it will be a condition to the receipt of such payment or the realization of such benefit that the Participant or such other person make arrangements satisfactory to the Company for payment of the balance of such taxes required or requested to be withheld. In addition, if permitted by the Committee, a Participant may elect to have any withholding obligation of the Company satisfied with shares of Common Stock that would otherwise be transferred to the Participant in payment of the Participant's Award. 15. Administration of the Plan. (a) Unless the administration of the Plan has been expressly assumed by the Board pursuant to a resolution of the Board, the Plan (other than the provisions of Paragraph 6) will be administered by the Committee, which at all times will consist of nonemployee directors appointed by the Board, each of whom will be a "disinterested person" within the meaning of Rule 16b-3. A majority of the Committee will constitute a quorum, and the action of the members of the Committee present at any meeting at which a quorum is present, or acts unanimously approved in writing, will be the acts of the Committee. (b) Except as set forth in Paragraphs 15(c) and (d), the Committee has the full authority and discretion to administer the Plan and to take any action that is necessary or advisable in connection with the administration of the Plan, including without limitation the authority and discretion to interpret and construe any provision of the Plan or of any agreement, notification or document evidencing the grant of an Award. The interpretation and construction by the Committee of any such provision and any determination by the Committee pursuant to any provision of the Plan or of any such agreement, notification or document will be final and conclusive. No member of the Committee will be liable for any such action or determination made in good faith. (c) If a Participant's employment terminates before the end of a Performance Period or before a Stock Option or Appreciation Right is fully exercisable, and the Participant's termination of employment is by reason of death, disability or retirement at or after age 65, each Stock Option or Appreciation Right held by the Participant will be fully exercisable by the Participant or his personal representative for a period of one year following such termination of employment, or if earlier, until the Stock Option or Appreciation Right expires by its terms, and any shares of Restricted Stock previously issued to the Participant as to which ownership or transfer restrictions have not lapsed will be delivered to the Participant or his personal representative free of such restrictions. If a Participant's employment terminates before the end of a Performance Period or before a Stock Option or Appreciation Right is fully exercisable for any reason other than death, disability or retirement at or after age 65, the Committee will have the sole discretion to determine, under the circumstances, the extent to which a Stock Option or Appreciation Right held by the Participant may be exercised following such termination of employment and the extent to which any Restricted Stock as to which ownership or transfer restrictions that relate solely to the Participant's continued employment (but not to the attainment of one or more Management Objectives) have not lapsed will be delivered to the Participant free of such restrictions. (d) Notwithstanding the foregoing provisions, the Board has the full authority and discretion to administer the provisions of Paragraph 6 and to take any action that is necessary or advisable in connection with the administration of the provisions of Paragraph 6, including without limitation the authority and discretion to interpret and construe any provision of Paragraph 6 or of any agreement, notification or document evidencing the grant of a Stock Option pursuant to Paragraph 6, provided any such action taken by the Board will not cause the provisions of Paragraph 6 to fail to satisfy the requirements of Rule 16b-3 or to cause the Committee members to cease to be disinterested administrators for purposes of Rule 16b-3. The interpretation and construction by the Board of any such provision and any determination by the Board pursuant to any provision of Paragraph 6 or of any such agreement, notification or document will be final and conclusive. No member of the Board will be liable for any such action or determination made in good faith. A-8 9 16. Amendments, Etc. (a) The Plan may be amended from time to time by the Committee or the Board but may not be amended without further approval by the shareholders of the Company if such amendment would result in the Plan no longer satisfying the requirements of Rule 16b-3. Notwithstanding the foregoing, the provisions of Paragraph 6 that designate Directors eligible to receive Stock Options and specify the amount, Option Price and timing of Stock Option awards may be amended only by the Board and may be amended not more than once every six months except to comply with changes in the Code, the Employee Retirement Income Security Act of 1974, as amended, or the rules and regulations thereunder. (b) The Plan will not confer upon any Participant any right with respect to continuance of employment or other service with the Company or any Subsidiary, nor will it interfere in any way with any right the Company or any Subsidiary would otherwise have to terminate such Participant's employment or other service at any time. (c) If the Committee determines, with the advice of legal counsel, that any provision of the Plan would prevent the payment of any Award intended to qualify as performance-based compensation within the meaning of Section 162(m) of the Code from so qualifying, such Plan provisions will be invalid and cease to have any effect without affecting the validity or effectiveness of any other provisions of the Plan. A-9 EX-10.3(17) 13 AH BELO CORP. EMPLOYEE THRIFT PLAN 1 Exhibit 10.3(17) A. H. BELO CORPORATION EMPLOYEE THRIFT PLAN Effective January 1, 1995 2 A. H. BELO CORPORATION EMPLOYEE THRIFT PLAN A. H. Belo Corporation, a Delaware corporation, establishes the A. H. Belo Corporation Employee Thrift Plan effective January 1, 1995. The Plan is a profit sharing plan with a cash or deferred arrangement intended to qualify under Code section 401(a) and to meet the requirements of Code section 401(k). The Company has entered into trust agreements with Fidelity Management Trust Company and Mellon Bank, N.A. that provide for the investment and reinvestment of the assets of the Plan. 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 ARTICLE 3 CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 ARTICLE 4 ALLOCATIONS TO PARTICIPANTS' ACCOUNTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 ARTICLE 5 VESTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 ARTICLE 6 DISTRIBUTIONS TO PARTICIPANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 ARTICLE 7 DISTRIBUTIONS TO BENEFICIARIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 ARTICLE 8 PROVISIONS REGARDING COMPANY STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 ARTICLE 9 ADMINISTRATION OF THE PLAN AND TRUST AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 ARTICLE 10 LIMITATIONS ON CONTRIBUTIONS AND ALLOCATIONS TO PARTICIPANTS' ACCOUNTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 ARTICLE 11 RESTRICTIONS ON DISTRIBUTIONS TO PARTICIPANTS AND BENEFICIARIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 ARTICLE 12 TOP-HEAVY PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 ARTICLE 13 ADOPTION OF PLAN BY CONTROLLED GROUP MEMBERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 ARTICLE 14 AMENDMENT OF THE PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 ARTICLE 15 TERMINATION, PARTIAL TERMINATION AND COMPLETE DISCONTINUANCE OF CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 ARTICLE 16 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 APPENDIX A PARTICIPATING EMPLOYERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
(ii) 4 ARTICLE 1 DEFINITIONS 1.1 "Account" means the records, including subaccounts, maintained by the Committee in the manner provided in Article 4 to determine the interest of each Participant in the assets of the Plan and may refer to any or all of the Participant's Deferral Contribution Account, Matching Contribution Account and Transfer Account. 1.2 "Beneficiary" means the one or more persons or entities entitled to receive distribution of a Participant's interest in the Plan in the event of his death as provided in Article 7. 1.3 "Board of Directors" or "Board" means the Board of Directors of the Company. 1.4 "Code" means the Internal Revenue Code of 1986, as amended from time to time. 1.5 "Committee" or "Administrative Committee" means the Committee appointed under Article 9. 1.6 "Company" means A. H. Belo Corporation, a Delaware corporation. 1.7 "Company Stock" means the Series A Common Stock, par value $1.67 per share, of the Company. 1.8 "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, reimbursements for moving expenses, automobile allowances and any earnings paid to the Employee in a form other than cash. In addition, Compensation includes any contributions made by the Participating Employers on behalf of an Employee pursuant to a deferral election under the Plan or under any other employee benefit plan containing a cash or deferred arrangement under Code section 401(k) and 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. The annual Compensation of an Employee taken into account for any purpose will not exceed $150,000 for any Plan Year, as adjusted in regulations prescribed by the Secretary of the Treasury. For purposes of applying the $150,000 limit set forth in the 5 preceding sentence, if an Employee is a Highly Compensated Employee (as defined in Section 10.2(m)) who is either (i) a 5-percent owner, determined in accordance with Code section 414(q) and the Treasury Regulations promulgated thereunder or (ii) one of the 10 most highly compensated Employees ranked on the basis of Compensation paid by the Controlled Group during the year, such Highly Compensated Employee and the members of his family (as hereafter defined) will be treated as a single employee and the Compensation of each member of the family will be aggregated with the Compensation of the Highly Compensated Employee. The limitation on Compensation will be allocated among such Highly Compensated Employee and his family members in proportion to each individual's Compensation. For purposes of this Section, the term 'family' means an Employee's spouse and any lineal descendants who are under age 19 at the end of the Plan Year in question. 1.9 "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. 1.10 "Controlled Group Member" means each corporation or unincorporated trade or business that is or was a member of the Controlled Group, but only during such period as it is or was such a member. 1.11 "Deferral Contribution" means the amount of a Participant's Compensation that he elects to have contributed to the Plan by the Participating Employers rather than paid to him directly in cash. 1.12 "Deferral Contribution Account" means the Account established for each Participant, the balance of which is attributable to the Participant's Deferral Contributions and earnings and losses of the Trust Fund with respect to such contributions. 1.13 "Effective Date" means the January 1, 1995. 1.14 "Employee" means any person who is: (i) employed by any Controlled Group Member if their relationship is, for federal income tax purposes, that of employer and employee, or (ii) "a leased employee" of a Controlled Group Member within the -2- 6 meaning of Code section 414(n)(2) but only for purposes of the requirements of Code section 414(n)(3). 1.15 "Entry Date" means January 1, April 1, July 1 and October 1 of each Plan Year. 1.16 "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time. 1.17 "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. (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 -3- 7 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 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, -4- 8 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 and vesting computation periods in accordance with the provisions of 29 C.F.R. Section 2530.200b-2, which provisions are incorporated in this Plan by reference. 1.18 "Matching Contribution Account" means the Account established for each Participant, the balance of which is attributable to Participating Employer matching contributions, if any, made pursuant to Article 3, forfeitures and earnings and losses of the Trust Fund with respect to such contributions and forfeitures. 1.19 [Reserved] 1.20 "One Year Break in Service" means a period of at least 12 consecutive months in which an Employee is absent from service. A One Year Break in Service Year will begin on the Employee's termination date (as defined in Section 1.30) and will end on the day on which the Employee again performs an Hour of Service for a Controlled Group Member. If an 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 his absence, his period of absence, solely for purposes of preventing a One Year Break in Service, will commence on the second anniversary of the first day of his absence from work. The period of absence from work between the first and second anniversaries of the first date of his absence from work will not be taken into account in determining whether the Employee has completed a Year of 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. Notwithstanding the foregoing, if an Employee is classified as a part-time Employee in accordance with standard personnel practices of his Participating Employer and is subject -5- 9 to the 1,000 Hour of Service requirement of Section 1.30, the term 'One Year Break in Service' means a 12 consecutive month computation period (determined under Section 1.30) in which the Employee fails to complete more than 500 Hours of Service. 1.21 "Participant" means an Employee or former Employee who has met the applicable eligibility requirements of Article 2 and who has not yet received a distribution of the entire amount of his vested interest in the Plan. 1.22 "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. 1.23 "Plan" means the employee thrift plan set forth herein, as amended from time to time. 1.24 "Plan Year" means the period with respect to which the records of the Plan are maintained, which will be the 12-month period beginning on January 1 and ending on December 31. 1.25 "Qualified Plan" means an employee benefit plan that is qualified under Code section 401(a). 1.26 "Trust Agreement" means the agreement or agreements executed by the Company and the Trustee which establishes 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. 1.27 "Trust Fund" means the assets of the Plan held by the Trustee pursuant to the Trust Agreement. 1.28 "Trustee" means the one or more individuals or organizations who have entered into the Trust Agreement as Trustee, and any duly appointed successor. 1.29 "Valuation Date" means the date with respect to which the Trustee determines the fair market value of the assets comprising the Trust Fund or any portion thereof. The regular Valuation Date will be the last day of each Plan Year. However, if the Committee determines that the fair market value of any asset comprising the Trust Fund has changed substantially since the previous Valuation Date, or if the Committee determines it to be in the best interests of the Plan and the Participants to -6- 10 value any asset of the Trust Fund at a time other than the regular Valuation Date, the Committee may fix, in a uniform and nondiscriminatory manner, one or more interim Valuation Dates. 1.30 "Year of Service" means each period of 365 days (determined by aggregating periods of service that are not consecutive) 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 earlier of (i) the date on which the Employee quits, retires, is discharged or dies or (ii) 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 earlier of such dates is hereafter referred to as the Employee's "termination date"). An Employee's period of service for purposes of determining a Year of Service will include each period in which the Employee is absent from service for less than 12 months (measured from the Employee's termination date) 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. Notwithstanding the foregoing, if an Employee is classified as a part-time Employee in accordance with standard personnel practices of his Participating Employer and did not participate in the Company's Employee Stock Purchase Plan immediately before the Effective Date, the term 'Year of Service' means the completion of 1,000 Hours of Service during the 12 consecutive months beginning on the date the Employee first performs an Hour of Service, or during the 12 consecutive months beginning on any anniversary of such date. If a part-time Employee who is subject to the 1,000 Hour of Service requirement of this Section transfers to full-time status, his service for the computation period in which the transfer occurs (but not for prior computation periods) will be determined under the elapsed time method, or if more favorable to the Employee, on the basis of his Hours of Service completed as of the date of such transfer. If a full-time Employee transfers to part-time status and becomes subject to the 1,000 Hour of Service requirement of this Section, he will receive credit for service under the elapsed time method through the date of the transfer, and his service during the computation period in which the transfer occurs will be credited on the basis of Hours of Service (with any fractional year prior to the date of -7- 11 transfer converted to hours on the basis of 190 Hours of Service for each month in which the Employee was credited with at least one Hour of Service). -8- 12 ARTICLE 2 PARTICIPATION 2.1 Eligibility to Participate. Each Employee who had both attained age 21 and completed a Year of Service before the Effective Date, or who was eligible to participate in the Company's Employee Savings and Investment Plan immediately before the Effective Date, will be a Participant as of the first payroll period beginning on or after the Effective Date, if he is then employed by a Participating Employer. Each Employee who is not a Participant as of the Effective Date will become a Participant as of the first payroll period beginning on or after the first Entry Date following the date he has both attained age 21 and completed a Year of 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) 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 represented by a bargaining representative but is not covered by a collective bargaining agreement, unless the Company and the bargaining representative agree in writing that the Employee will be eligible to participate in the Plan; (iii) 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)); (iv) he is a leased employee required to be treated as an Employee under Code section 414(n) or he is classified by a Participating Employer as an independent contractor whose compensation for services is reported on a form other than Form W-2 or any successor form for reporting wages paid to employees; (v) 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 (vi) he is then on an approved leave of absence without pay or in the service of the armed forces of the United States. (b) Exclusion after Participation. A Participant -9- 13 who becomes ineligible under subsection (a) may not elect to have Deferral Contributions made or continued to the Plan. (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 Hours of Service are counted 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 a number of consecutive One Year Breaks in Service at least equal to the greater of five or his aggregate Years of Service, he will become a Participant on the later of the Entry 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 a number of consecutive One Year Breaks in Service at least equal to the greater of five or his aggregate Years of Service, he will be treated as a new Employee for purposes of the Plan and his Hours of 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 terminates employment will again become an active Participant immediately upon his reemployment by a Participating Employer. -10- 14 ARTICLE 3 CONTRIBUTIONS 3.1 Participant Deferral Contributions. (a) Amount of Deferral Contributions. A Participant may elect, in accordance with procedures established by the Committee from time to time, to have Deferral Contributions made to the Plan by the Participating Employers, provided the amount of a Participant's Deferral Contributions for any payroll period will not be less than 2% nor more than 15% of his Compensation for the payroll period. (b) Modification and Suspension of Deferral Contributions. A Participant may increase or decrease the amount of his Deferral Contributions during the Plan Year, provided that only one such modification may be made during each calendar quarter of the Plan Year. A Participant may suspend his Deferral Contributions at any time during the Plan Year, and a suspension of his Deferral Contributions will not be considered a modification for purposes of this subsection (b). A Participant who suspends his Deferral Contributions may not again authorize Deferral Contributions to the Plan until the first day of the calendar quarter following such suspension, or such other time as the Committee prescribes. The Committee will adopt from time to time procedures for administering the rules contained in this subsection. (c) Limitations on Deferral Contributions. The sum of a Participant's Deferral Contributions and his elective deferrals (within the meaning of Code section 402(g)(3)) under any other plans, contracts or arrangements of any Controlled Group Member will not exceed $7,000 (as adjusted for cost of living increases in the manner described in Code section 415(d)) for any taxable year of the Participant. A Participant's Deferral Contributions will also be subject to the deferral percentage limitation set forth in Section 10.6. In the event a Participant's Deferral Contributions and other elective deferrals (whether or not under a plan, contract or arrangement of a Controlled Group Member) for any taxable year exceed the foregoing $7,000 limitation, the excess allocated by the Participant to Deferral Contributions (adjusted for Trust Fund earnings and losses in the manner described in Section 10.6(d)) may, in the discretion of the Committee, be distributed to the Participant no later than April 15 following the close of such -11- 15 taxable year. The amount of Deferral Contributions distributed to a Participant for a Plan Year pursuant to this Section will be reduced by any excess Deferral Contributions previously distributed to him pursuant to Section 10.6(c) for the same Plan Year. 3.2 Participating Employer Matching Contributions. (a) Amount of Matching Contributions. Each Participating Employer may, but is not required to, make such matching contributions to the Plan as determined in its sole discretion consistent with any applicable law, and such contributions will be allocated as single, uniform percentage of the Deferral Contributions of all Participants employed by the Participating Employer as provided in the resolutions authorizing such contributions. (b) Limitation on Matching Contributions. Participating Employer matching contributions will be subject to the contribution percentage limitation set forth in Section 10.7. 3.3 Time of Payment. Deferral Contributions will be paid to the Trustee as soon as practicable following the close of each calendar month during the Plan Year. Matching contributions may be paid to the Trustee on any date or dates selected by the Participating Employer, but in no event later than the time prescribed by law (including extensions) for filing the Participating Employer's federal income tax return for its tax year ending with or within the Plan Year. 3.4 Investment of Contributions. Participating Employer matching contributions will be invested by the Trustee pursuant to the Trust Agreement solely in shares of Company Stock, provided, however, that from and after January 1, 1994, a Participant who has attained age 55 may direct the Trustee to transfer all or any portion of his Matching Contribution Account to any other investment fund established under the Trust Agreement. The Deferral Contributions allocated to a Participant's Deferral Contribution Account will be invested by the Trustee in accordance with the Participant's directions in investment funds established pursuant to the Trust Agreement. The Committee from time to time will establish rules and procedures regarding Participant investment directions, including without limitation rules and procedures with respect to the manner in which such directions may be furnished, the frequency with which such directions may be changed during the Plan Year -12- 16 and the minimum portion of a Participant's Account that may be invested in any one investment fund. 3.5 Rollover and Transfer Contributions. Unless directed to do so by the Committee, the Trustee is not authorized to accept (i) any part of the cash or other assets distributed to a Participant from a Qualified Plan or from an individual retirement account or annuity described in Code section 408, or (ii) a direct transfer of assets to the Plan on behalf of a Participant from the trustee or other funding agent of a Qualified Plan. Any amounts contributed to the Plan pursuant to this Section will be allocated to the Participant's Transfer Account. -13- 17 ARTICLE 4 ALLOCATIONS TO PARTICIPANTS' ACCOUNTS 4.1 Establishment of Accounts. The Committee will establish a Deferral Contribution Account and a Matching Contribution Account for each Participant and may establish one or more subaccounts of a Participant's Accounts, if the Committee determines that subaccounts are necessary or desirable in administering the Plan. 4.2 Allocation of Contributions and Forfeitures. Each Deferral Contribution made by a Participating Employer on behalf of a Participant will be allocated by the Committee to the Participant's Deferral Contribution Account. Each Participating Employer matching contribution (if any) made with respect to a Plan Year and all forfeitures arising during that Plan Year will be allocated by the Committee to the Matching Contribution Accounts of Participants employed by that Participating Employer in the ratio that the Deferral Contributions made on behalf of each such Participant bear to the total Deferral Contributions made on behalf of all such Participants, as provided in resolutions authorizing the Participating Employer matching contribution. 4.3 Limitation on Allocations. Article 10 sets forth certain rules under Code sections 401(k), 401(m) and 415 that limit the amount of contributions and forfeitures that may be allocated to a Participant's Accounts for a Plan Year. 4.4 Allocation of Trust Fund Income and Loss. (a) Accounting Records. The Committee, through its accounting records, will clearly segregate each Account and subaccount and will maintain a separate and distinct record of all income and losses of the Trust Fund attributable to each Account or subaccount. Income or loss of the Trust Fund will include any unrealized increase or decrease in the fair market value of the assets of the Trust Fund. (b) Method of Allocation. The share of net income or net loss of the Trust Fund to be credited to, or deducted from, each Account will be the allocable portion of the net income or net loss of the Trust Fund attributable to each Account determined by the Committee as of each Valuation Date in a uniform and nondiscriminatory manner, based upon the ratio that -14- 18 each Account balance as of the previous Valuation Date bears to all Account balances after adjustment for withdrawals, distributions and other additions or subtractions that may be appropriate. The share of net income or net loss to be credited to, or deducted from, any subaccount will be an allocable portion of the net income or net loss credited to or deducted from the Account under which the subaccount is established. 4.5 Valuation of Trust Fund. The fair market value of the total net assets comprising the Trust Fund will be determined by the Trustee as of each Valuation Date. 4.6 No Guarantee. The Participating Employers, the Committee and the Trustee do not guarantee the Participants or their Beneficiaries against loss or depreciation or fluctuation of the value of the assets of the Trust Fund. 4.7 Annual Statement of Accounts. The Committee will furnish each Participant and each Beneficiary of a deceased Participant, at least annually, a statement showing (i) the value of his Accounts at the end of the Plan Year, (ii) the allocations to and distributions from his Accounts during the Plan Year, and (iii) his vested and nonforfeitable interest in his Accounts at the end of the Plan Year. No statement will be provided to a Participant or Beneficiary after the Participant's entire vested and nonforfeitable interest in his Accounts has been distributed. -15- 19 ARTICLE 5 VESTING 5.1 Determination of Vested Interest. Except as provided in Section 5.2, the interest of each Participant in his Deferral Contribution Account and his Matching Contribution Account will be 100% vested and nonforfeitable at all times. 5.2 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, he will be entitled to receive, as soon as administratively feasible, a benefit in an amount equal to the value of the forfeited benefit on the date of forfeiture. This benefit will be reinstated from Participating Employer contributions made to the Plan for this purpose. 5.3 Application of Forfeited Amounts. The amount of a Participant's Accounts which is forfeited pursuant to Section 5.2 will be applied to reduce Participating Employer contributions pursuant to Article 3. -16- 20 ARTICLE 6 DISTRIBUTIONS TO PARTICIPANTS 6.1 Basic Rules Governing Distributions. (a) Timing of Distributions. Except as set forth in Sections 6.2 and 6.3, distribution of a Participant's vested Account Balances will be made as soon as practicable after the Valuation Date coinciding with or immediately following the Participant's termination of employment, or if earlier, the date on which the Participant becomes eligible to receive benefits under the Social Security Act on account of total and permanent disability. If a loan is outstanding from the Trust Fund to the Participant on the date his vested Account balances become distributable, the amount distributed to the Participant will be reduced by any security interest in his Accounts held by the Plan by reason of the loan. (b) Form of Distributions. Distributions will be made in a single lump sum payment. Shares of Company Stock allocated to a Participant's Accounts will be distributed in the form of whole shares plus cash for any fractional share, unless the Participant elects to receive the cash value of such shares. (c) Participant's Consent to Certain Payments. If the amount of a Participant's vested Account balances exceeds $3,500, the Committee will not distribute the Participant's vested Account balances to him prior to his attainment of age 62 unless he consents to the distribution. The foregoing provision will not apply to any distributions required under Sections 10.6 and 10.7. 6.2 Withdrawals after Age 59-1/2. A Participant who has not terminated employment may request a distribution from his Accounts if he has reached age 59-1/2. A Participant who is a director, officer or principal stockholder of the Company within the meaning of Section 16 of the Securities Exchange Act of 1934 may exercise the foregoing withdrawal right only in accordance with rules and procedures established from time to time by the Committee. All other Participants may exercise their withdrawal rights at any time or times during the Plan Year. 6.3 Hardship Distributions. -17- 21 (a) General Rule. A Participant who has not terminated employment may request a distribution from his Deferral Contribution Account in the event of his hardship. A distribution will be on account of hardship only if the distribution is necessary to satisfy an immediate and heavy financial need of the Participant, as defined below, and satisfies all other requirements of this Section. (b) Deemed Financial Need. For purposes of this Section, a distribution is made on account of an immediate and heavy financial need of the Participant only if the distribution is for (i) the payment of medical expenses described in Code section 213(d) previously incurred by the Participant, the Participant's spouse or any dependents of the Participant (as defined in Code section 152) or necessary for such persons to obtain medical care described in Code section 213(d); (ii) costs directly related to the purchase of a principal residence for the Participant (excluding mortgage payments); (iii) the payment of tuition and related educational fees for the next 12 months of post-secondary education for the Participant, his spouse, children, or dependents (as defined in Code section 152); (iv) payments necessary to prevent the eviction of the Participant from his principal residence or foreclosure on the mortgage of the Participant's principal residence; or (v) the payment of funeral expenses of a family member. (c) Reasonable Reliance Test. A distribution will be considered necessary to satisfy an immediate and heavy financial need of the Participant only if all three of the following requirements are satisfied: (i) the distribution is not in excess of the amount required to relieve the immediate and heavy financial need of the Participant (taking into account the taxable nature of the distribution); (ii) the Participant represents in writing, on forms provided by the Committee, that the need cannot be relieved through reimbursement or compensation by insurance or otherwise, by reasonable liquidation of the Participant's assets, to the extent such liquidation would not itself cause an immediate and heavy financial need, by cessation of Deferral Contributions under the Plan, or by distributions other than hardship distributions or nontaxable (at the time of the loan) loans from the Plan and any other plans maintained by any Controlled Group Member or any other entity by which the Participant is employed, or by borrowing from commercial sources on reasonable commercial terms; and (iii) the Committee determines that it can reasonably rely on the Participant's written representation. -18- 22 (d) Limitation for Loans. No distribution under this Section will be made in an amount that is greater than the excess of the Participant's vested interest in his Accounts over the aggregate amount of outstanding loans, plus accrued interest, secured by the Participant's Accounts. (e) Source of Hardship Distributions. The cumulative amount distributed to a Participant on account of hardship will not exceed the amount of his Deferral Contributions that have not been previously withdrawn (but not the income allocable to his Deferral Contributions) and, with respect to hardship distributions on and after June 1, 1994, the balance, if any, of his Transfer Account. 6.4 Distribution Procedures. Distributions pursuant to Sections 6.2 and 6.3 will be made as soon as practicable following the Committee's approval of the Participant's written request for withdrawal and will be made in the form described in Section 6.1(b). Distributions pursuant to Section 6.2 will be made first from the Participant's Transfer Account, next from the vested portion of his Matching Contribution Account, and last from this Deferral Contribution Account. No distribution under this Section will be made in an amount that is greater than the excess of the Participant's vested interest in the Accounts from which the distributions are made over the aggregate amount of outstanding loans, plus accrued interest, secured by such Accounts. For purposes of determining the amount available for distribution, a Participant's Accounts will be valued as of the Valuation Date immediately preceding the date on which the Participant requests a distribution. 6.5 Loans to Participants. (a) Effective Date. The provisions of this Section will be effective as of a date determined by the Committee in its discretion and communicated to Participants. (b) General Provisions. A Participant may, subject to the provisions of this Section, borrow from the vested interest in his Accounts, provided, however, that no loan may be made from the portion of the Trust Fund that is invested in Company Stock. All such loans will be subject to the requirements of this Section and such other rules as the Committee may from time to time prescribe, including without limitation any rules restricting the purposes for which loans will be approved. The Committee will have complete discretion as to approval of a loan hereunder and as to the terms thereof, -19- 23 provided that its decisions will be made on a uniform and nondiscriminatory basis and in accordance with this Section. If the Committee approves a loan, the Committee will direct the Trustee to make the loan and will advise the Participant and the Trustee of the terms and conditions of the loan. Nothing in this Section will require the Committee to make loans available to Participants. (c) Terms and Conditions. Loans to Participants will be made according to the following terms and conditions and such additional terms and conditions as the Committee may from time to time establish: (i) no loan will be for a term of longer than five years; (ii) all loans will become due and payable in full upon termination (by death or otherwise) of the Participant's employment with the Controlled Group and upon the occurrence of such other events as the Committee may from time to time specify; (iii) all loans will bear a reasonable rate of interest as determined by the Committee from time to time; (iv) all loans will be made only upon receipt of adequate security (the security for a loan will be the Participant's interest in the separate investment fund established under subsection (g) for that loan) in an amount that does not exceed 50% of the Participant's vested interest under the Plan); (v) payments of principal and interest will be made through payroll deductions sufficient to provide for substantially level amortization of principal and interest with payments not less frequently than quarterly, which will be irrevocably authorized by the Participant in writing on a form provided by the Committee at the time the loan is made; (vi) the amount of any indebtedness (including accrued and unpaid interest) under any loan will be deducted from a Participant's interest in the Trust Fund if and only if such indebtedness or any installment thereof is not paid when due (including amounts due by acceleration) unless the Committee determines that there is adequate security for such loan other than the Participant's interest in the Trust Fund; (vii) no more than one outstanding loan will be permitted with respect to a Participant at any time, except that a Participant may have a home loan and a loan which is not a home loan outstanding at the same time; and (viii) all loans will be evidenced by a note containing such additional terms and conditions as the Committee will determine. (d) Maximum Amount of Loans. The amount of any loan made pursuant to this Section, when added to the outstanding balance of all other loans to the Participant from all qualified employer plans (as defined in Code section 72(p)(4)) of the Controlled Group, will not exceed the lesser of (i) one-half of -20- 24 the nonforfeitable interest in his Accounts, or (ii) $50,000 reduced by the excess, if any, of (A) the highest outstanding balance of all other loans from qualified employer plans of the Controlled Group to the Participant during the 1-year period ending on the date on which such loan was made, over (B) the outstanding balance of all loans from qualified employer plans of the Controlled Group to the Participant on the date on which such loan was made. (e) Minimum Loan. The minimum loan permitted under this Section is $1,000. If such minimum amount exceeds the limitations of subsection (d), no loan will be made. (f) Source of Loans. All loans will be made first from a Participant's Transfer Account, next from his Matching Contribution Account, and last from his Deferral Contribution Account. (g) Investment of Loan Payments. All loans will be treated as a separate investment fund of the borrowing Participant. All payments with respect to a loan will be credited to the borrowing Participant's Accounts and will be invested in the investment funds under the Trust Agreement in accordance with the Participant's latest investment directions pursuant to Section 3.5. 6.6 Reemployment of Participant. If a Participant who terminated employment again becomes an Employee before receiving a distribution of his Account balances, no distribution from the Trust Fund will be made while he is an Employee, and amounts distributable to him on account of his prior termination will be held in the Trust Fund until he is again entitled to a distribution under the Plan. 6.7 Valuation of Accounts. A Participant's distributable Account balances will be valued as of the Valuation Date immediately preceding the date the Accounts are to be distributed, except that there will be added to the value of his Accounts the fair market value of any amounts allocated to his Accounts under Article 4 after that Valuation Date. 6.8 Direct Rollovers (a) Distributions after 1992. Notwithstanding any other provision of the Plan, for distributions made on or after January 1, 1993, a Distributee (as hereinafter defined) may elect, at any time and in the manner prescribed by the Committee, -21- 25 to have any portion of an Eligible Rollover Distribution (as hereinafter defined) paid directly to an Eligible Retirement Plan (as hereinafter defined) specified by the Distributee. (b) Eligible Rollover Distribution. An Eligible Rollover Distribution is any distribution of all or any portion of the balance to the credit of the Distributee, except that an Eligible Rollover Distribution does not include (i) any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life or life expectancy of the Distributee or the joint lives or life expectancies of the Distributee and the Distributee's designated beneficiary, or for a specified period of ten years or more, (ii) any distribution to the extent such distribution is required by Code section 401(a)(9), and (iii) the portion of any distribution that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities). (c) Eligible Retirement Plan. An Eligible Retirement Plan is an individual retirement account described in Code section 408(a), an individual retirement annuity described in Code section 408(b), an annuity plan described in Code section 403(a), or a qualified trust described in Code section 401(a) that is a defined contribution plan within the meaning of Code section 414(i), that accepts the Distributee's Eligible Rollover Distribution. However, in the case of an Eligible Rollover Distribution to a Participant's surviving Spouse, an Eligible Retirement Plan is an individual retirement account or individual retirement annuity. (d) Distributee. A Distributee includes a Participant, the Participant's Spouse, or a Participant's former spouse who is an alternate payee under a qualified domestic relations order, as defined in Section 414(p) of the Code. 6.9 Restrictions on Distributions. Article 11 sets forth certain rules under various provisions of the Code relating to restrictions on distributions to Participants. -22- 26 ARTICLE 7 DISTRIBUTIONS TO BENEFICIARIES 7.1 Designation of Beneficiary. Each Participant will have the right to designate a Beneficiary or Beneficiaries to receive his vested Account balances upon his death. The designation will be made on forms prescribed by the Committee and will be effective upon receipt by the Committee. A Participant will have the right to change or revoke any designation by filing a new designation or notice of revocation with the Committee, but the revised designation or revocation will be effective only upon receipt by the Committee. 7.2 Consent of Spouse Required. A Participant who is married may not designate a Beneficiary other than, or in addition to, his spouse unless his spouse consents to the designation by means of a written instrument that is signed by the spouse, contains an acknowledgment by the spouse of the effect of the consent, and is witnessed by a member of the Committee (other than the Participant) or by a notary public. The designation will be effective only with respect to the consenting spouse, whose consent will be irrevocable. A Beneficiary designation to which a spouse has consented may not be changed by the Participant without spousal consent (other than to designate the spouse as Beneficiary), unless the spouse's consent expressly permits Beneficiary designations by the Participant without any further consent of the spouse. 7.3 Failure to Designate Beneficiary. In the event a Participant has not designated a Beneficiary, or in the event no Beneficiary survives a Participant, the distribution of the Participant's vested Account balances upon his death will be made (i) to the Participant's spouse, if living, (ii) if his spouse is not then living, to his then living issue by right of representation, (iii) if neither his spouse nor his issue are then living, to his then living parents, and (iv) if none of the above are then living, to his estate. 7.4 Distributions to Beneficiaries. Distribution of a Participant's vested Account balances to the Participant's Beneficiary will be made as soon as practicable after Participant's death. The Participant's vested Account balances will be distributed to the Beneficiary in a single lump sum payment and will be in the same form as provided for Participants in Section 6.1(b). The Participant's Account balances will be -23- 27 valued as of the Valuation Date coinciding with or immediately preceding the date the Accounts are to be distributed to his Beneficiary, except that there will be added to the value of the Participant's Accounts the fair market value of any amounts allocated to his Accounts under Article 4 after that Valuation Date. If a loan is outstanding from the Trust Fund to the Participant on the date of his death, the amount distributed to his Beneficiary will be reduced by any security interest in the Participant's Accounts held by the Plan by reason of the loan. 7.5 Restrictions on Distributions. Article 11 sets forth certain rules under various provisions of the Code relating to restrictions on distributions to Beneficiaries. -24- 28 ARTICLE 8 PROVISIONS REGARDING COMPANY STOCK 8.1 Powers and Duties of the Committee. (a) Committee as Named Fiduciary. Except as otherwise provided in this Section, the Committee will be the named fiduciary within the meaning of ERISA section 402(a)(2) for purposes of all shareholder action authorized or permitted to be taken with respect to Company Stock held in the Trust Fund. The powers and duties of the Committee as named fiduciary for this purpose will include, without limitation, the powers and duties to direct the Trustee with respect to the voting of all shares of Company Stock; to direct the Trustee to accept or reject a tender offer for shares of Company Stock; to direct the Trustee to sell shares of Company Stock under any other circumstances to any person, including the Company, provided that any sale to the Company or other "disqualified person" within the meaning of Code section 4975 or "party in interest" within the meaning of ERISA section 3(14) is made at a price which is not less than adequate consideration as defined in ERISA section 3(18) and no commission is charged with respect to the sale; and to exercise any options, warrants or other rights in connection with shares of Company Stock held in the Trust Fund. The Committee will also have the power, in its discretion, to permit each Participant and Beneficiary to direct the Trustee to take or to refrain from taking any action with respect to the shares of Company Stock allocated to his Accounts that the Committee could have directed the Trustee to take or refrain from taking. If the Committee permits Participants and Beneficiaries to direct the Trustee in connection with any matter relating to Company Stock held in the Trust Fund, each Participant and Beneficiary who furnishes instructions to the Trustee will be a named fiduciary within the meaning of ERISA section 402(a)(2) with respect to such matter, but the Committee will retain the power and duty to direct the Trustee with respect to shares of Company Stock allocated to the Accounts of Participants and Beneficiaries who fail to furnish timely instructions to the Trustee and with respect to any shares of Company Stock that have not been allocated to Participants' Accounts. The Committee will adopt from time to time whatever procedures it determines to be appropriate in order to exercise its powers and duties under this subsection (a) and may retain advisors and consultants (including, without limitation, legal counsel and financial advisors) who are independent of the Company, the Board and the Trustee to the extent the Committee -25- 29 determines such independent advice to be necessary or appropriate. (b) Delegation of Powers and Duties. The Committee may, in its discretion, delegate any power or duty allocated to it pursuant to subsection (a) above to another person or entity, who will act as an independent fiduciary and will exercise such power or duty to the same extent as it could have been exercised by the Committee. The persons or entities to which such powers and duties may be delegated will include, without limitation, the Board or any committee of the Board, the Trustee, any other person or entity that meets the requirements of an investment manager under ERISA section 3(38), or any other person or entity that the Committee determines in good faith has the requisite knowledge and experience concerning the matter with respect to which the delegation is made. The Committee may also remove any fiduciary to whom it has delegated any power or duty and exercise such power or duty itself or appoint a successor fiduciary. For purposes of Sections 8.2 and 8.3, the term "Committee" will also mean any fiduciary to which the Committee has delegated any power or duty pursuant to this subsection (b). 8.2 Voting Company Stock. Unless the Committee determines otherwise pursuant to Section 8.1, voting rights with respect to shares of Company Stock held in the Trust Fund will be exercised by Participants and Beneficiaries and the procedures of this Section will apply. Before each annual or special meeting of its shareholders, the Committee will cause to be sent to each Participant and Beneficiary who has Company Stock allocated to his Accounts on the record date of such meeting a copy of the proxy solicitation material for the meeting, together with a form requesting confidential instructions to the Trustee on how to vote the shares of Company Stock allocated to his Accounts. Upon receipt of such instructions, the Trustee will vote the shares allocated to such Participant's or Beneficiary's Accounts as instructed. The Trustee will vote allocated shares of Company Stock for which it does not receive timely instructions from Participants or Beneficiaries in accordance with the Committee's instructions. A Participant's or Beneficiary's right to instruct the Trustee with respect to voting shares of Company Stock will not include rights concerning the exercise of any appraisal rights, dissenters' rights or similar rights granted by applicable law to the registered or beneficial holders of Company Stock. These matters will be exercised by the Trustee in accordance with the Committee's instructions. -26- 30 8.3 Tender Offer for Company Stock. Unless the Committee determines otherwise pursuant to Section 8.1, the right to accept or reject a tender offer for shares of Company Stock held in the Trust Fund will be exercised by Participants and Beneficiaries and the procedures of this Section will apply. In the event of a tender offer for shares of Company Stock subject to Section 14(d)(1) of the Securities Exchange Act of 1934 or subject to Rule 13e-4 promulgated under that Act (as those provisions may from time to time be amended or replaced by successor provisions of federal securities laws), the Committee will advise each Participant and Beneficiary who has shares of Company Stock allocated to his Accounts in writing of the terms of the tender offer as soon as practicable after its commencement and will furnish each Participant and Beneficiary with a form by which he may instruct the Trustee confidentially to tender shares allocated to his Accounts. The Trustee will tender those shares it has been properly instructed to tender, and will not tender those shares which it has been properly instructed not to tender. The Committee will also advise Participants and Beneficiaries that the Committee will furnish instructions to the Trustee with respect to allocated shares for which no instructions are received from Participants and Beneficiaries and will furnish such related documents as are prepared by any person and provided to the shareholders of the Company pursuant to the Securities Exchange Act of 1934. The Committee may also provide Participants with such other material concerning the tender offer as the Committee in its discretion determines to be appropriate. The number of shares to which a Participant's instructions apply will be the total number of shares allocated to his Accounts as of the latest date for which Participant statements were prepared. The Committee will advise the Trustee of the commencement date of any tender offer and, until receipt of that advice, the Trustee will not be obligated to take any action under this Section. Funds received in exchange for tendered stock will be credited to the Accounts of the Participant or Beneficiary whose stock was tendered and will be used by the Trustee to purchase Company Stock, if available on a national securities exchange, commencing on the earlier of the following dates: (a) the trading day following the first date on which the closing price of the Company Stock on a national securities exchange on which the Company Stock is then traded is within 20% of the closing price on the tenth trading day preceding the commencement date of the tender offer or (b) the thirtieth trading day after the expiration date of the tender offer, of which date the Committee will advise the Trustee. In the interim, or if Company Stock is not available for purchase, the -27- 31 Trustee will invest such funds in short term investments permitted under the Trust Agreement. -28- 32 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 administering the Plan, including without limitation the expenses of the Committee properly incurred in the performance of its duties under the Plan, will be paid from the Trust Fund, and all such expenses paid by the Participating Employers on behalf of the Plan will be reimbursed from the Trust Fund unless the Participating Employers in their discretion elect not to submit such expenses for reimbursement. Notwithstanding the foregoing, the members of the Committee will not be compensated by the Plan for their services as Committee members. -29- 33 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 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 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 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. 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 -30- 34 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 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. -31- 35 (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 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 -32- 36 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. 9.12 Correction of Participants' Accounts. If an error or omission is discovered in the Accounts of a Participant, or in the amount distributed to a Participant, the Committee will make such equitable adjustments in the records of the Plan as may be necessary or appropriate to correct such error or omission as of the Plan Year in which such error or omission is discovered. Further, a Participating Employer may, in its discretion, make a special contribution to the Plan which will be allocated by the Committee only to the Account of one or more Participants to correct such error or omission. 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. 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. -33- 37 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. -34- 38 ARTICLE 10 LIMITATIONS ON CONTRIBUTIONS AND ALLOCATIONS TO PARTICIPANTS' ACCOUNTS 10.1 Priority over Other Contribution and Allocation Provisions. The provisions set forth in this Article will supersede any conflicting provisions of Articles 3 and 4. 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 the sum of the following amounts with respect to all Qualified Plans and Welfare Benefit Funds maintained by the Controlled Group Members: (i) the amount of Controlled Group Member contributions with respect to the Limitation Year 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, if any, carried forward pursuant to Section 10.4 or a similar provision in another Qualified Plan and allocated to the Participant's account; (iv) the amount of a Participant's voluntary nondeductible contributions for the Limitation Year, provided, however, that the Annual Addition for any Limitation Year beginning before January 1, 1987 will not be recomputed to treat all of the Participant's nondeductible voluntary contributions as part of the Annual Addition; (v) the amount allocated after March 31, 1984 to an individual medical benefit account (as defined in Code section 415(l)(2)) which is part of a Defined Benefit Plan or an annuity plan; and (vi) the amount derived from contributions paid or accrued after December 31, 1985 in taxable years ending after such date that 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. A Participant's Annual Addition will not include any nonvested -35- 39 amounts restored to his account following his reemployment before incurring five consecutive One Year Breaks in Service, and a corrective allocation pursuant to Section 9.12 will be considered an Annual Addition for the Limitation Year to which it relates. (b) "Average Contribution Percentage" means the average of the Contribution Percentages of each Participant in a group of Participants. (c) "Average Deferral Percentage" means the average of the Deferral Percentages of each Participant in a group of Participants. (d) "Contribution Percentage" means the ratio (expressed as a percentage) determined by dividing the Matching Contributions made to the Plan on behalf of a Participant who is eligible to receive an allocation of Matching Contributions for a Plan Year (but only to the extent such Matching Contributions are not taken into account in determining the Participant's Deferral Percentage for the Plan Year) by the Participant's Compensation for the Plan Year. A Participant is eligible to receive an allocation of Matching Contributions for purposes of determining his Contribution Percentage even though no Matching Contributions are made to the Plan on his behalf because of the suspension of his Deferral Contributions under the terms of the Plan, because of an election not to participate, or because of the limitations contained in Sections 10.3 through 10.5 of the Plan. (e) "Deferral Percentage" means the ratio (expressed as a percentage) determined by dividing the Deferral Contributions made to the Plan on behalf of a Participant who is eligible to make Deferral Contributions for all or any portion of a Plan Year by the Participant's Compensation for the Plan Year. In addition, if the Matching Contributions to the Plan for any Plan Year satisfy the requirements of Code section 401(k)(2)(B) and (C), a Participant's Deferral Percentage will be determined by aggregating the Deferral Contributions and the Matching Contributions made to the Plan on his behalf for such Plan Year, unless such aggregation is prohibited in regulations prescribed by the Secretary of the Treasury. A Participant is eligible to make Deferral Contributions for purposes of determining his Deferral Percentage even though he does not make Deferral Contributions because of the suspension of his Deferral Contributions under the terms of the Plan, because of an election not to participate, or because of the limitations contained in Sections 10.3 through 10.5 of the Plan. A Deferral Contribution -36- 40 will be taken into account for a Plan Year only if (i) the allocation of such contribution is not contingent on participation in the Plan or the performance of services after the Plan Year, (ii) such contribution is paid to the Trustee within 12 months after the end of the Plan Year, and (iii) such contribution relates to Compensation that either would have been received by the Participant in the Plan Year, or that is attributable to services performed during the Plan Year and that would have been received within two and one-half months after the Plan Year, but for the election to defer. (f) "Defined Benefit Dollar Limitation" means for any Limitation Year, $90,000 or such amount as determined by the Commissioner of Internal Revenue under Code section 415(d)(1) as of the January 1 falling within such Limitation Year. (g) "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. (h) "Defined Benefit Plan" means a Qualified Plan other than a Defined Contribution Plan. (i) "Defined Contribution Dollar Limitation" means for any Limitation Year, $30,000 or, if greater, 25% of the Defined Benefit Dollar Limitation for the same 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 -37- 41 preceding sentences 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. (j) "Defined Contribution Fraction" means a fraction, the numerator of which is the sum of the Annual Additions allocated to the Participant's 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 Participant was an Employee (regardless of whether a Defined Contribution Plan was in existence for such Limitation Year) (i) the Defined Contribution Dollar Limitation (determined for this purpose without regard to the provisions of Code section 415(c)(6)) effective for the Limitation Year multiplied by 125%, or (ii) 35% of the Participant's Includable Compensation for such Limitation Year. (k) "Defined Contribution Plan" means a Qualified Plan described in Code section 414(i). (l) "Family Member" means, with respect to an Employee, the Employee's spouse and lineal ascendants or descendants and the spouses of such lineal ascendants or descendants. (m) "Highly Compensated Employee" means any Employee who performs services for a Controlled Group Member during the determination year (as hereinafter defined) and who during the look-back year (as hereinafter defined): (i) received Compensation from a Controlled Group Member in excess of $75,000 (as adjusted pursuant to Code section 415(d)); (ii) received Compensation from a Controlled Group Member in excess of $50,000 (as adjusted pursuant to Code section 415(d)) and was a member of the top-paid group (as hereafter defined) for such year; or (iii) was an officer of a Controlled Group Member and received Compensation during such year that is greater than 50% of the dollar limitation in effect under Code section 415(b)(1)(A) (but limited to no more than 50 Employees or, if lesser, the greater of three Employees or 10% of the Employees). The term Highly Compensated Employee also includes: (i) an Employee who is both described in the preceding sentence if the term "determination year" is substituted for the term "look-back year" and the Employee is one of the 100 Employees who received the most Compensation from the Controlled Group during the determination year; and (ii) an Employee who is a 5-percent owner at any time during the look-back year or determination year. If no officer has satisfied the Compensation requirement of (ii) above during -38- 42 either a determination year or look-back year, the officer with the highest Compensation for such year will be treated as a Highly Compensated Employee. For purposes of this subsection, the determination year is the Plan Year, and the look-back year is the twelve-month period immediately preceding the determination year. A Highly Compensated Employee also includes any Employee who separated from service (or was deemed to have separated) prior to the determination year, performs no services for a Controlled Group Member during the determination year, and was a Highly Compensated Employee for either the separation year or any determination year ending on or after the Employee's 55th birthday. The term "top-paid group" means that group of Employees consisting of the top 20% of such Employees ranked on the basis of Compensation received during the Plan Year. For purposes of this subsection, Compensation will include Deferral Contributions under the Plan or any other 401(k) arrangement and any amounts that would have been received as cash but for an election to receive benefits under a Code section 125 cafeteria plan. All determinations under this definition will be made in accordance with Code section 414(q) and the Treasury Regulations thereunder. (n) "Includable Compensation" means an Employee's total wages from the Controlled Group 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) contributions of Controlled Group Members to a simplified employee pension plan to the extent such contributions are deductible by the Employee and contributions of Controlled Group Members to any other plan of deferred compensation that 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 that receive special tax benefits within the meaning of section 1.415-2(d)(2) of the Treasury Regulations. The annual Includable Compensation of an Employee taken into account for any purpose for any Plan Year will not exceed $150,000 for any Plan Year, as adjusted in regulations prescribed by the Secretary of the Treasury. For purposes of applying the $150,000 limit set forth in the preceding sentence, if an Employee is a Highly -39- 43 Compensated Employee who is either (i) a 5-percent owner, determined in accordance with Code section 414(q) and the Treasury Regulations promulgated thereunder or (ii) one of the 10 most highly compensated Employees ranked on the basis of Compensation paid by the Controlled Group during the year, such Highly Compensated Employee and the members of his family (as hereafter defined) will be treated as a single employee and the Compensation of each member of the family will be aggregated with the Compensation of the Highly Compensated Employee. The limitation on Compensation will be allocated among such Highly Compensated Employee and his family members in proportion to each individual's Compensation. For purposes of this Section 10.2(m), the term "family" means an Employee's spouse and any lineal descendants who are under age 19 at the end of the Plan Year in question. (o) "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. (p) "Maximum Annual Addition" means with respect to a Participant for any Limitation Year an amount equal to the lesser of (i) the Defined Contribution Dollar Limitation or (ii) 25% of the Participant's Includable Compensation. (q) "Nonhighly Compensated Employee" means an Employee who is neither a Highly Compensated Employee nor a Family Member of a Highly Compensated Employee. (r) "Projected Annual Benefit" means the annual benefit (as defined in Code section 415(b)(2)) to which a Participant would be entitled under the terms of a Defined Benefit Plan maintained by a Controlled Group Member, assuming that the Participant will continue employment until his normal retirement age under the Defined Benefit Plan (or current age, if later) and that the Participant's Includable Compensation for the current Limitation Year and all other relevant factors used to determine benefits under the Defined Benefit Plan will remain constant for all future Limitation Years. (s) "Matching Contribution" means the Participating Employer matching contribution made to the Plan on behalf of a Participant pursuant to Article 3. -40- 44 (t) "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 an 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. (u) "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 a Participant by the Participating Employers. In addition, Compensation includes any contributions made by the Participating Employers on behalf of an Employee pursuant to a deferral election under the Plan or under any other employee benefit plan containing a cash or deferred arrangement under Code section 401(k) and 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. The annual Compensation of an Employee taken into account for any purpose will not exceed $200,000 for any Plan Year ending before January 1, 1994, as adjusted in regulations prescribed by the Secretary of the Treasury, and will not exceed $150,000 for any Plan Year beginning after December 31, 1993, as adjusted in regulations prescribed by the Secretary of the Treasury. For purposes of applying the $150,000 limit set forth in the preceding sentence, if an Employee is a Highly Compensated Employee who is either (i) a 5-percent owner, determined in accordance with Code section 414(q) and the Treasury Regulations promulgated thereunder or (ii) one of the 10 most highly compensated Employees ranked on the basis of Compensation paid by the Controlled Group during the year, such Highly Compensated Employee and the members of his family (as hereafter defined) will be treated as a single employee and the Compensation of each member of the family will be aggregated with the Compensation of the Highly Compensated Employee. The limitation on Compensation will be allocated among such Highly Compensated Employee and his family members in proportion to each individual's Compensation. For purposes of this Section 10.2(u), the term "family" means an Employee's spouse and any lineal descendants who are under age 19 at the end of the Plan Year in question. -41- 45 10.3 General Allocation Limitation. The Annual Addition of a Participant for any Limitation Year will not exceed the Maximum Annual Addition. If, except for the application of this section, the Annual Addition of a Participant for any Limitation Year would exceed the Maximum Annual Addition, the excess Annual Addition attributable to this Plan will not be allocated to the Participant's Account for the Plan Year included in such Limitation Year, but will be subject to the provisions of Section 10.4. The limitations contained in this Article will apply on an aggregate basis to all Defined Contribution Plans and all Defined Benefit Plans (whether or not any of such plans have terminated) established by the Controlled Group Members. 10.4 Excess Allocations. (a) Participants Covered by One Defined Contribution Plan. If the Participant is not covered under another Defined Contribution Plan or a Welfare Benefit Fund maintained by a Controlled Group Member during the Limitation Year and the amount allocated or otherwise allocable to his Account would exceed the Maximum Annual Addition, the Participant's Deferral Contributions will be returned to the Participant (together with earnings, if any, attributable to the returned Deferral Contributions) to the extent necessary to reduce the excess Annual Addition. If an excess Annual Addition remains after the return of such Deferral Contributions plus earnings, the Participating Employer contributions and forfeitures which would continue to cause the Participant's Annual Addition to exceed the Maximum Annual Addition will be successively allocated in the manner described in Section 4.2 among the Accounts of eligible Participants whose Annual Additions do not exceed the Maximum Annual Addition. If, after such allocations have been made, there remain Participating Employer contributions or forfeitures which cannot be allocated without causing the Annual Addition of a Participant to exceed the Maximum Annual Addition, the forfeitures which cause the Annual Addition to exceed the Maximum Annual Addition and the Participating Employer contributions which result from a reasonable error in estimating the Participant's Includable Compensation or from any other limited facts and circumstances which the Commissioner of Internal Revenue finds justifiable under section 1.415-6(b)(6) of the Treasury Regulations and which cause the Participant's Annual Addition to exceed the Maximum Annual Addition will be held in a suspense account in the Trust Fund to be carried forward and used in subsequent Limitation Years to reduce Participating Employer contributions to the Plan. -42- 46 If a suspense account is in existence at any time during a Limitation Year, all amounts in the suspense account must be allocated before any contributions which would constitute Annual Additions will be made to the Plan for that Limitation Year. Such suspense account will not participate in the allocation of the net income or net loss of the Trust Fund. (b) Participants Covered by Two or More Defined Contribution Plans. If, in addition to this Plan, the Participant is covered under another Defined Contribution Plan or a Welfare Benefit Fund maintained by a Controlled Group Member during the Limitation Year, the following provisions will apply. The Annual Addition which may be credited to a Participant's Account under this Plan for any such Limitation Year will not exceed the Maximum Annual Addition reduced by the Annual Addition credited to a Participant's accounts under the other Defined Contribution Plans and Welfare Benefit Funds for the same Limitation Year. If the Annual Addition with respect to the Participant under the other Defined Contribution Plans and Welfare Benefit Funds maintained by a Controlled Group Member is less than the Maximum Annual Addition and the Participating Employer contribution that would otherwise be contributed or allocated to the Participant's Account under this Plan would cause the Annual Addition for the Limitation Year to exceed the Maximum Annual Addition, the amount to be contributed or allocated to the Participant's Account under this Plan will be reduced so that the Annual Addition under all such Defined Contribution Plans and Welfare Benefit Funds for the Limitation Year will equal the Maximum Annual Addition. If the aggregate Annual Addition with respect to the Participant under such other Defined Contribution Plans and Welfare Benefit Funds is equal to or greater than the Maximum Annual Addition, no amount will be contributed or allocated to the Participant's Account under this Plan for the Limitation Year. An excess Annual Addition will be reduced in the manner described in subsection (c). (c) Reduction of Excess Allocations. As soon as is administratively feasible after the end of the Limitation Year, the Maximum Annual Addition for the Limitation Year will be determined on the basis of the Participant's Includable Compensation for the Limitation Year. If a Participant's Annual Addition under this Plan and the other Defined Contribution Plans and Welfare Benefit Funds maintained by Controlled Group Members would result in the Annual Addition exceeding the Maximum Annual Addition for the Limitation Year, the excess amount will be deemed to consist of the Annual Addition last allocated. In making this determination, the Annual Addition attributable to a -43- 47 Welfare Benefit Fund will be deemed to have been allocated first regardless of the actual date of allocation. If an excess amount was allocated to a Participant on an allocation date of this Plan that coincides with an allocation date of another plan, the excess amount attributed to this Plan will be the product of (i) the total excess amount allocated as of such date and (ii) the ratio of the Annual Addition allocated to the Participant for the Limitation Year as of such date under this Plan to the total Annual Addition allocated to the Participant for the Limitation Year as of such date under this and all the other Defined Contribution Plans. Any excess amount attributed to this Plan will be disposed of in the manner described in subsection (a). 10.5 Aggregate Benefit Limitation. If a Controlled Group Member maintains, or at any time maintained, one or more Defined Benefit Plans 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 provisions of the Defined Benefit Plans will govern the order of reduction of Annual Additions or benefit accruals necessary to meet this limitation. If the provisions of the Defined Benefit Plans are silent, the current Annual Addition under this Plan will be reduced first, and then the rate of accrual under the Defined Benefit Plans will be reduced, if necessary to meet this limitation. If the Defined Contribution Plans taken into account in determining the Participant's Annual Addition under this Article satisfied the requirements of Code section 415 as in effect for all Limitation Years beginning before January 1, 1987, an amount will be subtracted from the numerator of the Defined Contribution Fraction (not exceeding such numerator) as prescribed by the Secretary of the Treasury so that the sum of the Defined Contribution Fraction and the Defined Benefit Fraction does not exceed 1.0. For purposes of this Section, a Participant's voluntary nondeductible contributions to a Defined Benefit Plan will be treated as being part of a separate Defined Contribution Plan. -44- 48 10.6 Limitation on Deferral Contributions. (a) Average Deferral Percentage Test. Notwithstanding any other provision of the Plan, the Average Deferral Percentage for a Plan Year for Participants who are Highly Compensated Employees will not exceed the greater of: (i) the Average Deferral Percentage for Participants who are Nonhighly Compensated Employees multiplied by 1.25; or (ii) the lesser of (A) the Average Deferral Percentage for Participants who are Nonhighly Compensated Employees plus two percentage points or (B) the Average Deferral Percentage for Participants who are Nonhighly Compensated Employees multiplied by 2.0. The multiple use of the alternative test in clause (ii) of this subsection will be restricted as provided in regulations prescribed by the Secretary of the Treasury. (b) Suspension of Deferral Contributions. If at any time during a Plan Year the Committee determines, on the basis of estimates made from information then available, that the limitation described in subsection (a) above will not be met for the Plan Year, the Committee in its discretion may reduce or suspend the Deferral Contributions of one or more Participants who are Highly Compensated Employees to the extent necessary (i) to enable the Plan to meet such limitation or (ii) to reduce the amount of excess Deferral Contributions that would otherwise be distributed pursuant to subsection (c) below. (c) Reduction of Excess Deferral Contributions. If, for any Plan Year, the Average Deferral Percentage for Participants who are Highly Compensated Employees exceeds the limitation described in subsection (a) above, the Deferral Percentage for such Participants will be reduced (in the order of Deferral Percentages, beginning with the highest of such percentages as provided below) until the limitation in subsection (a) is satisfied. The highest Deferral Percentage will be reduced first until the limitation in subsection (a) is satisfied or the percentage equals the next highest percentage, and the process will be repeated until such limitation is satisfied. In order to reduce a Participant's Deferral Percentage, the Participant's excess Deferral Contributions will be distributed to him. If Matching Contributions are taken into account in determining Deferral Percentages, a Participant's Deferral Percentage will be reduced by distributing first Deferral Contributions in excess of 5% of Compensation and by distributing next the remaining Deferral Contributions and Matching Contributions, in proportion to the amount of such contributions -45- 49 for the Plan Year. All distributions under this subsection will be increased by Trust Fund earnings and decreased by Trust Fund losses for the Plan Year and for the period between the end of the Plan Year and the date of distribution and will be made within two and one-half months following the close of the Plan Year, if practicable, but in no event later than the last day of the immediately following Plan Year. The amount of excess Deferral Contributions distributed pursuant to this Section with respect to a Participant for the Plan Year will be reduced by any Deferral Contributions previously distributed to the Participant for the same Plan Year pursuant to Section 3.1(c). The excess Deferral Contributions of Participants who are subject to the family aggregation rules of Section 10.8(d) will be allocated among the family members in proportion to the Deferral Contributions (and amounts treated as Deferral Contributions) of the family members. (d) Determination of Earnings and Losses. The earnings and losses of the Trust Fund for the Plan Year allocable to the portion of a Participant's Deferral Contributions that are distributed pursuant to subsection (c) above will be determined by multiplying the Trust Fund earnings or losses for the Plan Year allocable to the Participant's Deferral Contribution Account by a fraction, the numerator of which is the amount of Deferral Contributions to be distributed to the Participant and the denominator of which is the balance of the Participant's Deferral Contribution Account on the last day of the Plan Year, reduced by the earnings and increased by the losses allocable to such Account for the Plan Year. The earnings and losses of the Trust Fund allocable to the Participant's Deferral Contributions that are distributed pursuant to subsection (c) for the period between the end of the Plan Year and the date of such distribution will be determined in accordance with regulations prescribed by the Secretary of the Treasury interpreting Code section 401(k). The earnings and losses of the Trust Fund allocable to the portion of a Participant's Matching Contributions that are distributed pursuant to subsection (c) above will be determined in the manner described in Section 10.7(c). 10.7 Limitation on Matching Contributions. (a) Average Contribution Percentage Test. Notwithstanding any other provision of the Plan, the Average Contribution Percentage for a Plan Year for Participants who are Highly Compensated Employees will not exceed the greater of: (i) the Average Contribution Percentage for Participants who are Nonhighly Compensated Employees multiplied by 1.25; or (ii) the -46- 50 lesser of (A) the Average Contribution Percentage Test for Participants who are Nonhighly Compensated Employees plus two percentage points or (B) the Average Contribution Percentage for Participants who are Nonhighly Compensated Employees multiplied by 2.0. The multiple use of the alternative test contained in clause (ii) of this subsection will be restricted as provided in regulations prescribed by the Secretary of the Treasury. (b) Reduction of Excess Matching Contributions. If, for any Plan Year, the Average Contribution Percentage for Participants who are Highly Compensated Employees exceeds the limitation described in subsection (a) above, the Contribution Percentage for each such Participant will be reduced (in the order of Contribution Percentages, beginning with the highest of such percentages as provided below) until the limitation in subsection (a) is satisfied. The highest Contribution Percentage will be reduced first until the limitation in subsection (a) is satisfied or the percentage equals the next highest percentage, and the process will be repeated if necessary until such limitation is satisfied. In order to reduce a Participant's Contribution Percentage, the Participant's excess Matching Contributions (increased by Trust Fund earnings and decreased by Trust Fund losses for the Plan Year and for the period between the end of the Plan Year and the date of distribution) will be distributed to the Participant within two and one-half months following the close of the Plan Year, if practicable, but in no event later than the last day of the immediately following Plan Year. The excess Matching Contributions of Participants who are subject to the family aggregation rules of Section 10.8(d) will be allocated among the family members in proportion to the Matching Contributions made on behalf of the family members. (c) Determination of Earnings and Losses. The earnings and losses of the Trust Fund for the Plan Year allocable to the portion of a Participant's Matching Contributions that are distributed pursuant to Section 10.6 or subsection (b) above will be determined by multiplying the Trust Fund earnings or losses for the Plan Year allocable to the Participant's Matching Contribution Account by a fraction, the numerator of which is the amount of Matching Contributions to be distributed and the denominator of which is the balance of the Participant's Matching Contribution Account on the last day of the Plan Year, reduced by the earnings and increased by the losses allocable to such Account for the Plan Year. The earnings and losses of the Trust Fund allocable to a Participant's Matching Contributions that are distributed pursuant to Section 10.6 or subsection (b) above for the period between the end of the Plan Year and the date of such -47- 51 distribution will be determined in accordance with regulations prescribed by the Secretary of the Treasury interpreting Code sections 401(k) and 401(m). 10.8 Aggregation Rules. (a) Code Section 415. For purposes of the allocation limitations under Code section 415 set forth in this Article, (i) 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, and (ii) Controlled Group Members will be determined in accordance with the 50% control rule of Code section 415(h). (b) Code Section 401(k). For purposes of the limitation on Deferral Contributions set forth in this Article, the Average Deferral Percentage for any Participant who is a Highly Compensated Employee for the Plan Year and who is eligible to have deferral contributions allocated to his account under two or more plans or arrangements described in Code section 401(k) that are maintained by the Company or any Controlled Group Member will be determined as if all such deferral contributions were made under a single arrangement (unless such plans or arrangements may not be permissively aggregated under applicable regulations). Plans that are aggregated for purposes of satisfying the minimum coverage rules of Code section 410(b) (other than for purposes of the average benefits percentage test) will be treated as a single plan for such purposes. (c) Code Section 401(m). The Contribution Percentage of a Participant who is a Highly Compensated Employee for a Plan Year and who is eligible to make voluntary Employee contributions or receive deferral contributions or matching employer contributions allocated to his account under two or more Defined Contribution Plans maintained by the Company or a Controlled Group Member will be determined as if all such contributions were made to a single plan (unless such plans may not be permissively aggregated under applicable regulations). Plans that are aggregated for purposes of satisfying the minimum coverage rules of Code section 410(b) (other than for purposes of the average benefits percentage test) will be treated as a single plan for such purposes. (d) Family Members. For purposes of determining the Contribution Percentage or the Deferral Percentage of a -48- 52 Participant who is both a Highly Compensated Employee and either (i) a 5-percent owner, determined in accordance with Code section 414(q) and the Treasury Regulations promulgated thereunder or (ii) one of the 10 most highly compensated Employees ranked on the basis of Compensation paid by the Controlled Group during the year, determined in accordance with Code section 414(q) and the Treasury Regulations promulgated thereunder, the Matching Contributions, Deferral Contributions, and Compensation of such Participant will include the Matching Contributions, Deferral Contributions and Compensation of Family Members, and Family Members will be disregarded in determining the Contribution Percentage or the Deferral Percentage of Participants who are not such Highly Compensated Employees. -49- 53 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 6 or Article 7. 11.2 General Restrictions. (a) Distributions Prior to a Separation from Service. Except for distributions permitted under Article 6 with respect to Participants who attain age 59-1/2 or suffer a hardship, a Participant's interest in the Plan will not be distributed before the Participant's separation from service, disability or death unless: (i) the Plan is terminated without the establishment or maintenance by the Participating Employers of another defined contribution plan (other than an employee stock ownership plan as defined in Code section 4975(e)(7)); (ii) a Participating Employer that is a corporation sells all or substantially all of the assets used by the Participating Employer in a trade or business to a person other than a Controlled Group Member and the Participant becomes an employee of the acquiring employer; or (iii) a Participating Employer that is a corporation disposes of its interest in a subsidiary to a person other than an Controlled Group Member but only if the Participant continues employment with the subsidiary. An event will not be treated as described in clause (ii) or (iii) above unless the Participating Employer continues to maintain the Plan after the disposition. (b) Lump Sum Distribution Required. An event described in subparagraph (a) that would otherwise permit distribution of a Participant's interest in the Plan will not be treated as described in subparagraph (a) unless the Participant receives a lump sum distribution by reason of the event. A lump sum distribution for this purpose will be a distribution described in Code section 402(d)(4), without regard to clauses (i), (ii), (iii), and (iv) of subparagraph (A), subparagraph (B), or subparagraph (F) thereof. 11.3 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 -50- 54 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 62, (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. 11.4 Restrictions on Delay of Distributions. The following provisions will apply to limit a Participant's ability to delay the distribution of benefits. (a) General Rule. Distribution of a Participant's entire vested and nonforfeitable interest will be made or commence not later than April 1 following the calendar year in which he attains age 70-1/2. On or before December 31 of such calendar year and of each succeeding calendar year, distribution of the entire amount of any additional balances in the Participant's Accounts (determined as of the preceding Valuation Date) will be made in a lump sum. (b) Rule for Certain Participants Who Attained Age 70-1/2 Before 1988. Notwithstanding subsection (a), if a Participant attained age 70-1/2 before January 1, 1988 and was not a 5-percent owner (as such term is defined in Code Section 416(i)) at any time during the five-plan-year period ending in the calendar year in which he attained age 70-1/2, then distribution of his entire vested and nonforfeitable interest will be made or commence not later than April 1 following the earlier of (i) the calendar year in which his employment with the Controlled Group terminates or (ii) the calendar year in which he becomes a 5-percent owner. (c) Rule for Participants Who Attained Age 70-1/2 in 1988. If a Participant attained age 70-1/2 during 1988 and had not terminated employment with the Controlled Group as of January 1, 1989, distribution of his entire vested and nonforfeitable interest will be made or commence not later than April 1, 1990. 11.5 Limitation to Assure Benefits Payable to Beneficiaries are Incidental. In the event that any payments under the Plan are to be made to someone other than the Participant or jointly to the Participant and his spouse or other payee, such payments must conform to the "incidental benefit" rules of Code section 401(a)(9)(G) and Treasury Regulation section 1.401(a)(9)-2. -51- 55 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. 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). 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). -52- 56 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(f). (b) "Defined Benefit Plan" means the Qualified Plan described in Section 10.2(h). (c) "Defined Contribution Dollar Limitation" means the limitation described in Section 10.2(i). (d) "Defined Contribution Plan" means the Qualified Plan described in Section 10.2(k). (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(n). (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 -53- 57 interests in a Controlled Group Member, if such individual's Includable Compensation exceeds the Defined Contribution Dollar 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). For purposes of this subsection, Includable Compensation will include the amount of any salary reduction contributions pursuant to a cash or deferred arrangement meeting the requirements of Code section 401(k) or a cafeteria plan meeting the requirements of Code section 125. (i) "Minimum Allocation" means the allocation described in the first sentence of Section 12.3(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%. -54- 58 (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 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 Minimum Allocation. -55- 59 (a) Calculation of Minimum Allocation. For any Plan Year in which the Plan is a Top-Heavy Plan, each Participant who is not a Key Employee will receive an allocation of Participating Employer contributions and forfeitures of not less than the lesser of 3% of his Includable Compensation for such Plan Year or the percentage of Includable Compensation that equals the largest percentage of Participating Employer contributions (including Deferral Contributions) and forfeitures allocated to a Key Employee. The Minimum Allocation is determined without regard to any Social Security contribution. Deferral Contributions made on behalf of Participants who are not Key Employees will not be treated as Participating Employer contributions for purposes of the Minimum Allocation. Matching Contributions that are allocated to Participants who are not Key Employees and that are taken into account in determining a Participant's Deferral Percentage or Contribution Percentage will not be treated as Participating Employer contributions for such Plan Year for purposes of the Minimum Allocation. The Minimum Allocation applies even though under other Plan provisions the Participant would not otherwise be entitled to receive an allocation, or would have received a lesser allocation for the Plan Year because (i) the non-Key Employee fails to make mandatory contributions to the Plan, (ii) the non-Key Employee's Includable Compensation is less than a stated amount, or (iii) the non-Key Employee fails to complete 1,000 Hours of Service in the Plan Year. (b) Limitation on Minimum Allocation. No Minimum Allocation will be provided pursuant to subsection (a) to a Participant who is not employed by a Controlled Group Member on the last day of the Plan Year. (c) Minimum Allocation When Participant is Covered by Another Qualified Plan. If a Controlled Group Member maintains one or more other Defined Contribution Plans covering Employees who are Participants in this Plan, the Minimum Allocation will be provided under this Plan, unless such other Defined Contribution Plans make explicit reference to this Plan and provide that the Minimum Allocation will not be provided under this Plan, in which case the provisions of subsection (a) will not apply to any Participant covered under such other Defined Contribution Plans. If a Controlled Group Member maintains one or more Defined Benefit Plans covering Employees who are Participants in this Plan, and such Defined Benefit Plans provide that Employees who are participants therein will accrue the minimum benefit applicable to top-heavy Defined Benefit Plans notwithstanding their participation in this Plan, then the -56- 60 provisions of subsection (a) will not apply to any Participant covered under such Defined Benefit Plans. If a Controlled Group Member maintains one or more Defined Benefit Plans covering Employees who are Participants in this Plan, and the provisions of the preceding sentence do not apply, then each Participant who is not a Key Employee and who is covered by such Defined Benefit Plans will receive a Minimum Allocation determined by applying the provisions of subsection (a) with the substitution of "5%" in each place that "3%" occurs therein. (d) Nonforfeitability. The Participant's Minimum Allocation, to the extent required to be nonforfeitable under Code section 416(b) and the special vesting schedule provided in this Article, may not be forfeited under Code section 411(a)(3)(B) (relating to suspension of benefits on reemployment) or 411(a)(3)(D) (relating to withdrawal of mandatory contributions). 12.4 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 10.2(g) and (j). (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 one of the following conditions is met: (i) Employees who are not Key Employees do not participate in both a Defined Benefit Plan and a Defined Contribution Plan which are in the Required Aggregation Group, and the Minimum Allocation requirements of Section 12.3(a) are met when such requirements are applied with the substitution of "4%" for "3%"; (ii) the Minimum Allocation requirements of Section 12.3(c) are met when such requirements are applied with the substitution of "7 1/2%" for "5%"; or (iii) Employees who are not Key Employees have an accrued benefit of not less than 3% of their average Includable Compensation for the five consecutive Plan Years in which they had the highest Includable Compensation multiplied by their Years of Service in which the Plan is a Top-Heavy Plan (not to exceed a total such benefit of 30%), expressed as a life annuity commencing at the Participant's normal retirement age in a Defined Benefit Plan which is in the Required Aggregation Group. 12.5 Minimum Vesting. -57- 61 (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 5. The minimum vesting schedule applies to all Account balances including amounts attributable to Plan Years before the effective date of Code section 416 and amounts attributable to Plan Years before the Plan became a Top-Heavy Plan. Further, no reduction in vested Account balances 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 5 will be treated as an amendment subject to Section 14.1(iii). However, this subsection does not apply to the Account balances 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 Account balances will be determined without regard to this Section. (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
-58- 62 ARTICLE 13 ADOPTION OF 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 and the vested and nonforfeitable interest of such Employees in their Account balances provided that such credit will be applied in a uniform and nondiscriminatory manner with respect to all such Employees. -59- 63 ARTICLE 14 AMENDMENT OF THE PLAN 14.1 Right to Amend the Plan. (a) In General. The Company reserves to the Compensation Committee of the Board of Directors the right to amend the Plan at any time and from time to time to the extent it may deem advisable or appropriate, provided 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 will have the effect of reducing the percentage of the vested and nonforfeitable interest of any Participant in his Account nor will the vesting provisions of the Plan be amended unless each Participant with at least three Years of Service (including Years of Service disregarded pursuant to the reemployment provisions (if any) of Article 5) 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; and (iv) no amendment will be effective to the extent that it has the effect of decreasing a Participant's Account balance or eliminating an optional form of distribution as it applies to an existing Account balance. (b) Authority of the Board. The Company also reserves to the Board of Directors the right to amend the Plan at any time and from time to time to the extent it may deem advisable or appropriate, subject to the limitations on amendments set forth in subsection (a). 14.2 Amendment Procedure. Any amendment to the Plan will be made only pursuant to action of the Board or of the Compensation Committee of the Board. A certified copy of the resolutions adopting any amendment and a copy of the executed amendment will be delivered to the Trustee, the Committee and the Company. Upon such action by the Board or the Compensation Committee of the Board, the Plan will be deemed amended as of the date specified as the effective date by such action or in the instrument of amendment. The effective date of any amendment may be before, on or after the date of such action, except as otherwise set forth in Section 14.1. -60- 64 14.3 Effect on Participating Employers. Unless an amendment expressly provides otherwise, all Participating Employers will be bound by any amendment to the Plan. -61- 65 ARTICLE 15 TERMINATION, PARTIAL TERMINATION AND COMPLETE DISCONTINUANCE OF CONTRIBUTIONS 15.1 Continuance of Plan. The Participating Employers expect to continue the 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 or to completely discontinue contributions thereto at any time. In addition, subject to 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, or if there is a complete discontinuance of contributions to the Plan by the Participating Employers, the amounts allocated or to be allocated to the Accounts of all affected Participants will become 100% vested and nonforfeitable without regard to their Years of 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 or there is a complete discontinuance of Participating Employer contributions will not be an affected Participant entitled to full vesting if the Participant had no vested interest in his Account balance attributable to Participating Employer contributions at his termination of employment. In the event of a partial termination of the Plan, the amounts allocable to the Accounts 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 without regard to their Years of Service. 15.3 Disposition of the Trust Fund. If the Plan is terminated, or if there is a complete discontinuance of contributions to the Plan, the Committee will instruct the Trustee either (i) to continue to administer the Plan and pay benefits in accordance with the Plan until the Trust Fund has been depleted, or (ii) to distribute the assets remaining in the Trust Fund, unless distribution is prohibited by Section 11.2. If the Trust Fund is to be distributed, the Committee will make, after deducting estimated expenses for termination of the Trust Fund and distribution of its assets, the allocations required under the Plan as though the date of completion of the Trust Fund termination were a Valuation Date. The Trustee will distribute -62- 66 to each Participant the amount credited to his Account as of the date of completion of the Trust Fund termination. 15.4 Withdrawal by A Participating Employer. A Participating Employer may withdraw from participation in the Plan or completely discontinue contributions to the Plan only with the approval of the Board. If any Participating Employer withdraws from the Plan or completely discontinues contributions to the Plan, a copy of the 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. -63- 67 ARTICLE 16 MISCELLANEOUS 16.1 Reversion Prohibited. (a) General Rule. Except as provided in subsections (b), (c) and (d), 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 within one year after such determination and the Plan and Trust Agreement will terminate, but only if the application for determination was made within the time prescribed by law for filing the Company's income tax return for the taxable year in which the Plan and the Trust -64- 68 Agreement were adopted, or such later date as the Secretary of the Treasury may prescribe. 16.2 Bonding, Insurance and Indemnity. (a) Bonding. To the extent required under ERISA, the Participating Employers will obtain, pay for and 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 -65- 69 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, 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). Payment to an alternate payee pursuant to a qualified domestic relations order will be made in an immediate lump sum payment, if the order so provides. 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, INCLUDING WITHOUT LIMITATION, THE TEXAS STATUTE OF LIMITATIONS, BUT WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAWS OF SUCH STATE. Executed at Dallas, Texas, this ___ day of December, 1994. A. H. BELO CORPORATION By ------------------------------------- -66- 70 APPENDIX A PARTICIPATING EMPLOYERS DFW Suburban Newspapers, Inc. -67- EX-10.3(18) 14 1ST AMEND. TO AH BELO CORP. EMPLOYEE THRIFT PLAN 1 Exhibit 10.3(18) FIRST AMENDMENT TO A. H. BELO CORPORATION EMPLOYEE THRIFT PLAN A. H. Belo Corporation, a Delaware corporation, adopts the following amendments to the A. H. Below Employee Thrift Plan (the "Plan"). 1. Section 3.2 of the Plan is amended in its entirety to read as follows: 3.2 Participating Employer Matching Contributions. (a) Amount of Matching Contributions. Each Participating Employer will pay to the Plan as a matching contribution for each payroll period the amount, if any, designated for that Participating Employer on Appendix B to the Plan. In addition, each Participating Employer may make an additional matching contribution for any Plan Year if authorized by its board of directors, but no Participating Employer will be required to make an additional matching contribution for any Plan Year. Participating Employer matching contributions may be made in cash or in shares of Company Stock or both. (b) Calculation of Matching Contributions. Participating Employer matching contributions will be calculated solely on the basis of Deferral Contributions and Compensation for each payroll period within the Plan Year. (c) Limitation on Matching Contributions. Participating Employer matching contributions will be subject to the limitations set forth in Section 10.7, unless such contributions are taken into account in determining Participant deferral percentages under Section 10.6, in which case matching contributions will be subject to the limitations set forth in Section 10.6. 2. Section 3.3 is amended in its entirety to read as follows: 2 3.3 Time of Payment. Deferral Contributions and Participating Employer matching contributions made with respect to payroll periods will be paid to the Trustee as soon as practicable following the close of each calendar month during the Plan Year. Additional matching contributions may be paid to the Trustee on any date or dates selected by the Participating Employer, but in no event later than the time prescribed by law (including extensions) for filing the Participating Employer's federal income tax return for its tax year ending with or within the Plan Year. 3. Section 4.2 is amended to read in its entirety as follows: 4.2 Allocation of Contributions and Forfeitures. Each Deferral Contribution made by a Participating Employer on behalf of a Participant will be allocated by the Committee to the Participant's Deferral Contribution Account. Each Participating Employer matching contribution made with respect to a payroll period and all forfeitures will be allocated by the Committee to the Matching Contribution Accounts of Participants employed by that Participating Employer in the ratio that the Deferral Contributions made on behalf of each such Participant bear to the total Deferral Contributions made on behalf of all such Participants for each such payroll period, taking into account for purposes of this ratio only Deferral Contributions that do not exceed the percent of each Participant's Compensation for the payroll period that is set forth on Appendix B. 4. The fourth sentence of Section 10.6(c) of the Plan ("Limitation on Deferral contributions") is amended in its entirety to read as follows: If Matching Contributions are taken into account in determining Deferral Percentages, a Participant's Deferral Percentage will be reduced by distributing first Deferral 2 3 Contributions in excess of the percent of Compensation for which Matching Contributions are made (as set forth on Appendix B) and by distributing next the remaining Deferral Contributions and Matching Contributions, in proportion to the amount of such contributions for the Plan Year. 5. The Plan is amended by the addition of a new appendix, which will read as follows: APPENDIX B RATE OF MATCHING CONTRIBUTIONS 1. Matching Contributions for Participants Employed by DFW Suburban Newspapers, Inc. Effective with the first payroll period beginning after June 3, 1995, DFW Suburban Newspapers, Inc. will pay to the Plan as a matching contribution for each payroll period an amount equal to 50% of each Participant's Deferral Contributions, but only to the extent that the Participant's Deferral Contributions do not exceed 5% of the Participant's Compensation for the payroll period. 6. The foregoing amendments will be effective on and after June 4, 1995. Executed at Dallas, Texas, this 17 day of July, 1995. A. H. BELO CORPORATION By /s/ MICHAEL D. PERRY ------------------------------------- 3 EX-10.3(19) 15 2ND AMEND. TO AH BELO CORP. EMPLOYEE THRIFT PLAN 1 Exhibit 10.3(19) SECOND AMENDMENT TO A. H. BELO CORPORATION EMPLOYEE THRIFT PLAN A. H. Belo Corporation, a Delaware corporation, hereby adopts the following amendments to the A. H. Belo Employee Thrift Plan (the "Plan"). 1. Section 1.7 of the Plan is amended in its entirety to read as follows: 1.7 "Company Stock" means the Series A Common Stock, par value $1.67 per share, and the Series B Common Stock, par value $1.67 per share, of the Company. 2. Section 1.20 of the Plan is hereby amended by replacing each reference to "Section 1.30" with a reference to "Section 1.31". 3. A new Section 1.26 is hereby added, and subsequent Sections renumbered accordingly, in its entirety to read as follows: 1.26 "Transfer Account" means the Account established for each Participant, the balance of which is attributable to the Participant's rollover and transfer contributions made pursuant to Section 3.5 and earnings and losses of the Trust Fund with respect to such contributions. 4. Section 3.1(a) is hereby amended by the addition of the following sentence at the end of the Section: For any payroll period beginning on or after January 1, 1996, a Participant may elect to have Deferral Contributions made to the Plan in any amount that does not exceed 15% of his Compensation for the payroll period. 2 5. Section 3.1(b) is hereby amended by the addition of the following sentence before the last sentence of the Section: For Plan Years beginning on or after January 1, 1996, if a Participant receives a distribution on account of hardship pursuant to Section 6.3, such Participant's Deferral Contributions will automatically be suspended for a 12-month period following the date on which such Participant receives the hardship distribution. 6. Section 5.1 is hereby amended in its entirety to read as follows: 5.1 Determination of Vested Interest. Except as provided in Section 5.2 or 10.6(e) (with respect to discriminatory Matching Contributions), the interest of each Participant in his Deferral Contribution Account and his Matching Contribution Account will be 100% vested and nonforfeitable at all times. 7. Section 5.3 is hereby amended in its entirety to read as follows: 5.3 Application of Forfeited Amounts. The amount of a Participant's Accounts which is forfeited pursuant to Sections 5.2 or 10.6(e) will be applied to reduce Participating Employer contributions pursuant to Article 3. 8. Section 6.3(a) is hereby amended by the addition of the following sentence at the end of the Section: For Plan Years beginning on or after January 1, 1996, pursuant to Section 3.1(b), a Participant's Deferral Contributions will automatically be suspended for a 12-month period after the date on which such Participant receives a distribution on account of hardship. 2 3 9. Section 6.5(c) is hereby amended by deleting Subsections (vii) and (viii) and replacing them with the following: (vii) for Plan Years beginning before January 1, 1996, no more than one outstanding loan will be permitted with respect to a Participant at any time, except that a Participant may have a home loan and a loan which is not a home loan outstanding at the same time; (viii) for Plan Years beginning on or after January 1, 1996, no more than two outstanding loans will be permitted with respect to a Participant at any time; (ix) for Plan Years beginning on or after January 1, 1996, no new home loans will be permitted; and (x) all loans will be evidenced by a note containing such additional terms and conditions as the Committee will determine. Notwithstanding anything in the foregoing to the contrary, no amount of any indebtedness will be deducted pursuant to subsection (vi) above from a Participant's Deferral Contribution Account prior to the time that such Account is otherwise distributable. 10. Section 10.6(c) is hereby amended by the deletion of the fourth sentence thereof in its entirety and by the deletion of the parenthetical "(and amounts treated as Deferral Contributions)" in the last sentence of the Section. 11. Section 10.6(d) is hereby amended by the deletion of the last sentence thereof in its entirety. 12. Section 10.6 is hereby amended by the addition of a new Subsection (e) at the end of the Section: (e) Discriminatory Matching Contributions. If the allocation of Matching Contributions to a Participant's Matching Contribution Account results in a discriminatory matching contribution (as determined under Code sections 401(a)(4) or 401(m) and the regulations thereunder) for such Participant because the Matching Contribution relates to a Deferral 3 4 Contribution that exceeds the limitations described in Section 3.1 or this Section 10.6, or because of any other reason, and such discriminatory matching contribution cannot be distributed as an excess Matching Contribution pursuant to Section 10.7, such discriminatory matching contribution, or the portion thereof that results in prohibited discrimination, will be forfeited notwithstanding any other provision of the Plan to the contrary. 13. Section 10.7(c) is hereby amended in its entirety to read as follows: (c) Determination of Earnings and Losses. The earnings and losses of the Trust Fund for the Plan Year allocable to the portion of a Participant's Matching Contributions that are forfeited pursuant to Section 10.6(e) or distributed pursuant to subsection (b) above will be determined by multiplying the Trust Fund earnings or losses for the Plan Year by a fraction, the numerator of which is the amount of Matching Contributions to be distributed or forfeited and the denominator of which is the balance of the Participant's Matching Contribution Account on the last day of the Plan Year, reduced by the earnings and increased by the losses allocable to such Account for the Plan Year. The earnings and losses of the Trust Fund allocable to a Participant's Matching Contributions that are forfeited pursuant to Section 10.6(e) or distributed pursuant to subsection (b) above for the period between the end of the Plan Year and the date of such distribution or forfeiture will be determined in accordance with regulations prescribed by the Secretary of the Treasury interpreting Code sections 401(k) and 401(m). 14. The foregoing amendments will be effective on and after January 1, 1995. Executed at Dallas, Texas, this 2 day of February, 1996. A. H. BELO CORPORATION By /s/ MICHAEL J. McCARTHY ------------------------------------- 4 EX-10.3(20) 16 MASTER DEFINED CONTRIBUTION TRUST AGREEMENT 1 EXHIBIT 10.3 (20) MASTER DEFINED CONTRIBUTION TRUST AGREEMENT by and between A.H. BELO CORPORATION and MELLON BANK, N.A. 2 MASTER DEFINED CONTRIBUTION TRUST AGREEMENT THIS MASTER TRUST AGREEMENT made and entered into on this 22nd day of December, 1992, effective as of January 1st, 1993, by and 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 desires to establish a master trust which will serve as a funding medium to eligible employee benefit plans at the Corporation and its subsidiaries and affiliates; and WHEREAS, the Master Trustee is willing to act as trustee of such trust upon all of the terms and conditions hereinafter set forth; and WHEREAS, the Corporation and the Master Trustee wish to amend those trust agreements referred to in Exhibit A hereto (the "Prior Agreements") so that this Agreement shall be deemed to supersede all such Prior Agreements and so that all the separate trusts established by the Prior Agreements shall be deemed consolidated into the master trust established hereby; 3 NOW, THEREFORE, the Corporation and the Master Trustee declare and agree that the Master Trust will receive, hold and administer all sums of money and such other property acceptable to Master Trustee as shall from time to time be contributed, paid or delivered to it hereunder, IN TRUST, upon all of the following terms and conditions. SECTION 1 General 1.1 Definitions. Where used in this Agreement, unless the context otherwise requires or unless otherwise expressly provided: (a) "Account Party" shall mean an officer of the Corporation designated to represent the Company for this purpose, the Named Fiduciary and any Person to whom the Master Trustee shall be instructed by the Named Fiduciary to deliver its annual account under Section 12.2. (b) "Accounting Period" shall mean either the twelve consecutive month period coincident with the calendar year or, if different, the fiscal year of the Participating Plans or the shorter period in any year in which the Master Trustee accepts appointment as Master Trustee hereunder or ceases to act as Master Trustee for any reason. (c) "Administrative Committee" shall mean the committee or committees, individually or collectively, responsible for benefit administration under the Plans. (d) "Agreement" shall mean all of the provisions of this instrument and of all other instruments amendatory hereof. (e) "Asset Manager" shall mean the Master Trustee, Named Fiduciary or Investment Manager, individually or collectively as the context shall require, with respect to those assets held in an Investment Account over which it exercises, or to the extent it is authorized to exercise, discretionary investment authority or control. (f) "Bank business day" shall mean a day on which the Master Trustee is open for business. (g) "Board of Directors" shall mean the Board of Directors of the Corporation. -2- 4 (h) "Code" shall mean the internal Revenue Code of 1986, as amended from time to time, and Regulations issued thereunder. (i) "Directed Fund" shall mean any Investment Account, or part thereof, subject to the discretionary management and control of the Named Fiduciary or any Investment Manager. (j) "Discretionary Fund" shall mean any Investment Account, or part thereof, subject to the discretionary management and control of the Master Trustee. (k) "ERISA shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and Regulations issued thereunder. (l) "Fund" shall mean all cash and property contributed, paid or delivered to the Master Trustee hereunder, all investments made therewith and proceeds thereof and all earnings and profits thereon, less payments, transfers or other distributions which, at the time of reference, shall have been made by the Master Trustee, as authorized herein. The Fund shall include all evidences of ownership, interest or participation in an Investment Vehicle, but shall not, solely by reason of the Fund's investment therein, be deemed to include any assets of such Investment Vehicle. (m) "Insurance Contract" shall mean any contract or policy of any kind issued by an insurance company, whether or not providing for the allocation of amounts received by the insurance company thereunder solely to the general account or solely to one or more separate accounts (including separate accounts maintained for the collective investment of qualified retirement plans), or a combination thereof, and whether or not any such allocation may be made in the discretion of the insurance company or the Named Fiduciary. (n) "Investment Account" shall mean each pool of assets in the Master Trust in which one or more Plans has an interest during an Accounting period. (o) "Investment Manager" shall mean a bank, insurance company or investment adviser satisfying the requirements of Section 3(38) of ERISA which has provided the Master Trustee with written acknowledgment of compliance with ERISA. (p) "Investment Vehicle" shall mean any common, collective or commingled trust, investment company, corporation functioning as an investment intermediary, insurance contract, partnership, joint venture or other entity or arrangement to which, or pursuant to which, assets of the Master Trust may be transferred or in which the Master Trust has an interest, beneficial or otherwise (whether or not the underlying assets thereof are deemed to constitute "plan assets" for any purpose under ERISA). -3- 5 (q) "Master Trust" shall mean the trust created hereby. (r) "Named Fiduciary" shall mean the fiduciary with respect to the Plans within the meaning of Section 402(a)(2), 402(c)(3) or 403(a)(1) of ERISA who has the authority to perform the separate functions allocated to the "Named Fiduciary" under this Agreement. (s) "Plan" shall mean any employee benefit plan which meets the requirements for eligibility specified in Section 1.3 and as of the date of this Agreement includes those plans listed on Exhibit B. (t) "Person" shall mean a natural person, trust, estate, corporation of any kind or purpose, mutual company, joint-stock company, unincorporated organization, association, partnership, joint venture, employee organization, committee, board, participant, beneficiary, trustee, partner, or venturer acting in an individual, fiduciary or representative capacity, as the context may require. (u) "Qualifying Employer Security" shall mean the employer securities as defined in Section 407(d) of ERISA. (v) "Valuation Date" shall mean the last day of the Accounting Period, calendar quarter or any more frequent reporting date agreed to by the Master Trustee. The plural of any term shall have a meaning corresponding to the singular thereof as so defined and any neuter pronoun used herein shall include the masculine or feminine, as the context shall require. 1.2 Compliance With Law. The Trust hereinafter established is intended to comply with ERISA and to be tax exempt under Section 501(a) of the Code. 1.3 Eligibility. Any employee benefit plan established by the Corporation, or a subsidiary or an affiliate of the Corporation, may be funded, in whole or in part, through the Master Trust if (i) the plan is qualified under Section 401(a) of the Code, (ii) the Master Trust is exempt from taxation under Section 501(a) of the Code, and (iii) this Agreement has been duly adopted by the Board of Directors or by the board of directors of a subsidiary or affiliate of the Corporation and, in the case of such subsidiary or affiliate, the Board of Directors has consented thereto. -4- 6 SECTION 2 Establishment of Trust 2.1 Establishment of Trust. The Corporation hereby establishes with the Master Trustee the Master 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 Corporation 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 contributions 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 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. 2.5 Fund to be Held for Benefit of Plan Participants. Except as may be provided by law for the purpose of returning any of the Corporation's contributions or in case any Plan of which this Trust forms a part provides for the return of the Corporation's 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, retired participants, or their beneficiaries under the Plans and for the payment of the reasonable expenses of the Plans. 2.6 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 Corporation for the exclusive benefit of their employees. Where commingling is effected with other trusts maintained by the Corporation, 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 -5- 7 Corporation and to separate the assets attributable to each of the Plans for which contributions are made under this Agreement. The Corporation 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 Corporation 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 actuary. SECTION 3 Administration of the Plan 3.1 Administrator. The Plans shall be administered by the Administrative Committee which shall have the sole fiduciary duty as to plan administration and the Master Trustee shall not be responsible in any respect for such administration. 3.2 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 Administrative Committee 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 the Administrative Committee may from time to time in writing direct. In the discretion of the Administrative Committee, such payments may be made directly to the person specified by the Administrative Committee or deposited in a checking account maintained by the Administrative Committee 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 the Administrative Committee may designate to make payments. 4.2 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. -6- 8 SECTION 5 Allocation of Investment Responsibilities 5.1 Asset Managers. (a) The Named Fiduciary will from time to time, in its sole discretion, appoint one or more Asset Managers to manage specified portions of the Fund. Upon the appointment of each Asset 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 Asset Manager has discretion and control. The Asset Manager shall designate in writing the person or persons who are to represent any such Asset 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 directed funds, and, as to such directed funds, 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 Asset Manager in Section 6 or Section 7 without receipt of written directions of the Asset Manager. Unless specifically prohibited in writing, the Master Trustee, as custodian, may hold the assets of such directed funds in the name of a nominee or nominees. (b) Should an Asset 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 Asset Manager. Should the Asset 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. (c) In the event that an Asset Manager places security transactions directly or directs the utilization of a service, the Asset 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. 5.2 Transfer of Assets to Asset 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 Asset Manager so appointed, and (ii) accept the transfer back to it of any such assets at any time held by an Asset Manager, provided that the Named Fiduciary may only direct such transfers as are in conformity with the provisions of the -7- 9 Plans, this Agreement, and ERISA, 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 Asset Manager, such Asset 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 Asset 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 Asset 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 require such statements and reports from such Asset Manager as may be necessary to enable the Master Trustee and the Administrative Committees 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 Asset Manager in accordance with this Section 5.2. 5.3 The Master Trustee. Subject to investment policies, objectives and guidelines communicated to the Master Trustee by the Named Fiduciary as contemplated by this Section 5, the Master Trustee sha11 from time to time invest and reinvest the Discretionary Fund and keep it invested in accordance with such policies, objectives and guidelines. -8- 10 SECTION 6 Participant Accounts 6.1 Establishment of Accounts. The Administrative Committee shall direct the Master Trustee to establish on its books and records accounts sufficient to accommodate investment options, other than investments in Qualifying Employer Securities, available to the employees as specified by the Plan. The Administrative Committee shall establish an investment purpose for each account, either by separate written designation or through an agreement between the Administrative Committee and the Master Trustee that shall incorporate therein the investment purposes and, if applicable, the investment restrictions which the Plan provides as to investment options. The accounts so established shall, until changed by the Administrative Committee operate in the manner and form established. 6.2 Qualifying Employer Securities. As provided in the Plan, all amounts received by the Master Trustee which are directed by the Administrative Committee to be placed in an account which has as its investment purpose investment in Qualifying Employer Securities or any amount received by the Master Trustee as a result of holding such Qualifying Employer Securities shall be invested and reinvested in Qualifying Employer Securities. The investment purpose of the account so established shall be to invest one hundred (100%) in such Qualifying Employer Securities. However, the Master Trustee may, but shall not be required to, place amounts received by it for the purpose of investment in temporary investments, if in the opinion of the Master Trustee market conditions are such that investment in Qualifying Employer Securities would be disruptive or could not be accomplished. In the operation of this account, the Master Trustee shall have no investment discretion, except as hereinafter provided, and no duty or responsibility to determine the investment quality or prudence of such investment. The Corporation shall have the duty and responsibility to determine whether or not the investment in the Qualifying Employer Securities is prudent. The Master Trustee shall acquire or dispose of all Qualifying Employer Securities in the open market or through the method of purchase and sales which is used by the Master Trustee in the normal course of its security transactions. The Master Trustee shall be permitted to net all purchases and sales for an account limited in investment purposes to Qualifying Employer Securities, provided, however, both sales and purchases will be at market value and the books and records of the Master Trustee shall clearly reflect such fact. Should the Master Trustee for any reason be unable to acquire or dispose of the Qualifying Employer Securities in the manner provided by this Section, it -9- 11 shall notify the Named Fiduciary of such fact and shall thereafter make no purchases or sales of securities until instructions are received from the Named Fiduciary. 6.3 Allocation of Contributions. The Administrative Committee shall, upon the making of any contribution to this Trust by the Corporation, or, if applicable, a Participant, or both, instruct the Master Trustee in writing of the manner that such contribution is to be allocated between the account previously established. 6.4 Responsibility of Master Trustee. The Master Trustee shall not be responsible nor liable to establish or maintain a record or account in the name of any individual Participant. The Master Trustee shall not be required to establish the value of any Participant's individual interest in the Fund or any account established hereunder. Should the Master Trustee and the Administrative Committee or the Corporation agree that the Master Trustee shall maintain individual account records, such agreement shall be separate and apart from the terms of this Trust. Such an agreement shall not be construed as implying any duty upon the Master Trustee hereunder even though the Master Trustee, in its corporate capacity as record keeper for the accounts of individual instructions or directions as to the disposition or distribution of any assets held hereunder. 6.5 Accounts as Separate Trusts. For the purposes of application of this Agreement of Trust, each account created hereunder shall be considered a separate trust insofar as the application of powers granted the Master Trustee. Notwithstanding the provisions of this Agreement of Trust which established powers and duties with regard to the Trust as a whole, the Master Trustee shall exercise such of those powers as are consistent with the investment purposes of each account. Where applicable or required, the Master Trustee with the Corporation's consent may subdivide any account as may be required to fulfill either its duties hereunder or the instructions of the Administrative Committee. SECTION 7 Investment of the Fund 7.1 Standard of Care. The Master Trustee, each Asset 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 it would be clearly not prudent to diversify. -10- 12 7.2 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 asset managers under any statute or other laws of any state, district or territory. 7.3 Grant of Investment Powers. In addition to any power granted to trustees or asset managers under any statute or other laws, such laws and statutes if necessary being incorporated herein by reference, the Master Trustee's, and each Asset Manager's investment powers may, unless restricted in writing by the Named Fiduciary, includes, but shall not be limited to, investment in the following: (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) the purchase or sale, writing or issuing, of puts, calls or other options, covered or uncovered, entering into financial futures contracts, forward placement contracts and standby contracts, and in connection therewith, depositing, holding (or directing the Master Trustee, in its individual capacity, to deposit or bold) or pledging assets of the Fund; (c) corporate bonds and debentures and any such securities which are convertible into common stock, domestic or foreign; (d) 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; (e) obligations of the states and of municipalities or of any agencies thereof; (f) notes of any nature, of foreign or domestic issuers; (g) 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 -11- 13 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 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. (h) 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; (i) leaseholds of any duration; (j) mineral and other natural resources, including, but not limited to, oil, gas, timber and coal, and any participation therein in any form, including but limited to, royalties, ownership, drilling and exploration; (k) 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; (l) any collective, common or pooled trust fund operated or maintained exclusively for commingling and collective investment of monies or other assets including any such fund operated or maintained by the Master Trustee. Notwithstanding -12- 14 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; (m) 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; (n) 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 the Administrative Committee or the Named Fiduciary, as appropriate, to purchase or retain such policies and contracts. 7.4 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 the Administrative Committee 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. The Master Trustee shall not be liable for interest on any reasonable cash balances so maintained. -13- 15 SECTION 8 Powers of the Master Trustee, Asset Managers and the Named Fiduciary 8.1 Qualifying Employer Securities Accounts. The Plans provide generally with respect to accounts established to invest in Qualifying Employer Securities that the right to vote, the right to tender in the event of a tender offer, or the exercise of certain other rights concerning such Securities are vested in the Named Fiduciary. The Master Trustee shall act only in accordance with the procedures set forth in the Plans by which the Named Fiduciary exercise such rights. Prior to the time any such action is to be taken under any Plan, the Administrative Committee will advise the Master Trustee of the impending action and agree with the Master Trustee on the manner of implementing that specific action. 8.2 General Powers. As to all assets other than Qualifying Employer Securities, the Master Trustee shall have and exercise the following powers and authority in the administration of the Fund only on the direction of an Asset Manager and the Named Fiduciary where such powers and authority relate to a Directed Fund and in its sole discretion where such powers and authority relate to investments made by the Master Trustee in accordance with Section 5.3: (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; (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; -14- 16 (e) to join in, dissent from or oppose the reorganization, recapitalization, consolidation, sale or merger of corporations or properties of which the Fund may bold 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 conditions as the Master Trustee or Asset Manager 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 -15- 17 and its operation, or believed the Master Trustee or Asset Manager to be in the best interests of the Fund, except the Master Trustee or Asset Manager may not obtain any insurance whose premium obligation extended to the Fund which would protect the Master Trustee or Asset Manager against its liability for breach of fiduciary duty; (j) to enter into any type of 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(22) 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; (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; (m) to lend the assets of the Fund to participants of the Plan. The Corporation shall have full and exclusive -16- 18 responsibility for loans made to participants, including, without limitation, full and exclusive responsibility for the following: development of procedures and documentation for such loans; acceptance of loan applications; approval of loan applications; disclosure of interest rate information required by Regulation Z of the Federal Reserve Board promulgated pursuant to the Truth in Lending Act, 15 U.S.C. Section 1601 et seq.; acting as agent for the physical custody and safekeeping of the promissory notes and other loan documents; performing necessary and appropriate recordkeeping and accounting functions with respect to loan transactions; enforcement of promissory note terms, including, but not limited to, directing the Master Trustee to take specified actions; and maintenance of accounts and records regarding interest and principal payments on notes. The Master Trustee shall not in any way be responsible for holding or reviewing such documents, records and procedures and shall be entitled to rely upon such information as is provided by the Corporation or its own sub-agent or recordkeeper without any requirement or responsibility to inquire as to the completeness or accuracy thereof, but may from time to time examine such documents, records and procedures, as it deems appropriate. The Corporation shall indemnify and hold the Master Trustee harmless from all damages, costs or expenses, including reasonable attorneys fees, arising out of any action or inaction of the Corporation with respect to its agency responsibilities described herein with respect to participant loans. 8.3 Specific Powers of 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 the Corporation, 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 -17- 19 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 Fund, unless paid by the Corporation in accordance with Section 11; 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 the Administrative Committee 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 the Administrative Committee or the Named Fiduciary in writing; and (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. 8.4 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 -18- 20 ruling or regulations promugulated under the Act by the Secretary of Labor. 8.5 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 9 Discretionary Powers 9.1 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 necessary or proper for the protection of the property held hereunder. SECTION 10 Prohibited Transactions 10.1 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 ERISA or Section 4975 of the Code. 10.2 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; and -19- 21 (c) the compensation received by the Master Trustee for such services is reasonable and established in an arm's length manner. SECTION 11 Expenses, Compensation and Taxes 11.1 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. 11.2 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 to the Corporation. 11.3 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 12 Accounts, Books and Records of the Fund 12.1 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. -20- 22 12.2 Periodic Reports. In addition, within sixty (60) 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 Administrative Committee, 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. 12.3 Additional Accounting. Except as provided below, neither the Administrative Committee, Named Fiduciary nor the Corporation shall 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 Administrative Committee, 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. 12.4 Judicial Determination 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. 12.5 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. 12.6 Filings be Administrative Committee. For the purposes of this Section, the Master Trustee shall conclusively presume that the Administrative Committee has made or caused to be made, or, will make or cause to be made, all Federal filings as of the date required. Should the Master Trustee incur any -21- 23 liability by reason of failure of the Administrative Committee 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. 12.7 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. 12.8 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. SECTION 13 Fiduciary Duties of Master Trustee 13.1 Acknowledgement of Fiduciary Duty. The Master Trustee acknowledges that it assumes the fiduciary duties established by this Agreement. 13.2 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 is judicially determined to be a breach of its fiduciary duties. SECTION 14 Resignation and Removal 14.1 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. 14.2 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 -22- 24 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. 14.3 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. 14.4 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 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. 14.5 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. 14.6 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 -23- 25 and report, and its liability and accountability to anyone with respect to the propriety of it acts and transactions shown in such written statement and report shall be governed by the terms of this Agreement. SECTION 15 Actions by the Corporation, the Administrative Committee or Named Fiduciary 15.1 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. 15.2 Act by the Administrative Committee or Named Fiduciary. Any action by any person or entity duly empowered to act on behalf of the Administrative Committee 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 the Administrative Committee or the Named Fiduciary and the Master Trustee shall act and shall be fully protected in acting in accordance with such writing. SECTION 16 Amendment or Termination 16.1 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 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, retired participants and their beneficiaries, except for the return of Corporation contributions which are allowed by law and permitted under a Plan. -24- 26 16.2 PBGC Approval. Should this Trust form a part of a Plan subject to the jurisdiction of the Pension Benefit Guaranty Corporation ("PBGC") as provided in ERISA, 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 PBGC. Thereafter and in the event that this Trust does not form a part of a Plan subject to the jurisdiction of the PBGC, 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 Administrative Committee to such persons and in such manner as the Administrative Committee 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 any kind whatsoever arising from any distribution made by the Master Trustee at the direction of the Administrative Committee as a result of the termination of this Agreement and shall indemnify and save the Master Trustee harmless from any attempt to impose any liability on the Master Trustee with respect to any such distribution. 16.3 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. 16.4 Termination in the Absence of Directions From the Administrative Committee. In the event no direction is provided by the Administrative Committee with respect to the distribution of a Plan's portion of the Fund upon termination of this Agreement, the Master Trustee shall 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 is unable to 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 -25- 27 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 ERISA regulating the allocation of assets upon termination of plans such as the Plan. The Master Trustee, in such cases, 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. 16.5 Termination on Corporate Dissolution. If the Corporation 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 as provided in this Agreement. SECTION 17 Merger or Consolidation 17.1 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 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 or the performance of any further act on the part of the parties hereto. 17.2 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. 17.3 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. -26- 28 SECTION 18 Acceptance of Trust 18.1 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 19 Nonalienation of Trust 19.1 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 Corporation, 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 Administrative Committee. 19.2 Plans' Interest in Trust not Assignable. The equity or interest of any participating Plan in the Fund shall not be assignable. SECTION 20 Governing Law 20.1 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 21 Parties to Court Proceedings 21.1 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 -27- 29 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 22 Subsidiaries and Affiliates 22.1 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, as amended. 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 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. 22.2 Segregation from Further Participation. Any subsidiary or affiliate of the Corporation 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 segregation of the 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 Corporation, 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 -28- 30 401(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. 22.3 Segregation of Assets Allocable to specific employees. The Administrative Committee 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 Administrative Committee 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. SECTION 23 Authorities 23.1 Corporation. Whenever the provisions of this Agreement specifically require or permit any action to be taken by "the Corporation", such action must be authorized by the Board of Directors. Any resolution adopted by the Board of Directors or other evidence of such authorization shall be certified to the Master Trustee by the Secretary or an Assistant Secretary of the Corporation under its corporate seal, and the Trustee may rely upon any authorization so certified until revoked or modified by a further action of the Board of Directors similarly certified to the Master Trustee. 23.2 Subsidiary or Affiliate. Any action required or permitted to be taken under this Agreement by a subsidiary or affiliate of the Corporation shall be given by the board of directors thereof in the manner described in Section 23.1. 23.3 Named Fiduciary and Administrative Committee. The Corporation shall furnish the Master Trustee from time to time with a list of the names and signatures of all Persons (other than the Corporation) authorized to act as the Corporation designee under Section 1.1, is a Named Fiduciary, as members of the Administrative Committee, or in any other manner authorized to issue orders, notices, requests, instructions and objections -29- 31 to the Master Trustee pursuant to the provisions of this Agreement. Any such list shall be certified by the Secretary or an Assistant Secretary of the Corporation (or by the Secretary or an Assistant Secretary of any subsidary or affiliate of the Corporation with respect to members of the Administrative Committee of the Participating Plans), and may be relied upon for accuracy and completeness by the Master Trustee. Each such Person shall thereupon furnish the Master Trustee with a list of the names and signatures of those individuals who are authorized, jointly or severally, to act for such Person hereunder, and the Master Trustee shall be fully protected in acting upon any notices or directions received from any of them. 23.4 Investment Manager. The Named Fiduciary shall cause each Investment Manager to furnish the Master Trustee from time to time with the names and signatures of those persons authorized to direct the Master Trustee on its behalf hereunder. 23.5 Form of Communications. Any agreement between the Corporation and any Person (including an Investment Manager) or any other provision of this Agreement to the contrary notwithstanding, all notices, directions and other communications to the Master Trustee shall be in writing or in such other form, including transmission by electronic means through the facilities of third parties or otherwise, specifically agreed to in writing by the Master Trustee, and the Master Trustee shall be fully protected in acting in accordance therewith. 23.6 Continuation of Authority. The Master Trustee shall have the right to assume, in the absence of written notice to the contrary, that no event constituting a change in the Named Fiduciary or membership of the Administrative Committee or terminating the authority of any Person, including any Investment Manager, has occurred. 23.7 No Obligation to Act on Unsatisfactory Notice. The Master Trustee shall incur no liability under this Agreement for any failure to act pursuant to any notice, direction or any other communication from any Asset Manager, the Corporation, the Administrative Committee, or any other Person or the designee of any of them unless and until it shall have received instructions in form satisfactory to it. -30- 32 SECTION 24 Counterparts 24.1 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. 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 J. McCARTHY ------------------------------------- Name: Michael J. McCarthy Title: Sr. VP, General Counsel MELLON BANK, N.A. By /s/ ROBERT T. BORZA ------------------------------------- Name: Robert T. Borza Title: Vice President -31- 33 EXHIBIT "A" A.H. Belo Employee Savings and Investment Plan Trust Agreement -32- 34 EXHIBIT "B" A.H. Belo Employee Savings and Investment Plan -33- EX-10.3(21) 17 1ST AMEND. TO MASTER DEFINED CONTRIB. TRUST AGRMNT 1 EXHIBIT 10.3(21) FIRST AMENDMENT TO MASTER DEFINED CONTRIBUTION TRUST AGREEMENT by and between A.H. BELO CORPORATION and MELLON BANK, N.A. THIS FIRST AMENDMENT TO MASTER DEFINED CONTRIBUTION TRUST AGREEMENT is made and entered into this 3rd day of March, 1995, effective March 3rd, 1995 (this "Amendment"), by and between A.H. BELO CORPORATION (hereinafter referred to as the "Corporation") and MELLON BANK, N.A. (hereinafter referred to as the "Master Trustee"). W I T N E S S E T H: WHEREAS, the Corporation and the Master Trustee made and entered into a Master Defined Contribution Trust Agreement (the "Agreement") on December 22, 1992, effective as of January 1, 1993; and WHEREAS, the Corporation and the Master Trustee desire to amend the Agreement in certain ways; NOW, THEREFORE, the parties hereto, intending to be legally bound, do hereby amend the Agreement as follows: 1. The representations and definitions set forth above are incorporated herein by this reference thereto. 2. The following text shall be added as new Section 1.4: "1.4 Notwithstanding anything else in this Agreement to the contrary: (1) the Master Trustee is not a party to, and has no duties or 2 responsibilities under, the Plans; (2) the Administrative Committee shall be required to certify in writing to the Master Trustee the identity of any fiduciary which is named in the Plans and which has the power to manage and control Plan assets, and the Master Trustee shall be entitled to rely upon such certification until notified otherwise in writing by the Administrative Committee; (3) in any and all cases where the Master Trustee is required by this Agreement to act with reference to Plan terms, the Administrative Committee shall have the responsibility to certify the relevant provisions to the Master Trustee in writing, and the Master Trustee shall be entitled to rely upon such certification until notified otherwise in writing by the Administrative Committee; (4) absent written certification to the Master Trustee pursuant to this paragraph, the Master Trustee shall be chargeable with no knowledge of any Plan terms and shall be deemed to be in compliance with the Plans; and (5) in any case in which a provision of this Agreement conflicts with any provision in the Plans, this Agreement shall control. Notwithstanding the preceding sentence, the Master Trustee reserves the right to seek a judicial and/or administrative determination as to its proper course of action under this Agreement." 3. Section 22.1 shall be amended by substituting "Section 2.6" for "Section 2.7". 4. Except as set forth herein, the Agreement is hereby ratified and confirmed and remains in full force and effect. - 2 - 3 IN WITNESS WHEREOF, the parties hereto, each intending to be legally bound hereby, have executed this First Amendment to Master Defined Contribution Trust Agreement as of the day and year first above written. A.H. BELO CORPORATION By /s/ VICKY C. TEHERANI ----------------------------------- Name: Vicky C. Teherani Title: Vice President & Treasurer MELLON BANK, N.A. REVIEWED By /s/ ROBERT F. SASS ----------------------------------- [ILLEGIBLE] Name: Robert F. Sass ----------------- Title: Vice President LEGAL DEPARTMENT - 3 - EX-10.3(22) 18 2ND AMEND. TO MASTER DEFINED CONTRIB. TRUST AGRMNT 1 EXHIBIT 10.3(22) SECOND AMENDMENT TO MASTER DEFINED CONTRIBUTION TRUST AGREEMENT A. H. Belo Corporation (the "Corporation"), Mellon Bank, N.A. ("Mellon"), and U. S. Trust Company of California, N. A. ("U. S. Trust"), hereby agree to amend the Master Defined Contribution Trust Agreement (the "Master Trust") by and between A. H. Belo Corporation and Mellon Bank, N.A., dated as of December 22, 1992 and effective as of January 1, 1993, as amended effective March 3, 1995 as follows, effective as of this 28th day of February, 1996: 1. All references in the Master Trust to "Mellon Bank, N.A." are hereby amended to refer to "U. S. Trust Company of California, N.A." 2. Exhibit B is hereby amended by the addition of the following plan: "A. H. Belo Corporation Employee Thrift Plan". IN WITNESS WHEREOF, this Second Amendment is executed this 28th day of February, 1996. A. H. BELO CORPORATION By: /s/ VICKY C. TEHERANI ----------------------------------- Vicky C. Teherani Vice President & Controller ACCEPTANCE OF APPOINTMENT By executing this Second Amendment, U. S. Trust Company of California, N.A. hereby accepts its appointment as successor Master Trustee pursuant to Section 14.3 of the Master Trust and shall be vested with all the rights, powers, duties, privileges and immunities as successor Master Trustee as if originally designated as Master Trustee in the Master Trust. U. S. TRUST COMPANY OF CALIFORNIA, N.A. By: /s/ CHARLES E. WERT ----------------------------------- Charles E. Wert Executive Vice President 2 CONSENT OF MELLON BANK By executing this Second Amendment, Mellon Bank, N.A. hereby accepts its removal as Master Trustee effective as of the date of U. S. Trust's appointment as successor Master Trustee, consents to waive the 60-day notice period provided in Section 14.2 of the Master Defined Contribution Trust Agreement (the "Master Trust") and consents to the amendment of the Master Trust as provided herein. MELLON BANK By: /s/ ----------------------------------- Name: Title: EX-21 19 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 Owensboro Messenger-Inquirer, Inc. Delaware Bryan-College Station Eagle, Inc. Delaware 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 Third Avenue Television, Inc. d/b/a KIRO, Channel 7 Delaware WFAA-TV, Inc. d/b/a WFAA, Channel 8 Delaware WVEC Television, Inc. d/b/a WVEC, Channel 13 Delaware WWL-TV, Inc. d/b/a WWL, Channel 4 Delaware 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% of the outstanding common stock of Transtower, Inc. EX-23 20 CONSENT OF INDEPENDENT AUDITORS 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 24, 1996, with respect to the consolidated financial statements of A.H. Belo Corporation included in this Annual Report (Form 10-K) for the year ended December 31, 1995. /s/ ERNST & YOUNG LLP Dallas, Texas February 26, 1996 EX-27 21 FINANCIAL DATA SCHEDULE
5 1,000 YEAR DEC-31-1995 JAN-01-1995 DEC-31-1995 12,846 0 124,705 4,164 20,336 165,306 610,491 (248,650) 1,154,022 81,668 557,400 63,864 0 0 324,600 1,154,022 0 735,343 0 539,333 59,447 5,888 29,987 111,014 44,438 66,576 0 0 0 66,576 1.68 1.68
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