-----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, WQT7pdSBikL4HKxcIsI0wRWZWsVRWIU1RVbImRJRV7KIT2xNXqLEdtnka1zQw2pW jJt3z8aTMkw2BqRvQop7Bg== 0000950134-97-001733.txt : 19970313 0000950134-97-001733.hdr.sgml : 19970313 ACCESSION NUMBER: 0000950134-97-001733 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970312 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-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-08598 FILM NUMBER: 97554835 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-K405 1 FORM 10-K FOR YEAR ENDED DECEMBER 31, 1996 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, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NO. 1-8598 A. H. BELO CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 75-0135890 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) P. O. BOX 655237 DALLAS, TEXAS 75265-5237 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (214) 977-6606 Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED ------------------- ----------------------------------------- SERIES A COMMON STOCK, $1.67 PAR VALUE NEW YORK STOCK EXCHANGE PREFERRED SHARE PURCHASE RIGHTS NEW YORK STOCK EXCHANGE Securities registered pursuant to Section 12(g) of the Act: SERIES B COMMON STOCK, $1.67 PAR VALUE -------------------------------------- (Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO ----- ----- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ] The aggregate market value of the registrant's voting stock held by nonaffiliates on January 31, 1997, 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 $1,146,680,000. * Shares of Common Stock outstanding at January 31, 1997: 36,269,424 shares. (Consisting of 27,092,611 shares of Series A Common Stock and 9,176,813 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 14, 1997 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........................................................................................ 6 Item 3. Legal Proceedings................................................................................. 7 Item 4. Submission of Matters to a Vote of Security Holders............................................... 7 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters............................. 7 Item 6. Selected Financial Data........................................................................... 8 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations............. 8 Item 8. Financial Statements and Supplementary Data (see Index to Financial Statements below)............. 14 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.............. 14 PART III Item 10. Directors and Executive Officers of the Registrant................................................ 14 Item 11. Executive Compensation............................................................................ 14 Item 12. Security Ownership of Certain Beneficial Owners and Management.................................... 14 Item 13. Certain Relationships and Related Transactions.................................................... 14 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K................................... 15 Signatures .................................................................................................. 18 INDEX TO FINANCIAL STATEMENTS Report of Independent Auditors............................................................................... 20 Consolidated Statements of Earnings for the years ended December 31, 1996, 1995 and 1994..................... 21 Consolidated Balance Sheets as of December 31, 1996 and 1995................................................. 22 Consolidated Statements of Shareholders' Equity for the years ended December 31, 1996, 1995 and 1994 ................................................................................................. 24 Consolidated Statements of Cash Flows for the years ended December 31, 1996, 1995 and 1994................... 25 Notes to Consolidated Financial Statements................................................................... 26 Management's Responsibility for Financial Statements......................................................... 36
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 eight percent of all U.S. television households and its principal newspaper, The Dallas Morning News, has the country's eighth largest Sunday circulation (785,934) and ninth largest daily circulation (513,099). 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 155 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 is tied for third. 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 daily newspapers serving Bryan-College Station, Texas and Owensboro, Kentucky. The Company also publishes the Arlington Morning News and eight community newspapers in the Dallas-Fort Worth suburban area and operates a commercial printing business. On February 19, 1997, the shareholders of the Company and The Providence Journal Company ("Providence Journal") approved the acquisition by Belo of Providence Journal in a merger valued at approximately $1.5 billion in cash and stock. The merger was completed on February 28, 1997 with the issuance of 25,394,564 shares of A. H. Belo Corporation Series A Common Stock and $587,096,000 in cash. With completion of the merger, Belo adds to its broadcast holdings nine network-affiliated television stations and four television stations operated under local marketing agreements. Five of these stations are affiliated with NBC, two are affiliates of Fox, one is an ABC affiliate and one is a CBS affiliate. The Company also acquired from Providence Journal the Providence Journal-Bulletin, the largest daily newspaper in terms of both advertising and circulation in Rhode Island and southeastern Massachusetts. The Providence Journal Company also has interactive electronic media services and produces diversified programming, primarily through its part ownership of two cable networks, Television Food Network ("TVFN") and America's Health Network ("AHN"). The Company has determined that it will pursue alternate financing and operating strategies for AHN, including the possible sale of its ownership interest. As a result of the merger, the Company will own two television stations in the Seattle, Washington market (KIRO and KING). To comply with Federal Communications Commission regulations, the Company will divest one of these stations. On February 20, 1997, the Company announced an agreement among multiple parties whereby, through an exchange of assets, it will exchange KIRO for CBS affiliate KMOV-TV in St. Louis, Missouri. The exchange is subject to obtaining customary regulatory approvals. Unless specified otherwise, all information set forth in this report relates to the Company as of December 31, 1996, prior to the merger with Providence Journal and related divestiture of KIRO. Note 12 to the Consolidated Financial Statements contains information about the Company's industry segments for the years ended December 31, 1996, 1995 and 1994. 4 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 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. 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 14 1* 16% Seattle-Tacoma...... 12 KIRO 1995 UPN 7 8 3* 9% Sacramento.......... 20 KXTV 1984 ABC 10 9 2* 13% Hampton-Norfolk..... 40 WVEC 1984 ABC 13 7 1* 18% New Orleans......... 41 WWL 1994 CBS 4 7 1 27% Tulsa............... 58 KOTV 1984 CBS 6 8 1 21%
- -------------------- * 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 1996 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 1996 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 1996 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 are those affiliated with one of the three major national networks (ABC, CBS and NBC), and in recent years, Fox has effectively evolved into a 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 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 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, with the exception of the Company's UPN affiliate, receives a specified amount of network compensation for broadcasting network programming. To the extent a station's preemptions of network programming exceed a designated amount, that compensation may be reduced. These payments are also subject to decreases by the network during the term of an affiliation agreement under other circumstances, with provisions for advance notice and the right of termination by the station in the event of a reduction in such payments. The Company has renegotiated its affiliation agreements with ABC, resulting in an increase in the compensation paid by the network to the Company in return for a long-term extension 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. The Company also has long-term network affiliation agreements in place with CBS. 2 5 Affiliation with a television network can have a significant influence on the revenues of a television station because the audience ratings generated by a network's programming can affect the rates at which a station can sell advertising time. 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. 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 daily newspapers serving Bryan-College Station, Texas and Owensboro, Kentucky. In April 1996, the Company began publishing the Arlington Morning News, a daily newspaper serving Arlington, Texas. 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 513,099 785,934 Owensboro Messenger-Inquirer............... Owensboro, KY 31,717 34,250 Bryan-College Station Eagle................ Bryan-College Station, TX 21,336 26,948
- -------------------- (1) Average paid circulation for the six months ended September 30, 1996, according to the unaudited Publisher's Statement of the Audit Bureau of Circulations, an independent agency. 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 12 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, 1996, was 513,099 daily, down 3.9 percent from the 1995 average daily circulation of 534,197. Sunday's average paid circulation was 785,934, down 1.8 percent from the six months ended September 30, 1995 average of 800,147. The basic material used in publishing The Dallas Morning News is newsprint. The average unit cost of newsprint consumed during 1996 was higher than that of the prior year despite market-wide price decreases beginning in the second quarter of the year. The Company expects the effect of the 1996 newsprint price decreases to result in lower newsprint cost per ton in 1997. At present, newsprint is purchased from seven suppliers. During 1996, the Company's three largest providers of newsprint supplied approximately 70 percent 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 five 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. The Rockwall Texas Success newspaper is a paid publication that is delivered three days a week. 3 6 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, direct satellite distribution, radio stations, cable 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 an 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 television industry or on 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, direct satellite distribution, billboards and other newspapers (including other newspapers owned and operated by the Company). The Fort Worth Star-Telegram, owned by The Walt Disney Company, competes with The Dallas Morning News in certain mid-cities markets. REGULATION OF TELEVISION BROADCASTING The Company's television broadcasting operations are subject to the jurisdiction of the Federal Communications Commission ("FCC" or "Commission") 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 FCC recently announced the adoption of specific procedures to extend broadcast license terms to the eight-year limit. 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. 4 7 Applications for renewal of the broadcast licenses for WFAA, which expired August 1, 1993, and WWL, which is scheduled to expire on June 1, 1997, are pending before the FCC. The stations' licenses are, by statute, continued pending action thereon. The current license expiration dates for each of the Company's other television broadcast stations are as follows: KHOU, August 1, 1998; KIRO, February 1, 1999; KXTV, December 1, 1998; WVEC, October 1, 2001; and KOTV, June 1, 1998. FCC ownership rules limit the aggregate audience reach 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, to 35 percent of the total national audience. FCC rules also place certain limits on common ownership, operation and control of, or cognizable interests or voting power in, (a) broadcast stations serving the same area, (b) broadcast stations and daily newspapers serving the same area and (c) television broadcast stations and cable systems serving the same area. The 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 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. In November 1996, the FCC issued further notices requesting additional comment on these and related issues. The FCC has significantly reduced its 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 rules that restricted network participation in program production and syndication. The FCC also eliminated the prime time access rule ("PTAR"), effective August 30, 1996. The PTAR limited the ability of some stations in the 50 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 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 recently adopted stricter children's programming requirements, including a requirement that broadcasters provide a specific minimum number of hours of children's programming on a regular basis. 5 8 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 the FCC's current video dial tone rules. These provisions, among others, foreshadow significant future involvement by telephone companies in providing video services. 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 received by viewers, and would give television broadcasters the flexibility to provide new services, including high-definition television simultaneously with multiple programs of standard definition television and data transmission. As currently proposed, each existing broadcaster would be assigned, 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, while the vacated spectrum might be reallocated and auctioned for use by other telecommunication 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 or require the early return of currently authorized channels, which would then be auctioned by the FCC. 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 legislation, 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, 1996, the Company had 3,760 full-time employees. The Company has 229 employees, located principally at its Dallas, Seattle, and New Orleans television stations, that are represented by various employee unions. The Company believes its relations with all of its employees are good. ITEM 2. PROPERTIES At December 31, 1996, the Company owned broadcast operating facilities in the following U. S. cities: Dallas, Texas (WFAA); Houston, Texas (KHOU); Seattle, Washington (KIRO); Sacramento, California (KXTV); Hampton-Norfolk, Virginia (WVEC); New Orleans, Louisiana (WWL); and Tulsa, Oklahoma (KOTV). Three of these broadcast facilities use broadcast towers that are jointly owned with another network affiliated television station in the same market (WFAA, KXTV and KOTV). The Company's television stations' towers are located in Cedar Hill and DeWalt, Texas; Seattle, Washington; Sacramento County, California; Driver, Virginia; Gretna, Louisiana; and Tulsa, Oklahoma. During 1996, the Company entered into a lease for a facility in Washington D.C. that is used by both broadcasting and publishing segments for the gathering and distribution of news from the nation's capital. This facility includes a broadcast studio as well as general office space. The Company owns and operates a newspaper printing facility 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 6 9 equipped with computerized input and photocomposition equipment and other equipment that is used in the production of both news and advertising copy. The operations of DFW Suburban Newspapers, Inc. and DFW Printing Company, Inc. 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 has other newspaper production facilities in Owensboro, Kentucky and Bryan-College Station, Texas. The Company's corporate operations, several departments of The Dallas Morning News and certain broadcast administrative functions have offices located in downtown Dallas in a 17-story office building owned by the Company. All of the foregoing operations have additional leasehold interests that are used 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. 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. See Note 8 to the Consolidated Financial Statements. 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.
- -------------------------------------------------------------------------------------- HIGH LOW CLOSE DIVIDENDS - -------------------------------------------------------------------------------------- 1996 Fourth Quarter $40 $33 3/4 $34 7/8 $.11 Third Quarter $41 3/4 $33 5/8 $34 1/2 $.11 Second Quarter $39 7/8 $32 5/8 $37 1/4 $.11 First Quarter $37 3/8 $31 $34 $.08 - -------------------------------------------------------------------------------------- 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 - --------------------------------------------------------------------------------------
7 10 On January 31, 1997, the closing price for the Company's Series A Common Stock, as reported on the New York Stock Exchange, was $38 1/8. 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 676 and 519, 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, 1996. For a more complete understanding of this selected financial data, 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 1996 1995 1994 1993 1992 - ------------------------------------------------------------------------------------------------------------------- Broadcasting revenues (A) $ 333,396 $ 322,642 $ 258,040 $ 209,083 $ 201,241 Newspaper publishing revenues (B) 487,242 409,099 369,366 335,651 314,701 Other (C) 3,670 3,602 719 101 - - ------------------------------------------------------------------------------------------------------------------- Net operating revenues $ 824,308 $ 735,343 $ 628,125 $ 544,835 $ 515,942 ================================================================ Net earnings (D) $ 87,505 $ 66,576 $ 68,867 $ 51,077 $ 37,170 ================================================================ Per share amounts: Net earnings per common and common equivalent share $ 2.11 $ 1.68 $ 1.70 $ 1.26 $ .95 Cash dividends declared $ .41 $ .315 $ .30 $ .28 $ .27 - ------------------------------------------------------------------------------------------------------------------- Other data: Segment operating cash flow (E) Broadcasting $ 122,837 $ 121,716 $ 106,396 $ 83,356 $ 75,921 Newspaper publishing $ 128,118 $ 90,915 $ 87,284 $ 61,667 $ 59,221 Operating cash flow margins Broadcasting 36.8% 37.7% 41.2% 39.9% 37.7% Newspaper publishing 26.3% 22.2% 23.6% 18.4% 18.8% - ------------------------------------------------------------------------------------------------------------------- Total assets $ 1,224,072 $ 1,154,022 $ 913,791 $ 796,156 $ 758,527 Long-term debt (F) $ 631,857 $ 557,400 $ 330,400 $ 277,400 $ 302,151 - -------------------------------------------------------------------------------------------------------------------
(A) The Company purchased KIRO in February 1995 and WWL in June 1994. (B) The Company purchased the Bryan-College Station Eagle in December 1995 and the Owensboro Messenger-Inquirer in January 1996. (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) Operating cash flow is defined as segment earnings from operations plus depreciation and amortization. Operating cash flow is used in the broadcasting and publishing industries to analyze and compare companies on the basis of operating performance, leverage and liquidity. However, operating cash flow should not be considered in isolation or as a substitute for measures of performance prepared in accordance with generally accepted accounting principles. Operating cash flow for "Other" and "Corporate" are not included herein. See Note 12 to the Consolidated Financial Statements. (F) Long-term debt decreased in May 1996 after the application of net proceeds of approximately $198,500,000 from the issuance of 5,750,000 shares of Series A Common Stock. Long-term debt subsequently increased in the fourth quarter of 1996 when the Company borrowed $306,146,000 for the purchase of 8,321,700 shares of treasury stock. 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, 8 11 Texas. In the first quarter of 1996, the Company acquired a daily newspaper in Owensboro, Kentucky and sold its interest in its programming distribution partnership. Comparability of year-to-year results and financial condition are affected by these recent acquisitions and disposition. 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. All references herein to broadcast operating cash flow or newspaper publishing operating cash flow refer to segment earnings from operations plus depreciation and amortization, as defined in Item 6 - Selected Financial Data. Operating cash flow as defined should not be considered in isolation or as a substitute for measures of performance prepared in accordance with generally accepted accounting principles. CONSOLIDATED RESULTS OF OPERATIONS 1996 Compared to 1995 The Company recorded 1996 net earnings of $87,505,000 or $2.11 per share, compared to $66,576,000 or $1.68 per share in 1995. Results for 1996 include a gain of $3,895,000 (6 cents per share) on the sale of the Company's interest in its programming distribution partnership while 1995 results include a $2,406,000 (4 cents per share) gain on the sale of the Company's investment in Stauffer Communications, Inc. ("Stauffer") stock. Results for 1995 also include a non-recurring charge for early retirement costs of $1,254,000 (2 cents per share). These non-recurring items in 1996 and 1995 are included in other, net. Excluding these non-recurring items, adjusted earnings per share are $2.05 for 1996 compared to $1.66 in 1995. Interest expense in 1996 was $27,643,000 compared to $29,987,000 in 1995. The decrease in interest expense was primarily due to lower average rates, which were approximately 5.7 percent for 1996 compared to 6.3 percent in 1995. Average debt outstanding for the year was slightly lower than in 1995. Belo used the proceeds from its May 1996 equity offering to retire approximately $198,500,000 in revolving debt. However, borrowing increased substantially during the fourth quarter of 1996 as Belo purchased 8,321,700 shares of treasury stock for an aggregate purchase price of $306,146,000. 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 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 in February 1995 for $162,500,000 and WWL in New Orleans 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. 9 12 BROADCASTING 1996 Compared to 1995 Broadcast revenues in 1996 were $333,396,000, an increase of 3.3 percent over 1995 revenues of $322,642,000. Results for 1995 included only 11 months of revenue for the Seattle station, which was purchased on February 1, 1995. On a same-station basis, 1996 revenues increased 2.5 percent over 1995. The increase in 1996 broadcast revenues over last year is primarily due to political advertising associated with the presidential election, senate races in Texas and California and issues advertising. Local advertising revenues also improved over last year due primarily to a contract between the Seattle Mariners and UPN affiliate KIRO. Both local and national revenues were up at WWL in New Orleans, as advertisers favored this long-established market leader when other stations in the New Orleans market switched network affiliations in the first part of 1996. These increases in revenues were offset by declining national advertising. Stiff competition from NBC's prime time lineup and Olympics programming, as well as weak national sales in Dallas and Houston, combined for decreased national revenues of 2.7 percent. Broadcast operating cash flow for 1996 was $122,837,000, up slightly from 1995 operating cash flow of $121,716,000. Operating cash flow margins were 36.8 percent in 1996 and 37.7 percent in 1995. Excluding the effect of KIRO in January of the current year, earnings from operations and margins improved only slightly. Salaries, wages and employee benefits increased 7.1 percent (5.5 percent on a same-station basis) due primarily to more employees, merit increases, and overtime associated with election coverage. Programming expense in 1996 was also up significantly, due to the Seattle Mariners contract and more syndicated programming at KIRO. Programming costs also increased slightly at other stations for certain syndicated programming. These increases were partially offset by the elimination of a weekly news show in Dallas and the cancellation of the Oakland A's contract in Sacramento. 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 in 1995 compared to 1994, both as reported and on a same-station basis. Political advertising revenues in 1994 were 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 the effect of including the New Orleans station for the full year. 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 late in 1994. Broadcast operating cash flow was $121,716,000 in 1995 compared to $106,396,000 in 1994, an increase of 14.4 percent (4.1 percent on a same-station basis). Broadcast operating cash flow 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 cash flow margins in 1995 and 1994 were 37.7 percent and 41.2 percent, respectively. On a same-station basis, margins in 1995 and 1994 were 41.3 percent and 41.0 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 10 13 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. NEWSPAPER PUBLISHING 1996 Compared to 1995 In 1996, newspaper publishing revenues represented 59.1 percent of total revenues, compared to 55.6 percent in 1995. The increased contribution to total revenues over last year is partly due to the acquisitions of the Bryan-College Station Eagle in December 1995 and the Owensboro Messenger-Inquirer in January 1996. In addition, the Company's principal newspaper, The Dallas Morning News, had a revenue increase of nearly 13 percent over 1995. Advertising revenues account for approximately 87 percent of publishing revenues, while circulation revenues represent approximately 11 percent. Other publishing revenues, primarily commercial printing, contribute the remainder. Newspaper advertising volume for The Dallas Morning News is measured in column inches. Volume for the last three years was as follows:
Years ended December 31, - ------------------------------------------------------------------------------------------ In thousands 1996 1995 1994 - ------------------------------------------------------------------------------------------ Full-run ROP inches (1) : Classified 2,057 2,125 2,189 Retail 1,435 1,429 1,524 General 296 254 271 - ------------------------------------------------------------------------------------------ Total 3,788 3,808 3,984 - ------------------------------------------------------------------------------------------
(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. During the periods indicated above, The Dallas Morning News ran more full-run ROP advertising than any other newspaper in the United States. Revenues from newspaper publishing in 1996 were $487,242,000, an increase of 19.1 percent over 1995 revenues of $409,099,000. Excluding the effect of the recently acquired newspapers, revenues increased 12.4 percent. The full year effect of two advertising rate increases in 1995, combined with additional rate increases in January 1996, contributed the majority of the year over year revenue improvement at The Dallas Morning News. The rate increases were implemented in response to escalating newsprint prices throughout 1995 and in the first quarter of 1996. Classified advertising linage fell 3.2 percent as a result of the rate increases, which were higher in classified than in other advertising categories. Retail advertising volume was relatively unchanged over last year, with additional grocery store ads offsetting declines in department store advertising. General advertising linage improved 16.5 percent despite the higher rates, with significant gains in the technology and automotive categories. The Dallas Morning News' preprint, total market coverage ("TMC") and other advertising revenues increased 7.8 percent, primarily due to more TMC participation. Circulation revenues were up nearly 10 percent over last year due to an October 1995 increase in the daily single-copy rate from $.25 to $.50 and a February 1996 increase in the home delivery rate. Circulation volumes declined slightly from 534,197 in 1995 to 513,099 in 1996 for daily and from 800,147 in 1995 to 785,934 in 1996 for Sunday delivery due primarily to these rate increases. Newspaper publishing operating cash flow for 1996 was $128,118,000 compared to $90,915,000 in 1995, an increase of 40.9 percent. Excluding the effect of the newspaper acquisitions, operating cash flow increased 32.1 percent. The operating cash flow margin for 1996 of 26.3 percent (26.1 percent without the new newspapers) improved over the 1995 operating cash flow margin of 22.2 percent due to a combination of factors. While revenues increased 19.1 percent, expenses increased only 13.3 percent. Other production, distribution and operating expenses at The Dallas Morning News were up the most compared to last year, due to higher TMC distribution expenses, transportation costs, advertising and promotion and outside services associated with election coverage, research and temporary help. Salaries, wages and employee benefits were also higher than last year due to more employees and higher performance bonuses. Newsprint, ink and other supplies expense was up 6.5 percent (3.6 11 14 percent excluding the new newspapers) over last year due to higher cost per ton, offset somewhat by lower consumption due to decreased circulation. There have been significant fluctuations in newsprint prices in recent years. Prices began increasing in mid 1994 from a low of $375 per ton to a high of nearly $675 per ton in February 1996 before declining to approximately $460 per ton in December 1996. Future price changes, and thus overall newsprint costs, cannot be predicted with certainty. However, for 1997, the Company expects overall newsprint costs per ton to be lower than in 1996. 1995 Compared to 1994 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 with daily volumes of 534,197 for 1995 versus 524,567 for 1994 and Sunday volumes of 800,147 for 1995 versus 797,206 for 1994. Despite significant increases in newsprint prices, newspaper publishing operating cash flow for 1995 was $90,915,000, up 4.2 percent over 1994 operating cash flow of $87,284,000. Operating cash flow margins were 22.2 percent in 1995 compared to 23.6 percent in 1994. Revenue increases were 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 and lower ad linage and promotional space. 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. LIQUIDITY AND CAPITAL RESOURCES Net cash provided by operations is the Company's primary source of liquidity. During 1996, net cash provided by operations was $164,421,000, compared to $96,601,000 in 1995. The increase was due primarily to higher net earnings and changes in working capital. The most significant working capital change was a reduction in newsprint inventory balances at the end of 1996. The decrease was due to fewer newsprint tons on hand and a lower cost per ton at the end of 1996 versus 1995. The timing of accounts receivable collections and income tax payments also contributed to the increase in 1996 net cash provided by operations. Net cash provided by operations was sufficient to fund capital expenditures and common stock dividends. In January 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 three years. Also during 1996, the Company purchased a 38 percent equity interest in the Press Enterprise Company, the parent company of the Riverside Press-Enterprise newspaper in Riverside, California. The purchase was completed using funds from the Company's revolving credit facility. At December 31, 1996, the Company had a $1,000,000,000 variable rate revolving credit agreement with a syndicate of 18 banks led by Texas Commerce Bank, Bank of Tokyo-Mitsubishi, Bank of America, and NationsBank. Borrowings under the agreement at that time were $450,000,000. In January of 1997, in preparation for the Providence Journal transaction, the Company replaced this facility with a new $1,500,000,000 five-year facility and a $500,000,000 364-day facility with a syndicate of 35 banks led by the same agent banks. The $1,500,000,000 agreement expires January 31, 2002 with extensions to January 31, 2004 at the request of the Company and with the consent of the participating banks. Commitments under the 364-day facility terminate on January 30, 1998, with any borrowings under such facility payable in full at the end of the second year following 12 15 the termination of the commitments. Among other things, the agreements require the Company to maintain, as of the end of each quarter and measured over the preceding four quarters, (1) a Funded Debt to Pro Forma Operating Cash Flow ratio not exceeding 5.5 to 1.0, (2) a Funded Debt to Pro Forma Operating Cash Flow ratio (excluding subordinated debt) not exceeding 5.0 to 1.0, and (3) an Interest Coverage ratio of not less than 2.5 to 1.0, all as such terms are defined in the agreements. For the year ended December 31, 1996, the Company's ratio of funded debt to pro forma operating cash flow, as defined in the new credit facility, was 2.71 compared to 2.77 for the year ended December 31, 1995, and its interest coverage ratio for 1996 was 8.44 versus 6.71 for 1995. 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, 1996, the Company had $165,800,000 in such short-term borrowings outstanding. With the completion of the new banking agreements and the Providence Journal transaction, the Company's outstanding debt is expected to be approximately $1,500,000,000 immediately following the merger. The Company believes its current financial condition and credit relationships are adequate to fund current obligations and near-term growth. 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 during 1996 were approximately 5.7 percent and at the end of 1996, rates were approximately 6.1 percent. Total debt outstanding, including the current portion of long-term debt, increased $74,595,000 from December 31, 1995. Total debt was reduced in May 1996 by approximately $198,500,000 due to the application of the net proceeds from an equity offering of 5,750,000 shares of Series A Common Stock. Total long-term debt then increased in the fourth quarter of 1996 when the Company borrowed $306,146,000 to purchase 8,321,700 shares of treasury stock. These shares were purchased under a Board action in September of 1996, which increased the Company's stock repurchase authorization by 10,000,000 shares. Had these events occurred at January 1, 1996, earnings per share for the Company would have been $2.22, rather than $2.11. Treasury shares may or may not be used to facilitate future transactions with third parties and will be held in treasury until such a determination has been made. At December 31, 1996, the Company has remaining Board authority for the purchase of approximately 5,337,000 treasury shares. Capital expenditures in 1996 were $49,800,000. Capital projects included additional production equipment and major building renovations at The Dallas Morning News, a building and studio remodeling project at the Company's Dallas television station, leasehold improvements and furniture and equipment purchases for the Company's new consolidated Washington D.C. news bureau and the expansion of corporate offices. The Company also completed a new studio control room in Seattle, purchased broadcast equipment for each of the television stations and invested in new production equipment for its two new publishing subsidiaries. Total capital expenditures in 1997, including projects at Providence Journal subsidiaries, are expected to be between $80,000,000 and $90,000,000. As of December 31, 1996, required future payments for capital projects in 1997 were $18,724,000. The Company expects to finance future capital expenditures using cash generated from operations and, when necessary, borrowings under the revolving credit agreement. The Company paid dividends of $16,392,000 or 41 cents per share on Series A and Series B Common Stock outstanding during 1996 compared to $12,279,000 or 31 1/2 cents per share in 1995. The Company expects its aggregate dividend payment to be higher in 1997 due to the additional shares issued for the Providence Journal merger (see Other Matters). 13 16 OTHER MATTERS On February 28, 1997, the Company completed the acquisition of Providence Journal pursuant to a merger in which 25,394,564 shares of Series A Common Stock and $587,096,000 in cash were paid to Providence Journal shareholders. In addition, the Company assumed Providence Journal debt of approximately $200,000,000 and incurred acquisition related costs of approximately $100,000,000, including the cash-out of Providence Journal employee stock options and stock-based compensation plans, the settlement of employment agreements and other merger-related costs. The transaction is expected to be dilutive to the Company's earnings primarily due to the amortization of goodwill resulting from the transaction. As a result of the merger, the Company currently owns two television stations in the Seattle, Washington market (KIRO and KING). To comply with FCC regulations that require the Company to divest one of these stations, on February 20, 1997, the Company announced an agreement among multiple parties whereby, through an exchange of assets, it will exchange KIRO for CBS affiliate KMOV-TV in St. Louis, Missouri. The exchange is subject to obtaining customary regulatory approvals. 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 14, 1997, 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 14, 1997, 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 14, 1997, is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information set forth under the heading "Certain Transactions" contained in the definitive Proxy Statement for the Company's Annual Meeting of Shareholders to be held on May 14, 1997, is incorporated herein by reference. 14 17 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. (3) Exhibits Exhibits marked with an asterisk (*) are incorporated by reference to documents previously filed by the Company with the Securities and Exchange Commission, as indicated. Exhibits marked with a tilde (~) are management contracts or compensatory plan contracts or arrangements filed pursuant to Item 601 (b)(10)(iii)(A) of Regulation S-K. All other documents are filed with this report. EXHIBIT NUMBER DESCRIPTION 2.1 * Agreement and Plan of Merger, dated as of September 26, 1996 (Exhibit 2.1 to Form 8-K dated September 27, 1996) 3.1 * Certificate of Incorporation of the Company (Exhibit 3.1 to the Company's Annual Report on Form 10-K dated February 28, 1996(the "1995 Form 10-K")) 3.2 * Certificate of Correction to Certificate of Incorporation dated May 13, 1987 (Exhibit 3.2 to the 1995 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 1995 Form 10-K) 3.4 * Certificate of Amendment of Certificate of Incorporation of the Company dated May 4, 1988 (Exhibit 3.4 to the 1995 Form 10-K) 3.5 * Certificate of Amendment of Certificate of Incorporation of the Company dated May 3, 1995 (Exhibit 3.5 to the 1995 Form 10-K) 3.6 * Amended Certificate of Designation of Series A Junior Participating Preferred Stock of the Company dated May 4, 1988 (Exhibit 3.6 to the 1995 Form 10-K) 3.7 * Certificate of Designation of Series B Common Stock of the Company dated May 4, 1988 (Exhibit 3.7 to the 1995 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 Company's Annual Report on Form 10-K dated March 18, 1993 (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) 15 18 EXHIBIT NUMBER DESCRIPTION 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 (Exhibit 4.4 to the 1995 Form 10-K) 4.5 * Supplement No. 1 to Amended and Restated Rights Agreement between the Company and The First National Bank of Boston dated as of November 11, 1996 (Exhibit 4.5 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1996) 10.1 Contracts relating to television broadcasting: * (1) Form of Agreement for Affiliation between WFAA-TV in Dallas, Texas and ABC (Exhibit 10.1 (1) to the 1995 Form 10-K) * (2) Form of Agreement for Affiliation between KXTV in Sacramento, California and ABC (Exhibit 10.1 (2) to the 1995 Form 10-K) * (3) Contract for Affiliation between KHOU-TV in Houston, Texas and CBS (Exhibit 10.1 (3) to the 1995 Form 10-K) * (4) Contract for Affiliation between WWL-TV in New Orleans, Louisiana and CBS (Exhibit 10.1 (4) to the 1995 Form 10-K) 10.2 Financing agreements: * (1) Credit Agreement dated as of July 31, 1996 among the Company and Texas Commerce Bank, National Association as Administrative Agent, The Chase Manhattan Bank, as Competitive Advance Facility Agent, Bank of America National Trust and Savings Association and Bank of Tokyo-Mitsubishi, Ltd. as Co-Syndication Agents, NationsBank as Documentation Agent, and Societe Generale and The Fuji Bank, Limited as Co-Agents (Exhibit 10.4 (1) to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1996) (2) Five Year $1,500,000,000 revolving credit and competitive advance facility dated as of January 31, 1997 among the Company and Texas Commerce Bank National Association as Administrative Agent, The Chase Manhattan Bank, as Competitive Advance Facility Agent, Bank of America National Trust and Savings Association and Bank of Tokyo-Mitsubishi, Ltd. as Co-Syndication Agents, and NationsBank as Documentation Agent (3) 364-Day $500,000,000 revolving credit and competitive advance facility dated as of January 31, 1997 among the Company and Texas Commerce Bank National Association as Administrative Agent, The Chase Manhattan Bank, as Competitive Advance Facility Agent, Bank of America National Trust and Savings Association and Bank of Tokyo-Mitsubishi, Ltd. as Co-Syndication Agents, and NationsBank as Documentation Agent 10.3 Compensatory plans: ~(1) Management Security Plan ~(2) The A. H. Belo Corporation 1986 Long-Term Incentive Plan (Effective May 3, 1989, as amended by Amendments 1, 2, 3, 4, and 5) *~(3) Amendment No. 6 to 1986 Long-Term Incentive Plan (Exhibit 10.3(13) to the 1992 Form 10-K) *~(4) Amendment No. 7 to 1986 Long-Term Incentive Plan (Exhibit 10.3(9) to the 1995 Form 10-K) 16 19 EXHIBIT NUMBER DESCRIPTION *~(5) The A. H. Belo Corporation Employee Savings and Investment Plan Amended and Restated February 2, 1996 (Exhibit 10.3(10) to the 1995 Form 10-K) *~(6) The G. B. Dealey Retirement Pension Plan (as Amended and Restated Generally Effective January 1, 1989) (Exhibit 10.3(11) to the 1995 Form 10-K) *~(7) 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 Company's Annual Report on Form 10-K dated March 18, 1994 (the "1993 Form 10-K")) *~(8) A. H. Belo Corporation Supplemental Executive Retirement Plan (Exhibit 10.3(27) to the 1993 Form 10-K) *~(9) Trust Agreement dated February 28, 1994, between the Company and Mellon Bank, N. A. (Exhibit 10.3(28) to the 1993 Form 10-K) *~(10) A. H. Belo Corporation 1995 Executive Compensation Plan (Exhibit 10.3(16) to the 1995 Form 10-K) *~(11) A. H. Belo Corporation Employee Thrift Plan, effective January 1, 1995 (Exhibit 10.3(17) to the 1995 Form 10-K) *~(12) First Amendment to A. H. Belo Corporation Employee Thrift Plan (Exhibit 10.3(18) to the 1995 Form 10-K) *~(13) Second Amendment to A. H. Belo Corporation Employee Thrift Plan (Exhibit 10.3(19) to the 1995 Form 10-K) *~(14) Master Defined Contribution Trust Agreement by and between A. H. Belo Corporation and Mellon Bank, N.A. (Exhibit 10.3(20) to the 1995 Form 10-K) *~(15) First Amendment to Master Defined Contribution Trust Agreement (Exhibit 10.3(21) to the 1995 Form 10-K) *~(16) Second Amendment to Master Defined Contribution Trust Agreement (Exhibit 10.3(22) to the 1995 Form 10-K) ~(17) A. H. Belo Corporation 1995 Executive Compensation Plan (as restated to incorporate amendments through May 14, 1997) 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. 17 20 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. A. H. BELO CORPORATION By: /s/ Robert W. Decherd ----------------------------------- Robert W. Decherd Chairman of the Board, President & Chief Executive Officer Dated: March 10, 1997 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE --------- ----- ---- /s/ Robert W. Decherd - ------------------------------------ Chairman of the Board, President March 10, 1997 Robert W. Decherd & Chief Executive Officer /s/ Ward L. Huey, Jr. - ------------------------------------ Vice Chairman of the March 10, 1997 Ward L. Huey, Jr. Board and President, Broadcast Division /s/ Burl Osborne - ------------------------------------ Director, President, Publishing March 10, 1997 Burl Osborne Division and Publisher, The Dallas Morning News /s/ John W. Bassett, Jr. - ------------------------------------ Director March 10, 1997 John W. Bassett, Jr. /s/ Judith L. Craven, M.D., M.P.H. - ------------------------------------ Director March 10, 1997 Judith L. Craven, M.D., M.P.H. /s/ Roger A. Enrico - ------------------------------------ Director March 10, 1997 Roger A. Enrico /s/ Dealey D. Herndon - ------------------------------------ Director March 10, 1997 Dealey D. Herndon /s/ Lester A. Levy - ------------------------------------ Director March 10, 1997 Lester A. Levy /s/ Arturo Madrid, Ph.D. - ------------------------------------ Director March 10, 1997 Arturo Madrid, Ph.D.
18 21
SIGNATURE TITLE DATE --------- ----- ---- /s/ James M. Moroney, Jr. - ------------------------------------ Director and Former March 10, 1997 James M. Moroney, Jr. Chairman of the Board /s/ Hugh G. Robinson - ------------------------------------ Director March 10, 1997 Hugh G. Robinson /s/ William T. Solomon - ------------------------------------ Director March 10, 1997 William T. Solomon /s/ Thomas B. Walker, Jr. - ------------------------------------ Director March 10, 1997 Thomas B. Walker, Jr. /s/ J. McDonald Williams - ------------------------------------ Director March 10, 1997 J. McDonald Williams /s/ Michael D. Perry - ------------------------------------ Senior Vice President and March 10, 1997 Michael D. Perry Chief Financial Officer /s/ Vicky C. Teherani - ------------------------------------ Vice President/Controller March 10, 1997 Vicky C. Teherani
19 22 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, 1996 and 1995, and the related consolidated statements of earnings, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 1996. 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, 1996 and 1995, and the consolidated results of their operations and cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. /S/ERNST & YOUNG LLP Dallas, Texas January 27, 1997 except for Note 11, as to which the date is February 28, 1997 20 23 CONSOLIDATED STATEMENTS OF EARNINGS A. H. BELO CORPORATION AND SUBSIDIARIES
Years ended December 31, - ------------------------------------------------------------------------------------------------------------------- In thousands, except per share amounts 1996 1995 1994 - ------------------------------------------------------------------------------------------------------------------- NET OPERATING REVENUES Broadcasting (Note 2) $ 333,396 $ 322,642 $ 258,040 Newspaper publishing (Note 2) 487,242 409,099 369,366 Other 3,670 3,602 719 - ---------------------------------------------------------------------------------------------------------------- Total net operating revenues 824,308 735,343 628,125 - ---------------------------------------------------------------------------------------------------------------- OPERATING COSTS AND EXPENSES Salaries, wages and employee benefits (Notes 5 and 6) 231,856 204,833 178,264 Other production, distribution and operating costs (Note 7) 215,295 196,506 166,187 Newsprint, ink and other supplies 146,325 137,994 106,270 Depreciation 45,408 42,270 32,854 Amortization 19,775 17,177 13,551 - ---------------------------------------------------------------------------------------------------------------- Total operating costs and expenses 658,659 598,780 497,126 - ---------------------------------------------------------------------------------------------------------------- Earnings from operations 165,649 136,563 130,999 - ---------------------------------------------------------------------------------------------------------------- OTHER INCOME AND EXPENSE Interest expense (Note 3) (27,643) (29,987) (16,112) Other, net (Note 9) 6,034 4,438 (6,990) - ---------------------------------------------------------------------------------------------------------------- Total other income and expense (21,609) (25,549) (23,102) - ---------------------------------------------------------------------------------------------------------------- EARNINGS Earnings before income taxes 144,040 111,014 107,897 Income taxes (Note 4) 56,535 44,438 39,030 - ---------------------------------------------------------------------------------------------------------------- Net earnings $ 87,505 $ 66,576 $ 68,867 ========================================= Net earnings per common and common equivalent share $ 2.11 $ 1.68 $ 1.70 Weighted average common and common equivalent shares outstanding 41,510 39,646 40,446 =========================================
See accompanying Notes to Consolidated Financial Statements. 21 24 CONSOLIDATED BALANCE SHEETS A. H. BELO CORPORATION AND SUBSIDIARIES
ASSETS December 31, - ------------------------------------------------------------------------------------------------------------------- In thousands 1996 1995 - ------------------------------------------------------------------------------------------------------------------- Current assets: Cash and temporary cash investments $ 13,829 $ 12,846 Accounts receivable (net of allowance of $5,276 and $4,164 in 1996 and 1995, respectively) 129,976 120,541 Inventories 13,873 20,336 Deferred income taxes (Note 4) 5,692 5,223 Other current assets 8,555 6,360 - ------------------------------------------------------------------------------------------------------------------ Total current assets 171,925 165,306 - ------------------------------------------------------------------------------------------------------------------ Property, plant and equipment, at cost: Land 27,468 26,708 Buildings 169,784 155,877 Broadcast equipment 165,752 159,909 Newspaper publishing equipment 212,401 210,362 Other 61,025 51,156 Advance payments on plant and equipment expenditures (Note 7) 21,765 6,479 - ------------------------------------------------------------------------------------------------------------------ Total property, plant and equipment 658,195 610,491 Less accumulated depreciation 287,415 248,650 - ------------------------------------------------------------------------------------------------------------------ Property, plant and equipment, net 370,780 361,841 - ------------------------------------------------------------------------------------------------------------------ Intangible assets, net (Note 2) 582,248 571,060 Other assets, at cost (Note 5) 99,119 55,815 - ------------------------------------------------------------------------------------------------------------------ Total assets $1,224,072 $1,154,022 - ------------------------------------------------------------------------------------------------------------------
22 25 CONSOLIDATED BALANCE SHEETS (CONTINUED) A. H. BELO CORPORATION AND SUBSIDIARIES
LIABILITIES AND SHAREHOLDERS' EQUITY December 31, - ------------------------------------------------------------------------------------------------------------------- In thousands, except share and per share data 1996 1995 - ------------------------------------------------------------------------------------------------------------------- Current liabilities: Accounts payable $ 26,101 $ 28,569 Accrued compensation and benefits 31,440 24,773 Advance subscription payments 10,557 9,392 Other accrued expenses 13,307 14,098 Income taxes payable (Note 4) 7,908 4,836 - ------------------------------------------------------------------------------------------------------------------ Total current liabilities 89,313 81,668 - ------------------------------------------------------------------------------------------------------------------ Long-term debt (Note 3) 631,857 557,400 Deferred income taxes (Note 4) 121,808 114,729 Other liabilities 10,611 11,761 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 35,404,850 and 28,961,753 shares at December 31, 1996 and 1995, respectively; 59,126 48,366 Series B: Issued 9,177,133 and 9,280,179 shares at December 31, 1996 and 1995, respectively. 15,326 15,498 Additional paid-in capital 302,737 97,930 Retained earnings 301,316 230,203 - ------------------------------------------------------------------------------------------------------------------ Total 678,505 391,997 Less cost of 8,321,700 shares of Series A treasury stock 306,146 - Less deferred compensation - restricted shares 1,876 3,533 - ------------------------------------------------------------------------------------------------------------------ Total shareholders' equity 370,483 388,464 - ------------------------------------------------------------------------------------------------------------------ Total liabilities and shareholders' equity $1,224,072 $1,154,022 - ------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Consolidated Financial Statements. 23 26 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY A. H. BELO CORPORATION AND SUBSIDIARIES
- ------------------------------------------------------------------------------------------------------------------------------------ In thousands, except share and per share amounts Three years ended December 31, 1996 - ------------------------------------------------------------------------------------------------------------------------------------ COMMON STOCK TREASURY STOCK Deferred Additional Compensation- Shares Shares Paid-in Retained Shares Restricted Series A Series B Amount Capital Earnings Series A Amount Shares Total - ------------------------------------------------------------------------------------------------------------------------------------ BALANCE AT DECEMBER 31, 1993 14,467,182 5,743,099 $33,752 $116,451 $201,246 - $ - $(5,350) $346,099 Exercise of stock options 234,545 12,500 412 7,240 7,652 Restricted shares awarded 48,360 81 2,576 (2,657) - Change in restricted share valuation 188 (188) - Amortization of restricted shares 2,166 2,166 Forfeiture of restricted shares (810) (1) (25) 6 (20) Tax benefit from long-term incentive plan 1,828 1,828 Purchase of treasury stock (644,000) (32,073) (32,073) Retirement of treasury stock (644,000) (1,076) (3,827) (27,170) 644,000 32,073 - Net earnings 68,867 68,867 Cash dividends declared ($.30 per share) (11,984) (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 - $ - $(6,023) $382,535 Exercise of stock options 405,448 18,590 708 8,674 9,382 Change in restricted share valuation 698 (698) - Amortization of restricted shares 2,718 2,718 Forfeiture of restricted shares (27,905) (48) (917) 470 (495) Tax benefit from long-term incentive plan 3,427 3,427 Two-for-one stock split 15,137,977 4,709,794 33,146 (32,618) (316,000) (528) - Purchase of treasury stock (1,546,848) (63,400) (63,400) Retirement of treasury stock (1,862,848) (3,110) (5,765) (55,053) 1,862,848 63,928 - Net earnings 66,576 66,576 Cash dividends declared ($.315 per share) (12,279) (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 - $ - $(3,533) $388,464 Exercise of stock options 498,302 2,360 835 9,098 9,933 Change in restricted share valuation 7 (7) - Amortization of restricted shares 1,664 1,664 Tax benefit from long-term incentive plan 3,589 3,589 Employer's matching contri- bution to Savings and Investment Plan 89,389 150 3,214 3,364 Sale of stock 5,750,000 9,603 188,899 198,502 Purchase of treasury stock (8,321,700) (306,146) (306,146) Net earnings 87,505 87,505 Cash dividends declared ($.41 per share) (16,392) (16,392) Conversion of Series B to Series A 194,795 (194,795) - - ------------------------------------------------------------------------------------------------------------------------------------ BALANCE AT DECEMBER 31, 1996 35,404,850 9,177,133 $74,452 $302,737 $301,316 (8,321,700) $(306,146) $(1,876) $370,483 - ------------------------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Consolidated Financial Statements. 24 27 CONSOLIDATED STATEMENTS OF CASH FLOWS A. H. BELO CORPORATION AND SUBSIDIARIES
CASH PROVIDED (USED) Years ended December 31, - --------------------------------------------------------------------------------------------------------- In thousands 1996 1995 1994 - --------------------------------------------------------------------------------------------------------- OPERATIONS Net earnings $ 87,505 $ 66,576 $ 68,867 Adjustments to reconcile net earnings to net cash provided by operations: Depreciation and amortization 65,183 59,447 46,405 Deferred income taxes 6,610 6,823 1,428 Non-cash adjustments and allowances 1,112 205 1,842 Other, net 559 (4,012) 1,549 Net change in current assets and liabilities: Accounts receivable (11,867) (19,732) (20,067) Inventories and other current assets 3,669 (12,918) 8,234 Accounts payable (1,003) 1,270 10,187 Accrued compensation and benefits 5,207 (2,043) 5,554 Other accrued liabilities 785 2,796 (1,896) Income taxes payable 6,661 (1,811) 16,682 - --------------------------------------------------------------------------------------------------------- Net cash provided by operations 164,421 96,601 138,785 - --------------------------------------------------------------------------------------------------------- INVESTMENTS Capital expenditures (49,800) (40,830) (47,371) Acquisitions (Note 2) (74,091) (217,428) (110,058) Sale of interest in partnership 3,750 -- -- Other, net (3,788) 4,506 2,400 - --------------------------------------------------------------------------------------------------------- Net cash used for investments (123,929) (253,752) (155,029) - --------------------------------------------------------------------------------------------------------- FINANCING Net proceeds from sale of stock 198,502 -- -- Borrowings for acquisitions 75,180 216,934 110,000 Net proceeds from (payments on) debt (586) 10,066 (57,000) Payments of dividends on stock (16,392) (12,279) (11,984) Net proceeds from exercise of stock options 9,933 9,382 7,652 Purchase of treasury stock (306,146) (63,400) (32,073) - --------------------------------------------------------------------------------------------------------- Net cash provided by (used for) financing (39,509) 160,703 16,595 - --------------------------------------------------------------------------------------------------------- Net increase in cash and temporary cash investments 983 3,552 351 - --------------------------------------------------------------------------------------------------------- Cash and temporary cash investments at beginning of year 12,846 9,294 8,943 Cash and temporary cash investments at end of year $ 13,829 $ 12,846 $ 9,294 - --------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DISCLOSURES (Note 10) - ---------------------------------------------------------------------------------------------------------
See accompanying Notes to Consolidated Financial Statements. 25 28 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 estimate of amounts considered uncollectible. Expense for such uncollectible amounts, which is included in other production, distribution and operating costs, was $5,647,000, $5,888,000, and $4,506,000 in 1996, 1995 and 1994, respectively. Accounts written off during these years were $4,535,000, $5,683,000 and $4,231,000, 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 Broadcast equipment 7-15 years Newspaper publishing equipment 5-20 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, 1996 and 1995, approximately $28,544,000 and $27,683,000, respectively, of intangible assets, net is attributable to subscriber lists associated with certain newspaper transactions. These assets are carried at their appraised values and amortized on a straight-line basis over estimated useful lives of 13 to 18 years. Accumulated amortization of intangible assets was $163,278,000 and $143,503,000 at December 31, 1996 and 1995, respectively. The carrying values of all intangible assets are periodically reviewed to determine whether impairment exists and adjustments to net realizable value are made as needed. No such adjustments were required in 1996. 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. Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," ("SFAS 123") was issued in 1995 and, if fully adopted, changed the method for recognition of cost on plans similar to that of the Company. The Company did not adopt the cost recognition provisions of SFAS 123 for options granted to employees. Pro forma disclosures as if the Company had adopted the cost recognition requirements for options granted to employees beginning with stock option grants in 1995 are presented in Note 6. 26 29 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A. H. BELO CORPORATION AND SUBSIDIARIES 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. 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. On December 26, 1995, Belo completed the acquisition of the Bryan-College Station Eagle, a daily newspaper serving Bryan-College Station, Texas. In January 1996, the Company issued notes payable for the purchase of the Owensboro Messenger-Inquirer, a daily newspaper serving Owensboro, Kentucky. 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, $122,767,000 for KIRO-TV, $43,352,000 for the Bryan-College Station Eagle and $30,862,000 for the Owensboro Messenger-Inquirer. These amounts are generally being amortized on a straight-line basis over 40 years, although subscriber lists of the acquired newspapers have been assigned lives of 13 to 18 years. Pro forma financial information for the current year acquisition has not been included because the results are not material to the consolidated operations of the Company. See Note 11 for information regarding an acquisition subsequent to December 31, 1996. NOTE 3: LONG-TERM DEBT - ------------------------------------------------------------------------------ Long-term debt consists of the following:
- ---------------------------------------------------------------------------------- In thousands 1996 1995 - ---------------------------------------------------------------------------------- Revolving credit agreement $450,000 $480,000 Short-term unsecured notes classified as long-term debt 165,800 71,000 Other 16,057 6,400 - ---------------------------------------------------------------------------------- Total $631,857 $557,400 - ----------------------------------------------------------------------------------
At the end of 1996, the Company had a revolving credit facility for $1,000,000,000. 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, certificate of deposit rate, LIBOR or competitive bid. The rate obtained through competitive bid is either a Eurodollar rate or a rate agreed to by the Company and the bank. At December 31, 1996 and 1995, the weighted average interest rates for borrowings under the revolving credit agreement were 5.7 percent and 6.1 percent, respectively. The agreement also provides for a facility fee of up to .1875 percent on the total commitment. Borrowings under the agreement mature upon expiration of the agreement on July 31, 2001, with an extension to July 31, 2003, at the request of the Company and with the consent of the participating banks. The revolving credit agreement contains certain covenants, including a requirement to maintain, as of the end of each quarter and measured over the preceding four quarters, (1) a Funded Debt to Pro Forma Operating Cash Flow ratio not exceeding 5.5 to 1.0, (2) a Funded Debt to Pro Forma Operating Cash Flow ratio (excluding subordinated debt) not exceeding 5.0 to 1.0, and (3) an Interest Coverage ratio of not less than 2.5 to 1.0, all as such terms are defined in the agreement. At December 31, 1996, the Company was in compliance with these requirements. 27 30 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A. H. BELO CORPORATION AND SUBSIDIARIES During 1996, the Company used various short-term unsecured notes as an additional source of financing. The weighted average interest rate on this debt was 7.3 percent and 6.0 percent at December 31, 1996 and 1995, respectively. 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, $165,800,000 and $71,000,000 of short-term notes outstanding at December 31, 1996 and 1995, respectively, have been classified as long-term. In 1996, 1995 and 1994, the Company incurred interest costs of $27,898,000, $30,944,000 and $16,250,000, respectively, of which $255,000, $957,000 and $138,000, respectively, were capitalized as components of construction cost. Average interest rates on total debt were approximately 5.7 percent, 6.3 percent and 4.8 percent during 1996, 1995 and 1994, respectively. At December 31, 1996, the Company had outstanding letters of credit of $17,368,000 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 - ------------------------------------------------------------------------------- The Company uses the liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities, and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Income tax expense for the years ended December 31, 1996, 1995 and 1994 consists of the following:
- -------------------------------------------------------------------------- In thousands 1996 1995 1994 - -------------------------------------------------------------------------- Current Federal $ 42,298 $ 32,094 $32,548 State 7,627 5,521 5,054 - -------------------------------------------------------------------------- Total current 49,925 37,615 37,602 Deferred 6,610 6,823 1,428 - -------------------------------------------------------------------------- Total $ 56,535 $ 44,438 $39,030 - -------------------------------------------------------------------------- Effective tax rate 39.2% 40.0% 36.2% - --------------------------------------------------------------------------
Income tax provisions for the years ended December 31, 1996, 1995 and 1994 differ from amounts computed by applying the applicable U.S. federal income tax rate as follows:
- --------------------------------------------------------------------------- In thousands 1996 1995 1994 - --------------------------------------------------------------------------- Computed expected income tax expense $ 50,414 $ 38,855 $ 37,764 Amortization of excess cost 2,235 2,235 2,235 State income taxes 4,857 3,692 3,494 Stock donation (Note 9) - - (3,245) Other (971) (344) (1,218) - --------------------------------------------------------------------------- $ 56,535 $ 44,438 $ 39,030 - ---------------------------------------------------------------------------
28 31 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A. H. BELO CORPORATION AND SUBSIDIARIES Significant components of the Company's deferred tax liabilities and assets as of December 31, 1996 and 1995, are as follows:
- --------------------------------------------------------------------------------------- In thousands 1996 1995 - --------------------------------------------------------------------------------------- Deferred tax liabilities: Excess tax depreciation and amortization $ 108,076 $ 105,035 Deferred gain on sale of assets 3,972 4,294 Loss on investment 14,280 10,867 Expenses deductible for tax purposes in a year different from the year accrued 6,974 6,211 Other 367 463 - -------------------------------------------------------------------------------------- Total deferred tax liabilities $ 133,669 $ 126,870 - --------------------------------------------------------------------------------------- Deferred tax assets: State taxes $ 4,561 $ 4,620 Deferred compensation 4,828 5,126 Expenses deductible for tax purposes in a year different from the year accrued 3,592 3,200 Other 4,572 4,418 - --------------------------------------------------------------------------------------- Total deferred tax assets 17,553 17,364 - --------------------------------------------------------------------------------------- Net deferred tax liability $ 116,116 $ 109,506 - ---------------------------------------------------------------------------------------
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. 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, 1996 and 1995:
- --------------------------------------------------------------------------------- In thousands 1996 1995 - --------------------------------------------------------------------------------- Actuarial present value of benefit obligation: Vested benefit obligation $ (88,879) $ (82,119) Accumulated benefit obligation $ (92,124) $ (84,597) Projected benefit obligation for service rendered to date $(116,740) $(107,817) Plan assets at fair value, invested primarily in equity securities 108,008 95,291 -------------------------------------------------------------------------------- Plan assets less than projected benefit obligation (8,732) (12,526) Unrecognized net loss 26,742 34,350 Unrecognized net transition asset being recognized over 12.3 years (1,604) (2,837) Unrecognized prior service cost (2,490) (2,866) -------------------------------------------------------------------------------- Prepaid pension cost $ 13,916 $ 16,121 --------------------------------------------------------------------------------
29 32 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A. H. BELO CORPORATION AND SUBSIDIARIES The net periodic pension cost for the years ended December 31, 1996, 1995 and 1994 includes the following components:
------------------------------------------------------------------------------------------------- In thousands 1996 1995 1994 ------------------------------------------------------------------------------------------------- Service cost - benefits earned during the period $ 5,462 $ 3,697 $ 3,666 Interest cost on projected benefit obligation 8,290 7,331 6,461 Actual return on plan assets (14,121) (17,035) (604) Net amortization and deferral 5,257 9,498 (6,563) ------------------------------------------------------------------------------------------------- Net periodic pension cost $ 4,888 $ 3,491 $ 2,960 -------------------------------------------------------------------------------------------------
Assumptions used in the accounting for the defined benefit plan are as follows:
------------------------------------------------------------------------------------------------- 1996 1995 1994 ------------------------------------------------------------------------------------------------- Discount rate in determining benefit obligation 7.50% 7.25% 8.50% Discount rate in determining net periodic pension cost 7.25% 8.50% 7.50% Expected long-term rate of return on assets 10.25% 10.25% 10.25% Rate of increase in future compensation 5.50% 5.50% 6.00% -------------------------------------------------------------------------------------------------
The Company sponsors a defined contribution plan that covers substantially all of its employees. Subject to certain dollar limits, employees may contribute a percentage of their salaries to this plan, and the Company will match a portion of the employees' contributions. The Company's contributions totaled $3,587,000, $3,170,000 and $2,568,000 in 1996, 1995 and 1994, respectively. The Company also sponsors non-qualified retirement plans for key employees. Expense for the plans recognized in 1996, 1995 and 1994 was $1,150,000, $1,089,000 and $1,232,000, respectively. NOTE 6: LONG-TERM INCENTIVE PLAN - ------------------------------------------------------------------------------ The Company has a long-term incentive plan under which awards may be granted to employees in the form of incentive stock options, non-qualified stock options, restricted shares or performance units, the values of which are based on 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 the plan. The non-qualified options granted to employees under the Company's long-term incentive plan become exercisable in cumulative installments over periods of three to seven years and expire after ten years. Shares of common stock reserved for grants under the plan were 2,626,904 and 3,849,727 at December 31, 1996 and 1995, respectively. 30 33 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A. H. BELO CORPORATION AND SUBSIDIARIES Stock-based activity in the long-term incentive plan is summarized in the following tables:
- ------------------------------------------------------------------------------------------------------------------- Non-Qualified Stock Options 1996 1995 1994 - ------------------------------------------------------------------------------------------------------------------- Weighted Option Option Number of Average Number of Price Per Number of Price Per Options Price (A) Options Share (A) Options Share (A) - ------------------------------------------------------------------------------------------------------------------- Outstanding at January 1, 3,097,777 $24.16 1,496,750 $24-$53 1,428,002 $22-$49 Two-for-one stock split - - 1,351,907 $12-$30 - - Granted 1,237,850 $35.63 699,300 $30-$35 322,795 $50-$53 Exercised (500,662) $19.82 (424,038) $12-$27 (247,045) $22-$49 Canceled (15,027) $28.69 (26,142) $15-$27 (7,002) $29-$49 --------- --------- ---------- Outstanding at December 31, 3,819,938 $28.43 3,097,777 $12-$35 1,496,750 $24-$53 - ------------------------------------------------------------------------------------------------------------------- Weighted average fair value of options granted $9.68 - -------------------------------------------------------------------------------------------------------------------
(A) Disclosure of weighted average price information is required by SFAS 123 for years beginning after December 15, 1995.
Restricted Stock 1996 1995 1994 - ------------------------------------------------------------------------------------------------------------------- Price Price Price Shares Per Share Shares Per Share Shares Per Share - ------------------------------------------------------------------------------------------------------------------- Outstanding at January 1, 279,096 $15-$35 212,371 $29-$57 211,792 $29-$53 Two-for-one stock split - - 211,891 $15-$31 - - Granted - - - - 48,360 $53-$57 Vested (66,787) $20-$35 (117,261) $15-$35 (46,971) $30-$57 Forfeited - - (27,905) $15-$35 (810) $29-$43 ------- --------- --------- ------- Outstanding at December 31, 212,309 $15-$35 279,096 $15-$35 212,371 $29-$57 - -------------------------------------------------------------------------------------------------------------------
A provision for restricted shares is made ratably over the restriction period. Expense recognized under the plan for restricted shares was $1,664,000, $2,223,000 and $2,146,000 in 1996, 1995 and 1994, respectively. The following table summarizes information about non-qualified stock options outstanding at December 31, 1996:
- -------------------------------------------------------------------------------------------------------------- Number of Weighted Average Weighted Average Number of Weighted Average Range of Options Remaining Exercise Options Exercise Exercise Prices Outstanding Life (years) Price Exercisable Price - -------------------------------------------------------------------------------------------------------------- $12-$20 863,654 (A) 4.3 $16.71 863,654 $16.71 $22-$31 1,070,244 (B) 7.6 $25.72 854,829 $25.33 $35-$39 1,886,040 (C) 9.6 $35.33 265,959 $34.75 --------- ------- $12-$39 3,819,938 7.8 $28.43 1,984,442 $22.84 - --------------------------------------------------------------------------------------------------------------
(A) Comprised of Series A Shares, except for 67,390 Series B Shares (B) Comprised of Series A Shares (C) Comprised of Series B Shares 31 34 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A. H. BELO CORPORATION AND SUBSIDIARIES Pro forma information regarding net earnings and earnings per share has been determined as if the Company had accounted for its employee stock options under the fair value method of SFAS 123. The fair value for those options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions for 1996: risk-free interest rate of 6.22%; dividend yield of 1.23%; volatility factor of the expected market price of the Company's common stock of .206; and weighted-average expected life of the options of 5.07 years. For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting periods. Because options vest over a period of several years and additional awards are generally made each year, the full effect of applying SFAS 123 for providing pro forma disclosure will not be reflected until the completion of one full vesting cycle. Therefore, the pro forma information presented below is not indicative of the effects on reported or pro forma net earnings for future years. The Company's pro forma information follows:
- ----------------------------------------------------------------------- In thousands, except per share amounts 1996 1995 - ----------------------------------------------------------------------- Pro forma net earnings $85,839 $66,505 Pro forma net earnings per share $ 2.09 $ 1.68 - -----------------------------------------------------------------------
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 $104,298,000 at December 31, 1996 for broadcasts scheduled through August 2001. Advance payments on plant and equipment expenditures at December 31, 1996 primarily relate to newspaper production equipment, broadcast equipment and building renovations and improvements. Required future payments for capital expenditures for 1997 and 1998 are $18,724,000 and $1,000,000, respectively. Total lease expense for property and equipment was $3,333,000, $3,435,000 and $3,131,000 in 1996, 1995 and 1994, respectively. 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. 32 35 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A. H. BELO CORPORATION AND SUBSIDIARIES 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 5,336,872 shares under another Board authorization. On May 7, 1996, the Company completed a public offering of 5,750,000 shares of Series A Common Stock, resulting in net proceeds of approximately $198,500,000. These proceeds were used to reduce long term debt. During the fourth quarter of 1996, the Company borrowed $306,146,000 to purchase 8,321,700 shares of treasury stock. Had these transactions occurred at January 1, 1996, earnings per share for the Company would have been $2.22. NOTE 9: OTHER INCOME AND EXPENSE - ----------------------------------------------------------------------------- In 1994, the Company 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 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 ($1,564,000 after-tax or 4 cents per share). In 1996, the Company sold its interest in its programming distribution partnership, resulting in a gain of $3,895,000 ($2,337,000 after-tax or 6 cents per share). NOTE 10: SUPPLEMENTAL CASH FLOW INFORMATION - ------------------------------------------------------------------------------ Net cash provided by operations reflects cash payments for interest and income taxes during the years ended December 31, 1996, 1995 and 1994 as follows:
- ---------------------------------------------------------------------------------------------------------- In thousands 1996 1995 1994 - ---------------------------------------------------------------------------------------------------------- Interest paid, net of amounts capitalized $27,201 $30,724 $14,564 Income taxes paid, net of refunds $43,344 $39,427 $26,618 - ----------------------------------------------------------------------------------------------------------
NOTE 11: SUBSEQUENT EVENTS - -------------------------------------------------------------------------------- On February 28, 1997, the Company completed the acquisition of the Providence Journal Company ("Providence Journal") in a merger transaction by issuing 25,394,564 Series A shares and paying $587,096,000 in cash to Providence Journal shareholders. In addition, the Company assumed Providence Journal debt of approximately $200,000,000 and incurred acquisition related costs of approximately $100,000,000, including the cash-out of Providence Journal employee stock options and stock-based compensation, the settlement of employment agreements and other merger-related costs. The transaction will be accounted for as a purchase and is expected to be dilutive to the Company's earnings primarily due to the amortization of intangible assets resulting from the transaction. Had the transaction been complete as of December 31, 1996, the Company's pro forma capitalization would have resulted in total long-term debt of $1.5 billion and total shareholders' equity of $1.3 billion. As a result of the merger, the Company currently owns two television stations in the Seattle, Washington market (KIRO and KING). To comply with Federal Communications Commission regulations that require the Company to divest one of these stations, the Company announced an agreement among multiple parties whereby, through an exchange of assets, it will exchange KIRO for CBS affiliate KMOV-TV in St. Louis, Missouri. The exchange is subject to obtaining customary regulatory approvals. In January 1997, in preparation for the Providence Journal transaction, the Company replaced its existing $1,000,000,000 revolving credit agreement with a new $1,500,000,000 five-year facility and a $500,000,000 364-day facility. The terms of the new agreements are generally consistent with those of the previous facility. 33 36 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A. H. BELO CORPORATION AND SUBSIDIARIES NOTE 12: 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 involve the sale of advertising space in published issues, the sale of newspapers to distributors and individual subscribers and commercial printing. The Company's principal newspaper is The Dallas Morning News and is located in Dallas, Texas. 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 1994 has been reclassified to conform to the current year presentation. Selected segment data for the years ended December 31, 1996, 1995 and 1994 is as follows:
- ---------------------------------------------------------------------------------------------------------- In thousands 1996 1995 1994 - ---------------------------------------------------------------------------------------------------------- Net operating revenues Broadcasting (A) $ 333,396 $ 322,642 $ 258,040 Newspaper publishing (B) 487,242 409,099 369,366 Other 3,670 3,602 719 - ---------------------------------------------------------------------------------------------------------- $ 824,308 $ 735,343 $ 628,125 - ---------------------------------------------------------------------------------------------------------- Earnings from operations Broadcasting (A) $ 83,862 $ 83,921 $ 81,319 Newspaper publishing (B) 103,046 69,999 66,568 Other (1,238) (3,972) (874) Corporate expenses (20,021) (13,385) (16,014) - ---------------------------------------------------------------------------------------------------------- $ 165,649 $ 136,563 $ 130,999 - ---------------------------------------------------------------------------------------------------------- Depreciation and amortization Broadcasting (A) $ 38,975 $ 37,795 $ 25,077 Newspaper publishing (B) 25,072 20,916 20,716 Other 200 31 2 Corporate 936 705 610 - ---------------------------------------------------------------------------------------------------------- $ 65,183 $ 59,447 $ 46,405 - ---------------------------------------------------------------------------------------------------------- Identifiable assets Broadcasting (A) $ 709,884 $ 726,766 $ 566,766 Newspaper publishing (B) 372,958 341,025 271,179 Other 6,118 8,126 1,381 Corporate (C) 135,112 78,105 74,465 - ---------------------------------------------------------------------------------------------------------- $ 1,224,072 $ 1,154,022 $ 913,791 - ---------------------------------------------------------------------------------------------------------- Capital expenditures Broadcasting (A) $ 22,814 $ 19,605 $ 24,561 Newspaper publishing (B) 18,268 19,217 22,227 Other 1,338 154 62 Corporate 7,380 1,854 521 - ---------------------------------------------------------------------------------------------------------- $ 49,800 $ 40,830 $ 47,371 - ----------------------------------------------------------------------------------------------------------
(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) Newspaper publishing segment data for 1996 includes the operations of the Bryan-College Station Eagle and the Owensboro Messenger-Inquirer, which were purchased by the Company in December 1995 and January 1996, respectively. (See Note 2). (C) Corporate assets in 1996 include a 38 percent equity interest in the Riverside Press-Enterprise newspaper. 34 37 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A. H. BELO CORPORATION AND SUBSIDIARIES NOTE 13: QUARTERLY RESULTS OF OPERATIONS (unaudited) - ----------------------------------------------------------------------------- Following is a summary of the unaudited quarterly results of operations for 1996 and 1995:
- ------------------------------------------------------------------------------------------------------------------ In thousands, except per share amounts 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter - ------------------------------------------------------------------------------------------------------------------ 1996 Net operating revenues Broadcasting $ 70,607 $ 90,385 $ 79,803 $ 92,601 Newspaper publishing (A) 115,871 121,682 121,575 128,114 Other 766 752 769 1,383 - ------------------------------------------------------------------------------------------------------------------ $ 187,244 $ 212,819 $ 202,147 $ 222,098 - ------------------------------------------------------------------------------------------------------------------ Earnings from operations Broadcasting $ 10,213 $ 27,616 $ 16,804 $ 29,229 Newspaper publishing (A) 21,204 25,659 26,757 29,426 Other (1,001) 7 (112) (132) Corporate expenses (4,505) (5,229) (7,014) (3,273) - ------------------------------------------------------------------------------------------------------------------ $ 25,911 $ 48,053 $ 36,435 $ 55,250 - ------------------------------------------------------------------------------------------------------------------ Net earnings $ 12,724(B) $ 25,496 $ 18,926 $ 30,359 - ------------------------------------------------------------------------------------------------------------------ Net earnings per common - ------------------------------------------------------------------------------------------------------------------ and common equivalent share $ .33 $ .60 $ .42 $ .77 - ------------------------------------------------------------------------------------------------------------------ 1995 Net operating revenues Broadcasting (C) $ 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 (C) $ 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(D) $ 12,792 $ 21,143 - ------------------------------------------------------------------------------------------------------------------ Net earnings per common and common equivalent share $ .28 $ .53 $ .33 $ .54 - ------------------------------------------------------------------------------------------------------------------
(A) Newspaper publishing results include the operations of the Bryan-College Station Eagle and the Owensboro Messenger-Inquirer since December 1995 and January 1996, respectively. (See Note 2). (B) Net earnings for the first quarter of 1996 include a gain of $3,895,000 on the sale of Belo's interest in its programming distribution partnership. (See Note 9). (C) Broadcasting results include the operations of KIRO-TV since February 1, 1995. (See Note 2). (D) Net earnings for the second quarter of 1995 include an after-tax gain of $1,564,000 related to the sale of Belo's investment in Stauffer Communications, Inc. (See Note 9). 35 38 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, 1996, 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 36 39 EXHIBIT INDEX
EXHIBIT SEQ. NUMBER DESCRIPTION PAGE NO. - ------ ----------- -------- 2.1 Agreement and Plan of Merger, dated as of September 26, 1996 (Exhibit 2.1 to N/A Form 8-K dated September 27, 1996) 3.1 Certificate of Incorporation of the Company (Exhibit 3.1 to the Company's Annual N/A Report on Form 10-K dated February 28, 1996 (the "1995 Form 10-K")) 3.2 Certificate of Correction to Certificate of Incorporation dated May 13, 1987 N/A (Exhibit 3.2 to the 1995 Form 10-K) 3.3 Certificate of Designation of Series A Junior Participating Preferred Stock of the N/A Company dated April 16, 1987 (Exhibit 3.3 to the 1995 Form 10-K) 3.4 Certificate of Amendment of Certificate of Incorporation of the Company dated N/A May 4, 1988 (Exhibit 3.4 to the 1995 Form 10-K) 3.5 Certificate of Amendment of Certificate of Incorporation of the Company dated N/A May 3, 1995 (Exhibit 3.5 to the 1995 Form 10-K) 3.6 Amended Certificate of Designation of Series A Junior Participating Preferred N/A Stock of the Company dated May 4, 1988 (Exhibit 3.6 to the 1995 Form 10-K) 3.7 Certificate of Designation of Series B Common Stock of the Company dated N/A May 4, 1988 (Exhibit 3.7 to the 1995 Form 10-K) 3.8 Bylaws of the Company, effective February 22, 1995 (Exhibit 3.7 to the N/A 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 N/A Common Stock (Exhibit 4.2 to the Company's Annual Report on Form 10-K dated March 18, 1993 (the "1992 Form 10-K")) 4.3 Specimen Form of Certificate representing shares of the Company's Series B N/A 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 N/A between the Company and Chemical Mellon Shareholder Services, L.L.C., a New York banking corporation (Exhibit 4.4 to the 1995 Form 10-K) 4.5 Supplement No. 1 to Amended and Restated Rights Agreement between the N/A Company and The First National Bank of Boston dated as of November 11, 1996 (Exhibit 4.5 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1996)
E-1 40
EXHIBIT SEQ. NUMBER DESCRIPTION PAGE NO. - ------ ----------- -------- 10.1 Contracts relating to television broadcasting: (1) Form of Agreement for Affiliation between WFAA-TV in Dallas, Texas and ABC N/A (Exhibit 10.1 (1) to the 1995 Form 10-K) (2) Form of Agreement for Affiliation between KXTV in Sacramento, California and N/A ABC (Exhibit 10.1 (2) to the 1995 Form 10-K) (3) Contract for Affiliation between KHOU-TV in Houston, Texas and CBS (Exhibit N/A 10.1(3) to the 1995 Form 10-K) (4) Contract for Affiliation between WWL-TV in New Orleans, Louisiana and CBS N/A (Exhibit 10.1 (4) to the 1995 Form 10-K) 10.2 Financing agreements: (1) Credit Agreement dated as of July 31, 1996 among the Company and Texas N/A Commerce Bank, National Association as administrative agent, The Chase Manhattan Bank, as competitive advance facility agent, Bank of America National Trust and Savings Association and Bank of Tokyo-Mitsubishi, Ltd. as co- syndication agents, NationsBank as documentation agent, and Societe Generale and The Fuji Bank, Limited as co-agents (Exhibit 10.4 (1) to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1996) (2) Five Year $1,500,000,000 revolving credit and competitive advance facility dated _____ as of January 31, 1997 among the Company and Texas Commerce Bank National Association as Administrative Agent, The Chase Manhattan Bank, as Competitive Advance Facility Agent, Bank of America National Trust and Savings Association and Bank of Tokyo-Mitsubishi, Ltd. as Co-Syndication Agents, and NationsBank as Documentation Agent (3) 364-Day $500,000,000 revolving credit and competitive advance facility dated as _____ of January 31, 1997 among the Company and Texas Commerce Bank National Association as Administrative Agent, The Chase Manhattan Bank, as Competitive Advance Facility Agent, Bank of America National Trust and Savings Association and Bank of Tokyo-Mitsubishi, Ltd. as Co-Syndication Agents, and NationsBank as Documentation Agent 10.3 Compensatory plans: (1) Management Security Plan _____ . (2) The A. H. Belo Corporation 1986 Long-Term Incentive Plan (Effective May 3, _____ 1989, as amended by Amendments 1, 2, 3, 4, and 5) (3) Amendment No. 6 to 1986 Long-Term Incentive Plan (Exhibit 10.3(13) to the N/A 1992 Form 10-K) (4) Amendment No. 7 to 1986 Long-Term Incentive Plan (Exhibit 10.3(9) to the 1995 N/A Form 10-K)
E-2 41
EXHIBIT SEQ. NUMBER DESCRIPTION PAGE NO. - ------ ----------- -------- (5) The A. H. Belo Corporation Employee Savings and Investment Plan Amended and N/A Restated February 2, 1996 (Exhibit 10.3(10) to the 1995 Form 10-K) (6) The G. B. Dealey Retirement Pension Plan (as Amended and Restated Generally N/A Effective January 1, 1989) (Exhibit 10.3(11) to the 1995 Form 10-K) (7) Master Trust Agreement, effective as of July 1, 1992, between A. H. Belo N/A Corporation and Mellon Bank, N. A. (Exhibit 10.3(26) to the Company's Annual Report on Form 10-K dated March 18, 1994 (the "1993 Form 10-K")) (8) A. H. Belo Corporation Supplemental Executive Retirement Plan (Exhibit 10.3(27) N/A to the 1993 Form 10-K) (9) Trust Agreement dated February 28, 1994, between the Company and Mellon Bank, N/A N. A. (Exhibit 10.3(28) to the 1993 Form 10-K) (10) A. H. Belo Corporation 1995 Executive Compensation Plan (Exhibit 10.3(16) to the N/A 1995 Form 10-K) (11) A. H. Belo Corporation Employee Thrift Plan, effective January 1, 1995 (Exhibit 10.3 N/A (17) to the 1995 Form 10-K) (12) First Amendment to A. H. Belo Corporation Employee Thrift Plan (Exhibit 10.3(18) to N/A the 1995 Form 10-K) (13) Second Amendment to A. H. Belo Corporation Employee Thrift Plan (Exhibit 10.3(19) N/A to the 1995 Form 10-K) (14) Master Defined Contribution Trust Agreement by and between A. H. Belo Corporation N/A and Mellon Bank, N.A. (Exhibit 10.3(20) to the 1995 Form 10-K) (15) First Amendment to Master Defined Contribution Trust Agreement (Exhibit 10.3(21) to N/A the 1995 Form 10-K) (16) Second Amendment to Master Defined Contribution Trust Agreement (Exhibit 10.3(22) N/A to the 1995 Form 10-K) (17) A. H. Belo Corporation 1995 Executive Compensation Plan (as restated to incorporate _____ amendments through May 14, 1997) 21 Subsidiaries of the Company 23 Consent of Ernst & Young LLP 27 Financial Data Schedule (filed electronically with the Securities and Exchange Commission)
E-3 EX-10.2(2) 2 5-YEAR CREDIT AGREEMENT DATED JANUARY 31, 1997 1 EXHIBIT 10.2(2) ================================================================================ CREDIT AGREEMENT dated as of January 31, 1997 among A. H. BELO CORPORATION as Borrower, The Lenders Party Hereto, TEXAS COMMERCE BANK NATIONAL ASSOCIATION as Administrative Agent, THE CHASE MANHATTAN BANK, as Competitive Advance Facility Agent BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION BANK OF TOKYO-MITSUBISHI, LTD. as Co-Syndication Agents NATIONSBANK as Documentation Agent FIVE YEAR $1,500,000,000 REVOLVING CREDIT AND COMPETITIVE ADVANCE FACILITY ================================================================================ 2 TABLE OF CONTENTS
Page ---- ARTICLE I Definitions ----------- SECTION 1.01. Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 SECTION 1.02. Classification of Loans and Borrowings . . . . . . . . . . . . . . 14 SECTION 1.03. Terms Generally . . . . . . . . . . . . . . . . . . . . . . . . . 15 ARTICLE II The Credits ----------- SECTION 2.01. Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 SECTION 2.02. Loans and Borrowings . . . . . . . . . . . . . . . . . . . . . . . 16 SECTION 2.03. Requests for Revolving Borrowings . . . . . . . . . . . . . . . . . 16 SECTION 2.04. Competitive Bid Procedure . . . . . . . . . . . . . . . . . . . . . 17 SECTION 2.05. Funding of Borrowings . . . . . . . . . . . . . . . . . . . . . . . 19 SECTION 2.06. Interest Elections . . . . . . . . . . . . . . . . . . . . . . . . 20 SECTION 2.07. Termination and Reduction of Commitments . . . . . . . . . . . . . 21 SECTION 2.08. Repayment of Loans; Evidence of Debt . . . . . . . . . . . . . . . 22 SECTION 2.09. Prepayment of Loans . . . . . . . . . . . . . . . . . . . . . . . . 22 SECTION 2.10. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 SECTION 2.11. Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 SECTION 2.12. Alternate Rate of Interest . . . . . . . . . . . . . . . . . . . . 25 SECTION 2.13. Increased Costs . . . . . . . . . . . . . . . . . . . . . . . . . . 25 SECTION 2.14. Break Funding Payments . . . . . . . . . . . . . . . . . . . . . . 27 SECTION 2.15. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 SECTION 2.16. Payments Generally; Pro Rata Treatment; Sharing of Set-offs . . . . 28 SECTION 2.17. Mitigation Obligations; Replacement of Lenders . . . . . . . . . . 29 SECTION 2.18 Extension of Maturity Date . . . . . . . . . . . . . . . . . . . . 30 ARTICLE III Representations and Warranties ------------------------------ SECTION 3.01. Organization; Powers . . . . . . . . . . . . . . . . . . . . . . . 31 SECTION 3.02. Authorization; Enforceability . . . . . . . . . . . . . . . . . . . 31 SECTION 3.03. Governmental Approvals; No Conflicts . . . . . . . . . . . . . . . 31 SECTION 3.04. Financial Condition; No Material Adverse Change . . . . . . . . . 32 SECTION 3.05. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 SECTION 3.06. Litigation and Environmental Matters . . . . . . . . . . . . . . . 32 SECTION 3.07. Compliance with Laws and Agreements . . . . . . . . . . . . . . . . 33 SECTION 3.08. Certain Legal Matters . . . . . . . . . . . . . . . . . . . . . . . 33 SECTION 3.09. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 SECTION 3.10. ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
3 3 SECTION 3.11. Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 SECTION 3.12. Acquisition of The Providence Journal Company . . . . . . . . . . . 34 ARTICLE IV Conditions ---------- SECTION 4.01. Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . 34 SECTION 4.02. Each Credit Event . . . . . . . . . . . . . . . . . . . . . . . . . 35 ARTICLE V Affirmative Covenants --------------------- SECTION 5.01. Financial Statements and Other Information . . . . . . . . . . . . 36 SECTION 5.02. Notices of Material Events . . . . . . . . . . . . . . . . . . . . 37 SECTION 5.03. Existence; Conduct of Business . . . . . . . . . . . . . . . . . . 38 SECTION 5.04 Payment of Obligations . . . . . . . . . . . . . . . . . . . . . . 38 SECTION 5.05. Maintenance of Properties; Insurance . . . . . . . . . . . . . . . 38 SECTION 5.06. Books and Records; Inspection Rights . . . . . . . . . . . . . . . 38 SECTION 5.07. Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . 38 SECTION 5.08. Use of Proceeds . . . . . . . . . . . . . . . 39 ARTICLE VI Negative Covenants ------------------ SECTION 6.01. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 SECTION 6.02. Fundamental Changes . . . . . . . . . . . . . . . . . . . . . . . . 39 SECTION 6.03. Transactions with Affiliates . . . . . . . . . . . . . . . . . . . 39 SECTION 6.04. Restrictive Agreements . . . . . . . . . . . . . . . . . . . . . . 40 SECTION 6.05. Leverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 SECTION 6.06. Interest Coverage . . . . . . . . . . . . . . . . . . . . . . . . . 40 ARTICLE VII Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . 40 ----------------- ARTICLE VIII The Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 ----------
4 4 ARTICLE IX Miscellaneous ------------- SECTION 9.01 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 SECTION 9.02 Waivers, Amendments . . . . . . . . . . . . . . . . . . . . . . . . 46 SECTION 9.03 Expenses; Indemnity; Damage Waiver . . . . . . . . . . . . . . . . 46 SECTION 9.04 Successors & Assigns . . . . . . . . . . . . . . . . . . . . . . . 47 SECTION 9.05 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 SECTION 9.06 Counterparts; Integration; Effectiveness . . . . . . . . . . . . . 50 SECTION 9.07 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 SECTION 9.08 Right of Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . 50 SECTION 9.09 Governing Law; Jurisdiction; Consent to Service of Process . . . . . . . . . . . . . . . . . . . . . . . . 50 SECTION 9.10 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . 51 SECTION 9.11 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 SECTION 9.12 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . 51 SECTION 9.13 Interest Rate Limitations . . . . . . . . . . . . . . . . . . . . . 52 Exhibits and Schedules ---------------------- Exhibit A Form of Assignment and Acceptance Exhibit B-1 Form of Opinion of Counsel -- General Counsel of A. H. Belo Corporation Exhibit B-2 Form of Opinion of Counsel -- Locke Purnell Rain Harrell Exhibit B-3 Form of Opinion of Counsel -- Wiley, Rein & Fielding Schedule 2.01 Commitments Schedule 3.06 Litigation, Labor and Environmental Matters Schedule 6.01 Liens Schedule 6.05 Subordinated Debt
5 CREDIT AGREEMENT dated as of January 31, 1997, among A. H. BELO CORPORATION, the LENDERS party hereto, THE CHASE MANHATTAN BANK, a New York banking corporation ("Chase"), as Competitive Advance Facility Agent (in such capacity, the "CAF Agent"), BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION and BANK OF TOKYO-MITSUBISHI, LTD., as Co-Syndication Agents, NATIONSBANK OF TEXAS, N.A., as Documentation Agent, and TEXAS COMMERCE BANK NATIONAL ASSOCIATION, as Administrative Agent (in such capacity, the "Administrative Agent"; and, together with the CAF Agent, the "Agents"). The Borrower (such term and each other capitalized term used but not otherwise defined herein having the meaning assigned to it in Article I) has requested the Lenders to extend credit in order to enable it to borrow on a revolving credit basis on and after the date hereof and at any time and from time to time prior to the Maturity Date a principal amount not to exceed $1,500,000,000. The proceeds of such borrowings are to be used to finance a portion of the cost of acquiring The Providence Journal Company (including related refinancing of indebtedness and transaction costs) and for general corporate purposes, including working capital, acquisitions, stock repurchases and, if the Borrower shall so determine, commercial paper backup. Up to $100,000,000 of the proceeds of such borrowings and the borrowings under the 364-day revolving credit and competitive advance facility established pursuant to the credit agreement dated the date hereof among the Borrower, the Lenders and the Agents may be used to fund the operations of AHN and TVFN. The Borrower has also requested the Lenders to provide a procedure pursuant to which the Lenders may be invited to bid on an uncommitted basis on short-term borrowings by the Borrower. The Lenders are willing to extend such credit to the Borrower on the terms and subject to the conditions herein set forth. The parties hereto agree as follows: ARTICLE I Definitions SECTION 1.01. Defined Terms. As used in this Agreement, the following terms have the meanings specified below: "ABR", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Alternate Base Rate. "Adjusted CD Rate" means, with respect to any CD Borrowing for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/100 of 1%) equal to the sum of (a) the Fixed CD Rate for such Interest Period multiplied by the Statutory Reserve Rate, plus (b) the Assessment Rate. "Adjusted LIBO Rate" means, with respect to any Eurodollar Borrowing for any Interest Period, an interest rate per annum (rounded 6 2 upwards, if necessary, to the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate. "Administrative Agent" means Texas Commerce Bank National Association, as administrative agent for the Lenders hereunder. "Administrative Questionnaire" means an Administrative Questionnaire in a form supplied by the Administrative Agent. "Affiliate" means, when used with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified. "AHN" means America's Health Network, a subsidiary of The Providence Journal Company. "Alternate Base Rate" means, for any day, a rate per annum equal to the greatest of (a) the Prime Rate in effect on such day, (b) the Base CD Rate in effect on such day plus 1% and (c) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. Any change in the Alternate Base Rate due to a change in the Prime Rate, the Base CD Rate or the Federal Funds Effective Rate shall be effective from and including the effective date of such change in the Prime Rate, the Base CD Rate or the Federal Funds Effective Rate, respectively. "Applicable Percentage" means, with respect to any Eurodollar Loan (other than any Eurodollar Competitive Loan) or CD Loan or with respect to the facility fees referred to in Section 2.10(a), as the case may be, the applicable percentage set forth in the table below under the caption "Eurodollar Spread", "CD Spread" or "Facility Fee Percentage", as the case may be, based upon the ratio of Funded Debt to Pro Forma Operating Cash Flow as of the end of and for the most recent period of four consecutive fiscal quarters for which financial statements of the Borrower are required to have been delivered under Section 5.01(a) or (b), whether or not financial statements in respect of any subsequent period shall have been delivered:
Facility Fee Eurodollar Spread CD Spread ------------ ----------------- --------- Ratio Percentage ----- ---------- Category 1 Below 3.0 to 1.0 0.0700% 0.1550% 0.2800% Category 2 At least 3.0 to 1.0 but below 3.5 to 1.0 0.080% 0.1700% 0.2950% Category 3 At least 3.5 to 1.0 but below 4.0 to 1.0 0.1000% 0.2250% 0.3500% Category 4 At least 4.0 to 1.0 but below 4.5 to 1.0 0.1250% 0.2750% 0.4000% Category 5 At least 4.5 to 1.0 but below 5.0 to 1.0 0.1500% 0.3500% 0.4750% Category 6 Greater than or equal to 5.0 to 1.0 0.1875% 0.4375% 0.5625%
7 3 At any time when financial statements required to have been delivered under Section 5.01 (a) or (b) have not been delivered, the Applicable Percentage shall be determined by reference to Category 6. "Assessment Rate" means, for any day, the annual assessment rate in effect on such day that is payable by a member of the Bank Insurance Fund classified as "well-capitalized" and within supervisory subgroup "B" (or a comparable successor risk classification) within the meaning of 12 C.F.R. Part 327 (or any successor provision) to the Federal Deposit Insurance Corporation for insurance by such Corporation of time deposits made in dollars at the offices of such member in the United States; provided that if, as a result of any change in any law, rule or regulation, it is no longer possible to determine the Assessment Rate as aforesaid, then the Assessment Rate shall be such annual rate as shall be determined by the Administrative Agent to be representative of the cost to the Lenders of such insurance. "Assignment and Acceptance" means an assignment and acceptance entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 9.04), and accepted by the Administrative Agent, in the form of Exhibit A or another form approved by the Administrative Agent. "Availability Period" means the period from and including the Effective Date to but excluding the earlier of the Maturity Date and the date of termination of the Commitments. "Base CD Rate" means the sum of (a) the Three-Month Secondary CD Rate multiplied by the Statutory Reserve Rate plus (b) the Assessment Rate. "Board" means the Board of Governors of the Federal Reserve System of the United States of America. "Borrower" means A. H. Belo Corporation, a Delaware corporation. "Borrowing" means (a) a group of Revolving Loans of the same Type and, in the case of CD Loans or Eurodollar Loans, as to which a single Interest Period is in effect, (b) a Competitive Loan or group of Competitive Loans of the same Type made on the same date and as to which a single Interest Period is in effect. "Borrowing Request" means a request by the Borrower for a Revolving Borrowing in accordance with Section 2.03. "Business Day" means any day that is not a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to remain closed; provided that, when used in connection with a Eurodollar Loan, the term "Business Day" shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market. "CAF Agent" means The Chase Manhattan Bank as competitive advance facility agent for the Lenders hereunder. 8 4 "Capital Lease Obligations" of any Person means the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP. "CD", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Adjusted CD Rate. A "Change in Control" shall be deemed to have occurred if (a) any person or group (within the meaning of Rule 13d-5 of the Securities Exchange Act of 1934 as in effect on the date hereof) other than officers of the Borrower and Continuing Directors shall own, directly or indirectly, beneficially or of record, shares representing more than 50% of the aggregate ordinary voting power represented by the issued and outstanding capital stock of the Borrower; or (b) a majority of the seats (other than vacant seats) on the board of directors of the Borrower shall at any time be occupied by persons who are not Continuing Directors. "Change in Law" means (a) the adoption of any law, rule or regulation after the date of this Agreement, (b) any change in any law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the date of this Agreement or (c) compliance by any Lender (or, for purposes of Section 2.13, by any lending office of such Lender or by such Lender's holding company, if any) with any law, rule or regulation, or any guideline or directive (whether or not having the force of law) of any Governmental Authority, or any request of any Governmental Authority with which such Lender believes in good faith that it would be disadvantageous not to comply, in each case made or issued after the date of this Agreement. "Class", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are Revolving Loans or Competitive Loans. "Code" means the Internal Revenue Code of 1986, as amended from time to time. "Commitment" means, with respect to each Lender, the commitment of such Lender to make Revolving Loans hereunder, expressed as an amount representing the maximum aggregate amount of such Lender's Revolving Credit Exposure hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.09 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 9.04. The initial amount of each Lender's Commitment is set forth on Schedule 2.01, or in the Assignment and Acceptance pursuant to which such Lender shall have assumed its Commitment, as applicable. 9 5 "Competitive Bid" means an offer by a Lender to make a Competitive Loan in accordance with Section 2.04. "Competitive Bid Rate" means, with respect to any Competitive Bid, the Margin or the Fixed Rate, as applicable, offered by the Lender making such Competitive Bid. "Competitive Bid Request" means a request by the Borrower for Competitive Bids in accordance with Section 2.04. "Competitive Loan" means a Loan made pursuant to Section 2.04. "Continuing Directors" means (i) the members of the Board of Directors of the Borrower on the date hereof and (ii) future members of such Board of Directors who were nominated or appointed by a majority of the Continuing Directors at the date of their nomination or appointment. "Control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. "Controlling" and "Controlled" have meanings correlative thereto. "Default" means any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default. "Disclosed Matters" means the actions, suits and proceedings, labor controversies and the environmental matters disclosed in Schedule 3.06. The disclosure of information in Schedule 3.06 or in any other schedule or exhibit to this Agreement shall not constitute an admission by the Borrower that such information is material for any purpose, including applicable securities laws, other than this Agreement and the transactions provided for herein. "dollars" or "$" refers to lawful money of the United States of America. "Effective Date" means the date on which the conditions specified in Section 4.01 are satisfied (or waived in accordance with Section 9.02). "Environmental Laws" means all laws, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by any Governmental Authority, relating in any way to the environment, preservation or reclamation of natural resources, the management, release or threatened release of any Hazardous Material or to health and safety matters. "Environmental Liability" means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Borrower or any Subsidiary directly or indirectly resulting from or based upon 10 6 (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time. "ERISA Affiliate" means any trade or business (whether or not incorporated) that, together with the Borrower, is treated as a single employer under Section 414(b) or (c) of the Code, or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code. "ERISA Event" means (a) any "reportable event", as defined in Section 4043 of ERISA or the regulations issued thereunder, with respect to a Plan; (b) the existence with respect to any Plan of an "accumulated funding deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence of any liability under Title IV of ERISA with respect to the termination of any Plan or the withdrawal or partial withdrawal of the Borrower or any of its ERISA Affiliates from any Plan or Multiemployer Plan; (e) the receipt by the Borrower or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; or (f) the receipt by the Borrower or any ERISA Affiliate of any notice concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA. "Eurodollar", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Adjusted LIBO Rate (or, in the case of a Competitive Loan, the LIBO Rate). "Event of Default" has the meaning assigned to such term in Article VII. "Excluded Taxes" means, with respect to the Administrative Agent, any Lender or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, (a) income or franchise taxes imposed on (or measured by) its net income by the jurisdiction under the laws of which it is organized, or the jurisdiction in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located, (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction in which the Borrower is located and (c) in the case of a Foreign Lender (other than an assignee pursuant to a request by the Borrower under Section 2.17(b)), any U.S. Federal withholding tax imposed on amounts payable 11 7 to such Foreign Lender under this Agreement because of its failure or inability to comply with Section 2.15(e) or for any other reason, unless (and to the extent that) (i) such withholding tax liability arises or is increased by reason of a Change in Law occurring after such Foreign Lender becomes a Lender under this Agreement or (ii) such Foreign Lender's assignor (if any) was entitled, at the time of assignment, to receive additional amounts from the Borrower with respect to such withholding tax liability pursuant to Section 2.15(a). "FCC" means the Federal Communications Commission and any successors thereto. "Federal Funds Effective Rate" means, for any day, the weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for the day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it. "Film Contracts" mean contracts or agreements with suppliers which provide the right to broadcast certain specified film or video tape motion pictures. "Financial Officer" means the chief financial officer, vice president of finance, principal accounting officer, treasurer or controller of the Borrower. "Fixed CD Rate" means, with respect to any CD Borrowing for any Interest Period, the arithmetic average (rounded upwards, if necessary, to the next 1/100 of 1%) of the prevailing rates per annum bid at or about 10:00 a.m., New York City time, to the Administrative Agent on the first Business Day of such Interest Period by three negotiable certificate of deposit dealers of recognized standing selected by the Administrative Agent for the purchase at face value of negotiable certificates of deposit of major United States money center banks in a principal amount of $5,000,000 and with a maturity comparable to such Interest Period. "Fixed Rate" means, with respect to any Competitive Loan bearing interest at a fixed rate, the fixed rate of interest per annum specified by the Lender making such Competitive Loan in its related Competitive Bid. "Fixed Rate Loan" means a Competitive Loan bearing interest at a Fixed Rate. "Foreign Lender" means any Lender that is organized under the laws of a jurisdiction other than that in which the Borrower is located. For purposes hereof, the United States of America and each State thereof shall be considered to constitute a single jurisdiction. "Funded Debt" means without duplication, all Indebtedness, other than short-term obligations under Film Contracts. 12 8 "GAAP" means generally accepted accounting principles in the United States of America consistently applied. "Governmental Authority" means the government of the United States of America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government. "Guarantee" means any agreement by which the Borrower or any Subsidiary assumes, guarantees, endorses, contingently agrees to purchase or provide funds for the payment of, or otherwise becomes liable upon, the obligation of another Person, or agrees to maintain the net worth or working capital or other financial condition of any other Person or otherwise assure any creditor of such other Person against loss, but shall not include typical and customary indemnifications, representations and warranties made in connection with purchases and sales of property or issuances of securities. "Hedging Agreement" means any interest rate protection agreement, foreign currency exchange agreement, commodity price protection agreement or other interest or currency exchange rate or commodity price hedging arrangement. "Hazardous Materials" means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law. "Indebtedness" means, without duplication, the Borrower's and each Subsidiary's (a) obligations for borrowed money, (b) obligations representing the deferred purchase price of property (including, without limitation, under Film Contracts) other than accounts payable arising in connection with the purchase of inventory in the ordinary course of business, (c) obligations, whether or not assumed, secured by Liens on or payable out of the proceeds or production from property now or hereafter owned or acquired by the Borrower or any Subsidiary, (d) obligations created under any conditional purchase or other title retention agreements, (e) Capital Lease Obligations, letters of credit, bonds or similar instruments, bankers' acceptances, (f) obligations under Guarantees; provided, however, that Indebtedness shall not include obligations of the Borrower or any Subsidiary incurred in connection with the self-insurance program or employee benefit plans and programs of the Borrower or the Subsidiaries, and (g) obligations to make payments that would be required to be made in the event of an early termination, on the date Indebtedness of the Borrower or any Subsidiary is being determined, in respect of outstanding Hedging Agreements. "Indemnified Taxes" means Taxes other than Excluded Taxes. "Interest Coverage Ratio" means the ratio of Pro Forma Operating Cash Flow to Interest Expense. 13 9 "Interest Election Request" means a request by the Borrower to convert or continue a Revolving Borrowing in accordance with Section 2.06. "Interest Expense" means, with respect to the Borrower and the Subsidiaries for any period, the interest expense of the Borrower and the Subsidiaries determined on a consolidated basis in accordance with GAAP, including, without limitation, (a) the amortization of debt discounts, (b) the amortization of all fees (including, without limitation, fees with respect to interest rate protection agreements) payable in connection with the incurrence of Indebtedness and (c) the portion of any Capital Lease Obligation allocable to interest expense. "Interest Payment Date" means (a) with respect to any ABR Loan, the last day of each March, June, September and December, (b) with respect to any CD or Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Eurodollar Borrowing with an Interest Period of more than three months' duration or a CD Borrowing with an Interest Period of more than 90 days' duration, each day prior to the last day of such Interest Period that occurs at intervals of three months' duration or 90 days' duration, as the case may be, after the first day of such Interest Period, (c) with respect to any Fixed Rate Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Fixed Rate Borrowing with an Interest Period of more than 90 days' duration (unless otherwise specified in the applicable Competitive Bid Request), each day prior to the last day of such Interest Period that occurs at intervals of 90 days' duration after the first day of such Interest Period, and any other dates that are specified in the applicable Competitive Bid Request as Interest Payment Dates with respect to such Borrowing. "Interest Period" means (a) with respect to any Eurodollar Borrowing, the period commencing on the date of such Borrowing and ending on the numerically corresponding day in the calendar month that is one, two, three or six months thereafter, as the Borrower may elect, (b) with respect to any CD Borrowing, the period commencing on the date of such Borrowing and ending 30, 60, 90, 180, 270 or 360 days thereafter, as the Borrower may elect, and (c) with respect to any Fixed Rate Borrowing, the period (which shall not be less than 1 day or more than 360 days) commencing on the date of such Borrowing and ending on the date specified in the applicable Competitive Bid Request; provided, that (i) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless, in the case of a Eurodollar Borrowing only, such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day and (ii) any Interest Period pertaining to a Eurodollar Borrowing that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period. For purposes hereof, the date of a Borrowing initially shall be the date on which such Borrowing is made and, in the case of a Revolving Borrowing, thereafter shall be 14 10 the effective date of the most recent conversion or continuation of such Borrowing. "Lenders" means the Persons listed on Schedule 2.01 and any other Person that shall have become a party hereto pursuant to an Assignment and Acceptance, other than any such Person that ceases to be a party hereto pursuant to an Assignment and Acceptance. "LIBO Rate" means, with respect to any Eurodollar Borrowing for any Interest Period, the rate appearing on Page 3750 of the Telerate Service (or on any successor or substitute page of such Service, or any successor to or substitute for such Service, providing rate quotations comparable to those currently provided on such page of such Service, as determined by the Administrative Agent from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, as the rate for dollar deposits with a maturity comparable to such Interest Period. In the event that such rate is not available at such time for any reason, then the "LIBO Rate" with respect to such Eurodollar Borrowing for such Interest Period shall be the rate at which dollar deposits of $5,000,000 and for a maturity comparable to such Interest Period are offered to the principal London office of the Administrative Agent or any Affiliate designated by the Administrative Agent in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period. "Lien" means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities. "Loans" means the loans made by the Lenders to the Borrower pursuant to this Agreement. "Margin" means, with respect to any Competitive Loan bearing interest at a rate based on the LIBO Rate, the marginal rate of interest, if any, to be added to or subtracted from the LIBO Rate to determine the rate of interest applicable to such Loan, as specified by the Lender making such Loan in its related Competitive Bid. "Material Adverse Effect" means a material adverse effect on (a) the business, assets, operations or condition, financial or otherwise, of the Borrower and the Subsidiaries taken as a whole, (b) the ability of the Borrower to perform any of its obligations under this Agreement or (c) the rights of or benefits available to the Lenders under this Agreement. "Material Indebtedness" means Indebtedness (other than the Loans), of any one or more of the Borrower and the Subsidiaries in a 15 11 principal amount for any such Indebtedness in excess of $20,000,000 or in an aggregate principal amount for all such Indebtedness in excess of $35,000,000. "Maturity Date" means January 31, 2002, or any later date to which the Maturity Date has been extended pursuant to Section 2.18. "Multiemployer Plan" means a multiemployer plan as defined in Section 4001(a)(3) of ERISA. "Operating Cash Flow" means, for the Borrower and its Subsidiaries for any relevant period, on a consolidated basis, the sum of (i) earnings before income taxes for such period (without taking into account extraordinary or nonrecurring items), plus (ii) depreciation and amortization expense during such period, plus (iii) Interest Expense actually incurred or accrued during such period determined in accordance with GAAP; provided, however, that Operating Cash Flow shall not include (i) any income or loss attributable to any investment accounted for on the "equity" method of accounting or (ii) any operating cash flow (positive or negative) attributable to AHN or TVFN. "Other Taxes" means any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or from the execution or delivery of, or otherwise with respect to, this Agreement. "Participation Percentage" means, with respect to any Lender, the percentage of the total Commitments represented by such Lender's Commitment. If the Commitments have terminated or expired, the Participation Percentages shall be determined based upon the Commitments most recently in effect, giving effect to any assignments. "Permitted Liens" means (a) Liens for Taxes not yet due and payable, mechanic's Liens and materialman's, shipper's or warehouseman's Liens for services or materials and landlord's Liens for rental amounts for which payment is not yet due or which are being contested in good faith by appropriate proceedings, (b) Liens securing any purchase money Indebtedness (including Capital Lease Obligations relating to assets acquired after the date hereof) if such Liens do not encumber any property other than the property for the purchase of which such purchase money Indebtedness was incurred, (c) the currently existing Liens described in Schedule 6.01 hereto, if any, and renewals thereof, (d) pledges or deposits made to secure payment of worker's compensation, unemployment insurance, pensions, or other social security programs, (e) good-faith pledges or deposits made to secure performance of bids, tenders, contracts (other than for the repayment of borrowed money), or leases, or to secure statutory obligations, surety or appeal bonds, or indemnity, performance, or other similar bonds in the ordinary course of business, (f) encumbrances consisting of zoning restrictions, easements, utility district assessments or other restrictions on the use of property, none of which materially impairs the operation by the Borrower and the Subsidiaries (taken as a 16 12 whole) of their business, and none of which is violated by existing or proposed structures or land use where such violation would materially impair the operation by the Borrower and the Subsidiaries (taken as a whole) of their business, (g) the following, if the validity or amount thereof is being contested in good faith and by appropriate and lawful proceedings and so long as levy and execution thereon have been stayed and continue to be stayed, or they do not in the aggregate materially detract from the value of any material assets or the operations of the Borrower and the Subsidiaries taken as a whole: claims and Liens for Taxes due and payable; claims and Liens upon, and defects of title to, property, including any attachment of property or other legal process prior to adjudication of a dispute on the merits; and claims and Liens of mechanics, materialmen, warehousemen, carriers, landlords, or other Liens; judgment Liens; and (h) any Lien existing on any property or asset prior to the acquisition thereof by the Borrower or any Subsidiary or existing on any property or asset of any Person that becomes a Subsidiary after the date hereof prior to the time the Person becomes a Subsidiary; provided that (i) such Lien is not created in contemplation or connection with such acquisition or such Person becoming a Subsidiary, as the case may be, (ii) such Lien shall not apply to any other property or assets of the Borrower or any Subsidiary and (iii) such Lien shall secure only those obligations which it secures on the date of such acquisition or the date such Person becomes a Subsidiary, as the case may be. "PBGC" means the Pension Benefit Guarantee Corporation referred to and Defined in ERISA. "Person" means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity. "Plan" means any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect of which the Borrower or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA. "Prime Rate" means the rate of interest per annum publicly announced from time to time by Texas Commerce Bank National Association as its prime rate in effect at its principal office in Dallas; each change in the Prime Rate shall be effective from and including the date such change is publicly announced as being effective. "Prior Agreement" means the Borrower's credit agreement dated as of July 31, 1996. "Pro Forma Operating Cash Flow" means, for any relevant period, Operating Cash Flow of the Borrower and its Subsidiaries on a consolidated basis adjusted to include the Operating Cash Flow of any operating units or entities acquired during such relevant period and to exclude the Operating Cash Flow of any operating units or entities divested or sold during such relevant period (in each case, as if the acquisition or divestiture had occurred at the beginning of such relevant period). "Register" has the meaning set forth in Section 9.04. 17 13 "Required Lenders" means, at any time, Lenders having Revolving Credit Exposures and unused Commitments representing more than 51% of the sum of the total Revolving Credit Exposures and unused Commitments at such time; provided that, for purposes of declaring the Loans to be due and payable pursuant to Article VII, and for all purposes after the Loans become due and payable pursuant to Article VII or the Commitments expire or terminate, the outstanding Competitive Loans of the Lenders shall be included in their respective Revolving Credit Exposures in determining the Required Lenders. "Reportable Event" means any reportable event as defined by Section 4043 of ERISA and the regulations issued under such Section with respect to a Plan (other than a Multiemployer Plan), excluding, however, such events as to which the PBGC by regulation or by technical update waived the requirement of Section 4043(a) of ERISA that it be notified within 30 days of the occurrence of such event; provided that a failure to meet the minimum funding standard of Section 412 of the Code and Section 302 of ERISA shall be a reportable event regardless of the issuance of any waiver in accordance with Section 412(d) of the Code. "Revolving Credit Exposure" means, with respect to any Lender at any time, the sum of the outstanding principal amounts of such Lender's Revolving Loans at such time. "Revolving Loan" means a Loan made pursuant to Section 2.03. "Statutory Reserve Rate" means a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board to which the Administrative Agent is subject (a) with respect to the Adjusted CD Rate or the Base CD Rate, for new negotiable nonpersonal time deposits in dollars of over $100,000 with maturities approximately equal to (i) the applicable Interest Period, in the case of the Adjusted CD Rate, and (ii) three months, in the case of the Base CD Rate, and (b) with respect to the Adjusted LIBO Rate, for eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of the Board). Such reserve percentages shall include those imposed pursuant to such Regulation D. Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under such Regulation D or any comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage. "Subordinated Debt" means Indebtedness of the Borrower for borrowed money that satisfies the requirements set forth in Schedule 6.05 hereto. "subsidiary" means, with respect to any Person (the "parent") at any date, any corporation, limited liability company, partnership, association or other entity the accounts of which would 18 14 be consolidated with those of the parent in the parent's consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity (a) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, controlled or held, or (b) that is, as of such date, otherwise Controlled, by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent. "Subsidiary" means any subsidiary of the Borrower. "Taxes" means any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority. "Three-Month Secondary CD Rate" means, for any day, the secondary market rate for three-month certificates of deposit reported as being in effect on such day (or, if such day is not a Business Day, the next preceding Business Day) by the Board through the public information telephone line of the Federal Reserve Bank of New York (which rate will, under the current practices of the Board, be published in Federal Reserve Statistical Release H.15(519) during the week following such day), or, if such rate is not so reported on such day or such next preceding Business Day, the average of the secondary market quotations for three-month certificates of deposit of major money center banks in New York City received at approximately 10:00 a.m., New York City time, on such day (or, if such day is not a Business Day, on the next preceding Business Day) by the Administrative Agent from three negotiable certificate of deposit dealers of recognized standing selected by it. "Transactions" means the execution, delivery and performance by the Borrower of this Agreement and the borrowing of the Loans hereunder. "TVFN" means Television Food Network, a subsidiary of The Providence Journal Company. "Type", when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the Adjusted LIBO Rate, the Adjusted CD Rate, the Alternate Base Rate or, in the case of a Competitive Loan or Borrowing, the LIBO Rate or a Fixed Rate. "Withdrawal Liability" means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA. SECTION 1.02. Classification of Loans and Borrowings. For purposes of this Agreement, Loans may be classified and referred to by Class (e.g., a "Revolving Loan") or by Type (e.g., a "Eurodollar Loan") or by Class and Type (e.g., a "Eurodollar Revolving Loan"). 19 15 Borrowings also may be classified and referred to by Class (e.g., a "Revolving Borrowing") or by Type (e.g., a "Eurodollar Borrowing") or by Class and Type (e.g., a "Eurodollar Revolving Borrowing"). SECTION 1.03. Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation". The word "will" shall be construed to have the same meaning and effect as the word "shall". Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person's successors and assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement and (e) the words "asset" and "property" shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights. Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided that, if the Borrower notifies the Administrative Agent that the Borrower requests an amendment to any provision hereof to eliminate the effect of any change occurring after the date hereof in GAAP or in the application thereof on the operation of such provision (or if the Administrative Agent notifies the Borrower that the Required Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith. ARTICLE II The Credits SECTION 2.01. Commitments. Subject to the terms and conditions set forth herein, each Lender agrees to make Revolving Loans to the Borrower from time to time during the Availability Period in an aggregate principal amount that will not result in (a) such Lender's Revolving Credit Exposure exceeding such Lender's Commitment or (b) the sum of the total Revolving Credit Exposures plus the aggregate principal amount of outstanding Competitive Loans exceeding the total Commitments. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Revolving Loans. 20 16 SECTION 2.02. Loans and Borrowings. (a) Each Revolving Loan shall be made as part of a Borrowing consisting of Revolving Loans made by the Lenders ratably in accordance with their respective Participation Percentages. Each Competitive Loan shall be made in accordance with the procedures set forth in Section 2.04. The failure of any Lender to make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided that the Commitments and Competitive Bids of the Lenders are several and no Lender shall be responsible for any other Lender's failure to make Loans as required. (b) Subject to Section 2.12, (i) each Revolving Borrowing shall be comprised entirely of ABR Loans, CD Loans or Eurodollar Loans as the Borrower may request in accordance herewith, and (ii) each Competitive Borrowing shall be comprised entirely of Eurodollar Loans or Fixed Rate Loans as the Borrower may request in accordance herewith. Each Lender at its option may make any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of the Borrower to repay such Loan in accordance with the terms of this Agreement; provided further, that if the designation of any such foreign branch or Affiliate shall result in any costs, reductions or Taxes which would not otherwise have been applicable and for which such Lender would, but for this proviso, be entitled to request compensation under Section 2.13 or 2.15, such Lender shall not be entitled to request such compensation unless it shall in good faith have determined such designation to be necessary or advisable to avoid any material disadvantage to it. (c) At the commencement of each Interest Period for any CD Revolving Borrowing or Eurodollar Revolving Borrowing, such Borrowing shall be in an aggregate amount that is an integral multiple of $1,000,000 and not less than $5,000,000. At the time that each ABR Revolving Borrowing is made, such Borrowing shall be in an aggregate amount that is an integral multiple of $1,000,000 and not less than $5,000,000; provided that an ABR Revolving Borrowing may be in an aggregate amount that is equal to the entire unused balance of the total Commitments. Each Competitive Borrowing shall be in an aggregate amount that is an integral multiple of $1,000,000 and not less than $5,000,000. Borrowings of more than one Type and Class may be outstanding at the same time; provided that there shall not at any time be more than a total of 15 CD and Eurodollar Revolving Borrowings outstanding. (d) Notwithstanding any other provision of this Agreement, the Borrower shall not be entitled to request, or elect to convert or continue, any Borrowing if the Interest Period requested with respect thereto would end after the Maturity Date. SECTION 2.03. Requests for Revolving Borrowings. In order to request a Revolving Borrowing, the Borrower shall notify the Administrative Agent of such request by telephone (a) in the case of a Eurodollar Borrowing, not later than 11:00 a.m., Dallas time, three Business Days before the date of the proposed Borrowing, (b) in the case of a CD Borrowing, not later than 11:00 a.m., Dallas time, two Business Days before the date of the proposed Borrowing or (c) in the case of an ABR Borrowing, not later than 10:00 a.m., Dallas time, on 21 17 the date of the proposed Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Borrowing Request in a form approved by the Administrative Agent and signed by the Borrower. Each such telephonic and written Borrowing Request shall specify the following information in compliance with Section 2.02: (i) the aggregate amount of the requested Borrowing; (ii) the date of such Borrowing, which shall be a Business Day; (iii) whether such Borrowing is to be an ABR Borrowing, a CD Borrowing or a Eurodollar Borrowing; (iv) in the case of a CD Borrowing or a Eurodollar Borrowing, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term "Interest Period"; and (v) the location and number of the Borrower's account to which funds are to be disbursed, which shall comply with the requirements of Section 2.05. If no election as to the Type of Revolving Borrowing is specified, then the requested Revolving Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respect to any requested CD or Eurodollar Revolving Borrowing, then the Borrower shall be deemed to have selected an Interest Period of 30 days' duration, in the case of a CD Borrowing, or one month's duration, in the case of a Eurodollar Borrowing. Promptly following receipt of a Borrowing Request in accordance with this Section, the Administrative Agent shall advise each Lender of the details thereof and of the amount of such Lender's Loan to be made as part of the requested Borrowing. SECTION 2.04. Competitive Bid Procedure. (a) Subject to the terms and conditions set forth herein, from time to time during the Availability Period the Borrower may request Competitive Bids and may (but shall not have any obligation to) accept Competitive Bids and borrow Competitive Loans; provided that the sum of the total Revolving Credit Exposures plus the aggregate principal amount of outstanding Competitive Loans at any time shall not exceed the total Commitments. In order to request Competitive Bids, the Borrower shall notify the CAF Agent of such request by telephone, in the case of a Eurodollar Borrowing, not later than 11:00 a.m., Dallas time, four Business Days before the date of the proposed Borrowing and, in the case of a Fixed Rate Borrowing, not later than 10:00 a.m., Dallas time, one Business Day before the date of the proposed Borrowing; provided that a Competitive Bid Request shall not be made within five Business Days after the date of any previous Competitive Bid Request, unless any and all such previous Competitive Bid Requests shall have been withdrawn or all Competitive Bids received in response thereto rejected. Each such telephonic Competitive Bid Request shall be confirmed promptly by hand delivery or telecopy to the CAF Agent of a written Competitive Bid Request in a form approved by the CAF Agent and signed by the Borrower. Each such telephonic and written Competitive Bid Request 22 18 shall specify the following information in compliance with Section 2.02: (i) the aggregate amount of the requested Borrowing; (ii) the date of such Borrowing, which shall be a Business Day; (iii) whether such Borrowing is to be a Eurodollar Borrowing or a Fixed Rate Borrowing; (iv) the Interest Period to be applicable to such Borrowing, which shall be a period contemplated by the definition of the term "Interest Period"; and (v) the location and number of the Borrower's account to which funds are to be disbursed, which shall comply with the requirements of Section 2.05. Promptly following receipt of a Competitive Bid Request in accordance with this Section, the CAF Agent shall notify the Lenders of the details thereof by telecopy, inviting the Lenders to submit Competitive Bids. (b) Each Lender may (but shall not have any obligation to) make one or more Competitive Bids to the Borrower in response to a Competitive Bid Request. Each Competitive Bid by a Lender must be in a form approved by the CAF Agent and must be received by the Administrative Agent by telecopy, in the case of a Eurodollar Competitive Borrowing, not later than 9:30 a.m., Dallas time, three Business Days before the proposed date of such Competitive Borrowing, and in the case of a Fixed Rate Borrowing, not later than 9:30 a.m., Dallas time, on the proposed date of such Competitive Borrowing. Competitive Bids that do not conform substantially to the form approved by the CAF Agent may be rejected by the CAF Agent, and the CAF Agent shall notify the applicable Lender as promptly as practicable. Each Competitive Bid shall specify (i) the principal amount (which shall be a minimum of $5,000,000 and an integral multiple of $1,000,000 and which may equal the entire principal amount of the Competitive Borrowing requested by the Borrower) of the Competitive Loan or Loans that the Lender is willing to make, (ii) the Competitive Bid Rate or Rates at which the Lender is prepared to make such Loan or Loans (expressed as a percentage rate per annum in the form of a decimal to no more than four decimal places) and (iii) the Interest Period applicable to each such Loan and the last day thereof. (c) The CAF Agent shall promptly notify the Borrower by telecopy of the Competitive Bid Rate and the principal amount specified in each Competitive Bid and the identity of the Lender that shall have made such Competitive Bid. (d) Subject only to the provisions of this paragraph (d), the Borrower may accept or reject any Competitive Bid. The Borrower shall notify the CAF Agent by telephone, confirmed by telecopy in a form approved by the CAF Agent, whether and to what extent it has decided to accept or reject each Competitive Bid, in the case of a Eurodollar Competitive Borrowing, not later than 10:30 a.m., Dallas 23 19 time, three Business Days before the date of the proposed Competitive Borrowing, and in the case of a Fixed Rate Borrowing, not later than 10:30 a.m., Dallas time, on the proposed date of the Competitive Borrowing; provided, that (i) the failure of the Borrower to give such notice shall be deemed to be a rejection of each Competitive Bid, (ii) the Borrower shall not accept a Competitive Bid made at a particular Competitive Bid Rate if the Borrower rejects a Competitive Bid made at a lower Competitive Bid Rate, (iii) the aggregate amount of the Competitive Bids accepted by the Borrower shall not exceed the aggregate amount of the requested Competitive Borrowing specified in the related Competitive Bid Request, (iv) to the extent necessary to comply with clause (iii) above, the Borrower may accept Competitive Bids at the same Competitive Bid Rate in part, which acceptance, in the case of multiple Competitive Bids at such Competitive Bid Rate, shall be made pro rata in accordance with the amount of each such Competitive Bid, and (v) except pursuant to clause (iv) above, no Competitive Bid shall be accepted for a Competitive Loan unless such Competitive Loan is in a minimum principal amount of $5,000,000 and an integral multiple of $1,000,000; provided further that if a Competitive Loan must be in an amount less than $5,000,000 because of the provisions of clause (iv) above, such Competitive Loan may be for a minimum of $1,000,000 or any integral multiple thereof, and in calculating the pro rata allocation of acceptances of portions of multiple Competitive Bids at a particular Competitive Bid Rate pursuant to clause (iv) the amounts shall be rounded to integral multiples of $1,000,000 in a manner determined by the Borrower. A notice given by the Borrower pursuant to this paragraph (d) shall be irrevocable. (e) The CAF Agent shall promptly notify each bidding Lender by telecopy whether or not its Competitive Bid has been accepted (and, if so, the amount and Competitive Bid Rate so accepted), and each successful bidder will thereupon become bound, subject to the terms and conditions hereof, to make the Competitive Loan in respect of which its Competitive Bid has been accepted. (f) If any Lender that is an Affiliate of the CAF Agent shall elect to submit a Competitive Bid in its capacity as a Lender, it shall submit such Competitive Bid directly to the Borrower at least one quarter of an hour earlier than the time by which the other Lenders are required to submit their Competitive Bids to the CAF Agent pursuant to paragraph (b) of this Section. SECTION 2.05. Funding of Borrowings. (a) Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds by 12:00 noon, Dallas time, to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders. The Administrative Agent will make such Loans available to the Borrower by promptly crediting the amounts so received, in like funds, to an account of the Borrower maintained with the Administrative Agent in Dallas and designated by the Borrower in the applicable Borrowing Request or Competitive Bid Request. (b) Unless the Administrative Agent shall have received notice from a Lender prior to the proposed date of any Borrowing that such Lender will not make available to the Administrative Agent such 24 20 Lender's share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with paragraph (a) of this Section and may, in reliance upon such assumption, make available to the Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Administrative Agent, then the applicable Lender and the Borrower severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent, at (i) in the case of such Lender, the Federal Funds Effective Rate or (ii) in the case of the Borrower, the interest rate borne by the applicable Borrowing. If such Lender pays such amount to the Administrative Agent, then such amount shall constitute such Lender's Loan included in such Borrowing. SECTION 2.06. Interest Elections. (a) Each Revolving Borrowing initially shall be of the Type specified in the applicable Borrowing Request and, in the case of a CD or Eurodollar Revolving Borrowing, shall have an initial Interest Period as specified in such Borrowing Request. Thereafter, the Borrower may elect to convert such Borrowing to a different Type or to continue such Borrowing and, in the case of a CD or Eurodollar Revolving Borrowing, may elect new Interest Periods therefor, all as provided in this Section. The Borrower may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing. This Section shall not apply to Competitive Borrowings, which may not be converted or continued. (b) In order to make an election pursuant to this Section, the Borrower shall notify the Administrative Agent of such election by telephone by the time that a Borrowing Request would be required under Section 2.03 if the Borrower were requesting a Revolving Borrowing of the Type resulting from such election to be made on the effective date of such election. Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Interest Election Request in a form approved by the Administrative Agent and signed by the Borrower. (c) Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.02: (i) the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) below shall be specified for each resulting Borrowing); (ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day; 25 21 (iii) whether the resulting Borrowing is to be an ABR Borrowing, a CD Borrowing or a Eurodollar Borrowing; and (iv) if the resulting Borrowing is a CD Borrowing or a Eurodollar Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term "Interest Period". If any such Interest Election Request requests a CD Borrowing or Eurodollar Borrowing but does not specify an Interest Period, then the Borrower shall be deemed to have selected an Interest Period of 30 days' duration, in the case of a CD Borrowing, or one month's duration, in the case of a Eurodollar Borrowing. (d) Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each Lender of the details thereof and of such Lender's portion of each resulting Borrowing. (e) If the Borrower fails to deliver a timely Interest Election Request with respect to a CD or Eurodollar Revolving Borrowing prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be converted to an ABR Borrowing. Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing and the Administrative Agent, at the request of the Required Lenders, so notifies the Borrower, then, so long as an Event of Default is continuing (i) no outstanding Revolving Borrowing may be converted to or continued as a CD or Eurodollar Borrowing and (ii) unless repaid, each CD and Eurodollar Revolving Borrowing shall be converted to an ABR Borrowing at the end of the Interest Period applicable thereto. SECTION 2.07. Termination and Reduction of Commitments. (a) Unless previously terminated, the Commitments shall terminate on the Maturity Date; provided that the Commitments shall terminate at 3:00 p.m., Dallas time, on March 31, 1997, if the Effective Date has not occurred prior to such time. (b) Subject to Section 2.09(d), the Borrower may at any time terminate, or from time to time reduce, the Commitments; provided that (i) each reduction of the Commitments shall be in an amount that is an integral multiple of $1,000,000 and not less than $5,000,000 and (ii) the Borrower shall not terminate or reduce the Commitments if, after giving effect to any concurrent prepayment of the Loans, the sum of the Revolving Credit Exposures plus the aggregate principal amount of outstanding Competitive Loans would exceed the total Commitments. (c) The Borrower shall notify the Administrative Agent of any election to terminate or reduce the Commitments under paragraph (b) of this Section at least three Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof. Promptly following receipt of any notice, the Administrative Agent shall advise the Lenders of the contents thereof. Each notice delivered by the Borrower pursuant to this Section shall be irrevocable; provided that a notice of 26 22 termination of the Commitments delivered by the Borrower may state that such notice is conditioned upon the effectiveness of other credit facilities, in which case such notice may be revoked by the Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. Any termination or reduction of the Commitments shall be permanent. Each reduction of the Commitments shall be made ratably among the Lenders in accordance with their respective Commitments. SECTION 2.08. Repayment of Loans; Evidence of Debt. (a) The Borrower hereby unconditionally promises to pay (i) to the Administrative Agent for the account of each Lender the then unpaid principal amount of each Revolving Loan on the Maturity Date, (ii) to the Administrative Agent for the account of each Lender the then unpaid principal amount of each Competitive Loan on the last day of the Interest Period applicable to such Loan. (b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder. (c) The Administrative Agent shall maintain accounts in which it shall record (i) the amount of each Loan made hereunder, the Class and Type thereof and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder for the account of the Lenders and each Lender's share thereof. (d) The entries made in the accounts maintained pursuant to paragraphs (b) and (c) of this Section shall be prima facie evidence of the existence and amounts of the obligations recorded therein; provided that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrower to repay the Loans in accordance with the terms of this Agreement. (e) Any Lender may request that Loans made by it be evidenced by a promissory note. In such event, the Borrower shall prepare, execute and deliver to such Lender a promissory note payable to the order of such Lender (or, if requested by such Lender, to such Lender and its registered assigns) and in a form approved by the Administrative Agent. SECTION 2.09. Prepayment of Loans. (a) Subject to Section 2.09(d), the Borrower shall have the right at any time and from time to time to prepay any Borrowing in whole or in part. (b) In the event of any termination of the Commitments, the Borrower shall prepay all outstanding Borrowings on the date of such termination. In the event of any reduction of the Commitments, the Borrower shall prepay outstanding Borrowings to the extent, if any, necessary so that, on the date of and after giving effect to such reduction, the sum of the Revolving Credit Exposures and the aggregate 27 23 principal amount of the outstanding Competitive Loans does not exceed the total Commitments. (c) The Borrower shall notify the Administrative Agent by telephone (confirmed by telecopy) of any prepayment hereunder (i) in the case of prepayment of a Eurodollar Revolving Borrowing, not later than 11:00 a.m., Dallas time, three Business Days before the date of prepayment, (ii) in the case of prepayment of a CD Borrowing, not later than 11:00 a.m., Dallas time, two Business Days before the date of prepayment, (iii) in the case of prepayment of an ABR Revolving Borrowing, not later than 11:00 a.m., Dallas time, on the date of prepayment. Each such notice shall be irrevocable and shall specify the prepayment date and the principal amount of each Borrowing or portion thereof to be prepaid; provided that, if a notice of prepayment is given in connection with a conditional notice of termination of the Commitments as contemplated by Section 2.07, then such notice of prepayment may be revoked if such notice of termination is revoked in accordance with Section 2.07. Promptly following receipt of any such notice relating to a Revolving Borrowing, the Administrative Agent shall advise the Lenders of the contents thereof. Each partial prepayment of any Revolving Borrowing shall be in an amount that would be permitted in the case of an advance of a Revolving Borrowing of the same Type as provided in Section 2.02. Each prepayment of a Revolving Borrowing shall be applied ratably to the Loans included in the prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the extent required by Section 2.11. (d) The Borrower shall not have the right to prepay any Competitive Loan and shall not terminate or reduce the Commitments if such termination or reduction would require prepayment of any Competitive Loan. SECTION 2.10. Fees. (a) The Borrower agrees to pay to the Administrative Agent for the account of each Lender a facility fee, which shall accrue at the Applicable Percentage per annum on the daily amount of the Commitment of such Lender (whether used or unused) during the period from and including the date hereof to but excluding the date on which such Commitment terminates; provided that, if such Lender continues to have any Revolving Credit Exposure after its Commitment terminates, then such facility fee shall continue to accrue on the daily amount of such Lender's Revolving Credit Exposure from and including the date on which its Commitment terminates to but excluding the date on which such Lender ceases to have any Revolving Credit Exposure. Accrued facility fees shall be payable in arrears on the last day of March, June, September and December of each year and on the date on which the Commitments terminate, commencing on the first such date to occur after the date hereof; provided that any facility fees accruing after the date on which the Commitments terminate shall be payable on demand. All facility fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day). (b) The Borrower agrees to pay to the Administrative Agent for the account of each Lender, ratably in accordance with its respective Commitment, the upfront fee separately agreed upon between 28 24 the Borrower and the Lenders. The upfront fee shall be payable on the Effective Date. (c) The Borrower agrees to pay to the Administrative Agent, for its own account, fees payable in the amounts and at the times separately agreed upon between the Borrower and the Administrative Agent. (d) All fees payable hereunder shall be paid on the dates due, in immediately available funds, to the Administrative Agent for distribution, in the case of facility fees, to the Lenders. Fees paid shall not be refundable under any circumstances. SECTION 2.11. Interest. (a) The Loans comprising each ABR Borrowing shall bear interest at a rate per annum equal to the Alternate Base Rate. (b) The Loans comprising each CD Borrowing shall bear interest at a rate per annum equal to the Adjusted CD Rate for the Interest Period in effect for such Borrowing plus the Applicable Percentage from time to time in effect. (c) The Loans comprising each Eurodollar Borrowing shall bear interest at a rate per annum equal to the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the Applicable Percentage from time to time in effect (or, in the case of a Competitive Loan, the LIBO Rate for the Interest Period in effect for such Borrowing plus the Margin offered by the Lender making such loan and accepted by the Borrower pursuant to Section 2.04). (d) Each Fixed Rate Loan shall bear interest at a rate per annum equal to the Fixed Rate applicable to such Loan. (e) Notwithstanding the foregoing, if any principal of or interest on any Loan or any fee or other amount payable by the Borrower hereunder is not paid when due, whether at stated maturity, upon acceleration or otherwise, such overdue amount shall bear interest, after as well as before judgment, at a rate per annum equal to (i) in the case of overdue principal of any Loan, the rate otherwise applicable to such Loan as provided above plus 2% or (ii) in the case of any other amount, the rate applicable to ABR Loans as provided above plus 2%. (f) Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date for such Loan; provided that (i) interest accrued pursuant to paragraph (e) of this Section shall be payable on demand, (ii) in the event of any repayment or prepayment of any Loan (other than a prepayment of an ABR Revolving Loan prior to the end of the Availability Period), accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment, (iii) in the event of any conversion of any Loan (other than an ABR Revolving Loan) prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion and (d) in the event the Commitments are terminated, all accrued and unpaid interest on the Loans shall be paid on the date of such termination. 29 25 (g) All interest hereunder shall be computed on the basis of a year of 360 days, except that interest computed by reference to the Alternate Base Rate at times when the Alternate Base Rate is based on the Prime Rate shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable Alternate Base Rate, Adjusted CD Rate, Adjusted LIBO Rate or LIBO Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error. SECTION 2.12 Alternate Rate of Interest. If prior to the commencement of any Interest Period for a CD Borrowing or Eurodollar Borrowing: (a) the Administrative Agent determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted CD Rate, the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest Period or, in the case of a Eurodollar Borrowing, that a Change in Law makes it unlawful for any one or more of the Lenders to make a Eurodollar Loan; or (b) the Administrative Agent is advised by the Required Lenders that, as a result of a Change in Law or other unusual events or conditions affecting the markets in which such Lenders conduct their funding operations, the Adjusted CD Rate, the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest Period will be lower than the actual cost to such Lenders of obtaining the funds necessary to make or maintain their Loans comprising such Borrowing for such Interest Period; then the Administrative Agent shall give notice thereof to the Borrower and the Lenders by telephone or telecopy as promptly as practicable thereafter and, until the Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Request that requests the conversion of any Revolving Borrowing to, or continuation of any Revolving Borrowing as, a CD Borrowing or Eurodollar Borrowing shall be ineffective, (ii) if any Borrowing Request requests a CD or Eurodollar Revolving Borrowing, such Borrowing shall be made as an ABR Borrowing and (iii) any request by the Borrower for a Eurodollar Competitive Borrowing shall be ineffective; provided that (A) if the circumstances giving rise to such notice do not affect all the Lenders, then requests by the Borrower for Eurodollar Competitive Borrowings may be made to Lenders that are not affected thereby and (B) if the circumstances giving rise to such notice affect only one Type of Borrowings, then the other Type of Borrowings shall be permitted. SECTION 2.13. Increased Costs. (a) If any Change in Law shall: (i) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender (except 30 26 any such reserve requirement reflected in the Adjusted CD Rate or the Adjusted LIBO Rate); or (ii) impose on any Lender or the London interbank market any other condition affecting this Agreement, CD Loans or Eurodollar Loans or Fixed Rate Loans made by such Lender; and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any CD Loan, Eurodollar Loan or Fixed Rate Loan or to increase the cost to such Lender or to reduce the amount of any sum received or receivable by such Lender hereunder (whether of principal, interest or otherwise) by an amount deemed by such Lender to be material, then the Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender for such additional costs incurred or reduction suffered. (b) If any Lender determines that any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on such Lender's capital or on the capital of such Lender's holding company, if any, as a consequence of this Agreement or the Loans made by such Lender to a level below that which such Lender or such Lender's holding company could have achieved but for such Change in Law (taking into consideration such Lender's policies and the policies of such Lender's holding company with respect to capital adequacy) by an amount deemed by such Lender to be material, then from time to time the Borrower will pay to such Lender, as the case may be, such additional amount or amounts as will compensate such Lender or such Lender's holding company for any such reduction suffered. (c) A certificate of a Lender setting forth the amount or amounts necessary to compensate such Lender or its holding company, as the case may be, as specified in paragraph (a) or (b) of this Section, and setting forth in reasonable detail the manner in which such amount or amounts shall have been determined, shall be delivered to the Borrower and shall, if submitted in good faith, be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within 10 days after receipt thereof. (d) Failure or delay on the part of any Lender to demand compensation pursuant to this Section shall not constitute a waiver of such Lender's right to demand such compensation; provided that the Borrower shall not be required to compensate a Lender pursuant to this Section for any increased costs or reductions incurred more than six months prior to the date that such Lender notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender's intention to claim compensation therefor; provided further that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the six-month period referred to above shall be extended to include the period of retroactive effect thereof. (e) Notwithstanding the foregoing provisions of this Section, a Lender shall not be entitled to compensation pursuant to this Section in respect of any Competitive Loan if the Change in Law that would otherwise entitle it to such compensation shall have been 31 27 publicly announced prior to submission of the Competitive Bid pursuant to which such Loan was made. SECTION 2.14. Break Funding Payments. In the event of (a) the payment of any principal of any CD Loan, Eurodollar Loan or Fixed Rate Loan other than on the last day of an Interest Period applicable thereto, (b) the conversion of any CD Loan or Eurodollar Loan other than on the last day of the Interest Period applicable thereto, (c) the failure to borrow, convert, prepay or continue any Revolving Loan on the date specified in any notice delivered pursuant hereto (regardless of whether such notice is permitted to be revocable and is revoked in accordance herewith), (d) the failure to borrow any Competitive Loan after accepting the Competitive Bid to make such Loan, or (e) the assignment of any CD Loan, Eurodollar Loan or Fixed Rate Loan other than on the last day of the Interest Period applicable thereto as a result of a request by the Borrower pursuant to Section 2.17, then, in any such event, the Borrower shall compensate each Lender for the loss, cost and expense attributable to such event by payment to such Lender of an amount determined by such Lender to be equal to the excess, if any, of (i) the amount of interest that such Lender would pay for a deposit equal to the principal amount of the applicable Loan for the period from the date of such payment, conversion, failure or assignment to the last day of the then current Interest Period for such Loan (or, in the case of a failure to borrow, convert, prepay or continue, the duration of the Interest Period that would have resulted from such borrowing, conversion or continuation) if the interest rate payable on such deposit were equal to the Adjusted LIBO Rate, the Adjusted CD Rate or the Fixed Rate, as the case may be, in effect (or that would have been in effect) for such Interest Period, over (ii) the amount of interest that such Lender would earn on such principal amount for such period if such Lender were to invest such principal amount for such period at the interest rate that would be bid by such Lender (or an affiliate of such Lender) for dollar deposits at other banks in the London interbank market at the commencement of such period. A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section, and setting forth in reasonable detail the manner in which such amount or amounts shall have been determined, shall be delivered to the Borrower and shall, if submitted in good faith, be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within 10 days after receipt thereof. SECTION 2.15. Taxes. (a) Any and all payments by or on account of any obligation of the Borrower hereunder shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided that if the Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) each of the Agents or Lender (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law. 32 28 (b) In addition, the Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law. (c) The Borrower shall indemnify the Agents and each Lender within 10 days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) paid by the Agents or such Lender, as the case may be, and any liability (including penalties, interest and reasonable expenses) arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender, by the Administrative Agent on its own behalf or on behalf of a Lender, or by the CAF Agent, and setting forth in reasonable detail the manner in which such amount shall have been determined, shall, if submitted in good faith, be conclusive absent manifest error. (d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Borrower to a Governmental Authority, the Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent. (e) Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which the Borrower is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement shall deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable law, properly completed and executed forms prescribed by applicable law (together with such other documentation or certification as the Borrower may reasonably request) that will permit the Borrower to make such payments without withholding or at a reduced rate. SECTION 2.16. Payments Generally; Pro Rata Treatment; Sharing of Set-offs. (a) The Borrower shall make each payment required to be made by it hereunder (whether of principal, interest, fees or otherwise) prior to 12:00 noon, Dallas time, on the date when due, in immediately available funds, to the Administrative Agent at its offices at Dallas, Texas, without set-off or counterclaim. Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. The Administrative Agent shall distribute any such payments received for the account of any other Person to the appropriate recipient in the amount owed to it promptly following receipt thereof. If any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. All payments hereunder shall be made in dollars. 33 29 (b) If at any time insufficient funds are received by and available to the Administrative Agent to fully pay all amounts then due hereunder, such funds shall be applied to the amounts then due hereunder in such order and priority as the Administrative Agent may elect; provided that any funds that the Administrative Agent elects to apply to principal, interest or fees then due shall be applied ratably to all amounts of principal, interest or fees (as the case may be) then due. (c) If any Lender shall, by exercising any right of set-off or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Revolving Loans resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Revolving Loans and accrued interest thereon than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participation in the Revolving Loans of other Lenders to the extent necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Revolving Loans; provided that (i) if any such participations are purchased and all or any portion of the payments giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this paragraph shall not be construed to apply to any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans to any assignee or participant other than the Borrower or any Subsidiary or Affiliate thereof. The Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against the Borrower rights of set-off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Borrower in the amount of such participation. SECTION 2.17. Mitigation Obligations; Replacement of Lenders. (a) If any Lender requests compensation under Section 2.13, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.15, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the good faith judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.13 or 2.15, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender in such Lender's good faith judgment. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment. (b) If any Lender requests compensation under Section 2.13, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of 34 30 any Lender pursuant to Section 2.15, or if any Lender defaults in its obligation to fund Loans hereunder, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 9.04), all its interests, rights and obligations under this Agreement (other than any outstanding Competitive Loans held by it) to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) the Borrower shall have received the prior written consent of the Administrative Agent, which consent shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans (other than Competitive Loans, as to which such Lender will continue to have all of its rights hereunder), accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a claim for compensation under Section 2.13 or payments required to be made pursuant to Section 2.15, such assignment will result in a reduction in such compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply. SECTION 2.18 Extension of Maturity Date (a) The Borrower may, by notice to the Administrative Agent (which shall promptly deliver a copy to each of the Lenders) given not more than 60 days prior to any anniversary of the Closing Date while the Commitments remain in effect, request that the Lenders extend the Maturity Date for an additional one year period (but in no event beyond the seventh anniversary of the Closing Date) from the Maturity Date then in effect (the "Existing Maturity Date"). Each Lender shall, by notice to the Borrower and the Administrative Agent given not later than the 10th Business Day after the date of the Borrower's notice, advise the Borrower whether or not such Lender agrees to such extension (and any Lender that does not so advise the Borrower on or before such day shall be deemed to have advised the Borrower that it will not agree to such extension). (b) If (and only if) Lenders holding Commitments that represent at least 51% of the total Commitments on the 60th day prior to the applicable anniversary of the Closing Date shall have agreed to extend the Existing Maturity Date (such Lenders being called the "Continuing Lenders"), then (i) the Maturity Date shall be extended to the first anniversary of the Existing Maturity Date (provided, that if such date is not a Business Day, then the Maturity Date as so extended shall be the next following Business Day), and (ii) the Commitment of each Lender that is not a Continuing Lender shall terminate (with the result that the total Commitments will decrease by the amount of such Commitment), and all Loans of each such Lender shall become due and payable, together with all interest accrued thereon and all other amounts owed to such Lender hereunder, on the Existing Maturity Date. Notwithstanding the foregoing, no extension of the Maturity Date shall be effective with respect to any Lender unless, on 35 31 and as of the Existing Maturity Date, the conditions set forth in paragraphs (b) and (c) of Section 4.02 shall be satisfied (with all references to a Borrowing being deemed to be references to such extension) and the Administrative Agent shall have received a certificate to that effect dated the Existing Maturity Date and executed by a Financial Officer of the Borrower. ARTICLE III Representations and Warranties The Borrower represents and warrants to the Lenders that: SECTION 3.01. Organization; Powers. Each of the Borrower and its Subsidiaries is (i) duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, has all requisite power and authority to carry on its business as now conducted and, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, is qualified to do business in, and is in good standing in, every jurisdiction where such qualification is required and, (ii) possesses all requisite authority and power and material licenses, permits, franchises (including, without limitation licenses, permits and franchises issued by the FCC), and valid and subsisting network affiliation agreements in the case of each Subsidiary that operates a network affiliated television broadcasting enterprise, to conduct its business as presently conducted. SECTION 3.02. Authorization; Enforceability. The Transactions are within the Borrower's corporate powers and have been duly authorized by all necessary corporate and, if required, stockholder action. This Agreement has been duly executed and delivered by the Borrower and constitutes a legal, valid and binding obligation of the Borrower, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors' rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law. SECTION 3.03. Governmental Approvals; No Conflicts. The Transactions (a) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority, except (i) such as have been obtained or made and are in full force and effect, and (ii) routine filings after the Effective Date with Securities and Exchange Commission and the FCC made pursuant to the requirements of 47 CFR 73.3613, (b) will not violate any applicable law or regulation or the charter, by-laws or other organizational documents of the Borrower or any Subsidiary or any order of any Governmental Authority, (c) will not violate or result in a default under any indenture, or other material agreement or instrument binding upon the Borrower or any Subsidiary or its assets, or give rise to a right thereunder to require any material payment to be made by the Borrower or any Subsidiary, and (d) will not result in the creation or imposition of any Lien other than a Permitted Lien on any asset of the Borrower or any Subsidiary. 36 32 SECTION 3.04. Financial Condition; No Material Adverse Change. (a) The Borrower has heretofore furnished to the Lenders its consolidated balance sheet and statements of earnings, shareholders equity and cash flows (i) as of and for the fiscal year ended December 31, 1995, reported on by Ernst & Young LLP, independent auditors, and (ii) as of and for the fiscal quarter ended September 30, 1996, certified by its chief financial officer. Such financial statements present fairly, in all material respects, the financial position and results of operations and cash flows of the Borrower and its consolidated Subsidiaries as of such dates and for such periods in accordance with GAAP, subject to year-end audit adjustments and the absence of footnotes in the case of the statements referred to in clause (ii) above. (b) Since September 30, 1996, there has been no material adverse change in the business, assets, operations or condition, financial or otherwise, of the Borrower and its Subsidiaries, taken as a whole. SECTION 3.05. Properties. (a) Each of the Borrower and its Subsidiaries has good title to, or valid leasehold interests in, all its real and personal property material to its business, except for minor defects in title or interest that do not interfere with its ability to conduct its business as currently conducted or to utilize such properties for their intended purposes. (b) Each of the Borrower and the Subsidiaries owns, or is licensed to use, all trademarks, tradenames, copyrights, patents and other intellectual property material to its business, and the use thereof by the Borrower and its Subsidiaries does not infringe upon the rights of any other Person, except for any such infringements that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. SECTION 3.06. Litigation, Labor and Environmental Matters. (a) There are not any actions, suits or proceedings by or before any arbitrator or Governmental Authority now pending against or, to the knowledge of the Borrower, threatened against or affecting the Borrower or any Subsidiary (i) as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect (other than the Disclosed Matters) or (ii) that involve this Agreement or the Transactions. (b) Except for the Disclosed Matters, there are no actual or, to the knowledge of the Borrower, threatened labor controversies, including strikes, work stoppages, work slow downs or National Labor Relations Board proceedings affecting the Borrower or its Subsidiaries, that could, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. (c) Except for the Disclosed Matters and except with respect to any other matters that, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect, neither the Borrower nor any Subsidiary (i) has failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental 37 33 Law, (ii) has become subject to any Environmental Liability, (iii) has received notice of any claim with respect to any Environmental Liability or (iv) knows of any basis for any Environmental Liability. (d) There has been no change in the status of the Disclosed Matters that, individually or in the aggregate, has resulted in, or materially increased the likelihood of, a Material Adverse Effect. SECTION 3.07. Compliance with Laws and Agreements. Each of the Borrower and its Subsidiaries is in compliance with all laws, regulations and orders of any Governmental Authority applicable to it or its property and all indentures, agreements and other instruments binding upon it or its property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. No Default has occurred and is continuing. SECTION 3.08. Certain Legal Matters. (a) Neither the Borrower nor any Subsidiary is (i) an "investment company" as defined in, or subject to regulation under, the Investment Company Act of 1940 or (ii) a "holding company" as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935. (b) Neither the Borrower nor any Subsidiary is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of buying or carrying margin stock, within the meaning of Regulation U of the Board. Margin stock will at all times constitute less than 25% of the assets of the Borrower individually and the Borrower and the Subsidiaries on a consolidated basis that are subject to the restrictions of Section 6.01 and 6.02. SECTION 3.09. Taxes. Each of the Borrower and its Subsidiaries has filed or caused to be filed all tax returns and reports required to have been filed and paid or caused to be paid all Taxes required to have been paid by it, except (a) Taxes that are being contested in good faith by appropriate proceedings and for which the Borrower or such Subsidiary, as applicable, shall have set aside on its books adequate reserves or (b) to the extent that the failure to do so could not reasonably be expected to have a Material Adverse Effect. SECTION 3.10. ERISA. No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events, could reasonably be expected to result in a Material Adverse Effect. As of the date hereof, the present value of all accrued benefit liabilities under each Plan (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87), determined at the most recent annual valuation date for such Plan, does not exceed by more than $10,000,000 the fair market value of the assets of such Plan, and the present value of all accrued benefit liabilities of all underfunded Plans (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87), determined at the most recent annual valuation dates for such Plans, does not exceed by more than $10,000,000 the fair market value of the assets of all such underfunded Plans. 38 34 SECTION 3.11. Disclosure. There are no agreements, instruments or corporate restrictions to which the Borrower or any of its Subsidiaries is subject, and no other matters known to the Borrower, that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. None of the reports, financial statements, certificates or other information furnished by or on behalf of the Borrower to the Administrative Agent or any Lender in connection with the negotiation of this Agreement or delivered hereunder (as modified or supplemented by other information so furnished) contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that, with respect to projected and pro forma financial information, the Borrower represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time. SECTION 3.12. Acquisition of The Providence Journal Company. The purchase price for the acquisition of The Providence Journal Company payable by the Borrower or any of its Affiliates shall not exceed $600,000,000 exclusive of (i) any consideration payable in capital stock of the Borrower, (ii) Indebtedness of The Providence Journal Company assumed by the Borrower or any of its Affiliates (other than any Indebtedness created in contemplation of such acquisition), (iii) transaction costs related to the acquisition (including those items set forth in footnote 1 on page 139 of the Borrower's Proxy Statement dated January 8, 1997) and (iv) cash paid in lieu of fractional shares. ARTICLE IV Conditions SECTION 4.01. Effective Date. The obligations of the Lenders to make Loans hereunder shall not become effective until the date on which each of the following conditions is satisfied (or waived in accordance with Section 9.02): (a) The Administrative Agent (or its counsel) shall have received from each party hereto either (i) a counterpart of this Agreement signed on behalf of such party or (ii) written evidence satisfactory to the Administrative Agent (which may include telecopy transmission of a signed signature page of this Agreement) that such party has signed a counterpart of this Agreement. (b) The Administrative Agent shall have received favorable written opinions of Michael J. McCarthy, the General Counsel of the Borrower, Locke Purnell Rain Harrell, counsel for the Borrower, and Wiley, Rein & Fielding, special regulatory counsel to the Borrower, substantially in the forms of Exhibits B-1, B-2 and B-3 hereto and covering such other matters relating to this Agreement and the Transactions as the Required Lenders shall reasonably request. Each of such opinions shall be addressed to the Administrative Agent and the Lenders and shall 39 35 be dated the Effective Date. The Borrower hereby requests such counsel to deliver such opinions. (c) The Administrative Agent shall have received such documents and certificates as the Administrative Agent or its counsel may reasonably request relating to the organization, existence and good standing of the Borrower, the authorization of the Transactions and any other legal matters relating to this Agreement or the Transactions, all in form and substance satisfactory to the Administrative Agent and its counsel. (d) The Administrative Agent shall have received a certificate, dated the Effective Date and signed by the President, a Vice President or a Financial Officer of the Borrower, confirming compliance with the conditions set forth in paragraphs (b) and (c) of Section 4.02. (e) The Administrative Agent shall have received all fees and other amounts due and payable on or prior to the Effective Date, including, to the extent invoiced, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by the Borrower hereunder. (f) The Prior Agreement shall have been terminated and the obligations of the Borrower and the Subsidiaries thereunder paid in full. Notwithstanding the foregoing, the obligations of the Lenders to make Loans hereunder shall not become effective unless each of the foregoing conditions is satisfied (or waived) on or prior to March 31, 1997. The Administrative Agent shall notify the Borrower and the Lenders of the Effective Date, and such notice shall be conclusive and binding. SECTION 4.02. Each Credit Event. The obligation of each Lender to make a Loan on the occasion of any Borrowing (but not on the occasion of any interest election pursuant to Section 2.06 that does not increase the outstanding principal amount of the Loans of any Lender), is subject to the satisfaction of the following conditions: (a) In the case of a Borrowing of Revolving Loans, the Administrative Agent shall have received a Borrowing Request for such Borrowing in accordance with Section 2.03; or, in the case of a Borrowing of Competitive Loans, Borrower shall have accepted the Competitive Bid or Bids in respect of such Loans in accordance with Section 2.04. (b) The representations and warranties of the Borrower set forth in this Agreement shall be true and correct on and as of the date of such Borrowing. (c) At the time of and immediately after giving effect to such Borrowing, no Default shall have occurred and be continuing. 40 36 Each Borrowing shall be deemed to constitute a representation and warranty by the Borrower on the date thereof as to matters specified in paragraphs (b) and (c) of this Section. ARTICLE V Affirmative Covenants Until the Commitments have expired or been terminated and the principal of and interest on each Loan and all fees payable hereunder shall have been paid in full the Borrower covenants and agrees with the Lenders that: SECTION 5.01. Financial Statements and Other Information. The Borrower will furnish to the Administrative Agent and each Lender: (a) within 90 days after the end of each fiscal year of the Borrower, its audited consolidated balance sheet and related statements of earnings, stockholders' equity and cash flows as of the end of and for such year, all reported on by Ernst & Young LLP or other independent public accountants of recognized national standing (without a "going concern" or like emphasis paragraph and without any qualification or exception as to the scope of such audit) to the effect that such consolidated financial statements present fairly in all material respects the financial condition and results of operations of the Borrower and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP; (b) within 45 days after the end of each of the first three fiscal quarters of each fiscal year of the Borrower, its condensed consolidated balance sheet and related statements of earnings and cash flows as of the end of and for such fiscal quarter and the then elapsed portion of the fiscal year, all certified by one of its Financial Officers as presenting fairly in all material respects the financial condition and results of operations of the Borrower and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP for interim financial information and with the instructions to Form 10Q and Article 10 of Regulation S-X (and accordingly, such statements will not include all of the information and footnotes required by GAAP for complete financial statements); (c) concurrently with each delivery of financial statements under clause (a) or (b) above, a certificate of a Financial Officer of the Borrower (i) certifying as to whether a Default has occurred and, if a Default has occurred, specifying the details thereof and any action taken or proposed to be taken with respect thereto, (ii) setting forth reasonably detailed calculations demonstrating compliance with Sections 6.05 and 6.06 and (iii) stating whether any change in GAAP or in the application thereof has occurred since the date of the most recent audited financial statements referred to in Section 3.04 or delivered pursuant to this Section 5.01 and, if any such change has occurred, specifying the effect of such change on the financial statements accompanying such certificate; 41 37 (d) concurrently with any delivery of financial statements under clause (a) above, a certificate of the accounting firm that reported on such financial statements stating whether, in connection with their audit, anything came to their attention that caused them to believe that the Borrower had failed to comply with the terms, covenants, provisions or conditions of Sections 6.05 and 6.06; (e) promptly after the same become publicly available, copies of all annual and quarterly reports to shareholders, reports to the Securities and Exchange Commission on Form 10-K, Form 10-Q, Form 8-K or any successor form, proxy statements and registration statements (other than those relating only to employee benefit plans) filed or distributed by the Borrower or any Subsidiary; and (f) promptly following any request therefor, such other information regarding the operations, business affairs and financial condition of the Borrower or any Subsidiary, or compliance with the terms of this Agreement, as the Administrative Agent or any Lender may reasonably request. SECTION 5.02. Notices of Material Events. The Borrower will furnish to the Administrative Agent prompt written notice of the following: (a) the occurrence of any Default; (b) the filing or commencement of any action, suit or proceeding by or before any arbitrator or Governmental Authority against or affecting the Borrower or any Affiliate thereof that, if adversely determined, could reasonably be expected to result in a Material Adverse Effect; (c) the occurrence of any ERISA Event that, alone or together with any other ERISA Events that have occurred, could reasonably be expected to result in liability of the Borrower and its Subsidiaries in an aggregate amount exceeding $15,000,000; (d) the receipt of any notice from the FCC or any other Governmental Authority of the expiration without renewal, termination or suspension of, or the institution of any proceedings to terminate or suspend, any main transmitter license granted by the FCC or any other material license now or hereafter held by the Borrower or any Subsidiary which is required to operate any television broadcasting station in compliance with all applicable laws; and, (e) any other development that has resulted in, or could reasonably be expected to result in, a Material Adverse Effect. Each notice delivered under this Section shall be accompanied by a statement of a Financial Officer or other executive officer of the Borrower setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto. 42 38 SECTION 5.03. Existence; Conduct of Business. The Borrower will, and will cause each Subsidiary to, do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence and the rights, licenses, permits, privileges and franchises material to the conduct of the business of the Borrower and its Subsidiaries taken as a whole; provided that the foregoing shall not prohibit any merger, consolidation, liquidation or dissolution permitted under Section 6.02. SECTION 5.04. Payment of Obligations. The Borrower will, and will cause each Subsidiary to, pay its Indebtedness and other obligations, including tax liabilities, before the same shall become delinquent or in default, except where (a) the validity or amount thereof is being contested in good faith by appropriate proceedings, (b) the Borrower or such Subsidiary has set aside on its books adequate reserves with respect thereto in accordance with GAAP and (c) the failure to make payment pending such contest could not reasonably be expected to result in a Material Adverse Effect. SECTION 5.05. Maintenance of Properties; Insurance. The Borrower will, and will cause each Subsidiary to, (a) keep and maintain all property material to the conduct of the business of the Borrower and its Subsidiaries taken as a whole in good working order and condition, ordinary wear and tear and obsolescence excepted, (b) keep and maintain all licenses, permits, franchises and major network affiliation agreements (including those with American Broadcasting Companies, Inc. ("ABC"), National Broadcasting Companies ("NBC"), the Columbia Broadcasting System, Inc. ("CBS"), or Fox Broadcasting Company ("FOX") necessary for their business except as the loss of the same could not individually or in the aggregate reasonably be expected to cause a Material Adverse Effect, it being understood and agreed that a change from one such major network to another shall not be considered to have such an effect; and (b) maintain, with financially sound and reputable insurance companies, insurance in such amounts and against such risks as are customarily maintained by companies engaged in the same or similar businesses operating in the same or similar locations. SECTION 5.06. Books and Records; Inspection Rights. The Borrower will, and will cause each Subsidiary to, keep proper books of record and account in which full, true and correct entries are made of all dealings and transactions in relation to its business and activities. The Borrower will, and will cause each Subsidiary to, permit any representatives designated by the Administrative Agent or any Lender, upon reasonable prior notice, to visit and inspect its properties, to examine and make extracts from its books and records, and to discuss its affairs, finances and condition with its officers and independent accountants, all at reasonable times and as often as shall be reasonably requested. SECTION 5.07. Compliance with Laws. The Borrower will, and will cause each Subsidiary to, comply with all laws (including Environmental Laws), regulations and orders of any Governmental Authority applicable to it or its property, except to the extent that failures to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. 43 39 SECTION 5.08. Use of Proceeds. The Borrower will cause the proceeds of the Loans to be used only for the purposes referred to in the preamble to this Agreement. No part of the proceeds of any Loan will be used, whether directly or indirectly, for any purpose that entails a violation of any of the Regulations of the Board, including Regulations G, U and X. ARTICLE VI Negative Covenants Until the Commitments have expired or terminated and the principal of and interest on each Loan and all fees payable hereunder have been paid in full, the Borrower covenants and agrees with the Lenders that: SECTION 6.01. Liens. The Borrower will not, and will not permit any Subsidiary to, create, incur, assume or permit to exist any Lien on any property or asset now owned or hereafter acquired by it, or assign or sell any income or revenues (including accounts receivable) or rights in respect of any thereof, except that the Borrower and the Subsidiaries may assign or sell delinquent receivables and rights in respect thereof and may create, incur, assume or permit to exist (a) Permitted Liens and (b) other Liens securing obligations in an aggregate amount at any time not greater than $40,000,000. SECTION 6.02. Fundamental Changes. (a) The Borrower will not merge into or consolidate with any other Person, or permit any other Person to merge into or consolidate with it, or sell, transfer, lease or otherwise dispose of (in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired), or liquidate or dissolve, except that any Subsidiary or other Person may merge into the Borrower if the Borrower is the surviving corporation and at the time thereof and immediately after giving effect thereto no Default shall have occurred and be continuing and the Borrower shall be in compliance with the financial covenants contained in this Article VI on a pro forma basis with such merger being deemed to have occurred at the beginning of each relevant period. (b) The Borrower will not, and will not permit any Subsidiary to, engage to an extent material to the Borrower and the Subsidiaries on a consolidated basis in any business other than businesses of the type conducted by the Borrower and its Subsidiaries on the date hereof and businesses reasonably related thereto. SECTION 6.03. Transactions with Affiliates. The Borrower will not, and will not permit any Subsidiary to, enter into any transaction (including, without limitation, the purchase or sale of any property or service) with, or make any payment or transfer to, any of its Affiliates (other than the Borrower or any Subsidiary) except in the ordinary course of business and upon terms no less favorable to the Borrower or such Subsidiary than the Borrower or such Subsidiary could obtain in a comparable arms-length transaction. 44 40 SECTION 6.04. Restrictive Agreements. The Borrower will not, and will not permit any Subsidiary to, directly or indirectly, enter into, incur or permit to exist any agreement or other arrangement that prohibits, restricts or imposes any condition upon the ability of any Subsidiary to pay dividends or other distributions with respect to any shares of its capital stock or to make or repay loans or advances to the Borrower or any other Subsidiary or to Guarantee Indebtedness of the Borrower or any other Subsidiary, other than (i) such restrictions in the partnership agreements for TVFN and AHN in effect on the date hereof and (ii) such restrictions on Subsidiaries (other than TVFN and AHN) that are partnerships, joint ventures, limited liability companies or other similar entities, and in which the aggregate equity investment of the Borrower does not exceed $20,000,000. SECTION 6.05. Leverage. The Borrower will not permit (a) the ratio of Funded Debt to Pro Forma Operating Cash Flow as of the end of and for any period of four consecutive fiscal quarters ending after the Effective Date to be greater than 5.5 to 1.0, (b) the ratio of Funded Debt (excluding Subordinated Debt) to Pro Forma Operating Cash Flow as of the end of and for any period of four consecutive fiscal quarters ending after the Effective Date to be greater than 5.0 to 1.0 or (c) Funded Debt of Subsidiaries (other than Funded Debt owed to the Borrower or any other Subsidiary) to constitute more than 10% of the Funded Debt that would at any time be permitted to exist under clause (a) of this Section 6.05. SECTION 6.06. Interest Coverage. The Borrower will not permit the ratio of Pro Forma Operating Cash Flow to Interest Expense for any period of four consecutive fiscal quarters ending after the Effective Date to be less than 2.5 to 1.0. SECTION 6.07. Investments in AHN and TVFN. The Borrower will not, and will not permit any Subsidiary to, directly or indirectly, make any loans or advances to, or make any other investment in AHN or TVFN during the term of the Facility in excess of $100,000,000. ARTICLE VII Events of Default If any of the following events ("Events of Default") shall occur: (a) any representation or warranty made or deemed made by or on behalf of the Borrower or any Subsidiary in or in connection with this Agreement, or in any report, certificate, financial statement or other document furnished pursuant to or in connection with this Agreement, shall prove to have been incorrect in any material respect when so made or deemed made; (b) the Borrower shall fail to pay any principal of any Loan when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or otherwise; 45 41 (c) the Borrower shall fail to pay any interest on any Loan or any fee or any other amount (other than an amount referred to in clause (b) above) payable under this Agreement, when and as the same shall become due and payable, and such failure shall continue unremedied for a period of three Business Days; (d) the Borrower shall fail to observe or perform any covenant, condition or agreement contained in Section 5.02(a), (b) or (e), Section 5.03 (with respect to the Borrower's existence) or in Article VI; (e) the Borrower shall fail to observe or perform any covenant, condition or agreement contained in Section 5.02(c) or (d), and such failure shall continue unremedied for a period of five Business Days; (f) the Borrower shall fail to observe or perform any covenant, condition or agreement contained in this Agreement (other than those specified in clause (b), (c), (d) or (e) above) and such failure shall continue unremedied for a period of 30 days after notice thereof from the Administrative Agent or any Lender to the Borrower; (g) the Borrower or any Subsidiary shall fail to make any payment of principal, regardless of amount, in respect of any Material Indebtedness, when and as the same shall become due and payable; (h) any event or condition occurs that results in any Material Indebtedness becoming due prior to its scheduled maturity; (i) an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of the Borrower or any Subsidiary or its debts, or of a substantial part of the property or assets of the Borrower or a Subsidiary, under Title 11 of the United States Code, as now constituted or hereafter amended, or any other Federal, state or foreign bankruptcy, insolvency, receivership or similar law or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any Subsidiary or for a substantial part of the property or assets of the Borrower or any Subsidiary; and such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered; (j) the Borrower or any Subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking liquidation, reorganization or other relief under Title 11 of the United States Code, as now constituted or hereafter amended, or any other Federal, state or foreign bankruptcy, insolvency, receivership or similar law, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any 46 42 proceeding or petition described in clause (i) above, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any Subsidiary or for a substantial part of the property or assets of the Borrower or any Subsidiary, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors or (vi) take any action for the purpose of effecting any of the foregoing; (k) one or more judgments for the payment of money in an amount in excess of $20,000,000 individually or $35,000,000 (in each case net of insurance coverage) in the aggregate shall be rendered against the Borrower, any Subsidiary or any combination thereof (it being understood that the outstanding adverse declaratory judgment in the Cable L.P. I, Inc. litigation disclosed in The Providence Journal Company's SEC filings shall not constitute an Event of Default and that any amount payable in respect thereof shall not be included in the individual or aggregate limit) and the same shall remain undischarged for a period of 30 consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to attach or levy upon any property or assets of the Borrower or any Subsidiary to enforce any such judgment; (l) an ERISA Event shall have occurred that, in the opinion of the Required Lenders, when taken together with all other ERISA Events that have occurred, could reasonably be expected to result in a Material Adverse Effect; (m) any main transmitter license, permit or authorization issued to the Borrower or any Subsidiary by the FCC shall be forfeited, revoked or not renewed, or any proceeding with respect to any such forfeiture or revocation shall be instituted by the FCC, where such forfeiture, revocation or non-renewal or such proceeding, as the case may be, shall be reasonably likely to result in a Material Adverse Effect; (n) a Change in Control shall occur; then, and in every such event (other than an event with respect to the Borrower described in clause (i) or (j) above), and at any time thereafter during the continuance of such event, the Administrative Agent, at the request of the Required Lenders shall, by notice to the Borrower, take either or both of the following actions, at the same or different times: (i) terminate the Commitments, and thereupon the Commitments shall terminate immediately, and (ii) declare the Loans then outstanding to be due and payable in whole (or in part, in which case any principal not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and all fees and other liabilities of the Borrower accrued hereunder, shall become due and payable immediately, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; and in any event with respect to the Borrower described in clause (i) or (j) 47 43 above, the Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and all fees and other liabilities of the Borrower accrued hereunder, shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower. ARTICLE VIII The Agents Each of the Lenders hereby irrevocably appoints the Agents as its agents and authorizes the Agents to take such actions on its behalf and to exercise such powers as are delegated to the Agents by the terms hereof, together with such actions and powers as are reasonably incidental thereto. The bank serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent, and such bank and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate thereof as if it were not the Administrative Agent hereunder. The Agents shall not have any duties or obligations except those expressly set forth herein. Without limiting the generality of the foregoing (a) the Agents shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing, and (b) the Agents shall not have any duty to take any discretionary action or exercise any discretionary powers permitted hereunder unless requested to do so in writing by the Required Lenders. No Agent shall be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders or in the absence of its own gross negligence or wilful misconduct. In addition, the Agents shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement, (ii) the contents of any certificate, report or other document delivered hereunder or in connection herewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement or any other agreement, instrument or document, or (v) the satisfaction of any condition set forth in Article IV or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Agents. The Agents shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by the proper Person. The Agents also may rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person, and shall not incur any liability for relying thereon. Each of the Agents may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by 48 44 it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts. Each of the Agents may perform any and all its duties and exercise its rights and powers by or through any one or more sub-agents appointed by such Agent. The Administrative Agent, the CAF Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers through Affiliates or its or its Affiliates' employees. The exculpatory provisions of the preceding paragraphs shall apply to any such sub-agent, to the Affiliates of the Administrative Agent, the CAF Agent and any such sub-agent and to the directors, officers, employees, agents and advisors of the Administrative Agent, the CAF Agent, any such sub-agent and their respective Affiliates. Subject to the appointment and acceptance of a successor Agent as provided below, either Agent may resign at any time by notifying the Lenders and the Borrower. Upon any such resignation, the Required Lenders, with the consent of the Borrower (which shall not be unreasonably withheld) shall have the right to appoint a successor Agent. If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Agent gives notice of its resignation, then the retiring Agent may, with the consent of the Borrower (which shall not be unreasonably withheld), on behalf of the Lenders, appoint a successor Agent which shall be a bank with an office in Dallas or The City of New York, having a combined capital and surplus of at least $500,000,000 or an Affiliate of any such bank. Upon the acceptance of its appointment as Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. After the Agent's resignation hereunder, the provisions of this Article and Section 9.03 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Agent. Each Lender agrees (a) to reimburse the Agents, on demand, in the amount of its pro rata share at the time reimbursement is sought (based on its Commitment hereunder or, if the Commitments shall have expired or terminated, based on its portion of the total Revolving Credit Exposures and outstanding Competitive Loans) of any expenses incurred for the benefit of the Lenders by the Agent, including counsel fees and compensation of agents and employees paid for services rendered on behalf of the Lenders, that shall not have been reimbursed by the Borrower and (b) to indemnify and hold harmless each of the Agents and any of its directors, officers, employees or agents, on demand, in the amount of such pro rata share, from and against any and all liabilities, taxes, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever that may be imposed on, incurred by or asserted against it in its capacity as Agent or any of them in any way relating to or arising out of this Agreement or any action taken or omitted by it or any of them under this Agreement, to the extent the same shall not have been reimbursed by the Borrower, provided that no Lender shall be liable to any Agent or any such other indemnified 49 45 person for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements that are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or wilful misconduct of such Agent or any of its directors, officers, employees or agents. Each Lender acknowledges that it has, independently and without reliance upon the Agents or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Agents or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any related agreement or any document furnished hereunder or thereunder. ARTICLE IX Miscellaneous SECTION 9.01. Notices. Except in the case of notices and other communications expressly permitted to be given by telephone, all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows: (a) if to the Borrower, to it at 400 South Record Street, Dallas, TX 75202, Attention of the Chief Financial Officer (Telecopy No. 214-977-8209) with a copy to the General Counsel; (b) if to the Administrative Agent, to the attention of Loan Syndication Services/Gale Manning (Telecopy No. 713-750-3810), with a copy to Texas Commerce Bank National Association, at Dallas, TX, Attention of Kevin Kelty (Telecopy No. 214-965-2997); (c) if to the CAF Agent, to it at Loan and Agency Service Group, at One Chase Manhattan Plaza, 8th Floor, New York, New York 10005, Attention of Chris Consomer (Telecopy No. 212-552-5658); (d) if to a Lender, to it at its address (or telecopy number) set forth in its Administrative Questionnaire. Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt if delivered by hand or overnight courier service or sent by telecopy or on the date five Business Days after dispatch by certified or registered mail if mailed, except that notices and communications to the Agents pursuant 50 46 to Article II shall be deemed to have been given only when received by the Agents. SECTION 9.02. Waivers; Amendments. (a) No failure or delay by the Administrative Agent, the CAF Agent or any Lender in exercising any right or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Administrative Agent, the CAF Agent and the Lenders hereunder are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or consent to any departure by the Borrower therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) below, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. (b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Borrower and the Required Lenders or by the Borrower and the Administrative Agent with the consent of the Required Lenders; provided that no such agreement shall (i) increase or decrease the Commitment of any Lender (except for a ratable decrease in the Commitments of all the Lenders), without the written consent of such Lender, (ii) reduce the principal amount of any Loan or reduce the rate of interest thereon, or reduce any fees payable hereunder, without the written consent of each Lender affected thereby, (iii) postpone the scheduled date of payment of the principal amount of any Loan, or any interest thereon, or any fees payable hereunder, or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date of expiration of any Commitment, without the written consent of each Lender affected thereby, or (iv) change any of the provisions of this Section or the definition of "Required Lenders" or any other provision hereof specifying the number or percentage of Lenders required in order to waive, amend or modify any rights hereunder or grant any consent hereunder, without the written consent of each Lender; provided further that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent, hereunder without the prior written consent of the Administrative Agent. SECTION 9.03. Expenses; Indemnity; Damage Waiver. (a) The Borrower agrees to pay (i) all reasonable out-of-pocket expenses incurred by any Agent and its Affiliates, including the reasonable fees, charges and disbursements of Cravath, Swaine & Moore, counsel for the Agents, in connection with the syndication of the credit facilities provided for herein, the preparation and administration of this Agreement or any amendments, modifications or waivers of the provisions hereof (whether or not the transactions contemplated hereby or thereby shall be consummated), (ii) all reasonable out-of-pocket expenses incurred by the Agents or any Lender, including the reasonable fees, charges and disbursements of any counsel for the Agents or any Lender, in connection with the enforcement or protection of its rights in connection with this Agreement. 51 47 (b) The Borrower agrees to indemnify each of the Agents and each Lender, each Affiliate of any of them and each of the respective directors, officers, employees, agents and advisors of the foregoing (each such Person being called an "Indemnitee") against, and to hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including the fees, charges and disbursements of any counsel for any Indemnitee, incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement or any agreement or instrument contemplated hereby, the performance by the parties hereto of their respective obligations hereunder or the consummation of the Transactions or any other transactions contemplated hereby, (ii) any Loan or the use of the proceeds thereof, (iii) any actual or alleged presence or release of Hazardous Materials on or from any property owned or operated by the Borrower or any of its Subsidiaries, or any Environmental Liability related in any way to the Borrower or any of its Subsidiaries, or (iv) any claim, litigation, investigation or proceeding relating to any of the foregoing, whether or not any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or wilful misconduct of such Indemnitee (BUT SHALL BE AVAILABLE TO THE EXTENT THEY ARE DETERMINED TO HAVE RESULTED FROM, IN WHOLE OR IN PART, THE SIMPLE NEGLIGENCE OF SUCH INDEMNITEE). (c) To the extent permitted by applicable law, the Borrower agrees not to assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any agreement or instrument contemplated hereby, the Transactions, any Loan or the use of the proceeds thereof. (d) All amounts due under this Section shall be payable no later than 10 days after written demand therefor. SECTION 9.04. Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by the Borrower without such consent shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto and their respective successors and assigns permitted hereby) any legal or equitable right, remedy or claim under or by reason of this Agreement. (b) Any Lender may assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it); provided that (i) except in the case of an assignment to a Lender or an Affiliate of a Lender, each of the Borrower (and, except in the case of an assignment limited to rights in respect of an outstanding Competitive Loan, the Administrative 52 48 Agent) must give their prior written consent to such assignment (which consent shall not be unreasonably withheld), (ii) except in the case of an assignment to a Lender or an Affiliate of a Lender or an assignment of the entire remaining amount of the assigning Lender's Commitment, the amount of the Commitment of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall not be less than $20,000,000, (iii) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender's rights and obligations under this Agreement, except that this clause shall not apply to rights in respect of outstanding Competitive Loans, (iv) the Lenders party to each such assignment shall execute and deliver to the Administrative Agent an Assignment and Acceptance, together with a processing and recordation fee of $3,500, and (v) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire. Upon acceptance and recording pursuant to paragraph (d) of this Section, from and after the effective date specified in each Assignment and Acceptance, which effective date shall be at least five Business Days after the execution thereof, the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all of the assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.13, 2.14, 2.15 and 9.03). (c) The Administrative Agent, acting for this purpose as an agent of the Borrower, shall maintain at one of its offices in The City of New York a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitment of, and principal amount of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the "Register"). The entries in the Register shall be conclusive, and the Borrower, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice. (d) Upon its receipt of a duly completed Assignment and Acceptance executed by an assigning Lender and an assignee, the assignee's completed Administrative Questionnaire (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) above and any written consent to such assignment required by paragraph (b) above, the Administrative Agent shall (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the Lenders. No assignment shall be effective unless it has been recorded in the Register as provided in this paragraph (d). 53 49 (e) Any Lender may, without the consent of the Borrower or the Administrative Agent, sell participations to one or more banks or other entities ("Participants") in all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans owing to it); provided that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower, the Agents, and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in the first proviso to Section 9.02(b) that affects such Participant. Subject to paragraph (f) below, the Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.13, 2.14 and 2.15 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section. In connection with any sale of a participation pursuant to this paragraph, the selling Lender shall obtain from the Participant an undertaking to be bound by the provisions of Section 9.12. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with paragraph (b) above shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with this paragraph. (f) A Participant shall not be entitled to receive any greater payment under Section 2.13 or 2.15 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower's prior written consent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 2.15 unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with Section 2.15(e) as though it were a Lender. (g) Any Lender may at any time assign all or any portion of its rights under this Agreement to a Federal Reserve Bank to secure extensions of credit by such Federal Reserve Bank to such Lender; provided that no such assignment shall release a Lender from any of its obligations hereunder or substitute any such Federal Reserve Bank for such Lender as a party hereto. SECTION 9.05. Survival. All covenants, agreements, representations and warranties made by the Borrower herein and in the certificates or other instruments delivered in connection with or pursuant to this Agreement shall be considered to have been relied upon by the Lenders and shall survive the execution and delivery of this Agreement and the making of any Loans, regardless of any investigation made by the Lenders or on their behalf and notwithstanding that the Administrative Agent or any Lender may have 54 50 had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement is outstanding and unpaid and so long as the Commitments have not expired or terminated. The provisions of Sections 2.13, 2.14, 2.15 and 9.03 shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans or the termination of the Commitments, this Agreement or any provision hereof. SECTION 9.06. Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement and any separate letter agreements with respect to fees payable to the Agents constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 4.01, this Agreement shall become effective when it shall have been executed by the Agents and when the Agents shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Delivery of an executed counterpart of a signature page of this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement. SECTION 9.07. Severability. Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction. SECTION 9.08. Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender to or for the credit or the account of the Borrower against any of and all the obligations of the Borrower now or hereafter existing under this Agreement held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement and although such obligations may be unmatured. The rights of each Lender under this Section are in addition to other rights and remedies (including other rights of setoff) which such Lender may have. SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of Process. (a) THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. 55 51 (b) The Borrower hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that the Administrative Agent, the CAF Agent or any Lender may otherwise have to bring any action or proceeding relating to this Agreement against the Borrower or its properties in the courts of any jurisdiction. (c) The Borrower hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement in any court referred to in paragraph (b) of this Section. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (d) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 9.01. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law. SECTION 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION. SECTION 9.11. Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement. SECTION 9.12. Confidentiality. Each of the Agents and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates' directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be 56 52 informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority, (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party to this Agreement, (e) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or the enforcement of rights hereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement, (g) with the consent of the Borrower or (h) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section or (ii) becomes available to the Administrative Agent, or any Lender on a nonconfidential basis from a source other than the Borrower. For the purposes of this Section, "Information" means all information received from the Borrower relating to the Borrower or its business including any potential acquisition or proposed business transaction, other than any such information that is available to the Agents or any Lender on a nonconfidential basis prior to disclosure by the Borrower; provided that, in the case of information received from the Borrower after the date hereof (other than information obtained by any Lender in the course of examining the books or records of the Borrower or any Subsidiary as permitted by Section 5.06) such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information. SECTION 9.13. Interest Rate Limitation. Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges and other amounts which are treated as interest on such Loan under applicable law (collectively the "Charges"), shall exceed the maximum lawful rate (the "Maximum Rate") which may be contracted for, charged, taken, received or reserved by the Lender holding such Loan in accordance with applicable law, the rate of interest payable in respect of such Loan hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Loan but were not payable as a result of the operation of this Section shall be cumulated and the interest and Charges payable to such Lender in respect of other Loans or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with 57 53 interest thereon at the Federal Funds Effective Rate to the date of repayment, shall have been received by such Lender. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. A. H. BELO CORPORATION, by /s/ BRENDA C. MADDOX ------------------------------- Name: Brenda C. Maddox Title: Vice President/Treasurer 58 54 TEXAS COMMERCE BANK NATIONAL ASSOCIATION, individually and as Administrative Agent, by /s/ J. KEVIN KELTY -------------------------------- Name: J. Kevin Kelty Title: Senior Vice President 59 55 THE CHASE MANHATTAN BANK, as CAF Agent, by /s/ DEBORAH DAVEY ----------------------------- Name: Deborah Davey Title: Vice President Attorney-in-fact 60 56 BANK OF AMERICA NT & SA, by /s/ MATTHEW J. KOENIG -------------------------------- Name: Matthew J. Koenig Title: Vice President 61 57 BANK OF TOKYO-MITSUBISHI, LTD., by /s/ J. BECKWITH -------------------------------- Name: J. Beckwith Title: Vice President 62 58 NATIONSBANK OF TEXAS, N.A., by /s/ TODD SHIPLEY ----------------------------- Name: Todd Shipley Title: Senior Vice President 63 59 MORGAN GUARANTY TRUST COMPANY, by /s/ DONALD H. PATRICK -------------------------------- Name: Donald H. Patrick Title: Vice President 64 60 SOCIETE GENERALE, by /s/ CHRISTOPHER J. SPELTZ ------------------------------ Name: Christopher J. Speltz Title: Vice President 65 61 THE FIRST NATIONAL BANK OF BOSTON, by /s/ ROBERT F. MILORDI -------------------------------- Name: Robert F. Milordi Title: Managing Director 66 62 FLEET BANK, by /s/ CHRISTOPHER A. SWINDELL -------------------------------- Name: Christopher A. Swindell Title: Vice President 67 63 THE FUJI BANK, LIMITED, by /s/ PHILLIP C. LAUINGER, III -------------------------------- Name: Phillip C. Lauinger, III Title: Vice President & Joint Manager 68 64 BANQUE NATIONALE DE PARIS, HOUSTON AGENCY, by /s/ HENRY F. SETINA -------------------------------- Name: Henry F. Setina Title: Vice President 69 65 CIBC INC., by /s/ MATTHEW B. JONES -------------------------------- Name: Matthew B. Jones Title: Authorized Signatory 70 66 MELLON BANK, N.A., by /s/ STEPHEN D. LACKEY -------------------------------- Name: Stephen D. Lackey Title: First Vice President 71 67 THE SAKURA BANK LIMITED, NEW YORK BRANCH, by /s/ YASUMASA KIKUCHI -------------------------------- Name: Yasumasa Kikuchi Title: Senior Vice President 72 68 THE TOKAI BANK, LIMITED, by /s/ STUART M. SCHULMAN -------------------------------- Name: Stuart M. Schulman Title: Deputy General Manager 73 69 THE TOYO TRUST & BANKING CO LTD., by /s/ TAKAO SHIDA -------------------------------- Name: Takao Shida Title: Deputy General Manager 74 70 THE SANWA BANK LIMITED, DALLAS AGENCY, by /s/ ROBERT S. SMITH -------------------------------- Name: Robert S. Smith Title: Vice President 75 71 WACHOVIA BANK OF GEORGIA, N.A., by /s/ JOEL K. WOOD -------------------------------- Name: Joel K. Wood Title: Vice President 76 72 WELLS FARGO BANK (TEXAS), N.A., by /s/ KEN TAYLOR -------------------------------- Name: Ken Taylor Title: Assistant Vice President 77 73 CREDIT LYONNAIS, NEW YORK BRANCH, by /s/ JACQUES-YVES MULLIEZ -------------------------------- Name: Jacques-Yves Mulliez Title: Senior Vice President 78 74 THE DAI-ICHI KANGYO BANK, LTD., by /s/ D. MURDOCK -------------------------------- Name: D. Murdock Title: Vice President 79 75 FIRST HAWAIIAN BANK, by /s/ DONALD C. YOUNG -------------------------------- Name: Donald C. Young Title: Assistant Vice President 80 76 THE INDUSTRIAL BANK OF JAPAN, LIMITED, NEW YORK BRANCH, by /s/ KAZUTOSHI KUWAHARA -------------------------------- Name: Kazutoshi Kuwahara Title: Executive Vice President, Houston Office 81 77 THE LONG-TERM CREDIT BANK OF JAPAN, LIMITED, NEW YORK BRANCH, by /s/ JOHN J. SULLIVAN ----------------------------- Name: John J. Sullivan Title: Joint General Manager 82 78 MICHIGAN NATIONAL BANK, by /s/ STEPHANIE E. LUBIN ----------------------------- Name: Stephanie E. Lubin Title: Relationship Manager 83 79 THE NORTHERN TRUST COMPANY, by /s/ JOHN E. BURDA ------------------------------ Name: John E. Burda Title: Second Vice President 84 80 CRESTAR BANK, by /s/ THOMAS C. PALMER ----------------------------- Name: Thomas C. Palmer Title: Vice President 85 81 HIBERNIA NATIONAL BANK, by /s/ TROY J. VILLAFARRA ----------------------------- Name: Troy J. Villafarra Title: Vice President 86 82 THE MITSUBISHI TRUST AND BANKING CORPORATION, by /s/ HACHIRO HOSODA -------------------------------- Name: Hachiro Hosoda Title: Senior Vice President 87 83 SUNTRUST BANK, CENTRAL FLORIDA, N.A., by /s/ JANET SAMMONS ------------------------------ Name: Janet Sammons Title: Vice President 88 84 TORONTO DOMINION (TEXAS) INC., by /s/ NEVA NESBITT -------------------------------- Name: Neva Nesbitt Title: Vice President 89 85 WESTDEUTSCHE LANDESBANK GIROZENTRALE, NEW YORK BRANCH, by /s/ KHEIL MCINTYRE ------------------------------ Name: Kheil McIntyre Title: Vice President by /s/ SALVATORE BATTINELLI ----------------------------- Name: Salvatore Battinelli Title: Vice President Credit Department 90 86 FIRST UNION NATIONAL BANK OF NORTH CAROLINA, by /s/ BRUCE W. LOFIRA -------------------------------- Name: Bruce W. Lofira Title: Senior Vice President 91 87 CREDIT AGRICOLE, by /s/ DAVID BOUHL ----------------------------- Name: David Bouhl Title: First Vice President Head of Corporate Banking Chicago 92 88 U.S. BANK OF WASHINGTON, N.A., by /s/ WADE BLACK -------------------------------- Name: Wade Black Title: Vice President 93 89 THE YASUDA TRUST & BANKING CO., LTD., by /s/ MAKOTO TAGAWA -------------------------------- Name: Makoto Tagawa Title: Deputy General Manager 94 EXHIBIT A [Form of] ASSIGNMENT AND ACCEPTANCE Reference is made to the Credit Agreement dated as of January 31, 1997 (the "Credit Agreement"), among A. H. Belo Corporation, a Delaware corporation (the "Borrower"), the lenders listed on Schedule 2.01 thereto (the "Lenders"), Texas Commerce Bank National Association, as administrative agent for the Lenders (in such capacity, the "Administrative Agent") and The Chase Manhattan Bank, as Competitive Advance Facility Agent (the "CAF Agent"). Terms defined in the Credit Agreement are used herein with the same meanings. 1. The Assignor hereby sells and assigns, without recourse, to the Assignee, and the Assignee hereby purchases and assumes, without recourse, from the Assignor, effective as of the Effective Date set forth below (but not prior to the registration of the information contained herein in the Register pursuant to Section 9.04(c) of the Credit Agreement), the interests set forth below (the "Assigned Interest") in the Assignor's rights and obligations under the Credit Agreement, including, without limitation, the amounts and percentages set forth below of (i) the Commitment of the Assignor on the Effective Date and (ii) the Loans owing to the Assignor which are outstanding on the Effective Date. Each of the Assignor and the Assignee hereby makes and agrees to be bound by all the representations, warranties and agreements set forth in Section 9.04(b) of the Credit Agreement, a copy of which has been received by each such party. From and after the Effective Date (i) the Assignee shall be a party to and be bound by the provisions of the Credit Agreement and, to the extent of the interests assigned by this Assignment and Acceptance, have the rights and obligations of a Lender thereunder and under the Loan Documents and (ii) the Assignor shall, to the extent of the interests assigned by this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Credit Agreement. 2. This Assignment and Acceptance is being delivered to the Administrative Agent together with (i) if the Assignee is organized under the laws of a jurisdiction outside the United States, the forms specified in Section 2.15(e) of the Credit Agreement, duly completed and executed by such Assignee, (ii) if the Assignee is not already a Lender under the Credit Agreement, an Administrative Questionnaire in the form supplied by the Administrative Agent and (iii) a processing and recordation fee of $3,500. 3. This Assignment and Acceptance shall be governed by and construed in accordance with the laws of the State of New York. Date of Assignment: Legal Name of Assignor: Legal Name of Assignee: Assignee's Address for Notices: Effective date of Assignment (may not be fewer than 5 Business Days after the Date of Assignment): 95 Percentage Assigned of Applicable Facility/Commitment (set forth, to at least 8 decimals, as a (Principal Amount Assigned and percentage of the Facility and the Identifying Information as to aggregate Commitments of all Facility/Commitment individual Competitive Loans Lenders thereunder) ------------------- ----------------------------- ----------------------------------- Revolving Credit $ % Competitive Loans $ %
The terms set forth above are hereby agreed to: Accepted */ - ___________________, as Assignor TEXAS COMMERCE BANK NATIONAL ASSOCIATION, as Administrative Agent by:__________________________ by:_______________________ Name: Name: Title: Title: ___________________, as Assignee by:__________________________ Name: Title: 96 EXHIBIT B-1 [Letterhead of] A. H. BELO CORPORATION January [ ], 1997 Texas Commerce Bank National Association as Administrative Agent 2200 Ross Avenue Dallas, Texas 75201 Chase Securities Inc., as Arranger 270 Park Avenue New York, NY 10017 The Lenders from time to time party to the Credit Agreement referred to below (all of the Addressees, collectively, the "Creditors") Dear Ladies and Gentlemen: I have acted as General Counsel to A. H. Belo Corporation, a Delaware corporation (the "Borrower"), in connection with the execution and delivery today of, and the consummation of the transactions contemplated by, the Credit Agreement dated as of January 31, 1997, (the "Credit Agreement"), among the Borrower, the financial institutions party thereto as lenders (the "Lenders"), Texas Commerce Bank National Association, as administrative agent (in such capacity, the "Administrative Agent") and The Chase Manhattan Bank, as Competitive Advance Facility Agent (the "CAF Agent"), Bank of America National Trust and Savings Association and Bank of Tokyo-Mitsubishi, Ltd., as Co-Syndication Agents, and NationsBank of Texas, N.A., as Documentation Agent and any promissory notes ("Notes") delivered in connection with the Credit Agreement. This opinion is delivered pursuant to Section 4.01(b)of the Credit Agreement. Capitalized terms used but not defined herein shall have the meanings assigned to such terms in the Credit Agreement. In connection with this opinion, I have examined originals or copies, certified or otherwise identified to our satisfaction, of the Credit Agreement and such other records, agreements, instruments and other documents, and have made such other investigations, as I have deemed necessary for the purpose of this opinion. Based upon the foregoing, it is my opinion that: 1. The Borrower and each Subsidiary (a) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has all requisite corporate power and authority to own its property and assets and to carry on its business as now conducted and as proposed to be conducted, (c) is qualified to do business and is in good standing in each jurisdiction where such qualification is required, except where the failure so to qualify could not reasonably be expected to result in a Material Adverse Effect, and (d) in the case of the Borrower, has the corporate power and 97 authority to execute, deliver and perform its obligations under the Credit Agreement and to borrow thereunder. 2. The execution, delivery and performance of the Credit Agreement by the Borrower and the borrowings thereunder (a) have been duly authorized by all requisite corporate and, if necessary, stockholder action of the Borrower and each Subsidiary and (b) will not (i) violate (A) any provision of the certificate of incorporation or by laws of the Borrower or any Subsidiary, (B) to my knowledge after reasonable inquiry any law, statute, rule or regulation or any order of any Governmental Authority applicable to the Borrower or any Subsidiary or their properties or (C) any provision of any indenture or other material agreement or other material instrument to which the Borrower or any Subsidiary is a party or by which any of them or any of their property is or may be bound, (ii) be in conflict with, result in a breach of or constitute (along or with notice or lapse of time or both) a default under, or give rise to any right to accelerate or to require the prepayment, repurchase or redemption of any obligation under any such indenture, agreement or other instrument or (iii) result in the creating or imposition of any Lien upon or with respect to any property or assets now owned or hereafter acquired by the Borrower or any Subsidiary. 3. If, contrary to the intent of the parties, the Credit Agreement were held to be governed by the laws of the State of Texas, the Credit Agreement would nevertheless constitute a valid and binding agreement of the Borrower, enforceable in accordance with its terms, except (a) enforcement of the indemnification and exculpatory provisions of the Credit Agreement may be limited by applicable securities laws and other laws and public policies, (b) enforcement of the Credit Agreement may be limited by Debtor Relief Laws and is subject to equitable principles, and (c) certain provisions of the Credit Agreement may be limited by, modified or unenforceable under applicable state and federal laws, regulations, rulings and decisions in addition to those referenced herein, if any; however, such limitation, modification or unenforceability should not in our opinion materially diminish or substantially interfere with the practical realization of benefits intended to be afforded by the Credit Agreement except for the economic consequences of any procedural delay which may result therefrom. 4. No action, consent or approval of, registration or filing with or any other action by any Governmental Authority is or will be required in connection with the execution, delivery and performance of the Loan Documents by the Borrower party thereto or the consummation of the transactions contemplated thereby, other than routine filings with the SEC and FCC or required of public companies and FCC licensees and such authorizations and approvals as have already been obtained and are in full force and effect. 5. There are not any actions, suits or proceedings at law or in equity or by or before any Governmental Authority now pending or, to our knowledge, threatened against or affecting the Borrower or any Subsidiary or any business, property or rights of any such person (i) that involve the Credit Agreement or the transactions contemplated thereby or (ii) as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, could 98 reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect. 6. All shares of capital stock of each Subsidiary have been duly and validly authorized and issued, are fully paid and non-assessable and, except as set forth on Schedule 6.01 to the Credit Agreement, are owned by the Borrower, directly or indirectly, free and clear of all Liens. No authorized but unissued or treasury shares of capital stock of any Subsidiary are subject to any option, warrant, right to call or commitment of any kind. Other than the ongoing stock repurchase program of the Borrower, neither the Borrower nor any Subsidiary is subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any shares of its capital stock or any securities convertible into or for shares of its capital stock. Neither the Borrower nor any Subsidiary is a party to any agreement restricting the transfer or voting of any shares of any capital stock of any Subsidiary. 7. Neither the Borrower nor any of the Subsidiaries is an "investment company" or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940. 8. Neither the Borrower nor any of the Subsidiaries is a "holding company" or a "subsidiary company" of a "holding company", within the meaning of the Public Utility Holding Company Act of 1935. 9. The making of the Loans to the Borrower and the application of the proceeds thereof by the Borrower pursuant to the terms of the Credit Agreement will not violate Regulation G, T, U or X of the Board of Governors of the Federal Reserve System. I am admitted to practice in the State of Texas. I express no opinion as to matters under or involving the laws of any jurisdiction other than the laws of the State of Texas, the General Corporation Law of the State of Delaware and the Federal Laws of the United States. This opinion may be relied upon by each of you, by any successors and assigns of the Administrative Agent, and any participant, assignee or successor to the interests of the Lenders under the Credit Agreement. Very truly yours, 99 EXHIBIT B-2 [Letterhead of] LOCKE PURNELL RAIN HARRELL January 31, 1997 Texas Commerce Bank National Association as Administrative Agent 2200 Ross Avenue Dallas, Texas 75201 Chase Securities Inc., as Arranger 270 Park Avenue New York, NY 10017 The Lenders from time to time party to the Credit Agreement referred to below (all of the Addressees, collectively, the "Creditors") Dear Ladies and Gentlemen: This opinion is being delivered to you pursuant to Section 4.01(b) of that certain $1,500,000,000 Credit Agreement dated as of January 31, 1997 (the "Credit Agreement") among A. H. Belo Corporation, a Delaware corporation ("Borrower"), the financial institutions who are parties thereto as Lenders, Texas Commerce Bank National Association ("TCB"), as Administrative Agent and the Chase Manhattan Bank ("Chase"), as Competitive Advance Facility Agent, Bank of America National Trust and Savings Association and Bank of Tokyo-Mitsubishi, Ltd., as Co-Syndication Agents, and NationsBank of Texas, N.A. ("NationsBank"), as Documentation Agent. Terms which are defined in the Credit Agreement and which are used but not defined herein shall have the meanings given them in the Credit Agreement. We have acted as counsel for Borrower in connection with the transactions provided for in the Credit Agreement. Please be advised that we are engaged by Borrower and/or its Subsidiaries from time to time to assist with selected matters and do not serve as general counsel to any of such entities. Also, please be advised that we are engaged by TCB, Chase, NationsBank and certain other Lenders (or affiliates of TCB, Chase and such other Lenders) from time to time to assist in selected matters unrelated to the Credit Agreement. For purposes of this opinion, we have examined originals or copies of the Credit Agreement and the promissory notes evidencing the Loans (referred to herein individually as a "Principal Loan Document" and collectively as the "Principal Loan Documents") and such corporate records of Borrower and such other documents and matters of law which we have considered necessary for such purposes. In connection with our examination, we have assumed the genuineness of all signatures and the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as copies, and the authenticity of the originals of such copies. As to matters of fact material to this opinion, we have relied, without any 100 independent investigation or verification upon the accuracy of the representations, warranties and other statements of fact made in or pursuant to the Principal Loan Documents. In rendering the opinions expressed below, we have assumed the accuracy and validity of the opinions of Borrower's General Counsel expressed to you by letter of even date herewith, and to the extent relevant to our opinions, have relied upon such opinions without independent investigation or verification. Furthermore, we have assumed, with respect to the Credit Agreement, that: (i) such documents have been duly authorized by, have been duly executed and delivered by, and constitute legal, valid, binding and enforceable obligations of, all of the parties to such documents (other than Borrower); (ii) all signatories to such documents (other than on behalf of Borrower) have been duly authorized; (iii) all of the parties to such documents (other than Borrower) are duly organized and validly existing and have the power and authority (corporate or other) to execute, deliver and perform such documents; and (iv) no course of dealing, custom or practice between Borrower and any Agent or Lender shall supersede any provision thereof. The opinions expressed herein are limited to the laws of the State of Texas and federal laws of the United States except that we express no opinion with respect to, and have not taken into account the effect of, (i) the Communications Act of 1934, as amended, the Telecommunications Act of 1996, as amended, or the rules, regulations and policies of the FCC or (ii) applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or transfer or other similar laws relating to or affecting the rights of creditors or the obligations of debtors generally ("Debtor Relief Laws"). We call your attention to the fact that each Principal Loan Document (to the extent provided therein) provides that it is to be governed by and construed in accordance with the laws of the State of New York, as to which we have made no independent examination and express no opinion. With your permission we have assumed that the laws of the State of New York relevant to the matters addressed in our opinion are identical to the laws of the State of Texas. Based upon the foregoing, having due regard for the legal considerations we deem relevant and subject to the qualifications, assumptions and exceptions herein set forth, we are of the opinion that the Principal Loan Documents have been duly executed and delivered by the Borrower and constitute legal, valid and binding obligations of the Borrower and are enforceable against the Borrower in accordance with their terms, except (a) enforcement of the indemnification and exculpatory provisions of the Principal Loan Documents may be limited by applicable securities laws and other laws and public policies, (b) enforcement of the Principal Loan Documents may be limited by Debtor Relief Laws and is subject to equitable principles, and (c) certain provisions of the Principal Loan Documents may be limited, modified or 101 unenforceable under applicable state and federal laws, regulations, rulings and decisions in addition to those referenced herein, if any; however, such limitation, modification or unenforceability should not in our opinion materially diminish or substantially interfere with the practical realization of benefits intended to be afforded by the Principal Loan Documents except for the economic consequences of any procedural delay which may result therefrom. In rendering the opinions expressed herein, we have assumed that (a) every provision of the Principal Loan Documents limiting the rate and amount of interest charged thereunder to the maximum amount permitted by applicable law has been and will continue to be complied with and that each and every usury savings clause contained in the Principal Loan Documents has been and will continue to be complied with; (b) no other fees, sums, or benefits, whether direct or indirect, have been charged, paid, or received or are, or may be payable to or chargeable or receivable by any Agent or Lender except as expressly mentioned in the Principal Loan Documents, the Commitment Letter and the fee letter referred to therein; (c) any fees or charges which have been or may be paid to any Agent or any Lender or to any other party are, or will be, for services actually rendered, and that such fees and charges will not exceed just and reasonable compensation for such services rendered; and (d) any fees paid or to be paid by the Borrower to any Agent or any Lender and denominated "commitment fees" or the like are in fact commitment fees and not sums paid for the use, forbearance or detention of money. The opinions herein expressed are solely for your benefit in connection with the transactions contemplated by the Credit Agreement, and no one else is entitled to rely hereon (other than permitted successors and assigns) without our written consent. No person is entitled to rely hereon to the extent such person or its counsel shall have any knowledge why any opinion expressed herein is not accurate in any material respect. We hereby disclaim any obligation to advise you of any changes in fact or law which might affect the opinions expressed herein. Sincerely, LOCKE PURNELL RAIN HARRELL (A Professional Corporation) By: __________________________ Guy Kerr 102 EXHIBIT B-3 [Form of Opinion of Wiley, Rein & Fielding- FCC Counsel for Borrower] January [ ], 1997 Texas Commerce Bank National Association as Administrative Agent 2200 Ross Avenue Dallas, TX 75201 Chase Securities, Inc. as Arranger 270 Park Avenue New York, NY 10017 The Lenders from time to time party to the Credit Agreement referred to below (all of the Addressees, collectively, the "Creditors") Dear Ladies and Gentlemen: We have acted as special communications counsel to A. H. Belo Corporation, a Delaware Corporation (the "Borrower"), in connection with the execution and delivery today of, and the consummation of the transactions contemplated by, the Credit Agreement dated as of January 31, 1997, (the "Credit Agreement"), among the Borrower, the financial institutions party thereto as lenders (the "Lenders") and Texas Commerce Bank National Association, as administrative agent (in such capacity, the "Administrative Agent"). This opinion is delivered pursuant to Section 4.01(b) of the Credit Agreement. Capitalized terms used but not defined herein shall have the meanings assigned to such terms in the Credit Agreement. In rendering this opinion, we have examined the Credit Agreement and such other documents and instruments and such questions of law as we have deemed necessary for the purpose of rendering the opinion set forth herein. Additionally, we have relied upon the representations made by the Borrower in the Credit Agreement, upon the statements of officers and representatives of the Borrower, and upon records relating to the Borrower and the television broadcast stations owned and operated by the Borrower and its several Subsidiaries (the "Stations") that are routinely available for public inspection at the Federal Communications Commission ("FCC"). We have assumed the genuineness of all signatures on all original documents, the conformity to original documents of all copies submitted to us, and the full authorization, execution, and delivery of all documents by parties responsible therefor. We also have assumed that the documents and instruments described or referred to herein fully express the agreements of any party thereto. Finally, we have assumed the completeness of the public files relating to the Borrower, its Subsidiaries, and the Stations maintained by the FCC and the accuracy and authenticity of all documents contained therein. Whenever our opinion herein with respect to the existence (or absence) of facts is qualified by the phrase "to the best of our knowledge," it is intended to indicate that, during the course of our 103 representation of the Borrower, no information has come to our attention which would give us actual knowledge of the existence (or absence) of such facts. We have undertaken no on site inspection whatsoever of any of the Stations and, except as otherwise specifically stated herein, we have not undertaken any independent investigation to determine the existence or absence of such facts, and no inference as to our knowledge of the existence (or absence) of such facts should be drawn from the fact of our representation of the Borrower. We are admitted to practice law in the District of Columbia. We address herein only matters within the jurisdiction of the FCC under the Communications Act of 1934, as amended, and the rules, regulations and published orders of the FCC (Collectively, the "Communications Laws") applicable to the Stations. We express no opinion as to matters arising under or involving any other laws. Based upon the subject to the foregoing, it is our opinion that: 1. The Borrower or its Subsidiaries are the respective holders of the licenses, permits, and authorizations issued by the FCC listed in Attachment A hereto (the "FCC Licenses"). The FCC Licenses are in full force and effect for the terms specified in Attachment A and, where applicable, timely renewal applications have been filed with the FCC with respect to such FCC Licenses. The FCC Licenses are not subject to any condition, restriction or limitation materially adverse to the Borrower or the Stations except for conditions, restrictions or limitations that appear on the faces of the FCC Licenses or that are set forth in the rules, regulations or policies of the FCC that are applicable generally to stations of the types, nature, classes, or locations of the Stations. 2. To the best of our knowledge, no judgment, decree, order or notice has been issued by the FCC which permits, or after notice or lapse of time or both, would permit, revocation, nonrenewal, or termination of any of the FCC Licenses prior to the respective expiration dates thereof, or which results or would result in any other material impairment of any rights thereunder. 3. Neither the execution and delivery by the Borrower of the Credit Agreement nor the fulfillment of or compliance with any of the provisions thereof will (a) result in a violation of the Communications Laws, or (b) require any authorization, consent, approval, exemption or other action by, or any notice or filing with, the FCC pursuant to the Communications Laws (other than routine filings after the date of this opinion with the FCC under Section 73.3613(b)(5) of the FCC's Rules and Regulations). 4. Other than as set forth in Attachment A and except as to any other matters relating to the television broadcast industry in general, to the best of our knowledge, no proceeding, claim, lawsuit, investigation or other action is (a) currently pending before the FCC or (b) threatened in writing and received by any Station operated by the Borrower or any Subsidiary and not currently before the FCC, which has a substantial likelihood of resulting in a Material Adverse Effect. This opinion is being furnished to you subject to the qualifications and limitations expressed herein, and has been prepared 104 solely for your information in connection with the transactions contemplated under the Credit Agreement. This opinion may not be quoted in whole or in part or otherwise referred to, or furnished to any governmental agency or other entity or person, without our written consent. It may not be used or replied upon by any other person or entity without our written consent, and may be relied upon by you only with respect to the specific matters which are the subject hereof. The opinions expressed herein are as of the date hereof, and we specifically disclaim any obligation to advise you of any changes in the matters addressed in the foregoing opinion occurring after such date. Very truly yours, WILEY, REIN & FIELDING 105 Schedule 2.01
NAME ADDRESS COMMITMENT ---- ------- ---------- Texas Commerce Bank National 2200 Ross Avenue $112,500,000 Association 3rd Floor Dallas, TX 75201 Attn: Kevin Kelty Bank of America NT & SA 555 South Flower Street $105,000,000 Los Angeles, CA 90071 Attn: Robert Lagace Bank of Tokyo-Mitsubishi, Ltd. 2001 Ross Avenue $105,000,000 Suite 3150 Dallas, TX 75201 Attn: Jeb Beckwith NationsBank 901 Main Street $105,000,000 Dallas, TX 75283 Attn: Todd Shipley Fleet Bank One Federal Street MS/OF/DO3D $73,125,000 Boston, MA 02110 Attn: Ms. Paula Lang Morgan Guaranty Trust Company 60 Wall Street $73,125,000 22nd Floor New York, NY 10260 Attn: Mr. Donald Patrick Societe Generale 2001 Ross Avenue $73,125,000 Suite 4800 Dallas, TX 75201 Attn: Chris Speltz The Fuji Bank, Limited One Houston Center $73,125,000 1221 McKinney Suite 4100 Houston, TX 77010 Attn: Phillip Lauinger Banque Nationale de Paris 717 North Harwood Street $37,500,000 Suite 2630 Dallas, TX 75201 Attn: Hank Setina
106
NAME ADDRESS COMMITMENT ---- ------- ---------- First National Bank of Boston 100 Federal Street $37,500,000 01-08-08 Boston, MA 02110 Attn: Ms. Kathryn Ticknor First Union Bank of North One First Union Center $37,500,000 Carolina Charlotte, NC 28288 Attn: Adrienne Musgnug Mellon Bank, N.A. One Mellon Bank Center $37,500,000 Pittsburgh, PA 15258 Attn: Lisa Pellow Mitsubishi Trust 520 Madison Avenue $37,500,000 New York, NY 10022 Attn: Ms. Pat Loret De Mola Suntrust Banks Inc. 200 South Orange Avenue $37,500,000 Tower 4 Orlando, FL 32801 Attn: Mr. Chris Aguilar The Sakura Bank, Limited, 3940 Interfirst Plaza $37,500,000 Houston Agency. 1100 Louisiana Houston, TX 77002 Attn: Terrance Martin The Sanwa Bank Limited, Dallas 4100W $37,500,000 Agency Texas Commerce Tower 2200 Ross Avenue Dallas, TX 75201 Attn: Rob Smith The Tokai Bank, Limited 55 East 52nd Street $37,500,000 12th Floor New York, NY 10055 Attn: Stuart Schulman The Toyo Trust & Banking Co. 666 Fifth Avenue $37,500,000 33rd Floor New York, NY 10103 Attn: Sharon Bonelli
107
NAME ADDRESS COMMITMENT ---- ------- ---------- Toronto-Dominion 909 Sonin, Suite 1700 $37,500,000 Houston, TX 77010 Attn: Ms. Kimberly Burlesca CIBC Inc. 425 Lexington Avenue $26,250,000 New York, NY 10017 Attn: Ms. Michelle Roller Credit Agricole 600 Travis Street $26,250,000 Suite 2340 Houston, TX 77002 Attn: Mr. Ken Coulter Credit Lyonnais New York Branch 1301 Avenue of the Americas $26,250,000 New York, NY 10019 Attn: Legal Dept. w/copy to: 2200 Ross Avenue Dallas, TX Attn: Samuel Hill Dai-Ichi Kangyo 1100 Louisiana $26,250,000 Suite 4940 Houston, TX 77002 Attn: Mr. Kelton Glasscock Hibernia National Bank 313 Carondelet Street $26,250,000 New Orleans, LA 70130 Attn: Troy Villafarra Industrial Bank of Japan 3 Allen Center $26,250,000 333 Clay Street Houston, TX 77002 Attn: Mr. David Fox, II Long-Term Credit Bank 2200 Ross Avenue $26,250,000 of Japan Suite 4700 West Dallas, TX 75201 Attn: Mr. Robert Nelson The Northern Trust Company 50 South LaSalle Street $26,250,000 Chicago, IL 60675 Attn: Martin Alston
108
NAME ADDRESS COMMITMENT ---- ------- ---------- Wachovia Bank of Georgia, N.A. 191 Peachtree Street, NE $26,250,000 Atlanta, GA 30303 Attn: Joel Wood Wells Fargo Bank (Texas), N.A. 1445 Ross Avenue $26,250,000 3rd Floor Dallas, TX 77202 Attn: Ken Taylor Westdeutsche Landesbank 1211 Avenue of the Americas $26,250,000 New York, NY 10036 Attn: Mr. Richard Newman Crestar Bank 919 East Main Street $18,750,000 HDQ 1022 Richmond, VA 23261-6665 Attn: Mr. Thomas Palmer First Hawaiian Bank 3333 Michelson Drive $18,750,000 Irvine, CA 92612 Attn: Mr. Don Young Michigan National 27777 Inkster Road $15,000,000 Bank Farmington Hills, MI 48333-9065 Attn: Ms. Stephanie Lubin The Yasuda Trust & Banking Co., 725 South Figueroa Street $15,000,000 Inc. Suite 3990 Los Angeles, CA 90017 U.S. Bank of Washington, N.A. 1420 Fifth Avenue, WWH276 $11,250,000 Seattle, WA 98101
109 Schedule 3.06 Litigation, Labor and Environmental Matters None. 110 Schedule 6.01 Liens The liens created in connection with the $6,400,000 City of Arlington Industrial Development Corporation Industrial Development Revenue Bonds (Dallas-Fort Worth Suburban Newspapers Inc. Project) Series 1985. 111 Schedule 3.06 Litigation, Labor and Environmental Matters None. 112 Schedule 6.01 Liens The liens created in connection with the $6,400,000 City of Arlington Industrial Development Corporation Industrial Development Revenue Bonds (Dallas-Fort Worth Suburban Newspapers Inc. Project) Series 1985. 113 Schedule 6.05 Subordinated Debt Subordinated Debt shall mean any debt for borrowed money of the Borrower or its Subsidiaries expressly subordinate to the Indebtedness of the Borrower under the Credit Agreement which satisfies the following criteria or other criteria which may be acceptable to the Required Lenders: (i) such subordinated debt will not amortize or be subject to any scheduled prepayment, redemption or repurchase requirement (other than a repurchase requirement triggered by a change in control or similar event) until after the Maturity Date; (ii) the financial covenants taken as a whole under any such subordinated debt will not be more restrictive of the Borrower than those contained in this Credit Agreement; (iii) the terms of such subordinated debt will not permit payments to subordinated debt holders when an Event of Default has occurred and is continuing under this Credit Agreement; and (iv) the subordinated debt holders' rights will be subordinate to those of the Agents and the Lenders under the Credit Agreement in the event of bankruptcy and/or liquidation of the Borrower. EX-10.2(3) 3 364-DAY CREDIT AGREEMENT DATED JANUARY 31, 1997 1 EXHIBIT 10.2(3) CREDIT AGREEMENT dated as of January 31, 1997 among A. H. BELO CORPORATION as Borrower, The Lenders Party Hereto, TEXAS COMMERCE BANK NATIONAL ASSOCIATION as Administrative Agent, THE CHASE MANHATTAN BANK, as Competitive Advance Facility Agent BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION BANK OF TOKYO-MITSUBISHI, LTD. as Co-Syndication Agents NATIONSBANK as Documentation Agent 364-DAY $500,000,000 REVOLVING CREDIT AND COMPETITIVE ADVANCE FACILITY 2 TABLE OF CONTENTS
Page ---- ARTICLE I Definitions ----------- SECTION 1.01. Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 SECTION 1.02. Classification of Loans and Borrowings . . . . . . . . . . . . . . 15 SECTION 1.03. Terms Generally . . . . . . . . . . . . . . . . . . . . . . . . . 15 ARTICLE II The Credits ----------- SECTION 2.01. Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 SECTION 2.02. Loans and Borrowings . . . . . . . . . . . . . . . . . . . . . . . 16 SECTION 2.03. Requests for Revolving Borrowings . . . . . . . . . . . . . . . . . 17 SECTION 2.04. Competitive Bid Procedure . . . . . . . . . . . . . . . . . . . . . 17 SECTION 2.05. Funding of Borrowings . . . . . . . . . . . . . . . . . . . . . . . 20 SECTION 2.06. Interest Elections . . . . . . . . . . . . . . . . . . . . . . . . 20 SECTION 2.07. Termination and Reduction of Commitments . . . . . . . . . . . . . 21 SECTION 2.08. Repayment of Loans; Evidence of Debt . . . . . . . . . . . . . . . 22 SECTION 2.09. Prepayment of Loans . . . . . . . . . . . . . . . . . . . . . . . . 23 SECTION 2.10. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 SECTION 2.11. Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 SECTION 2.12. Alternate Rate of Interest . . . . . . . . . . . . . . . . . . . . 25 SECTION 2.13. Increased Costs . . . . . . . . . . . . . . . . . . . . . . . . . . 26 SECTION 2.14. Break Funding Payments . . . . . . . . . . . . . . . . . . . . . . 27 SECTION 2.15. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 SECTION 2.16. Payments Generally; Pro Rata Treatment; Sharing of Set-offs . . . . 28 SECTION 2.17. Mitigation Obligations; Replacement of Lenders . . . . . . . . . . 29 ARTICLE III Representations and Warranties ------------------------------ SECTION 3.01. Organization; Powers . . . . . . . . . . . . . . . . . . . . . . . 30 SECTION 3.02. Authorization; Enforceability . . . . . . . . . . . . . . . . . . . 31 SECTION 3.03. Governmental Approvals; No Conflicts . . . . . . . . . . . . . . . 31 SECTION 3.04. Financial Condition; No Material Adverse Change . . . . . . . . . . 31 SECTION 3.05. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 SECTION 3.06. Litigation and Environmental Matters . . . . . . . . . . . . . . . 32 SECTION 3.07. Compliance with Laws and Agreements . . . . . . . . . . . . . . . . 32 SECTION 3.08. Certain Legal Matters . . . . . . . . . . . . . . . . . . . . . . . 32 SECTION 3.09. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 SECTION 3.10. ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
3 3 SECTION 3.11. Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 SECTION 3.12. Acquisition of The Providence Journal Company . . . . . . . . . . . 33 ARTICLE IV Conditions ---------- SECTION 4.01. Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . 34 SECTION 4.02. Each Credit Event . . . . . . . . . . . . . . . . . . . . . . . . . 35 ARTICLE V Affirmative Covenants --------------------- SECTION 5.01. Financial Statements and Other Information . . . . . . . . . . . . 35 SECTION 5.02. Notices of Material Events . . . . . . . . . . . . . . . . . . . . 37 SECTION 5.03. Existence; Conduct of Business . . . . . . . . . . . . . . . . . . 37 SECTION 5.04 Payment of Obligations . . . . . . . . . . . . . . . . . . . . . . 37 SECTION 5.05. Maintenance of Properties; Insurance . . . . . . . . . . . . . . . 37 SECTION 5.06. Books and Records; Inspection Rights . . . . . . . . . . . . . . . 38 SECTION 5.07. Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . 38 SECTION 5.08. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . 38 ARTICLE VI Negative Covenants ------------------ SECTION 6.01. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 SECTION 6.02. Fundamental Changes . . . . . . . . . . . . . . . . . . . . . . . . 39 SECTION 6.03. Transactions with Affiliates . . . . . . . . . . . . . . . . . . . 39 SECTION 6.04. Restrictive Agreements . . . . . . . . . . . . . . . . . . . . . . 39 SECTION 6.05. Leverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 SECTION 6.06. Interest Coverage . . . . . . . . . . . . . . . . . . . . . . . . . 40 ARTICLE VII Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . 40 ----------------- ARTICLE VIII The Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 ----------
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ARTICLE IX Miscellaneous ------------- SECTION 9.01 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 SECTION 9.02 Waivers, Amendments . . . . . . . . . . . . . . . . . . . . . . . . 45 SECTION 9.03 Expenses; Indemnity; Damage Waiver . . . . . . . . . . . . . . . . 46 SECTION 9.04 Successors & Assigns . . . . . . . . . . . . . . . . . . . . . . . 47 SECTION 9.05 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 SECTION 9.06 Counterparts; Integration; Effectiveness . . . . . . . . . . . . . 49 SECTION 9.07 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 SECTION 9.08 Right of Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . 50 SECTION 9.09 Governing Law; Jurisdiction; Consent to Service of Process . . . . . . . . . . . . . . . . . . . . . . . . 50 SECTION 9.10 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . 51 SECTION 9.11 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 SECTION 9.12 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . 51 SECTION 9.13 Interest Rate Limitations . . . . . . . . . . . . . . . . . . . . . 52 Exhibits and Schedules ---------------------- Exhibit A Form of Assignment and Acceptance Exhibit B-1 Form of Opinion of Counsel -- General Counsel of A. H. Belo Corporation Exhibit B-2 Form of Opinion of Counsel -- Locke Purnell Rain Harrell Exhibit B-3 Form of Opinion of Counsel -- Wiley, Rein & Fielding Schedule 2.01 Commitments Schedule 3.06 Litigation, Labor and Environmental Matters Schedule 6.01 Liens Schedule 6.05 Subordinated Debt
5 CREDIT AGREEMENT dated as of January 31, 1997, among A. H. BELO CORPORATION, the LENDERS party hereto, THE CHASE MANHATTAN BANK, a New York banking corporation ("Chase"), as Competitive Advance Facility Agent (in such capacity, the "CAF Agent"), BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION and BANK OF TOKYO-MITSUBISHI, LTD., as Co-Syndication Agents, NATIONSBANK, as Documentation Agent, and TEXAS COMMERCE BANK NATIONAL ASSOCIATION, as Administrative Agent (in such capacity, the "Administrative Agent"; and, together with the CAF Agent, the "Agents"). The Borrower (such term and each other capitalized term used but not otherwise defined herein having the meaning assigned to it in Article I) has requested the Lenders to extend credit in order to enable it to borrow on a revolving credit basis on and after the date hereof and at any time and from time to time prior to the Termination Date a principal amount not to exceed $500,000,000. The proceeds of such borrowings are to be used to finance a portion of the cost of acquiring The Providence Journal Company (including related refinancing of indebtedness and transaction costs) and for general corporate purposes, including working capital, acquisitions, stock repurchases and, if the Borrower shall so determine, commercial paper backup. Up to $100,000,000 of the proceeds of such borrowings and the borrowings under the five-year revolving credit and competitive advance facility established pursuant to the credit agreement dated the date hereof among the Borrower, the Lenders and the Agents may be used to fund the operations of AHN and TVFN. The Borrower has also requested the Lenders to provide a procedure pursuant to which the Lenders may be invited to bid on an uncommitted basis on short-term borrowings by the Borrower. The Lenders are willing to extend such credit to the Borrower on the terms and subject to the conditions herein set forth. The parties hereto agree as follows: ARTICLE I Definitions SECTION 1.01. Defined Terms. As used in this Agreement, the following terms have the meanings specified below: "ABR", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Alternate Base Rate. "Adjusted CD Rate" means, with respect to any CD Borrowing for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/100 of 1%) equal to the sum of (a) the Fixed CD Rate for such Interest Period multiplied by the Statutory Reserve Rate, plus (b) the Assessment Rate. 6 2 "Adjusted LIBO Rate" means, with respect to any Eurodollar Borrowing for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate. "Administrative Agent" means Texas Commerce Bank National Association, as administrative agent for the Lenders hereunder. "Administrative Questionnaire" means an Administrative Questionnaire in a form supplied by the Administrative Agent. "Affiliate" means, when used with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified. "AHN" means America's Health Network, a subsidiary of The Providence Journal Company. "Alternate Base Rate" means, for any day, a rate per annum equal to the greatest of (a) the Prime Rate in effect on such day, (b) the Base CD Rate in effect on such day plus 1% and (c) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. Any change in the Alternate Base Rate due to a change in the Prime Rate, the Base CD Rate or the Federal Funds Effective Rate shall be effective from and including the effective date of such change in the Prime Rate, the Base CD Rate or the Federal Funds Effective Rate, respectively. "Applicable Percentage" means, with respect to any Eurodollar Loan (other than any Eurodollar Competitive Loan) or CD Loan or with respect to the facility fees referred to in Section 2.10(a), as the case may be, the applicable percentage set forth in the table below under the caption "Eurodollar Spread", "CD Spread" or "Facility Fee Percentage", as the case may be, based upon the ratio of Funded Debt to Pro Forma Operating Cash Flow as of the end of and for the most recent period of four consecutive fiscal quarters for which financial statements of the Borrower are required to have been delivered under Section 5.01(a) or (b), whether or not financial statements in respect of any subsequent period shall have been delivered: Facility Fee Eurodollar Spread CD Spread ------------ ----------------- --------- Ratio Percentage ----- ---------- Category 1 Below 3.0 to 1.0 0.055% 0.170% 0.295% Category 2 At least 3.0 to 1.0 but below 3.5 to 1.0 0.060% 0.190% 0.315% Category 3 At least 3.5 to 1.0 but below 4.0 to 1.0 0.070% 0.255% 0.380% Category 4 At least 4.0 to 1.0 but below 4.5 to 1.0 0.090% 0.310% 0.435% Category 5 At least 4.5 to 1.0 but below 5.0 to 1.0 0.125% 0.375% 0.500%
7 3 Category 6 Greater than or equal to 5.0 to 1.0 0.150% 0.475% 0.600%
At any time when financial statements required to have been delivered under Section 5.01 (a) or (b) have not been delivered, the Applicable Percentage shall be determined by reference to Category 6. "Assessment Rate" means, for any day, the annual assessment rate in effect on such day that is payable by a member of the Bank Insurance Fund classified as "well-capitalized" and within supervisory subgroup "B" (or a comparable successor risk classification) within the meaning of 12 C.F.R. Part 327 (or any successor provision) to the Federal Deposit Insurance Corporation for insurance by such Corporation of time deposits made in dollars at the offices of such member in the United States; provided that if, as a result of any change in any law, rule or regulation, it is no longer possible to determine the Assessment Rate as aforesaid, then the Assessment Rate shall be such annual rate as shall be determined by the Administrative Agent to be representative of the cost to the Lenders of such insurance. "Assignment and Acceptance" means an assignment and acceptance entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 9.04), and accepted by the Administrative Agent, in the form of Exhibit A or another form approved by the Administrative Agent. "Availability Period" means the period from and including the Effective Date to but excluding the earlier of the Termination Date and the date of termination of the Commitments. "Base CD Rate" means the sum of (a) the Three-Month Secondary CD Rate multiplied by the Statutory Reserve Rate plus (b) the Assessment Rate. "Board" means the Board of Governors of the Federal Reserve System of the United States of America. "Borrower" means A. H. Belo Corporation, a Delaware corporation. "Borrowing" means (a) a group of Revolving Loans of the same Type and, in the case of CD Loans or Eurodollar Loans, as to which a single Interest Period is in effect, (b) a Competitive Loan or group of Competitive Loans of the same Type made on the same date and as to which a single Interest Period is in effect. "Borrowing Request" means a request by the Borrower for a Revolving Borrowing in accordance with Section 2.03. "Business Day" means any day that is not a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to remain closed; provided that, when used in connection with a Eurodollar Loan, the term "Business Day" shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market. 8 4 "CAF Agent" means The Chase Manhattan Bank as competitive advance facility agent for the Lenders hereunder. "Capital Lease Obligations" of any Person means the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP. "CD", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Adjusted CD Rate. A "Change in Control" shall be deemed to have occurred if (a) any person or group (within the meaning of Rule 13d-5 of the Securities Exchange Act of 1934 as in effect on the date hereof) other than officers of the Borrower and Continuing Directors shall own, directly or indirectly, beneficially or of record, shares representing more than 50% of the aggregate ordinary voting power represented by the issued and outstanding capital stock of the Borrower; or (b) a majority of the seats (other than vacant seats) on the board of directors of the Borrower shall at any time be occupied by persons who are not Continuing Directors. "Change in Law" means (a) the adoption of any law, rule or regulation after the date of this Agreement, (b) any change in any law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the date of this Agreement or (c) compliance by any Lender (or, for purposes of Section 2.13, by any lending office of such Lender or by such Lender's holding company, if any) with any law, rule or regulation, or any guideline or directive (whether or not having the force of law) of any Governmental Authority, or any request of any Governmental Authority with which such Lender believes in good faith that it would be disadvantageous not to comply, in each case made or issued after the date of this Agreement. "Class", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are Revolving Loans or Competitive Loans. "Code" means the Internal Revenue Code of 1986, as amended from time to time. "Commitment" means, with respect to each Lender, the commitment of such Lender to make Revolving Loans hereunder, expressed as an amount representing the maximum aggregate amount of such Lender's Revolving Credit Exposure hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.09 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 9.04. The initial amount of each Lender's Commitment is set forth on Schedule 2.01, or in the 9 5 Assignment and Acceptance pursuant to which such Lender shall have assumed its Commitment, as applicable. "Competitive Bid" means an offer by a Lender to make a Competitive Loan in accordance with Section 2.04. "Competitive Bid Rate" means, with respect to any Competitive Bid, the Margin or the Fixed Rate, as applicable, offered by the Lender making such Competitive Bid. "Competitive Bid Request" means a request by the Borrower for Competitive Bids in accordance with Section 2.04. "Competitive Loan" means a Loan made pursuant to Section 2.04. "Continuing Directors" means (i) the members of the Board of Directors of the Borrower on the date hereof and (ii) future members of such Board of Directors who were nominated or appointed by a majority of the Continuing Directors at the date of their nomination or appointment. "Control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. "Controlling" and "Controlled" have meanings correlative thereto. "Default" means any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default. "Disclosed Matters" means the actions, suits and proceedings, labor controversies and the environmental matters disclosed in Schedule 3.06. The disclosure of information in Schedule 3.06 or in any other schedule or exhibit to this Agreement shall not constitute an admission by the Borrower that such information is material for any purpose, including applicable securities laws, other than this Agreement and the transactions provided for herein. "dollars" or "$" refers to lawful money of the United States of America. "Effective Date" means the date on which the conditions specified in Section 4.01 are satisfied (or waived in accordance with Section 9.02). "Environmental Laws" means all laws, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by any Governmental Authority, relating in any way to the environment, preservation or reclamation of natural resources, the management, release or threatened release of any Hazardous Material or to health and safety matters. 10 6 "Environmental Liability" means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Borrower or any Subsidiary directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time. "ERISA Affiliate" means any trade or business (whether or not incorporated) that, together with the Borrower, is treated as a single employer under Section 414(b) or (c) of the Code, or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code. "ERISA Event" means (a) any "reportable event", as defined in Section 4043 of ERISA or the regulations issued thereunder, with respect to a Plan; (b) the existence with respect to any Plan of an "accumulated funding deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence of any liability under Title IV of ERISA with respect to the termination of any Plan or the withdrawal or partial withdrawal of the Borrower or any of its ERISA Affiliates from any Plan or Multiemployer Plan; (e) the receipt by the Borrower or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; or (f) the receipt by the Borrower or any ERISA Affiliate of any notice concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA. "Eurodollar", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Adjusted LIBO Rate (or, in the case of a Competitive Loan, the LIBO Rate). "Event of Default" has the meaning assigned to such term in Article VII. "Excluded Taxes" means, with respect to the Administrative Agent, any Lender or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, (a) income or franchise taxes imposed on (or measured by) its net income by the jurisdiction under the laws of which it is organized, or the jurisdiction in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located, (b) any branch profits taxes imposed by the United States of America or 11 7 any similar tax imposed by any other jurisdiction in which the Borrower is located and (c) in the case of a Foreign Lender (other than an assignee pursuant to a request by the Borrower under Section 2.17(b)), any U.S. Federal withholding tax imposed on amounts payable to such Foreign Lender under this Agreement because of its failure or inability to comply with Section 2.15(e) or for any other reason, unless (and to the extent that) (i) such withholding tax liability arises or is increased by reason of a Change in Law occurring after such Foreign Lender becomes a Lender under this Agreement or (ii) such Foreign Lender's assignor (if any) was entitled, at the time of assignment, to receive additional amounts from the Borrower with respect to such withholding tax liability pursuant to Section 2.15(a). "FCC" means the Federal Communications Commission and any successors thereto. "Federal Funds Effective Rate" means, for any day, the weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for the day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it. "Film Contracts" mean contracts or agreements with suppliers which provide the right to broadcast certain specified film or video tape motion pictures. "Financial Officer" means the chief financial officer, vice president of finance, principal accounting officer, treasurer or controller of the Borrower. "Fixed CD Rate" means, with respect to any CD Borrowing for any Interest Period, the arithmetic average (rounded upwards, if necessary, to the next 1/100 of 1%) of the prevailing rates per annum bid at or about 10:00 a.m., New York City time, to the Administrative Agent on the first Business Day of such Interest Period by three negotiable certificate of deposit dealers of recognized standing selected by the Administrative Agent for the purchase at face value of negotiable certificates of deposit of major United States money center banks in a principal amount of $5,000,000 and with a maturity comparable to such Interest Period. "Fixed Rate" means, with respect to any Competitive Loan bearing interest at a fixed rate, the fixed rate of interest per annum specified by the Lender making such Competitive Loan in its related Competitive Bid. "Fixed Rate Loan" means a Competitive Loan bearing interest at a Fixed Rate. "Foreign Lender" means any Lender that is organized under the laws of a jurisdiction other than that in which the Borrower is 12 8 located. For purposes hereof, the United States of America and each State thereof shall be considered to constitute a single jurisdiction. "Funded Debt" means without duplication, all Indebtedness, other than short-term obligations under Film Contracts. "GAAP" means generally accepted accounting principles in the United States of America consistently applied. "Governmental Authority" means the government of the United States of America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government. "Guarantee" means any agreement by which the Borrower or any Subsidiary assumes, guarantees, endorses, contingently agrees to purchase or provide funds for the payment of, or otherwise becomes liable upon, the obligation of another Person, or agrees to maintain the net worth or working capital or other financial condition of any other Person or otherwise assure any creditor of such other Person against loss, but shall not include typical and customary indemnifications, representations and warranties made in connection with purchases and sales of property or issuances of securities. "Hedging Agreement" means any interest rate protection agreement, foreign currency exchange agreement, commodity price protection agreement or other interest or currency exchange rate or commodity price hedging arrangement. "Hazardous Materials" means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law. "Indebtedness" means, without duplication, the Borrower's and each Subsidiary's (a) obligations for borrowed money, (b) obligations representing the deferred purchase price of property (including, without limitation, under Film Contracts) other than accounts payable arising in connection with the purchase of inventory in the ordinary course of business, (c) obligations, whether or not assumed, secured by Liens on or payable out of the proceeds or production from property now or hereafter owned or acquired by the Borrower or any Subsidiary, (d) obligations created under any conditional purchase or other title retention agreements, (e) Capital Lease Obligations, letters of credit, bonds or similar instruments, bankers' acceptances, (f) obligations under Guarantees; provided, however, that Indebtedness shall not include obligations of the Borrower or any Subsidiary incurred in connection with the self- insurance program or employee benefit plans and programs of the Borrower or the Subsidiaries, and (g) obligations to make payments that would be required to be made in the event of an early termination, on the date Indebtedness of the Borrower or any 13 9 Subsidiary is being determined, in respect of outstanding Hedging Agreements. "Indemnified Taxes" means Taxes other than Excluded Taxes. "Interest Coverage Ratio" means the ratio of Pro Forma Operating Cash Flow to Interest Expense. "Interest Election Request" means a request by the Borrower to convert or continue a Revolving Borrowing in accordance with Section 2.06. "Interest Expense" means, with respect to the Borrower and the Subsidiaries for any period, the interest expense of the Borrower and the Subsidiaries determined on a consolidated basis in accordance with GAAP, including, without limitation, (a) the amortization of debt discounts, (b) the amortization of all fees (including, without limitation, fees with respect to interest rate protection agreements) payable in connection with the incurrence of Indebtedness and (c) the portion of any Capital Lease Obligation allocable to interest expense. "Interest Payment Date" means (a) with respect to any ABR Loan, the last day of each March, June, September and December, (b) with respect to any CD or Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Eurodollar Borrowing with an Interest Period of more than three months' duration or a CD Borrowing with an Interest Period of more than 90 days' duration, each day prior to the last day of such Interest Period that occurs at intervals of three months' duration or 90 days' duration, as the case may be, after the first day of such Interest Period, (c) with respect to any Fixed Rate Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Fixed Rate Borrowing with an Interest Period of more than 90 days' duration (unless otherwise specified in the applicable Competitive Bid Request), each day prior to the last day of such Interest Period that occurs at intervals of 90 days' duration after the first day of such Interest Period, and any other dates that are specified in the applicable Competitive Bid Request as Interest Payment Dates with respect to such Borrowing. "Interest Period" means (a) with respect to any Eurodollar Borrowing, the period commencing on the date of such Borrowing and ending on the numerically corresponding day in the calendar month that is one, two, three or six months thereafter, as the Borrower may elect, (b) with respect to any CD Borrowing, the period commencing on the date of such Borrowing and ending 30, 60, 90, 180, 270 or 360 days thereafter, as the Borrower may elect, and (c) with respect to any Fixed Rate Borrowing, the period (which shall not be less than 1 day or more than 360 days) commencing on the date of such Borrowing and ending on the date specified in the applicable Competitive Bid Request; provided, that (i) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless, in the case of a Eurodollar Borrowing only, such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day and (ii) any Interest Period 14 10 pertaining to a Eurodollar Borrowing that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period. For purposes hereof, the date of a Borrowing initially shall be the date on which such Borrowing is made and, in the case of a Revolving Borrowing, thereafter shall be the effective date of the most recent conversion or continuation of such Borrowing. "Lenders" means the Persons listed on Schedule 2.01 and any other Person that shall have become a party hereto pursuant to an Assignment and Acceptance, other than any such Person that ceases to be a party hereto pursuant to an Assignment and Acceptance. "LIBO Rate" means, with respect to any Eurodollar Borrowing for any Interest Period, the rate appearing on Page 3750 of the Telerate Service (or on any successor or substitute page of such Service, or any successor to or substitute for such Service, providing rate quotations comparable to those currently provided on such page of such Service, as determined by the Administrative Agent from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, as the rate for dollar deposits with a maturity comparable to such Interest Period. In the event that such rate is not available at such time for any reason, then the "LIBO Rate" with respect to such Eurodollar Borrowing for such Interest Period shall be the rate at which dollar deposits of $5,000,000 and for a maturity comparable to such Interest Period are offered to the principal London office of the Administrative Agent or any Affiliate designated by the Administrative Agent in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period. "Lien" means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities. "Loans" means the loans made by the Lenders to the Borrower pursuant to this Agreement. "Margin" means, with respect to any Competitive Loan bearing interest at a rate based on the LIBO Rate, the marginal rate of interest, if any, to be added to or subtracted from the LIBO Rate to determine the rate of interest applicable to such Loan, as specified by the Lender making such Loan in its related Competitive Bid. "Material Adverse Effect" means a material adverse effect on (a) the business, assets, operations or condition, financial or 15 11 otherwise, of the Borrower and the Subsidiaries taken as a whole, (b) the ability of the Borrower to perform any of its obligations under this Agreement or (c) the rights of or benefits available to the Lenders under this Agreement. "Material Indebtedness" means Indebtedness (other than the Loans), of any one or more of the Borrower and the Subsidiaries in a principal amount for any such Indebtedness in excess of $20,000,000 or in an aggregate principal amount for all such Indebtedness in excess of $35,000,000. "Maturity Date" means January 31, 2000. "Multiemployer Plan" means a multiemployer plan as defined in Section 4001(a)(3) of ERISA. "Operating Cash Flow" means, for the Borrower and its Subsidiaries for any relevant period, on a consolidated basis, the sum of (i) earnings before income taxes for such period (without taking into account extraordinary or nonrecurring items), plus (ii) depreciation and amortization expense during such period, plus (iii) Interest Expense actually incurred or accrued during such period determined in accordance with GAAP; provided, however, that Operating Cash Flow shall not include (i) any income or loss attributable to any investment accounted for on the "equity" method of accounting or (ii) any operating cash flow (positive or negative) attributable to AHN or TVFN. "Other Taxes" means any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or from the execution or delivery of, or otherwise with respect to, this Agreement. "Participation Percentage" means, with respect to any Lender, the percentage of the total Commitments represented by such Lender's Commitment. If the Commitments have terminated or expired, the Participation Percentages shall be determined based upon the Commitments most recently in effect, giving effect to any assignments. "Permitted Liens" means (a) Liens for Taxes not yet due and payable, mechanic's Liens and materialman's, shipper's or warehouseman's Liens for services or materials and landlord's Liens for rental amounts for which payment is not yet due or which are being contested in good faith by appropriate proceedings, (b) Liens securing any purchase money Indebtedness (including Capital Lease Obligations relating to assets acquired after the date hereof) if such Liens do not encumber any property other than the property for the purchase of which such purchase money Indebtedness was incurred, (c) the currently existing Liens described in Schedule 6.01 hereto, if any, and renewals thereof, (d) pledges or deposits made to secure payment of worker's compensation, unemployment insurance, pensions, or other social security programs, (e) good-faith pledges or deposits made to secure performance of bids, tenders, contracts (other than for the repayment of borrowed money), or leases, or to secure statutory obligations, surety or appeal bonds, or indemnity, performance, or other similar bonds in the ordinary course of business, (f) encumbrances consisting 16 12 of zoning restrictions, easements, utility district assessments or other restrictions on the use of property, none of which materially impairs the operation by the Borrower and the Subsidiaries (taken as a whole) of their business, and none of which is violated by existing or proposed structures or land use where such violation would materially impair the operation by the Borrower and the Subsidiaries (taken as a whole) of their business, (g) the following, if the validity or amount thereof is being contested in good faith and by appropriate and lawful proceedings and so long as levy and execution thereon have been stayed and continue to be stayed, or they do not in the aggregate materially detract from the value of any material assets or the operations of the Borrower and the Subsidiaries taken as a whole: claims and Liens for Taxes due and payable; claims and Liens upon, and defects of title to, property, including any attachment of property or other legal process prior to adjudication of a dispute on the merits; and claims and Liens of mechanics, materialmen, warehousemen, carriers, landlords, or other Liens; judgment Liens; and (h) any Lien existing on any property or asset prior to the acquisition thereof by the Borrower or any Subsidiary or existing on any property or asset of any Person that becomes a Subsidiary after the date hereof prior to the time the Person becomes a Subsidiary; provided that (i) such Lien is not created in contemplation or connection with such acquisition or such Person becoming a Subsidiary, as the case may be, (ii) such Lien shall not apply to any other property or assets of the Borrower or any Subsidiary and (iii) such Lien shall secure only those obligations which it secures on the date of such acquisition or the date such Person becomes a Subsidiary, as the case may be. "PBGC" means the Pension Benefit Guarantee Corporation referred to and Defined in ERISA. "Person" means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity. "Plan" means any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect of which the Borrower or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA. "Prime Rate" means the rate of interest per annum publicly announced from time to time by Texas Commerce Bank National Association as its prime rate in effect at its principal office in Dallas; each change in the Prime Rate shall be effective from and including the date such change is publicly announced as being effective. "Prior Agreement" means the Borrower's credit agreement dated as of July 31, 1996. "Pro Forma Operating Cash Flow" means, for any relevant period, Operating Cash Flow of the Borrower and its Subsidiaries on a consolidated basis adjusted to include the Operating Cash Flow of any operating units or entities acquired during such relevant period and to exclude the Operating Cash Flow of any operating units or entities 17 13 divested or sold during such relevant period (in each case, as if the acquisition or divestiture had occurred at the beginning of such relevant period). "Register" has the meaning set forth in Section 9.04. "Required Lenders" means, at any time, Lenders having Revolving Credit Exposures and unused Commitments representing more than 51% of the sum of the total Revolving Credit Exposures and unused Commitments at such time; provided that, for purposes of declaring the Loans to be due and payable pursuant to Article VII, and for all purposes after the Loans become due and payable pursuant to Article VII or the Commitments expire or terminate, the outstanding Competitive Loans of the Lenders shall be included in their respective Revolving Credit Exposures in determining the Required Lenders. "Reportable Event" means any reportable event as defined by Section 4043 of ERISA and the regulations issued under such Section with respect to a Plan (other than a Multiemployer Plan), excluding, however, such events as to which the PBGC by regulation or by technical update waived the requirement of Section 4043(a) of ERISA that it be notified within 30 days of the occurrence of such event; provided that a failure to meet the minimum funding standard of Section 412 of the Code and Section 302 of ERISA shall be a reportable event regardless of the issuance of any waiver in accordance with Section 412(d) of the Code. "Revolving Credit Exposure" means, with respect to any Lender at any time, the sum of the outstanding principal amounts of such Lender's Revolving Loans at such time. "Revolving Loan" means a Loan made pursuant to Section 2.03. "Statutory Reserve Rate" means a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board to which the Administrative Agent is subject (a) with respect to the Adjusted CD Rate or the Base CD Rate, for new negotiable nonpersonal time deposits in dollars of over $100,000 with maturities approximately equal to (i) the applicable Interest Period, in the case of the Adjusted CD Rate, and (ii) three months, in the case of the Base CD Rate, and (b) with respect to the Adjusted LIBO Rate, for eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of the Board). Such reserve percentages shall include those imposed pursuant to such Regulation D. Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under such Regulation D or any comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage. 18 14 "Subordinated Debt" means Indebtedness of the Borrower for borrowed money that satisfies the requirements set forth in Schedule 6.05 hereto. "subsidiary" means, with respect to any Person (the "parent") at any date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the parent in the parent's consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity (a) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, controlled or held, or (b) that is, as of such date, otherwise Controlled, by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent. "Subsidiary" means any subsidiary of the Borrower. "Taxes" means any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority. "Termination Date" means the date that is 364 days after the date hereof. "Three-Month Secondary CD Rate" means, for any day, the secondary market rate for three-month certificates of deposit reported as being in effect on such day (or, if such day is not a Business Day, the next preceding Business Day) by the Board through the public information telephone line of the Federal Reserve Bank of New York (which rate will, under the current practices of the Board, be published in Federal Reserve Statistical Release H.15(519) during the week following such day), or, if such rate is not so reported on such day or such next preceding Business Day, the average of the secondary market quotations for three-month certificates of deposit of major money center banks in New York City received at approximately 10:00 a.m., New York City time, on such day (or, if such day is not a Business Day, on the next preceding Business Day) by the Administrative Agent from three negotiable certificate of deposit dealers of recognized standing selected by it. "Transactions" means the execution, delivery and performance by the Borrower of this Agreement and the borrowing of the Loans hereunder. "TVFN" means Television Food Network, a subsidiary of The Providence Journal Company. "Type", when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the Adjusted LIBO Rate, the Adjusted CD Rate, the Alternate Base Rate or, in the case of a Competitive Loan or Borrowing, the LIBO Rate or a Fixed Rate. 19 15 "Withdrawal Liability" means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA. SECTION 1.02. Classification of Loans and Borrowings. For purposes of this Agreement, Loans may be classified and referred to by Class (e.g., a "Revolving Loan") or by Type (e.g., a "Eurodollar Loan") or by Class and Type (e.g., a "Eurodollar Revolving Loan"). Borrowings also may be classified and referred to by Class (e.g., a "Revolving Borrowing") or by Type (e.g., a "Eurodollar Borrowing") or by Class and Type (e.g., a "Eurodollar Revolving Borrowing"). SECTION 1.03. Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation". The word "will" shall be construed to have the same meaning and effect as the word "shall". Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person's successors and assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement and (e) the words "asset" and "property" shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights. Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided that, if the Borrower notifies the Administrative Agent that the Borrower requests an amendment to any provision hereof to eliminate the effect of any change occurring after the date hereof in GAAP or in the application thereof on the operation of such provision (or if the Administrative Agent notifies the Borrower that the Required Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith. 20 16 ARTICLE II The Credits SECTION 2.01. Commitments. Subject to the terms and conditions set forth herein, each Lender agrees to make Revolving Loans to the Borrower from time to time during the Availability Period in an aggregate principal amount that will not result in (a) such Lender's Revolving Credit Exposure exceeding such Lender's Commitment or (b) the sum of the total Revolving Credit Exposures plus the aggregate principal amount of outstanding Competitive Loans exceeding the total Commitments. No Competitive Loans or any new additional Revolving Loans will be made after the Termination Date. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Revolving Loans. SECTION 2.02. Loans and Borrowings. (a) Each Revolving Loan shall be made as part of a Borrowing consisting of Revolving Loans made by the Lenders ratably in accordance with their respective Participation Percentages. Each Competitive Loan shall be made in accordance with the procedures set forth in Section 2.04. The failure of any Lender to make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided that the Commitments and Competitive Bids of the Lenders are several and no Lender shall be responsible for any other Lender's failure to make Loans as required. (b) Subject to Section 2.12, (i) each Revolving Borrowing shall be comprised entirely of ABR Loans, CD Loans or Eurodollar Loans as the Borrower may request in accordance herewith, and (ii) each Competitive Borrowing shall be comprised entirely of Eurodollar Loans or Fixed Rate Loans as the Borrower may request in accordance herewith. Each Lender at its option may make any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of the Borrower to repay such Loan in accordance with the terms of this Agreement; provided further, that if the designation of any such foreign branch or Affiliate shall result in any costs, reductions or Taxes which would not otherwise have been applicable and for which such Lender would, but for this proviso, be entitled to request compensation under Section 2.13 or 2.15, such Lender shall not be entitled to request such compensation unless it shall in good faith have determined such designation to be necessary or advisable to avoid any material disadvantage to it. (c) At the commencement of each Interest Period for any CD Revolving Borrowing or Eurodollar Revolving Borrowing, such Borrowing shall be in an aggregate amount that is an integral multiple of $1,000,000 and not less than $5,000,000. At the time that each ABR Revolving Borrowing is made, such Borrowing shall be in an aggregate amount that is an integral multiple of $1,000,000 and not less than $5,000,000; provided that an ABR Revolving Borrowing may be in an aggregate amount that is equal to the entire unused balance of the total Commitments. Each Competitive Borrowing shall be in an aggregate amount that is an integral multiple of $1,000,000 and not less than $5,000,000. Borrowings of more than one Type and Class may be outstanding at the same time; provided that there shall not at any 21 17 time be more than a total of 15 CD and Eurodollar Revolving Borrowings outstanding. (d) Notwithstanding any other provision of this Agreement, the Borrower shall not be entitled to request, or elect to convert or continue, any Borrowing if the Interest Period requested with respect thereto would end after the Maturity Date. SECTION 2.03. Requests for Revolving Borrowings. In order to request a Revolving Borrowing, the Borrower shall notify the Administrative Agent of such request by telephone (a) in the case of a Eurodollar Borrowing, not later than 11:00 a.m., Dallas time, three Business Days before the date of the proposed Borrowing, (b) in the case of a CD Borrowing, not later than 11:00 a.m., Dallas time, two Business Days before the date of the proposed Borrowing or (c) in the case of an ABR Borrowing, not later than 10:00 a.m., Dallas time, on the date of the proposed Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Borrowing Request in a form approved by the Administrative Agent and signed by the Borrower. Each such telephonic and written Borrowing Request shall specify the following information in compliance with Section 2.02: (i) the aggregate amount of the requested Borrowing; (ii) the date of such Borrowing, which shall be a Business Day; (iii) whether such Borrowing is to be an ABR Borrowing, a CD Borrowing or a Eurodollar Borrowing; (iv) in the case of a CD Borrowing or a Eurodollar Borrowing, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term "Interest Period"; and (v) the location and number of the Borrower's account to which funds are to be disbursed, which shall comply with the requirements of Section 2.05. If no election as to the Type of Revolving Borrowing is specified, then the requested Revolving Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respect to any requested CD or Eurodollar Revolving Borrowing, then the Borrower shall be deemed to have selected an Interest Period of 30 days' duration, in the case of a CD Borrowing, or one month's duration, in the case of a Eurodollar Borrowing. Promptly following receipt of a Borrowing Request in accordance with this Section, the Administrative Agent shall advise each Lender of the details thereof and of the amount of such Lender's Loan to be made as part of the requested Borrowing. SECTION 2.04. Competitive Bid Procedure. (a) Subject to the terms and conditions set forth herein, from time to time during the Availability Period the Borrower may request Competitive Bids and may (but shall not have any obligation to) accept Competitive Bids and borrow Competitive Loans; provided that the sum of the total Revolving 22 18 Credit Exposures plus the aggregate principal amount of outstanding Competitive Loans at any time shall not exceed the total Commitments. In order to request Competitive Bids, the Borrower shall notify the CAF Agent of such request by telephone, in the case of a Eurodollar Borrowing, not later than 11:00 a.m., Dallas time, four Business Days before the date of the proposed Borrowing and, in the case of a Fixed Rate Borrowing, not later than 10:00 a.m., Dallas time, one Business Day before the date of the proposed Borrowing; provided that a Competitive Bid Request shall not be made within five Business Days after the date of any previous Competitive Bid Request, unless any and all such previous Competitive Bid Requests shall have been withdrawn or all Competitive Bids received in response thereto rejected. Each such telephonic Competitive Bid Request shall be confirmed promptly by hand delivery or telecopy to the CAF Agent of a written Competitive Bid Request in a form approved by the CAF Agent and signed by the Borrower. Each such telephonic and written Competitive Bid Request shall specify the following information in compliance with Section 2.02: (i) the aggregate amount of the requested Borrowing; (ii) the date of such Borrowing, which shall be a Business Day; (iii) whether such Borrowing is to be a Eurodollar Borrowing or a Fixed Rate Borrowing; (iv) the Interest Period to be applicable to such Borrowing, which shall be a period contemplated by the definition of the term "Interest Period"; and (v) the location and number of the Borrower's account to which funds are to be disbursed, which shall comply with the requirements of Section 2.05. Promptly following receipt of a Competitive Bid Request in accordance with this Section, the CAF Agent shall notify the Lenders of the details thereof by telecopy, inviting the Lenders to submit Competitive Bids. (b) Each Lender may (but shall not have any obligation to) make one or more Competitive Bids to the Borrower in response to a Competitive Bid Request. Each Competitive Bid by a Lender must be in a form approved by the CAF Agent and must be received by the Administrative Agent by telecopy, in the case of a Eurodollar Competitive Borrowing, not later than 9:30 a.m., Dallas time, three Business Days before the proposed date of such Competitive Borrowing, and in the case of a Fixed Rate Borrowing, not later than 9:30 a.m., Dallas time, on the proposed date of such Competitive Borrowing. Competitive Bids that do not conform substantially to the form approved by the CAF Agent may be rejected by the CAF Agent, and the CAF Agent shall notify the applicable Lender as promptly as practicable. Each Competitive Bid shall specify (i) the principal amount (which shall be a minimum of $5,000,000 and an integral multiple of $1,000,000 and which may equal the entire principal amount of the Competitive Borrowing requested by the Borrower) of the Competitive Loan or Loans that the Lender is willing to make, (ii) the Competitive Bid Rate or Rates at 23 19 which the Lender is prepared to make such Loan or Loans (expressed as a percentage rate per annum in the form of a decimal to no more than four decimal places) and (iii) the Interest Period applicable to each such Loan and the last day thereof. (c) The CAF Agent shall promptly notify the Borrower by telecopy of the Competitive Bid Rate and the principal amount specified in each Competitive Bid and the identity of the Lender that shall have made such Competitive Bid. (d) Subject only to the provisions of this paragraph (d), the Borrower may accept or reject any Competitive Bid. The Borrower shall notify the CAF Agent by telephone, confirmed by telecopy in a form approved by the CAF Agent, whether and to what extent it has decided to accept or reject each Competitive Bid, in the case of a Eurodollar Competitive Borrowing, not later than 10:30 a.m., Dallas time, three Business Days before the date of the proposed Competitive Borrowing, and in the case of a Fixed Rate Borrowing, not later than 10:30 a.m., Dallas time, on the proposed date of the Competitive Borrowing; provided, that (i) the failure of the Borrower to give such notice shall be deemed to be a rejection of each Competitive Bid, (ii) the Borrower shall not accept a Competitive Bid made at a particular Competitive Bid Rate if the Borrower rejects a Competitive Bid made at a lower Competitive Bid Rate, (iii) the aggregate amount of the Competitive Bids accepted by the Borrower shall not exceed the aggregate amount of the requested Competitive Borrowing specified in the related Competitive Bid Request, (iv) to the extent necessary to comply with clause (iii) above, the Borrower may accept Competitive Bids at the same Competitive Bid Rate in part, which acceptance, in the case of multiple Competitive Bids at such Competitive Bid Rate, shall be made pro rata in accordance with the amount of each such Competitive Bid, and (v) except pursuant to clause (iv) above, no Competitive Bid shall be accepted for a Competitive Loan unless such Competitive Loan is in a minimum principal amount of $5,000,000 and an integral multiple of $1,000,000; provided further that if a Competitive Loan must be in an amount less than $5,000,000 because of the provisions of clause (iv) above, such Competitive Loan may be for a minimum of $1,000,000 or any integral multiple thereof, and in calculating the pro rata allocation of acceptances of portions of multiple Competitive Bids at a particular Competitive Bid Rate pursuant to clause (iv) the amounts shall be rounded to integral multiples of $1,000,000 in a manner determined by the Borrower. A notice given by the Borrower pursuant to this paragraph (d) shall be irrevocable. (e) The CAF Agent shall promptly notify each bidding Lender by telecopy whether or not its Competitive Bid has been accepted (and, if so, the amount and Competitive Bid Rate so accepted), and each successful bidder will thereupon become bound, subject to the terms and conditions hereof, to make the Competitive Loan in respect of which its Competitive Bid has been accepted. (f) If any Lender that is an Affiliate of the CAF Agent shall elect to submit a Competitive Bid in its capacity as a Lender, it shall submit such Competitive Bid directly to the Borrower at least one quarter of an hour earlier than the time by which the other 24 20 Lenders are required to submit their Competitive Bids to the CAF Agent pursuant to paragraph (b) of this Section. SECTION 2.05. Funding of Borrowings. (a) Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds by 12:00 noon, Dallas time, to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders. The Administrative Agent will make such Loans available to the Borrower by promptly crediting the amounts so received, in like funds, to an account of the Borrower maintained with the Administrative Agent in Dallas and designated by the Borrower in the applicable Borrowing Request or Competitive Bid Request. (b) Unless the Administrative Agent shall have received notice from a Lender prior to the proposed date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender's share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with paragraph (a) of this Section and may, in reliance upon such assumption, make available to the Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Administrative Agent, then the applicable Lender and the Borrower severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent, at (i) in the case of such Lender, the Federal Funds Effective Rate or (ii) in the case of the Borrower, the interest rate borne by the applicable Borrowing. If such Lender pays such amount to the Administrative Agent, then such amount shall constitute such Lender's Loan included in such Borrowing. SECTION 2.06. Interest Elections. (a) Each Revolving Borrowing initially shall be of the Type specified in the applicable Borrowing Request and, in the case of a CD or Eurodollar Revolving Borrowing, shall have an initial Interest Period as specified in such Borrowing Request. Thereafter, the Borrower may elect to convert such Borrowing to a different Type or to continue such Borrowing and, in the case of a CD or Eurodollar Revolving Borrowing, may elect new Interest Periods therefor, all as provided in this Section. The Borrower may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing. This Section shall not apply to Competitive Borrowings, which may not be converted or continued. (b) In order to make an election pursuant to this Section, the Borrower shall notify the Administrative Agent of such election by telephone by the time that a Borrowing Request would be required under Section 2.03 if the Borrower were requesting a Revolving Borrowing of the Type resulting from such election to be made on the effective date of such election. Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed 25 21 promptly by hand delivery or telecopy to the Administrative Agent of a written Interest Election Request in a form approved by the Administrative Agent and signed by the Borrower. (c) Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.02: (i) the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) below shall be specified for each resulting Borrowing); (ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day; (iii) whether the resulting Borrowing is to be an ABR Borrowing, a CD Borrowing or a Eurodollar Borrowing; and (iv) if the resulting Borrowing is a CD Borrowing or a Eurodollar Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term "Interest Period". If any such Interest Election Request requests a CD Borrowing or Eurodollar Borrowing but does not specify an Interest Period, then the Borrower shall be deemed to have selected an Interest Period of 30 days' duration, in the case of a CD Borrowing, or one month's duration, in the case of a Eurodollar Borrowing. (d) Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each Lender of the details thereof and of such Lender's portion of each resulting Borrowing. (e) If the Borrower fails to deliver a timely Interest Election Request with respect to a CD or Eurodollar Revolving Borrowing prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be converted to an ABR Borrowing. Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing and the Administrative Agent, at the request of the Required Lenders, so notifies the Borrower, then, so long as an Event of Default is continuing (i) no outstanding Revolving Borrowing may be converted to or continued as a CD or Eurodollar Borrowing and (ii) unless repaid, each CD and Eurodollar Revolving Borrowing shall be converted to an ABR Borrowing at the end of the Interest Period applicable thereto. SECTION 2.07. Termination and Reduction of Commitments. (a) Unless previously terminated, the Commitments shall terminate on the Termination Date; provided that the Commitments shall terminate at 3:00 p.m., Dallas time, on March 31, 1997, if the Effective Date has not occurred prior to such time. 26 22 (b) Subject to Section 2.09(d), the Borrower may at any time terminate, or from time to time reduce, the Commitments; provided that (i) each reduction of the Commitments shall be in an amount that is an integral multiple of $1,000,000 and not less than $5,000,000 and (ii) the Borrower shall not terminate or reduce the Commitments if, after giving effect to any concurrent prepayment of the Loans, the sum of the Revolving Credit Exposures plus the aggregate principal amount of outstanding Competitive Loans would exceed the total Commitments. (c) The Borrower shall notify the Administrative Agent of any election to terminate or reduce the Commitments under paragraph (b) of this Section at least three Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof. Promptly following receipt of any notice, the Administrative Agent shall advise the Lenders of the contents thereof. Each notice delivered by the Borrower pursuant to this Section shall be irrevocable; provided that a notice of termination of the Commitments delivered by the Borrower may state that such notice is conditioned upon the effectiveness of other credit facilities, in which case such notice may be revoked by the Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. Any termination or reduction of the Commitments shall be permanent. Each reduction of the Commitments shall be made ratably among the Lenders in accordance with their respective Commitments. SECTION 2.08. Repayment of Loans; Evidence of Debt. (a) The Borrower hereby unconditionally promises to pay (i) to the Administrative Agent for the account of each Lender the then unpaid principal amount of each Revolving Loan on the Maturity Date, (ii) to the Administrative Agent for the account of each Lender the then unpaid principal amount of each Competitive Loan on the last day of the Interest Period applicable to such Loan. (b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder. (c) The Administrative Agent shall maintain accounts in which it shall record (i) the amount of each Loan made hereunder, the Class and Type thereof and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder for the account of the Lenders and each Lender's share thereof. (d) The entries made in the accounts maintained pursuant to paragraphs (b) and (c) of this Section shall be prima facie evidence of the existence and amounts of the obligations recorded therein; provided that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrower to repay the Loans in accordance with the terms of this Agreement. 27 23 (e) Any Lender may request that Loans made by it be evidenced by a promissory note. In such event, the Borrower shall prepare, execute and deliver to such Lender a promissory note payable to the order of such Lender (or, if requested by such Lender, to such Lender and its registered assigns) and in a form approved by the Administrative Agent. SECTION 2.09. Prepayment of Loans. (a) Subject to Section 2.09(d), the Borrower shall have the right at any time and from time to time to prepay any Borrowing in whole or in part. (b) In the event of any termination of the Commitments, the Borrower shall prepay all outstanding Borrowings on the date of such termination. In the event of any reduction of the Commitments, the Borrower shall prepay outstanding Borrowings to the extent, if any, necessary so that, on the date of and after giving effect to such reduction, the sum of the Revolving Credit Exposures and the aggregate principal amount of the outstanding Competitive Loans does not exceed the total Commitments. (c) The Borrower shall notify the Administrative Agent by telephone (confirmed by telecopy) of any prepayment hereunder (i) in the case of prepayment of a Eurodollar Revolving Borrowing, not later than 11:00 a.m., Dallas time, three Business Days before the date of prepayment, (ii) in the case of prepayment of a CD Borrowing, not later than 11:00 a.m., Dallas time, two Business Days before the date of prepayment, (iii) in the case of prepayment of an ABR Revolving Borrowing, not later than 11:00 a.m., Dallas time, on the date of prepayment. Each such notice shall be irrevocable and shall specify the prepayment date and the principal amount of each Borrowing or portion thereof to be prepaid; provided that, if a notice of prepayment is given in connection with a conditional notice of termination of the Commitments as contemplated by Section 2.07, then such notice of prepayment may be revoked if such notice of termination is revoked in accordance with Section 2.07. Promptly following receipt of any such notice relating to a Revolving Borrowing, the Administrative Agent shall advise the Lenders of the contents thereof. Each partial prepayment of any Revolving Borrowing shall be in an amount that would be permitted in the case of an advance of a Revolving Borrowing of the same Type as provided in Section 2.02. Each prepayment of a Revolving Borrowing shall be applied ratably to the Loans included in the prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the extent required by Section 2.11.e (d) The Borrower shall not have the right to prepay any Competitive Loan and shall not terminate or reduce the Commitments if such termination or reduction would require prepayment of any Competitive Loan. SECTION 2.10. Fees. (a) The Borrower agrees to pay to the Administrative Agent for the account of each Lender a facility fee, which shall accrue at the Applicable Percentage per annum on the daily amount of the Commitment of such Lender (whether used or unused) during the period from and including the date hereof to but excluding the date on which such Commitment terminates; provided that, if such Lender continues to have any Revolving Credit Exposure after its 28 24 Commitment terminates, then such facility fee shall continue to accrue on the daily amount of such Lender's Revolving Credit Exposure from and including the date on which its Commitment terminates to but excluding the date on which such Lender ceases to have any Revolving Credit Exposure. Accrued facility fees shall be payable in arrears on the last day of March, June, September and December of each year and on the date on which the Commitments terminate, commencing on the first such date to occur after the date hereof; provided that any facility fees accruing after the date on which the Commitments terminate shall be payable on demand. All facility fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day). (b) The Borrower agrees to pay to the Administrative Agent for the account of each Lender, ratably in accordance with its respective Commitment, the upfront fee separately agreed upon between the Borrower and the Lenders. The upfront fee shall be payable on the Effective Date. (c) The Borrower agrees to pay to the Administrative Agent, for its own account, fees payable in the amounts and at the times separately agreed upon between the Borrower and the Administrative Agent. (d) All fees payable hereunder shall be paid on the dates due, in immediately available funds, to the Administrative Agent for distribution, in the case of facility fees, to the Lenders. Fees paid shall not be refundable under any circumstances. SECTION 2.11. Interest. (a) The Loans comprising each ABR Borrowing shall bear interest at a rate per annum equal to the Alternate Base Rate. (b) The Loans comprising each CD Borrowing shall bear interest at a rate per annum equal to the Adjusted CD Rate for the Interest Period in effect for such Borrowing plus the Applicable Percentage from time to time in effect. (c) The Loans comprising each Eurodollar Borrowing shall bear interest at a rate per annum equal to the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the Applicable Percentage from time to time in effect (or, in the case of a Competitive Loan, the LIBO Rate for the Interest Period in effect for such Borrowing plus the Margin offered by the Lender making such loan and accepted by the Borrower pursuant to Section 2.04). (d) Each Fixed Rate Loan shall bear interest at a rate per annum equal to the Fixed Rate applicable to such Loan. (e) Notwithstanding the foregoing, if any principal of or interest on any Loan or any fee or other amount payable by the Borrower hereunder is not paid when due, whether at stated maturity, upon acceleration or otherwise, such overdue amount shall bear interest, after as well as before judgment, at a rate per annum equal to (i) in the case of overdue principal of any Loan, the rate otherwise applicable to such Loan as provided above plus 2% or (ii) in 29 25 the case of any other amount, the rate applicable to ABR Loans as provided above plus 2%. (f) Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date for such Loan; provided that (i) interest accrued pursuant to paragraph (e) of this Section shall be payable on demand, (ii) in the event of any repayment or prepayment of any Loan (other than a prepayment of an ABR Revolving Loan prior to the end of the Availability Period), accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment, (iii) in the event of any conversion of any Loan (other than an ABR Revolving Loan) prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion and (d) in the event the Commitments are terminated, all accrued and unpaid interest on the Loans shall be paid on the date of such termination. (g) All interest hereunder shall be computed on the basis of a year of 360 days, except that interest computed by reference to the Alternate Base Rate at times when the Alternate Base Rate is based on the Prime Rate shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable Alternate Base Rate, Adjusted CD Rate, Adjusted LIBO Rate or LIBO Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error. SECTION 2.12 Alternate Rate of Interest. If prior to the commencement of any Interest Period for a CD Borrowing or Eurodollar Borrowing: (a) the Administrative Agent determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted CD Rate, the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest Period or, in the case of a Eurodollar Borrowing, that a Change in Law makes it unlawful for any one or more of the Lenders to make a Eurodollar Loan; or (b) the Administrative Agent is advised by the Required Lenders that, as a result of a Change in Law or other unusual events or conditions affecting the markets in which such Lenders conduct their funding operations, the Adjusted CD Rate, the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest Period will be lower than the actual cost to such Lenders of obtaining the funds necessary to make or maintain their Loans comprising such Borrowing for such Interest Period; then the Administrative Agent shall give notice thereof to the Borrower and the Lenders by telephone or telecopy as promptly as practicable thereafter and, until the Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Request that requests the conversion of any Revolving Borrowing to, or continuation of any Revolving Borrowing as, a CD Borrowing or Eurodollar Borrowing shall be ineffective, (ii) if any Borrowing Request requests a CD or 30 26 Eurodollar Revolving Borrowing, such Borrowing shall be made as an ABR Borrowing and (iii) any request by the Borrower for a Eurodollar Competitive Borrowing shall be ineffective; provided that (A) if the circumstances giving rise to such notice do not affect all the Lenders, then requests by the Borrower for Eurodollar Competitive Borrowings may be made to Lenders that are not affected thereby and (B) if the circumstances giving rise to such notice affect only one Type of Borrowings, then the other Type of Borrowings shall be permitted. SECTION 2.13. Increased Costs. (a) If any Change in Law shall: (i) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender (except any such reserve requirement reflected in the Adjusted CD Rate or the Adjusted LIBO Rate); or (ii) impose on any Lender or the London interbank market any other condition affecting this Agreement, CD Loans or Eurodollar Loans or Fixed Rate Loans made by such Lender; and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any CD Loan, Eurodollar Loan or Fixed Rate Loan or to increase the cost to such Lender or to reduce the amount of any sum received or receivable by such Lender hereunder (whether of principal, interest or otherwise) by an amount deemed by such Lender to be material, then the Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender for such additional costs incurred or reduction suffered. (b) If any Lender determines that any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on such Lender's capital or on the capital of such Lender's holding company, if any, as a consequence of this Agreement or the Loans made by such Lender to a level below that which such Lender or such Lender's holding company could have achieved but for such Change in Law (taking into consideration such Lender's policies and the policies of such Lender's holding company with respect to capital adequacy) by an amount deemed by such Lender to be material, then from time to time the Borrower will pay to such Lender, as the case may be, such additional amount or amounts as will compensate such Lender or such Lender's holding company for any such reduction suffered. (c) A certificate of a Lender setting forth the amount or amounts necessary to compensate such Lender or its holding company, as the case may be, as specified in paragraph (a) or (b) of this Section, and setting forth in reasonable detail the manner in which such amount or amounts shall have been determined, shall be delivered to the Borrower and shall, if submitted in good faith, be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within 10 days after receipt thereof. (d) Failure or delay on the part of any Lender to demand compensation pursuant to this Section shall not constitute a waiver of 31 27 such Lender's right to demand such compensation; provided that the Borrower shall not be required to compensate a Lender pursuant to this Section for any increased costs or reductions incurred more than six months prior to the date that such Lender notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender's intention to claim compensation therefor; provided further that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the six-month period referred to above shall be extended to include the period of retroactive effect thereof. (e) Notwithstanding the foregoing provisions of this Section, a Lender shall not be entitled to compensation pursuant to this Section in respect of any Competitive Loan if the Change in Law that would otherwise entitle it to such compensation shall have been publicly announced prior to submission of the Competitive Bid pursuant to which such Loan was made. SECTION 2.14. Break Funding Payments. In the event of (a) the payment of any principal of any CD Loan, Eurodollar Loan or Fixed Rate Loan other than on the last day of an Interest Period applicable thereto, (b) the conversion of any CD Loan or Eurodollar Loan other than on the last day of the Interest Period applicable thereto, (c) the failure to borrow, convert, prepay or continue any Revolving Loan on the date specified in any notice delivered pursuant hereto (regardless of whether such notice is permitted to be revocable and is revoked in accordance herewith), (d) the failure to borrow any Competitive Loan after accepting the Competitive Bid to make such Loan, or (e) the assignment of any CD Loan, Eurodollar Loan or Fixed Rate Loan other than on the last day of the Interest Period applicable thereto as a result of a request by the Borrower pursuant to Section 2.17, then, in any such event, the Borrower shall compensate each Lender for the loss, cost and expense attributable to such event by payment to such Lender of an amount determined by such Lender to be equal to the excess, if any, of (i) the amount of interest that such Lender would pay for a deposit equal to the principal amount of the applicable Loan for the period from the date of such payment, conversion, failure or assignment to the last day of the then current Interest Period for such Loan (or, in the case of a failure to borrow, convert, prepay or continue, the duration of the Interest Period that would have resulted from such borrowing, conversion or continuation) if the interest rate payable on such deposit were equal to the Adjusted LIBO Rate, the Adjusted CD Rate or the Fixed Rate, as the case may be, in effect (or that would have been in effect) for such Interest Period, over (ii) the amount of interest that such Lender would earn on such principal amount for such period if such Lender were to invest such principal amount for such period at the interest rate that would be bid by such Lender (or an affiliate of such Lender) for dollar deposits at other banks in the London interbank market at the commencement of such period. A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section, and setting forth in reasonable detail the manner in which such amount or amounts shall have been determined, shall be delivered to the Borrower and shall, if submitted in good faith, be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within 10 days after receipt thereof. 32 28 SECTION 2.15. Taxes. (a) Any and all payments by or on account of any obligation of the Borrower hereunder shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided that if the Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) each of the Agents or Lender (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law. (b) In addition, the Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law. (c) The Borrower shall indemnify the Agents and each Lender within 10 days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) paid by the Agents or such Lender, as the case may be, and any liability (including penalties, interest and reasonable expenses) arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender, by the Administrative Agent on its own behalf or on behalf of a Lender, or by the CAF Agent, and setting forth in reasonable detail the manner in which such amount shall have been determined, shall, if submitted in good faith, be conclusive absent manifest error. (d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Borrower to a Governmental Authority, the Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent. (e) Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which the Borrower is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement shall deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable law, properly completed and executed forms prescribed by applicable law (together with such other documentation or certification as the Borrower may reasonably request) that will permit the Borrower to make such payments without withholding or at a reduced rate. SECTION 2.16. Payments Generally; Pro Rata Treatment; Sharing of Set-offs. (a) The Borrower shall make each payment required to be made by it hereunder (whether of principal, interest, fees or otherwise) prior to 12:00 noon, Dallas time, on the date when 33 29 due, in immediately available funds, to the Administrative Agent at its offices at Dallas, Texas, without set-off or counterclaim. Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. The Administrative Agent shall distribute any such payments received for the account of any other Person to the appropriate recipient in the amount owed to it promptly following receipt thereof. If any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. All payments hereunder shall be made in dollars. (b) If at any time insufficient funds are received by and available to the Administrative Agent to fully pay all amounts then due hereunder, such funds shall be applied to the amounts then due hereunder in such order and priority as the Administrative Agent may elect; provided that any funds that the Administrative Agent elects to apply to principal, interest or fees then due shall be applied ratably to all amounts of principal, interest or fees (as the case may be) then due. (c) If any Lender shall, by exercising any right of set-off or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Revolving Loans resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Revolving Loans and accrued interest thereon than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participation in the Revolving Loans of other Lenders to the extent necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Revolving Loans; provided that (i) if any such participations are purchased and all or any portion of the payments giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this paragraph shall not be construed to apply to any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans to any assignee or participant other than the Borrower or any Subsidiary or Affiliate thereof. The Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against the Borrower rights of set- off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Borrower in the amount of such participation. SECTION 2.17. Mitigation Obligations; Replacement of Lenders. (a) If any Lender requests compensation under Section 2.13, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.15, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking 34 30 its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the good faith judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.13 or 2.15, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender in such Lender's good faith judgment. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment. (b) If any Lender requests compensation under Section 2.13, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.15, or if any Lender defaults in its obligation to fund Loans hereunder, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 9.04), all its interests, rights and obligations under this Agreement (other than any outstanding Competitive Loans held by it) to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) the Borrower shall have received the prior written consent of the Administrative Agent, which consent shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans (other than Competitive Loans, as to which such Lender will continue to have all of its rights hereunder), accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a claim for compensation under Section 2.13 or payments required to be made pursuant to Section 2.15, such assignment will result in a reduction in such compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply. ARTICLE III Representations and Warranties The Borrower represents and warrants to the Lenders that: SECTION 3.01. Organization; Powers. Each of the Borrower and its Subsidiaries is (i) duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, has all requisite power and authority to carry on its business as now conducted and, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, is qualified to do business in, and is in good standing in, every jurisdiction where such qualification is required and, (ii) possesses all requisite authority and power and material licenses, permits, franchises (including, without limitation 35 31 licenses, permits and franchises issued by the FCC), and valid and subsisting network affiliation agreements in the case of each Subsidiary that operates a network affiliated television broadcasting enterprise, to conduct its business as presently conducted. SECTION 3.02. Authorization; Enforceability. The Transactions are within the Borrower's corporate powers and have been duly authorized by all necessary corporate and, if required, stockholder action. This Agreement has been duly executed and delivered by the Borrower and constitutes a legal, valid and binding obligation of the Borrower, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors' rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law. SECTION 3.03. Governmental Approvals; No Conflicts. The Transactions (a) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority, except (i) such as have been obtained or made and are in full force and effect, and (ii) routine filings after the Effective Date with Securities and Exchange Commission and the FCC made pursuant to the requirements of 47 CFR 73.3613, (b) will not violate any applicable law or regulation or the charter, by-laws or other organizational documents of the Borrower or any Subsidiary or any order of any Governmental Authority, (c) will not violate or result in a default under any indenture, or other material agreement or instrument binding upon the Borrower or any Subsidiary or its assets, or give rise to a right thereunder to require any material payment to be made by the Borrower or any Subsidiary, and (d) will not result in the creation or imposition of any Lien other than a Permitted Lien on any asset of the Borrower or any Subsidiary. SECTION 3.04. Financial Condition; No Material Adverse Change. (a) The Borrower has heretofore furnished to the Lenders its consolidated balance sheet and statements of earnings, shareholders equity and cash flows (i) as of and for the fiscal year ended December 31, 1995, reported on by Ernst & Young LLP, independent auditors, and (ii) as of and for the fiscal quarter ended September 30, 1996, certified by its chief financial officer. Such financial statements present fairly, in all material respects, the financial position and results of operations and cash flows of the Borrower and its consolidated Subsidiaries as of such dates and for such periods in accordance with GAAP, subject to year-end audit adjustments and the absence of footnotes in the case of the statements referred to in clause (ii) above. (b) Since September 30, 1996, there has been no material adverse change in the business, assets, operations or condition, financial or otherwise, of the Borrower and its Subsidiaries, taken as a whole. SECTION 3.05. Properties. (a) Each of the Borrower and its Subsidiaries has good title to, or valid leasehold interests in, all its real and personal property material to its business, except for minor defects in title or interest that do not interfere with its 36 32 ability to conduct its business as currently conducted or to utilize such properties for their intended purposes. (b) Each of the Borrower and the Subsidiaries owns, or is licensed to use, all trademarks, tradenames, copyrights, patents and other intellectual property material to its business, and the use thereof by the Borrower and its Subsidiaries does not infringe upon the rights of any other Person, except for any such infringements that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. SECTION 3.06. Litigation, Labor and Environmental Matters. (a) There are not any actions, suits or proceedings by or before any arbitrator or Governmental Authority now pending against or, to the knowledge of the Borrower, threatened against or affecting the Borrower or any Subsidiary (i) as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect (other than the Disclosed Matters) or (ii) that involve this Agreement or the Transactions. (b) Except for the Disclosed Matters, there are no actual or, to the knowledge of the Borrower, threatened labor controversies, including strikes, work stoppages, work slow downs or National Labor Relations Board proceedings affecting the Borrower or its Subsidiaries, that could, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. (c) Except for the Disclosed Matters and except with respect to any other matters that, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect, neither the Borrower nor any Subsidiary (i) has failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (ii) has become subject to any Environmental Liability, (iii) has received notice of any claim with respect to any Environmental Liability or (iv) knows of any basis for any Environmental Liability. (d) There has been no change in the status of the Disclosed Matters that, individually or in the aggregate, has resulted in, or materially increased the likelihood of, a Material Adverse Effect. SECTION 3.07. Compliance with Laws and Agreements. Each of the Borrower and its Subsidiaries is in compliance with all laws, regulations and orders of any Governmental Authority applicable to it or its property and all indentures, agreements and other instruments binding upon it or its property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. No Default has occurred and is continuing. SECTION 3.08. Certain Legal Matters. (a) Neither the Borrower nor any Subsidiary is (i) an "investment company" as defined in, or subject to regulation under, the Investment Company Act of 1940 or (ii) a "holding company" as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935. 37 33 (b) Neither the Borrower nor any Subsidiary is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of buying or carrying margin stock, within the meaning of Regulation U of the Board. Margin stock will at all times constitute less than 25% of the assets of the Borrower individually and the Borrower and the Subsidiaries on a consolidated basis that are subject to the restrictions of Section 6.01 and 6.02. SECTION 3.09. Taxes. Each of the Borrower and its Subsidiaries has filed or caused to be filed all tax returns and reports required to have been filed and paid or caused to be paid all Taxes required to have been paid by it, except (a) Taxes that are being contested in good faith by appropriate proceedings and for which the Borrower or such Subsidiary, as applicable, shall have set aside on its books adequate reserves or (b) to the extent that the failure to do so could not reasonably be expected to have a Material Adverse Effect. SECTION 3.10. ERISA. No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events, could reasonably be expected to result in a Material Adverse Effect. As of the date hereof, the present value of all accrued benefit liabilities under each Plan (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87), determined at the most recent annual valuation date for such Plan, does not exceed by more than $10,000,000 the fair market value of the assets of such Plan, and the present value of all accrued benefit liabilities of all underfunded Plans (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87), determined at the most recent annual valuation dates for such Plans, does not exceed by more than $10,000,000 the fair market value of the assets of all such underfunded Plans. SECTION 3.11. Disclosure. There are no agreements, instruments or corporate restrictions to which the Borrower or any of its Subsidiaries is subject, and no other matters known to the Borrower, that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. None of the reports, financial statements, certificates or other information furnished by or on behalf of the Borrower to the Administrative Agent or any Lender in connection with the negotiation of this Agreement or delivered hereunder (as modified or supplemented by other information so furnished) contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that, with respect to projected and pro forma financial information, the Borrower represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time. SECTION 3.12. Acquisition of The Providence Journal Company. The purchase price for the acquisition of The Providence Journal Company payable by the Borrower or any of its Affiliates shall not exceed $600,000,000 exclusive of (i) any consideration payable in capital stock of the Borrower, (ii) Indebtedness of The Providence Journal Company assumed by the Borrower or any of its Affiliates (other than any Indebtedness created in contemplation of such 38 34 acquisition), (iii) transaction costs related to the acquisition (including those items set forth in footnote 1 on page 139 of the Borrower's Proxy Statement dated January 8, 1997) and (iv) cash paid in lieu of fractional shares. ARTICLE IV Conditions SECTION 4.01. Effective Date. The obligations of the Lenders to make Loans hereunder shall not become effective until the date on which each of the following conditions is satisfied (or waived in accordance with Section 9.02): (a) The Administrative Agent (or its counsel) shall have received from each party hereto either (i) a counterpart of this Agreement signed on behalf of such party or (ii) written evidence satisfactory to the Administrative Agent (which may include telecopy transmission of a signed signature page of this Agreement) that such party has signed a counterpart of this Agreement. (b) The Administrative Agent shall have received favorable written opinions of Michael J. McCarthy, the General Counsel of the Borrower, Locke Purnell Rain Harrell, counsel for the Borrower, and Wiley, Rein & Fielding, special regulatory counsel to the Borrower, substantially in the forms of Exhibits B-1, B-2 and B-3 hereto and covering such other matters relating to this Agreement and the Transactions as the Required Lenders shall reasonably request. Each of such opinions shall be addressed to the Administrative Agent and the Lenders and shall be dated the Effective Date. The Borrower hereby requests such counsel to deliver such opinions. (c) The Administrative Agent shall have received such documents and certificates as the Administrative Agent or its counsel may reasonably request relating to the organization, existence and good standing of the Borrower, the authorization of the Transactions and any other legal matters relating to this Agreement or the Transactions, all in form and substance satisfactory to the Administrative Agent and its counsel. (d) The Administrative Agent shall have received a certificate, dated the Effective Date and signed by the President, a Vice President or a Financial Officer of the Borrower, confirming compliance with the conditions set forth in paragraphs (b) and (c) of Section 4.02. (e) The Administrative Agent shall have received all fees and other amounts due and payable on or prior to the Effective Date, including, to the extent invoiced, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by the Borrower hereunder. 39 35 (f) The Prior Agreement shall have been terminated and the obligations of the Borrower and the Subsidiaries thereunder paid in full. Notwithstanding the foregoing, the obligations of the Lenders to make Loans hereunder shall not become effective unless each of the foregoing conditions is satisfied (or waived) on or prior to March 31, 1997. The Administrative Agent shall notify the Borrower and the Lenders of the Effective Date, and such notice shall be conclusive and binding. SECTION 4.02. Each Credit Event. The obligation of each Lender to make a Loan on the occasion of any Borrowing (but not on the occasion of any interest election pursuant to Section 2.06 that does not increase the outstanding principal amount of the Loans of any Lender), is subject to the satisfaction of the following conditions: (a) In the case of a Borrowing of Revolving Loans, the Administrative Agent shall have received a Borrowing Request for such Borrowing in accordance with Section 2.03; or, in the case of a Borrowing of Competitive Loans, Borrower shall have accepted the Competitive Bid or Bids in respect of such Loans in accordance with Section 2.04. (b) The representations and warranties of the Borrower set forth in this Agreement shall be true and correct on and as of the date of such Borrowing. (c) At the time of and immediately after giving effect to such Borrowing, no Default shall have occurred and be continuing. Each Borrowing shall be deemed to constitute a representation and warranty by the Borrower on the date thereof as to matters specified in paragraphs (b) and (c) of this Section. ARTICLE V Affirmative Covenants Until the Commitments have expired or been terminated and the principal of and interest on each Loan and all fees payable hereunder shall have been paid in full the Borrower covenants and agrees with the Lenders that: SECTION 5.01. Financial Statements and Other Information. The Borrower will furnish to the Administrative Agent and each Lender: (a) within 90 days after the end of each fiscal year of the Borrower, its audited consolidated balance sheet and related statements of earnings, stockholders' equity and cash flows as of the end of and for such year, all reported on by Ernst & Young LLP or other independent public accountants of recognized national standing (without a "going concern" or like emphasis paragraph and without any qualification or exception as to the scope of such audit) to the effect that such consolidated 40 36 financial statements present fairly in all material respects the financial condition and results of operations of the Borrower and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP; (b) within 45 days after the end of each of the first three fiscal quarters of each fiscal year of the Borrower, its condensed consolidated balance sheet and related statements of earnings and cash flows as of the end of and for such fiscal quarter and the then elapsed portion of the fiscal year, all certified by one of its Financial Officers as presenting fairly in all material respects the financial condition and results of operations of the Borrower and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP for interim financial information and with the instructions to Form 10Q and Article 10 of Regulation S-X (and accordingly, such statements will not include all of the information and footnotes required by GAAP for complete financial statements); (c) concurrently with each delivery of financial statements under clause (a) or (b) above, a certificate of a Financial Officer of the Borrower (i) certifying as to whether a Default has occurred and, if a Default has occurred, specifying the details thereof and any action taken or proposed to be taken with respect thereto, (ii) setting forth reasonably detailed calculations demonstrating compliance with Sections 6.05 and 6.06 and (iii) stating whether any change in GAAP or in the application thereof has occurred since the date of the most recent audited financial statements referred to in Section 3.04 or delivered pursuant to this Section 5.01 and, if any such change has occurred, specifying the effect of such change on the financial statements accompanying such certificate; (d) concurrently with any delivery of financial statements under clause (a) above, a certificate of the accounting firm that reported on such financial statements stating whether, in connection with their audit, anything came to their attention that caused them to believe that the Borrower had failed to comply with the terms, covenants, provisions or conditions of Sections 6.05 and 6.06; (e) promptly after the same become publicly available, copies of all annual and quarterly reports to shareholders, reports to the Securities and Exchange Commission on Form 10-K, Form 10-Q, Form 8-K or any successor form, proxy statements and registration statements (other than those relating only to employee benefit plans) filed or distributed by the Borrower or any Subsidiary; and (f) promptly following any request therefor, such other information regarding the operations, business affairs and financial condition of the Borrower or any Subsidiary, or compliance with the terms of this Agreement, as the Administrative Agent or any Lender may reasonably request. 41 37 SECTION 5.02. Notices of Material Events. The Borrower will furnish to the Administrative Agent prompt written notice of the following: (a) the occurrence of any Default; (b) the filing or commencement of any action, suit or proceeding by or before any arbitrator or Governmental Authority against or affecting the Borrower or any Affiliate thereof that, if adversely determined, could reasonably be expected to result in a Material Adverse Effect; (c) the occurrence of any ERISA Event that, alone or together with any other ERISA Events that have occurred, could reasonably be expected to result in liability of the Borrower and its Subsidiaries in an aggregate amount exceeding $15,000,000; (d) the receipt of any notice from the FCC or any other Governmental Authority of the expiration without renewal, termination or suspension of, or the institution of any proceedings to terminate or suspend, any main transmitter license granted by the FCC or any other material license now or hereafter held by the Borrower or any Subsidiary which is required to operate any television broadcasting station in compliance with all applicable laws; and, (e) any other development that has resulted in, or could reasonably be expected to result in, a Material Adverse Effect. Each notice delivered under this Section shall be accompanied by a statement of a Financial Officer or other executive officer of the Borrower setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto. SECTION 5.03. Existence; Conduct of Business. The Borrower will, and will cause each Subsidiary to, do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence and the rights, licenses, permits, privileges and franchises material to the conduct of the business of the Borrower and its Subsidiaries taken as a whole; provided that the foregoing shall not prohibit any merger, consolidation, liquidation or dissolution permitted under Section 6.02. SECTION 5.04. Payment of Obligations. The Borrower will, and will cause each Subsidiary to, pay its Indebtedness and other obligations, including tax liabilities, before the same shall become delinquent or in default, except where (a) the validity or amount thereof is being contested in good faith by appropriate proceedings, (b) the Borrower or such Subsidiary has set aside on its books adequate reserves with respect thereto in accordance with GAAP and (c) the failure to make payment pending such contest could not reasonably be expected to result in a Material Adverse Effect. SECTION 5.05. Maintenance of Properties; Insurance. The Borrower will, and will cause each Subsidiary to, (a) keep and 42 38 maintain all property material to the conduct of the business of the Borrower and its Subsidiaries taken as a whole in good working order and condition, ordinary wear and tear and obsolescence excepted, (b) keep and maintain all licenses, permits, franchises and major network affiliation agreements (including those with American Broadcasting Companies, Inc. ("ABC"), National Broadcasting Companies ("NBC"), the Columbia Broadcasting System, Inc. ("CBS"), or Fox Broadcasting Company ("FOX") necessary for their business except as the loss of the same could not individually or in the aggregate reasonably be expected to cause a Material Adverse Effect, it being understood and agreed that a change from one such major network to another shall not be considered to have such an effect; and (b) maintain, with financially sound and reputable insurance companies, insurance in such amounts and against such risks as are customarily maintained by companies engaged in the same or similar businesses operating in the same or similar locations. SECTION 5.06. Books and Records; Inspection Rights. The Borrower will, and will cause each Subsidiary to, keep proper books of record and account in which full, true and correct entries are made of all dealings and transactions in relation to its business and activities. The Borrower will, and will cause each Subsidiary to, permit any representatives designated by the Administrative Agent or any Lender, upon reasonable prior notice, to visit and inspect its properties, to examine and make extracts from its books and records, and to discuss its affairs, finances and condition with its officers and independent accountants, all at reasonable times and as often as shall be reasonably requested. SECTION 5.07. Compliance with Laws. The Borrower will, and will cause each Subsidiary to, comply with all laws (including Environmental Laws), regulations and orders of any Governmental Authority applicable to it or its property, except to the extent that failures to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. SECTION 5.08. Use of Proceeds. The Borrower will cause the proceeds of the Loans to be used only for the purposes referred to in the preamble to this Agreement. No part of the proceeds of any Loan will be used, whether directly or indirectly, for any purpose that entails a violation of any of the Regulations of the Board, including Regulations G, U and X. ARTICLE VI Negative Covenants Until the Commitments have expired or terminated and the principal of and interest on each Loan and all fees payable hereunder have been paid in full, the Borrower covenants and agrees with the Lenders that: SECTION 6.01. Liens. The Borrower will not, and will not permit any Subsidiary to, create, incur, assume or permit to exist any 43 39 Lien on any property or asset now owned or hereafter acquired by it, or assign or sell any income or revenues (including accounts receivable) or rights in respect of any thereof, except that the Borrower and the Subsidiaries may assign or sell delinquent receivables and rights in respect thereof and may create, incur, assume or permit to exist (a) Permitted Liens and (b) other Liens securing obligations in an aggregate amount at any time not greater than $40,000,000. SECTION 6.02. Fundamental Changes. (a) The Borrower will not merge into or consolidate with any other Person, or permit any other Person to merge into or consolidate with it, or sell, transfer, lease or otherwise dispose of (in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired), or liquidate or dissolve, except that any Subsidiary or other Person may merge into the Borrower if the Borrower is the surviving corporation and at the time thereof and immediately after giving effect thereto no Default shall have occurred and be continuing and the Borrower shall be in compliance with the financial covenants contained in this Article VI on a pro forma basis with such merger being deemed to have occurred at the beginning of each relevant period. (b) The Borrower will not, and will not permit any Subsidiary to, engage to an extent material to the Borrower and the Subsidiaries on a consolidated basis in any business other than businesses of the type conducted by the Borrower and its Subsidiaries on the date hereof and businesses reasonably related thereto. SECTION 6.03. Transactions with Affiliates. The Borrower will not, and will not permit any Subsidiary to, enter into any transaction (including, without limitation, the purchase or sale of any property or service) with, or make any payment or transfer to, any of its Affiliates (other than the Borrower or any Subsidiary) except in the ordinary course of business and upon terms no less favorable to the Borrower or such Subsidiary than the Borrower or such Subsidiary could obtain in a comparable arms-length transaction. SECTION 6.04. Restrictive Agreements. The Borrower will not, and will not permit any Subsidiary to, directly or indirectly, enter into, incur or permit to exist any agreement or other arrangement that prohibits, restricts or imposes any condition upon the ability of any Subsidiary to pay dividends or other distributions with respect to any shares of its capital stock or to make or repay loans or advances to the Borrower or any other Subsidiary or to Guarantee Indebtedness of the Borrower or any other Subsidiary, other than (i) such restrictions in the partnership agreements for TVFN and AHN in effect on the date hereof and (ii) such restrictions on Subsidiaries (other than TVFN and AHN) that are partnerships, joint ventures, limited liability companies or other similar entities, and in which the aggregate equity investment of the Borrower does not exceed $20,000,000. SECTION 6.05. Leverage. The Borrower will not permit (a) the ratio of Funded Debt to Pro Forma Operating Cash Flow as of the end of and for any period of four consecutive fiscal quarters ending after the Effective Date to be greater than 5.5 to 1.0, (b) the 44 40 ratio of Funded Debt (excluding Subordinated Debt) to Pro Forma Operating Cash Flow as of the end of and for any period of four consecutive fiscal quarters ending after the Effective Date to be greater than 5.0 to 1.0 or (c) Funded Debt of Subsidiaries (other than Funded Debt owed to the Borrower or any other Subsidiary) to constitute more than 10% of the Funded Debt that would at any time be permitted to exist under clause (a) of this Section 6.05. SECTION 6.06. Interest Coverage. The Borrower will not permit the ratio of Pro Forma Operating Cash Flow to Interest Expense for any period of four consecutive fiscal quarters ending after the Effective Date to be less than 2.5 to 1.0. SECTION 6.07. Investments in AHN and TVFN. The Borrower will not, and will not permit any Subsidiary to, directly or indirectly, make any loans or advances to, or make any other investment in AHN or TVFN during the term of the Facility in excess of $100,000,000. ARTICLE VII Events of Default If any of the following events ("Events of Default") shall occur: (a) any representation or warranty made or deemed made by or on behalf of the Borrower or any Subsidiary in or in connection with this Agreement, or in any report, certificate, financial statement or other document furnished pursuant to or in connection with this Agreement, shall prove to have been incorrect in any material respect when so made or deemed made; (b) the Borrower shall fail to pay any principal of any Loan when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or otherwise; (c) the Borrower shall fail to pay any interest on any Loan or any fee or any other amount (other than an amount referred to in clause (b) above) payable under this Agreement, when and as the same shall become due and payable, and such failure shall continue unremedied for a period of three Business Days; (d) the Borrower shall fail to observe or perform any covenant, condition or agreement contained in Section 5.02(a), (b) or (e), Section 5.03 (with respect to the Borrower's existence) or in Article VI; (e) the Borrower shall fail to observe or perform any covenant, condition or agreement contained in Section 5.02(c) or (d), and such failure shall continue unremedied for a period of five Business Days; 45 41 (f) the Borrower shall fail to observe or perform any covenant, condition or agreement contained in this Agreement (other than those specified in clause (b), (c), (d) or (e) above) and such failure shall continue unremedied for a period of 30 days after notice thereof from the Administrative Agent or any Lender to the Borrower; (g) the Borrower or any Subsidiary shall fail to make any payment of principal, regardless of amount, in respect of any Material Indebtedness, when and as the same shall become due and payable; (h) any event or condition occurs that results in any Material Indebtedness becoming due prior to its scheduled maturity; (i) an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of the Borrower or any Subsidiary or its debts, or of a substantial part of the property or assets of the Borrower or a Subsidiary, under Title 11 of the United States Code, as now constituted or hereafter amended, or any other Federal, state or foreign bankruptcy, insolvency, receivership or similar law or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any Subsidiary or for a substantial part of the property or assets of the Borrower or any Subsidiary; and such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered; (j) the Borrower or any Subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking liquidation, reorganization or other relief under Title 11 of the United States Code, as now constituted or hereafter amended, or any other Federal, state or foreign bankruptcy, insolvency, receivership or similar law, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in clause (i) above, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any Subsidiary or for a substantial part of the property or assets of the Borrower or any Subsidiary, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors or (vi) take any action for the purpose of effecting any of the foregoing; (k) one or more judgments for the payment of money in an amount in excess of $20,000,000 individually or $35,000,000 (in each case net of insurance coverage) in the aggregate shall be rendered against the Borrower, any Subsidiary or any combination thereof (it being understood that the outstanding adverse declaratory judgment in the Cable L.P. I, Inc. litigation disclosed in The Providence Journal Company's SEC filings shall 46 42 not constitute an Event of Default and that any amount payable in respect thereof shall not be included in the individual or aggregate limit) and the same shall remain undischarged for a period of 30 consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to attach or levy upon any property or assets of the Borrower or any Subsidiary to enforce any such judgment; (l) an ERISA Event shall have occurred that, in the opinion of the Required Lenders, when taken together with all other ERISA Events that have occurred, could reasonably be expected to result in a Material Adverse Effect; (m) any main transmitter license, permit or authorization issued to the Borrower or any Subsidiary by the FCC shall be forfeited, revoked or not renewed, or any proceeding with respect to any such forfeiture or revocation shall be instituted by the FCC, where such forfeiture, revocation or non-renewal or such proceeding, as the case may be, shall be reasonably likely to result in a Material Adverse Effect; (n) a Change in Control shall occur; then, and in every such event (other than an event with respect to the Borrower described in clause (i) or (j) above), and at any time thereafter during the continuance of such event, the Administrative Agent, at the request of the Required Lenders shall, by notice to the Borrower, take either or both of the following actions, at the same or different times: (i) terminate the Commitments, and thereupon the Commitments shall terminate immediately, and (ii) declare the Loans then outstanding to be due and payable in whole (or in part, in which case any principal not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and all fees and other liabilities of the Borrower accrued hereunder, shall become due and payable immediately, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; and in any event with respect to the Borrower described in clause (i) or (j) above, the Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and all fees and other liabilities of the Borrower accrued hereunder, shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower. ARTICLE VIII The Agents Each of the Lenders hereby irrevocably appoints the Agents as its agents and authorizes the Agents to take such actions on its behalf and to exercise such powers as are delegated to the Agents by the terms hereof, together with such actions and powers as are reasonably incidental thereto. 47 43 The bank serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent, and such bank and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate thereof as if it were not the Administrative Agent hereunder. The Agents shall not have any duties or obligations except those expressly set forth herein. Without limiting the generality of the foregoing (a) the Agents shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing, and (b) the Agents shall not have any duty to take any discretionary action or exercise any discretionary powers permitted hereunder unless requested to do so in writing by the Required Lenders. No Agent shall be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders or in the absence of its own gross negligence or wilful misconduct. In addition, the Agents shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement, (ii) the contents of any certificate, report or other document delivered hereunder or in connection herewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement or any other agreement, instrument or document, or (v) the satisfaction of any condition set forth in Article IV or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Agents. The Agents shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by the proper Person. The Agents also may rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person, and shall not incur any liability for relying thereon. Each of the Agents may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts. Each of the Agents may perform any and all its duties and exercise its rights and powers by or through any one or more sub-agents appointed by such Agent. The Administrative Agent, the CAF Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers through Affiliates or its or its Affiliates' employees. The exculpatory provisions of the preceding paragraphs shall apply to any such sub-agent, to the Affiliates of the Administrative Agent, the CAF Agent and any such sub-agent and to the directors, officers, employees, agents and advisors of the Administrative Agent, the CAF Agent, any such sub-agent and their respective Affiliates. Subject to the appointment and acceptance of a successor Agent as provided below, either Agent may resign at any time by 48 44 notifying the Lenders and the Borrower. Upon any such resignation, the Required Lenders, with the consent of the Borrower (which shall not be unreasonably withheld) shall have the right to appoint a successor Agent. If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Agent gives notice of its resignation, then the retiring Agent may, with the consent of the Borrower (which shall not be unreasonably withheld), on behalf of the Lenders, appoint a successor Agent which shall be a bank with an office in Dallas or The City of New York, having a combined capital and surplus of at least $500,000,000 or an Affiliate of any such bank. Upon the acceptance of its appointment as Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. After the Agent's resignation hereunder, the provisions of this Article and Section 9.03 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Agent. Each Lender agrees (a) to reimburse the Agents, on demand, in the amount of its pro rata share at the time reimbursement is sought (based on its Commitment hereunder or, if the Commitments shall have expired or terminated, based on its portion of the total Revolving Credit Exposures and outstanding Competitive Loans) of any expenses incurred for the benefit of the Lenders by the Agent, including counsel fees and compensation of agents and employees paid for services rendered on behalf of the Lenders, that shall not have been reimbursed by the Borrower and (b) to indemnify and hold harmless each of the Agents and any of its directors, officers, employees or agents, on demand, in the amount of such pro rata share, from and against any and all liabilities, taxes, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever that may be imposed on, incurred by or asserted against it in its capacity as Agent or any of them in any way relating to or arising out of this Agreement or any action taken or omitted by it or any of them under this Agreement, to the extent the same shall not have been reimbursed by the Borrower, provided that no Lender shall be liable to any Agent or any such other indemnified person for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements that are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or wilful misconduct of such Agent or any of its directors, officers, employees or agents. Each Lender acknowledges that it has, independently and without reliance upon the Agents or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Agents or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any related agreement or any document furnished hereunder or thereunder. 49 45 ARTICLE IX Miscellaneous SECTION 9.01. Notices. Except in the case of notices and other communications expressly permitted to be given by telephone, all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows: (a) if to the Borrower, to it at 400 South Record Street, Dallas, TX 75202, Attention of the Chief Financial Officer (Telecopy No. 214-977-8209) with a copy to the General Counsel; (b) if to the Administrative Agent, to the attention of Loan Syndication Services/Gale Manning (Telecopy No. 713-750-3810), with a copy to Texas Commerce Bank National Association, at Dallas, TX, Attention of Kevin Kelty (Telecopy No. 214-965-2997); (c) if to the CAF Agent, to it at Loan and Agency Service Group, at One Chase Manhattan Plaza, 8th Floor, New York, New York 10005, Attention of Chris Consomer (Telecopy No. 212-552-5658); (d) if to a Lender, to it at its address (or telecopy number) set forth in its Administrative Questionnaire. Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt if delivered by hand or overnight courier service or sent by telecopy or on the date five Business Days after dispatch by certified or registered mail if mailed, except that notices and communications to the Agents pursuant to Article II shall be deemed to have been given only when received by the Agents. SECTION 9.02. Waivers; Amendments. (a) No failure or delay by the Administrative Agent, the CAF Agent or any Lender in exercising any right or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Administrative Agent, the CAF Agent and the Lenders hereunder are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or consent to any departure by the Borrower therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) below, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. (b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or 50 46 agreements in writing entered into by the Borrower and the Required Lenders or by the Borrower and the Administrative Agent with the consent of the Required Lenders; provided that no such agreement shall (i) increase or decrease the Commitment of any Lender (except for a ratable decrease in the Commitments of all the Lenders), without the written consent of such Lender, (ii) reduce the principal amount of any Loan or reduce the rate of interest thereon, or reduce any fees payable hereunder, without the written consent of each Lender affected thereby, (iii) postpone the scheduled date of payment of the principal amount of any Loan, or any interest thereon, or any fees payable hereunder, or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date of expiration of any Commitment, without the written consent of each Lender affected thereby, or (iv) change any of the provisions of this Section or the definition of "Required Lenders" or any other provision hereof specifying the number or percentage of Lenders required in order to waive, amend or modify any rights hereunder or grant any consent hereunder, without the written consent of each Lender; provided further that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent, hereunder without the prior written consent of the Administrative Agent. SECTION 9.03. Expenses; Indemnity; Damage Waiver. (a) The Borrower agrees to pay (i) all reasonable out-of-pocket expenses incurred by any Agent and its Affiliates, including the reasonable fees, charges and disbursements of Cravath, Swaine & Moore, counsel for the Agents, in connection with the syndication of the credit facilities provided for herein, the preparation and administration of this Agreement or any amendments, modifications or waivers of the provisions hereof (whether or not the transactions contemplated hereby or thereby shall be consummated), (ii) all reasonable out-of-pocket expenses incurred by the Agents or any Lender, including the reasonable fees, charges and disbursements of any counsel for the Agents or any Lender, in connection with the enforcement or protection of its rights in connection with this Agreement. (b) The Borrower agrees to indemnify each of the Agents and each Lender, each Affiliate of any of them and each of the respective directors, officers, employees, agents and advisors of the foregoing (each such Person being called an "Indemnitee") against, and to hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including the fees, charges and disbursements of any counsel for any Indemnitee, incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement or any agreement or instrument contemplated hereby, the performance by the parties hereto of their respective obligations hereunder or the consummation of the Transactions or any other transactions contemplated hereby, (ii) any Loan or the use of the proceeds thereof, (iii) any actual or alleged presence or release of Hazardous Materials on or from any property owned or operated by the Borrower or any of its Subsidiaries, or any Environmental Liability related in any way to the Borrower or any of its Subsidiaries, or (iv) any claim, litigation, investigation or proceeding relating to any of the foregoing, whether or not any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to 51 47 the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or wilful misconduct of such Indemnitee (BUT SHALL BE AVAILABLE TO THE EXTENT THEY ARE DETERMINED TO HAVE RESULTED FROM, IN WHOLE OR IN PART, THE SIMPLE NEGLIGENCE OF SUCH INDEMNITEE). (c) To the extent permitted by applicable law, the Borrower agrees not to assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any agreement or instrument contemplated hereby, the Transactions, any Loan or the use of the proceeds thereof. (d) All amounts due under this Section shall be payable no later than 10 days after written demand therefor. SECTION 9.04. Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by the Borrower without such consent shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto and their respective successors and assigns permitted hereby) any legal or equitable right, remedy or claim under or by reason of this Agreement. (b) Any Lender may assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it); provided that (i) except in the case of an assignment to a Lender or an Affiliate of a Lender, each of the Borrower (and, except in the case of an assignment limited to rights in respect of an outstanding Competitive Loan, the Administrative Agent) must give their prior written consent to such assignment (which consent shall not be unreasonably withheld), (ii) except in the case of an assignment to a Lender or an Affiliate of a Lender or an assignment of the entire remaining amount of the assigning Lender's Commitment, the amount of the Commitment of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall not be less than $20,000,000, (iii) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender's rights and obligations under this Agreement, except that this clause shall not apply to rights in respect of outstanding Competitive Loans, (iv) the Lenders party to each such assignment shall execute and deliver to the Administrative Agent an Assignment and Acceptance, together with a processing and recordation fee of $3,500, and (v) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire. Upon acceptance and recording pursuant to paragraph (d) of this Section, from and after the effective date specified in each Assignment and Acceptance, which effective date shall be at least five Business Days after the execution thereof, the 52 48 assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all of the assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.13, 2.14, 2.15 and 9.03). (c) The Administrative Agent, acting for this purpose as an agent of the Borrower, shall maintain at one of its offices in The City of New York a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitment of, and principal amount of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the "Register"). The entries in the Register shall be conclusive, and the Borrower, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice. (d) Upon its receipt of a duly completed Assignment and Acceptance executed by an assigning Lender and an assignee, the assignee's completed Administrative Questionnaire (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) above and any written consent to such assignment required by paragraph (b) above, the Administrative Agent shall (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the Lenders. No assignment shall be effective unless it has been recorded in the Register as provided in this paragraph (d). (e) Any Lender may, without the consent of the Borrower or the Administrative Agent, sell participations to one or more banks or other entities ("Participants") in all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans owing to it); provided that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower, the Agents, and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in the first proviso to Section 9.02(b) that affects such Participant. Subject to paragraph (f) below, the Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.13, 2.14 53 49 and 2.15 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section. In connection with any sale of a participation pursuant to this paragraph, the selling Lender shall obtain from the Participant an undertaking to be bound by the provisions of Section 9.12. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with paragraph (b) above shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with this paragraph. (f) A Participant shall not be entitled to receive any greater payment under Section 2.13 or 2.15 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower's prior written consent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 2.15 unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with Section 2.15(e) as though it were a Lender. (g) Any Lender may at any time assign all or any portion of its rights under this Agreement to a Federal Reserve Bank to secure extensions of credit by such Federal Reserve Bank to such Lender; provided that no such assignment shall release a Lender from any of its obligations hereunder or substitute any such Federal Reserve Bank for such Lender as a party hereto. SECTION 9.05. Survival. All covenants, agreements, representations and warranties made by the Borrower herein and in the certificates or other instruments delivered in connection with or pursuant to this Agreement shall be considered to have been relied upon by the Lenders and shall survive the execution and delivery of this Agreement and the making of any Loans, regardless of any investigation made by the Lenders or on their behalf and notwithstanding that the Administrative Agent or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement is outstanding and unpaid and so long as the Commitments have not expired or terminated. The provisions of Sections 2.13, 2.14, 2.15 and 9.03 shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans or the termination of the Commitments, this Agreement or any provision hereof. SECTION 9.06. Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement and any separate letter agreements with respect to fees payable to the Agents constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter 54 50 hereof. Except as provided in Section 4.01, this Agreement shall become effective when it shall have been executed by the Agents and when the Agents shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Delivery of an executed counterpart of a signature page of this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement. SECTION 9.07. Severability. Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction. SECTION 9.08. Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender to or for the credit or the account of the Borrower against any of and all the obligations of the Borrower now or hereafter existing under this Agreement held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement and although such obligations may be unmatured. The rights of each Lender under this Section are in addition to other rights and remedies (including other rights of setoff) which such Lender may have. SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of Process. (a) THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. (b) The Borrower hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that the Administrative Agent, the CAF Agent or any Lender may otherwise have to bring any action or proceeding relating to this Agreement against the Borrower or its properties in the courts of any jurisdiction. 55 51 (c) The Borrower hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement in any court referred to in paragraph (b) of this Section. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (d) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 9.01. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law. SECTION 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION. SECTION 9.11. Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement. SECTION 9.12. Confidentiality. Each of the Agents and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates' directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority, (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party to this Agreement, (e) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or the enforcement of rights hereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement, (g) with the consent of the Borrower or (h) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section or (ii) becomes available to the Administrative Agent, or any Lender on a nonconfidential basis from a source other than the Borrower. For the purposes of this Section, "Information" means all information received from the Borrower relating to the Borrower or its business including any potential acquisition or proposed business transaction, other than any such information that is available to the Agents or any Lender on 56 52 a nonconfidential basis prior to disclosure by the Borrower; provided that, in the case of information received from the Borrower after the date hereof (other than information obtained by any Lender in the course of examining the books or records of the Borrower or any Subsidiary as permitted by Section 5.06) such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information. SECTION 9.13. Interest Rate Limitation. Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges and other amounts which are treated as interest on such Loan under applicable law (collectively the "Charges"), shall exceed the maximum lawful rate (the "Maximum Rate") which may be contracted for, charged, taken, received or reserved by the Lender holding such Loan in accordance with applicable law, the rate of interest payable in respect of such Loan hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Loan but were not payable as a result of the operation of this Section shall be cumulated and the interest and Charges payable to such Lender in respect of other Loans or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Effective Rate to the date of repayment, shall have been received by such Lender. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. A. H. BELO CORPORATION, by /s/ BRENDA C. MADDOX -------------------------------- Name:Brenda C. Maddox Title:Vice President/Treasurer 57 TEXAS COMMERCE BANK NATIONAL ASSOCIATION, individually and as Administrative Agent, by /s/ J. KEVIN KELTY -------------------------------- Name: J. Kevin Kelty Title: Senior Vice President 58 by /s/ DEBORAH DAVEY -------------------------------- Name: Deborah Davey Title: Vice President 59 BANK OF AMERICA NT & SA, by /s/ MATTHEW J. KOENIG ----------------------------- Name: Matthew J. Koenig Title: Vice President 60 BANK OF TOKYO-MITSUBISHI, LTD., by /s/ J. BECKWITH --------------------------- Name: J. Beckwith Title: Vice President 61 NATIONSBANK OF TEXAS, N.A., by /s/ TODD SHIPLEY --------------------------- Name: Todd Shipley Title: Senior Vice President 62 MORGAN GUARANTY TRUST COMPANY, by /s/ DONALD H. PATRICK --------------------------- Name: Donald H. Patrick Title: Vice President 63 SOCIETE GENERALE, by /s/ CHRISTOPHER J. SPELTZ ---------------------------- Name: Christopher J. Speltz Title: Vice President 64 THE FIRST NATIONAL BANK OF BOSTON, by /s/ ROBERT F. MILORDI -------------------------------- Name: Robert F. Milordi Title: Managing Director 65 FLEET BANK, by /s/ CHRISTOPHER A. SWINDELL -------------------------------- Name: Christopher A. Swindell Title: Vice President 66 THE FUJI BANK, LIMITED, by /s/ PHILLIP C. LAUINGER, III -------------------------------- Name: Phillip C. Lauinger, III Title: Vice President & Joint Manager 67 BANQUE NATIONALE DE PARIS, HOUSTON AGENCY, by /s/ HENRY F. SETINA ----------------------- Name: Henry F. Setina Title: Vice President 68 CIBC INC., by /s/ MATTHEW B. JONES ---------------------------- Name: Matthew B. Jones Title: Authorized Signatory 69 MELLON BANK, N.A., by /s/ STEPHEN D. LACKEY ----------------------------- Name: Stephen D. Lackey Title: First Vice President 70 THE SAKURA BANK LIMITED, HOUSTON AGENCY, by /s/ YASUMASA KIKUCHI -------------------------- Name: Yasumasa Kikuchi Title: Senior Vice President 71 THE TOKAI BANK, LIMITED, by /s/ STUART M. SCHULMAN ------------------------------ Name: Stuart M. Schulman Title: Deputy General Manager 72 THE TOYO TRUST & BANKING CO LTD., by /s/ TAKAO SHIDA -------------------------------- Name: Takao Shida Title: Deputy General Manager 73 THE SANWA BANK LIMITED, DALLAS AGENCY, by /s/ ROBERT S. SMITH -------------------------------- Name: Robert S. Smith Title: Vice President 74 WACHOVIA BANK OF GEORGIA, N.A., by /s/ JOEL K. WOOD ---------------------------- Name: Joel K. Wood Title: Vice President 75 WELLS FARGO BANK (TEXAS), N.A., by /s/ KEN TAYLOR -------------------------------- Name: Ken Taylor Title: Assistant Vice President 76 CREDIT LYONNAIS, NEW YORK BRANCH, by /s/ JACQUES-YVES MULLIEZ -------------------------------- Name: Jacques-Yves Mulliez Title: Senior Vice President 77 THE DAI-ICHI KANGYO BANK, LTD., by /s/ D. MURDOCK ----------------------------- Name: D. Murdock Title: Vice President 78 FIRST HAWAIIAN BANK, by /s/ DONALD C. YOUNG -------------------------------- Name: Donald C. Young Title: Assistant Vice President 79 THE INDUSTRIAL BANK OF JAPAN, LIMITED NEW YORK BRANCH, by /s/ KAZUTOSHI KUWAHARA -------------------------------- Name: Kazutoshi Kuwahara Title: Executive Vice President, Houston Office 80 THE LONG-TERM CREDIT BANK OF JAPAN, LIMITED, NEW YORK BRANCH, by /s/ JOHN J. SULLIVAN -------------------------------- Name: John J. Sullivan Title: Joint General Manager 81 MICHIGAN NATIONAL BANK, by /s/ STEPHANIE LUBIN ----------------------------- Name: Stephanie Lubin Title: Relationship Manager 82 THE NORTHERN TRUST COMPANY, by /s/ JOHN E. BURDA ----------------------------- Name: John E. Burda Title: Second Vice President 83 CRESTAR BANK, by /s/ THOMAS C. PALMER ------------------------ Name: Thomas C. Palmer Title: Vice President 84 HIBERNIA NATIONAL BANK, by /s/ TROY J. VILLAFARRA --------------------------- Name: Troy J. Villafarra Title: Vice President 85 THE MITSUBISHI TRUST AND BANKING CORPORATION, by /s/ HACHIRO HOSODA -------------------------------- Name: Hachiro Hosoda Title: Senior Vice President 86 SUNTRUST BANK, CENTRAL FLORIDA, N.A., by /s/ JANET SAMMONS -------------------------------- Name: Janet Summons Title: Vice President 87 TORONTO DOMINION (TEXAS) INC., by /s/ NEVA NESBITT ---------------------------- Name: Neva Nesbitt Title: Vice President 88 WESTDEUTSCHE LANDESBANK GIROZENTRALE, NEW YORK BRANCH, by /s/ KHEIL MCINTYRE -------------------------------- Name: Kheil McIntyre Title: Vice President by /s/ SALVATORE BATTINELLI -------------------------------- Name: Salvatore Battinelli Title: Vice President Credit Department 89 FIRST UNION NATIONAL BANK OF NORTH CAROLINA, by /s/ BRUCE W. LOFIRA ------------------------------ Name: Bruce W. Lofira Title: Senior Vice President 90 CREDIT AGRICOLE, by /s/ DAVID BOUHL -------------------------------- Name: David Bouhl Title: First Vice President Head of Corporate Banking Chicago 91 U.S. BANK OF WASHINGTON, N.A., by /s/ WADE BLACK -------------------------------- Name: Wade Black Title: Vice President 92 THE YASUDA TRUST & BANKING CO., LTD., by /s/ MAKOTO TAGAWA -------------------------------- Name: Makoto Tagawa Title: Deputy General Manager 93 EXHIBIT A [Form of] ASSIGNMENT AND ACCEPTANCE Reference is made to the Credit Agreement dated as of January 31, 1997 (the "Credit Agreement"), among A. H. Belo Corporation, a Delaware corporation (the "Borrower"), the lenders listed on Schedule 2.01 thereto (the "Lenders"), Texas Commerce Bank National Association, as administrative agent for the Lenders (in such capacity, the "Administrative Agent") and The Chase Manhattan Bank, as Competitive Advance Facility Agent (the "CAF Agent"). Terms defined in the Credit Agreement are used herein with the same meanings. 1. The Assignor hereby sells and assigns, without recourse, to the Assignee, and the Assignee hereby purchases and assumes, without recourse, from the Assignor, effective as of the Effective Date set forth below (but not prior to the registration of the information contained herein in the Register pursuant to Section 9.04(c) of the Credit Agreement), the interests set forth below (the "Assigned Interest") in the Assignor's rights and obligations under the Credit Agreement, including, without limitation, the amounts and percentages set forth below of (i) the Commitment of the Assignor on the Effective Date and (ii) the Loans owing to the Assignor which are outstanding on the Effective Date. Each of the Assignor and the Assignee hereby makes and agrees to be bound by all the representations, warranties and agreements set forth in Section 9.04(b) of the Credit Agreement, a copy of which has been received by each such party. From and after the Effective Date (i) the Assignee shall be a party to and be bound by the provisions of the Credit Agreement and, to the extent of the interests assigned by this Assignment and Acceptance, have the rights and obligations of a Lender thereunder and under the Loan Documents and (ii) the Assignor shall, to the extent of the interests assigned by this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Credit Agreement. 2. This Assignment and Acceptance is being delivered to the Administrative Agent together with (i) if the Assignee is organized under the laws of a jurisdiction outside the United States, the forms specified in Section 2.15(e) of the Credit Agreement, duly completed and executed by such Assignee, (ii) if the Assignee is not already a Lender under the Credit Agreement, an Administrative Questionnaire in the form supplied by the Administrative Agent and (iii) a processing and recordation fee of $3,500. 3. This Assignment and Acceptance shall be governed by and construed in accordance with the laws of the State of New York. Date of Assignment: Legal Name of Assignor: Legal Name of Assignee: Assignee's Address for Notices: Effective date of Assignment (may not be fewer than 5 Business Days after the Date of Assignment): 94 Percentage Assigned of Applicable Facility/Commitment (set forth, to at least 8 decimals, as a percentage of the Facility and the aggregate (Principal Amount Assigned and Commitments of all Lenders Identifying Information as to thereunder) individual Competitive Loans) Facility/Commitment ---------------------------------------------------------------------------------------------------- Revolving Credit $ % Competitive Loans $ %
The terms set forth above are hereby agreed to: Accepted */ - ___________________, as Assignor TEXAS COMMERCE BANK NATIONAL ASSOCIATION, as Administrative Agent by:__________________________ by:_______________________ Name: Name: Title: Title: ___________________, as Assignee by:__________________________ Name: Title: 95 EXHIBIT B-1 [Letterhead of] A. H. BELO CORPORATION January [ ], 1997 Texas Commerce Bank National Association as Administrative Agent 2200 Ross Avenue Dallas, Texas 75201 Chase Securities Inc., as Arranger 270 Park Avenue New York, NY 10017 The Lenders from time to time party to the Credit Agreement referred to below (all of the Addressees, collectively, the "Creditors") Dear Ladies and Gentlemen: I have acted as General Counsel to A. H. Belo Corporation, a Delaware corporation (the "Borrower"), in connection with the execution and delivery today of, and the consummation of the transactions contemplated by, the Credit Agreement dated as of January 31, 1997, (the "Credit Agreement"), among the Borrower, the financial institutions party thereto as lenders (the "Lenders"), Texas Commerce Bank National Association, as administrative agent (in such capacity, the "Administrative Agent") and The Chase Manhattan Bank, as Competitive Advance Facility Agent (the "CAF Agent"), Bank of America National Trust and Savings Association and Bank of Tokyo-Mitsubishi, Ltd., as Co-Syndication Agents, and NationsBank, as Documentation Agent and any promissory notes ("Notes") delivered in connection with the Credit Agreement. This opinion is delivered pursuant to Section 4.01(b)of the Credit Agreement. Capitalized terms used but not defined herein shall have the meanings assigned to such terms in the Credit Agreement. In connection with this opinion, I have examined originals or copies, certified or otherwise identified to our satisfaction, of the Credit Agreement and such other records, agreements, instruments and other documents, and have made such other investigations, as I have deemed necessary for the purpose of this opinion. Based upon the foregoing, it is my opinion that: 1. The Borrower and each Subsidiary (a) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has all requisite corporate power and authority to own its property and assets and to carry on its business as now conducted and as proposed to be conducted, (c) is qualified to do business and is in good standing in each jurisdiction where such qualification is required, except where the failure so to qualify could not reasonably be expected to result in a Material Adverse Effect, and (d) in the case of the Borrower, has the corporate power and authority to execute, deliver and perform its obligations under the Credit Agreement and to borrow thereunder. 96 2. The execution, delivery and performance of the Credit Agreement by the Borrower and the borrowings thereunder (a) have been duly authorized by all requisite corporate and, if necessary, stockholder action of the Borrower and each Subsidiary and (b) will not (i) violate (A) any provision of the certificate of incorporation or by laws of the Borrower or any Subsidiary, (B) to my knowledge after reasonable inquiry any law, statute, rule or regulation or any order of any Governmental Authority applicable to the Borrower or any Subsidiary or their properties or (C) any provision of any indenture or other material agreement or other material instrument to which the Borrower or any Subsidiary is a party or by which any of them or any of their property is or may be bound, (ii) be in conflict with, result in a breach of or constitute (along or with notice or lapse of time or both) a default under, or give rise to any right to accelerate or to require the prepayment, repurchase or redemption of any obligation under any such indenture, agreement or other instrument or (iii) result in the creating or imposition of any Lien upon or with respect to any property or assets now owned or hereafter acquired by the Borrower or any Subsidiary. 3. If, contrary to the intent of the parties, the Credit Agreement were held to be governed by the laws of the State of Texas, the Credit Agreement would nevertheless constitute a valid and binding agreement of the Borrower, enforceable in accordance with its terms, except (a) enforcement of the indemnification and exculpatory provisions of the Credit Agreement may be limited by applicable securities laws and other laws and public policies, (b) enforcement of the Credit Agreement may be limited by Debtor Relief Laws and is subject to equitable principles, and (c) certain provisions of the Credit Agreement may be limited by, modified or unenforceable under applicable state and federal laws, regulations, rulings and decisions in addition to those referenced herein, if any; however, such limitation, modification or unenforceability should not in our opinion materially diminish or substantially interfere with the practical realization of benefits intended to be afforded by the Credit Agreement except for the economic consequences of any procedural delay which may result therefrom. 4. No action, consent or approval of, registration or filing with or any other action by any Governmental Authority is or will be required in connection with the execution, delivery and performance of the Loan Documents by the Borrower party thereto or the consummation of the transactions contemplated thereby, other than routine filings with the SEC and FCC or required of public companies and FCC licensees and such authorizations and approvals as have already been obtained and are in full force and effect. 5. There are not any actions, suits or proceedings at law or in equity or by or before any Governmental Authority now pending or, to our knowledge, threatened against or affecting the Borrower or any Subsidiary or any business, property or rights of any such person (i) that involve the Credit Agreement or the transactions contemplated thereby or (ii) as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect. 97 6. All shares of capital stock of each Subsidiary have been duly and validly authorized and issued, are fully paid and non-assessable and, except as set forth on Schedule 6.01 to the Credit Agreement, are owned by the Borrower, directly or indirectly, free and clear of all Liens. No authorized but unissued or treasury shares of capital stock of any Subsidiary are subject to any option, warrant, right to call or commitment of any kind. Other than the ongoing stock repurchase program of the Borrower, neither the Borrower nor any Subsidiary is subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any shares of its capital stock or any securities convertible into or for shares of its capital stock. Neither the Borrower nor any Subsidiary is a party to any agreement restricting the transfer or voting of any shares of any capital stock of any Subsidiary. 7. Neither the Borrower nor any of the Subsidiaries is an "investment company" or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940. 8. Neither the Borrower nor any of the Subsidiaries is a "holding company" or a "subsidiary company" of a "holding company", within the meaning of the Public Utility Holding Company Act of 1935. 9. The making of the Loans to the Borrower and the application of the proceeds thereof by the Borrower pursuant to the terms of the Credit Agreement will not violate Regulation G, T, U or X of the Board of Governors of the Federal Reserve System. I am admitted to practice in the State of Texas. I express no opinion as to matters under or involving the laws of any jurisdiction other than the laws of the State of Texas, the General Corporation Law of the State of Delaware and the Federal Laws of the United States. This opinion may be relied upon by each of you, by any successors and assigns of the Administrative Agent, and any participant, assignee or successor to the interests of the Lenders under the Credit Agreement. Very truly yours, 98 EXHIBIT B-2 [Letterhead of] LOCKE PURNELL RAIN HARRELL January [ ], 1997 Texas Commerce Bank National Association as Administrative Agent 2200 Ross Avenue Dallas, Texas 75201 Chase Securities Inc., as Arranger 270 Park Avenue New York, NY 10017 The Lenders from time to time party to the Credit Agreement referred to below (all of the Addressees, collectively, the "Creditors") Dear Ladies and Gentlemen: This opinion is being delivered to you pursuant to Section 4.01(b) of that certain $500,000,000 Credit Agreement dated as of January 31, 1997 (the "Credit Agreement") among A. H. Belo Corporation, a Delaware corporation ("Borrower"), the financial institutions who are parties thereto as Lenders, Texas Commerce Bank National Association ("TCB"), as Administrative Agent and the Chase Manhattan Bank ("Chase"), as Competitive Advance Facility Agent, Bank of America National Trust and Savings Association and Bank of Tokyo-Mitsubishi, Ltd., as Co-Syndication Agents, and NationsBank ("NationsBank"), as Documentation Agent. Terms which are defined in the Credit Agreement and which are used but not defined herein shall have the meanings given them in the Credit Agreement. We have acted as counsel for Borrower in connection with the transactions provided for in the Credit Agreement. Please be advised that we are engaged by Borrower and/or its Subsidiaries from time to time to assist with selected matters and do not serve as general counsel to any of such entities. Also, please be advised that we are engaged by TCB, Chase, NationsBank and certain other Lenders (or affiliates of TCB, Chase and such other Lenders) from time to time to assist in selected matters unrelated to the Credit Agreement. For purposes of this opinion, we have examined originals or copies of the Credit Agreement and the promissory notes evidencing the Loans (referred to herein individually as a "Principal Loan Document" and collectively as the "Principal Loan Documents") and such corporate records of Borrower and such other documents and matters of law which we have considered necessary for such purposes. In connection with our examination, we have assumed the genuineness of all signatures and the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as copies, and the authenticity of the originals of such copies. As to matters of fact material to this opinion, we have relied, without any 99 independent investigation or verification upon the accuracy of the representations, warranties and other statements of fact made in or pursuant to the Principal Loan Documents. In rendering the opinions expressed below, we have assumed the accuracy and validity of the opinions of Borrower's General Counsel expressed to you by letter of even date herewith, and to the extent relevant to our opinions, have relied upon such opinions without independent investigation or verification. Furthermore, we have assumed, with respect to the Credit Agreement, that: (i) such documents have been duly authorized by, have been duly executed and delivered by, and constitute legal, valid, binding and enforceable obligations of, all of the parties to such documents (other than Borrower); (ii) all signatories to such documents (other than on behalf of Borrower) have been duly authorized; (iii) all of the parties to such documents (other than Borrower) are duly organized and validly existing and have the power and authority (corporate or other) to execute, deliver and perform such documents; and (iv) no course of dealing, custom or practice between Borrower and any Agent or Lender shall supersede any provision thereof. The opinions expressed herein are limited to the laws of the State of Texas and federal laws of the United States except that we express no opinion with respect to, and have not taken into account the effect of, (i) the Communications Act of 1934, as amended, the Telecommunications Act of 1996, as amended, or the rules, regulations and policies of the FCC or (ii) applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or transfer or other similar laws relating to or affecting the rights of creditors or the obligations of debtors generally ("Debtor Relief Laws"). We call your attention to the fact that each Principal Loan Document (to the extent provided therein) provides that it is to be governed by and construed in accordance with the laws of the State of New York, as to which we have made no independent examination and express no opinion. With your permission we have assumed that the laws of the State of New York relevant to the matters addressed in our opinion are identical to the laws of the State of Texas. Based upon the foregoing, having due regard for the legal considerations we deem relevant and subject to the qualifications, assumptions and exceptions herein set forth, we are of the opinion that the Principal Loan Documents have been duly executed and delivered by the Borrower and constitute legal, valid and binding obligations of the Borrower and are enforceable against the Borrower in accordance with their terms, except (a) enforcement of the indemnification and exculpatory provisions of the Principal Loan Documents may be limited by applicable securities laws and other laws and public policies, (b) enforcement of the Principal Loan Documents may be limited by Debtor Relief Laws and is subject to equitable principles, and (c) certain provisions of the Principal Loan Documents may be limited, modified or 100 unenforceable under applicable state and federal laws, regulations, rulings and decisions in addition to those referenced herein, if any; however, such limitation, modification or unenforceability should not in our opinion materially diminish or substantially interfere with the practical realization of benefits intended to be afforded by the Principal Loan Documents except for the economic consequences of any procedural delay which may result therefrom. In rendering the opinions expressed herein, we have assumed that (a) every provision of the Principal Loan Documents limiting the rate and amount of interest charged thereunder to the maximum amount permitted by applicable law has been and will continue to be complied with and that each and every usury savings clause contained in the Principal Loan Documents has been and will continue to be complied with; (b) no other fees, sums, or benefits, whether direct or indirect, have been charged, paid, or received or are, or may be payable to or chargeable or receivable by any Agent or Lender except as expressly mentioned in the Principal Loan Documents, the Commitment Letter and the fee letter referred to therein; (c) any fees or charges which have been or may be paid to any Agent or any Lender or to any other party are, or will be, for services actually rendered, and that such fees and charges will not exceed just and reasonable compensation for such services rendered; and (d) any fees paid or to be paid by the Borrower to any Agent or any Lender and denominated "commitment fees" or the like are in fact commitment fees and not sums paid for the use, forbearance or detention of money. The opinions herein expressed are solely for your benefit in connection with the transactions contemplated by the Credit Agreement, and no one else is entitled to rely hereon (other than permitted successors and assigns) without our written consent. No person is entitled to rely hereon to the extent such person or its counsel shall have any knowledge why any opinion expressed herein is not accurate in any material respect. We hereby disclaim any obligation to advise you of any changes in fact or law which might affect the opinions expressed herein. Sincerely, LOCKE PURNELL RAIN HARRELL (A Professional Corporation) By: __________________________ Guy Kerr 101 EXHIBIT B-3 [Form of Opinion of Wiley, Rein & Fielding- FCC Counsel for Borrower] January [ ], 1997 Texas Commerce Bank National Association as Administrative Agent 2200 Ross Avenue Dallas, TX 75201 Chase Securities, Inc. as Arranger 270 Park Avenue New York, NY 10017 The Lenders from time to time party to the Credit Agreement referred to below (all of the Addressees, collectively, the "Creditors") Dear Ladies and Gentlemen: We have acted as special communications counsel to A. H. Belo Corporation, a Delaware Corporation (the "Borrower"), in connection with the execution and delivery today of, and the consummation of the transactions contemplated by, the Credit Agreement dated as of January 31, 1997, (the "Credit Agreement"), among the Borrower, the financial institutions party thereto as lenders (the "Lenders") and Texas Commerce Bank National Association, as administrative agent (in such capacity, the "Administrative Agent"). This opinion is delivered pursuant to Section 4.01(b) of the Credit Agreement. Capitalized terms used but not defined herein shall have the meanings assigned to such terms in the Credit Agreement. In rendering this opinion, we have examined the Credit Agreement and such other documents and instruments and such questions of law as we have deemed necessary for the purpose of rendering the opinion set forth herein. Additionally, we have relied upon the representations made by the Borrower in the Credit Agreement, upon the statements of officers and representatives of the Borrower, and upon records relating to the Borrower and the television broadcast stations owned and operated by the Borrower and its several Subsidiaries (the "Stations") that are routinely available for public inspection at the Federal Communications Commission ("FCC"). We have assumed the genuineness of all signatures on all original documents, the conformity to original documents of all copies submitted to us, and the full authorization, execution, and delivery of all documents by parties responsible therefor. We also have assumed that the documents and instruments described or referred to herein fully express the agreements of any party thereto. Finally, we have assumed the completeness of the public files relating to the Borrower, its Subsidiaries, and the Stations maintained by the FCC and the accuracy and authenticity of all documents contained therein. Whenever our opinion herein with respect to the existence (or absence) of facts is qualified by the phrase "to the best of our knowledge," it is intended to indicate that, during the course of our 102 representation of the Borrower, no information has come to our attention which would give us actual knowledge of the existence (or absence) of such facts. We have undertaken no on site inspection whatsoever of any of the Stations and, except as otherwise specifically stated herein, we have not undertaken any independent investigation to determine the existence or absence of such facts, and no inference as to our knowledge of the existence (or absence) of such facts should be drawn from the fact of our representation of the Borrower. We are admitted to practice law in the District of Columbia. We address herein only matters within the jurisdiction of the FCC under the Communications Act of 1934, as amended, and the rules, regulations and published orders of the FCC (Collectively, the "Communications Laws") applicable to the Stations. We express no opinion as to matters arising under or involving any other laws. Based upon the subject to the foregoing, it is our opinion that: 1. The Borrower or its Subsidiaries are the respective holders of the licenses, permits, and authorizations issued by the FCC listed in Attachment A hereto (the "FCC Licenses"). The FCC Licenses are in full force and effect for the terms specified in Attachment A and, where applicable, timely renewal applications have been filed with the FCC with respect to such FCC Licenses. The FCC Licenses are not subject to any condition, restriction or limitation materially adverse to the Borrower or the Stations except for conditions, restrictions or limitations that appear on the faces of the FCC Licenses or that are set forth in the rules, regulations or policies of the FCC that are applicable generally to stations of the types, nature, classes, or locations of the Stations. 2. To the best of our knowledge, no judgment, decree, order or notice has been issued by the FCC which permits, or after notice or lapse of time or both, would permit, revocation, nonrenewal, or termination of any of the FCC Licenses prior to the respective expiration dates thereof, or which results or would result in any other material impairment of any rights thereunder. 3. Neither the execution and delivery by the Borrower of the Credit Agreement nor the fulfillment of or compliance with any of the provisions thereof will (a) result in a violation of the Communications Laws, or (b) require any authorization, consent, approval, exemption or other action by, or any notice or filing with, the FCC pursuant to the Communications Laws (other than routine filings after the date of this opinion with the FCC under Section 73.3613(b)(5) of the FCC's Rules and Regulations). 4. Other than as set forth in Attachment A and except as to any other matters relating to the television broadcast industry in general, to the best of our knowledge, no proceeding, claim, lawsuit, investigation or other action is (a) currently pending before the FCC or (b) threatened in writing and received by any Station operated by the Borrower or any Subsidiary and not currently before the FCC, which has a substantial likelihood of resulting in a Material Adverse Effect. This opinion is being furnished to you subject to the qualifications and limitations expressed herein, and has been prepared 103 solely for your information in connection with the transactions contemplated under the Credit Agreement. This opinion may not be quoted in whole or in part or otherwise referred to, or furnished to any governmental agency or other entity or person, without our written consent. It may not be used or replied upon by any other person or entity without our written consent, and may be relied upon by you only with respect to the specific matters which are the subject hereof. The opinions expressed herein are as of the date hereof, and we specifically disclaim any obligation to advise you of any changes in the matters addressed in the foregoing opinion occurring after such date. Very truly yours, WILEY, REIN & FIELDING 104 Schedule 2.01
NAME ADDRESS COMMITMENT ---- ------- ---------- Texas Commerce Bank National 2200 Ross Avenue $37,500,000 Association 3rd Floor Dallas, TX 75201 Attn: Kevin Kelty Bank of America NT & SA 555 South Flower Street $35,000,000 Los Angeles, CA 90071 Attn: Robert Lagace Bank of Tokyo-Mitsubishi, Ltd. 2001 Ross Avenue $35,000,000 Suite 3150 Dallas, TX 75201 Attn: Jeb Beckwith NationsBank 901 Main Street $35,000,000 Dallas, TX 75283 Attn: Todd Shipley Fleet Bank One Federal Street MS/OF/DO3D $24,375,000 Boston, MA 02110 Attn: Ms. Paula Lang Morgan Guaranty Trust Company 60 Wall Street $24,375,000 22nd Floor New York, NY 10260 Attn: Mr. Donald Patrick Societe Generale 2001 Ross Avenue $24,375,000 Suite 4800 Dallas, TX 75201 Attn: Chris Speltz The Fuji Bank, Limited One Houston Center $24,375,000 1221 McKinney Suite 4100 Houston, TX 77010 Attn: Phillip Lauinger Banque Nationale de Paris 717 North Harwood Street $12,500,000 Suite 2630 Dallas, TX 75201 Attn: Hank Setina
105
NAME ADDRESS COMMITMENT ---- ------- ---------- First National Bank of Boston 100 Federal Street $12,500,000 01-08-08 Boston, MA 02110 Attn: Ms. Kathryn Ticknor First Union Bank of North One First Union Center $12,500,000 Carolina Charlotte, NC 28288 Attn: Adrienne Musgnug Mellon Bank, N.A. One Mellon Bank Center $12,500,000 Pittsburgh, PA 15258 Attn: Lisa Pellow Mitsubishi Trust 520 Madison Avenue $12,500,000 New York, NY 10022 Attn: Ms. Pat Loret De Mola Suntrust Banks Inc. 200 South Orange Avenue $12,500,000 Tower 4 Orlando, FL 32801 Attn: Mr. Chris Aguilar The Sakura Bank, Limited, 3940 Interfirst Plaza $12,500,000 Houston Agency. 1100 Louisiana Houston, TX 77002 Attn: Terrance Martin The Sanwa Bank Limited, Dallas 4100W $12,500,000 Agency Texas Commerce Tower 2200 Ross Avenue Dallas, TX 75201 Attn: Rob Smith The Tokai Bank, Limited 55 East 52nd Street $12,500,000 12th Floor New York, NY 10055 Attn: Stuart Schulman The Toyo Trust & Banking Co. 666 Fifth Avenue $12,500,000 33rd Floor New York, NY 10103 Attn: Sharon Bonelli
106
NAME ADDRESS COMMITMENT ---- ------- ---------- Toronto-Dominion 909 Sonin, Suite 1700 $12,500,000 Houston, TX 77010 Attn: Ms. Kimberly Burlesca 425 Lexington Avenue $8,750,000 CIBC Inc. New York, NY 10017 Attn: Ms. Michelle Roller Credit Agricole 600 Travis Street $8,750,000 Suite 2340 Houston, TX 77002 Attn: Mr. Ken Coulter Credit Lyonnais New York 1301 Avenue of the Americas $8,750,000 Branch New York, NY 10019 Attn: Legal Dept. w/copy to: 2200 Ross Avenue Dallas, TX Attn: Samuel Hill Dai-Ichi Kangyo 1100 Louisiana $8,750,000 Suite 4940 Houston, TX 77002 Attn: Mr. Kelton Glasscock Hibernia National Bank 313 Carondelet Street $8,750,000 New Orleans, LA 70130 Attn: Troy Villafarra Industrial Bank of Japan 3 Allen Center $8,750,000 333 Clay Street Houston, TX 77002 Attn: Mr. David Fox, II Long-Term Credit Bank 2200 Ross Avenue $8,750,000 of Japan Suite 4700 West Dallas, TX 75201 Attn: Mr. Robert Nelson The Northern Trust Company 50 South LaSalle Street $8,750,000 Chicago, IL 60675 Attn: Martin Alston
107
NAME ADDRESS COMMITMENT ---- ------- ---------- Wachovia Bank of Georgia, N.A. 191 Peachtree Street, NE $8,750,000 Atlanta, GA 30303 Attn: Joel Wood Wells Fargo Bank (Texas), N.A. 1445 Ross Avenue $8,750,000 3rd Floor Dallas, TX 77202 Attn: Ken Taylor Westdeutsche Landesbank 1211 Avenue of the Americas $8,750,000 New York, NY 10036 Attn: Mr. Richard Newman Crestar Bank 919 East Main Street $6,250,000 HDQ 1022 Richmond, VA 23261-6665 Attn: Mr. Thomas Palmer First Hawaiian Bank 3333 Michelson Drive $6,250,000 Irvine, CA 92612 Attn: Mr. Don Young Michigan National 27777 Inkster Road $5,000,000 Bank Farmington Hills, MI 48333-9065 Attn: Ms. Stephanie Lubin The Yasuda Trust & Banking 725 South Figueroa Street $5,000,000 Co., Inc. Suite 3990 Los Angeles, CA 90017 U.S. Bank of Washington, N.A. 1420 Fifth Avenue, WWH276 $3,750,000 Seattle, WA 98101
108 Schedule 3.06 Litigation, Labor and Environmental Matters None. 109 Schedule 6.01 Liens The liens created in connection with the $6,400,000 City of Arlington Industrial Development Corporation Industrial Development Revenue Bonds (Dallas-Fort Worth Suburban Newspapers Inc. Project) Series 1985. 110 Schedule 6.05 Subordinated Debt Subordinated Debt shall mean any debt for borrowed money of the Borrower or its Subsidiaries expressly subordinate to the Indebtedness of the Borrower under the Credit Agreement which satisfies the following criteria or other criteria which may be acceptable to the Required Lenders: (i) such subordinated debt will not amortize or be subject to any scheduled prepayment, redemption or repurchase requirement (other than a repurchase requirement triggered by a change in control or similar event) until after the Maturity Date; (ii) the financial covenants taken as a whole under any such subordinated debt will not be more restrictive of the Borrower than those contained in this Credit Agreement; (iii) the terms of such subordinated debt will not permit payments to subordinated debt holders when an Event of Default has occurred and is continuing under this Credit Agreement; and (iv) the subordinated debt holders' rights will be subordinate to those of the Agents and the Lenders under the Credit Agreement in the event of bankruptcy and/or liquidation of the Borrower. EX-10.3(1) 4 MANAGEMENT SECURITY AGREEMENT 1 EXHIBIT 10.3(1) MANAGEMENT SECURITY PLAN OF A. H. BELO CORPORATION AND AFFILIATED COMPANIES AS RESTATED EFFECTIVE JANUARY 1, 1982 2 A. H. BELO TABLE OF CONTENTS
Article Subject Page ------- ------- ---- 1 Definitions 1 2 Eligibility and Membership 2 3 Retirement Benefit and Benefit Upon Separation from Service 2 4 Death Benefit 3 5 Beneficiary 6 6 Leave of Absence 6 7 Source of Benefits 6 8 Employer Obligation 7 9 Termination of Participation 7 10 Termination, Amendment, Modification, or Supplement of Plan 7 11 Other Benefits and Agreements 8 12 Restrictions on Alienation of Benefits 8 13 Administration of the Plan 8 14 Miscellaneous 10 15 Adoption of Plan by Subsidiary, Affiliated or Associated Companies 10 Plan Agreement I-1
3 MANAGEMENT SECURITY PLAN OF A.H. BELO CORPORATION AND AFFILIATED COMPANIES AS RESTATED EFFECTIVE JANUARY 1, 1982 PURPOSE WHEREAS, A. H. BELO CORPORATION (hereinafter, the "Company"), a Texas corporation, in order to provide retirement and death benefits at a reduced cost to a select group of management and highly compensated employees who contribute materially to the continued growth, development and future business success of the Company and certain of its affiliates, has heretofore adopted the Management Security Plan of A. H. Belo Corporation and Affiliated Companies (hereinafter the "Plan"), the Plan set forth herein; and WHEREAS, the following affiliate of the Company has heretofore adopted the Plan for the benefit of its eligible employees: Belo Broadcasting Corporation (hereinafter, "Broadcasting"); and WHEREAS, pursuant to Section 10.1 of the Plan, the Company, joined by Broadcasting, desires hereby to amend and restate the Plan in its entirety; NOW, THEREFORE, the Company, joined by Broadcasting, does hereby agree as follows: ARTICLE 1 DEFINITIONS For the purposes of the Plan, unless otherwise clearly apparent from the context, the following phrases or terms shall have the following respective meanings: 1.0 "Company" shall mean A. H. Belo Corporation, A Texas corporation, and its successor or successors. 1.1 "Beneficiary" shall mean the person or persons designated by a Participant to receive any benefits under this Plan upon the death of such Participant. In the absence of such designation, or in the event that a Beneficiary so designated dies prior to the receipt of all benefits to which he is entitled, then such death benefits (or the balance thereof) shall be paid to such Participant's estate. 1.2 "Committee" shall mean the Administrative Committee appointed to manage and administer the Plan in accordance with the provisions of Article 13 of the Plan. 1.3 "Employee" shall mean any person who is in the regular full-time employment of an Employer as determined by the personnel rules and -1- 4 practices of the Employer. The term does not include persons who are retained as consultants or other independent contractors. 1.4 "Employer" shall mean the Company, Broadcasting, and any other affiliate of the Company which shall duly adopt the Plan with the approval of the Company as provided in Article 15 hereof. Where the context dictates, the term "Employer," as used herein, refers to the particular Employer which has entered into a Plan Agreement with a specific Participant. 1.5 "Covered Salary" shall mean that portion of a Participant's includable base annual salary, excluding bonuses or other fringe benefits, if any, which the Participant chooses as a basis for computation of his retirement or death benefits pursuant to the terms and conditions of the Plan. 1.6 "Participant" shall mean an Employee who is selected and elects to participate in the Plan as provided in Article 2 hereof. 1.7 "Plan" shall mean the Management Security Plan of A. H. Belo Corporation and Affiliated Companies, which shall be evidenced by this instrument and by each Plan Agreement. 1.8 "Plan Agreement" shall mean the form of written agreement, attached hereto as Exhibit I, which is entered into by and between an Employer and a Participant. 1.9 "Early Retirement Date" shall mean, with respect to a Participant, the first day of the month following the later of (i) his sixty-second (62nd) birthday, or (ii) the date on which he shall have been employed by the Company or its affiliates for ten (10) or more years and, in addition, shall have reached or passed his fifty-fifth (55th) birthday. 1.10 "Retirement" and "Retire" shall mean, with respect to a Participant, severance from employment with the Employers on or after his Early Retirement Date. ARTICLE 2 ELIGIBILITY AND MEMBERSHIP 2.0 The Committee shall have the sole discretion to determine the Employees who are eligible to become Participants in accordance with the purposes of the Plan. 2.1 As a condition of participation, each Participant so selected shall complete, execute, and return to the Committee a Plan Agreement in the form attached hereto as Exhibit I and comply with such further conditions as may be established by and in the sole discretion of the Committee. ARTICLE 3 RETIREMENT BENEFIT AND BENEFIT UPON SEPARATION FROM SERVICE 3.0 If a Participant who has remained an Employee until age sixty-five (65) retires, and if the Plan and Plan Agreement have been kept in force, the Employer will pay, or cause to be paid, to such Participant the amount specified in the Plan Agreement as a monthly retirement benefit. Monthly -2- 5 retirement benefit payments shall commence on the first day of the month following such Retirement and continue for a total of one hundred twenty (120) months. 3.1 The Committee, in its sole discretion, may permit a Participant to receive an early retirement benefit commencing at any time after the Participant's Early Retirement Date, but before his attainment of age sixty-five (65). In such event, his monthly retirement benefit shall be determined by the Committee, but in no event shall it be more than the monthly amount of the retirement benefit set forth in the Plan Agreement nor less than such monthly amount multiplied by a fraction, the numerator of which is the number of whole years said Employee has been a Participant in the Plan and the denominator of which is the number of whole years between such Participant's age at entry into the Plan and his sixty-fifth (65th) birthday. The said reduced monthly amount payable for one hundred twenty (120) months shall be the only benefit to which such Participant shall be entitled. 3.2 If a Participant who has attained his Early Retirement Date shall die after Retirement but before the applicable retirement benefit is paid in full, the unpaid retirement benefit payments to which such Participant is entitled shall continue to be paid to such Participant's Beneficiary. Such payments shall be made in accordance with the payment schedule applicable to that Participant pursuant to Section 3.0 or 3.1 of the Plan. 3.3 A Participant may irrevocably elect to have any retirement benefit due him paid to his Beneficiary solely as a death benefit either in a lump sum or in specified installments. Such election to treat unpaid retirement benefits as a death benefit shall be set forth in the Plan Agreement by the Participant's completion of Section 2(c) thereof. 3.4 No Death Benefit described in Article 4 shall be paid to the Beneficiary of a Participant who dies after Retirement but before his retirement benefit is paid in full. 3.5 A Participant who ceases to be an Employee after his completion of ten (10) full years of participation in the Plan, but before his Early Retirement Date, shall receive a portion of his monthly retirement benefit upon the earlier of (i) his death or (ii) his attainment of age sixty-five (65). Said portion shall be the monthly amount of the retirement benefit set forth in his Plan Agreement multiplied by a fraction, the numerator of which is the number of whole years said Employee has been a Participant in the Plan and the denominator of which is the number of whole years between such Participant's age at entry into the Plan and his sixty-fifth (65th) birthday. The said reduced monthly amount payable for one hundred twenty (120) months shall be the only benefit to which such Participant shall be entitled. 3.6 If a Participant elects to continue employment beyond age 65, the Committee, and only the Committee, will specify the amount of his retirement benefit, which shall be evidenced by a new Plan Agreement to be executed by the Participant. ARTICLE 4 DEATH BENEFIT 4.0 If a Participant dies before Retirement and the Plan is in effect at the date of his death, his Employer will pay or cause to be paid a death benefit to such -3- 6 Participant's Beneficiary. The said death benefit shall be a monthly amount equal to (i) one hundred percent (100%) of the Participant's Covered Salary as set forth in his Plan Agreement for the twelve (12) month period beginning on the date of his death and (ii) fifty percent (50%) of said Covered Salary for the next one hundred and eight (108) months, or until the Participant would have attained age sixty-five (65), whichever is later. Such payments shall commence on the first day of the month following the date of such Participant's death. In the sole discretion of the Committee, the present value of the entire death benefit described in this Section 4.0 may be paid in a lump sum within a reasonable period (as determined by the Committee) after the Participant's death. 4.1 The obligation of an Employer to pay the death benefit described in Section 4.0 on behalf of a Participant shall exist only if: (a) at the time of his death, the Participant was an Employee, totally disabled, or on an authorized leave of absence; (b) the Participant had made all payments required by Sections 4.2 through 4.5, other than any amounts waived as a result of disability; (c) the Plan Agreement had been kept in force until the date of his death; and (d) his death was not a result of suicide occurring within two (2) years after the date of execution of his Plan Agreement. 4.2 Each Participant shall periodically pay to his Employer a portion of the cost of his death benefit protection. The amount and time of each such payment shall be stated in the Plan Agreement and shall be dependent upon the amount of the benefits therein specified, the Participant's age, and his annual salary. 4.3 The amount to be paid by a Participant may be increased by the Committee to reflect increases in the Participant's Covered Salary. 4.4 Any increases in the Participant's Covered Salary and additional amounts to be paid as a result thereof shall be evidenced by an amendment to his Plan Agreement. 4.5 The Participant's obligation to make the aforesaid payments shall: (a) be stated in his Plan Agreement; (b) commence on the date specified in the Plan Agreement; and (c) except as otherwise provided in Section 4.7 (c), 4.7 (d), and 4.7 (g), continue thereafter during the term of his participation until the earlier of (i) his death, (ii) his Retirement, (iii) his other termination of employment, or (iv) the date on which the Committee determines that such payments are no longer required. 4.6 A Participant may, with the consent of his Employer, increase or decrease the amount of the benefits initially selected by amending his Plan Agreement in accordance with rules from time to time adopted by the Committee. -4- 7 4.7 Payments by a Participant pursuant to Sections 4.2 through 4.5 and the Plan Agreement shall be made in the following manner and subject to the following terms and conditions: (a) The Participant shall, in the Plan Agreement, authorize his Employer to deduct and retain from his salary the amount of his monthly contribution. (b) The amounts retained by the Employer shall be and become the property of that Employer without obligation to use the same in any specific manner and with no right of the Participant to reimbursement at any time. (c) If the Participant is, prior to his Retirement, totally disabled for more than six (6) months, then, subject to the provisions of Section 4.7 (d) hereof, he shall not be required to make any payments as provided in Sections 4.2 through 4.5 of this Plan beginning with the seventh month following the date such total disability occurs and for as long as it continues. (d) An Employer shall waive payments by a totally disabled Participant, only if: (i) the Participant's disability is not caused by illegal or criminal acts or is not intentionally self-inflicted; (ii) the Participant is an Employee or on an authorized leave of absence at the time such total disability occurs; (iii) the Participant has made all payments required by the Plan and his Plan Agreement; and (iv) the Participant's Plan Agreement is in full force and effect at the time of such total disability. (e) If a Participant dies prior to Retirement while payments are being waived, the death benefit provided in Section 4.0 shall be paid on behalf of such Participant in accordance with the provisions of that Section. (f) If a Participant retires on or after his Early Retirement Date while payments are being waived, the retirement benefits provided in Section 3 shall be paid to such Participant in accordance with the provisions of that Section. (g) The determinations of total disability and recovery therefrom shall be made by the Committee, in its sole discretion, and any such determination shall be binding and conclusive on all interested parties. -5- 8 ARTICLE 5 BENEFICIARY 5.0 A Participant shall, on his Plan Agreement, designate one or more persons as his Beneficiary or Beneficiaries to receive any death benefits under the Plan. If more than one Beneficiary is named, the shares and preferences of each shall be indicated. 5.1 Unless a Participant has previously named an irrevocable Beneficiary, he shall have the right to change any prior Beneficiary designation by submitting to the Committee a Change of Beneficiary Form, a specimen of which is attached hereto as Exhibit II. 5.2 No change of Beneficiary shall be effective until acknowledged in writing by the Employer. 5.3 If an Employer has any doubt as to the proper Beneficiary to receive payments pursuant to this Plan, it shall have the right to withhold such payments until the matter is finally adjudicated. 5.4 Any payment made by an Employer in accordance with this Plan in good faith shall fully discharge the Employer from all further obligations with respect to such payment. ARTICLE 6 LEAVE OF ABSENCE 6.0 If a Participant is authorized by his Employer for any reason to take a leave of absence from employment, such Participant shall, except as provided in Article 4.7 hereof, be required to continue to make all monthly payments in order to maintain his Plan Agreement in force. 6.1 A Participant's failure to make such payments shall cause his Plan Agreement to terminate without the necessity of any notice from either party to the other. From and after such termination, neither party shall have any further obligation to the other party under the Plan or Plan Agreement. ARTICLE 7 SOURCE OF BENEFITS 7.0 Amounts payable to a Participant shall be paid exclusively from the general assets of the Employer. 7.1 No person entitled to any payment hereunder shall have any claim, right, security or other interest, implied or otherwise, in any asset of the Employer. 7.2 An Employer's liability for the payment of benefits hereunder shall be evidenced only by this Plan and each Plan Agreement entered into between the Employer and a Participant. 7.3 The Employer may, but shall not be obligated to, invest in any specific asset, trust, fund or insurance policy. -6- 9 7.4 The Employer shall require that a Participant satisfy evidence of good health when enrolling for any increment of his Covered Salary. The Participant agrees to cooperate by: (a) furnishing such information as the Employer may require, including but not limited to the physical examination reports of any previous employer; (b) taking such additional physical examinations as may be requested by the Employer, and; (c) doing any other act which may be requested by the Employer. 7.5 If a Participant does not cooperate in the completion of such requirements, the Employer shall have no further obligation to the Participant under the Plan, and such Participant's Plan Agreement shall terminate. 7.6 The Employer shall have no obligation of any nature whatsoever to a Participant under the Plan and Plan Agreement, except as otherwise provided in the Plan, if the Participant's death is determined to be from a bodily or mental cause or causes, the information about which was withheld, or knowingly concealed, or falsely provided by the Participant, when requested by the Employer to furnish evidence of good health upon the Participant's enrolling in the Plan for any increment of his Covered Salary. ARTICLE 8 EMPLOYER OBLIGATION Neither the Plan nor any Plan Agreement, either singly or collectively, obligate any Employer to continue the employment of a Participant or limits the right of an Employer at any time and for any reason to terminate a Participant's employment. Termination of a Participant's employment with an Employer for any reason, whether by action of the Employer or Participant, shall immediately terminate the Participant's participation in the Plan and Plan Agreement and all further obligations of either party to the other. In no event shall the Plan or a Plan Agreement, either singly or collectively, by their terms or implications, constitute an employment contract of any nature whatsoever between an Employer and a Participant. ARTICLE 9 TERMINATION OF PARTICIPATION A Participant may terminate participation in the Plan and Plan Agreement at his election by giving his Employer written notice of such termination within 30 days prior to the anniversary date of the date of execution of his Plan Agreement. ARTICLE 10 TERMINATION, AMENDMENT, MODIFICATION OR SUPPLEMENT OF PLAN 10.0 The Company reserves the right to terminate this Plan at any time. 10.1 The Company reserves the right to amend, modify or supplement this Plan, in whole or in part, at any time and from time to time. -7- 10 10.2 Each Employer reserves the right to terminate the Plan Agreement of any of its Employees. 10.3 No action to terminate, amend, modify or supplement the Plan or terminate any Plan Agreement shall be taken except upon written notice to each Participant to be affected thereby not less than 30 days prior to such action. 10.4 In the event that a Participant or his Beneficiary becomes entitled to any benefits described in Article 3 or 4 of this Plan, no action shall be taken to terminate the Plan or a Plan Agreement with respect to such person. 10.5 Upon the termination of this Plan or any Plan Agreement, respectively, by either an Employer or a Participant in accordance with any provisions for such termination, neither the Plan nor the Plan Agreement shall be of any further force and effect and no party shall have any further obligation under either this Plan or any Plan Agreement so terminated. ARTICLE 11 OTHER BENEFITS AND AGREEMENTS The benefits provided for a Participant and his Beneficiary under the Plan are in addition to any other benefits available to such Participant under any other plan or program for employees of the Company or any Employer, and the Plan shall supplement and shall not supersede, modify or amend any other plan or program except as may otherwise be expressly provided. Benefits under the Plan shall not be considered compensation for purposes of computing contributions or benefits under any plan maintained by the Company or any of its subsidiaries which is qualified under Section 401(a) and 501(a) of the Internal Revenue Code of 1954, as amended. ARTICLE 12 RESTRICTIONS ON ALIENATION OF BENEFITS No right or benefit under the Plan or a Plan Agreement shall be subject to anticipation, alienation, sale, assignment, pledge, encumbrance or charge, and any attempt to anticipate, alienate, sell, assign, pledge, encumber or charge the same shall be void. No right or benefit hereunder shall in any manner be liable for or subject to the debts, contracts, liabilities, or torts of the person entitled to such benefit. ARTICLE 13 ADMINISTRATION OF THE PLAN 13.0 The general administration of this Plan, as well as construction and interpretation thereof, shall be vested in the Committee, the number and members of which shall be designated and appointed from time to time by, and shall serve at the pleasure of, the Board of Directors of the Company. Any member of the Committee may resign by notice in writing filed with the Secretary of the Committee. Vacancies shall be filled promptly by the Board of Directors of the Company, but any vacancies remaining unfilled for ninety days may be filled by a majority vote of the remaining members of the Committee. Each person appointed a member of the Committee shall signify his acceptance by filing a written acceptance with the Secretary of the Committee. -8- 11 13.1 The Board of Directors of the Company shall designate one of the members of the Committee as Chairman and shall appoint a Secretary who need not be a member of the Committee. The Secretary shall keep minutes of the proceedings of the Committee and all data, records and documents relating to the administration of the Plan by the Committee. The Committee may appoint from its number such subcommittees with such powers as the Committee shall determine and may authorize one or more members of the Committee or any agent to execute or deliver any instrument or make any payment on behalf of the Committee. 13.2 All resolutions or other actions taken by the Committee shall be by the vote of a majority of those present at a meeting at which a majority of the members are present, or in writing by all the members at the time in office if they act without a meeting. 13.3 Subject to the Plan, the Committee shall from time to time establish rules, forms and procedures for the administration of the Plan. Except as herein otherwise expressly provided, the Committee shall have the exclusive right to interpret the Plan and to decide any and all matters arising thereunder or in connection with the administration of the Plan, and it shall endeavor to act, whether by general rules or by particular decisions, so as not to discriminate in favor of or against any person. The Committee shall have the exclusive right to determine (a) disability in respect to a Participant, and (b) the degree thereof, either or both determinations to be made on the basis of such medical and/or other evidence as the Committee, in it its sole judgment, may require. Such decisions, actions and records of the Committee shall be conclusive and binding upon the Employers and all persons having or claiming to have any right or interest in or under the Plan. 13.4 The members of the Committee and the officers and directors of the Employers shall be entitled to rely on all certificates and reports made by any duly appointed accountants and on all opinions given by any duly appointed legal counsel. Such legal counsel may be counsel for the Company. 13.5 No member of the Committee shall be liable for any act or omission of any other member of the Committee, nor for any act or omission on his own part, excepting only his own willful misconduct. The Company shall indemnify and save harmless each member of the Committee against any and all expenses and liabilities arising out of his membership on the Committee, excepting only expenses and liabilities arising out of his own willful misconduct. Expenses against which a member of the Committee shall be indemnified hereunder shall include, without limitation, the amount of any settlement or judgment, costs, counsel fees and related charges reasonably incurred in connection with a claim asserted or a proceeding brought or settlement thereof. The foregoing right of indemnification shall be in addition to any other rights to which any such member may be entitled as a matter of law or otherwise. 13.6 In addition to the powers hereinabove specified, the Committee shall have the power to compute and certify under the Plan the amount and kind of benefits from time to time payable to Participants and their Beneficiaries and to authorize all disbursements for such purposes. 13.7 To enable the Committee to perform its functions, the Company shall supply full and timely information to the Committee on all matters relating to the compensation of all Participants, their Retirement, death or other cause for -9- 12 termination of employment, and such other pertinent facts as the Committee may require. 13.8 The Committee shall also have the power, in its sole discretion, to change the manner and time of payments to be made to a Participant or his Beneficiary from that set forth in the Participant's Plan Agreement, if requested to do so by such Participant or Beneficiary. ARTICLE 14 MISCELLANEOUS 14.0 Any notice which shall be or may be given under the Plan or a Plan Agreement shall be in writing and shall be mailed by United States mail, postage prepaid. If notice is to be given to an Employer, such notice shall be addressed to: A. H. Belo Corporation P. O. Box 225237 Dallas, Texas 75265 marked for the attention of the Secretary, Administrative Committee, Management Security Plan; or, if notice to a Participant, addressed to the address shown on such Participant's Plan Agreement. 14.1 Any party may from time to time change the address to which notice shall be mailed by giving written notice of such new address. 14.2 The Plan shall be binding upon the Employers and their successors and assigns, and upon a Participant, his Beneficiary, assigns, heirs, executors and administrators. 14.3 The Plan and Plan Agreement shall be governed and construed under the laws of the State of Texas as in effect at the time of their adoption and execution, respectively. 14.4 Masculine pronouns wherever used shall include feminine pronouns and the singular shall include the plural where applicable. ARTICLE 15 ADOPTION OF PLAN BY SUBSIDIARY, AFFILIATED OR ASSOCIATED COMPANIES 15.0 Any corporation which is a subsidiary, affiliated or associated company of the Company may, with the approval of the Company, adopt this Plan and thereby come within the definition of the term "Employer" in Article 1 hereof. -10- 13 ANNEX I MANAGEMENT SECURITY PLAN AGREEMENT OF A. H. BELO AND AFFILIATED COMPANIES The undersigned employee ("Employee") acknowledges that, as an Employee of A. H. BELO CORPORATION ("Employer"), Employee has been offered an opportunity to participate in the Management Security Plan ("Plan") described in the attached document and subject to the terms and conditions stated therein, and that Employee has elected one of the two alternatives set forth below as indicated by the space checked: To participate in the Plan - ------------- Not to participate in the Plan - ------------- Employee's covered salary, benefits, contributions to the cost of death benefits under the Plan, and designated Beneficiary(ies) are agreed to be as follows: 1. EMPLOYEE'S COVERED SALARY: $_____________________ per month. This represents (the full amount) or _______% of base earnings eligible for coverage at the date of application for this coverage. 2. RETIREMENT BENEFIT at age 65: $_______________ total benefit. (a) Retirement Benefit to be paid at rate of $_________________ per month for 120 months. (b) Retirement before or after age 65: Amounts to be determined by the Committee. (c) I irrevocably elect to have my Retirement Benefit held and paid solely as a death benefit to my Beneficiary. Signature: ------------------------------------ If the above (2(c)) is signed, in general, the following will result: 1. Retirement Benefits ($_____________________ per month for 120 months) will not be paid to Participant but will be paid to Participant's Beneficiary as a Death Benefit. 2. In such event and assuming the Participant's Beneficiary is his or her surviving spouse (or certain types of trusts for the benefit of his or her surviving spouse), the Benefits should qualify for the Federal Estate Tax marital deduction, and thus, no Federal Estate Taxes will be payable. If the above (2(c)) is not signed, in general, the following will result: 1. Retirement Benefits ($_____________________ per month for 120 months) will be paid to Participant. If Participant dies before receiving 120 payments, installments will be continued to Participant's Beneficiary until a total, including installments paid to Participant, of 120 payments have been made. 14 2. In such event and assuming the Participant's Beneficiary is his or her surviving spouse (or certain types of trusts for the benefit of his or her surviving spouse), the benefits after the Retired Participant dies should qualify for the Federal Estate Tax marital deduction and, thus, no Federal Estate Taxes would be payable. If the Participant has not named as a Beneficiary his or her surviving spouse (or certain types of trusts for the benefit of his or her surviving spouse), the unpaid Retirement Benefits at the time of the Retired Participant's death will be included in his or her estate for Federal Estate Tax purposes. 3. DISABILITY BENEFIT: (total disability before age 65); limited to a waiver of Employee's contribution listed in number 5(a) below. 4. DEATH BENEFIT: (a) One hundred percent (100%) of Covered Salary ($_________________) per month for the first 12 months. (b) Fifty percent (50%) of Covered Salary ($____________________) for next 108 months or until Employee would have attained age 65, whichever is later. 5. EMPLOYEE'S CONTRIBUTION to cost of Plan: $_______________________ per month. (a) EMPLOYEE'S AUTHORIZATION to deduct payments: (b) Employee hereby authorizes the Employer to deduct said monthly amount(s) from Employee's salary commencing with salary carried during the month of _______________________________, 19_____ and continuing for each month thereafter until no longer required by the terms of the Plan or by the Committee. 6. Employee hereby designates as Primary Beneficiary under this Plan and Plan Agreement: ----------------------------------------------------------------------- ----------------------------------------------------------------------- and Employee hereby designates as Secondary Beneficiary under this Plan and Plan Agreement: ----------------------------------------------------------------------- ----------------------------------------------------------------------- The term Beneficiary, as used herein, shall mean the Primary Beneficiary, if such Primary Beneficiary survives Employee by at least 30 days, and shall mean the estate of Employee, if neither Primary Beneficiary nor Secondary Beneficiary survives Employee by at least 30 days. Employee shall have the right to change Employee's designation of Primary Beneficiary and/or Secondary Beneficiary from time to time in such manner as shall be required by the Committee, it being agreed that no change in Beneficiary shall be effective until acknowledged in writing by the Employer. (If Beneficiary is to be irrevocable, strike and initial the previous sentence.) I-2 15 Employee further acknowledges that neither the Employer nor any of its subsidiaries, affiliated companies, officers, employees, or agents has any responsibility whatsoever for any changes made by Employee in other personal plans or programs as a result of employee's decision to participate or not to participate in the Plan, and they are fully released to such extent; and Employee further understands that the Plan may be terminated at any time, in the sole discretion of A. H. Belo Corporation, without any obligation of any nature whatsoever to the Employer, except that a Participant or Beneficiary of a Participant shall have those rights provided for in Articles 3, 4, and 10 of said Plan, to the extent that such may be applicable at the time of such termination. IN WITNESS WHEREOF, and Employee have ---------------------------------- executed this Plan Agreement as of 19 . ------------------------ ---- A. H. BELO CORPORATION By ---------------------------- Title ---------------------------- EMPLOYEE ------------------------------------ (Signature) ------------------------------------ (Type or print name under signature) ------------------------------------ ------------------------------------ (Address of Employee) I-3 EX-10.3(2) 5 1986 LONG TERM INCENTIVE 1 EXHIBIT 10.3(2) THE A. H. BELO CORPORATION 1986 LONG TERM INCENTIVE PLAN (Effective May 3, 1989, as amended by Amendments 1, 2, 3, 4, and 5) 1. Purpose The A. H. Belo Corporation (the "Corporation") desires to attract and retain the best available talent and encourage the highest level of performance by directors and employees in order to serve the best interests of the Corporation and its shareholders. By affording directors and eligible employees the opportunity to acquire proprietary interests in the Corporation and by providing them incentives to put forth maximum efforts for the success of the Corporation's business, the A. H. Belo Corporation 1986 Long Term Incentive Plan (the "1986 Plan") is expected to contribute to the attainment of those objectives. 2. Scope and Duration Awards under the 1986 Plan may be granted in the form of incentive stock options ("incentive stock options") as provided in Section 422A of the Internal Revenue Code of 1954, as amended (the "Code"), in the form of non-qualified stock options ("non-qualified options") (unless otherwise indicated references in the 1986 Plan to "options" include incentive stock options and non-qualified options), in the form of shares of the Common Stock of the Corporation (the "Common Stock") which are restricted as provided in paragraph 12 ("restricted shares") or in the form of units valued based upon the long-term performance of the Corporation as determined pursuant to paragraph 13 ("performance units"). Options may be accompanied by stock appreciation rights ("rights") and limited stock appreciation rights ("limited rights"). Rights and limited rights may also be granted without accompanying options. The maximum aggregate number of shares of Common Stock with respect to which options and restricted shares, and rights and limited rights granted without accompanying options, may be granted from time to time under the 1986 Plan shall be 2,400,000 shares (subject to adjustment as described in paragraph 16) less the number of performance units granted pursuant to the 1986 Plan. The maximum number of performance units which may be granted pursuant to the 1986 Plan shall be 2,400,000 less the number of shares of Common Stock with respect to which options and restricted shares, and rights and limited rights issued without accompanying options, are granted pursuant to the 1986 Plan. 2 Shares of Common Stock with respect to which awards are granted may be, in whole or in part, authorized but unissued shares or issued shares reacquired by the Corporation, as the Board of Directors of the Corporation (the "Board of Directors") shall from time to time determine. If for any reason (other than surrender of options upon exercise of rights as provided in paragraph 8 or limited rights as provided in paragraph 9 or payments in settlement of performance units as provided in paragraph 13) any shares as to which an option has been granted cease to be subject to purchase thereunder, or any restricted shares or performance units are forfeited to the Corporation, or any right or limited right issued without accompanying options terminates or expires without being exercised, then (unless the 1986 Plan shall have been terminated) the shares in respect of which such option, right or limited right was granted, or such restricted shares or performance units, shall become available for subsequent awards under the 1986 Plan (to the same employee who received the original award or to a different employee or employees). As provided in paragraph 17, the 1986 Plan shall become effective on May 8, 1986, subject to approval by shareholders of the Corporation. No incentive stock option shall be granted hereunder more than 10 years after the date that the 1986 Plan is adopted. Provided that shares of Series B Common Stock are issued and outstanding, (i) each option to purchase shares of Common Stock granted after May 13, 1988 shall be an option to purchase shares of Series B Common Stock and (ii) each award of restricted shares after May 13, 1988 shall be an award of restricted shares of Series B Common Stock (each event in clauses (i) and (ii) subject to adjustment as described in paragraph 16). Notwithstanding the foregoing, in the event such a grant or award with respect to Series B Common Stock would cause the Series A Common Stock to be excluded from trading on the New York Stock Exchange, the American Stock Exchange, or other national securities exchanges, or to be excluded from quotation on the National Association of Securities Dealers Automated Quotation Systems ("NASDAQ") or any other national quotation system then in use, in the discretion of the Committee such grants of options to purchase shares and awards of restricted shares after May 13, 1988 shall be with respect to Series A Common Stock. In the event that all issued and outstanding shares of Series B Common Stock are converted into shares of Series A Common Stock, (i) each option to purchase shares of Series B Common Stock will automatically convert into an option to purchase a like amount of shares of Series A Common Stock or Common Stock, as the case may be, and (ii) each restricted share of Series B Common Stock will automatically convert into a restricted share of Series A Common Stock or Common Stock, as the case may be. -2- 3 So long as the Common Stock of the Company shall be issued in series, for purposes of this 1986 Plan the term "Common Stock" shall mean (a) in the case of shares of Common Stock issued prior. to the effective date of Amendment No. 4 to the 1986 Plan (or after the conversion of all issued and outstanding shares of Series B Common Stock into shares of Series A Common Stock) Series A Common Stock or Common Stock, as the case may be, and (b) in the case of shares of Common Stock issued after the effective date of Amendment No. 4 to the 1986 Plan (provided shares of Series B Common Stock remain outstanding) Series B Common Stock. 3. Administration The Compensation Committee or any successor thereto (the "Committee") of the Board of Directors of the Corporation shall administer, construe and interpret the 1986 Plan. The Committee shall consist of either (a) not less than three members of the Board of Directors, none of whom is an employee of the Corporation who is, or who shall have been for at least one year prior to being appointed to the Committee, eligible to participate in the 1986 Plan, or any other plan of the Corporation or any of its affiliates (as defined in paragraph 4) entitling participants to acquire stock, stock options, rights or limited rights of the Corporation or its affiliates or (b) all the members of the Board of Directors. The Committee shall have plenary authority in its sole discretion, subject to and not inconsistent with the express provisions of the 1986 Plan, to grant options, to determine the purchase price of the Common Stock covered by each option (the "exercise price"), the term of each option, the employees to whom, and the time or times at which, options shall be granted and the number of shares to be covered by each option; to designate options as incentive stock options or non-qualified options and to determine which options shall be accompanied by rights and limited rights; to grant rights and limited rights without accompanying options to determine the employees to whom, and the time or times at which, such rights and limited rights shall be granted, and the exercise price of, the term of and the number of shares of Common Stock covered by the Deemed Option (as defined in paragraph 8) corresponding thereto; to grant restricted shares and performance units and to determine the term of the restricted period and appropriate long-term earnings objectives and other conditions applicable to such restricted shares or performance units, the employees to whom, and the time or times at which, restricted shares or performance units shall be granted and the number of restricted shares or performance units to be covered by each grant; to interpret the 1986 Plan; -3- 4 to prescribe, amend and rescind rules and regulations relating to the 1986 Plan; to determine the terms and provisions of the option agreements, right or limited right agreements, and the restricted share and performance unit agreements (which need not be identical) entered into in connection with awards under the 1986 Plan; to prepare and distribute, in such manner as the Committee determines to be appropriate, information about the 1986 Plan, and to make all other determinations deemed necessary or advisable for the administration of the 1986 Plan. The Committee may delegate to one or more of its members or to one or more agents such administrative duties as it may deem advisable, and the Committee or any person to whom it has delegated duties as aforesaid may employ one or more persons to render advice with respect to any responsibility the Committee or such person may have under the 1986 Plan; provided, however, that the Committee shall not delegate its authority to construe and interpret the 1986 Plan, to determine which employees may participate in the 1986 Plan, or its authority to make grants of options, restricted shares, performance units, rights and limited rights. The Committee may adopt such rules as it deems necessary, desirable or appropriate. The Committee may act at a meeting or in writing without a meeting. The Committee shall elect one of its members as chairman, appoint a secretary (who may or may not be a Committee member, as the case may be) and advise the Board of Directors of such actions. The secretary shall keep a record of all minutes and forward all necessary communications to the Corporation. The Committee may adopt such bylaws which it deems desirable for the conduct of its affairs. All decisions of the Committee, including actions in writing taken without a meeting, shall be made by a vote of the majority. A dissenting Committee member who, within a reasonable time after he has knowledge of any action or failure to act by the majority, registers his dissent in writing delivered to the other Committee members and to the Board of Directors, shall not be responsible for any such action or failure to act. All usual and reasonable expenses of the Committee shall be paid by the Corporation, and no member shall receive compensation with respect to his services for the Committee except as may be authorized by the Board of Directors. The Committee may employ attorneys, consultants, accountants or other persons and the Committee, the Corporation and its officers and directors shall be entitled to rely upon the advice, opinions or valuations of any such persons. All actions taken and all interpretations and determinations made by the Committee in good faith shall be final and binding upon all -4- 5 employees who have received awards, the Corporation and all other interested persons. No member of the Committee shall be personally liable for any action, determination, or interpretation taken or made in good faith with respect to the 1986 Plan or awards made thereunder, and the Corporation shall indemnify and hold harmless each member of the Committee against all loss, cost, expenses or damages, occasioned by any act or omission to act in connection with any such action, determination or interpretation under or of the 1986 Plan, consistent with the Corporation's bylaws. 4. Eligibility; Factors To Be Considered in Granting Awards Except for options awarded to nonemployee directors pursuant to the terms of this paragraph 4, awards shall be granted only to persons who are regular full-time employees of the Corporation or one or more of its present or future subsidiaries (as defined below) and either are officers of, or in the opinion of the Committee hold key positions in or for, the Corporation or one or more of its subsidiaries. In determining the employees to whom awards shall be granted, the number of shares of Common Stock with respect to which each award shall be granted, the number of performance units granted by each award, and the terms and conditions of each award, the Committee shall take into account the nature of employees' duties, their present and potential contributions to the growth and success of the Corporation and such other factors as the Committee shall deem relevant in connection with accomplishing the purposes of the 1986 Plan. The Chief Executive Officer of the Corporation shall assist the Committee in this determination by making recommendations. An employee who has been granted an award or awards under the 1986 Plan may be granted an additional award or awards, subject to such limitations as may be imposed by the Code on the grant of incentive stock options. The Committee, with the consent of the employee, may grant to an employee who has been granted an option under the 1986 Plan or any other option plan maintained by the Corporation, any of its subsidiaries or a parent, or any predecessors or successors thereto, in exchange for the surrender and cancellation of such option, a new option having an exercise price lower or higher than the exercise price provided in the option so surrendered and cancelled and containing such other terms as the Committee may deem appropriate, subject to such limitations or restrictions as may be imposed by the Code on an incentive stock option. For purposes of this 1986 Plan, the term subsidiary means any corporation (other than the Corporation) in an -5- 6 unbroken chain of corporations beginning with the Corporation if, at the time of granting of an option, right, limited right, restricted share or performance unit, each of the corporations in the chain, other than the last corporation, owns stock possessing 50 percent or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. For purposes of this 1986 Plan, the term "parent" means any corporation (other than the Corporation) in an unbroken chain of corporations ending with the Corporation if, at the time (of the granting of an option, right, limited right, restricted share or performance unit, each of the corporations other than the Corporation owns stock possessing 50 percent or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. For purposes of this 1986 Plan, the term "affiliate" shall have the same meaning as in Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Each director of the Corporation who is not also a regular full-time employee ("nonemployee director") on the date Amendment No. 3 to the 1986 Plan is approved by the Board of Directors (the "effective date") shall be granted an option to purchase 10,000 shares of Common Stock on the effective date. Each individual who first becomes a nonemployee director after the effective date shall be granted an option to purchase 10,000 shares of Common Stock on the date such individual becomes a nonemployee director. Options granted to nonemployee directors shall not be accompanied by rights or limited rights. A nonemployee director who has been granted an option to purchase Common Stock pursuant to this paragraph shall not be eligible to receive another option upon re-election to the Board of Directors. The exercise price per share of Common Stock of each option granted to at nonemployee director shall be the Fair Market Value per Share of Common Stock (as such term is defined in paragraph 5) on the date the option is granted, and the other terms and conditions of each such option shall be determined under paragraphs 6 and 7. Unless a different meaning is indicated or required by the context, the term "regular full-time employee" or "employee" as used in the Plan shall include a nonemployee director of the Corporation, and the term "employed" or "employment" shall include service by a nonemployee director. 5. Option Price; Fair Market value The exercise price of each option per share of Common Stock shall be determined by the Committee, but in no event shall be less than 100% of the Fair Market Value per Share of -6- 7 Common Stock on the date the option is granted. For purposes of this 1986 Plan, "Fair Market Value per Share of Common Stock" as of any date shall mean, except as provided in Section 8(c) hereof, (a) in the case of shares of Common Stock with respect to which restricted shares, options, rights and limited rights (other than incentive stock options and rights and limited rights relating to incentive stock options) shall be granted, the closing price of the Common Stock on such date (or if there are no sales on such date, on the next preceding date on which there were sales), as reported on the New York Stock Exchange Composite Tape, or if the Common Stock is not listed or admitted to trading on the New York Stock Exchange, as reported on the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Common Stock is listed or admitted to trading, or if the Common Stock is not listed or admitted to trading on any national securities exchange, the last quoted sales price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers Inc. Automated Quotation System or such other system as may then be in use, of if the Common Stock is not reported on any such system and is not listed or admitted to trading on any national securities exchange, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Common Stock selected by the Board of Directors, or if, in addition, no such market maker is making a market in the Common Stock, the fair value of the Common Stock as determined in good faith by the Board of Directors, and (b) in the case of shares of Common Stock with respect to which incentive stock options (and rights and limited rights relating to incentive stock options) shall be granted, the mean between the highest and lowest sales prices of the Common Stock on such date (or if there are no sales on such date, on the next preceding date on which there were sales), as reported on the New York Stock Exchange Composite Tape, or if the Common Stock is not listed or admitted to trading on the New York Stock Exchange, as reported on the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Common Stock is listed or admitted to trading, or if the Common Stock is not listed or admitted to trading on any national securities exchange, the last quoted sales price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotation System or such other system as may then be in use, or if the Common Stock is not reported on any such system and is not listed or admitted to trading on any national securities exchange, the average of the closing bid and asked -7- 8 prices as furnished by a professional market maker making a market in the Common Stock selected by the Board of Directors, and if, in addition, no such market maker is making a market in the Common Stock, the fair value of the Common Stock as determined in good faith by the Board of Directors; provided, however, that the Fair Market Value per Share of Common Stock shall be appropriately adjusted to reflect events described in paragraph 16. The Committee shall determine the date on which an option is granted, provided that such date is consistent with the Code and any applicable rules or regulations thereunder; in the absence of such determination, the date on which the Committee adopts a resolution granting an option shall be considered the date on which such option is granted, provided the employee to whom the option is granted is promptly notified of the grant and a written option agreement is duly executed as of the date of the resolution. The exercise price so determined shall also be applicable in connection with the exercise of any related right or limited right. 6. Term of Options The term of each incentive stock option granted under the 1986 Plan shall be as the Committee shall determine, but in no event shall any incentive stock option have a term of more than 10 years from the date of grant, subject to earlier termination as provided in paragraphs 14 and 15. The term of each non-qualified option granted under the 1986 Plan shall be 10 years and one day after the date of grant, subject to earlier termination as provided in paragraphs 14 and 15. 7. Exercise of Options (a) Subject to the provisions of the 1986 Plan and unless otherwise provided in the option agreement, an option granted under the 1986 Plan shall become 100% vested at the earliest of the employee's retirement from active employment at or after Early Retirement Age (as defined in paragraph 14), the employee's death or the employee's total and permanent disability (as defined in paragraph 15) or three years from the date of grant. Prior to becoming 100% vested, each option shall become exercisable in cumulative installments as follows: after the commencement of the second year of the term of the option, to the extent of 40% of the number of shares of Common Stock originally covered thereby; and after the commencement of the third year of the term of the option, to the extent of an additional 30%. In its sole discretion, the Committee may, in any case or cases, prescribe different installments. The Committee may also, in its sole discretion, accelerate the exercisability of any option At any time. Notwithstanding the -8- 9 installments set forth above, provided the Board has not adopted a resolution prior to any event specified in clauses (i) - (iv) below stipulating that the following provision shall be inoperative, an option shall become immediately exercisable with respect to all shares of Common Stock remaining subject to the option on or following either (i) the commencement of, or first public announcement of the intention of any person or group to commence, a tender offer or exchange offer (other than an offer by the Corporation or any of its subsidiaries) for all, or any part of, the Common Stock (an "Offer"), (ii) a "Change in Control" of the Corporation (as defined in this paragraph), (iii) approval by the Corporation's shareholders (or, if such approval is not required, consummation) of a merger in which the Corporation does not survive as an independent, publicly owned corporation, a consolidation, or a sale, exchange, or other disposition of all or substantially all the Corporation's assets, or (iv) a change in the composition of the Board of Directors during any period of two consecutive years such that individuals who at the beginning of such period were members of the Board of Directors cease for any reason to constitute at least a majority thereof, unless the election, or the nomination for election by the Corporation'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 (the date upon which an event described in clause (i), (ii), (iii), or (iv) of this paragraph 7(a) occurs shall be referred to herein as an "Acceleration Date"). A "Change in Control" is deemed to occur at the time when any group (within the meaning of Rule 12b-2 promulgated under the Exchange Act), entity or person (other than the Corporation, any subsidiary, or any savings, pension or other benefit plan for the benefit of employees of the Corporation or its subsidiaries) that theretofore beneficially owned (within the meaning of Rule 13d-3 promulgated under the Exchange Act) less than 30% of the total number of outstanding shares of common stock (including common stock and, if issued and outstanding, Series A Common Stock and Series B Common Stock, hereafter for purposes of this Paragraph 7(a), "Common Stock"), acquires shares of Common Stock in a transaction or series of transactions that results in such group, entity or person directly or indirectly owning beneficially more than 30% of the total number of outstanding shares of Common Stock. (b) An option may be exercised at any time or from time to time (subject, in the case of an incentive stock option, to such restrictions as may be imposed by the Code), as to any or all full shares of Common Stock as to which the option has become exercisable; provided, however, that an option shall not be exercised at any one time as to less than 100 shares (or less -9- 10 than the number of shares of Common Stock as to which the option is then exercisable, if that number is less than 100 shares). (c) At the time of exercise of any option, the exercise price of such option per share of Common Stock shall be paid in full for each share of Common Stock with respect to which such option is exercised. Payment may be made in cash, which may be paid by check or other instrument acceptable to the Corporation, or, with the approval of the Committee, in shares of the Common Stock, valued at the Fair Market Value per Share of Common Stock on the date of exercise. An option holder may also make payment at the time of exercise of an option by delivering to the Corporation a properly executed exercise notice together with irrevocable instructions to a broker approved by the Corporation that upon such broker's sale of shares with respect to which such option is exercised, it is to deliver promptly to the Corporation the amount of sale proceeds necessary to satisfy the option exercise price and any required withholding taxes. (d) Except as provided in paragraphs 14 and 15, no option shall be exercised at any time unless the holder thereof is then a regular full-time employee of the Corporation, one of its subsidiaries or a parent. For this purpose, "parent" or "subsidiary" shall include, as under Treasury Regulations Section 1.421-7(h)(3) and (4), Example (3), any corporation which is a parent or subsidiary of the Corporation during the entire portion of the requisite period of employment during which it is the employer of the holder. (e) If the Fair Market Value per Share of Common Stock with respect to any option exceeds the exercise price of such option per share of Common Stock, the Committee, in its sole discretion, may elect in lieu of delivering all or a portion of the shares of Common Stock as to which an option has been exercised, to reimburse the employee the exercise price tendered and to pay the employee in cash or in shares of Common Stock, or a combination of cash and Common Stock, an amount having an aggregate value equal to the product of (x) the excess of (A) the Fair Market Value per Share of Common Stock over (B) the exercise price of the option per share of Common Stock and (y) the number of shares of Common Stock as to which an option has been exercised. The Committee's election pursuant to this paragraph 7(e) shall be made by giving written notice to the employee (or other person exercising the option). No such election shall be made after the occurrence of an Acceleration Date. Shares of Common Stock paid pursuant to this subparagraph will be valued at the Fair Market Value -10- 11 per Share of Common Stock on the exercise date with cash paid in lieu of issuance of any fractional share of Common Stock. (f) Upon the exercise of an option or portion thereof in accordance with the 1986 Plan, the option agreement and such rules and regulations as may be established by the Committee, the holder thereof shall have the rights of a shareholder with respect to the Common Stock issued as a result of such exercise. 8. Award and Exercise of Rights (a) A right may be awarded by the Committee either alone or in connection with any option granted under the 1986 Plan. Each right and limited right granted without a corresponding option shall nevertheless be deemed for certain purposes described in this paragraph 8 and in paragraph 9 to have been accompanied by any option (a "Deemed Option"). A Deemed Option shall have no value, and no shares of Common Stock (and no other consideration) shall be delivered upon exercise thereof, but such Deemed Option shall serve solely to establish the terms and conditions of the corresponding right or limited right. At the time of grant of a right or limited right not granted in connection with an option, the Committee shall set forth the terms and conditions of a corresponding Deemed Option. The terms and conditions of such Deemed Option shall include all terms and conditions which at the time of grant are required, and, in the discretion of the Committee, may include any additional terms and conditions which at such time are permitted, to be included in options granted under this 1986 Plan. A right granted in connection with an option may be granted either at the time the option is granted or, in the case of an option which is not an incentive stock option, thereafter at any time prior to the exercise, termination or expiration of such option. Each right shall be subject to the same terms and conditions as the related option or Deemed Option and shall be exercisable only to the extent the option or Deemed Option is exercisable. No right, with or without an underlying option, shall be exercisable for cash by an employee who is subject to the provisions of Section 16(b) of the Exchange Act (an "Insider") prior to the expiration of six months from the date the right is awarded; provided, however, that this limitation shall not apply in the event the death or total and permanent disability (as defined in paragraph 15) of such employee occurs prior to the expiration of the six-month period. Subject to the foregoing, and provided that the Board has not adopted a resolution prior to an Acceleration Date stipulating that rights shall not be so exercisable, a right shall be exercisable on or after an Acceleration Date. -11- 12 (b) A right shall entitle the employee to surrender unexercised the related option or Deemed Option (or any portion or portions thereof which the employee from time to time determines to surrender for this purpose) and to receive in exchange, subject to the provisions of the 1986 Plan and such rules and regulations as from time to time may be established by the Committee, a payment having an aggregate value equal to (A) the excess of (i) the Fair Market Value per Share of Common Stock on the exercise date over (ii) the exercise price of the option or Deemed Option per Share of Common Stock, times (B) the number of shares of Common Stock subject to the option, Deemed Option or portion thereof which is surrendered. Surrender of an option or Deemed Option or portion thereof in exchange for a payment as described in this paragraph is referred to as the "exercise of a right." The payment shall be made in the form of cash shares of Common Stock, or a combination thereof, as elected by the employee, provided that the Committee shall have sole discretion to consent to or disapprove the election of an Insider to receive all or part of a payment in cash (which consent or disapproval may be given at any time after the election to which it relates). Shares of Common Stock paid upon exercise of a right will be valued at the Fair Market Value per Share of Common Stock on the exercise date. Cash will be paid in lieu of any fractional share based upon the Fair Market Value per Share of Common Stock on the exercise date. Subject to Section 19 hereof, no payment will be required from the employee upon exercise of a right. (c) Solely for purposes of paragraph 8(b), with respect to exercises of rights (other than rights which relate to an incentive stock option) by an Insider, during any period commencing on the third business day following the date of release for publication of any annual or quarterly summary statements of the Corporation's sales and earnings and ending on the twelfth business day following such date (a "window period"), the Committee may prescribe, by rule of general application, such other measure of Fair Market Value per Share of Common Stock as the Committee may, in its sole discretion, determine, but not in excess of the highest sale price of the Common Stock during such window period as reported on the New York Stock Exchange Composite Tape, or if the Common Stock is not listed or admitted to trading on the New York Stock Exchange, as reported on the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Common Stock is listed or admitted to trading, or if the Common Stock is not -12- 13 listed or admitted to trading on any national securities exchange, the last quoted sales price in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotation System or such other system as may then be in use, or if the Common Stock is not reported on any such system and is not listed or admitted to trading on any national securities exchange, the fair value of the Common Stock as determined in good faith by the Board of Directors; provided, however, that Fair Market Value per Share of Common Stock shall be appropriately adjusted to reflect events described in paragraph 16. In the case of rights that relate to an incentive stock option, the Committee may prescribe a similar measure of Fair Market Value per Share of Common Stock; provided, however that such measure shall not exceed the maximum amount that would be permissible under Section 422A of the Code without disqualifying such option as an incentive stock option under Section 422A or causing such option not to be considered fully exercised within the meaning of Section 422A. (d) Upon exercise of a right, the number of shares of Common Stock subject to exercise under the related option or Deemed Option shall automatically be reduced by the number of shares of Common Stock represented by the option, Deemed Option or portion thereof surrendered. Shares of Common Stock subject to options, Deemed Options or portions thereof surrendered upon the exercise of rights shall not be available for subsequent awards under the 1986 Plan. (e) A right related to an incentive stock option may only be exercised if the Fair Market Value per Share of Common Stock on the exercise date (as determined pursuant to paragraph 5 and without regard to paragraph 8(c)) exceeds the exercise price of the option per share of Common Stock. (f) If neither the right nor, in the case of a right with a related option, the related option, is exercised before the end of the day on which the right ceases to be exercisable, such right shall be deemed exercised as of such date and, subject to paragraph 19, a payment in the amount prescribed by paragraph 8(b) shall be paid to the employee in cash. 9. Award and Exercise of Limited Rights (a) A limited right may be granted by the Committee either alone or in connection with any option granted under the 1986 Plan. If granted in connection with an option, a limited right may be granted with respect to all or some of the shares of Common Stock covered by such option, and may be granted either at the time such option is granted or, if such option is -13- 14 not an incentive stock option, at any time thereafter prior to the exercise, termination or expiration of such option. If not granted in connection with an option, a limited right shall be granted in connection with a Deemed Option, as described in paragraph 8(a). A limited right may be granted to an employee irrespective of whether such employee is being granted or has been granted a right under paragraph 8. Provided that the Board has not adopted a resolution prior to an Acceleration Date stipulating that limited rights shall not be so exercisable, a limited right shall be exercisable during the 90-day period beginning on an Acceleration Date (as defined in paragraph 7(a)). In addition, each limited right shall be exercisable only if, and to the extent that, the related option or Deemed option is exercisable and, in the case of a limited right granted in respect of an incentive stock option, only when the Fair Market Value per Share of Common Stock exceeds the exercise price of the option per share of Common Stock. Notwithstanding the provisions of the two immediately preceding sentences, no limited right shall be exercisable by an Insider until the expiration of six months from the date of grant of the limited right; provided, however, that this limitation shall not apply in the event the death or total and permanent disability (as defined in paragraph 15) of such employee occurs prior to the expiration of the six-month period. Upon exercise of a limited right, in whole or in part, the related option or Deemed Option shall cease to be exercisable to the extent of the shares of Common Stock with respect to which such limited right is exercised, and shall be considered to have been exercised to that extent for purposes of determining the number of shares of Common Stock available for further grants pursuant to the 1986 Plan. Upon the exercise or termination of an option or Deemed Option, the related limited right shall terminate to the extent of the shares of Common Stock with respect to which such option or Deemed Option was exercised or terminated. (b) Upon the exercise of limited rights, the holder thereof shall receive in cash whichever of the following amounts is applicable: (i) in the case of an exercise of limited rights by reason of the commencement or announcement of an Offer described irk paragraph (a)(i), an amount equal to the Offer Spread (as defined in paragraph 9(d)); (ii) in the case of an exercise of limited rights by reason of an acquisition of Common Stock described in paragraph 7(a)(ii), an amount equal to the Acquisition Spread (as defined in paragraph 9(h) hereof); -14- 15 (iii) in the case Of an exercise of limited rights by reason of an event described in paragraph 7(a)(iii), an amount equal to the Merger Spread (as defined in paragraph 9(f) hereof); or (iv) in the case of an exercise of limited rights by reason of a change in the composition of the Board of Directors as described in paragraph 7(a)(iv), an amount equal to the Spread (as defined in paragraph 9(i) hereof). Notwithstanding the foregoing, in the case of a limited right granted in respect of an incentive stock option, the holder shall not receive an amount in excess of such amount as will enable such option to qualify as an incentive stock option under Section 422A of the Code. (c) The term "Offer Price per Share" as used in this paragraph 9 shall mean, with respect to the exercise of any limited right by reason of the occurrence of an Offer, the greater of (i) the highest price per share of Common Stock paid in any purchase pursuant to an Offer, which Offer is in effect at any time during the ninety-day period ending on the date on which such limited right is exercised, or (ii) the highest Fair Market Value per Share of Common Stock as of any date during such ninety-day period. Any securities or property which are part or all of the consideration paid for shares of Common Stock in the Offer shall be valued in determining the Offer Price per Share at the higher of (A) the valuation placed on such securities or property by the corporation, person or other entity making such Offer or (B) the valuation placed on such securities or property by the Committee. (d) The term "Offer Spread" as used in this paragraph 9 shall mean an amount equal to the product computed by multiplying (i) the excess of (A) the Offer Price per Share over (B) the exercise price of the related option or Deemed Option per share of Common Stock, by (ii) the number of shares of Common Stock with respect to which such limited right is being exercised. (e) The term "Merger Price per Share" as used in this paragraph 9 shall mean, with respect to the exercise of any limited right by reason of an event described in paragraph 7(a)(iii), the greater of (i) the fixed or formula price to be received by shareholders of the Corporation pursuant to such event for their shares of Common Stock occurring if such fixed or formula price is determinable on the date on which such limited right is exercised, and (ii) the highest Fair Market Value per Share of Common Stock as of any date during the -15- 16 ninety-day period ending on the date on which such limited right is exercised. Any securities or property which are part or all of the consideration paid for shares of Common Stock pursuant to such event shall be valued in determining the Merger Price per Share at the higher of (A) the valuation placed on such securities or property by the corporation, person or other entity which is a party with the Corporation to such event or (B) the valuation placed on such securities or property by the Committee. (f) The term "Merger Spread" as used in this paragraph 9 shall mean an amount equal to the product computed by multiplying (i) the excess of (A) the Merger Price per Share over (B) the exercise price of the related option or Deemed Option per share of Common Stock, by (ii) the number of shares of Common Stock with respect to which such limited right is being exercised. (g) The term "Acquisition Price per Share" as used in this paragraph 9 shall mean, with respect to the exercise of any limited right by reason of an acquisition of Common Stock described in paragraph 7(a)(ii), the greater of (i) the highest price per share stated on Schedule 13D or any amendment thereto filed by the holder of 30% or more of the Corporation's voting power which gives rise to the exercise of such limited right, and (ii) the highest Fair Market Value per Share of Common Stock on any date during the ninety-day period ending on the date the limited right is exercised. (h) The term Acquisition Spread" as used in this paragraph 9 shall mean an amount equal to the product computed by multiplying (i) the excess of (A) the Acquisition Price per Share over (B) the exercise price of the related option or Deemed Option per share of Common Stock, by (ii) the number of shares of Common Stock with respect to which such limited right is being exercised. (i) The term "Spread" as used in this paragraph 9 shall mean, with respect to the exercise of any limited right by reason of a change in the composition of the Board of Directors described in paragraph 7(a)(iv), an amount equal to the product computed by multiplying (i) the excess of (A) the highest Fair Market Value per Share of Common Stock on any date during the ninety-day period ending on the date the limited right is exercised over (B) the exercise price of the related option or Deemed Option per share of Common Stock, by (ii) the number of shares of Common Stock with respect to which the limited right is being exercised. -16- 17 (j) Notwithstanding any other provision of the 1986 Plan, rights granted pursuant to paragraph 8 may not be exercised to the extent that any limited rights granted with respect to the same option are then exercisable. 10. Incentive Stock Options (a) Prior to January 1, 1987, the aggregate Fair Market Value per Share of Common Stock (determined at the time of grant) of the Common Stock in respect of which any employee may be granted incentive stock options in any calendar year (under the 1986 Plan and any other plan of the Corporation, any parent or any subsidiary or any predecessor of any such corporations) shall not exceed $100,000 plus any unused limit carryover to such year, as defined in Section 422A of the Code applicable to incentive stock options granted prior to January 1, 1987. (b) No incentive stock option granted hereunder to an employee prior to January 1, 1987 shall be exercisable at any time while there is outstanding any incentive stock option (as defined in Sections 422A(b)(7) and (c)(7) of the Code for options granted prior to January 1, 1987) previously granted to such employee. (c) After December 31, 1986, in no event shall any employee be granted incentive stock options that will first become exercisable by such employee in any one calendar year covering Common Stock the aggregate Fair Market Value per Share of which exceeds $100,000. For these purposes, the aggregate Fair Market Value per Share of Common Stock shall be determined as of the date on which an option is granted. (d) In the event of amendments to the Code or applicable rules or regulations relating to incentive stock options subsequent to the date hereof, the Corporation may amend the provisions of the 1986 Plan, and the Corporation and the employees holding options may agree to amend outstanding option agreements to conform to such amendments. 11. Non-Transferability of Options, Rights and Limited Rights Options, rights and limited rights granted under the 1986 Plan shall not be transferable otherwise than by will or the laws of descent and distribution, and options, rights and limited rights shall be exercisable during the lifetime of the employee only by the employee or by the employee's guardian or legal representative (unless such exercise would disqualify an option as an incentive stock option). -17- 18 12. Award and Delivery-of Restricted Shares (a) At the time an award of restricted shares is made, the Committee shall establish a period of time (the "Restricted Period") applicable to such award which shall not be more than 10 years. Each award of restricted shares may have a different Restricted Period. The Committee may, in its sole discretion at the time an award is made, provide for the incremental lapse of restrictions during the Restricted Period and for the lapse or termination of restrictions upon the satisfaction of other conditions in addition to or other than the expiration of the Restricted Period with respect to all or any portion of the restricted shares. The Committee may also, in its sole discretion, shorten or terminate the Restricted Period or waive any conditions for the lapse or termination of restrictions with respect to all or any portion of the restricted shares. Notwithstanding the foregoing, all restrictions shall lapse or terminate with respect to all restricted shares upon (i) the employee's death, total and permanent disability (as defined in paragraph 15), or retirement from active employment at or after the Early Retirement Age, or (ii) provided that the Board has not adopted a resolution prior to an Acceleration Date stipulating that such restrictions shall not lapse and not terminate, the occurrence of an Acceleration Date as defined in paragraph 7(a). (b) At the time a grant of restricted shares is made to an employee, a stock certificate representing a number of shares of Common Stock equal to the number of such restricted shares shall be registered in the employee's name but shall be held in custody by the Corporation for such employee's account. The employee shall generally have the rights and privileges of a shareholder as to such restricted shares, including, without limitation, the right to vote such restricted shares, except that, subject to the provisions of paragraph 14, the following restrictions shall apply: (i) the employee shall not be entitled to delivery of the certificate until the expiration or termination of the Restricted Period and the satisfaction of any other conditions prescribed by the Committee; (ii) none of the restricted shares shall be sold, transferred, assigned, pledged, or otherwise encumbered or disposed of during the Restricted Period and until the satisfaction of any other conditions prescribed by the Committee; and (iii) all of the restricted shares shall be forfeited and all rights of the employee to such restricted shares shall terminate without further obligation on the part of the Corporation if the employee ceases to be a regular full-time employee of the Corporation, any of its subsidiaries, any parent or any combination thereof before the expiration or termination of the Restricted Period and the -18- 19 satisfaction of any other conditions prescribed by the Committee applicable to such restricted shares. Dividends in respect of restricted shares shall be currently paid; provided, however, that in lieu of paying currently a dividend of shares of Common Stock in respect of restricted shares, the Committee may, in its sole discretion, register in the name of an employee a stock certificate representing such shares of Common Stock issued as a dividend in respect of restricted shares, and may cause the Corporation to hold such certificate in custody for the employee's account subject to the same terms and conditions as such restricted shares. Upon the forfeiture of any restricted shares, such forfeited restricted shares shall be transferred to the Corporation without further action by the employee. The employee shall have the same rights and privileges, and be subject to the same restrictions, with respect to any shares received pursuant to paragraph 16. (c) Upon the expiration or termination of the Restricted Period and the satisfaction of any other conditions prescribed by the Committee or at such earlier time as provided for in paragraph 14, the restrictions applicable to the restricted shares shall lapse and a certificate for a number of shares of Common Stock equal to the number of restricted shares with respect to which the restrictions have expired or terminated shall be delivered, free of all such restrictions, except any that may be imposed by law, to the employee or the employee's Beneficiary (as defined in paragraph 14). The Corporation shall not be required to deliver any fractional share of Common Stock but shall pay to the employee or the employee's Beneficiary (as defined in paragraph 14), in lieu thereof, the product of (i) the Fair Market Value per Share of Common Stock (determined as of the date the restrictions expire or terminate) and (ii) the fraction of a share to which such employee would otherwise be entitled. Subject to paragraph 19 hereof, no payment will be required from the employee upon the issuance or delivery of any Common Stock upon the expiration or termination of the Restricted Period with respect to any restricted shares. 13. Award of Performance Units (a) At the time an award of performance units is made, the Committee shall prescribe a range of long-term earnings objectives, including minimum, maximum and target objectives of the Corporation during the Incentive Period (as defined in paragraph 13(c)) applicable to such performance units and shall determine a range of dollar values of each performance unit associated with such range of long-term earnings objectives. If the minimum long-term earnings objective prescribed by the -19- 20 Committee for any performance unit is not achieved or exceeded, then such performance unit shall have no value and no amount shall be payable with respect thereto. If such minimum long-term earnings objective is achieved or exceeded, then the dollar value of all performance units to be paid with respect thereto shall be based upon the level of earnings achieved, subject to any maximum performance unit value imposed by the Committee. If during the course of an Incentive Period there shall occur significant events which were not foreseen in establishing the minimum long-term earnings objective for such Incentive Period and which the Committee, in its discretion, with the advice of the Corporation's independent auditors, expects to have a substantial effect on such objective during such Incentive Period, the Committee may revise such objective. (b) Any employee who is an employee of the Corporation or a parent or subsidiary as of the Valuation Date (as defined in paragraph 13(d)) with respect to performance units which have been previously awarded to him, shall, if the minimum long-term earnings objectives specified in paragraph 13(a) are met, be eligible to receive a cash award equal to the value of such performance units determined pursuant to such paragraph 13(a) as of the Valuation Date applicable thereto. Payment of such cash award shall be made as soon as practicable following the last day of the calendar year in which occurs the Valuation Date of such performance units. Except as otherwise provided in paragraph 14 hereof, any performance units awarded to an employee during his employment period for which the Incentive Period has not ended shall be forfeited upon the date such employment terminates, and he shall not be entitled to any payment in respect thereof. (c) Unless otherwise provided by the Committee at the time a performance unit is granted, or unless prior to an Acceleration Date the Board has adopted a resolution making the provision immediately below inoperative, any employee who is an employee of the Corporation or a parent or subsidiary as of an Acceleration Date shall be eligible to receive with respect to performance units previously granted to him a cash award equal to the amount determined by multiplying the amount of the award which could have been earned assuming attainment of the target long-term earnings objective prescribed by the Committee by a fraction, the numerator of which is the number of full calendar months in the Incentive Period prior to the Acceleration Date (disregarding any months in the Incentive Period prior to the effectiveness of the grant of the performance unit) and the denominator of which is the total number of full calendar months in the Incentive Period. If the employee remains in the employ of the Corporation, any subsidiary, any parent or any -20- 21 combination thereof following the Acceleration Date, he shall be entitled to receive in respect of performance units previously granted to him any additional award which is earned (as determined in accordance with paragraph 13(a)) during the portion of the Incentive Period occurring after the Acceleration Date. Notwithstanding the provisions of paragraph 13(a), following an Acceleration Date, the Committee shall not adjust the minimum long-term earnings objective or other terms specified in a performance unit in effect immediately prior to the Acceleration Date in any manner adverse to the employee. (d) For purposes of the 1986 Plan, (i) The "Incentive Period" with respect to a performance unit shall be the five-year period beginning on the date such performance unit is granted or such other period (not shorter than 3 years or longer than 10 years) as the Committee may designate. (ii) The "Valuation Date" means the last day of the Incentive Period for a performance unit. 14. Termination of Employment In the event that the employment of an employee to whom an option, right or limited right has been granted under the 1986 Plan shall be terminated (except as set forth in paragraph 15), such option, right or limited right may, subject to the provisions of the 1986 Plan, be exercised (to the extent that the employee was entitled to do so at the termination of his employment) at any time within 3 months after such termination, or, in the case of an employee whose termination results from retirement from active employment at or after the earliest permissible retirement date (the "Early Retirement Age") specified in the G. B. Dealey Retirement Pension Plan, or any successor qualified retirement plan of the Corporation, one of its subsidiaries or a parent covering such employee (the "Pension Plan"), within 3 years after such termination, but in no case later than the date on which the option, right or limited right terminates; provided, however, that any option, right or limited right held by an employee whose employment is terminated for cause (as determined by the Board of Directors of the Corporation in its sole discretion) or an employee who leaves the employ of the Corporation voluntarily (other than after an Acceleration Date) shall, to the extent not theretofore exercised, forthwith terminate. (b) Unless otherwise determined by the Committee, if an employee to whom restricted shares have been granted ceases -21- 22 to be an employee of the Corporation or of a subsidiary or parent prior to the end of the Restricted Period and the satisfaction of any other conditions prescribed by the Committee for any reason other than death, total and permanent disability (as defined in paragraph 15), or retirement from active employment at or after the Early Retirement Age, the employee shall immediately forfeit all restricted shares. (c) Unless otherwise determined by the Committee, if an employee to whom performance units have been granted ceases to be an employee of the Corporation prior to the end of the Incentive Period with respect to such performance units for any reason other than death, total and permanent disability (as defined in paragraph 15) or retirement from active employment at or after the Early Retirement Age, the employee shall immediately forfeit all such performance units. If an employee to whom performance units have been granted terminates employment by reason of retirement on or after the Early Retirement Age, total and permanent disability, or death, he shall, if the minimum long-term earnings objectives specified in paragraph 13(a) are met, be eligible to receive a cash award equal to the value of such performance units, determined pursuant to such paragraph 13(a) and payable as soon as practicable following the last day of the calendar year in which occurs the Valuation Date of such performance units. If the employee terminates employment due to his death or if an employee who retires from active employment on or after his Early Retirement Age or terminated employment due to total and permanent disability dies prior to receipt of any such payment, then his designated Beneficiary shall, if the minimum long-term earnings objectives specified in paragraph 13(a) are met, be entitled to receive a cash award equal to the value of such performance units, determined pursuant to such paragraph 13(a) and payable as soon as practicable following the last day of the calendar year in which occurs the Valuation Date of such performance units. In the event that the person or persons designated by the employee as his Beneficiary or Beneficiaries shall not be living at the time, or if no designation has been made, then the payment of such cash award shall be made to the estate of the employee. An employee's "Beneficiary" is a person or persons (natural or otherwise) designated by such employee, pursuant to a written instrument executed by such employee and filed with the Committee, to receive any benefits payable hereunder in the event of such employee's death. (d) Awards granted under the 1986 Plan shall not be affected by any change of duties or position so long as the holder continues to be a regular full-time employee of the Corporation or any of its subsidiaries or a parent. Any option, -22- 23 right, limited right, restricted share or performance unit agreement, and any rules and regulations relating to the 1986 Plan, may contain such provisions as the Committee shall approve with reference to the determination of the date employment terminates and the effect of leaves of absence. Any such rules and regulations with reference to any option agreement shall be consistent with the provisions of the Code and any applicable rules and regulations thereunder. Nothing in the 1986 Plan or in any award granted pursuant to the 1986 Plan shall confer upon any employee any right to continue in the employ of the Corporation or any of its subsidiaries or parent or interfere in any way with the right of the Corporation or any such subsidiary or parent to terminate such employment at any time. 15. Death or Total Disability of Employee If an employee to whom an option, right, or limited right has been granted under the 1986 Plan shall die or suffer a total and permanent disability while employed by the Corporation, one of its subsidiaries or a parent or within three months (or, in the case of an employee who retires from active employment at or after Early Retirement Age, within one year) after the termination of such employment (other than (i) an employee terminated for cause, or (ii) an employee who leaves the employ of the Corporation voluntarily, both of which events will be governed by the provisions of Paragraph 14(a) hereof), such option, right, or limited right may be exercised, to the extent that the employee was entitled to do so at the termination of employment (including by reason of death or total disability), as set forth herein (subject to any restrictions set forth in paragraphs 8 and 9 with respect to Insiders) by the employee, legal guardian of the employee (unless such exercise would disqualify an option as an incentive stock option), a legatee or legatees of the employee under the employee's last will, or by the employee's personal representatives or distributees, whichever is applicable, at any time within one year after the date of the employee's death or total disability, but in no event later than the date on which the option, right, or limited right terminates. Notwithstanding the above, if an employee who terminates employment by reason of total and permanent disability shall die within three months of such termination, a legatee or legatees of such employee under the employee's last will, or the executor of such employee's estate, shall only have the right to exercise such option, right, or limited right, to the extent that the employee was entitled to do so at the termination of employment, during the period ending one year after the date of the employee's termination of employment by reason of disability. For purposes hereof, "total and permanent disability" is defined as such term is used in the Pension Plan. -23- 24 16. Adjustments upon Changes in Capitalization, etc. Notwithstanding any other provision of the 1986 Plan, the Committee may at any time make or provide for such adjustments to the 1986 Plan, to the number and class of shares available thereunder or to any outstanding options, rights, limited rights, restricted shares or performance units as it shall deem appropriate to prevent dilution or enlargement, including adjustments in the event of changes in the outstanding Common Stock by reason of stock dividends, split-ups recapitalizations, mergers, consolidations, combinations or exchanges of shares, separations, reorganizations, liquidations and the like. In the event of any offer to holders of Common Stock generally relating to the acquisition of their shares, the Committee may make such adjustment as it deems equitable in respect to outstanding options, rights, limited rights, restricted shares and performance units, including, in the Committee's discretion, revision of outstanding options, rights, limited rights, restricted shares and performance units so that they may be exercisable or redeemable for or payable in the consideration payable in the acquisition transaction. Any such determination by the Committee shall be conclusive. Any fractional shares resulting from such adjustments to options, rights, limited rights, or restricted shares shall be eliminated. 17. Effective Date The 1986 Plan shall become effective on May 8, 1986, provided that the adoption of the 1986 Plan shall have been ratified by the shareholders of the Corporation. The Committee thereafter may, in its discretion, grant awards under the 1986 Plan, the grant, exercise or payment of which shall be expressly subject to the conditions that to the extent required at the time of grant, exercise or payment (i) the shares of Common Stock covered by such awards shall be duly listed, upon official notice of issuance, on the New York Stock Exchange, and (ii) if the Corporation deems it necessary or desirable, a Registration Statement under the Securities Act of 1933 with respect to such shares shall be effective. 18. Termination and Amendment The Board of Directors of the Corporation may suspend, terminate, modify or amend the 1986 Plan, provided that any amendment that would increase the aggregate number of shares which may be issued under the 1986 Plan, materially increase the benefits accruing to participants under the 1986 Plan, or materially modify the requirements as to eligibility for -24- 25 participation in the 1986 Plan, shall be subject to the approval of the Corporation's shareholders, except that any such increase or modification that may result from adjustments authorized by paragraph 16 does not require such approval. If the 1986 Plan is terminated, the terms of the 1986 Plan shall, notwithstanding such termination, continue to apply to awards granted prior to such termination. In addition, no suspension, termination, modification or amendment of the 1986 Plan may, without the consent of the employee to whom an award shall theretofore have been granted, adversely affect the rights of such employee under such award. 19. Withholding Tax (a) The Corporation shall have the right to deduct from all amounts paid in cash in consequence of the exercise of an option, right or limited right under the 1986 Plan any taxes required by law to be withheld with respect to such cash payments. Where an employee or other person is entitled to receive shares of Common Stock pursuant to the exercise of an option, a right or a limited right pursuant to the 1986 Plan, the Corporation shall have the right to require the employee or such other person to pay to the Corporation the amount of any taxes which the Corporation is required to withhold with respect to such shares, or, in lieu thereof, to retain, or sell without notice, a sufficient number of such shares to cover the amount required to be withheld. Upon the disposition (within the meaning of Section 425(c) of the Code) of shares of Common Stock acquired pursuant to the exercise of an incentive stock option prior to the expiration of the holding period requirements of Section 422A(a)(1) of the Code, the employee shall be required to give notice to the Corporation of such disposition and the Corporation shall have the right to require the payment of the amount of any taxes which are required by law to be withheld with respect to such disposition. (b) Upon termination of the Restricted Period with respect to any restricted shares (or such earlier time, if any, as an election is made by the employee under Section 83(b) of the Code, or any successor provisions thereto, to include the value of such shares in taxable income), the Corporation shall have the right to require the employee or other person receiving shares of Common Stock in respect of such restricted shares to pay to the Corporation the amount of taxes which the Corporation is required to withhold with respect to such shares of Common Stock or, in lieu thereof, to retain or sell without notice a sufficient number of shares of Common Stock held by it to cover the amount required to be withheld. The Corporation shall have the right to deduct from all dividends paid with respect to -25- 26 restricted shares the amount of taxes which the Corporation is required to withhold with respect to such dividend payments. 20. Written Agreements Each award of options, rights, limited rights, restricted shares or performance units shall be evidenced by a written agreement, executed by the employee and the Corporation, which shall contain such restrictions, terms and conditions as the Committee may require. 21. Effect on Other Stock Plans The adoption of the 1986 Plan shall have no effect on awards made or to be made pursuant to other plans covering employees of the Corporation, its subsidiaries or parent, or any predecessors or successors thereto. 22. Preferred Share Purchase Rights Any reference in the 1986 Plan to the "Common Stock" shall be deemed to refer also to the preferred share purchase rights issued by the Corporation pursuant to the Agreement dated as of March 15, 1986 between the Corporation and RepublicBank Dallas, N.A. (the "Rights Agreement") until the earliest of the Distribution Date, the Redemption Date and the Final Expiration Date (as such terms aria defined in Sections 3 and 7 of the Rights Agreement) and thereafter to refer only to the Common Stock, $1.67 par value, of the Corporation. Notwithstanding the previous sentence, (a) after the Distribution Date until the earlier of the Redemption Date and the Final Expiration Date, every holder of any unexercised option granted prior to the Distribution Date shall upon exercise thereof be entitled to receive one preferred share purchase right for each share of Common Stock received, (b) after the Distribution Date until the earlier of the Redemption Date and the Final Expiration Date, any reference in paragraph 8(b), 8(e), 9(c), 9(e), 9(g) or 9(i) to the "Fair Market Value per Share of Common Stock" with respect to any unexercised right or limited right granted prior to the Distribution Date shall be deemed to refer instead to the sum of the Fair Market Value per Share of Common Stock and the fair market value of the preferred share purchase right and (c) as soon as practicable after the Distribution Date, the Rights Agent (as defined in the preamble to the Rights Amendment) shall send to each person who immediately prior to the Distribution Date was a holder of restricted shares, by, first-class, insured, postage-prepaid mail, a Right Certificate (as defined in Section 3(a) of the Rights Agreement) evidencing one preferred share purchase right for each such restricted -26- 27 share held, and the holder of such Right Certificate may at any time after the Distribution Date exercise the preferred share purchase rights evidenced thereby in the manner and subject only to the restrictions described in the Rights Agreement. For purposes of the 1986 Plan, the fair market value of a preferred share purchase right shall mean the value of a preferred share purchase right, calculated in the same manner as the Fair Market Value per Share of Common Stock would be calculated but for this paragraph 22. A. H. BELO CORPORATION By: /s/ ROBERT W. DECHERD ---------------------------------------- Title: CHAIRMAN AND CHIEF EXECUTIVE OFFICER ------------------------------------- -27- EX-10.3(17) 6 1995 EXECUTIVE COMPENSATION PLAN 1 EXHIBIT 10.3 (17) EXHIBIT A A. H. BELO CORPORATION 1995 EXECUTIVE COMPENSATION PLAN (As Restated to Incorporate Amendments through May 14, 1997) A. H. Belo Corporation, a Delaware corporation (the "Company"), established the A. H. Belo Corporation 1995 Executive Compensation Plan (the "Plan"), effective as of January 1, 1995, and has restated the Plan to incorporate amendments through May 14, 1997, 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 2 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. (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 -2- 3 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 -3- 4 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. (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 -4- 5 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 5,000,000 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 5,000,000 shares reserved for issuance under the Plan, no more than 1,200,000 shares of Common Stock will be issued or transferred as Restricted Stock. (b) No more than 5,000,000 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 not exceed 500,000 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. -5- 6 (e) The payment of an Executive Compensation Plan Bonus to any Participant will not exceed $1,500,000. 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. -6- 7 (h) If a Participant terminates employment by reason of death, disability or retirement at or after attaining the earliest age that qualifies as the Participant's Early Retirement Age under the G. B. Dealey Retirement Pension Plan, as amended from time to time, each outstanding Stock Option granted to the Participant will remain exercisable until the term of the Stock Option expires (determined without regard to the Participant's termination of employment). (i) 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 1996 annual meeting of shareholders of the Company will be granted an option to purchase 20,000 shares of Common Stock on the date of election to the Board. Each Director will be granted an additional option to purchase 5,000 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. 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 -7- 8 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 -8- 9 Value per Share at the date of exercise). (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) If a Participant terminates employment by reason of death, disability or retirement at or after attaining the earliest age that qualifies as the Participant's Early Retirement Age under the G. B. Dealey Retirement Pension Plan, as amended from time to time, each outstanding Appreciation Right granted to the Participant will remain exercisable until the Appreciation Right expires by its terms (determined without regard to the Participant's termination of employment). (g) 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. -9- 10 (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 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 -10- 11 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 or an award of Stock Options to a Director under Paragraph 6, (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 or the Director other than by will or the laws of descent and distribution and (ii) no Stock Option or Appreciation Right granted to the Participant or the Director will be exercisable during the Participant's or Director's lifetime by any person other than the Participant or Director, or such person's guardian or legal representative. 12. Adjustments. The Committee will make or provide for such adjustments in the maximum number of shares specified in Paragraphs 3, 4 and 6 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 -11- 12 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 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 will be administered by the Committee, which at all times will consist of two or more Directors appointed by the Board, all of whom will qualify as "non-employee directors" as defined in Rule 16b-3 and as "outside directors" as defined in regulations adopted under Section 162(m) of the Code, as such terms may be amended from time to time. 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) 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. -12- 13 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 any applicable requirements of the New York Stock Exchange (or any other exchange or market system upon which shares of Common Stock are listed or admitted to trading), Rule 16b-3 or Section 162(m) of the Code. (b) The Plan may be terminated at any time by action of the Board. The termination of the Plan will not adversely affect the terms of any outstanding Award. (c) 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. (d) 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 provision will be invalid and cease to have any effect without affecting the validity or effectiveness of any other provision of the Plan. -13- EX-21 7 SUBSIDIARIES OF THE REGISTRANT 1 EXHIBIT 21 SUBSIDIARIES OF THE COMPANY (AS OF DECEMBER 31, 1996)
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 WWLL, 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 8 CONSENT OF ERNST & YOUNG 1 Exhibit 23 Consent of Independent Auditors We consent to the incorporation by reference in the Registration Statements (Form S-8 No. 33-30994, Form S-8 No. 33-32526, Form S-8 No. 33-18771, Form S-8 No. 33-61491, and Form S-8 No. 33-61439) pertaining to the Employee Savings and Investment Plan, Long-Term Incentive Plan, Employee Thrift Plan, and 1995 Executive Compensation Plan of A. H. Belo Corporation of our report dated January 27, 1997, except for Note 11, as to which the date is February 28, 1997, 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, 1996. /s/ ERNST & YOUNG LLP Dallas, Texas March 7, 1997 EX-27 9 FINANCIAL DATA SCHEDULE
5 1,000 YEAR DEC-31-1996 JAN-01-1996 DEC-31-1996 13,829 0 135,252 (5,276) 13,873 171,925 658,195 (287,415) 1,224,072 89,313 631,857 0 0 74,452 296,031 1,224,072 0 824,308 0 593,476 65,183 5,647 27,643 144,040 56,535 87,505 0 0 0 87,505 2.11 2.11
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