-----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, SMm6kUsLZlxJtoKf+OG4KsqCQR6zlTRlA3Sfv3EtqX2pUj42Yobgt3U4AEoYyqDe ova8liWjC7hEdWZUg1V8WQ== 0000030419-99-000004.txt : 19990517 0000030419-99-000004.hdr.sgml : 19990517 ACCESSION NUMBER: 0000030419-99-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990514 FILER: COMPANY DATA: COMPANY CONFORMED NAME: R H DONNELLEY CORP CENTRAL INDEX KEY: 0000030419 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ENGINEERING, ACCOUNTING, RESEARCH, MANAGEMENT [8700] IRS NUMBER: 132740040 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-07155 FILM NUMBER: 99621494 BUSINESS ADDRESS: STREET 1: ONE MANHATTANVILLE ROAD CITY: PURCHASE STATE: NY ZIP: 10577 BUSINESS PHONE: 9149336800 MAIL ADDRESS: STREET 1: 1 DIAMOND HILL RD CITY: MURRAY HILL STATE: NJ ZIP: 07974 FORMER COMPANY: FORMER CONFORMED NAME: DUN & BRADSTREET CORP DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: DUN & BRADSTREET COMPANIES INC DATE OF NAME CHANGE: 19790429 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q (Mark one) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1999 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ------------- ------------------- Commission file number 001-07155 R.H. DONNELLEY CORPORATION (Exact name of registrant as specified in its charter) Delaware 13-2740040 - ---------------------- ----------------------------------- (State of Incorporation) (I.R.S. Employer Identification No.) One Manhattanville Road, Purchase N.Y. 10577 - ----------------------------------------- --------- (Address of principal executive offices) (Zip Code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No -- -- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: Title of Class Shares Outstanding at May 3, 1999 -------------- --------------------------------- Common Stock, par value $1 per share 33,833,327 Commission file number 333-59287 R.H. DONNELLEY INC. * --------------------- (Exact name of registrant as specified in its charter) Delaware 36-2467635 ------------------------ ------------------------------------ (State of Incorporation) (I.R.S. Employer Identification No.) One Manhattanville Road, Purchase N.Y. 10577 - --------------------------------------------- ------------- (Address of principal executive offices) (Zip Code) Registrants' telephone number, including area code (914) 933-6400 [FN] * R.H. Donnelley Inc. is a wholly owned subsidiary of R.H. Donnelley Corporation which became subject to the filing requirements of Section 15(d) on October 1, 1998. As of May 3, 1999, 100 shares of R.H. Donnelley Inc. common stock, no par value, were outstanding. R.H. DONNELLEY CORPORATION INDEX TO FORM 10-Q PART I. FINANCIAL INFORMATION PAGE - ------------------------------
Item 1. Financial Statements Consolidated Statements of Operations for the three months ended March 31, 1999 and 1998 3 Consolidated Balance Sheets at March 31, 1999 and December 31, 1998 4 Consolidated Statements of Cash Flows for the three months ended March 31, 1999 and 1998 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 Item 3. Quantitative and Qualitative Disclosure About Market Risk 15 PART II. OTHER INFORMATION - --------------------------- Item 1. Legal Proceedings 16 Item 6. Exhibits and Reports on Form 8-K 16 SIGNATURES 18
R.H. Donnelley Corporation and Subsidiary Consolidated Statements of Operations (Unaudited)
Three months ended March 31, ------------------ (amounts in thousands, except per share data) 1999 1998 Revenues............................................. $ 31,659 $ 24,344 Expenses: Operating expenses................................. 25,467 17,610 General and administrative......................... 8,879 5,914 Provision for bad debts............................ 1,408 1,264 Depreciation and amortization...................... 4,789 4,953 ------ ------ Total expenses................................... 40,543 29,741 Income from partnerships and related fees............ 27,487 25,642 ------ ------ Operating income................................. 18,603 20,245 Interest expense, net................................ 9,716 -- ------ ------ Income before income taxes...................... 8,887 20,245 Provision for income taxes........................... 3,572 8,098 ------ ------ Net income................................... $ 5,315 $ 12,147 ====== ====== Earnings per share: Basic........................................ $ 0.16 $ 0.36 Diluted...................................... $ 0.15 $ 0.35 Shares used in computing earnings per share: Basic........................................ 33,984 34,210 Diluted...................................... 34,330 34,489 The accompanying notes are an integral part of the consolidated financial statements.
R.H. Donnelley Corporation and Subsidiary Consolidated Balance Sheets (Unaudited)
March 31, December 31, (amounts in thousands, except share and per share data) 1999 1998 --------- ------------ Assets Current Assets Cash and cash equivalents.......................... $ 5,763 $ 2,302 Accounts receivable Billed........................................ 2,321 6,941 Unbilled...................................... 61,668 73,817 Other......................................... 3,942 8,712 Allowance for doubtful accounts............... (6,792) (5,298) ------ ------ Total accounts receivable, net............. 61,139 84,172 Deferred contract costs............................ 13,169 6,401 Other current assets............................... 4,462 4,278 ------ ------ Total current assets....................... 84,533 97,153 Property and equipment, net........................ 19,318 21,077 Computer software, net............................. 31,151 33,523 Partnership investments and related receivables ... 212,524 216,482 Other non-current assets........................... 21,319 22,891 ------- ------- Total Assets............................... $ 368,845 $ 391,126 ======= ======= Liabilities and Shareholders' Deficit Current Liabilities Accounts payable................................... $ 2,618 $ 1,654 Accrued and other current liabilities.............. 68,469 69,485 Current portion of long-term debt.................. 5,063 4,125 ------ ------ Total current liabilities.................. 76,150 75,264 Long-term debt..................................... 445,750 464,500 Deferred income taxes.............................. 50,303 50,909 Postretirement and postemployment benefits......... 9,622 9,648 Other liabilities.................................. 9,700 12,415 Commitments and contingencies Shareholders' Deficit Preferred stock, par value $1 per share, authorized - 10,000,000 shares, outstanding - none............................ -- -- Common stock, par value $1 per share, authorized - 400,000,000 shares; issued - 51,621,894 shares for 1999 and 1998.. 51,622 51,622 Additional paid in capital......................... 1,261 274 Retained deficit................................... (250,119) (255,434) Treasury stock, at cost, 17,789,254 shares for 1999 And 17,419,739 shares for 1998................ (25,444) (18,072) -------- ------- Total shareholders' deficit................ (222,680) (221,610) -------- -------- Total Liabilities and Shareholders' Deficit $ 368,845 $ 391,126 ======= ======= The accompanying notes are an integral part of the consolidated financial statements.
R.H. Donnelley Corporation and Subsidiary Consolidated Statements of Cash Flows (Unaudited)
Three months ended March 31, --------------------- (amounts in thousands) 1999 1998 Cash Flows from Operating Activities: Net income......................................... $ 5,315 $ 12,147 Reconciliation of net income to net cash provided by operating activities: Depreciation and amortization................. 4,789 4,953 Deferred income taxes......................... (606) -- Amortization of deferred financing costs...... 287 -- Provision for doubtful accounts............... 1,408 1,264 Cash received in excess of income from partnerships and related receivables....... 5,257 1,617 Decrease in accounts receivable............... 21,625 27,303 Increase in deferred contract costs........... (6,768) (9,701) (Increase) decrease in other assets........... (43) 148 Increase (decrease) in accounts payable, accrued and other current liabilities.............. 315 (8,940) Decrease in other liabilities................. (2,741) (1,386) ------ ------ Net cash provided by operating activities.. 28,838 27,405 Cash Flows from Investing Activities: Additions to property and equipment................ (379) (651) Additions to computer software..................... (786) (1,834) ------ ------ Net cash used in investing activities...... (1,165) (2,485) Cash Flows from Financing Activities: Repayment of debt.................................. (17,812) -- Purchase of treasury stock......................... (7,474) -- Proceeds from exercise of stock options............ 1,074 -- Net distributions to Old D&B....................... -- (24,935) ------ ------- Net cash used in financing activities...... (24,212) (24,935) Increase (decrease) in cash and cash equivalents... 3,461 (15) Cash and cash equivalents, beginning of year....... 2,302 32 ------ ------- Cash and cash equivalents, end of period........... $ 5,763 $ 17 ====== ======== Supplemental cash flow information: - ----------------------------------- Interest paid...................................... $ 12,095 N/A ======= Income taxes paid.................................. $ 1,251 N/A ======= The accompanying notes are an integral part of the consolidated financial statements.
R.H. Donnelley Corporation and Subsidiary Notes to Consolidated Financial Statements (Unaudited) (amounts in thousands) 1. Background and Basis of Presentation Prior to July 1, 1998, R.H. Donnelley Corporation (the 'Company') operated as part of The Dun & Bradstreet Corporation ('Old D&B'). In December 1997, the Board of Directors of Old D&B approved in principle a plan to separate into two publicly traded companies - the Company and The New Dun & Bradstreet Corporation ('New D&B'). The distribution ('Distribution') was the method by which Old D&B distributed to its shareholders shares of New D&B common stock. On July 1, 1998, as part of the Distribution, Old D&B distributed to its shareholders shares of New D&B stock. In connection with the Distribution, Old D&B changed its name to R.H. Donnelley Corporation. Since the Distribution, the Company's only operating subsidiary has been R.H. Donnelley Inc. ('Donnelley') and, on a consolidated basis, the financial statements of the Company and Donnelley are substantially identical. The financial statements at March 31, 1998 and for the three months then ended, represent the financial position, results of operations and cash flows of the Company as if it were a separate entity. The financial statements include allocations of certain Old D&B expenses, assets and liabilities related to the Company's businesses. Management believes these allocations are reasonable; however, the costs of these services are not necessarily indicative of the costs that would have been incurred if the Company had performed or provided these functions as a separate entity. The interim financial statements have been prepared in accordance with the instructions to Form 10-Q and should be read in conjunction with the financial statements and related notes included in the Company's Form 10-K for the year ended December 31, 1998. The results of interim periods are not necessarily indicative of results for the full year or any subsequent period. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of financial position, results of operations and cash flows at the dates and for the periods presented have been included. Certain 1998 amounts have been restated to conform to the 1999 presentation. 2. Reconciliation of Shares Used in Computing Earnings Per Share The table below provides a reconciliation of basic weighted average shares outstanding to diluted weighted average shares outstanding for each period presented. The conversion of dilutive shares has no impact on operating results.
Three months ended March 31, --------------- 1999 1998 ---- ---- Weighted average shares outstanding - basic ............ 33,984 34,210 Effect of potentially dilutive stock options ........... 346 279 ------ ------ Weighted average number of shares - diluted ............ 34,330 34,489 ====== ======
3. Long-term debt
Long-term debt at March 31, 1999 consisted of the following: Senior subordinated 9.125% Notes........................ $ 150,000 Senior secured term facilities.......................... 298,313 Senior revolving credit facility........................ 2,500 ------- Total.............................................. 450,813 Less current portion.................................... 5,063 ------- Net long-term debt................................. $ 445,750 =======
All long-term debt was incurred in connection with the Distribution. Accordingly, no long-term debt was outstanding at March 31, 1998. The committed bank facilities consist of an aggregate $300,000 Senior Secured Term Facilities ('Term Facilities') and a $100,000 Senior Revolving Credit Facility (the 'Revolver'). These facilities bear interest at a floating rate based on a spread over London interbank offered rate (LIBOR) or the greater of either the Prime rate or the Fed Funds rate plus 50 basis points, at the election of the Company. The facilities contain covenants that, among other things, restrict the Company's and Donnelley's ability to engage in mergers, consolidations and asset sales, incur additional indebtedness and liens and require that certain financial ratios be maintained. At March 31, 1999, there was $300,813 of outstanding debt under the Term Facilities and Revolver at a weighted average interest rate of 7.3% per annum. Available borrowing capacity under the Revolver was $97,500 at March 31, 1999. 4. Treasury Stock Activity During the three months ended March 31, 1999, the Company repurchased 472 shares at a cost of $7,474. 5. Litigation In April 1999, Sandy Goldberg, Dellwood Publishing, Inc. and Rockland Yellow Pages initiated a lawsuit against Donnelley and Bell Atlantic in the United States District Court of the Southern District of New York. The Rockland Yellow Pages is a proprietary directory that competes against a Bell Atlantic directory in the same region. The complaint alleges that the defendants disseminated false information concerning the Rockland Yellow Pages, which has resulted in damages to the Rockland Yellow Pages. The plaintiffs are alleging a variety of claims including RICO violations, antitrust violations and Lanham Act violations. They are seeking damages in excess of $30 million, which amount the plaintiffs are seeking to have trebled under the antitrust laws. In addition, the plaintiffs are also seeking punitive damages in an unspecified amount. Management intends to mount a vigorous defense of the Company in this matter. At this preliminary stage in the proceedings, management is unable to predict the outcome of this matter but believes that the resolution of the action will not have a material adverse effect on the Company's financial position or results of operations. Certain tax planning strategies entered into by Old D&B are currently subject to review by tax authorities. The Internal Revenue Service (the 'IRS') is currently reviewing Old D&B's utilization of certain capital losses during 1989 and 1990. While the IRS has not issued a formal assessment with respect to these transactions, the IRS has assessed other companies that had entered into similar types of transactions. IMS Health Incorporated ('IMS') and Nielsen Media Research, Inc. ('NMR'), both of which are former subsidiaries of Old D&B, are each jointly and severally liable to pay 50%, and Old D&B is liable for the remaining 50% of any payments for taxes and accrued interest arising from this matter and certain other potential tax liabilities after Old D&B pays the first $137 million. As a result of the form of the Distribution, the Company is the legal entity and the taxpayer referred to herein as Old D&B. However, New D&B, pursuant to the terms of the Distribution Agreement and the Tax Allocation Agreement, executed in connection with the Distribution, has assumed and will indemnify the Company and Donnelley against any payments to be made by the Company or Donnelley in respect of any tax liability that may be assessed and any related costs and expenses including ongoing legal fees. Accordingly, management believes that such tax liabilities and related costs and expenses will have no material impact on the Company's consolidated financial position. Management further believes that New D&B, IMS and NMR have sufficient financial resources to satisfy all such liabilities and to reimburse the Company for all costs and expenses incurred. In July 1996, Information Resources, Inc. ('IRI') filed a complaint in the United States district court for the Southern district of New York, naming as defendants Old D&B, ACNielsen Company, and IMS International Inc. ('the IRI Action'). The complaint alleges, among other things, various violations of the antitrust laws and seeks damages in excess of $350 million, which IRI is seeking to have trebled under the antitrust laws. IRI also seeks punitive damages of an unspecified amount. Under the Distribution Agreement, New D&B will assume the defense and indemnify the Company and Donnelley against any payments to be made by the Company or Donnelley with respect to the IRI Action, including any related legal fees and expenses. Other than the matters described above, the Company is also subject to proceedings, lawsuits and other claims in the ordinary course of business. In the opinion of management, the outcome of such current legal proceedings, claims and litigation will not materially affect the Company's financial position, results of operations or cash flows. 6. DonTech Partnership The following is summarized combined financial information of the DonTech Partnership:
Three months ended March 31, --------------- 1999 1998 ---- ---- Gross revenues.......................................... $20,206 $91,542 Income from operations.................................. 5,363 58,556 Net income.............................................. 5,580 58,556
The decrease in gross revenues, income from operations and net income in 1999 compared to 1998 is due to the change in the structure of the partnership, which occurred in August 1997. Prior to this change, DonTech published various directories, solicited advertising, and manufactured and delivered various directories in Illinois and northwest Indiana. Since the change, DonTech performs the advertising sales function for the directories and earns a commission, while an operating unit of Ameritech serves as the publisher. The Company has a 50% interest in the profits of DonTech and also receives revenue participation income, which is tied to advertising sales, from an operating unit of Ameritech. This revenue participation income is not shown in the above table. The Company's income and related fees from DonTech was $20,839 and $20,010 for the three months ended March 31, 1999 and 1998, respectively. Due to the change in the partnership structure and the timing of revenue recognition, the amounts in the table for 1998 do not correspond to the income from partnerships and related fees recognized in the financial statements. For the three months ended March 31, 1999, income and related fees is comprised of the Company's share of the net income above, plus revenue participation income of $18,827 less other reconciling items. 7. Business Segments The Company provides advertising sales and marketing services of yellow pages and other directory products under long-term sales agency agreements and joint venture partnerships with operating units of major telephone companies and through its own independent operations. The Company also provides publishing and production services for yellow pages directories. The Company's reportable operating segments are Directory Advertising Services, DonTech Partnership and Directory Publishing Services. The DonTech Partnership is viewed as a separate reportable operating segment since, among other factors, the employees of DonTech, including officers and managers, are not employees of the Company. Essentially, all operations are conducted in the United States. Management evaluates the performance of the operating segments and allocates resources to them based on operating income and other factors. Operating income for the reportable segments (except DonTech) includes those costs directly incurred by each operation plus an allocation of certain shared operating and general and administrative expenses based on estimated business usage. Interest expense, income tax expense and non-operating income and expenses are not allocated to the reportable segments. The operating loss under the Other column represents general and administrative expenses and other activities not allocated to the reportable segments. Total assets included in the Other column represent those assets not allocated to the reportable segments, such as cash and cash equivalents, prepaid and deferred expenses and corporate property and equipment. Selected financial results for the three month period ended March 31, 1999 and 1998 and total assets at March 31, 1999 and 1998 are as follows:
Three month period ended March 31, 1999 Directory Directory Advertising DonTech Publishing Consolidated Services Partnership Services (2) Other Totals -------- ----------- ------------ ----- ------ Advertising sales (1) Calendar cycle......$ 98,313 $ 78,147 -- -- $176,460 Publication cycle... 69,874 134,847 -- -- 204,721 Revenues.............. 23,850 -- $ 7,809 -- 31,659 Income from partnerships and related fees.... 6,648 20,839 -- -- 27,487 EBITDA (3)............ 8,322 20,839 262 $(6,031) 23,392 Depreciation and amortization....... 1,627 -- 1,648 1,514 4,789 Operating income (loss) 6,695 20,839 (1,386) (7,545) 18,603 Total assets......... 115,906 185,719 20,533 46,687 368,845
Three month period ended March 31, 1998 Directory Directory Advertising DonTech Publishing Consolidated Services Partnership Services (2) Other Totals -------- ----------- ------------ ----- ------ Advertising sales (1) Calendar cycle $ 71,586 $ 75,100 -- -- $146,686 Publication cycle... 64,915 129,213 -- -- 194,128 Revenues.............. 16,668 -- $ 7,676 -- 24,344 Income from partnerships and related fees.... 5,632 20,010 -- -- 25,642 EBITDA (3)............ 6,939 20,010 1,292 $(3,043) 25,198 Depreciation and amoritization....... 1,395 -- 1,619 1,939 4,953 Operating income (loss) 5,544 20,010 (327) (4,982) 20,245 Total assets.......... 111,288 194,206 23,544 30,136 359,174 (1) Advertising sales represents the billing value of advertisements sold by the Company and DonTech. Management reviews the performance of the operating segments on, among other things, the advertising sales generated on a calendar cycle and a publication cycle basis. Calendar cycle advertising sales represent the billing value of advertisements sold stated on the same basis for which revenue is recognized in the consolidated financial statements (that is, when a sales contract is signed where the Company acts as a sales agent and when a directory is published where the Company acts as the publisher). Advertising sales on a publication cycle basis represent the billing value of advertisements sold based on when a directory is published, regardless of the Company's role and the recognition of revenue in the consolidated financial statements. (2) Directory Publishing Services revenues do not include intracompany revenues of $243 and $198 for the three months ended March 31, 1999 and 1998, respectively. (3) EBITDA represents earnings before interest, taxes and depreciation and amortization. EBITDA is not a measurement of operating performance computed in accordance with generally accepted accounting principles and should not be considered as a substitute for operating income or net income prepared in conformity with generally accepted accounting principles. In addition, EBITDA may not be comparable to similarly titled measures of other companies.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The matters discussed in this Form 10-Q of R.H. Donnelley Corporation (the 'Company') and R.H. Donnelley Inc. ('Donnelley') contain forward looking statements subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995. Where applicable, the words 'believe,' 'expect,' 'anticipate,' 'should,' 'planned,' 'estimated,' 'potential,' 'goal,' 'outlook,' and similar expressions, as they relate to the Company, Donnelley or its management, have been used to identify such forward looking statements. These statements and all other forward looking statements reflect the Company's and Donnelley's current beliefs and specific assumptions with respect to future business decisions and are based on information currently available. Accordingly, the statements are subject to significant risks, uncertainties and contingencies which could cause the Company's and Donnelley's actual operating results, performance or business prospects to differ from those expressed in, or implied by, these statements. Such risks, uncertainties and contingencies include the following: (1) loss of market share through competition; (2) uncertainties caused by the consolidation of the telecommunications industry; (3) introduction of competing products or technologies by other companies; (4) complexity and uncertainty regarding the development of new high technology products; (5) pricing pressures from competitors and/or customers; (6) changes in the yellow pages industry and markets; (7) the Company's inability to complete the implementation of its Year 2000 plans on a timely basis; and (8) a sustained economic downturn in the United States. The Company Except where otherwise indicated, the terms 'Company,' 'we' and 'our' refer to R.H. Donnelley Corporation and its only wholly owned subsidiary R.H. Donnelley Inc. ('Donnelley'). We have no other operations other than through this subsidiary; therefore, on a consolidated basis, our financial statements and the financial statements of Donnelley are substantially identical. We provide advertising sales and marketing services for yellow pages and other directory products under long-term sales agency agreements and joint venture partnerships with operating units of major telephone companies as well as through our own independent operation. We are a sales agent in New York State for an operating unit of Bell Atlantic and in Florida for an operating unit of Sprint. We also serve as a sales agent and publisher for the CenDon partnership ('CenDon'), a 50/50 partnership with an operating unit of Sprint that was formed to publish directories in Florida, Nevada, Virginia and North Carolina. We also publish our own independent yellow pages directory in the Cincinnati area. Due to their similarities, we aggregate these businesses in our Directory Advertising Services segment. We are also a 50% partner in the DonTech Partnership ('DonTech'), a partnership with an operating unit of Ameritech, which acts as the exclusive sales agent for yellow pages directories published by Ameritech in Illinois and northwest Indiana. In addition to receiving 50% of the profits of DonTech, we receive direct fees ('Revenue Participation') from an operating unit of Ameritech, which are tied to advertising sales. While DonTech provides advertising sales of yellow pages and other directory products, the partnership is considered a separate operating segment since, among other things, the employees of DonTech, including officers and managers, are not our employees. We also provide pre-press publishing services for yellow pages directories, including advertisement creation, sales contract management, listing database management, sales reporting and commissions, pagination, billing services and imaging, to independent yellow pages publishers and certain existing customers under separately negotiated contracts. This business is classified as Directory Publishing Services. Factors Affecting Comparability Prior to July 1, 1998, we operated as part of The Dun & Bradstreet Corporation ('Old D&B'). In December 1997, the Board of Directors of Old D&B approved in principle a plan to separate into two publicly traded companies - the Company and The New Dun & Bradstreet Corporation ('New D&B'). The distribution ('Distribution') was the method by which Old D&B distributed to its shareholders shares of New D&B common stock. On July 1, 1998, as part of the Distribution, Old D&B distributed to its shareholders shares of New D&B stock. In connection with the Distribution, Old D&B changed its name to R.H. Donnelley Corporation. The financial statements at March 31, 1998 and for the three months then ended, reflect our financial position, results of operations and cash flows as if we were a separate entity. The financial statements include allocations of certain Old D&B general and administrative expenses and corporate assets and liabilities related to our business. Management believes these allocations are reasonable; however, these costs and allocations are not necessarily indicative of the costs that would have been incurred had we performed or provided these functions as a separate entity. For example, we estimate that general and administrative expenses would have been approximately $2.2 million higher than the amounts allocated during the first quarter of 1998. Additionally, in connection with the Distribution, we issued Debt (as defined below; see - 'Liquidity and Capital Resources') and estimate that additional interest expense of $10.7 million would have been incurred in the first quarter of 1998 assuming the Debt was outstanding as of the beginning of 1998. Three Months Ended March 31, 1999 Compared with Three Months Ended March 31, 1998 Advertising sales represents the billing value of advertisements sold by the Company and DonTech in a given calendar year (calendar cycle sales). These sales are recognized on the same basis on which revenues are recognized (that is, when a customer signs a sales contract where we are a sales agent or when the directory is published where we are the publisher). Calendar cycle sales in the first quarter of 1999 increased 20.3% to $176.5 million compared to $146.7 million in the first quarter 1998. Advertising sales for each segment are as follows:
1999 1998 Change ---- ---- --------------- Directory Advertising Services $ 98.3 $ 71.6 $26.7 37.3% DonTech 78.2 75.1 3.1 4.1% ----- ----- ---- Total $176.5 $146.7 $29.8 20.3% ====== ===== ====
The increase in Directory Advertising Services sales is primarily due to timing of sales for various Bell Atlantic directories compared to last year and sales from our recent entry into Bell Atlantic's Buffalo and North Country markets. In May 1998, we were appointed the exclusive sales agent by Bell Atlantic to service these markets. Management believes that an additional measurement of sales performance is the publication cycle method. This method calculates sales on the basis of the annual value of a directory according to its publication date regardless of when the advertising for that directory was sold. If a directory publication date changes from one year to the next, the prior year publication date is adjusted to conform to the present year to maintain comparability. For the first quarter 1999, publication cycle sales increased 5.5% to $204.7 million compared to $194.1 million for the first quarter 1998. Advertising sales for each segment is as follows:
1999 1998 Change ---- ---- --------------- Directory Advertising Services $ 69.9 $ 64.9 $ 5.0 7.7% DonTech 134.8 129.2 5.6 4.3% ------ ----- ---- Total $204.7 $194.1 $10.6 5.5% ====== ===== ====
The increase in Directory Advertising Services sales is partially due to directories for the Buffalo and North Country markets that were published for the first time since we were appointed Bell Atlantic's sales agent in that region. Accordingly, there were no comparable sales during the first quarter of 1998. In addition, strong sales performance in Bell Atlantic's Westchester county and Albany directories, which published in the quarter, also contributed to the increase. DonTech advertising sales increased due to strong growth in the Chicago directories. Revenues from Directory Advertising Services consist of sales commissions from our sales agency agreements and the billing value of advertisements sold from our independent operation. Revenues from Directory Publishing Services consist of pre-press publishing services for yellow pages directories provided to independent yellow pages publishers and certain existing customers under separately negotiated contracts. Revenues for the first quarter of 1999 were $31.7 million, an increase of $7.4 million over the first quarter of 1998. Revenues by segment are as follows:
1999 1998 Change ---- ---- --------------- Directory Advertising Services $23.9 $16.6 $7.3 44.0% Directory Publishing Services 7.8 7.7 0.1 1.3% ---- ---- --- Total $31.7 $24.3 $7.4 30.5% ==== ==== ===
The increase in Directory Advertising Services revenues is primarily due to higher sales agency commissions revenue from the increase in calendar sales mentioned above. Operating expenses of $25.5 million were $7.9 million higher compared to the first quarter 1998, principally due to an increase in salesperson commissions and information technology related expenses. The higher salesperson commissions is related to the increase in advertising sales. The increase in information technology related expenses is attributable to timing. General and administrative costs of $8.9 million were $3.0 million higher than the first quarter of 1998. This increase is mainly due to higher costs associated with being a stand-alone company and costs associated with the joint venture with China Unicom (see - 'Liquidity and Capital Resources'). Income from partnerships and related fees was $27.5 million for the quarter, an increase of $1.8 million over the prior year quarter. Income from DonTech, including Revenue Participation, was $0.8 million higher than last year and income from CenDon was $1.0 million higher than last year, both due to higher sales. Operating income of $18.6 million was $1.6 million lower than the first quarter 1998. Operating income (loss) by segment is as follows:
1999 1998 Change ---- ---- --------------- Directory Advertising Services $ 6.7 $ 5.5 $ 1.2 21.8% DonTech 20.8 20.0 0.8 4.0% Directory Publishing Services (1.4) (0.3) (1.1) N/M Other (7.5) (5.0) (2.5) (50.0)% ---- ---- ---- Total $18.6 $20.2 $(1.6) (7.9)% ==== ==== ====
Operating income for Directory Advertising Services increased over last year primarily due to the higher revenues in Bell Atlantic which were partially offset by a corresponding increase in salesperson commissions. Directory Publishing Services' operating income decreased primarily due to an increase in information technology related expenses referred to above. Other operating loss represents corporate and general overhead costs that are not allocated to the business segments. The increase is due to higher costs associated with being a stand-alone company. Interest expense of $9.7 million in the first quarter 1999 represents the interest on the Debt. The Debt was issued in connection with the Distribution and was not outstanding during the first quarter 1998. Net income for the first quarter 1999 was $5.3 million, or $0.15 per diluted share compared to $12.1 million, or $0.35 per diluted share in 1998. As previously stated, we believe that the first quarter 1998 results are not comparable to the current operations as they do not include certain general and administrative expenses and interest expense that were incurred as a result of the separation from Old D&B. If the first quarter 1998 results are adjusted to (i) include the estimated additional general and administrative expenses associated with being a stand-alone company and (ii) assume the Debt was outstanding as of the beginning of 1998, we estimate that operating income for the first quarter 1998 would have been $18.0 million and net income would have been $4.4 million or $0.13 per diluted share. Liquidity And Capital Resources In connection with the Distribution, Donnelley borrowed $300 million under its Senior Secured Term Facilities ('Term Facilities') and issued $150 million of Senior Subordinated Notes (the 'Notes'). Donnelley also borrowed $50 million against its $100 million Senior Revolving Credit Facility (the 'Revolver', together with the Term Facilities, the 'Credit Agreement'). The net proceeds from these initial borrowings (the 'Debt'), were dividended to Old D&B and distributed to New D&B in connection with the Distribution. The Term Facilities mature between June 2004 and December 2006, and require quarterly principal repayments. The Notes mature in 2008 and pay interest semi-annually in June and December at the annual rate of 9.125%. The Credit Agreement and the Indenture governing the Notes each contain various financial and other restrictive covenants, including restrictions on indebtedness, capital expenditures and commitments. At April 30, 1999, we had total available borrowing capacity of $97.0 million under the Revolver. In 1998, we entered into a joint venture with China United Telecommunications Corporation ('China Unicom') to publish yellow pages directories and to offer Internet directory services in the People's Republic of China. Under the terms of the joint venture agreement, we will invest cash of approximately $15.6 million to acquire a 15% equity interest in the joint venture. As of April 30, 1999, we have invested $1.3 million and anticipate making additional contributions totaling $14.3 million over the next two to three years. We anticipate contributing approximately $8.0 million during the second quarter 1999, $3.8 million in 2000 and $2.5 million in 2001. These payments will be funded from cash flows from operations or from borrowings under the Revolver. We believe that cash from operations and available debt capacity under the Revolver, will be sufficient to fund our operations and meet our anticipated investment, capital expenditures and debt service requirements for the foreseeable future. Cash Flow Net cash provided by operations was $28.8 million through March 31, 1999 compared to $27.4 million through March 31, 1998. Net income declined in the first quarter 1999 mainly due to an increase in expenses, principally interest and general and administrative expenses, as a result of the Company's separation from Old D&B. In addition, cash generated by accounts receivable was lower in 1999, mainly due to higher sales for various Bell Atlantic directories during the first quarter 1999 as compared to 1998, which will be collected in later periods. These declines were offset by the timing of partnership cash receipts and changes in liabilities. The change in accounts payable, accrued and other liabilities in the first quarter 1998 resulted in a use of cash of $10.3 million compared to a use of $2.4 million in the first quarter of 1999. The decrease in the use of cash was attributable to the payment in 1998 for liabilities associated with a business sold in December 1997 and higher accounts payable and accrued taxes at March 31, 1999. Net cash used in investing activities during the first quarter 1999 was $1.2 million compared to $2.5 million through the first quarter 1998. The decrease in capital spending in 1999 is primarily attributable to lower spending on computer software. We currently have no material commitments for investment spending, other than the China joint venture mentioned above. Net cash used in financing activities was $24.2 million through March 31, 1999 compared to $24.9 million through March 31, 1998. The 1998 amount represents amounts distributed to Old D&B. Prior to July 1, 1998, all cash deposits were transferred to Old D&B on a daily basis and Old D&B funded our disbursement bank accounts as required. In the first quarter of 1999, cash of $17.8 million was used to repay debt and $7.5 million was used to repurchase stock, which was offset, in part, by proceeds of $1.1 million from the exercise of employee stock options. Year 2000 Issue The Year 2000 ('Y2K') issue is the result of computer programs being written using two digits rather than four digits to define the applicable year. Computer programs that have date sensitive software may recognize a date using '00' as the year 1900 rather than the year 2000. This could result in a system failure or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions. As part of our Y2K compliance program, all of our installed computer systems and software products have been assessed for Y2K problems. We replaced our financial systems (General Ledger, Accounts Payable, and Fixed Assets) with systems that use programs from Oracle Corporation, which have been tested and certified to be Y2K compliant. For all remaining systems, software programs are being modified or replaced. We are requesting assurances from all software vendors from which we have purchased or licensed software, or from which we may purchase or license software, that such software will correctly process all date information at all times. Additionally, all modifications to existing software, or new software installed is subjected to our internal Y2K compliance program described below. Through continued modifications to existing software and conversions to new software, we believe that we will be able to mitigate our exposure to the Y2K issue before 2000. However, if continued modifications and conversions are not made, or not completed on a timely basis, the Y2K issue could have a material adverse effect on our operating results and financial condition. We have divided our Y2K compliance program into five major phases - (1) the assessment of all computer systems and software products (collectively the 'Computer Systems') for Y2K compliance, (2) the remediation (i.e. conversion or modification) of each Computer System to be Y2K compliant, (3) the testing of the remediation to confirm that such remediation has not adversely impacted the operation of the Computer Systems, and that it can process dates correctly, (4) the implementation of the remediated Computer Systems into production and (5) certification of the remediation for Y2K compliance. The percentage of completion of each phase at the end of April 1999 is shown in the table below:
Assessment......... 100% Remediation........ 100% Testing............ 98% Implementation..... 96% Certification...... 75% We have been in the process of preparing six remaining applications for certification. The certification testing for some of these applications has been started and all six applications are expected to be certified by July 31, 1999. In addition, it is possible that certain computer systems or software products with which our computer systems, software, databases or other technology interface or are integrated with may not accept input of, store, manipulate and output dates in the year 2000 or thereafter without error or interruption. We have conducted a review of our computer systems to attempt to identify ways in which the systems could be affected by interface- or integration-related problems in correctly processing date information. We are communicating with those third parties with which we maintain business relationships to monitor and evaluate their progress in identifying and addressing their Y2K issues and assessing the potential impact, if any, to us. Currently, nothing has come to our attention that would indicate that the Y2K compliance efforts of a major third party would have a material adverse effect on our results of operations and financial condition. However, there can be no assurance that we will identify all interface- or integration-related or third party-related problems in advance of their occurrence, or that we will be able to successfully remedy problems that are discovered. The expenses of our efforts to identify and address such problems, or the expenses and liabilities to which we may become subject to as a result of such problems, could have a material adverse effect on our results of operations and financial condition. We expect to have our Y2K compliance program substantially completed during the third quarter. We continually assess the risk of non-compliance of our systems and the systems of major third parties and are currently in the process of developing contingency plans and alternative arrangements for circumstances outside our direct control. Through April 30, 1999, we have spent approximately $4.4 million addressing the Y2K issues and estimate that we will spend an additional $0.9 million during 1999. These costs will be funded through cash flows from operations. Market Risk Sensitive Instruments We are exposed to interest rate risk through our Credit Agreement where we borrow at prevailing short-term variable rates. In order to manage our exposure to fluctuations in interest rates, we have entered into interest rate swap agreements which allow us to raise funds at floating rates and effectively swap them into fixed rates that are lower than those available if fixed rate borrowings were made directly. These derivative financial instruments are viewed as risk management tools and are entered into for hedging purposes only. We do not use derivative financial instruments for trading or speculative purposes. There has been no change in the $175 million outstanding notional amount of interest rate swaps since December 31, 1998 and the unrealized fair value of the swaps was a loss of $1.3 million at March 31, 1999. Item 3. Quantitative and Qualitative Disclosure About Market Risk The requirements of this Item are discussed in Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations. PART II. OTHER INFORMATION Item 1. Legal Proceedings Reference is made to the discussion of legal proceedings found in the Annual Report on Form 10-K for the year ended December 31, 1998. New D&B has assumed the defense of the matters discussed therein and to the best of management's knowledge, there have been no material changes in the status of the proceedings referenced therein. In April 1999, Sandy Goldberg, Dellwood Publishing, Inc. and Rockland Yellow Pages initiated a lawsuit against Donnelley and Bell Atlantic in the United States District Court of the Southern District of New York. The Rockland Yellow Pages is a proprietary directory that competes against a Bell Atlantic directory in the same region. The complaint alleges that the defendants disseminated false information concerning the Rockland Yellow Pages, which has resulted in damages to the Rockland Yellow Pages. The plaintiffs are alleging a variety of claims including RICO violations, antitrust violations and Lanham Act violations. They are seeking damages in excess of $30 million, which amount the plaintiffs are seeking to have trebled under the antitrust laws. In addition, the plaintiffs are also seeking punitive damages in an unspecified amount. Management intends to mount a vigorous defense of the Company in this matter. At this preliminary stage in the proceedings, management is unable to predict the outcome of this matter, but believes that the resolution of the action will not have a material adverse effect on the Company's financial position or results of operations. The Company is also involved in certain legal proceedings incidental to the normal conduct of its business. Although there can be no assurances, management believes that the outcome of such legal proceedings will not have a material adverse effect on the Company's financial position, results of operations or cash flows. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits
Exhibit No. Document * 3.1 Certificate of Incorporation of the Company * 3.2 By-laws of the Company 3.3 Certificate of Incorporation of Donnelley (incorporated by reference to Exhibit 3.3 to Amendment No. 1 to the Registration Statement on Form S-4, filed with the Securities and Exchange Commission on August 7, 1998, Registration No. 333-59287) 3.4 By-laws of Donnelley (incorporated by reference to Exhibit 3.4 to the Registration Statement on Form S-4, filed with the Securities and Exchange Commission on July 17, 1998, Registration No. 333-59287) 4.1 Indenture dated as of June 5, 1998 between Donnelley, as Issuer, the Company, as Guarantor, and the Bank of New York, as Trustee, with respect to the 9 1/8% Senior Subordinated Notes due 2008 (incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S-4, filed with the Securities and Exchange Commission on July 17, 1998, Registration No. 333-59287) 4.2 Form of the 9 1/8% Senior Subordinated Notes due 2008 (included in Exhibit 4.1) 4.3 Company Guarantee (included in Exhibit 4.1) 4.4 Rights Agreement, dated as of October 27, 1998 between R.H. Donnelley Corporation and First Chicago Trust Company (incorporated by reference to Exhibit 4 to the Registration Statement on Form 8- A, filed with the Securities and Exchange Commission on November 5, 1998, Registration No. 001-07155) * 10.1 First Amendment to the Credit Agreement, dated as of March 4, 1999, among the Company, Donnelley, The Chase Manhattan Bank, as Administrative Agent and the Lenders party thereto * 10.2 1991 Key Employees' Stock Option Plan, as amended and restated * 27.1 Financial Data Schedule of the Company * 27.2 Financial Data Schedule of Donnelley - -------------------------- * filed herewith
(b) Reports on Form 8-K: None SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. R.H. DONNELLEY CORPORATION Date: May 14, 1999 By: ------------------------------- Philip C. Danford Senior Vice President and Chief Financial Officer Date: May 14, 1999 By: ------------------------------- William C. Drexler Vice President and Controller SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. R.H. DONNELLEY INC. Date: May 14, 1999 By: ------------------------------- Philip C. Danford Senior Vice President and Chief Financial Officer Date: May 14, 1999 By: ------------------------------- William C. Drexler Vice President and Controller EX-27.1 2 WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM R.H.DONNELLEY CORPORATION'S FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS 3-MOS DEC-31-1999 DEC-31-1998 MAR-31-1999 MAR-31-1998 5763 17 0 0 67931 60856 6792 5657 0 0 84533 72139 60764 56208 41446 32601 368845 359174 76150 50527 445750 0 0 0 0 0 51622 51165 (274302) 194722 368845 359174 0 0 31659 24344 0 0 25467 17610 0 0 1408 1264 9716 0 8887 20245 3572 8098 5315 12147 0 0 0 0 0 0 5315 12147 0.16 0.36 0.15 0.35
EX-27.2 3
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM R.H.DONNELLEY INC.'S FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS 3-MOS DEC-31-1999 DEC-31-1998 MAR-31-1999 MAR-31-1998 5763 17 0 0 67931 60856 6792 5657 0 0 84533 72139 60764 56208 41446 32601 368845 359174 76150 50527 445750 0 0 0 0 0 12002 12002 (234682) 233885 368845 359174 0 0 31659 24344 0 0 25467 17610 0 0 1408 1264 9716 0 8887 20245 3572 8098 5315 12147 0 0 0 0 0 0 5315 12147 0.16 0.36 0.15 0.35
EX-3.1 4 CERTIFICATE OF AMENDMENT TO THE RESTATED CERTIFICATE OF INCORPORATION, OF R.H. DONNELLEY CORPORATION R.H. Donnelley Corporation (the 'Corporation'), a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the 'DGCL'), does hereby amend the Restated Certificate of Incorporation of the Corporation. The undersigned hereby certifies that this amendment to the Restated Certificate of Incorporation, as amended, of the Corporation has been duly adopted in accordance with Section 242 of the DGCL. Article FIFTH of the Restated Certificate of Incorporation of the Corporation is hereby amended by deleting the last paragraph thereof. THE UNDERSIGNED, being the Vice President and Secretary of the Corporation, for the purpose of amending the Restated Certificate of Incorporation, of the Corporation pursuant to the DGCL, does make this amendment to the Restated Certificate of Incorporation of the Corporation, hereby declaring and certifying that this is my act and deed and the facts herein stated are true, and accordingly have hereunto set my hand as of this 27th day of April, 1999. R.H. DONNELLEY CORPORATION By: ------------------------- Name: Jane B. Clark Title: Vice President and Secretary ATTEST: ------------------------- Name: Adam F. Wergeles Title: Corporate Counsel CERTIFICATE OF AMENDMENT TO THE RESTATED CERTIFICATE OF INCORPORATION OF R.H. DONNELLEY CORPORATION R.H. Donnelley Corporation (the 'Corporation'), a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the 'DGCL'), does hereby amend the Restated Certificate of Incorporation of the Corporation. The undersigned hereby certifies that this amendment to the Restated Certificate of Incorporation of the Corporation has been duly adopted in accordance with Section 242 of the DGCL. Article FOURTH of the Restated Certificate of Incorporation of the Corporation is hereby amended to include the following text after the last paragraph thereof: 5. Reverse Stock Split. Effective as of the close of business on the date of filing this Amendment to the Restated Certificate of Incorporation (the 'Effective Time'), the filing of this Amendment, shall effect a reverse stock split (the 'Reverse Stock Split') pursuant to which each five (5) shares of common stock, par value $1 per share, of the corporation issued and outstanding, shall be combined into one (1) validly issued, fully paid and nonassessable share of common stock, par value $1 per share, of the corporation. The number of authorized shares, the number of shares of treasury stock and the par value of the common stock shall not be affected by the Reverse Stock Split. Each stock certificate that prior to the Effective Time represented shares of common stock shall, following the Effective Time, represent the number of shares into which the shares of common stock represented by such certificate shall be combined. The corporation shall not issue fractional shares or scrip as a result of the Reverse Stock Split, but shall arrange for the disposition of shares on behalf of those record holders of common stock at the Effective Time who would otherwise be entitled to fractional shares as a result of the Reverse Stock Split. THE UNDERSIGNED, being the Vice President and the Secretary of the Corporation, for the purpose of amending the Restated Certificate of Incorporation of the Corporation, pursuant to the DGCL, does make this amendment to the Restated Certificate of Incorporation of the Corporation, hereby declaring and certifying that this is my act and deed and the facts herein stated are true, and accordingly have hereunto set my hand as of this 24th day of August, 1998. R.H. DONNELLEY CORPORATION By: ---------------------- Name: Jane B. Clark Title: Vice President and Corporate Secretary ATTEST: -------------------------- Name: Adam F. Wergeles Title: Corporate Counsel CERTIFICATE OF DESIGNATION OF SERIES B PARTICIPATING CUMULATIVE PREFERRED STOCK OF R.H. DONNELLEY CORPORATION Pursuant to Section 151 of the General Corporation Law of the State of Delaware We, Frank M. Colarusso, Vice President and Treasurer, and Jane B. Clark, Vice President and Corporate Secretary, of R.H. Donnelley Corporation, a corporation organized and existing under the General Corporation Law of the State of Delaware ('Delaware Law'), in accordance with the provisions thereof, DO HEREBY CERTIFY: That pursuant to the authority conferred upon the Board of Directors by the Certificate of Incorporation of the Corporation, the Board of Directors on October 27, 1998, adopted the following resolution creating a series of Preferred Stock in the amount and having the designation, voting powers, preferences and relative, participating, optional and other special rights and qualifications, limitations and restrictions thereof as follows: SECTION 1. Designation and Number of Shares. The shares of such series shall be designated as 'Series B Participating Cumulative Preferred Stock' (the 'Series B Preferred Stock'), and the number of shares constituting such series shall be 400,000. Such number of shares of the Series B Preferred Stock may be increased or decreased by resolution of the Board of Directors; provided that no decrease shall reduce the number of shares of Series B Preferred Stock to a number less than the number of shares then outstanding plus the number of shares issuable upon exercise or conversion of outstanding rights, options or other securities issued by the Corporation. SECTION 2. Dividends and Distributions. (a) The holders of shares of Series B Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable on March 10, June 10, September 10 and December 10 of each year (each such date being referred to herein as a 'Quarterly Dividend Payment Date'), commencing on the first Quarterly Dividend Payment Date after the first issuance of any share or fraction of a share of Series B Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (i) $1.00 and (ii) subject to the provision for adjustment hereinafter set forth, 100 times the aggregate per share amount of all cash dividends or other distributions and 100 times the aggregate per share amount of all non-cash dividends or other distributions (other than (A) a dividend payable in shares of Common Stock, par value $1 per share, of the Corporation (the 'Common Stock') or (B) a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise)), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series B Preferred Stock. If the Corporation shall at any time after October 27, 1998 (the 'Rights Declaration Date') pay any dividend on Common Stock payable in shares of Common Stock or effect a subdivision or combination of the outstanding shares of Common Stock (by reclassification or otherwise) into a greater or lesser number of shares of Common Stock, then in each such case the amount to which holders of shares of Series B Preferred Stock were entitled immediately prior to such event under clause 2(a) (ii) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (b) The Corporation shall declare a dividend or distribution on the Series B Preferred Stock as provided in paragraph 2(a) above immediately after it declares a dividend or distribution on the Common Stock (other than as described in clauses 2(a)(ii)(A) and 2(a)(ii)(B) above); provided that if no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date (or, with respect to the first Quarterly Dividend Payment Date, the period between the first issuance of any share or fraction of a share of Series B Preferred Stock and such first Quarterly Dividend Payment Date), a dividend of $1.00 per share on the Series B Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. (c) Dividends shall begin to accrue and be cumulative on outstanding shares of Series B Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares of Series B Preferred Stock, unless the date of issue of such shares is on or before the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue and be cumulative from the date of issue of such shares, or unless the date of issue is a date after the record date for the determination of holders of shares of Series B Preferred Stock entitled to receive a quarterly dividend and on or before such Quarterly Dividend Payment Date, in which case dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on shares of Series B Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series B Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall not be more than 60 days prior to the date fixed for the payment thereof. SECTION 3. Voting Rights. In addition to any other voting rights required by law, the holders of shares of Series B Preferred Stock shall have the following voting rights: (a) Subject to the provision for adjustment hereinafter set forth, each share of Series B Preferred Stock shall entitle the holder thereof to 100 votes on all matters submitted to a vote of stockholders of the Corporation. If the Corporation shall at any time after the Rights Declaration Date pay any dividend on Common Stock payable in shares of Common Stock or effect a subdivision or combination of the outstanding shares of Common Stock (by reclassification or otherwise) into a greater or lesser number of shares of Common Stock, then in each such case the number of votes per share to which holders of shares of Series B Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (b) Except as otherwise provided herein or by law, the holders of shares of Series B Preferred Stock and the holders of shares of Common Stock shall vote together as a single class on all matters submitted to a vote of stockholders of the Corporation. (c) (i) If at any time dividends on any Series B Preferred Stock shall be in arrears in an amount equal to six quarterly dividends thereon, the occurrence of such contingency shall mark the beginning of a period (herein called a 'default period') which shall extend until such time when all accrued and unpaid dividends for all previous quarterly dividend periods and for the current quarterly dividend period on all shares of Series B Preferred Stock then outstanding shall have been declared and paid or set apart for payment. During each default period, all holders of Preferred Stock and any other series of Preferred Stock then entitled as a class to elect directors, voting together as a single class, irrespective of series, shall have the right to elect two Directors. (ii) During any default period, such voting right of the holders of Series B Preferred Stock may be exercised initially at a special meeting called pursuant to subparagraph 3(c)(iii) hereof or at any annual meeting of stockholders, and thereafter at annual meetings of stockholders; provided that neither such voting right nor the right of the holders of any other series of Preferred Stock, if any, to increase, in certain cases,the authorized number of Directors shall be exercised unless the holders of 10% in number of shares of Preferred Stock outstanding shall be present in person or by proxy. The absence of a quorum of holders of Common Stock shall not affect the exercise by holders of Preferred Stock of such voting right. At any meeting at which holders of Preferred Stock shall exercise such voting right initially during an existing default period, they shall have the right, voting as a class, to elect Directors to fill such vacancies, if any, in the Board of Directors as may then exist up to two Directors or, if such right is exercised at an annual meeting, to elect two Directors. If the number which may be so elected at any special meeting does not amount to the required number, the holders of the Preferred Stock shall have the right to make such increase in the number of Directors as shall be necessary to permit the election by them of the required number. After the holders of the Preferred Stock shall have exercised their right to elect Directors in any default period and during the continuance of such period, the number of Directors shall not be increased or decreased except by vote of the holders of Preferred Stock as herein provided or pursuant to the rights of any equity securities ranking senior to or pari passu with the Series B Preferred Stock. (iii) Unless the holders of Preferred Stock shall, during an existing default period, have previously exercised their right to elect Directors, the Board of Directors may order, or any stockholder or stockholders owning in the aggregate not less than 10% of the total number of shares of Preferred Stock outstanding, irrespective of series, may request, the calling of a special meeting of holders of Preferred Stock, which meeting shall thereupon be called by the President, a Vice President or the Secretary of the Corporation. Notice of such meeting and of any annual meeting at which holders of Preferred Stock are entitled to vote pursuant to this paragraph 3(c)(iii) shall be given to each holder of record of Preferred Stock by mailing a copy of such notice to him at his last address as the same appears on the books of the Corporation. Such meeting shall be called for a time not earlier than 20 days and not later than 60 days after such order or request or in default of the calling of such meeting within 60 days after such order or request, such meeting may be called on similar notice by any stockholder or stockholders owning in the aggregate not less than 10% of the total number of shares of Preferred Stock outstanding, irrespective of series. Notwithstanding the provisions of this paragraph 3(c)(iii), no such special meeting shall be called during the period within 60 days immediately preceding the date fixed for the next annual meeting of stockholders. (iv) In any default period, the holders of Common Stock, and other classes of stock of the Corporation if applicable, shall continue to be entitled to elect the whole number of Directors until the holders of Preferred Stock shall have exercised their right to elect two Directors voting as a class, after the exercise of which right (x) the Directors so elected by the holders of Preferred Stock shall continue in office until their successors shall have been elected by such holders or until the expiration of the default period, and (y) any vacancy in the Board of Directors may (except as provided in paragraph 3(c)(ii) hereof) be filled by vote of a majority of the remaining Directors theretofore elected by the holders of the class of stock which elected the Director whose office shall have become vacant. References in this paragraph 3(c) to Directors elected by the holders of a particular class of stock shall include Directors elected by such Directors to fill vacancies as provided in clause (y) of the foregoing sentence. (v) Immediately upon the expiration of a default period, (x) the right of the holders of Preferred Stock as a class to elect Directors shall cease, (y) the term of any Directors elected by the holders of Preferred Stock as a class shall terminate, and (z) the number of Directors shall be such number as may be provided for in the certificate of incorporation or bylaws irrespective of any increase made pursuant to the provisions of paragraph 3(c)(ii) hereof (such number being subject, however, to change thereafter in any manner provided by law or in the certificate of incorporation or bylaws). Any vacancies in the Board of Directors effected by the provisions of clauses (y) and (z) in the preceding sentence may be filled by a majority of the remaining Directors. (d) The Certificate of Incorporation of the Corporation shall not be amended in any manner (whether by merger or otherwise) so as to adversely affect the powers, preferences or special rights of the Series B Preferred Stock without the affirmative vote of the holders of a majority of the outstanding shares of Series B Preferred Stock, voting separately as a class. (e) Except as otherwise provided herein, holders of Series B Preferred Stock shall have no special voting rights, and their consent shall not be required for taking any corporate action. SECTION 4. Certain Restrictions. (a) Whenever quarterly dividends or other dividends or distributions payable on the Series B Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on outstanding shares of Series B Preferred Stock shall have been paid in full, the Corporation shall not: (i) declare or pay dividends on, or make any other distributions on, any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series B Preferred Stock; (ii) declare or pay dividends on, or make any other distributions on, any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series B Preferred Stock, except dividends paid ratably on the Series B Preferred Stock and all such other parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; (iii) redeem, purchase or otherwise acquire for value any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series B Preferred Stock; provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of stock of the Corporation ranking junior (as to dividends and upon dissolution, liquidation or winding up) to the Series B Preferred Stock; or (iv) redeem, purchase or otherwise acquire for value any shares of Series B Preferred Stock, or any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series B Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of Series B Preferred Stock and all such other parity stock upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. (b) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for value any shares of stock of the Corporation unless the Corporation could, under paragraph 4(a), purchase or otherwise acquire such shares at such time and in such manner. SECTION 5. Reacquired Shares. Any shares of Series B Preferred Stock redeemed, purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock without designation as to series and may be reissued as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board of Directors as permitted by the Certificate of Incorporation or as otherwise permitted under Delaware Law. SECTION 6. Liquidation, Dissolution and Winding Up. Upon any liquidation, dissolution or winding up of the Corporation, no distribution shall be made (1) to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series B Preferred Stock unless, prior thereto, the holders of shares of Series B Preferred Stock shall have received $1.00 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment; provided that the holders of shares of Series B Preferred Stock shall be entitled to receive an aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to 100 times the aggregate amount to be distributed per share to holders of Common Stock, or (2) to the holders of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series B Preferred Stock, except distributions made ratably on the Series B Preferred Stock and all such other parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. If the Corporation shall at any time after the Rights Declaration Date pay any dividend on Common Stock payable in shares of Common Stock or effect a subdivision or combination of the outstanding shares of Common Stock (by reclassification or otherwise) into a greater or lesser number of shares of Common Stock, then in each such case the aggregate amount to which holders of shares of Series B Preferred Stock were entitled immediately prior to such event under the proviso in clause (1) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. SECTION 7. Consolidation, Merger, Etc. If the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash or any other property, then in any such case the shares of Series B Preferred Stock shall at the same time be similarly exchanged for or changed into an amount per share, subject to the provision for adjustment hereinafter set forth, equal to 100 times the aggregate amount of stock, securities, cash or any other property, as the case may be, into which or for which each share of Common Stock is changed or exchanged. If the Corporation shall at any time after the Rights Declaration Date pay any dividend on Common Stock payable in shares of Common Stock or effect a subdivision or combination of the outstanding shares of Common Stock (by reclassification or otherwise) into a greater or lesser number of shares of Common Stock, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series B Preferred Stock shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. SECTION 8. No Redemption. The Series B Preferred Stock shall not be redeemable. SECTION 9. Rank. The Series B Preferred Stock shall rank junior (as to dividends and upon liquidation, dissolution and winding up) to all other series of the Corporation's preferred stock except any series that specifically provides that such series shall rank junior to the Series B Preferred Stock. SECTION 10. Fractional Shares. Series B Preferred Stock may be issued in fractions of a share which shall entitle the holder, in proportion to such holder's fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series B Preferred Stock. IN WITNESS WHEREOF, we have executed and subscribed this Certificate this 30th day of October, 1998. Frank M. Colarusso ------------------ Jane B. Clark ------------------ CERTIFICATE OF OWNERSHIP AND MERGER MERGING RHD CORPORATION INTO THE DUN & BRADSTREET CORPORATION (PURSUANT TO SECTION 253 OF THE GENERAL CORPORATION LAW OF DELAWARE) The Dun & Bradstreet Corporation, a Delaware corporation (the 'Corporation'), does hereby certify: FIRST: That the Corporation is incorporated pursuant to the General Corporation Law of the State of Delaware. SECOND: That the Corporation owns all of the outstanding shares of each class of the capital stock of RHD Corporation, a Delaware corporation. THIRD: That the Corporation, by the following resolutions of its Board of Directors, duly adopted on the third day of June, 1998, determined to merge into itself RHD Corporation (the 'Merger') on the conditions set forth in such resolutions: RESOLVED: That the Dun & Bradstreet Corporation merge into itself its subsidiary, RHD Corporation, and assume all of said subsidiary's liabilities and obligations; and FURTHER RESOLVED: That upon the filing of the certificate of ownership and merger contemplated by these resolutions, and effective at the time specified in such certificate, the name of the Corporation shall be changed to R.H. Donnelley Corporation; and FURTHER RESOLVED: That the President and the Secretary of this Corporation be and they hereby are directed to make, execute and acknowledge a certificate of ownership and merger setting forth a copy of the resolution to merge said RHD Corporation into this corporation and to assume said subsidiary's liabilities and obligations and the date of adoption thereof and to file the same in the office of the Secretary of State of Delaware and a certified copy thereof to the Office of the Recorder of Deeds of New Castle County. FOURTH: that the Merger shall be effective at 5:30 p.m., Eastern Standard Time, on June 30, 1998. IN WITNESS WHEREOF, said The Dun & Bradstreet Corporation caused its corporate seal to be affixed and this certificate to be signed by Mitchell C. Sussis, its authorized officer, this 29th day of June, 1998. ------------------ BY: Mitchell C. Sussis Secretary RESTATED CERTIFICATE OF INCORPORATION OF THE DUN & BRADSTREET CORPORATION The name of the corporation is The Dun & Bradstreet Corporation (the 'corporation'). The corporation was originally incorporated under the name of DUN & BRADSTREET COMPANIES, INC.; the original Certificate of Incorporation was filed with the Secretary of State of Delaware on February 6, 1973. The following Restated Certificate of Incorporation only restates and integrates and does not further amend the provisions of the Certificate of Incorporation as heretofore amended or supplemented and there is no discrepancy between those provisions and the provisions of this Restated Certificate of Incorporation. 'FIRST: The name of the corporation is The Dun & Bradstreet Corporation. SECOND: The registered office of the corporation in the State of Delaware is located at No. 1209 Orange Street, in the City of Wilmington, County of New Castle; and the name of its registered agent at such address is The Corporation Trust Company. THIRD: The purposes of the corporation are to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware, and without limiting the foregoing to hold the securities of other corporations and to gather, interpret, publish and/or communicate information of all kinds, and to develop, produce, manufacture, buy, sell and generally deal in products, goods, wares, merchandise and services of all kinds. FOURTH: (1) The total number of shares of stock which the corporation shall have authority to issue is 400,000,000 shares of common stock, par value $1 per share, and 10,000,000 shares of preferred stock, par value $1 per share. (2) (a) Shares of preferred stock may be issued from time to time in one or more series, each such series to have distinctive serial designations, as shall hereafter be determined in the resolution or resolutions providing for the issue of such series from time to time adopted by the Board of Directors pursuant to authority so to do which is hereby vested in the Board of Directors. (b) Each series of preferred stock (i) may have such number of shares; (ii) may have such voting powers, full or limited, or may be without voting powers; (iii) may be subject to redemption at such time or times and at such prices; (iv) may be entitled to receive dividends (which may be cumulative or noncumulative) at such rate or rates, on such conditions, and at such times, and payable in preference to, or in such relation to, the dividends payable on any other class or classes or series of stock; (v) may have such rights upon the dissolution of, or upon any distribution of the assets of, the corporation; (vi) may be made convertible into, or exchangeable for, shares of any other class or classes or of any other series of the same or any other class or classes of stock of the corporation at such price or prices or at such rates of exchange, and with such adjustments; (vii) may be entitled to the benefit of a sinking fund or purchase fund to be applied to the purchase or redemption of shares of such series in such amount or amounts; (viii) may be entitled to the benefit of conditions and restrictions upon the creation of indebtedness of the corporation of any subsidiary, upon the issue of any additional stock (including additional shares of such series or of any other series) and upon the payment of dividends or the making of other distributions on, and the purchase, redemption or other acquisition by the corporation or any subsidiary of any outstanding stock of the corporation; and (ix) may have such other relative, participating, optional or other special rights and qualifications, limitations or restrictions thereof; all as shall be stated in said resolution or resolutions providing for the issue of such preferred stock. Except where otherwise set forth in the resolution or resolutions adopted by the Board of Directors providing for the issue of any series of preferred stock, the number of shares comprising such series may be increased or decreased (but not below the number of shares then outstanding) from time to time by like action of the Board of Directors. (c) Shares of any series of preferred stock which have been redeemed (whether through the operation of a sinking fund or otherwise) or purchased by the corporation, or which, if convertible or exchangeable, have been converted into or exchanged for shares of stock of any other class or classes shall have the status of authorized and unissued shares of preferred stock and may be reissued as a part of the series of which they were originally a part or may be reclassified and reissued as part of a new series of preferred stock to be created by resolution or resolutions of the Board of Directors or as part of any other series of preferred stock, all subject to the conditions or restrictions on issuance set forth in the resolution or resolutions adopted by the Board of Directors providing for the issue of any series of preferred stock and to any filing required by law. (3) (a) Except as otherwise provided by law or by the resolution or resolutions of the Board of Directors providing for the issue of any series of the preferred stock, the common stock shall have the exclusive right to vote for the election of directors and for all other purposes, each holder of the common stock being entitled to one vote for each share held. (b) Subject to all of the rights of the preferred stock or any series thereof, the holders of the common stock shall be entitled to receive, when, as and if declared by the Board of Directors, out of funds legally available therefor, dividends payable in cash, stock or otherwise. (c) Upon any liquidation, dissolution or winding-up of the corporation, whether voluntary or involuntary, and after the holders of the preferred stock or each series shall have been paid in full the amounts to which they respectively shall be entitled, or a sum sufficient for such payment in full shall have been set aside, the remaining net assets of the corporation shall be distributed pro rata to the holders of the common stock in accordance with their respective rights and interests, to the exclusion of the holders of the preferred stock. (4) No holder of shares of stock of the corporation of any class now or hereafter authorized shall be entitled as such as a matter of right, to subscribe for or purchase any part of any new or additional issue of stock of any class whatsoever, or of securities convertible into stock of any class whatsoever, whether nor or hereafter authorized, or whether issued for cash or otherwise. FIFTH: The business of the corporation shall be managed by the Board of Directors except as otherwise provided by law. None of the directors need be a stockholder of the corporation or a resident of the State of Delaware. Subject to any limitations that may be imposed by the stockholders, the Board of Directors may make by-laws and from time to time may alter, amend or repeal any by-laws, but any by-laws made by the Board of Directors or the stockholders may be altered, amended or repealed by the stockholders at any annual meeting or at any special meeting, provided that notice of such proposed alteration, amendment or repeal is included in the notice of such meeting. A director of the corporation shall not, in the absence of fraud, be disqualified by his office from dealing or contracting with the corporation either as vendor, purchaser or otherwise, nor in the absence of fraud, shall any transaction or contract of the corporation be void or voidable or affected by reason of the fact that any director or any firm of which any director is a member, or any corporation of which the director is an officer, director or stockholder, is in any way interested in such transaction or contract, provided that, at the meeting of the Board of Directors or of a committee thereof having authority in the premises to authorize or confirm said contract or transaction, the interest of such director, firm, or corporation therein and the material facts with respect thereto are disclosed or known, and there shall be present a quorum of directors or of the directors constituting such committee not so interested or connected, and such contract or transaction shall be approved by a majority of such quorum, which majority shall consist of directors not so interested or connected. Nor shall such contract or transaction be void or voidable or affected by reason of the fact that the vote of such director or directors, who have or may have interests therein which are or might be adverse to the interests of the corporation, shall have been necessary to obligate the corporation upon such contract or transaction, nor shall any director or directors having such adverse interest be liable to the corporation or to any stockholder or creditor thereof, or to any other person, for any loss incurred by it under or by reason of any such contract or transaction nor shall any such director or directors be accountable for any gains or profits realized thereon; always provided, however, that such contract or transaction shall, at the time it was entered into, have been a reasonable one to have been entered into and shall have been upon terms that at the time were fair. Any contract, transaction or act of the corporation or of the Board of Directors or of the Executive Committee which shall be ratified by a majority vote of the stockholders of the corporation having voting power present at any annual meeting or any special meeting called for such purpose and to whom the material facts with respect thereto are disclosed or known, shall be as valid and as binding as though ratified by every stockholder of the corporation, provided, however, that any failure of the stockholders to approve or ratify such contract, transaction or act, when and if submitted, shall not be deemed in any way to invalidate the same or to deprive the corporation, its directors or officers, of their right to proceed with such contract, transaction or action. Any director of the corporation may vote upon any contract or other transaction between the corporation and any subsidiary or affiliated corporation without regard to the fact that he is also a director of such subsidiary or affiliated corporation. No more than one-fourth of the corporation's issued capital stock shall be owned of record or voted by aliens or their representatives or by a foreign corporation or representative thereof or by any corporation organized under the laws of a foreign country. The corporation shall not be owned or controlled directly or indirectly by any other corporation of which any officer or more than one-fourth of the directors are aliens, or of which more than one-fourth of the capital stock is owned of record or voted by aliens, their representatives, or by a foreign government or representative thereof, or by any corporation organized under the laws of a foreign country. The By-Laws of the corporation may contain provisions to implement this provision and to avoid the prohibition of Section 310(a) of the Federal Communications Act as now in effect or as it may hereafter from time to time be amended. SIXTH: (1) The corporation shall indemnify, to the full extent that it shall have power under applicable law to do so and in a manner permitted by such law, any person made or threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact he is or was a director or officer of the corporation. The corporation may indemnify, to the full extent that it shall have power under applicable law to do so and in a manner permitted by such law, any person made or threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was an employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise. The indemnification provided by this Article SIXTH shall not be deemed exclusive of any other rights to which any person indemnified may be entitled under any by-law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be such director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. The corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability under the provisions of this Article SIXTH or otherwise. (2) A director of the corporation shall have no personal liability to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, to the full extent that such liability may be eliminated under the Delaware General Corporation Law as in effect from time to time. SEVENTH: The business and affairs of the corporation shall be managed by or under the direction of a Board of Directors consisting of not less than three directors, the exact number of directors to be determined from time to time by resolution adopted by affirmative vote of a majority of the entire Board of Directors. The directors shall be divided into three classes, designated Class I, Class II, and Class III. Each class shall consist, as nearly as possible, of one-third of the total number of directors constituting the entire Board of Directors. At the 1984 annual meeting of stockholders, four Class I directors shall be elected for a one-year term and five Class II directors for a two- year term and five Class III directors for a three-year term. At each succeeding annual meeting of stockholders beginning in 1985, successors to the class of directors whose term expires at that annual meeting shall be elected for a three-year term. If the number of directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of directors in each class as nearly equal as possible, and any additional director of any class elected to fill a vacancy resulting from an increase in such class shall hold office for a term that shall coincide with the remaining term of that class, but in no case shall a decrease in the number of directors remove or shorten the term of any incumbent director. A director shall hold office until the annual meeting for the year in which his term expires and until his successor shall be elected and shall qualify, subject, however, to prior death, resignation, retirement, disqualification or removal from office. Any vacancy on the Board of Directors that results from an increase in the number of directors may be filled by a majority of the directors then in office, and any other vacancy occurring in the Board of Directors may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director. Any director elected to fill a vacancy not resulting from an increase in the number of directors shall have the same remaining term as that of his predecessor. Notwithstanding the foregoing, whenever the holders of any one or more classes or series of preferred stock issued by the corporation shall have the right, voting separately by class or series, to elect directors at an annual or special meeting of stockholders, the election, term of office, filling of vacancies and other features of such directorships shall be governed by the terms of this certificate of incorporation applicable thereto, and such directors so elected shall not be divided into classes pursuant to this Article SEVENTH unless expressly provided by such terms. EIGHTH: No action shall be taken by stockholders of the corporation except at an annual or special meeting of stockholders of the corporation.' This Restated Certificate of Incorporation was duly adopted by the Board of Directors in accordance with the provisions of Section 245 of the General Corporation Law of Delaware. IN WITNESS WHEREOF, THE DUN & BRADSTREET CORPORATION has caused its corporate seal to be hereunto affixed and this certificate to be signed by CHARLES W. MORITZ, its Chairman of the Board and Chief Executive Officer, and attested by WILLIAM H. BUCHANAN, JR., its Vice President and Secretary, this 15th day of June, 1988. THE DUN & BRADSTREET CORPORATION [Corporate Seal] By: --------------------------- Chairman of the Board Attest: --------------------------- Secretary State of New York ) County of New York ) ss.: BE IT REMEMBERED that on this 15th day of June, 1988, personally came before me a Notary Public in and for the County and State aforesaid, CHARLES W. MORITZ, Chairman of the Board of THE DUN & BRADSTREET CORPORATION, a corporation of the State of Delaware, and he duly executed said certificate before me and acknowledged the said certificate to be his act and deed and the act and deed of said corporation and that the facts stated herein are true; and that the seal affixed to said certificate and attested by the Secretary of said corporation is the common or corporate seal of said corporation. IN WITNESS WHEREOF, I have hereunto set my hand and seal of office the day and year aforesaid. ---------------------------- Notary Public [Notarial Seal] EX-3.2 5 EXHIBIT A AMENDED AND RESTATED BY-LAWS OF R.H. DONNELLEY CORPORATION APRIL 28, 1999 AMENDED AND RESTATED R.H. DONNELLEY CORPORATION BY-LAWS ARTICLE 1. STOCKHOLDERS. Section 1. The annual meeting of the stockholders of the Corporation for the purpose of electing directors and for the transaction of such other business as may properly be brought before the meeting shall be held on such date, and at such time and place within or without the State of Delaware as may be designated from time to time by the Board of Directors. Section 2. Special meetings of the stockholders may be held upon call of the Board of Directors, the Chairman of the Board or the President (and shall be called by the Chairman of the Board or the President at the request in writing of stockholders owning a majority of the outstanding shares of the Corporation entitled to vote at the meeting) at such time and at such place within or without the State of Delaware, as may be fixed by the Board of Directors, the Chairman of the Board or the President or by the stockholders owning a majority of the outstanding shares of the Corporation so entitled to vote, as the case may be, and as may be stated in the notice setting forth such call. Section 3. Except as otherwise provided by law, notice of the time, place and purpose or purposes of every meeting of stockholders shall be delivered personally or mailed not earlier than sixty, nor less than ten days previous thereto, to each stockholder of record entitled to vote at the meeting at such address as appears on the record of the Corporation. Notice of any meeting of stockholders need not be given to any stockholder who shall waive notice thereof, before or after such meeting, in writing, or to any stockholder who shall attend such meeting, except when the stockholder attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Section 4. A majority of the shares entitled to vote, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders. If there be no such quorum present in person or by proxy, the holders of a majority of such shares so present or represented may adjourn the meeting from time to time. Section 5. Meeting of the stockholders shall be presided over by the Chairman of the Board or, if such officer is not present, by the President or a Vice President or, if no such officer is present, by a chairman to be chosen at the meeting. The Secretary of the Corporation or, in such officer's absence, an Assistant Secretary shall act as secretary of the meeting. If neither the Secretary nor an Assistant Secretary is present, the chairman shall appoint a secretary. Section 6. Each stockholder entitled to vote at any meeting may vote in person or by proxy for each share of stock held by such stockholder which has voting power upon the matter in question at the time but no proxy shall be voted on after one year from its date. Section 7. All elections of directors shall be by written ballot and shall be determined by a plurality of the voting power present in person or represented by proxy and entitled to vote. All other voting need not be by written ballot, except upon demand therefor by the Board of Directors or the officer of the Corporation presiding at the meeting of stockholders where the vote is to be taken. Except as otherwise provided by law, in all matters other than the election of directors, the affirmative vote of the majority of the voting power present in person or represented by proxy and entitled to vote shall be the act of the stockholders. The chairman of each meeting at which directors are to be elected shall appoint at least one inspector of election, unless such appointment shall be unanimously waived by those stockholders present or represented by proxy at the meeting and entitled to vote at the election of directors. No director or candidate for the office of director shall be appointed as such inspector. The duties of inspector at such meeting with strict impartiality and according to the best of their ability, and shall take charge of the polls and after the balloting shall make a certificate of the result of the vote taken. Section 8. Only persons who are nominated in accordance with the procedures set forth in these by-laws shall be eligible to serve as directors. Nominations of persons for election to the Board of Directors of the Corporation may be made at a meeting of stockholders (a) by or at the direction of the Board of Directors or (b) by any stockholder of the Corporation who is a stockholder of record at the time of giving of notice provided for in this Section 8, who shall be entitled to vote for the election of directors at the meeting and who complies with the notice procedures set forth in this Section 8. Such nominations, other than those made by or at the direction of the Board of Directors, shall be made pursuant to timely notice in writing to the Secretary of the Corporation. To be timely, a stockholder's notice shall be delivered to or mailed and received at the principal executive offices of the Corporation not less than 60 days nor more than 90 days prior to the meeting; provided, however, that in the event that less than 70 days' notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the 10th day following the day on which such notice of the date of the meeting or such public disclosure was made. Such stockholder's notice shall set forth (a) as to each person whom the stockholder proposes to nominate for election or reelection as a director all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934 (including such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected); and (b) as to the stockholder giving the notice (i) the name and address, as they appear on the Corporation's books, of such stockholder and (ii) the class and number of shares of the Corporation which are beneficially owned by such stockholder. At the request of the Board of Directors, any person nominated by the Board of Directors for election as a director shall furnish to the Secretary of the Corporation that information required to be set forth in a stockholder's notice of nomination which pertains to the nominee. No person shall be eligible to serve as a director of the Corporation unless nominated in accordance with the procedure set forth in this by-law. The chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the procedures prescribed by the by-laws, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. Notwithstanding the foregoing provisions of this Section 8, a stockholder shall also comply with all applicable requirements of the Securities Exchange Act of 1934, and the rules and regulations thereunder with respect to the matters set forth in this Section. Section 9. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall be not more than sixty or less than ten days before the date of such meeting, or more than sixty days prior to any other action. If for any reason the Board of Directors shall not have fixed a record date for any such purpose, the record date for such purposes shall be determined as provided by law. Only those stockholders of record on the date so fixed or determined shall be entitled to any of the foregoing rights, notwithstanding the transfer of any such stock on the books of the Corporation after any such record date so fixed or determined. ARTICLE II. BOARD OF DIRECTORS. Section 1. The Board of Directors of the Corporation shall consist of such number of directors, not less than three, as shall from time to time be fixed by resolution of the Board of Directors. The directors shall be divided into three classes in the manner set forth in the Certificate of Incorporation of the corporation, each class to be elected for the term set forth therein. A majority of the total number of directors shall constitute a quorum for the transaction of business and, except as otherwise provided by law or by the Corporation's Certificate of Incorporation, the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors. Directors need not be stockholders. Section 2. Vacancies in the Board of Directors shall be filled by a majority of the remaining directors, though less than a quorum; and in case of an increase in the number of directors, the additional directors shall be elected by a majority of the directors in office at the time of increase, though less than a quorum; and the directors so chosen shall hold office for a term as set forth in the Certificate of Incorporation of the Corporation. Section 3. Meetings of the Board of Directors shall be held at such place within or without the State of Delaware as may from time to time be fixed by resolution of the Board or as may be specified in the notice of call of any meeting. Regular meetings of the Board of Directors shall be held at such times as may from time to time be fixed by resolution of the Board and special meetings may be held at any time upon the call of the Chairman of the Board or the President, by oral, telegraphic or written notice, duly served on or sent or mailed to each director not less than one day before the meeting. The notice of any meeting need not specify the purpose thereof. A meeting of the Board may be held without notice immediately after the annual meeting of stockholders at the same place at which such meeting is held. Notice need not be given of regular meetings of the Board held at times fixed by resolution of the Board. Notice of any meeting need not be given to any director who shall attend such meeting in person or who shall waive notice thereof, before or after such meeting, in writing. Section 4. The Board of Directors may, by resolution or resolutions, passed by a majority of the whole Board, designate one or more committees, each committee to consist of three or more of the Directors of the Corporation which, to the extent provided in said resolution or resolutions, shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it. A majority of the members of a committee shall constitute a quorum for the transaction of its business. In the absence of disqualification of any member of any such committee or committees, but not in the case of a vacancy therein, the member or members thereof present at any meeting and not disqualified from voting, whether or not the member or members constitute a quorum, may unanimously appoint another member of the Board of Directors, who is not an officer of the Corporation or any of its subsidiaries, to act at the meeting for all purposes in the place of any such absent or disqualified member. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board of Directors. ARTICLE III. OFFICERS. Section 1. The Board of Directors, as soon as may be after each annual meeting of the stockholders, shall elect officers of the Corporation, including a Chairman of the Board, a President, one or more Vice Presidents, a Secretary and a Treasurer. The Board of Directors may also from time to time appoint such other officers (including one or more Assistant Vice Presidents, and one or more Assistant Secretaries and one or more Assistant Treasurers) as it may deem proper or may delegate to any elected officer of the Corporation the power so to appoint and remove any such other officers and to prescribe their respective terms of office, authorities and duties. Any Vice President may be designated Executive, Senior or Corporate, or may be given such other designation or combination of designations as the Board of Directors may determine. Any two offices may be held by the same person. The Chairman of the Board and the President shall be chosen from among the Directors. Section 2. All officers of the Corporation elected or appointed by the Board of Directors shall hold office until their respective successors are chosen and qualified. Any officer may be removed from office at any time either with or without cause by the affirmative vote of a majority of the members of the Board then in office, or, in the case of appointed officers, by any elected officer upon whom such power of removal shall have been conferred by the Board of Directors. Section 3. Each of the officers of the Corporation elected or appointed by the Board of Directors shall have powers and duties prescribed by law, by the By-Laws or by the Board of Directors and, unless otherwise prescribed by the By-Laws or by the Board of Directors, shall have such further powers and duties as ordinarily pertain to that office. The Chairman of the Board or the President, as determined by the Board of Directors, shall be the Chief Executive Officer and shall have the general direction of the affairs of the Corporation. Any officer, agent, or employee of the Corporation may be required to give bond for the faithful discharge of such person's duties in such sum and with such surety or sureties as the Board of Directors may from time to time prescribe. Section 4. There shall be a Controller who shall exercise general supervision of and be responsible for the efficient operation of the Accounting Department of the Corporation. The Controller shall be consulted in the preparation of the annual budget of the Corporation and shall render to the Chief Executive Officer from time to time and to the Board of Directors at each of the regular meetings of the Board statements necessary to keep them informed of the earnings, expenses and condition of the Corporation, and shall bring to their notice any and all matters which the Controller may deem desirable to submit to their attention for the successful conduct of the business. ARTICLE IV. CERTIFICATES OF STOCK. Section 1. The interest of each stockholder of the Corporation shall be evidenced by a certificate or certificates for shares of stock in such form as the Board of Directors may from time to time prescribe. The shares in the stock of the Corporation shall be transferable on the books of the Corporation by the holder thereof in person or by such holder's attorney, upon surrender for cancellation of a certificate or certificates for the same number of shares, with an assignment and power of transfer endorsed thereon or attached thereto, duly executed, and with such proof of the authenticity of the signature as the Corporation or its agents may reasonably require. Section 2. The certificates of stock shall be signed by such officer or officers as may be permitted by law to sign (except that where any such certificate is countersigned by a transfer agent other than the Corporation or its employee, or by a registrar other than the Corporation or its employee, the signatures of any such officer or officers may be facsimiles), and shall be countersigned and registered in such manner, all as the Board of Directors may by resolution prescribe. In case any officer or officers who shall have signed or whose facsimile signature or signatures shall cease to be such officer or officers of the Corporation, whether because of death, resignation or otherwise, before such certificate or certificates shall have been issued by the Corporation, such certificate or certificates may nevertheless be issued and delivered as though the person or persons who signed such certificate or certificates, or whose facsimile signature or signatures shall have been used thereon, had not ceased to be such officer or officers of the Corporation. Section 3. No certificate for shares of stock in the Corporation shall be issued in place of any certificate alleged to have been lost, stolen or destroyed, except upon production of such evidence of such loss, theft or destruction and upon delivery to the Corporation of a bond of indemnity in such amount, upon such terms and secured by such surety, as the Board of Directors in its discretion may require. ARTICLE V. CORPORATE BOOKS. The books of the Corporation may be kept outside of the State of Delaware at such place or places as the Board of Directors may from time to time determine. ARTICLE VI. CHECKS, NOTES, PROXIES, ETC. All checks and drafts on the Corporation's bank accounts and all bills of exchange and promissory notes, and all acceptances, obligations and other instruments for the payment of money, shall be signed by such officer or officers or agent or agents as shall be thereunto authorized from time to time by the Board of Directors. Proxies to vote and consents with respect to securities of other corporations owned by or standing in the name of the Corporation may be executed and delivered from time to time on behalf of the Corporation by the Chairman of the Board, the President, or by such officers as the Board of Directors may from time to time determine. ARTICLE VII. FISCAL YEAR. The fiscal year of the Corporation shall begin on the first day of January in each year and shall end on the thirty-first day of December following. ARTICLE VIII. CORPORATE SEAL. The corporate seal shall have inscribed thereon the name of the Corporation. In lieu of the corporate seal, when so authorized by the Board of Directors or a duly empowered committee thereof, a facsimile thereof may be impressed or affixed or reproduced. ARTICLE IX. OFFICES. The Corporation and the stockholders and the directors may have offices outside of the State of Delaware at such places as shall be determined from time to time by the Board of Directors. ARTICLE X. AMENDMENTS. Subject to any limitations that may be imposed by the stockholder, the Board of Directors may make the by-laws and from time to time may alter, amend or repeal any by-laws, but any by-laws made by the Board of Directors or the stockholders may be altered, amended or repealed by the stockholders at any annual meeting or at any special meeting, provided that notice of such proposed alteration, amendment or repeal is included in the notice of such meeting. EX-10.1 6 FIRST AMENDMENT dated as of March 4, 1999 (this 'Amendment'), among R.H. DONNELLEY INC., a Delaware corporation (the 'Borrower'), R.H. DONNELLEY CORPORATION, a Delaware corporation ('Holdings'), the financial institutions party to the Credit Agreement referred to below (the 'Lenders') and THE CHASE MANHATTAN BANK, as administrative agent for the Lenders (the 'Administrative Agent'). A. Reference is made to the Credit Agreement dated as of June 5, 1998 (as amended, the 'Credit Agreement') among the Borrower, Holdings, the Lenders and the Administrative Agent. Capitalized terms used but not otherwise defined herein have the meanings assigned to them in the Credit Agreement. B. The Borrower has requested that the Lenders amend the definition of 'subsidiary' insofar as it relates to investments by the Borrower in Unicom Media Limited and Unicom Yellow Pages Information Co., Ltd. The undersigned Lenders are willing to do so, subject to the terms and conditions of this Amendment. Accordingly, in consideration of the mutual agreements herein contained and other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, the parties hereto hereby agree as follows: SECTION 1. Amendment to Article I. The definition of 'subsidiary' is hereby amended by inserting the following proviso immediately prior to the period at the end thereof: 'provided, that neither Unicom Media Limited, a corporation organized under the laws of Hong Kong, nor any of its subsidiaries including Unicom Yellow Pages Information Co., Ltd., a corporation organized under the laws of the People's Republic of China, shall be deemed a subsidiary by operation of this clause (b)' SECTION 2. Representations, Warranties and Agreements. Each of Holdings and the Borrower hereby represents and warrants to and agrees with each Lender and the Administrative Agent that: (a) The representations and warranties set forth in Article III of the Credit Agreement are true and correct in all material respects with the same effect as if made on the Amendment Effective Date (as defined herein). (b) Each of Holdings and the Borrower has the requisite power and authority to execute and deliver this Amendment and to perform its obligations under the Credit Agreement, as amended hereby. (c) The execution and delivery of this Amendment and the performance by each of Holdings and the Borrower of the Credit Agreement, as amended hereby, (i) have been duly authorized by all requisite action and (ii) will not (A) violate or result in a default under, as the case may be, (x) any applicable law or regulation, or the charter or by-laws or other organizational documents of Holdings, the Borrower or any of its Subsidiaries or any Material Joint Venture or any order of any Governmental Authority or (y) any indenture, material agreement or other material instrument binding upon Holdings, the Borrower or any of its Subsidiaries or any Material Joint Venture or its or their assets, (B) give rise to a right under any such indenture, material agreement or other material instrument to require any payment to be made by Holdings, the Borrower or any of its Subsidiaries or any Material Joint Venture or (C) result in the creation or imposition of any Lien on any asset of Holdings, the Borrower or any of its Subsidiaries or any Material Joint Venture. (d) This Amendment has been duly executed and delivered by each of Holdings and the Borrower. Each of this Amendment and the Credit Agreement, as amended hereby, constitutes a legal, valid and binding obligation of each of Holdings and the Borrower, enforceable against each of Holdings and the Borrower in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors' rights generally and subject to general principals of equity, regardless of whether considered in a proceeding in equity or at law. (e) As of the Amendment Effective Date, no Event of Default or Default has occurred and is continuing. SECTION 3. Conditions to Effectiveness. This Amendment shall become effective on the date of the satisfaction in full of the following conditions precedent (the 'Amendment Effective Date'): (a) The Administrative Agent shall have received duly executed counterparts hereof which, when taken together, bear the authorized signatures of the Borrower, the Administrative Agent and the Required Lenders. (b) All legal matters incidental to this Amendment shall be satisfactory to the Administrative Agent and Cravath, Swaine & Moore, counsel for the Administrative Agent. (c) The Administrative Agent shall have received such other documents, instruments and certificates as it or its counsel shall reasonably request. SECTION 4. Credit Agreement. Except as specifically stated herein, the Credit Agreement shall continue in full force and effect in accordance with the provisions thereof. As used therein, the terms 'Agreement', 'herein', 'hereunder', 'hereto', 'hereof' and words of similar import shall, unless the context otherwise requires, refer to the Credit Agreement as modified hereby. SECTION 5. Applicable Law. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SECTION 6. Counterparts. This Amendment may be executed in any number of counterparts, each of which shall be an original but all of which, when taken together, shall constitute but one instrument. Delivery of an executed counterpart of a signature page of this Amendment by telecopy shall be effective as delivery of a manually executed counterpart of this Amendment. SECTION 7. Expenses. The Borrower agrees to reimburse the Administrative Agent for its out-of-pocket expenses in connection with this Amendment, including the reasonable fees, charges and disbursements of Cravath, Swaine & Moore, counsel for the Administrative Agent. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective authorized officers as of the date first above written. R.H. DONNELLEY INC., by ------------------------- Name: Philip C. Danford Title: Senior Vice President & CFO R.H. DONNELLEY CORPORATION, by ------------------------- Name: Philip C. Danford Title: Senior Vice President & CFO THE CHASE MANHATTAN BANK, individually and as Administrative Agent, by ------------------------- Name: Bruce E. Langenkamp Title: Vice President GOLDMAN SACHS CREDIT PARTNERS L.P., by ------------------------- Name: Stephen B. King Title: Authorized Signature ROYAL BANK OF CANADA, by ------------------------- Name: John D'Angelo Title: Manager BANKBOSTON, N.A., by ------------------------- Name: Julie Jalelian Title: Director THE BANK OF NEW YORK, by ------------------------- Name: Title: PARIBAS, by ------------------------- Name: Salo Aizenberg Title: Vice President by ------------------------- Name: William B. Schink Title: Director CREDIT LYONNAIS NEW YORK BRANCH, by -------------------------- Name: Title: THE BANK OF NOVA SCOTIA, by -------------------------- Name: Ian A. Hodgart Title: Authorized Signature FLEET NATIONAL BANK, by ------------------------- Name: Stephen Curran Title: Vice President UNION BANK OF CALIFORNIA, N.A., by ------------------------- Name: Jenny Dongo Title: Assistant Vice President SUNTRUST BANK, ATLANTA, by ------------------------- Name: Title: by ------------------------- Name: Title: ERSTE BANK DER OESTERREICHISCHEN SPARKASSEN AG, by ------------------------- Name: Title: by ------------------------- Name: Title: DLJ CAPITAL FUNDING, INC., by ------------------------- Name: Title: MERRILL LYNCH SENIOR FLOATING RATE FUND, INC., By ------------------------ Name: Joseph P. Matteo Title: Authorized Signatory THE TRAVELERS INSURANCE COMPANY, by ------------------------- Name: Craig H. Farnsworth Title: 2nd Vice President THE TRAVELERS LIFE AND ANNUITY COMPANY, by ------------------------- Name: Craig H. Farnsworth Title: 2nd Vice President TRANSAMERICA LIFE INSURANCE AND ANNUITY CORPORATION, by ------------------------- Name: John M. Casparian Title: Investment Officer OCTAGON LOAN TRUST, By: Octagon Credit Investors as Manager by ------------------------- Name: Andrew D. Gordon Title: Managing Director METROPOLITAN LIFE INSURANCE COMPANY, by ---------------------------- Name: James R. Dingler Title: Director NATIONAL WESTMINISTER BANK PLC, By: NatWest Capital Markets Limited, its agent By: Greenwich Capital Markets, Inc., its agent by ------------------------- Name: Jeremy Hood Title: Vice President KZH-ING-2 LLC, by ------------------------- Name: Title: KZH-IV LLC, by ------------------------- Name: Virginia Conway Title: Authorized Agency KZH-SOLEIL-2 LLC, by ------------------------- Name: Title: KZH-CRESCENT LLC, by ------------------------- Name: Title: KZH CYPRESSTREE-1 LLC, by ------------------------- Name: Title: KZH LANGDALE LLC, by ------------------------- Name: Virginia Conway Title: Authorized Agent KZH STERLING LLC, by ------------------------- Name: Title: OASIS COLLATERALIZED HIGH INCOME PORTFOLIOS-I, LTD., by ------------------------- Name: Ian David Moore Title: Director CAPTIVA II FINANCE LTD., by ------------------------- Name: John H. Cullinane Title: Director CAPTIVA III FINANCE LTD., as advised by Pacific Investment Management Company by ------------------------- Name: John H. Cullinane Title: Director DELANO COMPANY, By: Pacific Investment Management Company, as its investment advisor By: PIMCO Management, Inc., a general partner By: ------------------------- Bradley W. Paulson Vice President STATE STREET BANK AND TRUST COMPANY, AS TRUSTEE FOR GENERAL MOTORS EMPLOYEES GLOBAL GROUP PENSION TRUST, by ------------------------- Name: Michael Connors Title: Assistant Vice President STATE STREET BANK AND TRUST COMPANY, AS TRUSTEE FOR GENERAL MOTORS WELFARE BENEFITS TRUST, by ------------------------- Name: Michael Connors Title: Assistant Vice President LONG TERM CREDIT BANK OF JAPAN, LTD., by ------------------------- Name: Title: MERRILL LYNCH PRIME RATE PORTFOLIO, by ------------------------- Joseph Matteo Authorized Signatory SENIOR DEBT PORTFOLIO, By: Boston Management Research as Investment Advisor by ------------------------- Name: Scott H. Page Title: Vice President VAN KAMPEN CLO II, LIMITED, By: Van Kampen Management Inc., as Collateral Manager by ------------------------- Name: Jeffrey W. Maillet Title: Sr. Vice Pres. & Director VAN KAMPEN SENIOR INCOME TRUST, by ------------------------- Name: Jeffrey W. Maillet Title: Sr. Vice Pres. & Director WAREHOUSE STANFIELD, by ------------------------- Name: Title: FIRST DOMINION FUNDING I, by ------------------------- Name: Title: EX-10.2 7 R.H. DONNELLEY CORPORATION 1991 KEY EMPLOYEES' STOCK OPTION PLAN, As Amended and Restated (February 23, 1999) R.H. DONNELLEY CORPORATION 1991 KEY EMPLOYEES' STOCK OPTION PLAN, As Amended and Restated Page 1. Purpose of the Plan 1 2. Stock Subject to the Plan 1 3. Administration 1 4. Eligibility 1 5. Termination Date for Grants 2 6. Terms and Conditions of Stock Options 2 7. Terms and Conditions of Stock Appreciation Rights 5 8. Transfers and Leaves of Absence 6 9. Adjustments Upon Changes in Capitalization or Other Events 6 10. Use of Proceeds 8 11. Amendments 8 12. Effectiveness of the Plan and Amendments 9 R.H. DONNELLEY CORPORATION 1991 KEY EMPLOYEES' STOCK OPTION PLAN, As Amended and Restated 1. Purpose of the Plan The purpose of the Plan is to aid R.H. Donnelley Corporation (herein called the 'Company') and its subsidiaries in securing and retaining key employees of outstanding ability and to motivate such employees to exert their best efforts on behalf of the Company and its subsidiaries by providing incentive through the award of stock options and stock appreciation rights. The Company expects that it will benefit from the added interest which such key employees will have in the welfare of the Company as a result of their proprietary interest in the Company's success. 2. Stock Subject to the Plan The total number of shares of Common Stock of the Company which may be issued under the Plan from and after July 1, 1998 shall be 29,800,000, subject to adjustment as provided in Section 9. The maximum number of shares for which stock options may be granted from the 1995 Annual Meeting during the remaining term of the Plan to any individual optionee shall be 7,000,000, subject to adjustment as provided in Section 9. The shares may consist, in whole or in part, of unissued shares or treasury shares. Issuance of shares of Common Stock upon exercise of a stock option or reduction of the number of shares of Common Stock subject to a stock option upon exercise of a stock appreciation right shall reduce the total number of shares of Common Stock available under the Plan. Shares which are subject to unexercised stock options which terminate or lapse may be optioned again under the Plan. 3. Administration The Board of Directors of the Company shall appoint a Compensation and Benefits Committee (herein called the 'Committee') consisting of at least three members of the Board of Directors who shall administer the Plan and serve at the pleasure of the Board. Each member of the Committee shall not be eligible to participate in the Plan. The Committee shall have the authority, consistent with the Plan, to determine the provisions of the stock options and stock appreciation rights to be granted, to interpret the Plan and the stock options and the stock appreciation rights granted under the Plan, to adopt, amend and rescind rules and regulations for the administration of the Plan, the stock options and the stock appreciation rights and generally to conduct and administer the Plan and to make all determinations in connection therewith which may be necessary or advisable, and all such actions of the Committee shall be binding upon all participants. The Committee shall require payment of any amount the Company may determine to be necessary to withhold for federal, state or local taxes as a result of the exercise of a stock option or a stock appreciation right. 4. Eligibility Key employees (but not members of the Committee and any person who serves only as a Director) of the Company, its subsidiaries (within the meaning of Section 424(f) of the Internal Revenue Code of 1986, as amended (the 'Code')) and its Participating Affiliates (as defined below), who are from time to time responsible for the management, growth and protection of the business of the Company, its subsidiaries and Participating Affiliates, are eligible to be granted stock options or stock appreciation rights under the Plan. Participating Affiliates shall refer to those entities in which the Company or its subsidiaries has a significant equity interest, as such shall be determined, from time to time, in the sole discretion of the Committee. The participants under the Plan shall be selected from time to time by the Committee, in its sole discretion, from among those eligible, and the Committee shall determine, in its sole discretion, the number of shares to be covered by the stock options or stock appreciation rights or both granted to each participant. An employee may not be granted a stock option, however, if at the time such option is to be granted, such employee owns stock of the Company or any of its subsidiaries possessing more than 10% of the total combined voting power of all classes of stock of the Company or of any such subsidiary. For purposes of the preceding sentence, the attribution rules of stock ownership set forth in Section 424(d) of the Code shall apply. The granting of a stock option or stock appreciation right under the Plan shall impose no obligation on the Company, any subsidiary or Participating Affiliate to continue the employment of an optionee and shall not lessen or affect the right to terminate the employment of an optionee. 5. Termination Date for Grants No stock option or stock appreciation right may be granted under the Plan after February 19, 2001, but stock options or stock appreciation rights theretofore granted may extend beyond that date. 6. Terms and Conditions of Stock Options Stock options granted under the Plan shall be, as determined by the Committee, non-qualified, incentive or other stock options for federal income tax purposes, as evidenced by stock option grants, and shall be subject to the foregoing and the following terms and conditions and to such other terms and conditions, not inconsistent therewith, as the Committee shall determine: (a) Option Price. The option price per share shall be determined by the Committee, but shall not be less than 100% of the Fair Market Value of the Common Stock on the date a stock option is granted. For purposes of the Plan, unless otherwise determined by the Committee, 'Fair Market Value' of Common Stock means, as of a given date, the average of the high and low sales prices per share of Common Stock reported on a consolidated basis for securities listed on the principal stock exchange or market on which Stock is traded on the date immediately preceding the date as of which such value is being determined or, if there is no sale on that date, then on the last previous day on which a sale was reported. (b) Exercisability. Stock options granted under the Plan shall be exercisable at such time and upon such terms and conditions as may be determined by the Committee, but in no event shall a stock option be exercisable more than ten years after the date it is granted. The Committee may accelerate the date any previously granted Option will become exercisable. (c) First Year Non-Exercisability. Except as provided in elsewhere in this Paragraph 6 and in Paragraph 9 of the Plan, no stock option shall be exercisable during the year ending on the first anniversary date of the granting of the stock option. (d) Exercise of Stock Options. Except as otherwise provided in the Plan or the stock option, a stock option may be exercised for all, or from time to time any part, of the shares for which it is then exercisable. The option price for the shares as to which a stock option is exercised shall be paid to the Company in full, or adequate provision for such payment made, at the time of exercise at the election of the optionee (i) in cash, (ii) in shares of Common Stock of the Company having a Fair Market Value equal to the option price for the shares being purchased and satisfying such other requirements as may be imposed by the Committee or (iii) partly in cash and partly in such shares of Common Stock of the Company. The Committee may permit the optionee to elect, subject to such terms and conditions as the Committee shall determine, to have the number of shares deliverable to the optionee as a result of the exercise reduced by a number sufficient to pay the amount the Company determines to be necessary to withhold for federal, state or local taxes as a result of the exercise of the stock option. No optionee shall have any rights to dividends or other rights of a shareholder with respect to shares subject to a stock option until the optionee has given written notice of exercise of the stock option, paid in full for such shares or made adequate provision therefor and, if requested given the representation described in Paragraph 6(h) of the Plan. (e) Exercisability Upon Termination of Employment by Death. If an optionee's employment by the Company or a subsidiary terminates by reason of death, the stock option thereafter may be exercised for three years after the date of death or the remaining stated period of the stock option, whichever period is shorter, to the full extent of the stock option regardless of the extent to which it was exercisable at the time of death (including death less than one year after the date of grant). (f) Exercisability Upon Termination of Employment by Disability or Retirement. If an optionee's employment by the Company or a subsidiary terminates by reason of disability or retirement, the stock option thereafter may be exercised as follows: (i) Pre-July 14, 1998 Options: In the case of a stock option granted before July 14, 1998, during the five years after the date of such termination of employment or the remaining stated period of the stock option, whichever period is shorter, to the full extent of the stock option regardless of the extent to which it was exercisable at the time of termination of employment (including termination less than one year after the date of grant); provided, however, that if the optionee dies within a period of five years after such termination of employment, any unexercised stock option may be exercised thereafter, during either (1) the period ending on the later of (i) five years after such termination of employment and (ii) one year after the date of death or (2) the period remaining in the stated term of the stock option, whichever period is shorter. (ii) Post-July 13, 1998 Options: In the case of a stock option granted on or after July 14, 1998, during the remaining stated period of the stock option, to the full extent of the stock option regardless of the extent to which it was exercisable at the time of termination of employment (including termination less than one year after the date of grant). For purposes of this Paragraph 6, 'retirement' shall mean voluntary termination of employment with the Company or a subsidiary after the optionee has attained age 55 with the approval of the Committee; or after the optionee has attained age 65. An optionee shall not be considered disabled for purposes of this Paragraph 6, unless he or she furnishes such medical or other evidence of the existence of the disability as the Committee, in its sole discretion, may require. (g) Effect of Other Termination of Employment. If a participant's employment terminates for any reason, other than disability, death or retirement, each stock option and stock appreciation right held by such participant shall be subject to the following: (i) Pre-July 14, 1998 Options: In the case of a stock option granted before July 14, 1998, the stock option shall terminate upon such termination of employment. (ii) Post-July 13, 1998 Options: In the case of a stock option granted on or after July 14, 1998, unless otherwise determined by the Committee, if such termination is for reasons other than for Cause the stock option shall be exercisable during (1) the period of 90 days after such termination or (2) the period remaining in the stated term of the stock option, whichever period is shorter, but only to the extent to which the stock option was exercisable at the time of termination of employment; and if such termination is for Cause the stock option shall terminate upon such termination of employment. For purposes of this Plan, the term 'Cause' shall have the meaning defined in any employment agreement between the participant and the Company or a subsidiary then in effect or, if no such employment agreement is then in effect, 'Cause' shall mean: (i) The participant's willful and continued failure substantially to perform the duties of his or her position after notice and opportunity to cure; (ii) Any willful act or omission by the participant constituting dishonesty, fraud or other malfeasance, which in any such case is demonstrably injurious to the financial condition or business reputation of the Company or any of its affiliates; or (iii) A felony conviction in a court of law under the laws of the United States or any state thereof or any other jurisdiction in which the Company or a subsidiary conducts business which materially impairs the value of the participant's services to the Company or any of its subsidiaries; provided, however, that, for purposes of this definition, no act or failure to act shall be deemed 'willful' unless effected by the participant not in good faith and without a reasonable belief that such action or failure to act was in or not opposed to the Company's best interests, and no act or failure to act shall be deemed 'willful' if it results from any incapacity of the participant due to physical or mental illness. (h) Termination of Employment After Change in Control Negotiations Have Commenced. For purposes of this Section 6, a termination of employment of a participant by the Company without Cause after the commencement of negotiations with a potential acquirer or business combination partner will be deemed to be a termination of employment immediately after a Change in Control if such negotiations result in a transaction constituting a Change in Control. (i) Additional Agreements of Optionee and Restrictions on Transfer. The Committee may require each person purchasing shares pursuant to exercise of a stock option to represent to and agree with the Company in writing that the shares are being acquired without a view to distribution thereof. The certificates for shares so purchased may include any legend which the Committee deems appropriate to reflect any restrictions on transfers. The Committee also may impose, in its discretion, as a condition of any option, any restrictions on the transferability of shares acquired through the exercise of such option as it may deem fit. Without limiting the generality of the foregoing, the Committee may impose conditions restricting absolutely the transferability of shares acquired through the exercise of options for such periods as the Committee may determine and, further, in the event the optionee's employment by the Company or a subsidiary terminates during the period in which such shares are nontransferable, the optionee may be required, if required by the related option agreement, to sell such shares back to the Company at such price and on such other terms as the Committee may have specified in the stock option agreement. (j) Nontransferability of Stock Options. Except as otherwise provided in this Paragraph 6(i), a stock option shall not be transferable by the optionee otherwise than by will or by the laws of descent and distribution and during the lifetime of an optionee a stock option shall be exercisable only by the optionee. A stock option exercisable after the death of an optionee or a transferee pursuant to the following sentence may be exercised by the legatees, personal representatives or distributees of the optionee or such transferee. The Committee may, in its discretion, authorize all or a portion of the stock options previously granted or to be granted to an optionee to be on terms which permit irrevocable transfer for no consideration by such optionee to (i) any or all of the spouse, children or grandchildren of the optionee ('Immediate Family Members'), (ii) a trust or trusts for the exclusive benefit of the optionee and/or any or all of such Immediate Family Members, or (iii) a partnership in which the optionee and/ or any or all of such Immediate Family Members are the only partners, provided that subsequent transfers of transferred options shall be prohibited except those in accordance with the first sentence of this Paragraph 6(i). Following transfer, any such options shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer. The events of termination of employment of Paragraphs 6(e), 6(f), and 6(g) hereof shall continue to be applied with respect to the original optionee, following which the stock options shall be exercisable by the transferee only to the extent, and for the periods specified, in Paragraphs 6(e), 6(f) and 6(g). The Committee may delegate to an administrative committee the authority to authorize transfers, establish terms and conditions upon which transfers may be made and establish classes of optionees eligible to transfer options, as well as to make other determinations with respect to option transfers. 7. Terms and Conditions of Stock Appreciation Rights (a) Grants. The Committee also may grant stock appreciation rights in connection with stock options granted under the Plan, either at the time of grant of options or subsequently. Stock appreciation rights shall cover the same shares covered by a stock option (or such lesser number of shares of Common Stock as the Committee may determine) and shall be subject to the same terms and conditions as the stock option (including limitations on transferability) except for such additional limitations as are contemplated by this Paragraph 7 (or as may be included in a stock appreciation right granted hereunder). (b) Terms. Each stock appreciation right shall entitle an optionee to surrender to the Company an unexercised option, or any portion thereof, and to receive from the Company in exchange therefor an amount equal to the excess of the Fair Market Value on the exercise date of one share of Common Stock over the option price per share times the number of shares covered by the stock option, or portion thereof, which is surrendered. The date a notice of exercise is received by the Company shall be the exercise date. Payment shall be made in shares of Common Stock or in cash, or partly in shares and partly in cash, valued at such Fair Market Value, all as shall be determined by the Committee. Stock appreciation rights may be exercised from time to time upon actual receipt by the Company of written notice of exercise stating the number of shares of Common Stock subject to an exercisable option with respect to which the stock appreciation right is being exercised. No fractional shares of Common Stock will be issued in payment for stock appreciation rights, but instead cash will be paid for a fraction or, if the Committee should so determine, the number of shares will be rounded downward to the next whole share. (c) Limitations on Exercisability. The Committee shall impose such conditions upon the exercisability of stock appreciation rights as will result, except upon the occurrence of an event contemplated by limited stock appreciation rights granted pursuant to Paragraph 7(d) or contemplated by the provisions of Paragraph 9, in the amount to be charged against the Company's consolidated income by reason of stock appreciation rights not to exceed, in any one calendar year, two percent of the Company's prior calendar year's consolidated income before income taxes. The Committee also may impose, in its discretion, such other conditions upon the exercisability of stock appreciation rights as it may deem fit. (d) Limited Stock Appreciation Rights. The Committee may grant limited stock appreciation rights which are exercisable upon the occurrence of specified contingent events. Such stock appreciation rights may provide for a different method of determining appreciation, may specify that payment will be made only in cash and may provide that related stock options or stock appreciation rights or both are not exercisable while such limited stock appreciation rights are exercisable. Unless the context otherwise requires, whenever the term 'stock appreciation right' is used in the Plan, such term shall include limited stock appreciation rights. 8. Transfers and Leaves of Absence For purposes of the Plan: (a) a transfer of an employee from the Company to a 50% or more owned subsidiary, partnership, venture or other affiliate (whether or not incorporated) or vice versa, or from one such subsidiary, partnership, venture or other affiliate to another, (b) a leave of absence, duly authorized in writing by the Company, for military service or sickness or for any other purpose approved by the Company if the period of such leave does not exceed 90 days, or (c) a leave of absence in excess of 90 days, duly authorized in writing by the Company, provided the employee's right to re-employment is guaranteed either by statute or by contract, shall not be deemed a termination of employment under the Plan. 9. Adjustments Upon Changes in Capitalization or Other Events Upon changes in the Common Stock of the Company by reason of a stock dividend, stock split, reverse split, recapitalization, merger, consolidation, combination or exchange of shares, separation, reorganization or liquidation, the number and class of shares available under the Plan as to which stock options or stock appreciation rights may be granted (both in the aggregate and to any one optionee), the number and class of shares under each option and the the option price per share, and the terms of stock appreciation rights, shall be correspondingly adjusted by the Committee, such adjustments to be made in the case of outstanding options without change in the total price applicable to such options. In the event of a merger, consolidation, combination, reorganization or other transaction in which the Company will not be the surviving corporation, an optionee shall be entitled to options on that number of shares of stock in the new corporation which the optionee would have received had the optionee exercised all of the unexercised options available to the optionee under the Plan, whether or not then exercisable, at the instant immediately prior to the effective date of such transaction, and if such unexercised options had related stock appreciation rights the optionee also will receive new stock appreciation rights related to the new options. Thereafter, adjustments as provided above shall relate to the stock options or stock appreciation rights of the new corporation. Except as otherwise specifically provided in the stock option or stock appreciation right, in the event of a Change in Control, merger, consolidation, combination, reorganization or other transaction in which the shareholders of the Company will receive cash or securities (other than common stock) or in the event that an offer is made to the holders of Common Stock of the Company to sell or exchange such Common Stock for cash, securities or stock of another corporation and such offer, if accepted, would result in the offeror becoming the owner of (a) at least 50% of the outstanding Common Stock of the Company or (b) such lesser percentage of the outstanding Common Stock which the Committee in its sole discretion determines will materially adversely affect the market value of the Common Stock after the tender or exchange offer, the Committee shall, prior to the shareholders' vote on such transaction or prior to the expiration date (without extensions) of the tender or exchange offer, (i) accelerate the time of exercise so that all stock options and stock appreciation rights which are outstanding shall become immediately exercisable in full without regard to any limitations of time or amount otherwise contained in the Plan or the stock options or stock appreciation rights and/or (ii) determine that the stock options and stock appreciation rights shall be adjusted and make such adjustments by substituting for Common Stock of the Company subject to options and stock appreciation rights, common stock of the surviving corporation or offeror if such stock of such corporation is publicly traded or, if such stock is not publicly traded, by substituting common stock of a parent of the surviving corporation or offeror if the stock of such parent is publicly traded, in which event the aggregate option price shall remain the same and the number of shares subject to option shall be the number of shares which could have been purchased on the closing day of such transaction or the expiration date of the offer with the proceeds which would have been received by the optionee if the stock option had been exercised in full prior to such transaction or expiration date and the optionee had exchanged all of such shares in the transaction or sold or exchanged all of such shares pursuant to the tender or exchange offer, and if any such option has related stock appreciation rights, the stock appreciation rights shall likewise be adjusted; provided, however, that, in the event of a Change in Control, the acceleration of the exercisability of options and stock appreciation rights under clause (i) of this paragraph shall occur automatically and without the requirement of action by the Committee. For purposes of this Plan, 'Change in Control' means the occurrence of any of the following events after the effective date of the amendment and restatement of the Plan: (i) Any 'person,' as such term is used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the 'Exchange Act') (other than the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company, or any company owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of stock of the Company), is or becomes the 'beneficial owner' (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities; (ii) During any period of two consecutive years commencing on July 14, 1998, individuals who at the beginning of such period constitute the Board, and any new director (other than a director designated by a person (as defined above) who has entered into an agreement with the Company to effect a transaction described in subsections (i), (iii) or (iv) of this definition) whose election by the Board or nomination for election by the Company's shareholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved cease for any reason to constitute at least a majority thereof; (iii) The shareholders of the Company have approved a merger or consolidation of the Company with any other company and all other required governmental approvals of such merger or consolidation have been obtained, other than (A) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 60% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation or (B) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no person (as defined above) becomes the beneficial owner (as defined above) of more than 20% of the combined voting power of the Company's then outstanding securities; or (iv) The shareholders of the Company have approved a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets, and all other required governmental approvals of such transaction have been obtained. 10. Use of Proceeds Proceeds from the sale of shares of Common Stock pursuant to exercise of options granted under the Plan shall constitute general funds of the Company. 11. Amendments The Board of Directors may amend, alter or discontinue the Plan, but no amendment, alteration or discontinuation shall be made which would materially impair the rights of any optionee under any option theretofore granted, without the optionee's consent, or which, without the approval of the shareholders of the Company, would: (a) Except as is provided in Paragraph 9 of the Plan, increase the total number of shares reserved for the purposes of the Plan or change the maximum number of shares for which options may be granted to any optionee. (b) Decrease the option price to less than 100% of Fair Market Value on the date of grant of a stock option. (c) Change the employees (or class of employees) eligible to receive options under the Plan. (d) Materially increase the benefits accruing to employees participating under the Plan. 12. Effectiveness of the Plan and Amendments The Plan became effective upon approval by the shareholders at the 1991 Annual Meeting. The Amendments proposed in 1995 became effective upon approval by the shareholders at the 1995 Annual Meeting. Paragraph 6(f) as amended became applicable to all options outstanding at the date of the 1995 Annual Meeting and thereafter. Paragraph 6(i) as amended became effective upon approval by the Board of Directors at its July 16, 1997 meeting. The amendment and restatement of the Plan in connection with the reorganization of the Company and the change of the name of the Company to R.H. Donnelley Corporation became effective as of July 14, 1998. -----END PRIVACY-ENHANCED MESSAGE-----