10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2005

OR

o 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.)
1001 Winstead Drive, Cary, N.C.	27513
(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 þ No o

Indicate by check mark whether registrant is an accelerated filer Yes þ No o

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 August 1, 2005
Common Stock, par value $1 per share		31,777,775

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.)
1001 Winstead Drive, Cary, N.C.	27513
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code (919) 297-1600

* R.H. Donnelley Inc. is a wholly owned subsidiary of R.H. Donnelley Corporation. R.H. Donnelley Inc. meets the conditions set forth in General Instructions H (1)(a) and (b) of Form 10-Q and is therefore filing this report with respect to R.H. Donnelley Inc. with the reduced disclosure format. R.H. Donnelley Inc. became subject to the filing requirements of Section 15(d) on October 1, 1998 in connection with the public offer and sale of its 9 1/8% Senior Subordinated Notes, which were redeemed in full on February 6, 2004. In addition, R.H. Donnelley Inc. is the obligor of 8 7/8% Senior Notes due 2010 and 10 7/8% Senior Subordinated Notes due 2012 and is subject to the filing requirements of Section 15(d) as a result of such notes. As of August 1, 2005, 100 shares of R.H. Donnelley Inc. common stock, no par value, were outstanding.

R.H. DONNELLEY CORPORATION

INDEX TO FORM 10-Q

	PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets at June 30, 2005 and December 31, 2004		3
Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and six months ended June 30, 2005 and 2004		4
Consolidated Statements of Cash Flows for the six months ended June 30, 2005 and 2004		5
Notes to Consolidated Financial Statements		6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		31
Item 3. Quantitative and Qualitative Disclosures About Market Risk		50
Item 4. Controls and Procedures		51
PART II. OTHER INFORMATION
Item 1. Legal Proceedings		52
Item 4. Submission of Matters to a Vote of Security Holders		58
Item 6. Exhibits		59
SIGNATURES		69
Ex-10.15
Ex-10.16
Ex-10.17
Ex-10.19
Ex-14
Ex-31.1
Ex-31.2
Ex-31.3
Ex-31.4
Ex-32.1
Ex-32.2

2

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

R.H. Donnelley Corporation and Subsidiaries

Consolidated Balance Sheets (Unaudited)

	June 30,			December 31,
(in thousands, except share and per share data)	2005			2004
Assets
Current Assets
Cash and cash equivalents	$	5,824		$	10,755
Accounts receivable
Billed		108,536			112,107
Unbilled		371,832			376,419
Allowance for doubtful accounts and sales claims		(31,780	)		(33,093	)
Net accounts receivable		448,588			455,433
Deferred directory costs		100,354			116,517
Other current assets		33,188			40,604
Total current assets		587,954			623,309
Fixed assets and computer software, net		43,874			37,686
Other non-current assets		103,045			102,628
Intangible assets, net		2,869,151			2,905,330
Goodwill		319,014			309,969
Total Assets	$	3,923,038		$	3,978,922
Liabilities, Redeemable Convertible Preferred Stock and Shareholders’ (Deficit) Equity
Current Liabilities
Accounts payable and accrued liabilities	$	47,982		$	70,341
Accrued interest		21,030			10,021
Deferred directory revenue		452,855			381,424
Current portion of long-term debt		132,536			162,011
Total current liabilities		654,403			623,797
Long-term debt		3,090,168			2,965,331
Deferred income taxes, net		133,866			118,820
Other non-current liabilities		44,180			36,878
Total liabilities		3,922,617			3,744,826
Commitments and contingencies
Redeemable convertible preferred stock (liquidation preference of $122,186 at June 30, 2005 and $234,886 at December 31, 2004)		112,807			216,111
Shareholders’ (Deficit) Equity
Common stock, par value $1 per share, 400,000,000 shares authorized, 51,621,894 shares issued		51,622			51,622
Additional paid-in capital		9,967			107,103
Warrants outstanding		13,758			13,758
(Accumulated deficit) retained earnings		(33,228	)		3,855
Treasury stock, at cost, 19,870,130 shares at June 30, 2005 and 20,137,361 shares at December 31, 2004		(163,637	)		(163,603	)
Accumulated other comprehensive income		9,132			5,250
Total shareholders’ (deficit) equity		(112,386	)		17,985
Total Liabilities, Redeemable Convertible Preferred Stock and Shareholders’ (Deficit) Equity	$	3,923,038		$	3,978,922

The accompanying notes are an integral part of the consolidated financial statements.

3

R.H. Donnelley Corporation and Subsidiaries

Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited)

	Three months ended						Six months ended
	June 30,						June 30,
(in thousands, except per share data)	2005			2004			2005			2004
Net revenue	$	232,967		$	144,641		$	440,307		$	288,448
Expenses
Operating expenses		106,495			56,932			208,836			110,890
General and administrative expenses		14,831			15,429			27,982			28,046
Depreciation and amortization		20,611			14,947			42,263			29,339
Total expenses		141,937			87,308			279,081			168,275
Partnership income		—			34,803			—			58,701
Operating income		91,030			92,136			161,226			178,874
Interest expense, net		(58,206	)		(37,496	)		(115,703	)		(77,796	)
Income before income taxes		32,824			54,640			45,523			101,078
Provision for income taxes		12,801			21,583			17,754			39,926
Net income		20,023			33,057			27,769			61,152
Preferred dividend		2,919			5,392			6,238			10,678
Loss on repurchase of redeemable convertible preferred stock		—			—			133,681			—
Income (loss) available to common shareholders	$	17,104		$	27,665		$	(112,150	)	$	50,474
Earnings (loss) per share
Basic	$	0.46		$	0.68		$	(3.55	)	$	1.25
Diluted	$	0.44		$	0.65		$	(3.55	)	$	1.20
Shares used in computing earnings (loss) per share
Basic		31,699			31,204			31,621			31,132
Diluted		33,471			32,546			31,621			32,379
Comprehensive Income (Loss)
Net income	$	20,023		$	33,057		$	27,769		$	61,152
Unrealized (loss) gain on interest rate swaps, net of tax		(8,335	)		5,869			3,884			3,161
Comprehensive income	$	11,688		$	38,926		$	31,653		$	64,313

The accompanying notes are an integral part of the consolidated financial statements.

4

R.H. Donnelley Corporation and Subsidiaries

Consolidated Statements of Cash Flows (Unaudited)

	Six months ended
	June 30,
amounts in thousands	2005			2004
Cash Flows from Operating Activities
Net income	$	27,769		$	61,152
Reconciliation of net income to net cash provided by operating activities:
Depreciation and amortization		42,263			29,339
Deferred income taxes		37,281			39,926
Provision for bad debts		11,505			6,491
Other non-cash charges		10,602			11,031
Changes in assets and liabilities, net of effects from acquisition:
Cash in excess of partnership income		—			1,569
Increase in accounts receivable		(4,659	)		(19,030	)
Decrease in other assets		26,203			1,863
(Decrease) increase in accounts payable and accrued liabilities		(11,735	)		2,729
Increase in deferred directory revenue		71,431			11,248
(Decrease) increase in other non-current liabilities		(15,947	)		1,142
Net cash provided by operating activities		194,713			147,460
Cash Flows from Investing Activities
Additions to fixed assets and computer software		(12,035	)		(8,857	)
Net cash used in investing activities		(12,035	)		(8,857	)
Cash Flows from Financing Activities
Proceeds from the issuance of debt, net of costs		291,516			—
Borrowings under Revolver		140,100			1,400
Revolver repayments		(161,300	)		(1,400	)
Repurchase of redeemable convertible preferred stock		(277,197	)		—
Debt repayments		(183,282	)		(149,466	)
(Decrease) increase in checks not yet presented for payment		(2,383	)		9,470
Proceeds from employee stock option exercises		4,937			4,265
Net cash used in financing activities		(187,609	)		(135,731	)
(Decrease) increase in cash and cash equivalents		(4,931	)		2,872
Cash and cash equivalents, beginning of year		10,755			7,722
Cash and cash equivalents, end of period	$	5,824		$	10,594
Supplemental Information:
Cash paid (received):
Interest	$	97,346		$	70,881
Income taxes, net	$	508		$	(12,443	)

The accompanying notes are an integral part of the consolidated financial statements.

5

R.H. Donnelley Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

(tabular amounts in thousands, except per share data)

1. Business and Basis of Presentation

The interim consolidated financial statements of R.H. Donnelley Corporation and its direct and indirect wholly owned subsidiaries (the “Company”, “RHD”, “we”, “us” and “our”) have been prepared in accordance with the instructions to Quarterly Report on Form 10-Q and should be read in conjunction with the financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2004 (“2004 10-K”). 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 statement of financial position, results of operations and cash flows at the dates and for the periods presented have been included.

We are a leading yellow pages publisher and directional media company. Directional media is where consumers search to find who sells the goods and services they are ready to purchase. We publish Sprint^®-branded directories in 18 states, with major markets including Las Vegas, Nevada and Orlando and Lee County, Florida, with a total distribution of approximately 18 million serving approximately 160,000 local and national advertisers. We also publish SBC^®-branded directories in Illinois and Northwest Indiana, with a total distribution of approximately 10 million serving approximately 100,000 local and national advertisers. We also offer online city guides and search web sites in all of our Sprint markets under the Best Red Yellow Pages^® brand at www.bestredyp.com and in the Chicagoland area at www.chicagolandyp.com. We also sell local advertising in Illinois and Northwest Indiana onto www.SMARTpages.com, SBC’s Internet yellow pages platform.

On September 1, 2004, we completed the acquisition of the directory publishing business (“SBC Directory Business”) of SBC Communications, Inc. (“SBC”) in Illinois and Northwest Indiana, including SBC’s interests in The DonTech II Partnership (“DonTech”), a 50/50 general partnership between us and SBC (collectively, the “SBC Directory Acquisition”), for $1.41 billion in cash, after working capital adjustments and the settlement of a $30 million liquidation preference owed to us related to DonTech. The acquisition was consummated pursuant to, and in accordance with, the terms of the Purchase Agreement, dated as of July 28, 2004, as amended, by and among the Company, Ameritech Corporation (“Ameritech”), a direct wholly owned subsidiary of SBC, and Ameritech Publishing, Inc. (“API”), a direct wholly owned subsidiary of Ameritech. The acquisition was accounted for as a purchase business combination and the purchase price was allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their respective fair values on the acquisition date. The results of the SBC Directory Business are included in our consolidated results from and after September 1, 2004. The acquired SBC Directory Business now operates as R.H. Donnelley Publishing & Advertising of Illinois Partnership, an indirect wholly owned subsidiary of the Company. See Note 3, “Acquisitions” for a further description of the acquisition.

On January 3, 2003, we completed the acquisition of the directory business (the “SPA Directory Business”) of Sprint Corporation (“Sprint”) by acquiring all the outstanding capital stock of the various entities comprising Sprint Publishing & Advertising (“SPA”) (collectively, the “SPA Acquisition”) for $2.23 billion in cash. The acquisition was accounted for as a purchase business combination and the purchase price was allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their respective fair values on the acquisition date. The results of the SPA Directory Business are included in our consolidated results from and after January 3, 2003. The acquired SPA Directory Business now operates as R.H. Donnelley Publishing & Advertising, Inc., an indirect wholly owned subsidiary of the Company. See Note 3, “Acquisitions” for a further description of the acquisition.

2. Summary of Significant Accounting Policies

Principles of Consolidation. The consolidated financial statements include the accounts of R.H. Donnelley Corporation and its direct and indirect wholly owned subsidiaries. All intercompany transactions and balances have been eliminated.

6

Revenue Recognition. We earn revenue principally from the sale of advertising into our yellow pages directories. Revenue from the sale of such advertising is deferred when a directory is published and recognized ratably over the life of a directory, which is typically 12 months (the “deferral and amortization method”). Revenue from the sale of advertising is recorded net of an allowance for sales claims, estimated based on historical experience on a directory-by-directory basis. We increase or decrease this estimate as information or circumstances indicate that the estimate may no longer adequately represent the amount of claims we may incur for a directory in the future. Before the SBC Directory Acquisition, we also earned revenue from providing pre-press publishing services to SBC for those directories in the DonTech markets. Revenue from these pre-press publishing services was recognized as services were performed.

Deferred Directory Costs. Costs directly related to the selling and production of our directories are initially deferred when incurred and recognized ratably over the life of a directory, which is typically 12 months. These costs include sales commissions and print, paper and initial distribution costs. Such costs that are paid prior to directory publication are classified as other current assets.

Equity Method Accounting. Before the SBC Directory Acquisition, DonTech was a 50/50 perpetual partnership in which we and a subsidiary of SBC were the partners. DonTech was a separate legal entity that provided its services with its own employees and a stand-alone management team. Subject to the oversight of the board of directors, the employees of DonTech had the right, authority and power to do any act to accomplish, and enter into any contract incidental to attain the purposes of the partnership. No employees of either RHD or SBC were involved in the day-to-day operations of DonTech and, because the partners shared equally in the net profits and each had one voting member on the DonTech board of directors, neither partner had the unilateral ability to control or influence the operations of DonTech. Accordingly, through September 1, 2004, we accounted for DonTech under the equity method and did not consolidate the DonTech results in our financial statements.

Before the SBC Directory Acquisition, we recognized our 50% share of DonTech net income as partnership income in our consolidated statement of operations. DonTech reported commission revenue based on the annual value of a sales contract in the period the contract was executed (calendar sales) and reported expenses as incurred. Partnership income also included revenue participation income from SBC. Revenue participation income was based on DonTech advertising sales and was reported when a sales contract was executed with a customer. Our investment in DonTech and the revenue participation receivable from SBC had been reported as partnership investment on the consolidated balance sheet prior to the SBC Directory Acquisition. As a result of the SBC Directory Acquisition, SBC ceased paying us revenue participation income, we now consolidate all net profits from DonTech and we eliminated our DonTech partnership investment. Consequently, partnership income was no longer reported commencing on September 1, 2004. Rather, following the SBC Directory Acquisition, the revenues, expenses and income of the acquired SBC Directory Business are directly recorded in our statement of operations.

Cash and Cash Equivalents. Cash equivalents include liquid investments with a maturity of less than three months at their time of purchase. We place our investments with high quality financial institutions. At times, such investments may be in excess of federally insured limits.

Accounts Receivable. Accounts receivable consist of balances owed to us by our advertising customers. Advertisers typically enter into a 12-month contract for their advertising. Most local advertisers are billed a pro rata amount of their contract value on a monthly basis. On behalf of national advertisers, Certified Marketing Representatives (“CMRs”) pay to the Company the total contract value of their advertising, net of their commission, within 60 days after the publication month. Billed receivables represent the amount that has been billed to advertisers. Unbilled receivables represent contractually owed amounts for published directories that have yet to be billed to advertisers. Billed and unbilled receivables are recorded net of an allowance for doubtful accounts and sales claims, estimated based on historical experience on a directory-by-directory basis. We increase or decrease this estimate as information or circumstances indicate that the estimate may no longer accurately represent the amount of bad debts and sales claims we may incur.

7

In connection with the SBC Directory Acquisition, we entered into a transition services agreement with SBC whereby SBC billed and collected from our advertising customers in the Illinois and Northwest Indiana directories and remitted collections (net of specified holdback) to us through early 2005. On a monthly basis commencing September 1, 2004, SBC provided an advance to us related to those billings, and as such, we recorded an advance from SBC that was decreased as SBC collected from our advertisers, thus satisfying that liability. In the first quarter of 2005, we assumed all responsibility for billing and collections from our advertising customers in the Illinois and Northwest Indiana directories.

Deferred Financing Costs. Certain costs associated with the issuance of debt instruments are capitalized and included in other non-current assets on the consolidated balance sheet. These costs are amortized to interest expense over the terms of the respective debt agreements. The “bond outstanding” method is used to amortize deferred financing costs relating to debt instruments with respect to which we make accelerated principal payments. Other deferred financing costs are amortized using the straight-line method. Amortization of deferred financing costs included in interest expense was $4.0 million and $3.7 million for the three months ended June 30, 2005 and 2004, respectively, and $8.1 million and $7.1 million for the six months ended June 30, 2005 and 2004, respectively.

Advertising Expense. We recognize advertising expenses as incurred. These expenses include public relations, media, on-line advertising and other promotional and sponsorship costs. Total advertising expense was $4.6 million and $3.7 million for the three months ended June 30, 2005 and 2004, respectively, and $8.9 million and $5.6 million for the six months ended June 30, 2005 and 2004, respectively.

Concentration of Credit Risk. Approximately 85% of our directory advertising revenue is derived from the sale of advertising to local small- and medium-sized businesses. These advertisers typically enter into 12-month advertising sales contracts and make monthly payments over the term of the contract. Some advertisers prepay the full amount or a portion of the contract value. Most new advertisers and advertisers desiring to expand their advertising programs are subject to a credit review. If the advertisers qualify, we may extend credit to them for their advertising purchase. Small- and medium-sized businesses tend to have fewer financial resources and higher failure rates than large businesses. In addition, full collection of delinquent accounts can take an extended period of time and involve significant costs. While we do not believe that extending credit to our local advertisers will have a material adverse effect on our results of operations or financial condition, no assurances can be given. We do not require collateral from our advertisers, although we do charge late fees to advertisers that do not pay by specified due dates.

The remaining approximately 15% of our directory advertising revenue is derived from the sale of advertising to national or large regional chains, such as rental car companies, automobile repair shops and pizza delivery businesses. Substantially all of the revenue derived through national accounts is serviced through CMRs with which we contract. CMRs are independent third parties that act as agents for national advertisers. The CMRs are responsible for billing the national customers for their advertising. We receive payment for the value of advertising placed in our directory, net of the CMR’s commission, directly from the CMR. While we are still exposed to credit risk, the amount of losses from these accounts historically has been less than the local accounts as the advertisers, and in some cases the CMRs, tend to be larger companies with greater financial resources than local advertisers.

At June 30, 2005, we had interest rate swap agreements with major financial institutions with a notional value of $1,355 million. We are exposed to credit risk in the event that one or more of the counterparties to the agreements does not, or cannot, meet their obligation. The notional amount is used to measure interest to be paid or received and does not represent the amount of exposure to credit loss. The loss would be limited to the amount that would have been received, if any, over the remaining life of the swap agreement. The counterparties to the swap agreements are major financial institutions with credit ratings of A or higher. We do not currently foresee a material credit risk associated with these swap agreements; however, no assurances can be given.

Derivative Financial Instruments. We do not use derivative financial instruments for trading or speculative purposes. Our derivative financial instruments are limited to interest rate swap agreements used to manage exposure to fluctuations in interest rates on variable rate debt. These agreements effectively convert $1,355 million of our variable rate debt to fixed rate debt, mitigating our exposure to increases in interest rates. Under the terms of the swap agreements, we receive variable interest based on the three-month LIBOR and pay a weighted average fixed rate of 3.19%. The swaps mature at varying dates beginning October 2005 through September 2009. The weighted average rate received was 3.08% and 2.86% during the three and six months ended June 30, 2005, respectively. These periodic payments and receipts are recorded as interest expense.

8

The interest rate swaps have been designated as cash flow hedges to hedge three-month LIBOR-based interest payments on $1,355 million of bank debt. To the extent the swaps provide an effective hedge, changes in the fair value of the swaps are recorded in other comprehensive income. Any ineffectiveness is recorded through earnings. As of June 30, 2005, our interest rate swaps provided an effective hedge of the three-month LIBOR-based interest payments on $1,355 million of bank debt, and no ineffectiveness was included in earnings.

Earnings per Share. We account for earnings per share in accordance with Emerging Issues Task Force Issue No. 03-6, Participating Securities and the Two-Class Method under FASB Statement 128 (“EITF 03-6”), which established standards regarding the computation of earnings per share (“EPS”) by companies that have issued securities other than common stock that contractually entitle the holder to participate in dividends and earnings of the company. EITF 03-6 requires earnings available to common shareholders for the period, after deduction of preferred stock dividends, to be allocated between the common and preferred shareholders based on their respective rights to receive dividends. Basic EPS is then calculated by dividing income (loss) allocable to common shareholders by the weighted average number of shares outstanding. EITF 03-6 does not require the presentation of basic and diluted EPS for securities other than common stock. Therefore, the following EPS amounts only pertain to our common stock.

Under the guidance of EITF 03-6, diluted EPS is calculated by dividing income (loss) allocable to common shareholders by the weighted average common shares outstanding plus dilutive potential common stock. Potential common stock includes stock options, stock appreciation rights and warrants, the dilutive effect of which is calculated using the treasury stock method, and our 8% redeemable convertible cumulative preferred stock (“Preferred Stock”), the dilutive effect of which is calculated using the “if-converted” method. The calculation of basic and diluted earnings (loss) per share for the three and six months ended June 30, 2005 and 2004 is presented below.

	Three months ended						Six months ended
	June 30,						June 30,
	2005			2004			2005			2004
Basic EPS–Two–Class Method
Income (loss) available to common shareholders	$	17,104		$	27,665		$	(112,150	)	$	50,474
Amount allocable to common shareholders (1)		86	%		77	%		100	%		77	%
Income (loss) allocable to common shareholders		14,709			21,302			(112,150	)		38,865
Weighted average common shares outstanding		31,699			31,204			31,621			31,132
Basic earnings (loss) per share, Two–Class Method	$	0.46		$	0.68		$	($3.55	)	$	1.25
Diluted EPS
Income (loss) available to common shareholders	$	17,104		$	27,665		$	(112,150	)	$	50,474
Amount allocable to common shareholders (1) (1)		86	%		77	%		100	%		77	%
Income (loss) allocable to common shareholders		14,709			21,302			(112,150	)		38,865
Weighted average common shares outstanding		31,699			31,204			31,621			31,132
Dilutive effect of stock awards (2) (2)		1,772			1,342			—			1,247
Dilutive effect of Preferred Stock assuming conversion (2)		—			—			—			—
Weighted average diluted shares outstanding		33,471			32,546			31,621			32,379
Diluted earnings (loss) per share	$	0.44		$	0.65		$	(3.55	)	$	1.20

(1)

31,699 / (31,699 + 5,081) and 31,204 / (31,204 + 9,387) for the three months ended June 30, 2005 and 2004, respectively, and 31,132 / (31,132 + 9,295) for the six months ended June 30, 2004. In computing EPS using the two-class method, we have not allocated the net loss for the six months ended June 30, 2005 between common and preferred shareholders since preferred shareholders do not have a contractual obligation to share in the net loss.

(2)

The effect of stock awards for the six months ended June 30, 2005 and the assumed conversion of the Preferred Stock in the three and six months ended June 30, 2005 and 2004 were anti-dilutive and therefore are not included in the calculation of diluted EPS.

9

Employee Stock Awards. In accordance with Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock Based Compensation, the Company accounts for its employee stock compensation plans using the intrinsic value-based method prescribed by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (“APB 25”) and related interpretations. Compensation expense related to the issuance of stock options to employees or non-employee directors is only recognized if the exercise price of the stock option is less than the fair market value of the underlying stock at the measurement date. Compensation expense related to stock appreciation rights (“SARs”) is recognized at the end of each period in the amount by which the quoted market value of the underlying shares covered by the grant exceeds the grant price recognized over the vesting term.

The Company grants stock awards to eligible employees that are subject to specific vesting conditions. These stock awards have an accelerated vesting feature associated with employee retirement, allowing for the immediate exercise of stock awards without providing any future service. For pro forma reporting purposes the Company follows the nominal vesting period approach, which requires the recognition of compensation expense over the vesting period and, if an employee terminates by reason of retirement before the end of the vesting period, any remaining unrecognized compensation cost is recognized at the date of retirement. SFAS No. 123(R), Share-Based Payment, specifies that an award is vested when the employee’s retention of the award is no longer contingent on providing subsequent service (the “non-substantive vesting period approach”). This would be the case for awards that vest when employees retire and for awards that are granted to retirement eligible employees. Accordingly, related compensation cost must be recognized immediately for awards granted to retirement eligible employees or over the period from the grant date to the date retirement eligibility is achieved, if that is expected to occur during the nominal vesting period.

We will continue to follow the nominal vesting period approach for (1) any new stock awards granted prior to adopting SFAS No. 123(R) and (2) the remaining portion of unvested outstanding awards after adopting SFAS No. 123(R). Upon adoption of SFAS No. 123(R), we will apply the non-substantive vesting period approach to new grants that have retirement eligibility provisions. The Company is currently assessing the impact of this change in approach.

Grants were made in October 2002 of 1.5 million options (“Founders Grant”) to certain employees, including senior management, in connection with the SPA Acquisition. These options were granted with an exercise price equal to the fair market value of the Company’s common stock on the grant date. However, the award of these options was contingent upon the successful closing of the SPA Acquisition. Therefore, these options were subject to forfeiture until January 3, 2003, by which time the fair market value of the Company’s common stock exceeded the exercise price. Accordingly, these options are accounted for as compensatory options, and we are recognizing non-cash compensation expense over the vesting period of the options. We recognized non-cash compensation expense related to these stock options of $0.2 million and $0.3 million for the three-month periods ended June 30, 2005 and 2004, respectively, and $0.5 million and $0.6 million for the six-month periods ended June 30, 2005 and 2004, respectively.

On July 28, 2004, the Company granted 0.9 million SARs to certain employees, including senior management, in connection with the SBC Directory Acquisition. On February 24, 2005, the Company granted 0.5 million SARs to certain employees under the Company’s 2001 Stock Award and Incentive Plan. The SARs were granted with an exercise price equal to the fair market value of the Company’s common stock on the grant date. The maximum appreciation of each SAR is 100% of the initial exercise price. In accordance with APB 25 and FIN 28, Accounting for Stock Appreciation Rights and Other Variable Stock Option or Award Plans, we recognize non-cash compensation at the end of each period in the amount by which the quoted market value of the underlying shares covered by the grant exceeds the grant price over the vesting term. We recognized non-cash compensation related to these SARs of $1.6 million and $2.2 million during the three and six months ended June 30, 2005, respectively.

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The following table reflects the pro forma net income (loss) and earnings (loss) per share for the three and six months ended June 30, 2005 and 2004, respectively, assuming we applied the fair value method of SFAS No. 123, Accounting for Stock-Based Compensation. The pro forma disclosures shown are not necessarily representative of the effects on net income (loss) and earnings (loss) per share in future years.

	Three months ended						Six months ended
	June 30,						June 30,
	2005			2004			2005			2004
Net income, as reported	$	20,023		$	33,057		$	27,769		$	61,152
Add: Stock-based compensation expense included in reported net income, net of related tax effects		1,098			238			1,643			553
Less: Stock-based compensation expense that would have been included in the determination of net income if the fair value method had been applied to all awards, net of related tax effects		(2,030	)		(1,618	)		(3,706	)		(2,933	)
Pro forma net income		19,091			31,677			25,706			58,772
Loss on repurchase of preferred stock		—			—			133,681			—
Preferred dividend		2,919			5,392			6,238			10,678
Pro forma income (loss) available to common shareholders	$	16,172		$	26,285		$	(114,213	)	$	48,094
Basic earnings (loss) per share
As reported	$	0.46		$	0.68		$	(3.55	)	$	1.25
Pro forma	$	0.44		$	0.65		$	(3.61	)	$	1.19
Diluted earnings (loss) per share
As reported	$	0.44		$	0.65		$	(3.55	)	$	1.20
Pro forma	$	0.42		$	0.62		$	(3.61	)	$	1.14

The pro forma information was determined based on the fair value of stock awards calculated using the Black-Scholes option-pricing model with the following weighted average assumptions:

	2005			2004
Dividend yield		0	%		0	%
Expected volatility		30	%		29	%
Risk-free interest rate		3.9	%		2.2	%
Expected holding period	5.0 years			4.0 years

Estimates. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and certain expenses and the disclosure of contingent assets and liabilities. Actual results could differ materially from those estimates and assumptions. Estimates and assumptions are used in the determination of sales allowances, allowances for doubtful accounts, depreciation and amortization, employee benefit plans and restructuring reserves, among others.

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New Accounting Pronouncements. On December 16, 2004, the Financial Accounting Standards Board (“FASB”) issued Statement No. 123 (Revised 2004), or Statement 123(R), Share-Based Payment, which is a revision of Statement No. 123, Accounting for Stock-Based Compensation. Statement 123(R) supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees. The approach in Statement 123(R) is similar to the approach described in Statement 123; however, Statement 123(R) requires companies to calculate the fair value of all share-based payments to employees, including grants of employee stock options, and amortize that amount over the vesting period as an expense through the statement of operations. Pro forma disclosure, as allowed under Statement No. 123, will no longer be a permitted alternative. Statement 123(R) offers a choice of transition methods including Modified Prospective and Modified Retrospective (to all prior periods or interim periods in year of adoption).

On April 14, 2005, the Securities and Exchange Commission (“SEC”) announced the adoption of a new rule that amends the compliance dates for Statement 123(R). The SEC’s new rule allows companies to implement Statement No. 123(R) at the beginning of their next fiscal year, instead of the next reporting period, that begins after June 15, 2005. The Company currently intends to adopt Statement 123(R) in the third quarter of 2005 using the Modified Retrospective application method, electing to restate the quarterly results of operations for the first and second quarters of 2005. The Company presently estimates that it will recognize a pre-tax charge of approximately $11.0 million for the year ending December 31, 2005 as a result of adopting this Statement. Actual results could differ materially from this estimate upon finalization of certain assumptions and implementation matters underlying the new Statement, including, but not limited to, the forfeiture rate assumption, option exercise patterns and related expected option term and deferred tax accounting.

3. Acquisitions

On September 1, 2004, we completed the SBC Directory Acquisition for $1.41 billion in cash, after working capital adjustments and the settlement of a $30 million liquidation preference owed to us related to DonTech. As a result of the acquisition, we became the publisher of SBC-branded yellow pages directories in Illinois and Northwest Indiana. The results of the SBC Directory Business are included in our consolidated results from and after September 1, 2004. The acquired SBC Directory Business now operates as R.H. Donnelley Publishing & Advertising of Illinois Partnership, an indirect wholly owned subsidiary of the Company.

On January 3, 2003, we completed the SPA Acquisition for $2.23 billion in cash and became the publisher of Sprint-branded yellow pages directories in 18 states. The results of the SPA Directory Business are included in our consolidated results from and after January 3, 2003. The acquired SPA Directory Business now operates as R.H. Donnelley Publishing & Advertising, Inc., an indirect wholly owned subsidiary of the Company.

The primary purpose of each acquisition was to facilitate the Company’s transformation from a sales agent and pre-press vendor for yellow pages advertising to a leading publisher of yellow pages directories with control over its business and thereby increase shareholder value. The acquisitions were accounted for as purchase business combinations in accordance with SFAS 141, Business Combinations. Each purchase price was allocated to the related tangible and identifiable intangible assets acquired and liabilities assumed based on their respective estimated fair values on the acquisition dates. Certain long-term intangible assets were identified and recorded at their estimated fair value. Identifiable intangible assets acquired include directory services agreements between the Company and Sprint and the Company and SBC, customer relationships and acquired trademarks and trade names. In accordance with SFAS 142, Goodwill and Other Intangible Assets, the fair values of the identifiable intangible assets are being amortized over their estimated useful lives in a manner that best reflects the economic benefits derived from such assets. Goodwill is not amortized but is subject to impairment testing on an annual basis. See Note 4, Intangible Assets and Goodwill, for a further description of our intangible assets and goodwill.

Under purchase accounting rules, we did not assume or record the deferred revenue balance associated with SBC Directory Business of $204.1 million at September 1, 2004 or the deferred revenue balance of the SPA Directory Business of $315.9 million at January 3, 2003. These amounts represented revenue that would have been recognized subsequent to each acquisition under the deferral and amortization method in the absence of purchase accounting. Accordingly, we did not and will not record revenue associated with directories that were published prior to each acquisition, as well as directories that were published in the month each acquisition was completed. Although the deferred revenue balances were eliminated, we retained all the rights associated with the collection of amounts due under and contractual obligations under the advertising contracts executed prior to the acquisitions. As a result, the billed and unbilled accounts receivable balances acquired in both acquisitions became assets of the Company. Also

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under purchase accounting rules, we did not assume or record the deferred directory costs related to those directories that were published prior to each acquisition as well as directories that published in the month each acquisition was completed, totaling $175.8 million for SBC-branded directories and $63.3 million for Sprint-branded directories, respectively. These costs represented operating expenses that would have been recognized subsequent to the acquisitions under the deferral and amortization method in the absence of purchase accounting.

4. Intangible Assets and Goodwill

As a result of the SBC Directory Acquisition and the SPA Acquisition, certain long-term intangible assets were identified and recorded at their estimated fair value. Amortization expense was $18.1 million and $12.4 million for the three months ended June 30, 2005 and 2004, respectively, and $36.2 million and $24.9 million for the six months ended June 30, 2005 and 2004, respectively. The acquired long-term intangible assets and their respective book values at June 30, 2005 are shown in the table below.

	Directory
	Services			Local Customer			National CMR
	Agreements			Relationships			Relationships			Trade names			Total
Initial fair value:
SBC	$	952,500		$	90,000		$	55,000		$	—		$	1,097,500
Sprint		1,625,000			200,000			60,000			30,000			1,915,000
Total		2,577,500			290,000			115,000			30,000			3,012,500
Accumulated amortization		(97,499	)		(33,334	)		(7,516	)		(5,000	)		(143,349	)
Net intangible assets	$	2,480,001		$	256,666		$	107,484		$	25,000		$	2,869,151

Directory services agreements between SBC and the Company include a directory services license agreement, a non-competition agreement, a SMARTpages reseller agreement and a directory publishing listing agreement (collectively, “SBC Directory Services Agreements”) with certain affiliates of SBC. The directory services license agreement designates us as the official and exclusive provider of yellow pages directory services for SBC (and its successors) in Illinois and Northwest Indiana (the “Territory”), grants us the exclusive license (and obligation as specified in the agreement) to produce, publish and distribute white pages directories in the Territory as SBC’s agent and grants us the exclusive license (and obligation as specified in the agreement) to use the SBC brand and logo on print directories in the Territory. The non-competition agreement prohibits SBC (and its affiliates and successors), with certain limited exceptions, from (1) producing, publishing and distributing yellow and white pages print directories in the Territory, (2) soliciting or selling local or national yellow or white pages advertising for inclusion in such directories, and (3) soliciting or selling local Internet yellow pages advertising for certain Internet yellow pages directories in the Territory or licensing SBC marks to any third party for that purpose. The SMARTpages reseller agreement gives us the exclusive right to sell local Internet yellow pages advertising and the non-exclusive right to sell Internet yellow pages advertising with respect to geographies outside the Territory to any advertiser (excluding national advertisers) located inside the Territory onto SBC’s SMARTpages.com platform (and any successor products as specified in the agreement). The directory publishing listing license agreement gives us the right to purchase and use basic SBC subscriber listing information and updates for the purpose of publishing directories. The SBC Directory Services Agreements (other than the SMARTpages reseller agreement) have initial terms of 50 years, subject to automatic renewal and early termination under specified circumstances. The SMARTpages reseller agreement has a term of 5 years. The fair value assigned to the SBC Directory Services Agreements and the SMARTpages reseller agreement of $950.0 million and $2.5 million, respectively, was based on the present value of estimated future cash flows and is being amortized under the straight-line method over the indicated terms.

Directory services agreements between Sprint and the Company include a directory services license agreement, a trademark license agreement and a non-competition agreement (collectively “SPA Directory Services Agreements”) with certain affiliates of Sprint. The directory services license agreement grants us the exclusive license (and obligation as specified in the agreement) to produce, publish and distribute yellow and white pages directories for Sprint (and its successors) in 18 states where Sprint provided local telephone service at the time of the agreement. The trademark license agreement grants us the exclusive license (and obligation as specified in the agreement) to use certain specified Sprint trademarks, including the Sprint diamond logo, in those markets, and the non-competition

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agreement prohibits Sprint (and its affiliates and successors) in those markets from selling local directory advertising, with certain limited exceptions, or producing, publishing and distributing print directories. The SPA Directory Services Agreements have initial terms of 50 years, subject to automatic renewal and early termination under specified circumstances. The fair value of these agreements was determined based on the present value of estimated future cash flows and is being amortized under the straight-line method over 50 years.

The fair values of local and national customer relationships were determined based on the present value of estimated future cash flows and are being amortized under the “income forecast” method that assumes the value derived from customer relationships is greater in the earlier years and steadily declines over time. The weighted average useful life of these relationships is approximately 20 years.

The fair value of acquired trade names was determined based on the “relief from royalty” method, which values the trade names based on the estimated amount that a company would have to pay in an arms length transaction to use these trade names. These assets are being amortized under the straight-line method over 15 years.

The excess purchase price for the SBC Directory Acquisition and the SPA Acquisition over the net tangible and identifiable intangible assets acquired of $222.0 million and $97.0 million, respectively, was recorded as goodwill. During the first quarter of 2005, we recorded an adjustment increasing goodwill from the SBC Directory Acquisition by approximately $9.0 million relating to a restructuring plan associated with SBC Directory Acquisition. See Note 8, “Restructuring Charges.”

While we do not anticipate significant changes to the fair value of net assets acquired, additional information could come to our attention that may require us to revise the purchase price allocation in connection with the SBC Directory Acquisition. In accordance with SFAS 142, Goodwill and Other Intangible Assets, goodwill is not amortized, but is subject to periodic impairment testing. No impairment losses were recorded during this period.

5. Partnership Income and Investment

Before the SBC Directory Acquisition, partnership income included our 50% share of the net profits of DonTech and revenue participation income received directly from SBC, which was based on the value of advertising sales. As a result of the SBC Directory Acquisition, SBC ceased paying us revenue participation income, we now consolidate all net profits from DonTech and our DonTech partnership investment was eliminated. Consequently, partnership income was no longer reported commencing September 1, 2004. Partnership income from DonTech for the three and six months ended June 30, 2004 consisted of the following:

	Three months ended		Six months ended
	June 30, 2004		June 30, 2004
50% share of DonTech net profits	$	6,288	$	9,372
Revenue participation income		28,515		49,329
Total DonTech income	$	34,803	$	58,701

6. Long-Term Debt

Long-term debt at June 30, 2005 and December 31, 2004 consisted of the following:

	June 30, 2005		December 31, 2004
Credit Facility	$	1,997,704	$	2,202,342
8.875% Senior Notes due 2010		325,000		325,000
10.875% Senior Subordinated Notes due 2012		600,000		600,000
6.875% Senior Notes due 2013		300,000		—
Total		3,222,704		3,127,342
Less current portion		132,536		162,011
Long-term debt	$	3,090,168	$	2,965,331

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Our Senior Secured Credit Facility, as amended and restated (“Credit Facility”), consists of a $700 million Term Loan A-2, a $200 million Term Loan A-3, a $1,450 million Term Loan D and a $175 million Revolving Credit Facility (the “Revolver”) for an aggregate facility of $2,525 million. Term Loans A-2, A-3 and D require quarterly principal payments. As of June 30, 2005, the outstanding balances of Term Loans A-2, A-3 and D were $397.5 million, $146.9 million and $1,433.3 million, respectively, and $20.0 million was outstanding under the Revolver. The Revolver, Term Loans A-2 and A-3 mature in December 2009, and Term Loan D matures in June 2011. The Credit Facility provides for a new Term Loan C for potential borrowings up to $400 million. Such proceeds, if borrowed, may be used to fund acquisitions, for retirement of Notes (defined below) and for redemption of and payment of dividends on the Preferred Stock, subject to certain limitations. Substantially all of our assets, including the capital stock of our subsidiaries, are pledged as collateral to secure our obligations under the Credit Facility and the Senior Notes (defined below).

Our Credit Facility bears interest, at our option, at either:

• The higher of (i) a base rate as determined by the Administrative Agent, Deutsche Bank Trust Company Americas, plus a 1.00% margin on the Revolver and Term Loan A-2 and a 0.75% margin on Term Loan A-3 and Term Loan D; and (ii) the Federal Funds Effective Rate (as defined) plus 0.50%, plus a 1.00% margin on the Revolver and Term Loan A-2 and a 0.75% margin on Term Loan A-3 and Term Loan D; or

• LIBOR rate plus a 2.00% margin on the Revolver and Term Loan A-2 and a 1.75% margin on Term Loan A-3 and Term Loan D. We may elect interest periods of 1, 2, 3, 6, 9 or 12 months for LIBOR borrowings.

The weighted average interest rate of outstanding debt under the Credit Facility was 5.22% and 3.97% as of June 30, 2005 and 2004, respectively.

We have also issued $325 million of 8.875% Senior Notes due 2010 (“Senior Notes”) and $600 million of 10.875% Senior Subordinated Notes due 2012 (“Subordinated Notes”). Interest is paid on these notes semi-annually on June 15 and December 15.

On January 14, 2005, we issued $300 million of 6.875% Senior Notes (“Holdco Notes” and collectively with the Senior Notes and the Subordinated Notes, the “Notes”), the proceeds of which were used to redeem approximately 50% of the then outstanding Preferred Stock from certain investment partnerships affiliated with The Goldman Sachs Group, Inc. (collectively, “the GS Funds”), pay transaction costs and repay debt associated with our Credit Facility. Interest is payable on the Holdco Notes semi-annually in arrears on January 15 and July 15 of each year, commencing July 15, 2005. The Holdco Notes are unsecured obligations of the Company and mature on January 15, 2013. In connection with the issuance of the Holdco Notes, we completed an exchange offer in June 2005.

On February 6, 2004, we redeemed the remaining aggregate principal amount of the 9.125% Senior Subordinated Notes due 2008 totaling $21.2 million at a redemption price of 104.563% of the principal amount thereof, plus accrued and unpaid interest. In the six months ended June 30, 2004, we recorded interest expense related to these notes of $1.2 million, consisting of a premium over par value paid at redemption of $1.0 million, plus the write-off of $0.2 million of unamortized deferred financing costs.

The Credit Facility and the indentures governing the Notes contain usual and customary restrictive covenants that, among other things, place limitations on our ability to (i) incur additional indebtedness, including capital leases and liens; (ii) pay dividends and repurchase our capital stock; (iii) enter into mergers, consolidations, acquisitions, asset dispositions and sale-leaseback transactions; (iv) make capital expenditures; (v) issue capital stock of our subsidiaries; and (vi) engage in transactions with our affiliates. The Credit Facility also contains financial covenants relating to maximum consolidated leverage, minimum interest coverage and maximum senior secured leverage as defined therein.

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7. Redeemable Convertible Preferred Stock and Warrants

We have 10 million shares of preferred stock authorized for issuance. At June 30, 2005 and December 31, 2004, we had 100,301 and 200,604 shares of Preferred Stock outstanding, respectively. The Preferred Stock, and any accrued and unpaid dividends, are convertible by the GS Funds into common stock at any time after issuance at a price of $24.05 per share and earns a cumulative dividend of 8% compounded quarterly. We cannot pay cash dividends on the Preferred Stock through September 2005, during which time the dividend will accrete. After October 1, 2005, we may pay the Preferred Stock dividend in cash, subject to any limitations under our Credit Facility, or allow it to accrete, at our option. In connection with the issuance of the Preferred Stock, we also issued warrants to purchase 1.65 million shares of our common stock with exercise prices ranging between $26.28 and $28.62, which are exercisable at any time during a five-year term.

We may redeem the Preferred Stock in cash at any time on or after January 3, 2006 if the market price (as defined) of our common stock exceeds 200% of the conversion price for 30 of 45 consecutive trading days. The Preferred Stock is redeemable in cash by us at any time on or after January 3, 2013 and in cash, common stock or a combination of both after January 3, 2018. The Preferred Stock is redeemable in cash at the option of the GS Funds in the event of a Change in Control (as defined). At June 30, 2005 and December 31, 2004, the liquation value (including accrued and unpaid dividends) of the Preferred Stock was $122.2 million and $234.9 million, respectively, and at June 30, 2005, the Preferred Stock was convertible into approximately 5.1 million shares of common stock. Except in the case of a Change in Control (as defined), the cash redemption price of the Preferred Stock at any time is the Liquidation Preference (as defined). In the event we elect to redeem the Preferred Stock, the GS Funds can effectively preclude our redemption by converting their Preferred Stock into common stock within a prescribed period following our notice of redemption. Upon conversion, the GS Funds would continue to have the right to appoint directors (or an observer) to our Board until such time as the common stock beneficially owned by the GS Funds or their affiliates falls below certain thresholds, but would cease to have all other rights associated with the Preferred Stock, including their right to receive preferred dividends and other preferential distributions.

The net proceeds received from the issuance of Preferred Stock were allocated to the Preferred Stock, warrants and the beneficial conversion feature (“BCF”) of the Preferred Stock based on their relative fair values. The fair value of the Preferred Stock was estimated using the “dividend discount” method, which determines the fair value based on the discounted cash flows of the security. The BCF is a function of the conversion price of the Preferred Stock, the fair value of the warrants and the fair market value of the underlying common stock on the date of issuance. In connection with the issuance of our Preferred Stock and each subsequent quarterly dividend date, a BCF was recorded because the fair value of the underlying common stock at the time of issuance was greater than the conversion price of the Preferred Stock. The BCF is treated as a deemed dividend because the Preferred Stock was convertible into common stock immediately after issuance. The Preferred Stock dividend for the three and six-months ended June 30, 2005 of $2.9 million and $6.2 million, respectively, consisted of the stated 8% dividend of $2.4 million and $5.1 million, respectively, and a BCF of $0.5 million and $1.1 million, respectively. The Preferred Stock dividend for the three and six-months ended June 30, 2004 of $5.4 million and $10.7 million, respectively, consisted of the stated 8% dividend of $4.4 million and $8.7 million, respectively, and a BCF of $1.0 million and $1.9 million, respectively.

On January 14, 2005, we repurchased approximately 50% of our outstanding Preferred Stock from the GS Funds for $277.2 million in cash. In order to fund this repurchase, on January 14, 2005, we issued $300 million of Holdco Notes. See Note 6, “Long-Term Debt,” for a further discussion of the financing associated with this transaction. In connection with the Preferred Stock repurchase, we recorded a reduction from earnings available to common shareholders on the Consolidated Statements of Operations and Comprehensive Income of $133.7 million to reflect the loss on the repurchase of these shares for the six-months ended June 30, 2005. The excess of the cash paid to the GS Funds over the carrying amount of the repurchased Preferred Stock, plus the amount previously recognized for the BCF associated with these shares has been recognized as the loss on repurchase. Such amount represents a return to the GS Funds and, therefore has been treated in a manner similar to the treatment of the Preferred Stock dividend.

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8. Restructuring Charges

Following the SPA Acquisition, we consolidated publishing and technology operations, sales offices and administrative personnel and relocated the headquarters functions in Overland Park, Kansas and Purchase, New York to Cary, North Carolina. Approximately 140 people were affected by the relocation of the headquarters functions in Overland Park, Kansas and Purchase, New York, of which 75 were included in the restructuring reserve. The remaining 65 people relocated with the Company. In 2003, $9.5 million was charged to earnings primarily representing severance and related costs associated with the consolidation of the publishing and technology operations, sales offices and administrative personnel and the relocation of our headquarters. In the second and third quarters of 2004, additions to the reserve of $0.7 million and $0.1 million, respectively, were recorded representing adjustments to previous severance and related cost estimates. Payments for severance of $0.1 million have been made during the six months ended June 30, 2005. An additional reserve of $2.1 million was recorded during the second quarter of 2004, representing the estimated fair value of the remaining lease payments, net of estimated sub-lease income, on the former headquarters office lease in New York. Payments of $0.2 million and $0.4 million were made with respect to the former headquarters office lease during the three and six months ended June 30, 2005, respectively, and payments of $0.1 million were made during the three and six months ended June 30, 2004. The remaining payments will be made through 2006.

In 2003, a $2.2 million reserve was recorded, with an offsetting charge to goodwill, representing the closure of the pre-press publishing facility operated by SPA in Blountville, Tennessee. The reserve represented the remaining lease payments, net of estimated sub-lease income, on the pre-press facility. Payments of $0.1 million and $0.2 million were made with respect to the former pre-press publishing facility during the three and six months ended June 30, 2005, respectively, and payments of $0.2 million and $0.3 million were made during the three and six months ended June 30, 2004, respectively. The remaining payments will be made through 2012.

During the first quarter of 2005, we completed a restructuring relating to the integration of the SBC Directory Business. Approximately 63 employees have been affected by the restructuring; 57 were terminated during the first quarter of 2005, and 6 were relocated to our corporate headquarters in Cary, North Carolina. Additionally, we have vacated certain of our leased facilities in Chicago, Illinois. We have estimated the costs associated with the terminated employees and the abandonment of certain of our leased facilities to be approximately $8.7 million and such costs have been charged against goodwill during the first quarter of 2005. Payments of $0.9 million and $1.3 million were made with respect to leases and severance during the three and six months ended June 30, 2005. The remaining payments will be made through 2012. All other costs associated with the restructuring plan were estimated to be approximately $0.2 million and are being charged to earnings as incurred.

The table below shows the activity in our restructuring reserve during the three and six months ended June 30, 2005.

	Three months
	Ended June 30, 2005
Balance at March 31, 2005	$	10,740
Payments, net		(1,058	)
Balance at June 30, 2005.	$	9,682

	Six months
	Ended June 30, 2005
Balance at December 31, 2004	$	3,461
Additions		8,828
Payments, net		(2,607	)
Balance at June 30, 2005	$	9,682

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9. Benefit Plans

Retirement Plans. We have a defined benefit pension plan covering substantially all employees with at least one year of service. The benefits to be paid to employees are based on age, years of service and a percentage of total annual compensation. The percentage of compensation allocated to a retirement account ranges from 3.0% to 12.5% depending on age and years of service (“cash balance benefit”). Benefits for certain employees who were participants in the predecessor The Dun & Bradstreet Corporation (“D&B”) defined benefit pension plan are also determined based on the participant’s average compensation and years of service (“final average pay benefit”) and benefits to be paid will equal the greater of the final average pay benefit or the cash balance benefit. Pension costs are determined on an annual basis using the projected unit credit actuarial cost method. Our funding policy is to contribute an amount at least equal to the minimum legal funding requirement. We were not required to make and have not made any contributions for the three and six-month periods ended June 30, 2005. In addition, no contributions were required or made in 2004. The underlying pension plan assets are invested in diversified portfolios consisting primarily of equity and debt securities. A measurement date of December 31 is used for the majority of our plan assets.

We also have an unfunded non-qualified defined benefit pension plan, the Pension Benefit Equalization Plan (“PBEP”), which covers senior executives and certain key employees. Benefits are based on years of service and compensation (including compensation not permitted to be taken into account under the previously mentioned defined benefit pension plan).

Other Postretirement Benefits. We have an unfunded postretirement benefit plan that provides certain healthcare and life insurance benefits to certain full-time employees who reach retirement age while working for the Company.

In connection with the SBC Directory Acquisition, we assumed DonTech’s benefit plans. Information presented below for the three and six-months ended June 30, 2005 includes combined amounts for the Company’s benefit plans and DonTech’s benefit plans. Information presented below for the three and six-months ended June 30, 2004 excludes amounts relating to the DonTech benefit plans since they were not our obligation at that time. The retirement plans of the Company and DonTech are similar in nature and both share in a Master Trust. In accordance with Statement of Financial Accounting Standards (SFAS) 132, Employers’ Disclosures About Pensions and Other Postretirement Benefits (Revised 2003), the following table provides the components of net periodic benefit cost for the three and six-months ended June 30, 2005 and 2004:

	Pension Benefits
	Three months						Six months
	Ended June 30,						Ended June 30,
	2005			2004			2005			2004
Service cost	$	1,342		$	900		$	2,684		$	1,800
Interest cost		1,593			963			3,186			1,926
Expected return on plan assets		(2,090	)		(1,458	)		(4,180	)		(2,916	)
Unrecognized prior service cost		38			27			76			54
Amortization of unrecognized loss		320			138			640			276
Net periodic benefit cost	$	1,203		$	570		$	2,406		$	1,140

	Postretirement Benefits
	Three months				Six months
	Ended June 30,				Ended June 30,
	2005		2004		2005		2004
Service cost	$	188	$	113	$	376	$	226
Interest cost		272		165		544		330
Unrecognized prior service cost		240		130		480		260
Amortization of unrecognized loss		25		32		50		64
Net periodic benefit cost	$	725	$	440	$	1,450	$	880

As previously disclosed in the 2004 Form 10-K, we expect to make contributions of approximately $0.9 million and $0.1 million to our postretirement medical plan and our PBEP, respectively, in 2005.

18

Savings Plan. We offer a defined contribution savings plan to substantially all employees and contribute $0.50 for each dollar contributed by a participating employee, up to a maximum of 6% of each participating employee’s salary (including bonus and commissions). Effective July 1, 2005, DonTech’s defined contribution savings plan was merged into RHD’s defined contribution savings plan.

10. Business Segments

During 2004, we revised our historical segment reporting to reflect the change in our business that resulted from the SBC Directory Acquisition and to reflect how management now reviews and analyzes the business. Our business of publishing yellow pages directories is now conducted in one reportable operating segment. All pre-press publishing services and other ancillary services previously performed on behalf of other publishers are now performed entirely on behalf of the directories we now publish. As a result of the SBC Directory Acquisition, SBC ceased paying us revenue participation income, we consolidate all net profits from DonTech and we eliminated our partnership investment in DonTech. Consequently, partnership income was no longer reported commencing on September 1, 2004 and, accordingly, the previously reported DonTech operating segment is no longer applicable.

11. Litigation

We are involved in various legal proceedings arising in the ordinary course of our business, as well as certain litigation and tax matters described below. We periodically assess our liabilities and contingencies in connection with these matters based upon the latest information available to us. For those matters where it is probable that we have incurred a loss and the loss or range of loss can be reasonably estimated, we record reserves in our consolidated financial statements. In other instances, we are unable to make a reasonable estimate of any liability because of the uncertainties related to both the probable outcome and amount or range of loss. As additional information becomes available, we adjust our assessment and estimates of such liabilities accordingly.

Based on our review of the latest information available, we believe our ultimate liability in connection with pending legal proceedings, including the litigation and tax matters described below, will not have a material adverse effect on our results of operations, cash flows or financial position, as described below. No material amounts have been accrued in our financial statements with respect to any of these matters.

In order to understand our potential exposure under the litigation and tax matters described below under the captions “Information Resources, Inc.” and “Tax Matters,” you need to understand the relationship between us and D&B, and certain of our predecessors and affiliates that, through various corporate reorganizations and contractual commitments, have assumed varying degrees of responsibility with respect to such matters.

In November 1996, the company then known as The Dun & Bradstreet Corporation separated through a spin-off (“1996 Distribution”) into three separate public companies: The Dun and Bradstreet Corporation, ACNielsen Corporation (“ACNielsen”), and Cognizant Corporation (“Cognizant”). In June 1998, The Dun & Bradstreet Corporation separated through a spin-off (“1998 Distribution”) into two separate public companies: R.H. Donnelley Corporation (formerly The Dun & Bradstreet Corporation) and a new company that changed its name to The Dun & Bradstreet Corporation. Later in 1998, Cognizant separated through a spin-off (“Cognizant Distribution”) into two separate public companies: IMS Health Incorporated (“IMS”), and Nielsen Media Research, Inc. (“NMR”). In September 2000, The Dun & Bradstreet Corporation separated into two separate public companies: Moody’s Corporation, (“Moody’s”) (formerly The Dun & Bradstreet Corporation), and a new company that changed its name to The Dun & Bradstreet Corporation. As a result of the form of R.H. Donnelley Corporation’s separation from The Dun & Bradstreet Corporation in 1998, we are the corporate successor of and technically the defendant and taxpayer referred to below as D&B with respect to any matter accruing prior to June 30 1998.

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Information Resources, Inc.

The following is a description of an antitrust lawsuit filed in 1996 by Information Resources, Inc. (“IRI”). VNU N.V., a publicly traded Dutch company (“VNU”), and its U.S. subsidiaries VNU, Inc., AC Nielsen, AC Nielsen (US), Inc. (“ACN (US)”), and NMR (collectively, the “VNU Parties”), have assumed exclusive joint and several liability for any judgment or settlement of this antitrust lawsuit (collectively, the “IRI Liabilities”). As a result of the indemnity obligation, we do not have any exposure to a judgment or settlement of this lawsuit unless the VNU Parties default on their obligations. In the event of such default, we have contingent liability for this matter as a result of our succeeding to D&B’s liabilities and obligations as part of the 1998 Distribution. In such event, however, under the contractual commitments described below, any such amounts that we might need to pay would be shared equally (50% each) by D&B and Moody’s, on a joint and several basis. Only if D&B and Moody’s were unable to bear all or a part of the IRI Liabilities, would we be liable, and then only to the extent that either of them could not satisfy their joint and several indemnity obligations to us.

On February 1, 2005, the U.S. District Court for the Southern District of New York entered a final judgment against IRI dismissing IRI’s claims with prejudice and on the merits. IRI filed a notice of appeal to the Second Circuit Court of Appeals. The appeal has been fully briefed, but no argument date has yet been set for this appeal. Due to the dismissal of this matter and several layers of indemnity described above, our disclosure regarding this matter will be relatively brief.

In July 1996, IRI filed a complaint, subsequently amended in 1997, in the United States District Court for the Southern District of New York, naming as defendants D&B (now, the Company, as successor of D&B), A.C. Nielsen Company (a subsidiary of ACNielsen) and IMS (then known as Cognizant), at the time of the filing, all wholly owned subsidiaries of D&B.

The amended complaint alleged, among other claims, various violations of U.S. antitrust laws under Sections 1 and 2 of the Sherman Antitrust Act. IRI sought damages in excess of $650.0 million, which IRI sought to treble under the antitrust laws. IRI also sought punitive damages of an unspecified amount, which we believe are precluded as a result of the prior dismissal of one of IRI’s claims.

In December 2004, the Court entered an order that barred IRI from arguing that defendant’s pricing practices or discounts were illegal or anti-competitive unless it could satisfy a specified burden of proof. In response to this ruling, in a press release, IRI stated, in relevant part, “without this evidence, IRI believes that little would be left of IRI’s case to take to trial.” As a result, IRI asked the Court to enter a final judgment against it so that it could take an immediate appeal to the Second Circuit. Defendants did not object to this request. As noted above, the case was dismissed by the District Court and IRI has filed an appeal. The appeal has been fully briefed, but no argument date has yet been set for this appeal.

In connection with the 1996 Distribution, Cognizant (now NMR), ACNielsen and D&B (now the Company) entered into an Indemnity and Joint Defense Agreement. On July 30, 2004, the VNU Parties, the Company, D&B, Moody’s and IMS entered into an Amended and Restated Indemnity and Joint Defense Agreement (the “Amended JDA”).

Pursuant to the Amended JDA, any and all IRI Liabilities incurred by us, D&B, Moody’s or IMS relating to a judgment (even if not final) or any settlement being entered into in the IRI action will be jointly and severally assumed and fully discharged exclusively by the VNU Parties. Under the Amended JDA, the VNU Parties have agreed to, jointly and severally, indemnify us, D&B, Moody’s and IMS from and against all IRI Liabilities to which we become subject.

Under the agreements relating to the 1998 Distribution, D&B assumed the defense and agreed to indemnify us against any payments that we may be required to make with respect to the IRI Liabilities and related legal fees. As required by those agreements, Moody’s Corporation, which subsequently separated from D&B in the 2000 Distribution, has agreed to be jointly and severally liable with D&B for the indemnity obligation to us. We understand that D&B and Moody’s have agreed amongst themselves to share equally (50% each) these indemnity obligations to us. Only if D&B and Moody’s were unable to bear all or a part of their aggregate 50% share of the liability would we be liable, and then only to the extent that either of them could not satisfy their joint and several indemnity obligations to us.

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Because liability for violations of the antitrust laws is joint and several and because the rights and obligations relating to the Amended JDA are based on contractual relationships, the failure of the VNU Parties to fulfill their obligations under the Amended JDA could result in the other parties bearing all or a share of the IRI Liabilities. Joint and several liability for the IRI Liabilities means that even where more than one defendant is determined to have been responsible for an alleged wrongdoing, the plaintiff can collect all or part of the judgment from just one of the defendants. This is true regardless of whatever contractual allocation of responsibility the defendants and any other indemnifying parties may have made, including the allocations described above between the VNU Parties, the Company, D&B, Moody’s and IMS.

Accordingly, and as a result of the allocations of liability described above, in the event the VNU Parties default on their obligations under the Amended JDA, each of D&B and Moody’s will be jointly and severally responsible for the payment of any portion of any judgment or settlement ultimately payable by the Company (which is the defendant in the IRI action), which could be as high as all of the IRI Liabilities.

While, as described above, the IRI lawsuit has been dismissed with prejudice on the merits, IRI has filed an appeal. Accordingly, we are unable to predict the outcome of the IRI litigation or the financial condition of any of the VNU Parties or the other defendants at the time of any such outcome (and hence we cannot estimate their ability to pay the IRI Liabilities pursuant to the Amended JDA or the judgment or settlement in the IRI action). Nonetheless, while we cannot assure you as to the outcome of this matter, management presently believes that the VNU Parties have sufficient financial resources and borrowing capacity to satisfy their obligations under the Amended JDA and, if they default, D&B and Moody’s have sufficient financial resources and borrowing capacity to reimburse us for any payments we may be required to make and related costs we may incur in connection with this matter. Therefore, management presently believes that the ultimate resolution of this matter would not have a material adverse effect on the Company’s results of operations, cash flows or financial condition. Accordingly, no amount in respect of this matter has been accrued in our consolidated financial statements.

Tax Matters

D&B entered into global tax-planning initiatives in the normal course of its business, primarily through tax-free restructurings of both its foreign and domestic operations (collectively, “Legacy Tax Matters”). The IRS is currently disputing certain tax positions taken with respect to the Legacy Tax Matters. The status of these Legacy Tax Matters is summarized below, including the settlement of the matter described below under “Royalty Expense Deductions – 1993-1997.”

Pursuant to a series of tax sharing and other agreements (collectively, “Tax Sharing Agreements”) relating to the spin-offs and separations referred to above, IMS and NMR are jointly and severally liable for, and must pay one-half of, and D&B and Moody’s are jointly and severally liable for, and must pay the other half of, any amounts resulting from the Legacy Tax Matters summarized below under “Royalty Expense Deductions 1993-1997” and D&B and Moody’s are jointly and severally liable for all amounts resulting from the Legacy Tax Matters summarized below under “Amortization and Royalty Expense Deductions/Royalty Income — 1997-2005.”

Under the terms of the 1998 Distribution, D&B agreed to assume the defense and to indemnify us against any tax liability that may be assessed against us and any related costs and expenses that we may incur in connection with any of these Legacy Tax Matters. Also, as required by those agreements, Moody’s has agreed to be jointly and severally liable with D&B for the indemnity obligation to us. Under the terms of certain of the other spin-offs and separations, D&B and Moody’s have, between each other, agreed to be financially responsible for 50% of any potential liabilities that may arise to the extent such potential liabilities are not directly attributable to each party’s respective business operations. Only if D&B and Moody’s were unable to bear all or a part of these liabilities, would we be liable, and then only to the extent that both of them could not satisfy their joint and several indemnity obligations to us.

21

While we cannot assure you as to the outcome of these Legacy Tax Matters (other than the settled portion of the Royalty Expense Matter), management presently believes that D&B and Moody’s have sufficient financial resources, borrowing capacity and, where applicable, indemnity rights against IMS and NMR (who succeeded to Cognizant’s indemnity obligations under the Cognizant Distribution) and IMS and NMR in turn have sufficient financial resources and borrowing capacity to satisfy their respective indemnity obligations to D&B and Moody’s, so as to reimburse us for any payments we may be required to make and related costs we may incur in connection with these Legacy Tax Matters. Therefore, management presently believes that the ultimate resolution of these Legacy Tax Matters would not have a material adverse effect on the Company’s results of operations, cash flows or financial condition.

Royalty Expense Deductions – 1993 – 1997

Beginning in the second quarter of 2003, D&B received (on our behalf) a series of communications from the IRS proposing adjustments with respect to a partnership transaction entered into in 1993. Specifically, the IRS proposed to disallow certain royalty expense deductions claimed by D&B on its 1993 through 1997 tax returns. The IRS also separately challenged the tax treatment of certain royalty payments received by that partnership and proposed reallocating certain partnership income to D&B. These matters are collectively referred to herein as the Royalty Expense Matter.

We understand that D&B estimates that the disallowance of the 1993 and 1994 royalty expense deductions would result in a loss to it of approximately $5.0 million in pending tax refunds and that the additional tax liability to it with respect to (a) the disallowance of the 1995 and 1996 royalty expense deductions could be up to approximately $47.4 million (tax, interest and penalties, net of tax benefits) and (b) its share of the reallocated partnership income could be up to approximately $23.6 million (tax, interest and penalties, net of tax benefits). We understand that D&B believes that the position of the IRS regarding the partnership income is inconsistent with its position with respect to the same royalty expense deductions described above and, therefore, the IRS would be unlikely to prevail on both positions. We understand that D&B has filed a protest with respect to the 1993 and 1994 tax refunds, and intends to attempt to resolve this matter with the IRS before proceeding to litigation, if necessary.

In July 2005, we (as the taxpayer of record) entered into a settlement agreement with the IRS resolving the disallowance of the 1995 and 1996 royalty expense deductions portion of the Royalty Expense Matter. Under the terms of the settlement, the aggregate tax liability will be approximately $56.0 million (including interest and penalties) for 1995 and $86.0 million (including interest and penalties) for 1996, subject to final bill(s) from the IRS, which we expect to be consistent with prior computations it has provided to D&B.

While this matter has now been settled with the IRS, each of the relevant parties have consented to the settlement without prejudice to certain claims they may have against each other based upon the prior tender of the initial settlement agreement by us and D&B and the refusal to consent thereto by IMS and NMR during 2004, as disclosed in prior periodic reports.

IMS has alleged various breaches of our and D&B’s obligations under the Tax Sharing Agreements related to D&B’s management and attempted settlement of this matter with the IRS. In addition to “reserving its rights” against us and D&B, IMS has urged NMR (which is in direct contractual privity with us) to assert breaches of contract and to terminate the indemnity obligations of IMS and NMR under the Tax Sharing Agreements generally.

We and our legal counsel, and we understand D&B and their legal counsel, believe that neither NMR nor IMS have any right or the legal basis to terminate their indemnity obligations under the Tax Sharing Agreements, and that any attempt by them to do so will be found to be without merit, although we cannot assure you with respect to the ultimate outcome of that issue or with respect to the timing of its resolution.

The 1993, 1994, and 1997 royalty expense deduction portions of the Royalty Expense Matter remain pending before the IRS.

22

Amortization and Royalty Expense Deductions/Royalty Income – 1997 – 2005

In the fourth quarter of 2003, D&B received (on our behalf) IRS notices of proposed adjustment with respect to a partnership transaction entered into in 1997. The IRS asserted that certain amortization expense deductions claimed by D&B on its 1997 and 1998 tax returns should be disallowed.

In April 2004, D&B received (on our behalf) proposed notices of deficiency from the IRS, proposing adjustments with respect to the same 1997 partnership transaction consistent with the notices of proposed adjustment. We understand that D&B filed protests relating to this matter for the 1997 and 1998 tax years with the IRS Office of Appeals. During the third quarter of 2004, D&B was informed by the IRS Office of Appeals that the 1997 and 1998 tax years were being returned to the Examination Division of the IRS for further development of the issues.

In the second quarter of 2005, D&B received (on our behalf) IRS notices of proposed adjustment for 1999 through 2002, with respect to the same 1997 partnership transaction referred to above. The IRS again asserted that certain amortization expense deductions claimed by D&B on its 1999 through 2002 tax returns should be disallowed. We understand that D&B anticipates that the IRS will issue proposed notices of deficiency for 1999 through 2002, reflecting the adjustments proposed in the notices of proposed adjustment received during the second quarter of 2005.

In addition, the IRS has asserted that royalty expense deductions, claimed by D&B on its tax returns for 1997 through 2002 for royalties paid to the partnership should be disallowed. The IRS also has asserted that the receipt of these same royalties by the partnership should be reallocated to and reported as royalty income by D&B, including the portions of the royalties that were allocated to third party partners in the partnership, and, thus, included in their taxable income. We understand that D&B believes that the IRS’ stated positions with respect to the treatment of the royalty expense and royalty income are mutually inconsistent, making it unlikely that the IRS will prevail on both of the positions. We also understand that D&B nonetheless believes that the IRS may seek to issue notices with respect to both of these inconsistent positions.

In addition to the foregoing, and in connection with the notices received during the second quarter of 2005, the IRS has asserted that certain business expenses incurred by D&B during 1999 through 2002 should be capitalized and amortized over a 15-year period, if, but only if, the proposed adjustments described above are not sustained.

As a result, we understand that D&B estimates that after taking into account certain other tax benefits resulting from the IRS’ position on the partnership it is unlikely that there will be any additional cash tax payments due in addition to the amounts noted above related to the amortization expense deduction.

We understand that D&B estimates that its additional tax liability as a result of the disallowance of the 1997 through 2002 amortization deductions and the disallowance of such deductions claimed from 2003 to date could be up to $64.4 million (tax, interest and penalties, net of tax benefits). This transaction is scheduled to expire in 2012 and, unless earlier terminated, based on current interest rates and tax rates, additional tax exposure would increase at a rate of approximately $2.1 million per quarter (including potential penalties) as future amortization expenses are deducted.

In the event the IRS were to prevail on both positions with respect to the royalty expense and royalty income, which D&B believes unlikely, D&B estimates that the additional tax liability to it as a result of the disallowance of the 1997 through 2002 royalty expense deductions, the disallowance of such deductions claimed from 2003 to date and the inclusion of the reallocated royalty income for all relevant years could be up to $143.3 million (tax, interest and penalties, net of tax benefits), which would be in addition to the $64.4 million noted above related to the amortization expense deduction.

We understand that D&B is attempting to resolve these matters with the IRS before proceeding to litigation, if necessary. If D&B were to challenge, at any time, any of these IRS positions for years 1997 through 2002 in U.S. District Court or the U.S. Court of Federal Claims, rather than in U.S. Tax Court, the disputed amounts for each applicable year would need to be paid in advance for the Court to have jurisdiction over the case.

23

Conclusion

As a result of our assessment of our exposure in these matters relating to our prior relationship with D&B and its former affiliates, especially in light of our indemnity arrangements with D&B and Moody’s (and the VNU Parties with respect to the IRI matter), and their respective financial resources, borrowing capacity and, in the case of certain Legacy Tax Matters, indemnity rights against IMS and NMR, and in turn IMS and NMR’s respective financial resources and borrowing capacity to satisfy their respective indemnity obligations to D&B and Moody’s, no material amounts have been accrued in our consolidated financial statements for any of these D&B-related litigation and tax matters.

Other Matters

The Company is exposed to potential defamation and breach of privacy claims arising from our publication of directories and our methods of collecting, processing and using advertiser and telephone subscriber data. If such data was determined to be inaccurate or if data stored by us was improperly accessed and disseminated by us or by unauthorized persons, the subjects of our data and users of that data we collect and publish could submit claims against the Company. Although to date we have not experienced any material claims relating to defamation or breach of privacy, we may be party to such proceedings in the future that could have a material adverse effect on our business.

We are also involved in other legal proceedings, claims and litigation arising in the ordinary conduct of our business. Although we cannot assure you of any outcome, management presently believes that the outcome of such legal proceedings will not have a material adverse effect on our results of operations or financial condition and no material amounts have been accrued in our consolidated financial statements with respect to these matters.

24

12. Guarantees

R.H. Donnelley Inc. is a direct wholly owned subsidiary of the Company and the issuer of the Senior Notes and Subordinated Notes. The Company and the direct and indirect 100% owned subsidiaries of R.H. Donnelley Inc. jointly and severally, fully and unconditionally, guarantee these debt instruments. The Holdco Notes were issued as of January 14, 2005 and are not guaranteed by any of the Company’s subsidiaries. At June 30, 2005 and December 31, 2004, R.H. Donnelley Inc.’s direct wholly owned subsidiaries were R.H. Donnelley Publishing & Advertising, Inc., R.H. Donnelley APIL, Inc., DonTech Holdings, LLC, The DonTech II Partnership, R.H. Donnelley Publishing & Advertising of Illinois Holdings, LLC, R.H. Donnelley Publishing & Advertising of Illinois Partnership and Get Digital Smart.com Inc.

As of June 30, 2005, R.H. Donnelley Corporation had issued and outstanding 100,301 shares of its Preferred Stock. See Note 7, “Redeemable Convertible Preferred Stock and Warrants,” for a further description of the terms of the Preferred Stock and the related dividend requirements. See Note 11, “Litigation,” for a description of various legal proceedings in which the Company is involved and related contingencies.

R.H. Donnelley Corporation receives dividends from R.H. Donnelley Inc. for the payment of income taxes and certain other public company matters. Dividends in these periods were not material.

In general, substantially all of the net assets of the Company and its subsidiaries are restricted from being paid as dividends to any third party, and our subsidiaries are restricted from paying dividends, loans or advances to R.H. Donnelley Corporation with very limited exceptions, under the terms of our Credit Facility. See Note 6, “Long-Term Debt,” for a further description of our debt instruments.

25

R.H. Donnelley Corporation

Consolidating Condensed Balance Sheet
June 30, 2005

	R.H. Donnelley			R.H.							Consolidated
	Corp.			Donnelley Inc.		Guarantor					R.H. Donnelley
	(Parent)			(Issuer)		Subsidiaries		Eliminations			Corporation
Assets
Cash and cash equivalents	$	6		$	1,021	$	4,797	$	—		$	5,824
Accounts receivable, net		—			2		448,586		—			448,588
Intercompany receivables		35,878			—		261,537		(297,415	)		—
Deferred directory costs		—			—		100,354		—			100,354
Other current assets		—			125,951		19,915		(112,678	)		33,188
Total current assets		35,884			126,974		835,189		(410,093	)		587,954
Investment in subsidiaries		264,725			1,502,344		—		(1,767,069	)		—
Fixed assets, net		—			37,805		6,069		—			43,874
Other assets		9,772			95,639		32,194		(34,560	)		103,045
Intercompany notes & other receivables		—			1,845,356		—		(1,845,356	)		—
Intangible assets, net		—			—		2,869,151		—			2,869,151
Goodwill		—			—		319,014		—			319,014
Total assets	$	310,381		$	3,608,118	$	4,061,617	$	(4,057,078	)	$	3,923,038
Liabilities, Preferred Stock and Shareholders’ (Deficit) Equity
Accounts payable & accrued liabilities	$	9,960		$	28,314	$	31,628	$	(890	)	$	69,012
Deferred directory revenue		—			—		452,855		—			452,855
Intercompany payables		—			297,415		—		(297,415	)		—
Current portion LTD		—			132,536		111,840		(111,840	)		132,536
Total current liabilities		9,960			458,265		596,323		(410,145	)		654,403
Long-term debt		300,000			2,790,168		—		—			3,090,168
Intercompany notes & other payables		—			—		1,845,356		(1,845,356	)		—
Deferred income taxes, net		—			64,706		103,668		(34,508	)		133,866
Other long-term liabilities		—			30,254		13,926		—			44,180
Redeemable convertible preferred stock		112,807			—		—		—			112,807
Shareholders’ (deficit) equity		(112,386	)		264,725		1,502,344		(1,767,069	)		(112,386	)
Total liabilities, preferred stock and shareholders’ (deficit) equity	$	310,381		$	3,608,118	$	4,061,617	$	(4,057,078	)	$	3,923,038

26

R.H. Donnelley Corporation

Consolidating Condensed Balance Sheet
December 31, 2004

	R.H.
	Donnelley		R.H.							Consolidated
	Corp.		Donnelley Inc.		Guarantor					R.H. Donnelley
	(Parent)		(Issuer)		Subsidiaries		Eliminations			Corporation
Assets
Cash and cash equivalents	$	—	$	6,008	$	4,747	$	—		$	10,755
Accounts receivable, net		—		—		455,433		—			455,433
Deferred directory costs		—		—		155,959		(39,442	)		116,517
Other current assets		—		18,456		693,933		(671,785	)		40,604
Total current assets		—		24,464		1,310,072		(711,227	)		623,309
Investment in subsidiaries		234,096		1,895,478		—		(2,129,574	)		—
Fixed assets, net		—		31,125		6,562		(1	)		37,686
Other assets		—		101,061		1,567		—			102,628
Notes receivable		—		2,124,745		—		(2,124,745	)		—
Intangible assets, net		—		—		2,905,026		304			2,905,330
Goodwill		—		—		309,969		—			309,969
Total assets	$	234,096	$	4,176,873	$	4,533,196	$	(4,965,243	)	$	3,978,922
Liabilities, Preferred Stock and Shareholders’ Equity
Accounts payable and accrued liabilities	$	—	$	366,086	$	45,091	$	(330,815	)	$	80,362
Deferred directory revenue		—		—		381,424		—			381,424
Current portion LTD		—		162,011		111,840		(111,840	)		162,011
Total current liabilities		—		528,097		538,355		(442,655	)		623,797
Long-term debt		—		3,314,522		2,012,905		(2,362,096	)		2,965,331
Deferred income taxes, net		—		70,612		53,366		(5,158	)		118,820
Other long-term liabilities		—		29,546		33,092		(25,760	)		36,878
Redeemable convertible preferred stock		216,111		—		—		—			216,111
Shareholders’ equity		17,985		234,096		1,895,478		(2,129,574	)		17,985
Total liabilities, preferred stock and shareholders’ equity	$	234,096	$	4,176,873	$	4,533,196	$	(4,965,243	)	$	3,978,922

27

R.H. Donnelley Corporation

Consolidating Condensed Statement of Operations
For the Three Months Ended June 30, 2005

	R.H.												Consolidated
	Donnelley			R.H.									R.H.
	Corp.			Donnelley Inc.			Guarantor						Donnelley
	(Parent)			(Issuer)			Subsidiaries			Eliminations			Corporation
Net revenue	$	—		$	4,601		$	232,912		$	(4,546	)	$	232,967
Expenses		39			756			145,738			(4,596	)		141,937
Operating income		(39	)		3,845			87,174			50			91,030
Equity earnings in Subsidiaries		23,381			22,995			—			(46,376	)		—
Interest expense, net		(5,354	)		(7,038	)		(45,814	)		—			(58,206	)
Pre-tax income		17,988			19,802			41,360			(46,326	)		32,824
Income tax (benefit) expense		(2,035	)		(3,579	)		18,365			50			12,801
Net income		20,023			23,381			22,995			(46,376	)		20,023
Preferred dividend		(2,919	)		—			—			—			(2,919	)
Income available to common shareholders	$	17,104		$	23,381		$	22,995		$	(46,376	)	$	17,104

R.H. Donnelley Corporation

Consolidating Condensed Statement of Operations
For the Three Months Ended June 30, 2004

	R.H.			R.H.								Consolidated
	Donnelley			Donnelley								R.H.
	Corp.			Inc.			Guarantor					Donnelley
	(Parent)			(Issuer)			Subsidiaries		Eliminations			Corporation
Net revenue	$	—		$	4,656		$	139,985	$	—		$	144,641
Expenses		—			24,179			63,129		—			87,308
Partnership income		32,674			106,488			28,515		(132,874	)		34,803
Operating income		32,674			86,965			105,371		(132,874	)		92,136
Interest expense, net		—			(37,496	)		—		—			(37,496	)
Pre-tax income		32,674			49,469			105,371		(132,874	)		54,640
Income tax expense		(383	)		16,795			5,171		—			21,583
Net income		33,057			32,674			100,200		(132,874	)		33,057
Preferred dividend		(5,392	)		—			—		—			(5,392	)
Income available to common shareholders	$	27,665		$	32,674		$	100,200	$	(132,874	)	$	27,665

28

R.H. Donnelley Corporation

Consolidating Condensed Statement of Operations
For the Six Months Ended June 30, 2005

	R.H.												Consolidated
	Donnelley			R.H.									R.H.
	Corp.			Donnelley Inc.			Guarantor						Donnelley
	(Parent)			(Issuer)			Subsidiaries			Eliminations			Corporation
Net revenue	$	—		$	5,978		$	440,251		$	(5,922	)	$	440,307
Expenses		39			7,778			277,236			(5,972	)		279,081
Operating income		(39	)		(1,800	)		163,015			50			161,226
Equity earnings in Subsidiaries		33,972			41,613			—			(75,585	)		—
Interest expense, net		(9,917	)		(14,030	)		(91,756	)		—			(115,703	)
Pre-tax income		24,016			25,783			71,259			(75,535	)		45,523
Income tax (benefit) expense		(3,753	)		(8,189	)		29,646			50			17,754
Net income		27,769			33,972			41,613			(75,585	)		27,769
Preferred dividend		(6,238	)		—			—			—			(6,238	)
Loss on repurchase of preferred stock		(133,681	)		—			—			—			(133,681	)
(Loss) income available to common shareholders	$	(112,150	)	$	33,972		$	41,613		$	(75,585	)	$	(112,150	)

R.H. Donnelley Corporation

Consolidating Condensed Statement of Operations
For the Six Months Ended June 30, 2004

												Consolidated
	R.H. Donnelley			R.H.								R.H.
	Corp.			Donnelley Inc.			Guarantor					Donnelley
	(Parent)			(Issuer)			Subsidiaries		Eliminations			Corporation
Net revenue	$	—		$	9,866		$	278,582	$	—		$	288,448
Expenses		—			45,767			122,508		—			168,275
Partnership income		61,152			172,699			49,329		(224,479	)		58,701
Operating income		61,152			136,798			205,403		(224,479	)		178,874
Interest expense, net		—			(77,796	)		—		—			(77,796	)
Pre-tax income		61,152			59,002			205,403		(224,479	)		101,078
Income tax (benefit) expense		—			(2,150	)		42,076		—			39,926
Net income		61,152			61,152			163,327		(224,479	)		61,152
Preferred dividend		(10,678	)		—			—		—			(10,678	)
Income available to common shareholders	$	50,474		$	61,152		$	163,327	$	(224,479	)	$	50,474

29

R.H. Donnelley Corporation

Consolidating Condensed Statement of Cash Flows
For the Six Months Ended June 30, 2005

	R.H.			R.H.
	Donnelley			Donnelley									Consolidated
	Corp.			Inc.			Guarantor						R.H. Donnelley
	(Parent)			(Issuer)			Subsidiaries			Eliminations			Corporation
Cash flow from operating activities	$	(14,313	)	$	207,721		$	1,514		$	(209	)	$	194,713
Cash flow from investing activities		—			(11,995	)		(249	)		209			(12,035	)
Cash flow from financing activities:
Proceeds from issuance of debt, net of costs		291,516			—			—			—			291,516
Borrowings under revolver		—			140,100			—			—			140,100
Repurchase of preferred stock		(277,197	)		—			—			—			(277,197	)
Debt repayments		—			(183,282	)		—			—			(183,282	)
Revolver repayments		—			(161,300	)		—			—			(161,300	)
Other		—			3,769			(1,215	)		—			2,554
Net cash flow from financing activities		14,319			(200,713	)		(1,215	)		—			(187,609	)
Change in cash		6			(4,987	)		50			—			(4,931	)
Cash at beginning of year		—			6,008			4,747			—			10,755
Cash at end of period	$	6		$	1,021		$	4,797		$	—		$	5,824

R.H. Donnelley Corporation

Consolidating Condensed Statement of Cash Flows
For the Six Months Ended June 30, 2004

	R.H.		R.H.
	Donnelley		Donnelley									Consolidated
	Corp.		Inc.			Guarantor						R.H. Donnelley
	(Parent)		(Issuer)			Subsidiaries			Eliminations			Corporation
Cash flow from operating activities	$	—	$	(81,513	)	$	223,739		$	5,234		$	147,460
Cash flow from investing activities		—		(7,893	)		(964	)		—			(8,857	)
Cash flow from financing activities:
Debt repayments		—		(149,466	)		—			—			(149,466	)
Revolver repayments		—		(1,400	)		—			—			(1,400	)
Intercompany transfers		—		237,798			(232,564	)		(5,234	)		—
Other		—		4,268			10,867			—			15,135
Net cash flow from financing activities		—		91,200			(221,697	)		(5,234	)		(135,731	)
Change in cash		—		1,794			1,078			—			2,872
Cash at beginning of year		—		6,900			822			—			7,722
Cash at end of period	$	—	$	8,694		$	1,900		$	—		$	10,594

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Information

Certain statements contained in this Form 10-Q regarding our future operating results, performance, business plans or prospects and any other statements not constituting historical fact are “forward-looking statements” subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995. Where possible, words such as “believe”, “expect”, “anticipate”, “should”, “will”, “would”, “planned”, “estimated”, “potential”, “goal”, “outlook”, “could”, and similar expressions, are used to identify such forward-looking statements. All forward-looking statements reflect only our current beliefs and assumptions with respect to our future results, business plans, and prospects, and are based solely on information currently available to us. Accordingly, these statements are subject to significant risks and uncertainties and our actual results, business plans and prospects could differ significantly from those expressed in, or implied by, these statements. We caution readers not to place undue reliance on, and we undertake no obligation to update, other than imposed by law, any forward-looking statements. Such risks and uncertainties are described in detail in our Annual Report on Form 10-K for the year ended December 31, 2004 (“Form 10-K”). Unless otherwise indicated, the terms “Company”, “we”, “us” and “our” refer to R.H. Donnelley Corporation and its direct and indirect wholly owned subsidiaries.

Corporate Overview

We are a leading yellow pages publisher and directional media company. Directional media is where consumers search to find who sells the goods and services they are ready to purchase. We publish Sprint-branded directories in 18 states, with major markets including Las Vegas, Nevada and Orlando and Lee County, Florida, with a total distribution of approximately 18 million serving approximately 160,000 local and national advertisers. We also publish SBC-branded directories in Illinois and Northwest Indiana, with a total distribution of approximately 10 million serving approximately 100,000 local and national advertisers. We also offer online city guides and search web sites in all our Sprint markets under the Best Red Yellow Pages brand at www.bestredyp.com and in the Chicagoland area at www.chicagolandyp.com. We also sell local advertising in Illinois and Northwest Indiana onto www.SMARTpages.com, SBC’s Internet yellow pages platform.

On September 1, 2004, we completed the acquisition of the directory publishing business (“SBC Directory Business”) of SBC Communications, Inc. (“SBC”) in Illinois and Northwest Indiana, including SBC’s interests in The DonTech II Partnership (“DonTech”), a 50/50 general partnership between us and SBC (collectively, the “SBC Directory Acquisition”), for $1.41 billion in cash, after working capital adjustments and the settlement of a $30 million liquidation preference owed to us related to DonTech. The acquisition was consummated pursuant to, and in accordance with, the terms of the Purchase Agreement, dated as of July 28, 2004, as amended, by and among the Company, Ameritech Corporation (“Ameritech”), a direct wholly owned subsidiary of SBC, and Ameritech Publishing, Inc. (“API”), a direct wholly owned subsidiary of Ameritech. The acquisition was accounted for as a purchase business combination and the purchase price was allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their respective fair values on the acquisition date. The results of the SBC Directory Business are included in our consolidated results from and after September 1, 2004. The acquired SBC Directory Business now operates as R.H. Donnelley Publishing & Advertising of Illinois Partnership, an indirect wholly owned subsidiary of the Company.

On January 3, 2003, we completed the acquisition of the directory business (the “SPA Directory Business”) of Sprint Corporation (“Sprint”) by acquiring all the outstanding capital stock of the various entities comprising Sprint Publishing & Advertising (“SPA”) (collectively, the “SPA Acquisition”) for $2.23 billion in cash. The acquisition was accounted for as a purchase business combination and the purchase price was allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their respective fair values on the acquisition date. The results of the SPA Directory Business are included in our consolidated results from and after January 3, 2003. The acquired SPA Directory Business now operates as R.H. Donnelley Publishing & Advertising, Inc., an indirect wholly owned subsidiary of the Company.

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Recent Developments

On January 14, 2005, we repurchased approximately 50% of our outstanding 8% redeemable convertible cumulative preferred stock (“Preferred Stock”) from certain investment partnerships affiliated with The Goldman Sachs Group, Inc. (collectively, “the GS Funds”), for $277.2 million in cash. In order to fund this repurchase, on January 14, 2005, we issued $300 million of 6.875% Senior Notes (“Holdco Notes”). See “Liquidity and Capital Resources” below for a further discussion of the financing associated with this transaction. In connection with the Preferred Stock repurchase, we recorded a reduction in earnings available to common shareholders of $133.7 million to reflect the loss on the repurchase of these shares. The excess of the cash paid to the GS Funds over the carrying amount of the repurchased Preferred Stock, plus the amount previously recognized for the beneficial conversion feature (“BCF”) associated with these shares has been recognized as the loss on repurchase. In connection with the issuance of the Holdco Notes, we completed an exchange offer in June 2005.

Segment Reporting

During 2004, we revised our historical segment reporting to reflect the change in our business that resulted from the SBC Directory Acquisition and to reflect how management now reviews and analyzes the business. Our business of publishing yellow pages directories is now conducted in one reportable operating segment. All pre-press publishing services and other ancillary services previously performed on behalf of other publishers are now performed entirely on behalf of the directories we now publish. As a result of the SBC Directory Acquisition, SBC ceased paying us revenue participation income, we now consolidate all net profits from DonTech and we eliminated our partnership investment in DonTech. Consequently, partnership income was no longer reported commencing on September 1, 2004 and, accordingly, the previously reported DonTech operating segment is no longer applicable.

Critical Accounting Estimates

The preparation of financial statements in accordance with generally accepted accounting principles (“GAAP”) requires management to estimate the effect of various matters that are inherently uncertain as of the date of the financial statements. Each of these estimates varies in regard to the level of judgment involved and its potential impact on the Company’s reported financial results. Estimates are deemed critical when a different estimate could have reasonably been used or when changes in the estimate are reasonably likely to occur from period to period, and could materially impact the Company’s financial condition, changes in financial condition or results of operations. The Company’s significant accounting polices are discussed in Note 2 of the consolidated financial statements included in Item 1 of this Quarterly Report. The critical estimates inherent in these accounting polices are discussed below. Management believes the current assumptions and other considerations used to estimate these amounts in the Company’s consolidated financial statements are appropriate.

Allowance for Doubtful Accounts and Sales Claims

We record our revenue net of an allowance for sales claims. Additionally, we record a provision for bad debts. The provision for bad debts and allowance for sales claims are estimated for each directory based on historical experience. We also evaluate the current condition of our customer balances, bankruptcy filings, any change in credit policy, historical charge-off patterns, recovery rates and other data when determining our allowance for doubtful accounts. We review these estimates periodically to assess whether any additional adjustment is needed based on economic events or other circumstances, including actual experience at the end of the billing and collection cycle with respect to each directory. We believe the allowance for doubtful accounts and sales claims is adequate to cover anticipated losses under current conditions. However, significant deterioration in any of the factors noted above or in the overall economy could materially change these expectations. The provisions for sales claims and doubtful accounts are estimated based on a percentage of revenue.

32

Pension Benefits

Our pension plan obligations and related assets of the Company’s defined benefit retirement plans and those related to the DonTech employees of the SBC Directory Business are presented in Note 9 of the consolidated financial statements included in Item 1 of this Quarterly Report and Note 10 of the consolidated financial statements included in Item 8 of our Form 10-K. Plan assets consist primarily of marketable equity and debt instruments and are valued using market quotations. Plan obligations and annual pension expense are determined by independent actuaries and through the use of a number of assumptions. Key assumptions in measuring the plan obligations include the discount rate, the rate of future salary increases and the long-term expected return on plan assets. In determining the discount rate, we consider yields on high-quality, fixed-income investments with maturities corresponding to the anticipated timing of the benefit payments. Salary increase assumptions are based upon historical experience and anticipated future management actions. Asset returns are based upon the anticipated average rate of earnings expected on invested funds of the plan over the long-term.

Intangible Assets and Goodwill Valuation and Amortization

Our intangible assets consist of directory services agreements between the Company and each of Sprint and SBC, respectively, established customer relationships and trademarks and trade names, all resulting from the SPA Acquisition and the SBC Directory Acquisition. The intangible assets are being amortized over the period the assets are expected to contribute to the cash flow of the Company, which reflect the expected pattern of benefit. Our recorded goodwill resulted from the SPA Acquisition and the SBC Directory Acquisition and is not subject to amortization but is subject to periodic impairment testing.

The intangible assets are subject to an impairment test in accordance with Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-lived Assets (“SFAS 144”), and the goodwill is subject to periodic impairment testing in accordance with Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets (“SFAS 142”). The Company reviews the carrying value of its intangible assets for impairment at least annually or more frequently whenever events or circumstances indicate that their carrying amounts may not be recoverable. The impairment test for the intangible assets is performed by comparing the carrying amount of the intangible assets to the sum of the undiscounted expected future cash flows. In accordance with SFAS 144, impairment exists if the sum of the future undiscounted cash flows is less than the carrying amount of the intangible asset, or to its related group of assets. Impairment would result in a write-down of the intangible asset to its estimated fair value based on the discounted future cash flows. Goodwill is tested for impairment by comparing the carrying amount of the reporting unit to which it was assigned to the estimated fair value of the reporting unit. In accordance with SFAS 142, impairment exists if the carrying amount of the reporting unit is less than its estimated fair value. Impairment would result in a write-down equal to the difference between the carrying amount and the estimated fair value of the reporting unit.

We used certain estimates and assumptions in our impairment evaluation, including, but not limited to, projected future cash flows, revenue growth, customer attrition levels, and estimated write-offs. As of June 30, 2005, management believes that there was no impairment to the intangible assets or goodwill. However, significant deterioration in our business, the assumptions underlying the impairment evaluations, or in the overall economy, could result in impairment charges in future reporting periods.

33

Additionally, management must assess whether the remaining useful lives of the intangible assets represent the period that the intangible assets are expected to contribute to our cash flow. In our assessment process, we used certain estimates and assumptions, including projected future cash flows, customer attrition levels and industry and economic conditions. In accordance with SFAS 142, we evaluate the remaining useful lives annually to determine whether events or circumstances warrant a revision to the remaining period of amortization. If the estimated remaining useful lives change, the remaining carrying amount of the intangible asset would be amortized prospectively over that revised remaining useful life.

New Accounting Pronouncements

New Accounting Pronouncements. On December 16, 2004, the Financial Accounting Standards Board (“FASB”) issued Statement No. 123 (Revised 2004), or Statement 123(R), Share-Based Payment, which is a revision of Statement No. 123, Accounting for Stock-Based Compensation. Statement 123(R) supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees. The approach in Statement 123(R) is similar to the approach described in Statement 123; however, Statement 123(R) requires companies to calculate the fair value of all share-based payments to employees, including grants of employee stock options, and amortize that amount over the vesting period as an expense through the statement of operations. Pro forma disclosure, as allowed under Statement No. 123, will no longer be a permitted alternative. Statement 123(R) offers a choice of transition methods including Modified Prospective and Modified Retrospective (to all prior periods or interim periods in year of adoption).

On April 14, 2005, the Securities and Exchange Commission (“SEC”) announced the adoption of a new rule that amends the compliance dates for Statement 123(R). The SEC’s new rule allows companies to implement Statement No. 123(R) at the beginning of their next fiscal year, instead of the next reporting period, that begins after June 15, 2005. The Company currently intends to adopt Statement 123(R) in the third quarter of 2005 using the Modified Retrospective application method, electing to restate the quarterly results of operations for the first and second quarters of 2005. The Company presently estimates that it will recognize a pre-tax charge of $11.0 million for the year ended December 31, 2005 as a result of adopting this Statement. Actual results could differ materially from this estimate upon finalization of certain assumptions and implementation matters underlying the new Statement, including, but not limited to, the forfeiture rate assumption, option exercise patterns and related expected option term and deferred tax accounting.

34

RESULTS OF OPERATIONS

Three and six months ended June 30, 2005 and 2004

Factors Affecting Comparability

Acquisitions

As a result of the SBC Directory Acquisition and the SPA Acquisition, the related financings and associated purchase accounting, our 2005 reported GAAP results are not comparable to our 2004 reported GAAP results. Under the deferral and amortization method of revenue recognition, the billable value of directories published is recognized as revenue in subsequent reporting periods. However, purchase accounting precluded us from recognizing directory revenue and certain expenses associated with directories that published prior to each acquisition, including all directories published in the month each acquisition was completed. Thus, our reported 2005 and 2004 GAAP results are not indicative of our underlying operating and financial performance. Accordingly, management is presenting adjusted and adjusted pro forma information that, among other things, eliminates the purchase accounting impact on revenue and certain expenses for each acquisition and assumes the SBC Directory Acquisition and related financing occurred at the beginning of 2004. Management believes that the presentation of this adjusted and adjusted pro forma information will help financial statement users better and more easily compare current period underlying operating results against what the combined company performance would more likely have been in the comparable prior period. All of the adjusted and adjusted pro forma amounts disclosed under the caption “Adjusted and Adjusted Pro Forma Amounts and Other Non-GAAP Measures” or elsewhere are non-GAAP measures and are reconciled to the most comparable GAAP measures under that caption below. While we believe the adjusted and adjusted pro forma results reasonably represent results as if the businesses had been combined for the three and six month periods ended June 30, 2005 and 2004, respectively, because of differences in the application of accounting policies and practices between the Company and the acquired entities, management does not believe these adjusted and adjusted pro forma amounts are strictly comparable, nor are they necessarily indicative of results for future periods.

Before the SBC Directory Acquisition, we reported our 50% share of DonTech net income as partnership income in our consolidated statement of operations. Partnership income also included revenue participation income from SBC. Revenue participation income was based on DonTech advertising sales and was recognized when a sales contract was executed with a customer. Upon the SBC Directory Acquisition, SBC ceased paying us revenue participation income, we consolidate all net profits of DonTech and we eliminated our partnership investment. Consequently, commencing on September 1, 2004, we no longer report partnership income. During 2004 until the SBC Directory Acquisition, we earned revenue from pre-press publishing and other ancillary services related to the SBC Directory Business and we continued to report partnership income from our investment in DonTech.

GAAP Reported Results

Net Revenue

The components of our net revenue in the three and six months ended June 30, 2005 and 2004 were as follows:

	Three months Ended June 30,									Six months Ended June 30,
(amounts in millions)	2005			2004			$ Change			2005			2004			$ Change
Gross directory advertising revenue	$	232.3		$	140.3		$	92.0		$	439.2		$	279.2		$	160.0
Sales allowances		(2.2	)		(1.5	)		(0.7	)		(4.3	)		(3.2	)		(1.1	)
Net directory advertising revenue		230.1			138.8			91.3			434.9			276.0			158.9
Pre-press publishing fees		—			4.2			(4.2	)		—			9.0			(9.0	)
Other revenue		2.9			1.6			1.3			5.4			3.4			2.0
Total	$	233.0		$	144.6		$	88.4		$	440.3		$	288.4		$	151.9

35

Following the SBC Directory Acquisition, substantially all of our revenue is derived from our directory publishing business. Before the SBC Directory Acquisition, DonTech was accounted for under the equity method and we did not recognize revenue with respect to the SBC Directory Business. Our directory advertising revenue is earned primarily from the sale of advertising in yellow pages directories we publish, net of sales allowances. Revenue from directory advertising sales is recognized under the deferral and amortization method, whereby revenue from advertising sales is initially deferred when the directory is published and recognized ratably over the directory’s life, which is typically 12 months. Before the SBC Directory Acquisition, we also earned pre-press publishing and other related fees with respect to services we rendered on behalf of SBC for the SBC-branded directories we now publish. These fees were and other revenue was and is recognized when earned.

Total net revenue in the three and six months ended June 30, 2005 was $233.0 million and $440.3 million, respectively, compared to $144.6 million and $288.4 million, respectively, for the same periods in the prior year. The increase in total net revenue is primarily a result of the SBC Directory Acquisition. Gross directory advertising revenue for the three and six months of 2005 includes $86.5 million and $149.5 million, respectively, in revenues from SBC-branded directories with no comparable revenues for the same periods in 2004. Due to purchase accounting, directory revenue for the three and six months ended June 30, 2005 excluded the amortization of publication sales for SBC-branded directories published before October 2004 under the deferral and amortization method totaling $70.9 million and $116.3 million, respectively, that would have been reported absent purchase accounting. Purchase accounting resulting from the SBC Directory Acquisition will continue to adversely impact reported net revenue during 2005. Purchase accounting resulting from the Sprint Acquisition negatively impacted net revenue for the six months ended June 30, 2004 by $1.1 million due to the exclusion of amortized directory revenue from certain directories in the first quarter of 2004.

Revenue from pre-press publishing and other related services was $4.2 million and $9.0 million for the three and six months ended June 30, 2004, respectively, with no comparable revenue for the three and six months ended June 30, 2005. The decrease in pre-press publishing fees is a result of the Company no longer providing such services to SBC following the SBC Directory Acquisition. We now support internally the SBC-branded directories we publish.

Other revenue includes late fees paid on outstanding customer balances, commissions earned on sales contracts with respect to advertising placed into other publishers’ directories, sales of directories and certain other products and fees from telephone companies for publishing their information pages. Other revenue for the three and six months ended June 30, 2004 included $0.4 million for sales-related computer application services rendered to DonTech on behalf of SBC, which we ceased providing as of the SBC Directory Acquisition.

Expenses

The components of our total expenses for the three and six months ended June 30, 2005 and 2004 were as follows:

	Three months Ended June 30,							Six months Ended June 30,
(amounts in millions)	2005		2004		$ Change			2005		2004		$ Change
Operating expenses	$	106.5	$	56.9	$	49.6		$	208.8	$	110.9	$	97.9
G&A expenses		14.8		15.4		(0.6	)		28.0		28.0		—
D&A expenses		20.6		15.0		5.6			42.3		29.4		12.9
Total	$	141.9	$	87.3	$	54.6		$	279.1	$	168.3	$	110.8

Substantially all expenses are derived from our directory publishing business. Before the SBC Directory Acquisition, DonTech was accounted for under the equity method. We began recognizing expenses related to the SBC Directory Business on September 1, 2004. Certain costs directly related to the selling and production of directories are initially deferred and recognized ratably over the life of the directory. These costs include sales commissions and print, paper and initial distribution costs. All other expenses are recognized as incurred.

36

Operating Expenses

Total operating expenses for the three and six months ended June 30, 2005 were $106.5 million and $208.8 million, respectively, compared to $56.9 million and $110.9 million, respectively, in the corresponding periods in the prior year. The primary components of the $49.6 million and $97.9 million increase in operating expenses for the three and six-month periods, respectively, are shown below:

	Three Months			Six Months
	Ended June 30,			Ended June 30,
	2005			2005
(amounts in millions)	Change			Change
Expenses recorded in 2005 resulting from the SBC Directory Acquisition	$	27.6		$	56.5
Cost uplift from the SBC transaction		18.7			35.8
Increased digital initiative costs		3.9			6.3
Increased commission and sales costs		1.9			4.5
Cost uplift from the SPA Acquisition recorded in 2004		(0.8	)		(3.5	)
All other		(1.7	)		(1.7	)
Total 2005 increase in operating expenses, compared to 2004	$	49.6		$	97.9

Operating expenses for the three and six months ended June 30, 2005 increased $49.6 million and $97.9 million, respectively, compared to the same period in 2004 primarily as a result of the SBC Directory Acquisition. Expenses of $27.6 million and $56.5 million were incurred to support the SBC business for the three and six months ended June 30, 2005, respectively, including bad debt, commissions, salesperson expenses, printing, distribution, marketing, advertising and other operating expenses. There were no comparable expenses for the three and six months ended June 30, 2004. Similar to the deferral and amortization method of revenue recognition, certain costs directly related to the selling and production of our directories are initially deferred when incurred and recognized ratably over the life of a directory. Due to the elimination of SBC’s deferred costs for all pre-acquisition (including September 2004) directories as required by purchase accounting, our reported operating expenses for the three and six months of 2005 did not include certain expenses associated with those directories totaling approximately $13.8 million and $21.8 million, respectively. Due to these adjustments, directory expenses for the three and six months ended June 30, 2005 include only the amortization of deferred directory costs relating to directories published beginning in October 2004.

As a result of purchase accounting required by GAAP, we recorded the deferred directory costs related to directories that were scheduled to publish subsequent to the SBC Directory Acquisition and SPA Acquisition at their fair value, determined as the estimated billable value of the published directory less (a) the expected costs to complete the directories, and (b) a normal profit margin. We refer to this purchase accounting entry as “cost uplift.” The fair value of these costs was determined to be $81.3 million and $14.8 million for the SBC Directory Acquisition and the SPA Acquisition, respectively. These costs are amortized as operating expenses over the terms of the applicable directories and such amortization totaled $18.7 million and $35.8 million for the three and six months ended June 30, 2005, respectively, relating to the SBC Directory Acquisition (with no comparable expense in 2004), and $0.8 million and $3.5 million for the three and six months ended June 30, 2004, respectively, relating to the SPA Acquisition (with no comparable expense in 2005).

Digital initiative costs were $3.9 million and $6.3 million higher for the three and six months ended June 30, 2005, respectively, compared to the same period in 2004, which reflects increased investment in our internet products, and due to additional internet costs for the newly acquired SBC Directory Business. Commission and sales costs during the three and six months ended June 30, 2005 were $1.9 million and $4.5 million higher, respectively, compared to the corresponding period in 2004, due to favorable sales performance, particularly in certain Sprint markets, and increased support in our SBC markets.

Purchase accounting from the SBC Directory Acquisition will continue to impact reported expenses in 2005. We expect operating expenses in 2005 to be significantly higher than 2004 due to a full year of results from the SBC Directory Business.

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General and Administrative Expenses

General and administrative (“G&A”) expenses for the three and six months ended June 30, 2005 were $14.8 million and $28.0 million, respectively, as compared to $15.4 million and $28.0 million, respectively, for the corresponding periods in the prior year. The decrease in general and administrative expenses for the three months ended June 30, 2005 from the prior corresponding period is due to corporate headquarters relocation and related severance costs of $4.8 million that were recorded in 2004 and for which there were no comparable expenses in 2005, and reduced general insurance and other costs of $1.3 million. These decreases were offset by increased billing, credit and collection expenses of $3.9 million resulting from the SBC Directory Acquisition, plus compensation expense related to stock appreciation rights (“SARs”) of $1.6 million, for which there was no comparable expense in 2004. Although general and administrative expenses for the six months ended June 30, 2005 remained relatively unchanged as compared to the prior corresponding year to date period, results included a decrease due to corporate headquarters relocation and related severance costs of $7.4 million that were recorded in 2004 and for which there were no comparable expenses in 2005, and reduced general insurance and other costs of $2.3 million. These decreases were offset by increased billing, credit and collection expenses of $7.5 million resulting from the SBC Directory Acquisition, plus compensation expense related to SARs of $2.2 million, for which there is no comparable expense in 2004.

Depreciation and Amortization

Depreciation and amortization (“D&A”) expenses for the three and six months ended June 30, 2005 were $20.6 million and $42.3 million, respectively, compared to $15.0 million and $29.4 million, respectively, for the corresponding periods in the prior year. Amortization of intangible assets was $18.1 million and $36.2 million for the three and six months ended June 30, 2005, respectively, compared to $12.5 million and $24.9 million, respectively, for the corresponding periods in the prior year. The increase in amortization expense is due to the increase in intangible assets resulting from the SBC Directory Acquisition. On an annual basis, we expect amortization expense in 2005 to be significantly higher than 2004 due to a full year impact related to the intangible assets acquired in connection with the SBC Directory Acquisition. Depreciation of fixed assets and amortization of computer software was $2.5 million and $6.1 million for the three and six months ended June 30, 2005, respectively, and $2.5 million and $4.5 million, respectively, for the corresponding periods in the prior year. The increase in depreciation expense for the six months ended June 30, 2005 was due to higher depreciation of certain computer software.

Partnership Income

Partnership income for the three and six months ended June 30, 2004 was $34.8 million and $58.7 million, respectively, with no corresponding amount for the three and six months ended June 30, 2005. During the three and six months ended June 30, 2004, partnership income related to our 50% share of the net income of DonTech (accounted for under the equity method) plus revenue participation income from SBC. As a sales agent for SBC, DonTech earned commission revenue based on the annual value of local sales contracts executed during the period (“calendar sales”). We also earned revenue participation income from SBC based on the amount of DonTech calendar sales during the period. As a result of the SBC Directory Acquisition, SBC ceased paying us revenue participation income, we now consolidate all net profits in DonTech and we eliminated our DonTech partnership investment. Accordingly, commencing on September 1, 2004, we no longer report partnership income.

Operating Income

Operating income for the three and six months ended June 30, 2005 and 2004 was as follows:

	Three months Ended June 30,							Six months Ended June 30,
(amounts in millions)	2005		2004		$ Change			2005		2004		$ Change
Total	$	91.0	$	92.1	$	(1.1	)	$	161.2	$	178.9	$	(17.7	)

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Operating income for the three months ended June 30, 2005 of $91.0 million decreased by $1.1 million from operating income of $92.1 million in the same period in the prior year. Reported operating income for the six months ended June 30, 2005 of $161.2 million decreased by $17.7 million from operating income of $178.9 million in the same period last year. The decrease in operating income during the three and six months ended June 30, 2005 as compared to the prior corresponding periods was primarily a result of the SBC Directory Acquisition and the related purchase accounting impact on our revenues and expenses, as described above. While net revenue increased for the three and six month periods ended June 30, 2005 by $88.4 million and $151.9 million, respectively, over net revenue in the same periods in 2004, primarily resulting from the SBC Directory Acquisition, offsetting that increase in net revenue was an increase in total operating expenses in 2005 of $49.6 million and $97.9 million for the three and six month periods, respectively, also primarily as a result of the SBC Directory Acquisition. The primary reason that our costs relating to the SBC Directory Business increased more than our revenues in the three and six months ended June 30, 2005 as compared to the prior corresponding periods is because while all directory advertising revenue is deferred under our deferral and amortization method, only a portion of total costs related to publication of the directories are deferred under the deferral and amortization method. Therefore, under purchase accounting, when the entire balance of deferred revenue and deferred directory costs were eliminated at the time of the SBC Directory Acquisition, the elimination had a disproportionately higher impact on revenues than it did on expenses. Accordingly, after the adjustments required by purchase accounting, operating expenses for the three and six months ended June 30, 2005 were disproportionately higher than the related revenue. If the effects of purchase accounting were eliminated, adjusted operating income in 2005 would have been substantially higher (and relatively proportional to the increase in net revenues) compared to GAAP operating income in 2004. See “Adjusted and Pro Forma Amounts and Other Non-GAAP Measures” below.

Purchase accounting from the SBC Directory Acquisition will continue to impact reported results during 2005. On a full year basis, we expect operating income to be higher in 2005 than in 2004 due to a full year of results from the acquired SBC Directory Business.

Interest Expense, Net

Net interest expense for the three and six months ended June 30, 2005 was $58.2 million and $115.7 million, respectively, compared to $37.5 million and $77.8 million, respectively, for the same periods in 2004. The increase in net interest expense of $20.7 million and $37.9 million, respectively, for those periods, is a result of higher outstanding debt balances associated with the SBC Directory Acquisition, combined with higher interest rates, compared to the prior year. Additionally, interest expense in 2005 includes interest costs associated with the $300 million Holdco Notes issued on January 14, 2005. Interest expense for the six months ended June 30, 2004 includes a $1.2 million charge resulting from the redemption in 2004 of the remaining 9.125% Senior Subordinated Notes due 2008. See “Liquidity and Capital Resources” for a further description of our debt obligations and the provisions of the related debt instruments. Net interest expense for the three months ended June 30, 2005 and 2004 includes $4.0 million and $3.7 million, respectively, of non-cash amortization of deferred financing costs. Net interest expense for the six months ended June 30, 2005 and 2004 includes $8.1 million and $7.1 million, respectively, of non-cash amortization of deferred financing costs.

Income Taxes

The effective tax rate on income before income taxes of 39.0% for the three and six months ended June 30, 2005 compares to 39.5% on income before income taxes for the corresponding periods in the prior year. The year-to-date effective rate as of June 30, 2005 reflects a decrease in the state and local tax rate as a result of the integration of the SBC Directory Acquisition and the SPA Acquisition.

Net Income (loss) and Earnings (loss) Per Share

Net income for the three and six months ended June 30, 2005 was $20.0 million and $27.8 million, respectively, as compared to $33.1 million and $61.2 million, respectively, for the corresponding periods in the prior year. The results for 2005 were adversely affected by purchase accounting that precluded us from recognizing deferred revenue and certain expenses associated with those directories published prior to the SBC Directory Acquisition, including all September 2004 published directories. Purchase accounting from the SBC Directory Acquisition will continue to impact reported results during 2005.

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The 8% dividend on our Preferred Stock reduces net income or increases the net loss, resulting in income (loss) available to common shareholders from which earnings (loss) per share amounts are calculated. The amount of the Preferred Stock dividend includes the stated 8% dividend, plus a deemed dividend for a BCF. The BCF is a function of the conversion price of the Preferred Stock, the fair value of the related warrants issued with the Preferred Stock and the fair market value of the underlying common stock on the date of issuance of the Preferred Stock. In connection with the issuance of our Preferred Stock and each subsequent quarterly accrued dividend, a BCF has been recorded because the fair value of the underlying common stock at the time of issuance of the Preferred Stock was greater than the conversion price of the Preferred Stock. The full amount of the BCF is treated as a deemed dividend because the Preferred Stock was convertible by the GS Funds into common stock immediately after issuance in January 2003. The Preferred Stock dividend for the three and six months ended June 30, 2005 of $2.9 million and $6.2 million, respectively, consisted of the stated 8% dividend of $2.4 million and $5.1 million, respectively, and a BCF of $0.5 million and $1.1 million, respectively. The Preferred Stock dividend for the three and six months ended June 30, 2004 of $5.4 million and $10.7 million, respectively, consisted of the stated 8% dividend of $4.4 million and $8.7 million, respectively, and a BCF of $1.0 million and $1.9 million, respectively.

On January 14, 2005, we repurchased approximately 50% of our outstanding Preferred Stock from the GS Funds for $277.2 million in cash. In connection with the Preferred Stock repurchase, we recorded a reduction in earnings available to common shareholders of $133.7 million to reflect the loss on the repurchase of these shares for the six months ended June 30, 2005. The excess of the cash paid to the GS Funds over the carrying amount of the repurchased Preferred Stock, plus the amount previously recognized for the BCF associated with these shares has been recognized as the loss on repurchase.

The resulting income (loss) available to common shareholders was $17.1 million and $(112.2) million for the three and six months ended June 30, 2005, respectively, as compared to $27.7 million and $50.5 million, respectively, for the corresponding periods in the prior year.

All earnings per share (“EPS”) amounts have been calculated using the two-class method. See Note 2, “Summary of Significant Accounting Policies,” in Part 1 — Item 1 of this quarterly report for further details and computations of the basic and diluted EPS amounts. For the three months ended June 30, 2005, basic and diluted EPS were $0.46 per share and $0.44 per share, respectively, compared to $0.68 per share and $0.65 per share, respectively, for the corresponding period in the prior year. For the six months ended June 30, 2005, basic and diluted EPS were ($3.55) per share as compared to basic EPS of $1.25 per share and diluted EPS of $1.20 per share, respectively, for the corresponding period in the prior year. Because there was a reported net loss available to common shareholders for the six months ended June 30, 2005, diluted EPS does not include potential common shares in the denominator of the diluted per share calculation, because by doing so, it would be antidilutive. Diluted EPS cannot be greater than basic EPS (or less of a loss). Therefore, reported diluted EPS and basic EPS for the six months ended June 30, 2005 were the same.

Adjusted and Adjusted Pro Forma Amounts and Other Non-GAAP Measures

As a result of the SBC Directory Acquisition and the SPA Acquisition, the related financings and associated purchase accounting, our 2005 reported GAAP results are not comparable to our 2004 reported GAAP results. Under the deferral and amortization method of revenue recognition, the billable value of directories published is recognized as revenue in subsequent reporting periods. However, purchase accounting precluded us from recognizing directory revenue and certain expenses associated with directories that published prior to each acquisition, including all directories published in the month each acquisition was completed. Thus, our reported 2005 and 2004 GAAP results are not indicative of our underlying operating and financial performance. Accordingly, management is presenting adjusted and adjusted pro forma information that, among other things, eliminates the purchase accounting impact on revenue and certain expenses for each acquisition and assumes the SBC Directory Acquisition and related financing occurred at the beginning of 2004. Management believes that the presentation of this adjusted and adjusted pro forma information will help financial statement users better and more easily compare current period underlying operating results against what the combined company performance would more likely have been in the comparable prior period. All of the adjusted and adjusted pro forma amounts disclosed in this section or elsewhere are non-GAAP measures and are reconciled to the most comparable GAAP measures below. While we believe the adjusted and adjusted pro forma results reasonably represent results as if the businesses had been combined for the three and six month periods ended June 30, 2005 and 2004, respectively, because of differences in the application of accounting policies and practices between the Company and the acquired entities, management

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does not believe these adjusted and adjusted pro forma amounts are strictly comparable, nor are they necessarily indicative of results for future periods.

	Three months ended June 30, 2005
	Reported		SBC Directory			SPA
(amounts in millions)	GAAP		Acquisition			Acquisition		Adjusted
Net revenue	$	233.0	$	27.6	(1)	$	—	$	260.6
Expenses, other than depreciation and amortization		121.3		(13.8	)(2)		—		107.5
Depreciation and amortization		20.6		—			—		20.6
Operating income	$	91.1	$	41.4		$	—	$	132.5

	Three months ended June 30, 2004
	Reported		SBC Directory			SPA			Adjusted
(amounts in millions)	GAAP		Acquisition			Acquisition			Pro Forma
Net revenue	$	144.6	$	113.1	(1)	$	—		$	257.7
Expenses, other than depreciation and amortization		72.4		29.7	(2)		(0.8	) (6)		101.3
Depreciation and amortization.		14.9		7.1	(3)		—			22.0
Partnership income		34.8		(34.8	) (4)		—			—
Operating income	$	92.1	$	41.5		$	0.8		$	134.4

	Six months ended June 30, 2005
	Reported		SBC Directory			SPA
(amounts in millions)	GAAP		Acquisition			Acquisition		Adjusted
Net revenue	$	440.3	$	79.5	(1)	$	—	$	519.8
Expenses, other than depreciation and amortization		236.8		(21.8	)(2)		—		215.0
Depreciation and amortization		42.3		—			—		42.3
Operating income	$	161.2	$	101.3		$	—	$	262.5

	Six months ended June 30, 2004
	Reported		SBC Directory			SPA			Adjusted
(amounts in millions)	GAAP		Acquisition			Acquisition			Pro Forma
Net revenue	$	288.4	$	225.2	(1)	$	1.1	(5)	$	514.7
Expenses, other than depreciation and amortization		138.9		65.8	(2)		(3.5	) (6)		201.2
Depreciation and amortization		29.3		14.1	(3)		—			43.4
Partnership income		58.7		(58.7	) (4)		—			—
Operating income	$	178.9	$	86.6		$	4.6		$	270.1

(1) Represents revenue for SBC-branded directories that published prior to the SBC Directory Acquisition, plus all September 2004 published directories, which would have been recognized during the period had it not been for purchase accounting required under GAAP.

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(2)	Represents expenses for SBC-branded directories that published prior to the SBC Directory Acquisition, including September 2004 published directories, which would have been recognized during the period had it not been for purchase accounting required under GAAP. The pro forma adjustments also include (a) for the three and six months ended June 30, 2004, DonTech’s selling and operational expenses prior to September 1, 2004, which were eliminated in consolidation upon the SBC Directory Acquisition, and (b) for all periods presented, certain differences in the application of accounting policies and practices between RHD and the acquired entities. Additionally, as a result of purchase accounting, we recorded the deferred directory costs related to directories that were scheduled to publish subsequent to the SBC Directory Acquisition at their fair value. The impact of such costs has also been removed.
(3)	Represents the additional depreciation and amortization expense related to the tangible and identifiable intangible assets acquired in the SBC Directory Acquisition over their estimated useful lives.
(4)	Represents the elimination of equity accounting used to account for RHD’s 50% ownership in DonTech and the revenue participation income from SBC recognized prior to the SBC Directory Acquisition.
(5)	Represents revenue for Sprint-branded directories that published prior to the SPA Acquisition including January 2003 published directories, which would have been recognized during the period had it not been for purchase accounting required under GAAP.
(6)	Represents expenses for Sprint-branded directories that published prior to the SPA Acquisition, including January 2003 published directories, which would have been recognized during the period had it not been for purchase accounting required under GAAP. Also includes the effect of differences in the application of accounting policies and practices between legacy SPA and the Company. Additionally, as a result of purchase accounting, we recorded the fair value of deferred directory costs related to directories that were scheduled to publish subsequent to the SPA Acquisition at their fair value. The impact of such costs has also been removed.

2005 Revenue and Adjusted Revenue Compared to 2004 Revenue and Adjusted Pro Forma Revenue

The components of 2005 revenue and adjusted revenue and 2004 revenue and adjusted pro forma revenue for the three and six months ended June 30 of each year are as follows:

	Three months ended June 30, 2005
				SBC
	Reported			Directory			SPA
(amounts in millions)	GAAP			Acquisition			Acquisition		Adjusted
Gross directory advertising revenue	$	232.3		$	27.8	(1)	$	—	$	260.1
Sales claims and allowances		(2.2	)		(0.2	)(1)		—		(2.4	)
Net directory advertising revenue		230.1			27.6			—		257.7
Other revenue		2.9			—			—		2.9
Net revenue	$	233.0		$	27.6		$	—	$	260.6

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	Three months ended June 30, 2004
				SBC
	Reported			Directory			SPA		Adjusted
(amounts in millions)	GAAP			Acquisition			Acquisition		Pro Forma
Gross directory advertising revenue	$	140.3		$	115.9	(1)	$	—	$	256.2
Sales claims and allowances		(1.5	)		(0.2	)(1)		—		(1.7	)
Net directory advertising revenue		138.8			115.7			—		254.5
Pre-press publishing fees		4.2			(4.2	)(2)		—		—
Other revenue		1.6			1.6	(3)		—		3.2
Net revenue	$	144.6		$	113.1		$	—	$	257.7

	Six months ended June 30, 2005
				SBC
	Reported			Directory			SPA
(amounts in millions)	GAAP			Acquisition			Acquisition		Adjusted
Gross directory advertising revenue	$	439.2		$	80.0	(1)	$	—	$	519.2
Sales claims and allowances		(4.3	)		(0.5	)(1)		—		(4.8	)
Net directory advertising revenue		434.9			79.5			—		514.4
Other revenue		5.4			—			—		5.4
Net revenue	$	440.3		$	79.5		$	—	$	519.8

	Six months ended June 30, 2004
				SBC
	Reported			Directory			SPA			Adjusted
(amounts in millions)	GAAP			Acquisition			Acquisition			Pro Forma
Gross directory advertising revenue	$	279.2		$	232.4	(1)	$	1.1	(4)	$	512.7
Sales claims and allowances		(3.2	)		(0.4	)(1)		—			(3.6	)
Net directory advertising revenue		276.0			232.0			1.1			509.1
Pre-press publishing fees		9.0			(9.0	)(2)		—			—
Other revenue		3.4			2.2	(3)		—			5.6
Net revenue	$	288.4		$	225.2		$	1.1		$	514.7

(1)	Represents gross revenue and sales claims and allowances for SBC-branded directories that published prior to the SBC Directory Acquisition, including September 2004 published directories, which would have been recognized during the period had it not been for purchase accounting required under GAAP.
(2)	Represents the elimination of pre-press publishing and related fees recognized prior to the SBC Directory Acquisition, which were eliminated in consolidation upon the SBC Directory Acquisition.
(3)	Represents other revenue associated with the SBC Directory Business, primarily consisting of other yellow pages and other product revenue recognized as earned.
(4)	Represents gross revenue and sales claims and allowances for Sprint-branded directories that published prior to the SPA Acquisition, including January 2003 published directories, which would have been recognized during the period had it not been for purchase accounting required under GAAP.

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Adjusted net revenue for the three months ended June 30, 2005 was $260.6 million, representing an increase of $2.9 million or 1.1% from adjusted pro forma net revenue of $257.7 million for the three months ended June 30, 2004. Adjusted net revenue for the six months ended June 30, 2005 was $519.8 million, representing an increase of $5.1 million or 1.0 % from adjusted pro forma net revenue of $514.7 million for the six months ended June 30, 2004. The increase in adjusted net revenue for the three and six month periods is due to increased amortization of revenue primarily from our major Sprint markets due to higher directory advertising renewal rates and new business, partially offset by a decrease in amortized net revenue from our SBC markets due to a decline in the publication value of our SBC directories in Illinois and northwest Indiana during the last six months of 2004 and first six months of 2005 due to lower renewal rates partially offset by new business. Under the deferral and amortization method of revenue recognition, revenue from directory advertising sales is initially deferred when a directory is published and recognized ratably over the life of the directory, which is typically 12 months.

2005 Adjusted Expenses Compared to 2004 Adjusted Pro Forma Expenses and 2005 Adjusted Operating Income Compared to 2004 Adjusted Pro Forma Operating Income

Adjusted operating and G&A expenses for the three and six months ended June 30, 2005 of $107.5 million and $215.0 million, respectively, represents an increase of $6.2 million and $13.8 million, respectively, from adjusted pro forma operating and G&A expenses of $101.3 million and $201.2 million, respectively, for the comparable periods in the prior year. The primary components of the $6.2 million and $13.8 million increase are shown below:

	Three Months			Six Months
	Ended June			Ended June
(amounts in millions)	30, 2005			30, 2005
Increased digital initiative costs	$	3.9		$	6.3
Increased costs to support the SBC Directory Business		2.8			5.2
Increased bad debt expense		4.0			3.8
Stock appreciation rights compensation expense incurred in 2005		1.6			2.2
Increased commission and salesperson costs		1.3			2.7
Increased marketing and advertising costs		0.2			2.6
Corporate headquarters relocation and related severance costs incurred in 2004		(4.8	)		(7.4	)
Other		(2.8	)		(1.6	)
Total 2005 increase in adjusted operating and G&A expenses, compared to 2004 adjusted pro forma operating and G&A expenses	$	6.2		$	13.8

Similar to the deferral and amortization method of revenue recognition, certain costs directly related to the selling and production of our directories are initially deferred when incurred and recognized ratably over the life of a directory. Adjusted digital initiative costs were $3.9 million and $6.3 million higher for the three and six months ended June 30, 2005, respectively, compared to the same periods of 2004, which reflects increased investment in our internet products, and due to additional internet costs for the newly acquired SBC Directory Business. Increased costs to support the SBC Directory Business for the three and six month periods in 2005 as compared to 2004 include print, paper and distribution costs, market investments, increased headcount, and billing, credit, collection and administrative costs, which were higher primarily due to additional support requirements for the SBC Directory Business as compared to corporate-related amounts allocated by SBC to the SBC Directory Business in 2004. Adjusted bad debt expense was $4.0 million and $3.8 million higher for the three and six months ended June 30, 2005, respectively, compared to the prior corresponding periods primarily reflecting favorable bad debt adjustments recorded by the SBC Directory Business prior to the acquisition in 2004. Compensation costs related to stock appreciation rights of $1.6 million and $2.2 million were incurred for the three and six months ended June 30, 2005, respectively, for which there was no comparable expense in 2004. Adjusted commission and salesperson expenses were $1.3 million and $2.7 million higher for the three and six months ended June 30, 2005, respectively, compared to the same periods in 2004, due to favorable sales performances in certain Sprint markets and increased sales headcount. Marketing and advertising costs for the three months ended June 30, 2005 were comparable to the same period in 2004, however these costs were $2.6 million higher for the six months ended June 30, 2005 as compared to the same period in 2004 due to increased competitive responses and increased market investment, particularly in our SBC markets. These increases were offset by $4.8 million and $7.4 million of expenses for the three and six months of 2004, respectively, associated with the relocation of our corporate

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headquarters to Cary, North Carolina and related severance costs, with no comparable expense in 2005. Adjusted expenses for information technology and certain other expenses were $2.8 million and $1.6 million lower for the three and six months ended June 30, 2005, respectively, primarily from operational efficiencies.

Depreciation and amortization (“D&A”) for the three and six months ended June 30, 2005 was $20.6 million and $42.3 million, respectively, compared to adjusted pro forma D&A for the three and six months ended June 30, 2004 of $22.0 million and $43.4 million, respectively.

Adjusted operating income for the three and six months ended June 30, 2005 was $132.5 million and $262.5 million, respectively, representing a decrease of $1.9 million and $7.6 million, respectively, from adjusted pro forma operating income for the three and six months ended June 30, 2004 of $134.4 million and $270.1 million, respectively, reflecting the variances between revenues and expenses from period to period described above.

Advertising Sales – Publication Sales

Management reviews and evaluates the value of advertising sales in directories that published during the period (“publication sales”) as its primary sales performance measure. Management believes that a comparison of publication sales for the same directories from one period to the next gives a better indication of underlying sales trends, economic conditions and business confidence than a comparison of directory revenue recognized using the deferral and amortization method. Because we recognize directory revenue ratably over the life of a directory under the deferral and amortization method, the amount of revenue recognized during a period is not directly related to the sales trends, economic conditions and business confidence during that period. Publication sales are similar to a “same-store” sales measure. If events occur during the current period that affect the comparability of publication sales to the prior year period, such as changes in directory publication dates, then prior year publication sales amounts are adjusted to conform to the current period presentation.

Sprint-branded publication sales for the three and six months ended June 30, 2005 were $146.0 million and $304.4 million, respectively, up $7.3 million and $14.6 million or 5.3% and 5.0%, respectively, from publication sales of $138.7 million and $289.8 million, respectively, for the three and six months ended June 30, 2004. SBC-branded publication sales for the three and six months ended June 30, 2005 were $107.2 million and $205.5 million, respectively, representing a decline of 2.7% from both 2004 corresponding periods of publication sales of $110.2 million and $211.2 million, respectively. The increase in Sprint-branded publication sales resulted from higher advertiser renewal rates and new business in many of our Sprint markets for directories published in the first and second quarters of 2005. The decrease in SBC-branded publication sales is attributable to lower customer renewals as a result of market and product changes we have made and tighter credit policies we have implemented. Publication sales are a non-GAAP measure for which the most comparable GAAP measure is net revenue. A reconciliation of publication sales to net revenue reported in accordance with GAAP is presented below:

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	Three months						Six months
	ended June 30,						ended June 30
(amounts in millions)	2005			2004			2005			2004
Publication sales — Sprint-branded directories	$	146.0		$	138.7		$	304.4		$	289.8
Publication sales — Sprint-branded directories — percentage change over prior year		5.3	%		—			5.0	%		—
Adjustments for changes in directory publication date(s)		—			(0.9	)		—			(0.7	)
Publication sales disclosed in June 30, 2004 Form 10-Q					137.8						289.1
Publication sales — SBC-branded directories		107.2			110.2			205.5			211.2
Publication sales — SBC-branded directories – percentage change over prior year		-2.7	%		—			-2.7	%		—
Less pre-acquisition publication sales for SBC-branded directories not recognized as revenue in current period due to purchase accounting		—			(110.2	)		—			(211.2	)
Less current period publication sales for Sprint-branded directories not recognized as revenue in current period due to the deferral method of accounting		(122.6	)		(115.9	)		(236.5	)		(176.4	)
Less current period publication sales for SBC-branded directories not recognized as revenue in current period due to the deferral method of accounting		(92.4	)		—			(173.8	)		—
Plus net revenue reported in the period for publication sales from prior periods, for Sprint-branded directories		121.0			116.9			219.0			163.3
Plus net revenue reported in the period for publication sales from prior periods, for SBC-branded directories		70.9			—			116.3			—
Net directory advertising revenue		230.1			138.8			434.9			276.0
Pre-press publishing revenue		—			4.2			—			9.0
Other revenue		2.9			1.6			5.4			3.4
Net revenue – GAAP		233.0			144.6			440.3			288.4
Plus net revenue from Sprint-branded directories published prior to the acquisition that would have been recognized during the period absent purchase accounting adjustments required under GAAP		—			—			—			1.1
Plus net revenue from SBC-branded directories published prior to the acquisition that would have been recognized during the period absent purchase accounting adjustments required under GAAP had the transaction occurred on January 1, 2004		27.6			117.3			79.5			234.2
Less pre-press publishing revenue that would not have been recorded had the SBC transaction occurred on January 1, 2004		—			(4.2	)		—			(9.0	)
Net Revenue-Adjusted	$	260.6					$	519.8
Net Revenue-Adjusted pro forma				$	257.7					$	514.7

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LIQUIDITY AND CAPITAL RESOURCES

Our Senior Secured Credit Facility, as amended and restated (“Credit Facility”), consists of a $700 million Term Loan A-2, a $200 million Term Loan A-3, a $1,450 million Term Loan D and a $175 million Revolving Credit Facility (the “Revolver”) for an aggregate facility of $2,525 million. Term Loans A-2, A-3 and D require quarterly principal payments. As of June 30, 2005, the outstanding balances of Term Loans A-2, A-3 and D were $397.5 million, $146.9 million and $1,433.3 million, respectively, and $20 million was outstanding under the Revolver. The Revolver, Term Loans A-2 and A-3 mature in December 2009, and Term Loan D matures in June 2011. The Credit Facility provides for a new Term Loan C for potential borrowings up to $400 million. Such proceeds, if borrowed, may be used to fund acquisitions, for retirement of Notes (defined below) and for redemption of and payment of dividends on the Preferred Stock, subject to certain limitations. Substantially all of our assets, including the capital stock of our subsidiaries, are pledged as collateral to secure our obligations under the Credit Facility and the Senior Notes (defined below).

Our Credit Facility bears interest, at our option, at either:

• The higher of (i) a base rate as determined by the Administrative Agent, Deutsche Bank Trust Company Americas, plus a 1.00% margin on the Revolver and Term Loan A-2 and a 0.75% margin on Term Loan A-3 and Term Loan D; and (ii) the Federal Funds Effective Rate (as defined) plus 0.50%, plus a 1.00% margin on the Revolver and Term Loan A-2 and a 0.75% margin on Term Loan A-3 and Term Loan D; or

• LIBOR rate plus a 2.00% margin on the Revolver and Term Loan A-2 and a 1.75% margin on Term Loan A-3 and Term Loan D. We may elect interest periods of 1, 2, 3, 6, 9 or 12 months for LIBOR borrowings.

The weighted average interest rate of outstanding debt under the Credit Facility was 5.22% and 3.97% as of June 30, 2005 and 2004, respectively.

We have also issued $325 million of 8.875% Senior Notes due 2010 (the “Senior Notes”) and $600 million of 10.875% Senior Subordinated Notes due 2012 (the “Subordinated Notes”). Interest is paid on these notes semi-annually on June 15 and December 15.

On January 14, 2005 we issued $300 million of 6.875% Holdco Notes (collectively with the Senior Notes and the Subordinated Notes, the “Notes”), the proceeds of which were used to redeem approximately 50% of the then outstanding Preferred Stock from the GS Funds, pay transaction costs and repay debt associated with our Credit Facility. Interest is payable on the Holdco Notes semi-annually in arrears on January 15 and July 15 of each year, commencing July 15, 2005. The Holdco Notes are unsecured obligations of the Company and mature on January 15, 2013. In connection with the issuance of the Holdco Notes, we completed an exchange offering in June 2005.

Aggregate outstanding debt as of June 30, 2005 was $3,222.7 million. During the six months ended June 30, 2005, we made scheduled principal payments of $45.6 million and prepaid an additional $115.0 million in principal under our Credit Facility. Additionally, excess proceeds of $16.8 million from the Holdco Notes after redemption of the Preferred Stock plus $6.0 million in mandatory payments were used to pay $22.8 million in aggregate principal amount outstanding under the Credit Facility.

At June 30, 2005, we had $5.8 million of cash and cash equivalents and checks not yet presented for payment of $3.4 million and available borrowings under the Revolver of $155.0 million. During the six months ended June 30, 2005, $140.1 million was borrowed under the Revolver, of which $161.3 million was repaid during the period including $41.2 million of the outstanding balance as of December 31, 2004. No borrowings have been made under Term Loan C. During 2005, we expect to periodically utilize the Revolver as a financing resource to balance the timing of our periodic and accelerated payments made under the Credit Facility with the timing of cash receipts from operations. Our present intention is to repay borrowings on the Revolver in a timely manner and keep any outstanding amounts to a minimum.

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The Credit Facility and the indentures governing the Notes contain usual and customary restrictive covenants that, among other things, place limitations on our ability to (i) incur additional indebtedness, including capital leases and liens; (ii) pay dividends and repurchase our capital stock; (iii) enter into mergers, consolidations, acquisitions, asset dispositions and sale-leaseback transactions; (iv) make capital expenditures; (v) issue capital stock of our subsidiaries; and (vi) engage in transactions with our affiliates. The Credit Facility also contains financial covenants relating to maximum consolidated leverage, minimum interest coverage and maximum senior secured leverage as defined therein.

Our primary source of liquidity will continue to be cash flows from operations as well as available borrowing capacity under the Revolver. We expect our primary liquidity requirement will be to fund operations and for principal and interest payments on our debt. Our ability to meet our debt service requirements will depend on our ability to generate cash flow in the future. Our primary sources of cash flow will consist mainly of cash receipts from the sale of advertising in our yellow pages directories and can be impacted by, among other factors, general economic conditions, competition from other yellow pages directory publishers and other alternative products, consumer confidence and the level of demand for yellow pages advertising. We believe that cash flows from operations, along with borrowing capacity under the Revolver, will be adequate to fund our operations and capital expenditures and to meet our debt service requirements for at least the next 12 to 24 months. However, we make no assurances that our business will generate sufficient cash flows from operations or that sufficient borrowing will be available under the Revolver or Term Loan C to enable us to fund our operations, capital expenditures and meet all debt service requirements, to pursue all of our strategic initiatives or for other purposes.

Cash flow provided by operating activities was $194.7 million for the six months ended June 30, 2005. Key contributors to operating cash flow included the following:

• $27.8 million in net income.

• $101.6 million of net non-cash charges reflecting a source of cash, consisting of $42.3 million of depreciation and amortization, $11.5 million in bad debt provision, $37.2 million in deferred taxes and $10.6 million in other non-cash charges.

• $66.7 million net source of cash from a $71.4 million increase in deferred directory revenue less an increase in accounts receivable of $4.7 million. We analyze the change in deferred revenue and accounts receivable together because when a directory is published, the annual billing value of that directory is initially deferred and unbilled accounts receivable are established. Each month thereafter, typically one-twelfth of the billing value is recognized as revenue and billed to customers. In connection with the SBC Directory Acquisition, while we did not record the deferred revenue for directories published prior to the acquisition due to purchase accounting, we did acquire the associated unbilled receivables and the rights to bill and collect these receivables, which totaled approximately $207.3 million.

• $26.2 million net source of cash from a decrease in other assets, reflecting a net decrease in deferred directory costs of $16.2 million, consisting of an increase in deferred directory costs of $19.6 million related to directories that have yet to publish offset by $35.8 million in amortization of deferred directory costs relating to directories that have already published; and a $10.1 million decrease in prepaid expenses, offset by a $0.1 million increase in other current assets. Deferred directory costs represent cash payments for certain costs associated with the publication of directories. Since deferred directory costs are initially deferred when incurred, the cash payments are made prior to the expense being recognized.

• $11.7 million net use of cash from a decrease in accounts payable and accrued liabilities, reflecting a $22.4 million decrease in accounts payable and accrued liabilities and a $0.3 million decrease in other accrued liabilities, offset by an $11.0 million increase in accrued interest payable on the Notes.

• $15.9 million net use of cash resulting from a decrease in other non-current liabilities comprised of a $19.5 million current tax benefit offset by a net increase in other non-current liabilities of $3.6 million, which includes a $4.7 million increase to the restructuring reserve relating to the SBC Directory Business.

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Cash used in investing activities for the six months ended June 30, 2005 was $12.0 million used to purchase fixed assets, primarily computer equipment and software.

Cash used in financing activities through June 30, 2005 was $187.6 million and included the following:

• $291.5 million in net proceeds from the issuance of Holdco Notes for the redemption of outstanding Preferred Stock.

• $21.2 million reduction in the Revolver balance consisting of $161.3 million of Revolver repayments (including $41.2 million from the outstanding Revolver balance at December 31, 2004) less $140.1 million in borrowings.

• $277.2 million used for the redemption of Preferred Stock.

• $183.3 million of other debt repayments including $68.3 million in scheduled and mandatory payments and $115.0 million in pre-payments.

• $2.3 million in the decreased value of checks not presented for payment.

• $4.9 million in proceeds from the exercise of employee stock options.

Cash flow provided by operating activities was $147.5 million for the first six months ended June 30, 2004. Key contributors to operating cash flow included the following:

• $61.2 million in net income.

• $86.8 million of net non-cash charges reflecting a source of cash, primarily consisting of $29.4 million of depreciation and amortization, $6.5 million in the bad debts provision and $11.0 million in other non-cash charges and $39.9 million in deferred taxes.

• $2.7 million increase in accounts payable and accrued liabilities, reflected a source of cash based on the timing of invoices received as compared to invoices paid during the six months ended June 30, 2004, resulting in higher accounts payable and accrued liability at quarter end.

• $19.0 million increase in accounts receivable and a $11.2 million increase in deferred directory revenue. We analyze the change in deferred revenue and accounts receivable together because when a directory is published, the annual billing value of that directory is initially deferred and unbilled accounts receivable are established. Each month thereafter, typically one-twelfth of the billing value is recognized as revenue and customers are billed on a periodic basis.

• $1.6 million in cash received from partnerships in excess of recorded partnership income representing a source of cash. Partnership income during the six months ended June 30, 2004 consisted of our 50% interest in DonTech’s net income and the revenue participation income from SBC. We received cash from DonTech and SBC subsequent to the time we recorded the associated partnership income; therefore, in periods of declining DonTech partnership income, cash received related to prior periods exceeded the income recognized from the current period.

• $1.9 million decrease in other assets reflected a $2.2 million increase in deferred directory costs, offset by a decrease in prepaid insurance of $2.3 million and a decrease of $1.8 million in other current and non-current assets. Deferred directory costs represent cash payments for certain costs associated with the publication of directories. Since deferred directory costs are initially deferred when incurred, the cash payments are made prior to the expense being recognized.

Cash used in investing activities in the six months ended June 30, 2004 was $8.9 million used to purchase fixed assets, primarily computer equipment, computer software and leasehold improvements.

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Cash used in financing activities through June 30, 2004 was $135.7 million and included the following:

• $129.7 million in principal payments on debt borrowed under the Credit Facility. Of this amount, $18.3 million represented scheduled quarterly payments, $110.0 million represented principal payments made on an accelerated basis, at our option, from excess cash flow generated from operations and $1.4 million represented principal payments on the Revolver.

• $21.2 million in principal payments on the remaining 9 1/8% Senior Subordinated Notes.

• $1.4 million in borrowings under the Revolver.

• $9.5 million in the increased value of checks not yet presented for payment.

• $4.3 million in proceeds from the exercise of employee stock options.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk and Risk Management

The Credit Facility bears interest at variable rates and, accordingly, our earnings and cash flow are affected by changes in interest rates. The Credit Facility requires that we maintain hedge agreements to provide either a fixed interest rate or interest rate protection on at least 50% of our total outstanding debt. The Company has entered into the following interest rate swaps that effectively convert variable rate debt to fixed rate debt as of June 30, 2005. Under the terms of the agreements, the Company receives variable interest based on three-month LIBOR and pays a fixed rate of interest.

	Notional
Effective Dates	Amounts			Pay rates	Maturity Dates
(amounts in millions)
April 1, 2003	$	255	(1)	2.850%	March 31, 2007
October 9, 2003	$	150		1.959%	October 9, 2005
June 21, 2004	$	50		3.230%	June 21, 2006
June 23, 2004	$	50		3.170%	June 23, 2006
June 28, 2004	$	50		3.110%	June 28, 2006
July 2, 2004	$	50		3.200%	July 3, 2006
September 7, 2004	$	200	(2)	3.490% — 3.750%	September 8, 2008-September 7, 2009
September 15, 2004	$	250	(3)	3.200% — 3.910%	September 15, 2007-September 15, 2009
September 17, 2004	$	150	(1)	3.210% — 3.740%	September 17, 2007-September 17, 2009
September 23, 2004	$	150	(1)	3.160% — 3.438%	September 24, 2007-September 24, 2008
Total	$	1,355

(1)	consists of three swaps
(2)	consists of two swaps
(3)	consists of four swaps

The outstanding interest rate swaps expose us to credit risk in the event that the counterparties to the agreements do not or cannot meet their obligations. The notional amount is used to measure interest to be paid or received and does not represent the amount of exposure to credit loss. The loss would be limited to the amount that would have been received, if any, over the remaining life of the swap agreements. The counterparties to the swaps are major financial institutions, and we expect the counterparties to be able to perform their obligations under the swaps. We use derivative financial instruments for hedging purposes only and not for trading or speculative purposes.

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Market Risk Sensitive Instruments

The interest rate swap agreements have been designated as cash flow hedges. In accordance with the provisions of SFAS 133, Accounting for Derivative Instruments and Hedging Activities, as amended by SFAS 137 and SFAS 138, the swaps are recorded at fair value. On a quarterly basis, the fair value of the swaps are determined based on quoted market prices and, assuming effectiveness, the difference between the fair value and the book value of the swaps are recognized in other comprehensive income. Any ineffectiveness of the swaps is required to be recognized in earnings. The swaps and the hedged item (three-month LIBOR-based interest payments on $1,355 million of bank debt) have been designed so that the critical terms (interest reset dates, duration and index) coincide. Assuming the critical terms continue to coincide, the cash flows from the swaps will exactly offset the cash flows of the hedged item and no ineffectiveness will exist.

Item 4. Controls and Procedures

(a)	Evaluation of Disclosure Controls and Procedures. Based on their evaluation, as of the end of the period covered by this Quarterly Report on Form 10-Q, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) the principal executive officer and principal financial officer of the Company have each concluded that such disclosure controls and procedures are effective and sufficient to ensure that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission’s rules and forms and that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
	The Company provided a report in its Annual Report on Form 10-K for the year ended December 31, 2004 that included, among other things, management’s assessment of the effectiveness of the Company’s internal controls over financial reporting. In addition, the Company provided in its Form 10-K a written opinion prepared by its independent registered public accounting firm in connection with management’s assessment.
	Management excluded from its assessment of the Company’s internal control over financial reporting as of December 31, 2004 certain elements of the internal control over financial reporting of the directory publishing business of SBC Communications, Inc. in Illinois and Northwest Indiana that the Company acquired in September 2004 because this acquisition represented a material purchase business combination. Subsequent to the acquisition, certain elements of the acquired business’ internal control over financial reporting and related functions, processes and systems were integrated during 2004 into the Company’s existing internal control over financial reporting and related functions, processes and systems. Those elements of the acquired business’ internal control over financial reporting that were not integrated during 2004 into the Company’s existing internal control over financial reporting were excluded from management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2004. During the first quarter of 2005, all significant elements of the acquired business’ internal control over financial reporting were integrated into the Company’s existing internal control over financial reporting and related functions, processes and systems and have been included in management’s evaluation of the disclosure controls and procedures for the period covered by this Quarterly Report on Form 10-Q.
(b)	Changes in Internal Control Over Financial Reporting. There have not been any changes in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We are involved in various legal proceedings arising in the ordinary course of our business, as well as certain litigation and tax matters described below. We periodically assess our liabilities and contingencies in connection with these matters based upon the latest information available to us. For those matters where it is probable that we have incurred a loss and the loss or range of loss can be reasonably estimated, we record reserves in our consolidated financial statements. In other instances, we are unable to make a reasonable estimate of any liability because of the uncertainties related to both the probable outcome and amount or range of loss. As additional information becomes available, we adjust our assessment and estimates of such liabilities accordingly.

Based on our review of the latest information available, we believe our ultimate liability in connection with pending legal proceedings, including the litigation and tax matters described below, will not have a material adverse effect on our results of operations, cash flows or financial position, as described below. No material amounts have been accrued in our financial statements with respect to any of these matters.

In order to understand our potential exposure under the litigation and tax matters described below under the captions “Information Resources, Inc.” and “Tax Matters,” you need to understand the relationship between us and D&B, and certain of our predecessors and affiliates that, through various corporate reorganizations and contractual commitments, have assumed varying degrees of responsibility with respect to such matters.

In November 1996, the company then known as The Dun & Bradstreet Corporation separated through a spin-off (“1996 Distribution”) into three separate public companies: The Dun and Bradstreet Corporation, ACNielsen Corporation (“ACNielsen”), and Cognizant Corporation (“Cognizant”). In June 1998, The Dun & Bradstreet Corporation separated through a spin-off (“1998 Distribution”) into two separate public companies: R.H. Donnelley Corporation (formerly The Dun & Bradstreet Corporation) and a new company that changed its name to The Dun & Bradstreet Corporation. Later in 1998, Cognizant separated through a spin-off (“Cognizant Distribution”) into two separate public companies: IMS Health Incorporated (“IMS”), and Nielsen Media Research, Inc. (“NMR”). In September 2000, The Dun & Bradstreet Corporation separated into two separate public companies: Moody’s Corporation, (“Moody’s”) (formerly The Dun & Bradstreet Corporation), and a new company that changed its name to The Dun & Bradstreet Corporation. As a result of the form of R.H. Donnelley Corporation’s separation from The Dun & Bradstreet Corporation in 1998, we are the corporate successor of and technically the defendant and taxpayer referred to below as D&B with respect to any matter accruing prior to June 30 1998.

Information Resources, Inc.

The following is a description of an antitrust lawsuit filed in 1996 by Information Resources, Inc. (“IRI”). VNU N.V., a publicly traded Dutch company (“VNU”), and its U.S. subsidiaries VNU, Inc., AC Nielsen, AC Nielsen (US), Inc. (“ACN (US)”), and NMR (collectively, the “VNU Parties”), have assumed exclusive joint and several liability for any judgment or settlement of this antitrust lawsuit (collectively, the “IRI Liabilities”). As a result of the indemnity obligation, we do not have any exposure to a judgment or settlement of this lawsuit unless the VNU Parties default on their obligations. In the event of such default, we have contingent liability for this matter as a result of our succeeding to D&B’s liabilities and obligations as part of the 1998 Distribution. In such event, however, under the contractual commitments described below, any such amounts that we might need to pay would be shared equally (50% each) by D&B and Moody’s, on a joint and several basis. Only if D&B and Moody’s were unable to bear all or a part of the IRI Liabilities, would we be liable, and then only to the extent that either of them could not satisfy their joint and several indemnity obligations to us.

On February 1, 2005, the U.S. District Court for the Southern District of New York entered a final judgment against IRI dismissing IRI’s claims with prejudice and on the merits. IRI filed a notice of appeal to the Second Circuit Court of Appeals. The appeal has been fully briefed, but no argument date has yet been set for this appeal. Due to the dismissal of this matter and several layers of indemnity described above, our disclosure regarding this matter will be relatively brief.

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In July 1996, IRI filed a complaint, subsequently amended in 1997, in the United States District Court for the Southern District of New York, naming as defendants D&B (now, the Company, as successor of D&B), A.C. Nielsen Company (a subsidiary of ACNielsen) and IMS (then known as Cognizant), at the time of the filing, all wholly owned subsidiaries of D&B.

The amended complaint alleged, among other claims, various violations of U.S. antitrust laws under Sections 1 and 2 of the Sherman Antitrust Act. IRI sought damages in excess of $650.0 million, which IRI sought to treble under the antitrust laws. IRI also sought punitive damages of an unspecified amount, which we believe are precluded as a result of the prior dismissal of one of IRI’s claims.

In December 2004, the Court entered an order that barred IRI from arguing that defendant’s pricing practices or discounts were illegal or anti-competitive unless it could satisfy a specified burden of proof. In response to this ruling, in a press release, IRI stated, in relevant part, “without this evidence, IRI believes that little would be left of IRI’s case to take to trial.” As a result, IRI asked the Court to enter a final judgment against it so that it could take an immediate appeal to the Second Circuit. Defendants did not object to this request. As noted above, the case was dismissed by the District Court and IRI has filed an appeal. The appeal has been fully briefed, but no argument date has yet been set for this appeal.

In connection with the 1996 Distribution, Cognizant (now NMR), ACNielsen and D&B (now the Company) entered into an Indemnity and Joint Defense Agreement. On July 30, 2004, the VNU Parties, the Company, D&B, Moody’s and IMS entered into an Amended and Restated Indemnity and Joint Defense Agreement (the “Amended JDA”).

Pursuant to the Amended JDA, any and all IRI Liabilities incurred by us, D&B, Moody’s or IMS relating to a judgment (even if not final) or any settlement being entered into in the IRI action will be jointly and severally assumed and fully discharged exclusively by the VNU Parties. Under the Amended JDA, the VNU Parties have agreed to, jointly and severally, indemnify us, D&B, Moody’s and IMS from and against all IRI Liabilities to which we become subject.

Under the agreements relating to the 1998 Distribution, D&B assumed the defense and agreed to indemnify us against any payments that we may be required to make with respect to the IRI Liabilities and related legal fees. As required by those agreements, Moody’s Corporation, which subsequently separated from D&B in the 2000 Distribution, has agreed to be jointly and severally liable with D&B for the indemnity obligation to us. We understand that D&B and Moody’s have agreed amongst themselves to share equally (50% each) these indemnity obligations to us. Only if D&B and Moody’s were unable to bear all or a part of their aggregate 50% share of the liability would we be liable, and then only to the extent that either of them could not satisfy their joint and several indemnity obligations to us.

Because liability for violations of the antitrust laws is joint and several and because the rights and obligations relating to the Amended JDA are based on contractual relationships, the failure of the VNU Parties to fulfill their obligations under the Amended JDA could result in the other parties bearing all or a share of the IRI Liabilities. Joint and several liability for the IRI Liabilities means that even where more than one defendant is determined to have been responsible for an alleged wrongdoing, the plaintiff can collect all or part of the judgment from just one of the defendants. This is true regardless of whatever contractual allocation of responsibility the defendants and any other indemnifying parties may have made, including the allocations described above between the VNU Parties, the Company, D&B, Moody’s and IMS.

Accordingly, and as a result of the allocations of liability described above, in the event the VNU Parties default on their obligations under the Amended JDA, each of D&B and Moody’s will be jointly and severally responsible for the payment of any portion of any judgment or settlement ultimately payable by the Company (which is the defendant in the IRI action), which could be as high as all of the IRI Liabilities.

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While, as described above, the IRI lawsuit has been dismissed with prejudice on the merits, IRI has filed an appeal. Accordingly, we are unable to predict the outcome of the IRI litigation or the financial condition of any of the VNU Parties or the other defendants at the time of any such outcome (and hence we cannot estimate their ability to pay the IRI Liabilities pursuant to the Amended JDA or the judgment or settlement in the IRI action). Nonetheless, while we cannot assure you as to the outcome of this matter, management presently believes that the VNU Parties have sufficient financial resources and borrowing capacity to satisfy their obligations under the Amended JDA and, if they default, D&B and Moody’s have sufficient financial resources and borrowing capacity to reimburse us for any payments we may be required to make and related costs we may incur in connection with this matter. Therefore, management presently believes that the ultimate resolution of this matter would not have a material adverse effect on the Company’s results of operations, cash flows or financial condition. Accordingly, no amount in respect of this matter has been accrued in our consolidated financial statements.

Tax Matters

D&B entered into global tax-planning initiatives in the normal course of its business, primarily through tax-free restructurings of both its foreign and domestic operations (collectively, “Legacy Tax Matters”). The IRS is currently disputing certain tax positions taken with respect to the Legacy Tax Matters. The status of these Legacy Tax Matters is summarized below, including the settlement of the matter described below under ”Royalty Expense Deductions – 1993-1997.”

Pursuant to a series of tax sharing and other agreements (collectively, “Tax Sharing Agreements”) relating to the spin-offs and separations referred to above, IMS and NMR are jointly and severally liable for, and must pay one-half of, and D&B and Moody’s are jointly and severally liable for, and must pay the other half of, any amounts resulting from the Legacy Tax Matters summarized below under “Royalty Expense Deductions 1993-1997” and D&B and Moody’s are jointly and severally liable for all amounts resulting from the Legacy Tax Matters summarized below under “ Amortization and Royalty Expense Deductions/Royalty Income — 1997-2005.”

Under the terms of the 1998 Distribution, D&B agreed to assume the defense and to indemnify us against any tax liability that may be assessed against us and any related costs and expenses that we may incur in connection with any of these Legacy Tax Matters. Also, as required by those agreements, Moody’s has agreed to be jointly and severally liable with D&B for the indemnity obligation to us. Under the terms of certain of the other spin-offs and separations, D&B and Moody’s have, between each other, agreed to be financially responsible for 50% of any potential liabilities that may arise to the extent such potential liabilities are not directly attributable to each party’s respective business operations. Only if D&B and Moody’s were unable to bear all or a part of these liabilities, would we be liable, and then only to the extent that both of them could not satisfy their joint and several indemnity obligations to us.

While we cannot assure you as to the outcome of these Legacy Tax Matters (other than the settled portion of the Royalty Expense Matter), management presently believes that D&B and Moody’s have sufficient financial resources, borrowing capacity and, where applicable, indemnity rights against IMS and NMR (who succeeded to Cognizant’s indemnity obligations under the Cognizant Distribution) and IMS and NMR in turn have sufficient financial resources and borrowing capacity to satisfy their respective indemnity obligations to D&B and Moody’s, so as to reimburse us for any payments we may be required to make and related costs we may incur in connection with these Legacy Tax Matters. Therefore, management presently believes that the ultimate resolution of these Legacy Tax Matters would not have a material adverse effect on the Company’s results of operations, cash flows or financial condition.

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Royalty Expense Deductions – 1993 – 1997

Beginning in the second quarter of 2003, D&B received (on our behalf) a series of communications from the IRS proposing adjustments with respect to a partnership transaction entered into in 1993. Specifically, the IRS proposed to disallow certain royalty expense deductions claimed by D&B on its 1993 through 1997 tax returns. The IRS also separately challenged the tax treatment of certain royalty payments received by that partnership and proposed reallocating certain partnership income to D&B. These matters are collectively referred to herein as the Royalty Expense Matter.

We understand that D&B estimates that the disallowance of the 1993 and 1994 royalty expense deductions would result in a loss to it of approximately $5.0 million in pending tax refunds and that the additional tax liability to it with respect to (a) the disallowance of the 1995 and 1996 royalty expense deductions could be up to approximately $47.4 million (tax, interest and penalties, net of tax benefits) and (b) its share of the reallocated partnership income could be up to approximately $23.6 million (tax, interest and penalties, net of tax benefits). We understand that D&B believes that the position of the IRS regarding the partnership income is inconsistent with its position with respect to the same royalty expense deductions described above and, therefore, the IRS would be unlikely to prevail on both positions. We understand that D&B has filed a protest with respect to the 1993 and 1994 tax refunds, and intends to attempt to resolve this matter with the IRS before proceeding to litigation, if necessary.

In July 2005, we (as the taxpayer of record) entered into a settlement agreement with the IRS resolving the disallowance of the 1995 and 1996 royalty expense deductions portion of the Royalty Expense Matter. Under the terms of the settlement, the aggregate tax liability will be approximately $56.0 million (including interest and penalties) for 1995 and $86.0 million (including interest and penalties) for 1996, subject to final bill(s) from the IRS, which we expect to be consistent with prior computations it has provided to D&B.

While this matter has now been settled with the IRS, each of the relevant parties have consented to the settlement without prejudice to certain claims they may have against each other based upon the prior tender of the initial settlement agreement by us and D&B and the refusal to consent thereto by IMS and NMR during 2004, as disclosed in prior periodic reports.

IMS has alleged various breaches of our and D&B’s obligations under the Tax Sharing Agreements related to D&B’s management and attempted settlement of this matter with the IRS. In addition to “reserving its rights” against us and D&B, IMS has urged NMR (which is in direct contractual privity with us) to assert breaches of contract and to terminate the indemnity obligations of IMS and NMR under the Tax Sharing Agreements generally.

We and our legal counsel, and we understand D&B and their legal counsel, believe that neither NMR nor IMS have any right or the legal basis to terminate their indemnity obligations under the Tax Sharing Agreements, and that any attempt by them to do so will be found to be without merit, although we cannot assure you with respect to the ultimate outcome of that issue or with respect to the timing of its resolution.

The 1993, 1994, and 1997 royalty expense deduction portions of the Royalty Expense Matter remain pending before the IRS.

Amortization and Royalty Expense Deductions/Royalty Income – 1997 – 2005

In the fourth quarter of 2003, D&B received (on our behalf) IRS notices of proposed adjustment with respect to a partnership transaction entered into in 1997. The IRS asserted that certain amortization expense deductions claimed by D&B on its 1997 and 1998 tax returns should be disallowed.

In April 2004, D&B received (on our behalf) proposed notices of deficiency from the IRS, proposing adjustments with respect to the same 1997 partnership transaction consistent with the notices of proposed adjustment. We understand that D&B filed protests relating to this matter for the 1997 and 1998 tax years with the IRS Office of Appeals. During the third quarter of 2004, D&B was informed by the IRS Office of Appeals that the 1997 and 1998 tax years were being returned to the Examination Division of the IRS for further development of the issues.

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In the second quarter of 2005, D&B received (on our behalf) IRS notices of proposed adjustment for 1999 through 2002, with respect to the same 1997 partnership transaction referred to above. The IRS again asserted that certain amortization expense deductions claimed by D&B on its 1999 through 2002 tax returns should be disallowed. We understand that D&B anticipates that the IRS will issue proposed notices of deficiency for 1999 through 2002, reflecting the adjustments proposed in the notices of proposed adjustment received during the second quarter of 2005.

In addition, the IRS has asserted that royalty expense deductions, claimed by D&B on its tax returns for 1997 through 2002 for royalties paid to the partnership should be disallowed. The IRS also has asserted that the receipt of these same royalties by the partnership should be reallocated to and reported as royalty income by D&B, including the portions of the royalties that were allocated to third party partners in the partnership, and, thus, included in their taxable income. We understand that D&B believes that the IRS’ stated positions with respect to the treatment of the royalty expense and royalty income are mutually inconsistent, making it unlikely that the IRS will prevail on both of the positions. We also understand that D&B nonetheless believes that the IRS may seek to issue notices with respect to both of these inconsistent positions.

In addition to the foregoing, and in connection with the notices received during the second quarter of 2005, the IRS has asserted that certain business expenses incurred by D&B during 1999 through 2002 should be capitalized and amortized over a 15-year period, if, but only if, the proposed adjustments described above are not sustained.

As a result, we understand that D&B estimates that after taking into account certain other tax benefits resulting from the IRS’ position on the partnership it is unlikely that there will be any additional cash tax payments due in addition to the amounts noted above related to the amortization expense deduction.

We understand that D&B estimates that its additional tax liability as a result of the disallowance of the 1997 through 2002 amortization deductions and the disallowance of such deductions claimed from 2003 to date could be up to $64.4 million (tax, interest and penalties, net of tax benefits). This transaction is scheduled to expire in 2012 and, unless earlier terminated, based on current interest rates and tax rates, additional tax exposure would increase at a rate of approximately $2.1 million per quarter (including potential penalties) as future amortization expenses are deducted.

In the event the IRS were to prevail on both positions with respect to the royalty expense and royalty income, which D&B believes unlikely, D&B estimates that the additional tax liability to it as a result of the disallowance of the 1997 through 2002 royalty expense deductions, the disallowance of such deductions claimed from 2003 to date and the inclusion of the reallocated royalty income for all relevant years could be up to $143.3 million (tax, interest and penalties, net of tax benefits), which would be in addition to the $64.4 million noted above related to the amortization expense deduction.

We understand that D&B is attempting to resolve these matters with the IRS before proceeding to litigation, if necessary. If D&B were to challenge, at any time, any of these IRS positions for years 1997 through 2002 in U.S. District Court or the U.S. Court of Federal Claims, rather than in U.S. Tax Court, the disputed amounts for each applicable year would need to be paid in advance for the Court to have jurisdiction over the case.

Conclusion

As a result of our assessment of our exposure in these matters relating to our prior relationship with D&B and its former affiliates, especially in light of our indemnity arrangements with D&B and Moody’s (and the VNU Parties with respect to the IRI matter), and their respective financial resources, borrowing capacity and, in the case of certain Legacy Tax Matters, indemnity rights against IMS and NMR, and in turn IMS and NMR’s respective financial resources and borrowing capacity to satisfy their respective indemnity obligations to D&B and Moody’s, no material amounts have been accrued in our consolidated financial statements for any of these D&B-related litigation and tax matters.

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Other Matters

The Company is exposed to potential defamation and breach of privacy claims arising from our publication of directories and our methods of collecting, processing and using advertiser and telephone subscriber data. If such data was determined to be inaccurate or if data stored by us was improperly accessed and disseminated by us or by unauthorized persons, the subjects of our data and users of that data we collect and publish could submit litigation claims against the Company. Although to date we have not experienced any material claims relating to defamation or breach of privacy, we may be party to such proceedings in the future that could have a material adverse effect on our business.

We are also involved in other legal proceedings, claims and litigation arising in the ordinary conduct of our business. Although we cannot assure you of any outcome, management presently believes that the outcome of such legal proceedings will not have a material adverse effect on our results of operations or financial condition and no material amounts have been accrued in our consolidated financial statements with respect to these matters.

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Item 4. Submission of Matters to a Vote of Security Holders

Our Annual Meeting of Stockholders (“Meeting”) was held in Cary, North Carolina on April 26, 2005. At the Meeting, the Company’s stockholders elected David M. Veit as a Class III director to serve a three-year term, as follows:

			Votes
Name	Votes For		Withheld
David M. Veit		22,885,722		7,782,180

The Board of Directors now comprises 10 members consisting of three classes. As described in our Proxy Statement relating to the Meeting, pursuant to the Certificate of Designations governing our Preferred Stock, the holders of the Preferred Stock are entitled to elect two directors to the Company’s Board of Directors, without any approval or veto right by the Company’s other stockholders. In accordance with that provision, at the Meeting, the holders of the Preferred Stock unanimously (voting the equivalent of 4,951,599 shares of our common stock in favor) re-elected Messrs. Robert R. Gheewalla and Terrence M. O’Toole as Class III directors to serve three-year terms. The other members of our Board of Directors (Nancy Cooper, Scott Flanders, Robert Kamerschen, Alan Schultz, David C. Swanson, Barry Lawson Williams and Edwina Woodbury) were not subject to re-election by stockholders this year and continue in office.

At the Meeting, the Company’s stockholders also approved the 2005 Stock Award and Incentive Plan, as follows:

	Votes For		Votes Against		Abstentions
Approval of the 2005 Stock Award and Incentive Plan		20,121,289		6,291,100		588,977

At the Meeting, the Company’s stockholders also ratified the appointment of PricewaterhouseCoopers LLP (“PwC”) to serve as the Company’s independent registered public accounting firm for 2005, as follows:

	Votes For		Votes Against		Abstentions
Ratification of the appointment of PwC		30,433,450		228,523		5,929

Lastly, at the Meeting, the Company’s stockholders also approved a stockholder proposal relating to the Company’s stockholder rights plan, as follows:

	Votes For		Votes Against		Abstentions
Stockholder Proposal re: Rights Plan		15,020,528		11,914,711		66,127

With respect to the approval of the 2005 Stock Award and Incentive Plan and the approval of the stockholder proposal, there were also 3,666,536 broker non-votes.

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Item 6. Exhibits

(a) Exhibits:

Exhibit No.	Document
2.1#	Stock Purchase Agreement, dated as of September 21, 2002, by and among the Company, Sprint Corporation and Centel Directories LLC (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K, filed with the Securities and Exchange Commission on October 1, 2002, Commission File No. 001-07155)
2.2	Supplemental Agreement to Stock Purchase Agreement, dated as of December 31, 2002, by and among the Company, Sprint Corporation and Centel Directories LLC (incorporated by reference to Exhibit 2.2 to the Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 17, 2003, Commission File No. 001-07155).
2.3#	Preferred Stock and Warrant Purchase Agreement, dated as of September 21, 2002, among R.H. Donnelley Corporation and investment partnerships affiliated with The Goldman Sachs Group, Inc. (incorporated by reference to Exhibit 2.2 to the Current Report on Form 8-K, filed with the Securities and Exchange Commission on October 1, 2002, Commission File No. 001-07155)
2.4#	Purchase Agreement dated as of July 28, 2004 by and among R.H. Donnelley Corporation, Ameritech Corporation and Ameritech Publishing, Inc. (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed with the SEC on August 2, 2004, Commission File No. 001-07155)
2.5	Amendment No. 1 to the Purchase Agreement, dated as of September 1, 2004, by and among R.H. Donnelley Corporation, Ameritech Corporation and Ameritech Publishing, Inc. (incorporated by reference to Exhibit 2.2 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on September 3, 2004, Commission File No. 001-07155)
3.1	Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Quarterly Report on Form 10-Q for the three and six months ended June 30, 1999, filed with the Securities and Exchange Commission on May 14, 1999 Commission File No. 001-07155)
3.2	By-laws of the Company (incorporated by reference to Exhibit 3.2 to the Quarterly Report on Form 10-Q for the three and six months ended June 30, 1999, filed with the Securities and Exchange Commission on May 14, 1999 Commission File No. 001-07155)
3.3	Certificate of Incorporation of R.H. Donnelley Inc. (incorporated by reference to Exhibit 3.1 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 R.H. Donnelley Inc. (incorporated by reference to Exhibit 3.2 to the Registration Statement on Form S-4, filed with the Securities and Exchange Commission on July 17, 1998, Registration No. 333-59287)
3.5	Certificate of Designations of Convertible Cumulative Preferred Stock of R.H. Donnelley Corporation (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 17, 2003, Commission File No. 001-07155)

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Exhibit No.	Document
3.6	Certificate of Designations of Series B-1 Convertible Cumulative Preferred Stock of R.H. Donnelley Corporation (incorporated by reference to Exhibit 3.1 to the Current Report Form 8-K, filed with the Securities and Exchange Commission on December 3, 2002, Commission File No. 001-07155)
4.1	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, Commission File No. 001-07155)
4.2	Amendment No. 1 to Rights Agreement, dated as of February 26, 2001, by and among R.H. Donnelley Corporation, First Chicago Trust Company of New York (as initial Rights Agent) and The Bank of New York (as successor Rights Agent) (incorporated by reference to Exhibit 4.5 to the Annual Report on Form 10-K for the year ended December 31, 2000, filed with the Securities and Exchange Commission on March 28, 2001, Commission File No. 001-07155)
4.3	Amendment No. 2 to Rights Agreement, dated as of September 21, 2002, between the Company and The Bank of New York, as successor Rights Agent (incorporated by reference to Exhibit 4.1 to Amendment No. 1 to the Registration Statement on Form 8-A , filed with the Securities and Exchange Commission on October 1, 2002, Commission File No. 001-07155)
4.4	Form of Warrant Agreement, dated as of November 25, 2002, between the Company and investment partnerships affiliated with The Goldman Sachs Group, Inc. (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 17, 2003, Commission File No. 001-07155)
4.5	Form of Warrant Agreement, dated January 3, 2003, between the Company and investment partnerships affiliated with The Goldman Sachs Group, Inc. (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 17, 2003, Commission File No. 001-07155)
4.6	Registration Rights Agreement, dated as of November 25, 2002, among the Company and investment partnerships affiliated with The Goldman Sachs Group, Inc. (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K, filed with the Securities and Exchange Commission on December 3, 2002, Commission File No. 001-07155)
4.7	Indenture dated as of December 3, 2002 between R.H. Donnelley Inc. (as successor to R.H. Donnelley Finance Corporation I), as Issuer, and The Bank of New York, as Trustee, with respect to the 8.875% Senior Notes due 2010 (incorporated by reference to Exhibit 4.13 to the Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 20, 2003, Commission File No. 001-07155)
4.8	Supplemental Indenture dated as of January 3, 2003 among R.H. Donnelley Inc., as Issuer, the Company and the other guarantors signatory thereto, as Guarantors, and The Bank of New York, as Trustee, with respect to the 8.875% Senior Notes due 2010 (incorporated by reference to Exhibit 4.14 to the Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 20, 2003, Commission File No. 001-07155)
4.9	Form of 8.875% Senior Notes due 2010 (included in Exhibit 4.13)

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Exhibit No.	Document
4.10	Guarantees relating to the 8.875% Senior Notes due 2010 (incorporated by reference to Exhibit 4.16 to the Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 20, 2003, Commission File No. 001-07155)
4.11	Indenture dated as of December 3, 2002 between R.H. Donnelley Inc. (as successor to R.H. Donnelley Finance Corporation I), as Issuer, and The Bank of New York, as Trustee, with respect to the 10.875% Senior Subordinated Notes due 2012 (incorporated by reference to Exhibit 4.17 to the Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 20, 2003, Commission File No. 001-07155)
4.12	Supplemental Indenture dated as of January 3, 2003 among R.H. Donnelley Inc., as Issuer, the Company and the other guarantors signatory thereto, as Guarantors, and The Bank of New York, as Trustee, with respect to the 10.875% Senior Subordinated Notes due 2012 (incorporated by reference to Exhibit 4.18 to the Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 20, 2003, Commission File No. 001-07155)
4.13	Form of 10.875% Senior Subordinated Notes due 2012 (included in Exhibit 4.17)
4.14	Guarantees relating to the 10.875% Senior Subordinated Notes due 2012 (incorporated by reference to Exhibit 4.20 to the Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 20, 2003, Commission File No. 001-07155)
4.15	Second Supplemental Indenture dated as of January 9, 2004 among R.H. Donnelley Inc., as Issuer, the Company and other guarantors signatory thereto, as Guarantors, and The Bank of New York, as Trustee, with respect to the 10.875% Senior Subordinated Notes due 2012 (incorporated by reference to Exhibit 4.21 to the Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 12, 2004, Commission File No. 001-07155)
4.16	Second Supplemental Indenture, dated as of September 1, 2004, by and among R.H. Donnelley Inc., the guarantors party thereto and The Bank of New York, as Trustee, with respect to the 8.875% Senior Notes due 2010 of R.H. Donnelley Inc. (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on September 3, 2004, Commission File No. 001-07155)
4.17	Third Supplemental Indenture, dated as of September 1, 2004, by and among R.H. Donnelley Inc., the guarantors party thereto and The Bank of New York, as Trustee, with respect to the 10.875% Senior Subordinated Notes due 2012 of R.H. Donnelley Inc. (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on September 3, 2004, Commission File No. 001-07155)
4.18	Senior Guarantees relating to Second Supplemental Indenture to the Indenture governing the 8.875% Senior Notes due 2010 (incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on September 3, 2004, Commission File No. 001-07155)
4.19	Senior Subordinated Guarantees relating to the Third Supplemental Indenture to the Indenture governing the 10.875% Notes due 2012 (incorporated by reference to Exhibit 4.4 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on September 3, 2004, Commission File No. 001-07155)

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Exhibit No.	Document
4.20#	Indenture, dated as of January 14, 2005, among R.H. Donnelly Corporation and The Bank of New York, as trustee (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 19, 2005, Commission File No. 001-07155)
4.21	Form of 6 7/8% Senior Notes due 2013 (included in Exhibit 4.26)
10.1#	Form of Distribution Agreement between the Company (f/k/a The Dun & Bradstreet Corporation) and The New Dun & Bradstreet Corporation (incorporated by reference to Exhibit 99.2 to the Current Report on Form 8-K of the Company (f/k/a The Dun & Bradstreet Corporation), filed with the Securities and Exchange Commission on September 30, 1998, Commission File No. 001-07155)
10.2#	Form of Tax Allocation Agreement between the Company (f/k/a The Dun & Bradstreet Corporation) and The New Dun & Bradstreet Corporation (incorporated by reference to Exhibit 99.3 to the Current Report on Form 8-K of the Company (f/k/a The Dun & Bradstreet Corporation), filed with the Securities and Exchange Commission on September 30, 1998, Commission File No. 001-07155)
10.3#	Amended and Restated Indemnity and Joint Defense Agreement dated as of July 30, 2004, by and among VNU, N.V., VNU, Inc., ACNielson Corporation, AC Nielson (US), Inc., Nielson Media Research, Inc., R.H. Donnelley Corporation, the Dun & Bradstreet Corporation, Moody’s Corporation, and IMS Health Incorporated (incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 9, 2004, Commission File No. 001-07155)
10.4#	DonTech II Partnership Agreement, effective August 19, 1997, by and between R.H. Donnelley Inc. (f/k/a The Reuben H. Donnelley Corporation) and R.H. Donnelley Publishing and Advertising of Illinois Partnership, as successor to Ameritech Publishing of Illinois, Inc. (incorporated by reference to Exhibit 10.10 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)
10.5	Amendment No. 1 to DonTech II Partnership Agreement dated as of January 28, 2000 between R.H. Donnelley Inc. and R.H. Donnelley Publishing and Advertising of Illinois Partnership, as successor to Ameritech Publishing of Illinois, Inc. (incorporated by reference to Exhibit 10.4 to the Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 12, 2004, Commission File No. 001-07155)
10.6#	Revenue Participation Agreement, dated as of August 19, 1997, by and between R.H. Donnelley Publishing and Advertising of Illinois Partnership, as successor to APIL Partners Partnership, and R.H. Donnelley APIL, Inc., as assignee of R.H. Donnelley Inc. (f/k/a The Reuben H. Donnelley Corporation) (incorporated by reference to Exhibit 10.11 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)
10.7#	Master Agreement, executed August 19, 1997, by and among R.H. Donnelley Inc. (f/k/a The Reuben H. Donnelley Corporation), the Company (f/k/a The Dun & Bradstreet Corporation), The Am-Don Partnership a/k/a DonTech, DonTech II, Ameritech Publishing, Inc., Ameritech Publishing of Illinois, Inc., Ameritech Corporation, DonTech I Publishing Company LLC and the APIL Partners Partnership (incorporated by reference to Exhibit 10.12 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) This agreement is no longer in effect.

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Exhibit No.	Document
10.8#	Exclusive Sales Agency Agreement, effective August 19, 1997, between R.H. Donnelley Publishing and Advertising of Illinois Partnership, as successor to APIL Partners Partnership, and DonTech II (incorporated by reference to Exhibit 10.13 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)
10.9	Agreement for Publishing Services, dated as of January 1, 2002 between Ameritech Publishing Inc. and R.H. Donnelley Inc. (certain portions of this exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to an Application for an Order Granting Confidential Treatment) (incorporated by reference to Exhibit 10.13 to the Company’s Quarterly Report on Form 10-Q for the three and six months ended June 30, 2002, filed with the Securities and Exchange Commission on May 10, 2002, Commission File No. 001-07155) This agreement is no longer in effect.
10.10^	Key Employees’ Performance Unit Plan, as amended and restated (incorporated by reference to Exhibit 10.15 to Amendment No. 3 to the Registration Statement on Form S-4, filed with the Securities and Exchange Commission on September 28, 1998, Registration No. 333-59287)
10.11^	1991 Key Employees’ Stock Option Plan, as amended and restated through April 25, 2000 (incorporated by reference to Exhibit 10.17 to the Company’s Quarterly Report on Form 10-Q for the three and six months ended September 30, 2000, filed with the Securities and Exchange Commission on November 13, 2000, Commission File No. 001-07155)
10.12^	Amended and Restated 1998 Directors’ Stock Plan (incorporated by reference to Exhibit 10.18 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1999, filed with the Securities and Exchange Commission on March 27, 2000, Commission File No. 001-07155)
10.13^	Pension Benefit Equalization Plan (incorporated by reference to Exhibit 10.16 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2001, filed with the Securities and Exchange Commission on March 27, 2002, Commission File No. 001-07155)
10.14^	2001 Stock Award and Incentive Plan (incorporated by reference to Exhibit 10.17 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2001, filed with the Securities and Exchange Commission on March 27, 2002, Commission File No. 001-07155)
10.15*^	2005 Stock Award and Incentive Plan
10.16*^	Form of Non-Qualified Stock Option Agreement under 2005 Plan
10.17*^	Form of Annual Incentive Program Award under 2005 Plan
10.18^	Form of Performance Unit Program Award (incorporated by reference to Exhibit 99.04 to the Registration Statement on Form S-8, filed with the Securities and Exchange Commission on July 25, 2001, Registration No. 333-65822)
10.19*^	Form of Stock Appreciation Rights Agreement under 2005 Plan
10.20^	Deferred Compensation Plan (incorporated by reference to Exhibit 4.01 to the Company’s Registration Statement on Form S-8, filed with the Securities and Exchange Commission on November 24, 1999, Registration No. 333-91613)

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Exhibit No.	Document
10.21^	Employment Agreement effective as of May 1, 2002 between the Company and David C. Swanson (incorporated by reference to Exhibit 10.29 to the Company’s Quarterly Report on Form 10-Q for the three and six months ended September 30, 2002, filed with the Securities and Exchange Commission on August 14, 2002, Commission File No. 001-07155)
10.22^	Employment Agreement effective September 21, 2002 between the Company and Peter J. McDonald (incorporated by reference to Exhibit 10.30 to the Quarterly Report on Form 10-Q for the nine months ended September 30, 2002, filed with the Securities and Exchange Commission on November 12, 2002, Commission File No. 001-07155)
10.23^	Employment Agreement effective March 1, 2002 between the Company and Steven M. Blondy (incorporated by reference to Exhibit 10.30 to the Company’s Quarterly Report on Form 10-Q for the three and six months ended June 30, 2002, filed with the Securities and Exchange Commission on August 14, 2002, Commission File No. 001-07155)
10.24^	Employment Agreement dated as of January 1, 2001 between the Company and Robert J. Bush (incorporated by reference to Exhibit 10.37 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2000, filed with the Securities and Exchange Commission on March 28, 2001, Commission File No. 001-07155)
10.25^	Amendment No. 1 to Employment Agreement dated as of February 27, 2001 between the Company and Robert J. Bush (incorporated by reference to Exhibit 10.38 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2000, filed with the Securities and Exchange Commission on March 28, 2001, Commission File No. 001-07155)
10.26	Letter Agreement, dated as of November 25, 2002, among the Company, R.H. Donnelley Inc. and investment partnerships affiliated with The Goldman Sachs Group, Inc (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, filed with the Securities and Exchange Commission on December 3, 2002, Commission File No. 001-07155)
10.27	Letter Agreement dated as of January 3, 2003 among the Company, R.H. Donnelley Inc. and investment partnerships affiliated with The Goldman Sachs Group, Inc (incorporated by reference to Exhibit 10.8 to the Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 17, 2003, Commission File No. 001-07155)
10.28	Letter Agreement, dated as of July 22, 2003 among the Company and investment partnerships affiliated with The Goldman Sachs Group, Inc. (incorporated by reference to Exhibit 10.45 to the Company’s Quarterly Report on Form 10-Q for the three and six months ended September 30, 2003, filed with the Securities and Exchange Commission on August 13, 2003, Commission File No. 001-07155)
10.29#	Directory Services License Agreement, dated as of January 3, 2003, by and among R.H. Donnelley Publishing & Advertising, Inc. (f/k/a Sprint Publishing & Advertising, Inc.), CenDon L.L.C., R.H. Donnelley Directory Company (f/k/a Centel Directory Company), Sprint Corporation, Sprint Directory Trademark Company, LLC and the Sprint Local Telecommunications Division (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 17, 2003, Commission File No. 001-07155)

64

Exhibit No.	Document
10.30#	Trademark License Agreement, dated as of January 3, 2003, by and among Sprint Directory Trademark Company, LLC, R.H. Donnelley Publishing & Advertising, Inc. (f/k/a Sprint Publishing & Advertising, Inc.), CenDon L.L.C. and R.H. Donnelley Directory Company (f/k/a Centel Directory Company) (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 17, 2003, Commission File No. 001-07155)
10.31#	Publisher Trademark License Agreement, dated as of January 3, 2003, by and among R.H. Donnelley Publishing & Advertising, Inc. (f/k/a Sprint Publishing & Advertising, Inc.), R.H. Donnelley Directory Company (f/k/a Centel Directory Company) and Sprint Corporation (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 17, 2003, Commission File No. 001-07155)
10.32	Non-Competition Agreement, dated as of January 3, 2003, by and among the Company, R.H. Donnelley Publishing & Advertising, Inc. (f/k/a Sprint Publishing & Advertising, Inc.), CenDon L.L.C., R.H. Donnelley Directory Company (f/k/a Centel Directory Company), Sprint Corporation and the Sprint Local Telecommunications Division (incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 17, 2003, Commission File No. 001-07155)
10.33	Subscriber Listings Agreement, dated as of January 3, 2003, by and among R.H. Donnelley Publishing & Advertising, Inc. (f/k/a Sprint Publishing & Advertising, Inc.), CenDon L.L.C., R.H. Donnelley Directory Company (f/k/a Centel Directory Company), Sprint Corporation and the Sprint Local Telecommunications Division (incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 17, 2003, Commission File No. 001-07155)
10.34#	Directory Services License Agreement, dated as of September 1, 2004, among R.H. Donnelley Corporation, R.H. Donnelley Publishing & Advertising of Illinois Partnership (formerly known as The APIL Partners Partnership), DonTech II Partnership, Ameritech Corporation, SBC Directory Operations, Inc. and SBC Knowledge Ventures, L.P. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on September 3, 2004, Commission File No. 001-07155)
10.35	Non-Competition Agreement, dated as of September 1, 2004, between R.H. Donnelley Corporation and SBC Communications, Inc. (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on September 3, 2004, Commission File No. 001-07155)
10.36	SMARTpages Reseller Agreement, dated as of September 1, 2004, among SBC Communications, Inc., Southwestern Bell Yellow Pages, Inc., SBC Knowledge Ventures, L.P., R.H. Donnelley Corporation, R.H. Donnelley Publishing & Advertising of Illinois Partnership (formerly known as The APIL Partners Partnership) and DonTech II Partnership (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on September 3, 2004, Commission File No. 001-07155)
10.37	Ameritech Directory Publishing Listing License Agreement, dated as of September 1, 2004, among R.H. Donnelley Publishing & Advertising of Illinois Partnership (formerly known as The APIL Partners Partnership), DonTech II Partnership and Ameritech Services Inc. (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on September 3, 2004, Commission File No. 001-07155)

65

Exhibit No.	Document
10.38#	Credit Agreement, dated as of December 6, 2002, among the Company, R.H. Donnelley Inc., R.H. Donnelley Finance Corporation II (subsequently merged with and into R.H. Donnelley Inc.), the several lenders from time to time party thereto, Bear Stearns Corporate Lending Inc. and Citicorp North America, Inc., as joint syndication agents, BNP Paribas and Fleet National Bank, as joint documentation agents, Deutsche Bank Trust Company Americas, as administrative agent, and Deutsche Bank Securities Inc., Salomon Smith Barney Inc. and Bear, Stearns & Co. Inc., as joint lead arrangers and joint book runners (incorporated by reference to Exhibit 10.10 to the Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 17, 2003, Commission File No. 001-07155)
10.39	First Amendment, dated as of December 5, 2003, among the Company, R.H. Donnelley Inc., the financial institutions parties thereto, Deutsche Bank Securities Inc., CitiGroup Global Markets Inc. and Bear, Stearns & Co. Inc., as joint lead arrangers and joint book runners, Bear Stearns Corporate Lending Inc. and Citicorp North America, Inc., as joint syndication agents, BNP Paribas and Fleet National Bank, as documentation agents, and Deutsche Bank Trust Company Americas, as administrative agent, to the Credit Agreement, dated as of December 6, 2002 (incorporated by reference to Exhibit 99.1 to the Current Report on Form 8-K, filed with the Securities and Exchange Commission on February 26, 2004, Commission File No. 001-07155)
10.40#	Amended and Restated Credit Agreement, dated as of September 1, 2004, by and among, R.H. Donnelley Inc., as borrower, R.H. Donnelley Corporation, the lenders from time to time parties thereto, J.P. Morgan Securities Inc. and Bear, Stearns & Co. Inc., as joint lead arrangers and joint bookrunners, JPMorgan Chase Bank and Bear Stearns Corporate Lending Inc., as co-syndication agents, Citicorp North America, Inc. and Goldman Sachs Credit Partners L.P., as co-documentation agents, and Deutsche Bank Trust Company Americas, as administrative agent (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on September 3, 2004, Commission File No. 001-07155)
10.41	First Amendment, dated as of December 6, 2004, to the Amended and Restated Credit Agreement, dated as of September 1, 2004, by and among R.H. Donnelley Corporation, R.H. Donnelley Inc., the lenders from time to time parties thereto, Deutsche Bank Trust Company Americas, as administrative agent and J.P. Morgan Securities Inc. as sole bookrunner and sole lead arranger and the other agents party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on December 8, 2004, Commission File No. 001-07155)
10.42	Second Amendment, dated as of January 7, 2005, to the Amended and Restated Credit Agreement, dated as of September 1, 2004, by and among R.H. Donnelley Corporation, R.H. Donnelley Inc., the lenders from time to time parties thereto, Deutsche Bank Trust Company Americas, as administrative agent and the other agents party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 11, 2005, Commission File No. 001-07155)

66

Exhibit No.	Document
10.43	Amended and Restated Guaranty and Collateral Agreement, dated as of September 1, 2004, by and among R.H. Donnelley Corporation, R.H. Donnelley Inc., R.H. Donnelley APIL, Inc., R.H. Donnelley Publishing & Advertising, Inc., Get Digital Smart.com Inc., R.H. Donnelley Publishing & Advertising of Illinois Partnership, DonTech II Partnership, DonTech Holdings, LLC, and R.H. Donnelley Publishing & Advertising of Illinois Holdings, LLC (incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on September 3, 2004, Commission File No. 001-07155)
10.44	Reaffirmation, dated as of December 6, 2004, by R.H. Donnelley Corporation, R.H. Donnelley Inc. and its subsidiaries in favor of Deutsche Bank Trust Company Americas, as administrative agent (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on December 8, 2004, Commission File No. 001-07155)
10.45#	Closing Agreement dated as of December 13, 2004 by and between the Company and the Commissioner of the Internal Revenue Service (incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on December 16, 2004, Commission File No. 001-07155)
10.46	Closing Agreement dated as of July 21, 2005 by and between the Company and the Commissioner of the Internal Revenue Service (incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on August 3, 2005, Commission File No. 001-07155)
10.47#	Stock Purchase Agreement dated as of January 10, 2005, by and among R.H. Donnelley Corporation and certain investment partnerships affiliated with The Goldman Sachs Group, Inc. (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 11, 2005, Commission File No. 001-07155)
10.48	Registration Rights Agreement, dated as of January 14, 2005, among R.H. Donnelley Corporation and the initial purchasers that are party thereto (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 19, 2005, Commission File No. 001-07155)
14*	R.H. Donnelley Policy on Business Conduct
21	Subsidiaries of the Company (incorporated by reference to Exhibit 21 to the Company’s Quarterly Report on Form 10-Q for the three month period ended September 30, 2004, filed with the Securities and Exchange Commission on November 9, 2004, Commission File No. 001-07155)
31.1*	Certification of Quarterly Report on Form 10-Q for the period ended June 30, 2005 by David C. Swanson, Chief Executive Officer of R.H. Donnelley Corporation under Section 302 of the Sarbanes-Oxley Act
31.2*	Certification of Quarterly Report on Form 10-Q for the period ended June 30, 2005 by Steven M. Blondy, Senior Vice President and Chief Financial Officer R.H. Donnelley Corporation under Section 302 of the Sarbanes-Oxley Act
31.3*	Certification of Quarterly Report on Form 10-Q for the period ended June 30, 2005 by David C. Swanson, Chief Executive Officer for R.H. Donnelley Inc. under Section 302 of the Sarbanes-Oxley Act

67

Exhibit No.	Document
31.4*	Certification of Quarterly Report on Form 10-Q for the period ended June 30, 2005 by Steven M. Blondy, Senior Vice President and Chief Financial Officer for R.H. Donnelley Inc. under Section 302 of the Sarbanes-Oxley Act
32.1*	Certification of Quarterly Report on Form 10-Q for the period ended June 30, 2005 under Section 906 of the Sarbanes-Oxley Act by David C. Swanson, Chief Executive Officer, and Steven M. Blondy, Senior Vice President and Chief Financial Officer, for R.H. Donnelley Corporation
32.2*	Certification of Quarterly Report on Form 10-Q for the period ended June 30, 2005 under Section 906 of the Sarbanes-Oxley Act by David C. Swanson, Chief Executive Officer, and Steven M. Blondy, Senior Vice President and Chief Financial Officer, for R.H. Donnelley Inc.

*	Filed herewith
^	Management contract or compensatory plan
#	The Company agrees to furnish supplementally a copy of any omitted exhibits or schedules to the Securities and Exchange Commission upon request.

68

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: August 5, 2005	By:	/s/ Steven M. Blondy
		Steven M. Blondy
		Senior Vice President and Chief Financial Officer
		(Principal Financial Officer)
Date: August 5, 2005	By:	/s/ Robert A. Gross
		Robert A. Gross
		Vice President and Controller
		(Principal Accounting Officer)

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: August 5, 2005	By:	/s/ Steven M. Blondy
		Steven M. Blondy
		Senior Vice President and Chief Financial Officer
		(Principal Financial Officer)
Date: August 5, 2005	By:	/s/ Robert A. Gross
		Robert A. Gross
		Vice President and Controller
		(Principal Accounting Officer)

69

Exhibit Index

Exhibit No.	Document
10.15*	2005 Stock Award and Incentive Plan
10.16*	Form of Non-Qualified Stock Option Agreement under 2005 Plan
10.17*	Form of Annual Incentive Program Award under 2005 Plan
10.19*	Form of Stock Appreciation Rights Agreement under 2005 Plan
14*	R.H. Donnelley Policy on Business Conduct
31.1*	Certification of Quarterly Report on Form 10-Q for the period ended June 30, 2005 by David C. Swanson, Chief Executive Officer of R.H. Donnelley Corporation under Section 302 of the Sarbanes-Oxley Act
31.2*	Certification of Quarterly Report on Form 10-Q for the period ended June 30, 2005 by Steven M. Blondy, Senior Vice President and Chief Financial Officer R.H. Donnelley Corporation under Section 302 of the Sarbanes-Oxley Act
31.3*	Certification of Quarterly Report on Form 10-Q for the period ended June 30, 2005 by David C. Swanson, Chief Executive Officer for R.H. Donnelley Inc. under Section 302 of the Sarbanes-Oxley Act
31.4*	Certification of Quarterly Report on Form 10-Q for the period ended June 30, 2005 by Steven M. Blondy, Senior Vice President and Chief Financial Officer for R.H. Donnelley Inc. under Section 302 of the Sarbanes-Oxley Act
32.1*	Certification of Quarterly Report on Form 10-Q for the period ended June 30, 2005 under Section 906 of the Sarbanes-Oxley Act by David C. Swanson, Chief Executive Officer, and Steven M. Blondy, Senior Vice President and Chief Financial Officer, for R.H. Donnelley Corporation
32.2*	Certification of Quarterly Report on Form 10-Q for the period ended June 30, 2005 under Section 906 of the Sarbanes-Oxley Act by David C. Swanson, Chief Executive Officer, and Steven M. Blondy, Senior Vice President and Chief Financial Officer, for R.H. Donnelley Inc.

* Filed herewith

70

EX-10.15

Exhibit 10.15

R.H. DONNELLEY CORPORATION

2005 STOCK AWARD AND INCENTIVE PLAN

R.H. DONNELLEY CORPORATION

2005 STOCK AWARD AND INCENTIVE PLAN

		Page
1.	Purpose		1
2.	Definitions		1
3.	Administration		4
4.	Stock Subject to Plan		5
5.	Eligibility; Per-Person Award Limitations		7
6.	Specific Terms of Awards		7
7.	Performance Awards, Including Annual Incentive Awards		11
8.	Nonemployee Director Awards		14
9.	Certain Provisions Applicable to Awards		21
10.	Change of Control		22
11.	Additional Award Forfeiture Provisions		25
12.	General Provisions		27

2

R.H. DONNELLEY CORPORATION
2005 STOCK AWARD AND INCENTIVE PLAN

     1. Purpose. The purpose of this 2005 Stock Award and Incentive Plan (the “Plan”) is to aid R.H. Donnelley Corporation, a Delaware corporation (together with its successors and assigns, the “Company”), in attracting, retaining, motivating and rewarding employees and non-employee directors of the Company or its subsidiaries or affiliates, to provide for equitable and competitive compensation opportunities, to recognize individual contributions and reward achievement of Company goals, and promote the creation of long-term value for stockholders by closely aligning the interests of Participants with those of stockholders. The Plan authorizes stock-based and cash-based incentives for Participants.

     2. Definitions. In addition to the terms defined in Section 1 above and elsewhere in the Plan, the following capitalized terms used in the Plan have the respective meanings set forth in this Section:

     (a) “Annual Incentive Award” means a type of Performance Award granted to a Participant under Section 7(c) representing a conditional right to receive cash, Stock or other Awards or payments, as determined by the Committee, based on performance in a performance period of one fiscal year or a portion thereof.

     (b) “Annual Limit” shall have the meaning specified in Section 5(b).

     (c) “Award” means any Option, SAR, Restricted Stock, Deferred Stock, Stock granted as a bonus or in lieu of another award, Dividend Equivalent, Other Stock-Based Award, Performance Award or Annual Incentive Award, together with any related right or interest, granted to a Participant under the Plan.

     (d) “Beneficiary” means the legal representatives of the Participant’s estate entitled by will or the laws of descent and distribution to receive the benefits under a Participant’s Award upon a Participant’s death, provided that, if and to the extent authorized by the Committee, a Participant may be permitted to designate a Beneficiary, in which case the “Beneficiary” instead will be the person, persons, trust or trusts (if any are then surviving) which have been designated by the Participant in his or her most recent written and duly filed beneficiary designation to receive the benefits specified under the Participant’s Award upon such Participant’s death. Unless otherwise determined by the Committee, any designation of a Beneficiary other than a Participant’s spouse shall be subject to the written consent of such spouse.

     (e) “Board” means the Company’s Board of Directors.

     (f) “Cause” shall have the meaning defined in any employment agreement or severance agreement between the Participant and the Company or a subsidiary or affiliate then in effect or, if no such 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 subsidiaries or affiliates; (iii) an act that constitutes misconduct resulting in a restatement of the Company’s financial statements due to material non-compliance with any financial reporting requirement within the meaning of Section 304 of The Sarbanes-Oxley Act of 2002; or (iv) 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 or affiliate conducts business which materially impairs the value of the Participant’s service to the Company or any of its subsidiaries or affiliates; 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.

     (g) “Change in Control” and related terms have the meanings specified in Section 10.

     (h) “Code” means the Internal Revenue Code of 1986, as amended. References to any provision of the Code or regulation thereunder shall include any successor provisions and regulations, and reference to regulations includes any applicable guidance or pronouncement of the Department of the Treasury and Internal Revenue Service.

     (i) “Committee” means the Compensation and Benefits Committee of the Board, the composition and governance of which is established in the Committee’s Charter as approved from time to time by the Board and subject to Section 303A.05 of the Listed Company Manual of the New York Stock Exchange, and other corporate governance documents of the Company. No action of the Committee shall be void or deemed to be without authority due to the failure of any member, at the time the action was taken, to meet any qualification standard set forth in the Committee Charter or this Plan. The full Board may perform any function of the Committee hereunder except to the extent limited under Section 303A.05 of the Listed Company Manual, in which case the term “Committee” shall refer to the Board.

     (j) “Covered Employee” means an Eligible Person who is a Covered Employee as specified in Section 12(j).

     (k) “Deferral Account” means the account established and maintained by the Company for Deferred Stock and/or deferred cash credited under Section 8. A Deferral Account shall include one or more subaccounts, including a Deferred Stock Account for forfeitable Deferred Stock under Section 8(c), a Deferred Stock Account for shares of Deferred Stock that have become nonforfeitable under Section 8(c) or that are at all times nonforfeitable under Section 8(e)(iii), and a Deferred Cash Account described in Section 8(e)(iv). The Deferral Account and subaccounts, and Deferred Stock and deferred cash credited thereto, will be maintained solely as bookkeeping entries by the Company to evidence unfunded obligations of the Company.

     (l) “Deferred Stock” means a right, granted under this Plan, to receive Stock or other Awards or a combination thereof at the end of a specified deferral period.

     (m) “Disability” means, with respect to a non-employee director, termination of service as a director of the Company due to a physical or mental incapacity of long duration which renders the Participant unable to perform the duties of a director of the Company.

     (n) “Dividend Equivalent” means a right, granted under this Plan, to receive cash, Stock, other Awards or other property equal in value to all or a specified portion of the dividends paid with respect to a specified number of shares of Stock.

     (o) “Effective Date” means the effective date specified in Section 12(p).

     (p) “Eligible Person” has the meaning specified in Section 5(a).

     (q) “Exchange Act” means the Securities Exchange Act of 1934, as amended. References to any provision of the Exchange Act or rule (including a proposed rule) thereunder shall include any successor provisions and rules.

2

     (r) “Fair Market Value” means the fair market value of Stock, Awards or other property as determined in good faith by the Committee or under procedures established by the Committee. Unless otherwise determined by the Committee, the Fair Market Value of Stock shall be the average of the high and low sales prices per share of Stock reported on a consolidated basis for securities listed on the principal stock exchange or market on which Stock is traded on the day immediately preceding the day as of which such value is being determined or, if there is no sale on that day, then on the last previous day on which a sale was reported. Fair Market Value relating to the exercise price or base price of any Non-409A Option or SAR shall conform to requirements under Code Section 409A.

     (s) “409A Awards” means Awards that constitute a deferral of compensation under Code Section 409A and regulations thereunder. “Non-409A Awards” means Awards other than 409A Awards. Although the Committee retains authority under the Plan to grant Options, SARs and Restricted Stock on terms that will qualify those Awards as 409A Awards, Options, SARs exercisable for Stock, and Restricted Stock will be Non-409A Awards unless otherwise expressly specified by the Committee.

     (t) “Full-Value Award” means Awards relating to Stock other than (i) Options and SARs that are treated as exercisable solely for Stock under applicable accounting rules and (ii) Awards for which the Participant pays the intrinsic value directly or by forgoing a right to receive a cash payment from the Company; provided, however, that the Committee may designate any Option or SAR (including those previously granted but excluding any ISO) as “Full-Value Awards” for purposes of the Plan. References to a “Full-Value Award” under a Preexisting Plan mean an award of a type that would be a Full-Value Award if granted under the Plan.

     (u) “Incentive Stock Option” or “ISO” means any Option designated as an incentive stock option within the meaning of Code Section 422 and qualifying thereunder.

     (v) “Option” means a right, granted under this Plan, to purchase Stock.

     (w) “Option Valuation Methodology” means the method for determining the number of shares to be subject to Options, and the exercise price thereof, granted in payment of Retainer Fees under Section 8(e)(ii).

     (x) “Other Director Compensation” means fees payable to a director in his or her capacity as such, other than Retainer Fees, for attending meetings and other service on the Board and Board committees or otherwise.

     (y) “Other Stock-Based Awards” means Awards granted to a Participant under Section 6(h).

     (z) “Participant” means a person who has been granted an Award under the Plan which remains outstanding, including a person who is no longer an Eligible Person.

     (aa) “Performance Award” means a conditional right, granted to a Participant under Sections 6(i) and 7, to receive cash, Stock or other Awards or payments.

     (bb) “Plan Year” means, with respect to a non-employee director, the period commencing at the time of election of the director at an annual meeting of shareholders (or the election of a class of directors if the Company then has a classified Board of Directors), or the director’s initial appointment to the Board if not at an annual meeting of shareholders, and continuing until the close of business of the day preceding the next annual meeting of shareholders.

3

     (cc) “Preexisting Plans” means each of the following Company plans: The 2001 Stock Award and Incentive Plan, the 1991 Key Employees’ Stock Option Plan, as amended and restated; the Key Employees’ Performance Unit Plan, as amended and restated; and the 1998 Directors’ Stock Plan, as amended and restated.

     (dd) “Restricted Stock” means Stock granted under this Plan which is subject to certain restrictions and to a risk of forfeiture.

     (ee) “Retainer Fees” means annual Board and chair retainer fees payable to a director in his or her capacity as such for service on the Board and Board committees.

     (ff) “Retirement” means, with respect to a non-employee director, termination of service as a director of the Company at or after age 65.

     (gg) “Rule 16b-3” means Rule 16b-3, as from time to time in effect and applicable to Participants, promulgated by the Securities and Exchange Commission under Section 16 of the Exchange Act.

     (hh) “Stock” means the Company’s Common Stock, par value $1.00 per share, and any other equity securities of the Company that may be substituted or resubstituted for Stock pursuant to Section 12(c).

     (ii) “Stock Appreciation Rights” or “SAR” means a right granted to a Participant under Section 6(c).

     (jj) “Valuation Date” shall mean the close of business on the last business day of each calendar quarter and, in the case of any final distribution from a Participant’s Deferred Cash Account (described in Section 8(f)(ii)), the day preceding such distribution.

     3. Administration.

     (a) Authority of the Committee. The Plan shall be administered by the Committee, which shall have full and final authority, in each case subject to and consistent with the provisions of the Plan, to select Eligible Persons to become Participants; to grant Awards; to determine the type and number of Awards, the dates on which Awards may be exercised and on which the risk of forfeiture or deferral period relating to Awards shall lapse or terminate, the acceleration of any such dates, the expiration date of any Award, whether, to what extent, and under what circumstances an Award may be settled, or the exercise price of an Award may be paid, in cash, Stock, other Awards, or other property, and other terms and conditions of, and all other matters relating to, Awards; to prescribe documents evidencing or setting terms of Awards (such Award documents need not be identical for each Participant), amendments thereto, and rules and regulations for the administration of the Plan and amendments thereto; to construe and interpret the Plan and Award documents and correct defects, supply omissions or reconcile inconsistencies therein; and to make all other decisions and determinations as the Committee may deem necessary or advisable for the administration of the Plan. Decisions of the Committee with respect to the administration and interpretation of the Plan shall be final, conclusive, and binding upon all persons interested in the Plan, including Participants, Beneficiaries, transferees under Section 12(b) and other persons claiming rights from or through a Participant, and stockholders. The foregoing notwithstanding, the Board shall perform the functions of the Committee for purposes of granting Awards under the Plan to non-employee directors (the functions of the Committee with respect to other aspects of non-employee director awards is not exclusive to the Board, however).

4

     (b) Manner of Exercise of Committee Authority. The express grant of any specific power to the Committee, and the taking of any action by the Committee, shall not be construed as limiting any power or authority of the Committee. The Committee may act through subcommittees, including for purposes of perfecting exemptions under Rule 16b-3 or qualifying Awards under Code Section 162(m) as performance-based compensation, in which case the subcommittee shall be subject to and have authority under the charter applicable to the Committee, and the acts of the subcommittee shall be deemed to be acts of the Committee hereunder. The Committee may delegate to officers or managers of the Company or any subsidiary or affiliate, or committees thereof, the authority, subject to such terms as the Committee shall determine, to perform such functions, including administrative functions, as the Committee may determine, to the extent (i) that such delegation will not result in the loss of an exemption under Rule 16b-3(d) for Awards granted to Participants subject to Section 16 of the Exchange Act in respect of the Company and will not cause Awards intended to qualify as “performance-based compensation” under Code Section 162(m) to fail to so qualify, and (ii) permitted under Section 157 and other applicable provisions of the Delaware General Corporation Law.

     (c) Limitation of Liability. The Committee and each member thereof, and any person acting pursuant to authority delegated by the Committee, shall be entitled, in good faith, to rely or act upon any report or other information furnished by any executive officer, other officer or employee of the Company or a subsidiary or affiliate, the Company’s independent auditors, consultants or any other agents assisting in the administration of the Plan. Members of the Committee, any person acting pursuant to authority delegated by the Committee, and any officer or employee of the Company or a subsidiary or affiliate acting at the direction or on behalf of the Committee or a delegee shall not be personally liable for any action or determination taken or made in good faith with respect to the Plan, and shall, to the extent permitted by law, be fully indemnified and protected by the Company with respect to any such action or determination.

     4. Stock Subject To Plan.

     (a) Overall Number of Shares Available for Delivery. The total number of shares of Stock reserved and available for delivery in connection with Awards under the Plan shall be (i) five million shares, plus (ii) the number of shares that, immediately prior to the Effective Date, remain available for new awards under the 2001 Stock Award and Incentive Plan plus (iii) the number of shares subject to awards under the Preexisting Plans which become available in accordance with Section 4(b) after the Effective Date; provided, however, that the total number of shares with respect to which ISOs may be granted shall not exceed the number specified under clause (i) above. The shares available under this Section 4(a) shall consist of two designated “share pools,” of which one (“Pool 1”) shall be available for Full-Value Awards and the other (“Pool 2”) shall be available for Awards relating to Stock that are not Full-Value Awards. Pool 1 shall consist of 3.75 million shares plus shares added to Pool 1 under clause (iii) above, and Pool 2 shall consist of all other shares available under the Plan; provided, however, that the Committee may increase Pool 1 above its existing limit by reducing the shares available in Pool 2 by four shares for each share added to Pool 1 (which shall have the net effect of reducing the total number of shares available under the Plan). The total number of shares available and the shares designated for Pool 1 and Pool 2 are subject to adjustment as provided in Section 12(c). Any shares of Stock delivered under the Plan shall consist of authorized and unissued shares or treasury shares.

     (b) Share Counting Rules. The Committee may adopt reasonable counting procedures to ensure appropriate counting, avoid double counting (as, for example, in the case of tandem or substitute awards) and make adjustments in accordance with this Section 4(b). For purposes of Pool 1, shares shall be counted against those reserved to the extent such shares have been delivered and are no longer subject to a risk of forfeiture. Accordingly, (i) to the extent that a Full-Value Award under the Plan or a Preexisting Plan is canceled, expired, forfeited,

5

settled in cash, settled by issuance of fewer shares than the number underlying the award, or otherwise terminated without delivery of shares to the Participant, the shares retained by or returned to the Company will be available under the Plan and Pool 1; and (ii) shares that are withheld from such an award or separately surrendered by the Participant in payment of the exercise price or taxes relating to such an award shall be deemed to constitute shares not delivered to the Participant and will be available under the Plan and Pool 1. The Committee may determine that Full-Value Awards may be outstanding that relate to more shares than the aggregate remaining available under Pool 1 so long as such Awards will not in fact result in delivery and vesting of shares in excess of the number then available under Pool 1. For purposes of Pool 2, shares shall be counted against those reserved to the full extent of the shares underlying the non-Full-Value Award under the Plan or a Preexisting Plan, except that, to the extent such a non-Full-Value Award expires or is forfeited, the shares retained by the Company will be available again under the Plan and Pool 2. In addition, in the case of any Award granted in assumption of or in substitution for an award of a company or business acquired by the Company or a subsidiary or affiliate or with which the Company or a subsidiary or affiliate combines, shares issued or issuable in connection with such substitute Award shall not be counted against the number of shares reserved under the Plan.

     (c) Run Rate Limitation in 2005-2007. During the three fiscal years beginning with 2005, the “run rate” for equity-related awards shall not exceed 2.34% per year as an average over the three-year period. For this purpose, the “run rate” is determined as (i) the number of shares of Stock underlying Options, SARs, and similar awards for which the Participant pays the intrinsic value directly or by forgoing a right to receive a cash payment from the Company plus four times the number of shares underlying other equity-related awards (including Restricted Stock and Deferred Stock) divided by (ii) the number of shares outstanding at the beginning of the fiscal year. “Equity-related awards” means awards that can result in the delivery of shares of Stock under the Plan and any other Company “equity compensation plan” as such term is defined in Section 303A.08 of the New York Stock Exchange Listed Company Manual, excluding plans assumed in acquisitions, qualified employee stock purchase plans, and plans qualified under Section 401 of the Code.

     5. Eligibility; Per-Person Award Limitations.

     (a) Eligibility. Awards may be granted under the Plan only to Eligible Persons. For purposes of the Plan, an “Eligible Person” means an employee of the Company or any subsidiary or affiliate, including any executive officer or non-employee director of the Company or a subsidiary or affiliate, and any person who has been offered employment by the Company or a subsidiary or affiliate, provided that such prospective employee may not receive any payment or exercise any right relating to an Award until such person has commenced employment with the Company or a subsidiary or affiliate. An employee on leave of absence may be considered as still in the employ of the Company or a subsidiary or affiliate for purposes of eligibility for participation in the Plan. For purposes of the Plan, a joint venture in which the Company or a subsidiary has a substantial direct or indirect equity investment shall be deemed an affiliate, if so determined by the Committee. Holders of awards granted by a company or business acquired by the Company or a subsidiary or affiliate, or with which the Company or a subsidiary or affiliate combines, are eligible for grants of substitute awards granted in assumption of or in substitution for such outstanding awards previously granted under the Plan in connection with such acquisition or combination transaction.

     (b) Per-Person Award Limitations. In each calendar year during any part of which the Plan is in effect, an Eligible Person may be granted Awards intended to qualify as “performance-based compensation” under Code Section 162(m) under each of Section 6(b), 6(c), 6(d), 6(e), 6(f), 6(g) or 6(h) relating to up to his or her Annual Limit (such Annual Limit to apply separately to the type of Award authorized under each specified subsection, except that the limitation applies to Dividend Equivalents under Section 6(g) only if such Dividend Equivalents

6

are granted separately from and not as a feature of another Award). A Participant’s Annual Limit, in any year during any part of which the Participant is then eligible under the Plan, shall equal one million shares plus the amount of the Participant’s unused Annual Limit relating to the same type of Award as of the close of the previous year, subject to adjustment as provided in Section 12(c). In the case of an Award which is not valued in a way in which the limitation set forth in the preceding sentence would operate as an effective limitation satisfying applicable law (including Treasury Regulation 1.162-27(e)(4)), an Eligible Person may not be granted Awards authorizing the earning during any calendar year of an amount that exceeds the Eligible Person’s Annual Limit, which for this purpose shall equal $5 million plus the amount of the Eligible Person’s unused cash Annual Limit as of the close of the previous year (this limitation is separate and not affected by the number of Awards granted during such calendar year subject to the limitation in the preceding sentence). For this purpose, (i) “earning” means satisfying performance conditions so that an amount becomes payable, without regard to whether it is to be paid currently or on a deferred basis or continues to be subject to any service requirement or other non-performance condition, and (ii) a Participant’s Annual Limit is used to the extent an amount or number of shares may be potentially earned or paid under an Award, regardless of whether such amount or shares are in fact earned or paid.

     6. Specific Terms Of Awards.

     (a) General. Awards may be granted on the terms and conditions set forth in this Section 6. In addition, the Committee may impose on any Award or the exercise thereof, at the date of grant or thereafter (subject to Sections 12(e) and 12(k)), such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall determine, including terms requiring forfeiture of Awards in the event of termination of employment or service by the Participant, terms requiring forfeiture of Awards and gains realized upon exercise, vesting or settlement of Awards in cases in which the Participant engages in conduct harmful to the Company, and terms permitting a Participant to make elections relating to his or her Award. The Committee shall retain full power and discretion with respect to any term or condition of an Award that is not mandatory under the Plan, subject to Section 12(k). The Committee shall require the payment of lawful consideration for an Award to the extent necessary to satisfy the requirements of the Delaware General Corporation Law, and may otherwise require payment of consideration for an Award except as limited by the Plan.

     (b) Options. The Committee is authorized to grant Options to Participants on the following terms and conditions:

(i)

Exercise Price. The exercise price per share of Stock purchasable under an Option (including both ISOs and non-qualified Options) shall be determined by the Committee, provided that such exercise price shall be not less than the Fair Market Value of a share of Stock on the date of grant of such Option, subject to Section 9(a). Notwithstanding the foregoing, any substitute award granted in assumption of or in substitution for an outstanding award granted by a company or business acquired by the Company or a subsidiary or affiliate, or with which the Company or a subsidiary or affiliate combines may be granted with an exercise price per share of Stock other than as required above.

(ii)

Option Term; Time and Method of Exercise. The Committee shall determine the term of each Option, provided that in no event shall the term of any Option exceed a period of ten years from the date of grant. The Committee shall determine the time or times at which or the circumstances under which an Option may be exercised in whole or in part (including based on achievement of performance goals and/or future service requirements), the methods by which such exercise price may be paid or deemed to be paid and the form of such payment (subject to Section 12(k)), including, without limitation, cash, Stock

7

(including by withholding Stock deliverable upon exercise, if such withholding or withholding feature will not result in additional accounting expense to the Company), other Awards or awards granted under other plans of the Company or any subsidiary or affiliate, or other property (including through broker-assisted “cashless exercise” arrangements, to the extent permitted by applicable law), and the methods by or forms in which Stock will be delivered or deemed to be delivered in satisfaction of Options to Participants (including, in the case of 409A Awards, deferred delivery of shares subject to the Option, as mandated by the Committee, with such deferred shares subject to any vesting, forfeiture or other terms as the Committee may specify).

(iii)

ISOs. The terms of any ISO granted under the Plan shall comply in all respects with the provisions of Code Section 422.

      (c) Stock Appreciation Rights. The Committee is authorized to grant SAR’s to Participants on the following terms and conditions:

(i)

Right to Payment. An SAR shall confer on the Participant to whom it is granted a right to receive, upon exercise thereof, the excess of (A) the Fair Market Value of one share of Stock on the date of exercise (or, in the case of a “Limited SAR,” the Fair Market Value determined by reference to the Change in Control Price, as defined under Section 10(e) hereof) over (B) the grant price of the SAR, which shall be determined by the Committee but which in any event shall be not less than the Fair Market Value of a share of Stock on the date of grant of the SAR, subject to Section 9(a).

(ii)

Other Terms. The Committee shall determine the term of each SAR, provided that in no event shall the term of an SAR exceed a period of ten years from the date of grant. The Committee shall determine at the date of grant or thereafter, the time or times at which and the circumstances under which a SAR may be exercised in whole or in part (including based on achievement of performance goals and/or future service requirements), the method of exercise, method of settlement, form of consideration payable in settlement, method by or forms in which Stock will be delivered or deemed to be delivered to Participants, whether or not a SAR shall be free-standing or in tandem or combination with any other Award, and whether or not the SAR will be a 409A Award or Non-409A Award (cash SARs will in all cases be 409A Awards). Limited SARs that may only be exercised in connection with a Change in Control or termination of service following a Change in Control as specified by the Committee may be granted on such terms, not inconsistent with this Section 6(c), as the Committee may determine. The Committee may require that an outstanding Option be exchanged for an SAR exercisable for Stock having vesting, expiration, and other terms substantially the same as the Option, so long as such exchange will not result in additional accounting expense to the Company.

      (d) Restricted Stock. The Committee is authorized to grant Restricted Stock to Participants on the following terms and conditions:

(i) Grant and Restrictions. Restricted Stock shall be subject to such restrictions on transferability, risk of forfeiture and other restrictions, if any, as the Committee may impose, which restrictions may lapse separately or in combination at such times, under such circumstances (including based on achievement of performance goals and/or future service requirements), in such installments or otherwise and under such other circumstances as the Committee may determine at the date of grant or thereafter. Except to the extent restricted under the terms

8

	of the Plan and any Award document relating to the Restricted Stock, a Participant granted Restricted Stock shall have all of the rights of a stockholder, including the right to vote the Restricted Stock and the right to receive dividends thereon (subject to any mandatory reinvestment or other requirement imposed by the Committee).
(ii)	Forfeiture. Except as otherwise determined by the Committee, upon termination of employment or service during the applicable restriction period, Restricted Stock that is at that time subject to restrictions shall be forfeited and reacquired by the Company; provided that the Committee may provide, by rule or regulation or in any Award document, or may determine in any individual case, that restrictions or forfeiture conditions relating to Restricted Stock will lapse in whole or in part, including in the event of terminations resulting from specified causes.
(iii)	Certificates for Stock. Restricted Stock granted under the Plan may be evidenced in such manner as the Committee shall determine. If certificates representing Restricted Stock are registered in the name of the Participant, the Committee may require that such certificates bear an appropriate legend referring to the terms, conditions and restrictions applicable to such Restricted Stock, that the Company retain physical possession of the certificates, and that the Participant deliver a stock power to the Company, endorsed in blank, relating to the Restricted Stock.
(iv)	Dividends and Splits. As a condition to the grant of an Award of Restricted Stock, the Committee may require that any dividends paid on a share of Restricted Stock shall be either (A) paid with respect to such Restricted Stock at the dividend payment date in cash, in kind, or in a number of shares of unrestricted Stock having a Fair Market Value equal to the amount of such dividends, or (B) automatically reinvested in additional Restricted Stock or held in kind, which shall be subject to the same terms as applied to the original Restricted Stock to which it relates, or (C) deferred as to payment, either as a cash deferral or with the amount or value thereof automatically deemed reinvested in shares of Deferred Stock, other Awards or other investment vehicles, subject to such terms as the Committee shall determine or permit a Participant to elect. Unless otherwise determined by the Committee, Stock distributed in connection with a Stock split or Stock dividend, and other property distributed as a dividend, shall be subject to restrictions and a risk of forfeiture to the same extent as the Restricted Stock with respect to which such Stock or other property has been distributed.

     (e) Deferred Stock. The Committee is authorized to grant Deferred Stock to Participants, subject to the following terms and conditions:

(i) Award and Restrictions. Issuance of Stock will occur upon expiration of the deferral period specified for an Award of Deferred Stock by the Committee (or, if permitted by the Committee, as elected by the Participant). In addition, Deferred Stock shall be subject to such restrictions on transferability, risk of forfeiture and other restrictions, if any, as the Committee may impose, which restrictions may lapse at the expiration of the deferral period or at earlier specified times (including based on achievement of performance goals and/or future service requirements), separately or in combination, in installments or otherwise, and under such other circumstances as the Committee may determine at the date of grant or thereafter. Deferred Stock may be satisfied by delivery of Stock, other Awards, or a combination thereof, as determined by the Committee at the date of grant or thereafter.

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(ii)

Forfeiture. Except as otherwise determined by the Committee, upon termination of employment or service during the applicable deferral period or portion thereof to which forfeiture conditions apply (as provided in the Award document evidencing the Deferred Stock), all Deferred Stock that is at that time subject to such forfeiture conditions shall be forfeited; provided that the Committee may provide, by rule or regulation or in any Award document, or may determine in any individual case, that restrictions or forfeiture conditions relating to Deferred Stock will lapse in whole or in part, including in the event of terminations resulting from specified causes. Deferred Stock subject to a risk of forfeiture may be called “restricted stock units” or otherwise designated by the Committee.

(iii)

Dividend Equivalents. Unless otherwise determined by the Committee, Dividend Equivalents on the specified number of shares of Stock covered by an Award of Deferred Stock shall be either (A) paid with respect to such Deferred Stock at the dividend payment date in cash or in shares of unrestricted Stock having a Fair Market Value equal to the amount of such dividends, or (B) deferred with respect to such Deferred Stock, either as a cash deferral or with the amount or value thereof automatically deemed reinvested in additional Deferred Stock, other Awards or other investment vehicles having a Fair Market Value equal to the amount of such dividends, as the Committee shall determine or permit a Participant to elect.

     (f) Bonus Stock and Awards in Lieu of Obligations. The Committee is authorized to grant Stock as a bonus, or to grant Stock or other Awards in lieu of obligations of the Company or a subsidiary or affiliate to pay cash or deliver other property under the Plan or under other plans or compensatory arrangements, subject to such terms as shall be determined by the Committee.

     (g) Dividend Equivalents. The Committee is authorized to grant Dividend Equivalents to a Participant, which may be awarded on a free-standing basis or in connection with another Award. The Committee may provide that Dividend Equivalents shall be paid or distributed when accrued or shall be deemed to have been reinvested in additional Stock, Awards, or other investment vehicles, and subject to restrictions on transferability, risks of forfeiture and such other terms as the Committee may specify.

     (h) Other Stock-Based Awards. The Committee is authorized, subject to limitations under applicable law, to grant to Participants such other Awards that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, Stock or factors that may influence the value of Stock, including, without limitation, convertible or exchangeable debt securities, other rights convertible or exchangeable into Stock, purchase rights for Stock, Awards with value and payment contingent upon performance of the Company or business units thereof or any other factors designated by the Committee, and Awards valued by reference to the book value of Stock or the value of securities of or the performance of specified subsidiaries or affiliates or other business units. The Committee shall determine the terms and conditions of such Awards. Stock delivered pursuant to an Award in the nature of a purchase right granted under this Section 6(h) shall be purchased for such consideration, paid for at such times, by such methods, and in such forms, including, without limitation, cash, Stock, other Awards, or other property, as the Committee shall determine. Cash awards, as an element of or supplement to any other Award under the Plan, may also be granted pursuant to this Section 6(h).

     (i) Performance Awards. Performance Awards, denominated in cash or in Stock or other Awards, may be granted by the Committee in accordance with Section 7. A Performance Award denominated in shares constitutes an Award authorized under Section 6(b) — (h) to which performance conditions have been attached.

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     7. Performance Awards, Including Annual Incentive Awards.

     (a) Performance Awards Generally. Performance Awards may be denominated as a cash amount, number of shares of Stock, or specified number of other Awards (or a combination) which may be earned upon achievement or satisfaction of performance conditions specified by the Committee. In addition, the Committee may specify that any other Award shall constitute a Performance Award by conditioning the right of a Participant to exercise the Award or have it settled, and the timing thereof, upon achievement or satisfaction of such performance conditions as may be specified by the Committee. The Committee may use such business criteria and other measures of performance as it may deem appropriate in establishing any performance conditions, and may exercise its discretion to reduce or increase the amounts payable under any Award subject to performance conditions, except as limited under Sections 7(b) and 7(c) in the case of a Performance Award intended to qualify as “performance-based compensation” under Code Section 162(m).

     (b) Performance Awards Granted to Covered Employees. If the Committee determines that a Performance Award to be granted to an Eligible Person who is designated by the Committee as likely to be a Covered Employee should qualify as “performance-based compensation” for purposes of Code Section 162(m), the grant, exercise and/or settlement of such Performance Award shall be contingent upon achievement of a preestablished performance goal and other terms set forth in this Section 7(b).

(i)

Performance Goal Generally. The performance goal for such Performance Awards shall consist of one or more business criteria and a targeted level or levels of performance with respect to each of such criteria, as specified by the Committee consistent with this Section 7(b). The performance goal shall be objective and shall otherwise meet the requirements of Code Section 162(m) and regulations thereunder, including the requirement that the level or levels of performance targeted by the Committee result in the achievement of performance goals being “substantially uncertain.” The Committee may determine that such Performance Awards shall be granted, exercised and/or settled upon achievement of any one performance goal or that two or more of the performance goals must be achieved as a condition to grant, exercise and/or settlement of such Performance Awards. Performance goals may differ for Performance Awards granted to any one Participant or to different Participants.

(ii)

Business Criteria. One or more of the following business criteria for the Company, on a consolidated basis, and/or for specified subsidiaries or affiliates or other business units of the Company shall be used by the Committee in establishing performance goals for such Performance Awards: (1) advertising sales (either calendar cycle or publication cycle basis) or other sales or revenue measures; (2) operating income, earnings from operations, earnings before or after taxes, earnings before or after interest, depreciation, amortization, or extraordinary or special items, (3) net income or net income per common share (basic or diluted); (4) return on assets, return on investment, return on capital, or return on equity; (5) cash flow, free cash flow, cash flow return on investment, or net cash provided by operations; (6) interest expense after taxes; (7) economic profit or value created; (8) operating margin; (9) stock price or total stockholder return; and (10) strategic business criteria, consisting of one or more objectives based on meeting specified market penetration, geographic business expansion goals, operating goals, cost targets, customer satisfaction, employee satisfaction, human resources management , supervision of litigation and information technology, and goals relating to acquisitions or divestitures of subsidiaries, affiliates or joint ventures. The targeted level or levels of performance with respect to such business criteria may be established at such levels and in such

11

	terms as the Committee may determine, in its discretion, including in absolute terms, as a goal relative to performance in prior periods, or as a goal compared to the performance of one or more comparable companies or an index covering multiple companies. Performance goals based upon these business criteria may be based upon generally accepted accounting principles (“GAAP”) or may be non-GAAP measures, and in either case may be adjusted for purchase accounting impacts related to acquisitions and other extraordinary, non-recurring or unusual events or accounting treatments.
(iii)	Performance Period; Timing for Establishing Performance Goals. Achievement of performance goals in respect of such Performance Awards shall be measured over a performance period of up to one year or more than one year, as specified by the Committee. A performance goal shall be established not later than the earlier of (A) 90 days after the beginning of any performance period applicable to such Performance Award or (B) the time 25% of such performance period has elapsed.
(iv)	Performance Award Pool. The Committee may establish a Performance Award pool, which shall be an unfunded pool, for purposes of measuring performance of the Company in connection with Performance Awards. The amount of such Performance Award pool shall be based upon the achievement of a performance goal or goals based on one or more of the business criteria set forth in Section 7(b)(ii) during the given performance period, as specified by the Committee in accordance with Section 7(b)(iv). The Committee may specify the amount of the Performance Award pool as a percentage of any of such business criteria, a percentage thereof in excess of a threshold amount, or as another amount which need not bear a strictly mathematical relationship to such business criteria.
(v)	Settlement of Performance Awards; Other Terms. Settlement of Performance Awards shall be in cash, Stock, other Awards or other property, in the discretion of the Committee. The Committee may, in its discretion, increase or reduce the amount of a settlement otherwise to be made in connection with such Performance Awards, but may not exercise discretion to increase any such amount payable to a Covered Employee in respect of a Performance Award subject to this Section 7(b). Any settlement which changes the form of payment from that originally specified shall be implemented in a manner such that the Performance Award and other related Awards do not, solely for that reason, fail to qualify as “performance-based compensation” for purposes of Code Section 162(m). The Committee shall specify the circumstances in which such Performance Awards shall be paid or forfeited in the event of termination of employment by the Participant or other event (including a Change in Control) prior to the end of a performance period or settlement of such Performance Awards.

      (c) Annual Incentive Awards Granted to Designated Covered Employees. The Committee may grant an Annual Incentive Award to an Eligible Person who is designated by the Committee as likely to be a Covered Employee. Such Annual Incentive Award will be intended to qualify as “performance-based compensation” for purposes of Code Section 162(m), and its grant, exercise and/or settlement shall be contingent upon achievement of preestablished performance goals and other terms set forth in this Section 7(c).

(i) Grant of Annual Incentive Awards. Not later than the earlier of 90 days after the beginning of any performance period applicable to such Annual Incentive Award or the time 25% of such performance period has elapsed, the Committee shall determine the Covered Employees who will potentially receive Annual Incentive

12

Awards, and the amount(s) potentially payable thereunder, for that performance period. The amount(s) potentially payable shall be based upon the achievement of a performance goal or goals based on one or more of the business criteria set forth in Section 7(b)(ii) in the given performance period, as specified by the Committee. The Committee may designate an annual incentive award pool as the means by which Annual Incentive Awards will be measured, which pool shall conform to the provisions of Section 7(b)(iv). In such case, the portion of the Annual Incentive Award pool potentially payable to each Covered Employee shall be preestablished by the Committee. In all cases, the maximum Annual Incentive Award of any Participant shall be subject to the limitation set forth in Section 5.

(ii)

Payout of Annual Incentive Awards. After the end of each performance period, the Committee shall determine the amount, if any, of the Annual Incentive Award for that performance period payable to each Participant. The Committee may, in its discretion, determine that the amount payable to any Participant as a final Annual Incentive Award shall be reduced from the amount of his or her potential Annual Incentive Award, including a determination to make no final Award whatsoever, but may not exercise discretion to increase any such amount. The Committee shall specify the circumstances in which an Annual Incentive Award shall be paid or forfeited in the event of termination of employment by the Participant or other event prior to the end of a performance period or settlement of such Annual Incentive Award.

      (d) Written Determinations. Determinations by the Committee as to the establishment of performance goals, the amount potentially payable in respect of Performance Awards and Annual Incentive Awards, the level of actual achievement of the specified performance goals relating to Performance Awards and Annual Incentive Awards, and the amount of any final Performance Award and Annual Incentive Award shall be recorded in writing in the case of Performance Awards intended to qualify under Section 162(m). Specifically, the Committee shall certify in writing, in a manner conforming to applicable regulations under Section 162(m), prior to settlement of each such Award granted to a Covered Employee, that the performance objective relating to the Performance Award and other material terms of the Award upon which settlement of the Award was conditioned have been satisfied.

      8. Non-Employee Director Awards. Options, Deferred Stock, Restricted Stock and other Awards (which other Awards, if granted, will be governed by Sections 6 and 7 of this Plan) shall be granted to non-employee directors of the Company or a subsidiary or an affiliate in accordance with policies established from time to time by the Board specifying the classes of non-employee directors to be granted such Awards, the number of shares to be subject to each Award, and the time or times at which such Awards shall be granted. All Options granted to non-employee directors shall be non-qualified stock options and shall be Non-409A Awards. The foregoing notwithstanding, the aggregate number of shares that may be delivered in connection with Awards granted to non-employee directors shall be five percent of the total reserved under the Plan, and in each calendar year a non-employee director may be granted Awards relating to no more than 6,000 shares, subject to adjustment as provided in Section 11(c).

      (a) Initial Policy — Option Grants. The initial policy with respect to Options granted under this Section 8(a), effective as of the Effective Date and continuing until modified or revoked by the Board from time to time, shall be as follows:

(i) Initial Grants. At the date of a person’s initial election or appointment as a member of the Board after the Effective Date, such person, if he or she is a non-employee director of the Company eligible to participate upon such election or appointment, shall be granted an Option to purchase 1,500 shares of Stock,

13

subject to adjustment as provided in Section 12(c). At the Effective Date, each person who is a non-employee director of the Company eligible to participate at that date shall be granted an Option to purchase 1,500 shares of Stock, subject to adjustment as provided in Section 12(c).

(ii)

Annual Grants. At the date of each annual meeting of shareholders following the Effective Date at which a director is elected or reelected as a member of the Board (or at which members of another class of directors are elected or reelected, if the Company then has a classified Board), such director, if he or she is a non-employee director of the Company eligible to participate at that date and if he or she has not been granted an Option under this Section 8(a) previously during the same calendar year, shall be granted an Option to purchase 1,500 shares of Stock, subject to adjustment as provided in Section 12(c).

     (b) Terms of Options Granted Under Section 8(a). Each Option granted under Section 8(a) shall be subject to the following terms and conditions:

(i)	Exercise Price. The exercise price per share of Stock purchasable under an Option shall be equal to 100% of the Fair Market Value of Stock on the date of grant of the Option, subject to Section 9(a).
(ii)	Option Term. Each Option shall expire not later than ten years after the date of grant, or such earlier date as the Option may no longer be exercised and cannot, by its terms, thereafter become exercisable. For options granted under the initial policy, the stated expiration date shall be seven years after the date of grant.
(iii)	Vesting and Exercisability. The Board may establish terms regarding the times at which Options shall become vested and exercisable. Unless otherwise determined by the Board, an Option granted under this Section 8(a) and not previously forfeited shall vest and become exercisable by a Participant as to one-third of the number of shares subject to the Option at the close of business on the day preceding each of the three annual meetings of shareholders following the date of grant of the Option, rounded to the nearest number of whole shares. The foregoing notwithstanding, an Option not previously forfeited shall vest and become exercisable on an accelerated basis upon a Change in Control or upon the termination of the Participant’s service as a director due to death, Disability or Retirement. Unless otherwise determined by the Board, an Option will cease to vest and become exercisable upon the termination of the Participant’s service prior to a Change in Control for any reason other than death, Disability or Retirement, and such portion that has not vested and become exercisable at the time of such termination shall be forfeited.
(iv)	Payment. The exercise price of an Option shall be paid to the Company either in cash or by the surrender of Stock, or any combination thereof, or in such other form or manner as may be consistent with Section 6(b)(ii).

      (c) Initial Policy — Grant of Deferred Stock and Restricted Stock. The initial policy with respect to Awards granted under this Section 8(c), effective as of the Effective Date and continuing until modified or revoked by the Board from time to time, shall be as follows:

(i) Initial Grant. At the date of a person’s initial election or appointment as a member of the Board after the Effective Date, such person, if he or she is a non-employee director of the Company eligible to participate upon such election or appointment, shall be granted 1,500 shares of Deferred Stock, subject to

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adjustment as provided in Section 12(c). At the Effective Date, each person who is a non-employee director of the Company eligible to participate at that date shall be granted 1,500 shares of Deferred Stock, subject to adjustment as provided in Section 12(c).

(ii)

Annual Grants. At the date of each annual meeting of shareholders following the Effective Date at which a director is elected or reelected as a member of the Board (or at which members of another class of directors are elected or reelected, if the Company then has a classified Board), such director, if he or she is a non-employee director of the Company eligible to participate at that date and if he or she has not been granted Deferred Stock or Restricted Stock under Section 8(c) previously during the same calendar year, shall be granted 1,500 shares of Deferred Stock, unless the director has elected (at the time elections are required to be filed under Section 8(e)(i)) to receive such grant in the form of an equal number of shares of Restricted Stock. The number of shares subject to such annual grants shall be subject to adjustment as provided in Section 12(c).

     (d) Terms of Deferred Stock and Restricted Stock Granted Under Section 8(c). Deferred Stock granted under Section 8(c) shall be subject to the terms and conditions of Deferred Stock specified in Sections 8(f)(i), (ii), and (iii), unless otherwise determined by the Board. Deferred Stock and Restricted Stock granted under this Section 8(c) shall also be subject to the following additional terms and conditions:

(i)	Vesting and Forfeiture. The Board may establish terms regarding the times at which Deferred Stock and Restricted Stock shall become vested and non-forfeitable. Unless otherwise determined by the Board, an Award granted under Section 8(c) and not previously forfeited shall become vested and non-forfeitable as to one-third of the number of shares of Deferred Stock or Restricted Stock at the close of business on the day preceding each of the three annual meetings of shareholders following the date of grant of such Award, rounded to the nearest number of whole shares. The foregoing notwithstanding, an Award of Deferred Stock or Restricted Stock not previously vested or forfeited shall vest and become non-forfeitable on an accelerated basis upon a Change in Control or upon the termination of the Participant’s service as a director due to death, Disability or, in the case of Deferred Stock, Retirement. Unless otherwise determined by the Board, an Award of Deferred Stock or Restricted Stock not previously vested or forfeited will cease to vest and will be forfeited upon the termination of the Participant’s service prior to a Change in Control for any reason other than death, Disability or, in the case of Deferred Stock, Retirement.
(ii)	Deferred Stock Credited as a Result of Dividend Equivalents. Unless otherwise determined by the Board, Deferred Stock credited as a result of Dividend Equivalents under Section 8(f)(i) shall be subject to the same terms, including risk of forfeiture, as the Deferred Stock with respect to which the dividend equivalents were credited.
(iii)	Dividends on Restricted Stock. Unless otherwise determined by the Board, dividends on Restricted Stock declared and paid prior to the lapse of the risk of forfeiture on such Restricted Stock shall be automatically deemed to be reinvested in additional shares of Restricted Stock, which shall be subject to the same terms, including risk of forfeiture, as the Restricted Stock on which the dividend was paid.

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(iv) Awards Nontransferable. Deferred Stock and Restricted Stock shall be nontransferable by the Participant at any time that the Award remains subject to a risk of forfeiture.

     (e) Options Granted in Payment of Fees and Deferral of Fees in Deferred Stock and Deferred Cash. Each non-employee director of the Company may elect, in accordance with Section 8(e)(i), to be paid Retainer Fees in the form of Options (or, if so determined by the Committee, stock SARs with terms qualifying such Awards as 409A Awards) under Section 8(e)(ii) or to defer receipt of Retainer Fees and Other Director Compensation in the form of Deferred Stock under Section 8(e)(iii) or deferred cash under Section 8(e)(iv).

(i) Elections. A director shall elect to participate and the terms of such participation by filing an election with the Company prior to the beginning of the calendar year in which a Plan Year commences (Plan Years generally begin at each annual meeting of shareholders or, in the case of a new director, upon initial appointment) .

(A)	Effect and Irrevocability of Elections. Elections shall be deemed continuing, and therefore applicable to Plan Years after the initial Plan Year covered by the election, until the election is modified or superseded by the Participant. Elections relating to a specified Plan Year shall become irrevocable at the commencement of the calendar year in which the Plan Year commences. Elections may be modified or revoked by filing a new election prior to the time the election to be modified or revoked has become irrevocable. The latest election filed with the Board shall be deemed to revoke all prior inconsistent elections that remain revocable at the time of filing of the latest election.
(B)	Matters To Be Elected. The Company will provide a form of election which will permit a director to make appropriate elections with respect to all relevant matters under this Section 8.
(C)	Prior Elections under the 2001 Stock Award and Incentive Plan. The deferral features of the Plan for non-employee directors represent a continuation of the similar deferral features under the 2001 Stock Award and Incentive Plan. Accordingly, elections filed under the 2001 Stock Award and Incentive Plan shall be given effect for purposes of the Plan; provided, however, that with respect to deferrals to be given effect in 2005, notwithstanding other provisions of this Section 8, elections filed by non-employee directors on or before March 15, 2005 shall be deemed validly filed and effective, in accordance with Question 21 under IRS Notice 2005-1.

(ii) Options Granted in Payment of Retainer Fees. A Participant who has elected to be paid a specified amount of Retainer Fees in the form of Options shall be granted, at the close of business on the day the Participant’s Plan Year commences, an Option to purchase the number of whole shares of Stock determined in accordance with the Option Valuation Methodology specified by the Board. Each Option granted under this Section 8(e)(ii) shall be subject to the following terms and conditions:

(A) Option Valuation Methodology. The Board shall determine, prior to the calendar year in which the Plan Year commences, the Option Valuation Methodology which will be used to determine the number of Options

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	granted and the Option exercise price. The Option Valuation Methodology may be based upon a valuation of the Option, a discounting of the aggregate exercise price of the Options by the amount of Retainer Fees to be paid in the form of Options, or such other methodology as may be deemed reasonable for purposes of this Section 8(e)(ii).
(B)	Option Term. Each Option will expire at a date specified by the Board, which shall not be later than ten years after the date of grant; provided, however, that, unless otherwise determined by the Board, any portion of an Option that is not yet exercisable as of the date a Participant ceases to serve as a director for any reason will expire at the date such service ceases.
(C)	Vesting and Exercisability. Unless otherwise determined by the Board, each Option will vest and become exercisable as to 25% of the underlying shares on the June 30, September 30, December 31, and March 31 following the date of grant; provided, however, that, in the case of a Plan Year which begins on or after June 30 and before September 30, the vesting percentage shall be 33%, and in the case of a Plan Year which begins on or after September 30 and before December 31, the vesting percentage shall be 50%; and provided further, that an Option will become fully vested and exercisable at the close of business on the last day of the Plan Year in which it was granted. The number of shares as to which the Option becomes vested and exercisable will be rounded to the nearest whole number. The foregoing notwithstanding, (i) upon a Change in Control a Participant’s Option not previously forfeited shall vest and become exercisable in full, and (ii) upon termination of the Participant’s service as a director due to death, Disability, or Retirement, that portion of the Option which would become vested and exercisable on the last day of the calendar quarter in which such death, Disability, or Retirement occurred will become immediately vested and exercisable.
(D)	Exercise Price. The exercise price per share of Stock purchasable under an Option will be 100% of the Fair Market Value of the underlying shares. The exercise price of an Option shall be paid to the Company either in cash or by the surrender of Stock, or any combination thereof, or in such other form or manner as then may be permitted under Section 6(b)(ii).
(E)	Changes in Fees; Changes in Service as a Committee Chair. If the amount of Retainer Fees is increased during a Plan Year, or if a Director is appointed chair of a Board committee such that an additional Retainer Fee is payable during a Plan Year, such increased or additional fees will not be paid in the form of Options. If a Director has been granted an Option in respect of a Plan Year in payment of Retainer Fees which included committee-related fees for service as chair or a member of any Board committee, and during such Plan Year he or she ceases such service but remains on the Board, the Option will expire in part at the time such service ceases, to the extent of that portion of the Option which is not yet exercisable multiplied by a fraction the numerator of which is the amount of committee-related fees included in such Retainer Fees and the denominator of which is the total amount of such Retainer Fees.

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(F) Effect of Code Section 409A. If the Options granted under this Section 8(e)(ii) would not qualify as Non-409A Options, the Board may substitute for such Options 409A Awards in the form of Stock SARs, which shall include terms that provide for distribution acquisition of Deferred Stock upon exercise and a distribution of the Deferred Stock at the expiration date of the Stock SAR, with the valuation of the Stock SAR determined taking into account its mandatory deferral terms.

(iii)	Deferral of Retainer Fees and Other Director Compensation in the Form of Deferred Stock. If a Participant has elected to defer receipt of a specified amount of Retainer Fees or Other Director Compensation in the form of Deferred Stock, a number of shares of Deferred Stock shall be credited to the Participant’s Deferred Stock Account, as of the date such Retainer Fees or Other Director Compensation otherwise would have been payable to the Participant but for such election to defer, equal to (i) such amount otherwise payable divided by (ii) the Fair Market Value of a share of Stock at that date. Deferred Shares credited under this Section 8(e)(iii) shall be subject to the terms and conditions of Deferred Stock specified in Sections 8(f)(ii), (iii) and (iv). The right and interest of each Participant in Deferred Stock credited to the Participant’s Deferred Stock Account under this Section 8(e)(iii) at all times will be nonforfeitable.
(iv)	Deferral of Retainer Fees and Other Director Compensation in the Form of Deferred Cash. If a Participant has elected to defer receipt of a specified amount of Retainer Fees or Other Director Compensation in the form of deferred cash, an amount equal to such specified amount shall be credited to the Participant’s Deferred Cash Account as of the date such Retainer Fees or Other Director Compensation otherwise would have been payable to the Participant but for such election to defer. Each Participant shall be entitled to direct the manner in which his or her Deferred Cash Account will be deemed to be invested, selecting among the same investment alternatives (other than Company common stock) as are offered from time to time to participants in the Company’s Deferred Compensation Plan. The right and interest of each Participant relating to his or her Deferred Cash Account at all times will be nonforfeitable.
(v)	Cessation of Service as a Director. If any Retainer Fee or Other Director Compensation otherwise subject to an election would be paid to a Participant after he or she has ceased to serve as a director, such payment shall not be subject to deferral under this Section 8(e), but shall instead be paid in accordance with the Company’s regular non-employee director compensation policies.

      (f) Other Terms of Deferral Accounts.

(i) Dividend Equivalents on Deferred Stock. Dividend Equivalents will be credited on Deferred Stock credited to a Participant’s Deferred Stock Account(s) as follows:

(A) Cash and Non-Share Dividends. If the Company declares and pays a dividend on Stock in the form of cash or property other than shares of Stock, then a number of additional shares of Deferred Stock shall be credited to a Participant’s Deferred Stock Account(s) as of the payment date for such dividend equal to (i) the number of shares of Deferred Stock credited to the respective Account as of the record date for such dividend, multiplied by (ii) the amount of cash plus the Fair Market Value of any property other than shares actually paid as a dividend on each

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share at such payment date, divided by (iii) the Fair Market Value of a share of Stock at such payment date.

(B)

Share Dividends and Splits. If the Company declares and pays a dividend on Stock in the form of additional shares of Stock, or there occurs a forward split of Stock, then a number of additional shares of Deferred Stock shall be credited to the Participant’s Deferred Stock Account(s) as of the payment date for such dividend or forward Stock split equal to (i) the number of shares of Deferred Stock credited to the respective Account as of the record date for such dividend or split multiplied by (ii) the number of additional shares actually paid as a dividend or issued in such split in respect of each share of Stock.

(ii)

Reallocation of Accounts. A Participant may allocate amounts credited to his or her Deferred Cash Account to one or more of the investment vehicles authorized under the Company’s Deferred Compensation Plan. Subject to the rules established by the Board and subject to the provisions of this Section 8(f), a Participant may reallocate amounts credited to his or her Deferred Cash Account as of the Valuation Date following the Participant’s election, to one or more of such investment vehicles, by filing with the Company a notice, in such form, and in accordance with such procedures, as the Board shall determine from time to time. The Board may, in its discretion, restrict allocation into or reallocation by specified Participants into or out of special investment vehicles or specify minimum or maximum amounts that may be allocated or reallocated by Participants. Notwithstanding the foregoing, a Participant shall have no right to have amounts credited as cash to the Participant’s Deferred Cash Account reallocated or switched to his or her Deferred Stock Account or amounts credited to the Participant’s Deferred Stock Account reallocated or switched to his or her Deferred Cash Account, except as may be permitted by the Board.

(iii)

Elections as to Settlement. Each Participant’s election under Section 8(e)(i) shall specify the time or times at which the Participant’s Deferral Account will be settled, which may be a fixed date or a date at or following the Participant’s termination of service as a director of the Company, and whether distribution will be in a single lump sum or in a number of annual installments not exceeding ten (or such other number as may be determined by the Board); provided, however, that, if no valid election has been filed as to the time of settlement of a Participant’s Deferral Account or any portion thereof, such Deferral Account or portion thereof shall be distributed in a single lump sum on the first business day of the year following the year in which the Participant ceases to serve as a director. If installments are elected, such installments must be annual installments (unless otherwise permitted by the Company and validly elected in the Participant’s deferral election form, commencing not later than the first year following the year in which the Participant ceases to serve as a director (on such annual installment date as may be specified in such election form) and extending over the period elected by the Participant (not to exceed ten years).

(A) Matters Covered by Election. Subject to the terms of the Plan, the Company shall determine whether all deferrals under the Plan must be subject to a single election as to the time or times of settlement, or whether settlement elections may relate to a specified sub-account (i.e., the Deferred Stock Account or the Deferred Cash Account) and/or deferrals in a specified Plan Year. If the Company permits elections to relate to a specified Plan Year, such election shall apply to the amounts originally credited to the specified sub account in respect of such Plan

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	Year and to any additional amounts credited as Dividend Equivalents or interest or earnings in respect of such originally credited amounts and previously credited additional amounts.
(B)	Modifying Elections. A Participant may modify a prior election as to the time at which a Participant’s Deferral Account (including a specified sub account) will be settled in accordance with Code Section 409A(a)(4)(C), subject to such additional requirements as may be specified by the Company. Such modification shall be made by filing a new election with the Company.

(v)	Election Forms. Elections under the Plan shall be made in writing on such form or forms as may be specified from time to time by the Board.
(vi)	Statements. The Company will furnish statements to each Participant reflecting the amount credited to a Participant’s Deferral Account, transactions therein, and other related information no less frequently than once each calendar year.
(vii)	Fractional Shares. The Company may specify a reasonable method to account for fractional shares of Deferred Stock, which may include rounding downward or upward to eliminate such fractional shares at each crediting date.

     (g) Settlement of Deferral Accounts. The Company will settle a Participant’s Deferral Account by making one or more distributions to the Participant (or his or her Beneficiary, following Participant’s death) at the time or times, in a lump sum or installments, as specified in the Participant’s election filed in accordance with Section 8(e)(i) and 8(f)(iv); provided, however, that a Deferral Account will be settled at times earlier than those specified in such election in accordance with Sections 8(g)(ii), (iii), and (iv).

(i)	Form of Distribution. Distributions in respect of a Participant’s Deferred Stock Account shall be made only in shares of Stock, together with cash in lieu of any fractional share remaining at a time that less than one whole share of Deferred Stock is credited to such Deferred Stock Account. Shares may be delivered in certificate form to a Participant (or his or her Beneficiary) or to a nominee for the account of the Participant (or his or her Beneficiary), or in such other manner as the Board may determine. Distributions in respect of a Participant’s Deferred Cash Account shall be made only in cash.
(ii)	Death. If a Participant ceases to serve as a director due to death or dies prior to distribution of all amounts from his or her Deferral Account, the Company shall make a single lump-sum distribution to the Participant’s Beneficiary. Any such distribution shall be made on the 60th day following formal notification to the Company of the Participant’s death.
(iii)	Unforeseeable Emergency and Other Payments. Other provisions of the Plan notwithstanding, if, upon the written application of a Participant, the Board determines that the Participant has had an unforeseeable emergency within the meaning of Code Sections 409A(a)(2)(A)(vi) and 409A(a)(2)(B)(ii), the Board shall direct the payment to the Participant of all or a portion of the balance of a Deferral Account (to the extent of then vested amounts) in accordance with Section 409A(a)(2)(B)(ii).
(iv)	Change in Control. In the event of a Change in Control which also constitutes a 409A Ownership/Control Change, payments in settlement of any Deferral

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Account (including a Deferral Account with respect to which one or more installment payments have previously been made) shall be made on the date fifteen (15) business days following such 409A Ownership/Control Change.

     9. Certain Provisions Applicable To Awards.

     (a) Stand-Alone, Additional, Tandem, and Substitute Awards. Awards granted under the Plan may, in the discretion of the Committee, be granted either alone or in addition to, in tandem with, or in substitution or exchange for, any other Award or any award granted under another plan of the Company, any subsidiary or affiliate, or any business entity to be acquired by the Company or a subsidiary or affiliate, or any other right of a Participant to receive payment from the Company or any subsidiary or affiliate; provided, however, that a 409A Award may not be granted in tandem with a Non-409A Award. Awards granted in addition to or in tandem with other Awards or awards may be granted either as of the same time as or a different time from the grant of such other Awards or awards. Subject to Section 12(k), the Committee may determine that, in granting a new Award, the in-the-money value or fair value of any surrendered Award or award or the value of any other right to payment surrendered by the Participant may be applied to reduce the exercise price of any Option, grant price of any SAR, or purchase price of any other Award.

     (b) Term of Awards. The term of each Award shall be for such period as may be determined by the Committee, subject to the express limitations set forth in Sections 6(b)(ii), 6(c)(ii) and 8 or elsewhere in the Plan.

     (c) Form and Timing of Payment under Awards; Deferrals. Subject to the terms of the Plan (including Section 12(k)) and any applicable Award document, payments to be made by the Company or a subsidiary or affiliate upon the exercise of an Option or other Award or settlement of an Award may be made in such forms as the Committee shall determine, including, without limitation, cash, Stock, other Awards or other property, and may be made in a single payment or transfer, in installments, or on a deferred basis. The settlement of any Award may be accelerated, and cash paid in lieu of Stock in connection with such settlement, in the discretion of the Committee or upon occurrence of one or more specified events, subject to Section 12(k). Subject to Section 12(k), installment or deferred payments may be required by the Committee (subject to Section 12(e)) or permitted at the election of the Participant on terms and conditions established by the Committee. Payments may include, without limitation, provisions for the payment or crediting of reasonable interest on installment or deferred payments or the grant or crediting of Dividend Equivalents or other amounts in respect of installment or deferred payments denominated in Stock. In the case of any 409A Award that is vested and no longer subject to a risk of forfeiture (within the meaning of Code Section 83), such Award will be distributed to the Participant, upon application of the Participant, if the Participant has had an unforeseeable emergency within the meaning of Code Sections 409A(a)(2)(A)(vi) and 409A(a)(2)(B)(ii), in accordance with Section 409A(a)(2)(B)(ii).

     (d) Limitation on Vesting of Certain Awards. Subject to Section 8, Restricted Stock will vest over a minimum period of three years except in the event of a Participant’s death, disability, or retirement, or in the event of a Change in Control or other special circumstances. The foregoing notwithstanding, (i) Restricted Stock as to which either the grant or vesting is based on, among other things, the achievement of one or more performance conditions generally will vest over a minimum period of one year except in the event of a Participant’s death, disability, or retirement, or in the event of a Change in Control or other special circumstances, and (ii) up to 5% of the shares of Stock authorized under the Plan may be granted as Restricted Stock without any minimum vesting requirements. For purposes of this Section 9(d), (i) a performance period that precedes the grant of the Restricted Stock will be treated as part of the vesting period if the participant has been notified promptly after the commencement of the performance period that he or she has the opportunity to earn the Award based on performance and continued service, and

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(ii) vesting over a three-year period or one-year period will include periodic vesting over such period if the rate of such vesting is proportional (or less rapid) throughout such period.

     10. Change in Control.

     (a) Effect of “Change in Control” on Non-Performance Based Awards. In the event of a “Change in Control,” the following provisions shall apply to non-performance based Awards, including Awards as to which performance conditions previously have been satisfied or are deemed satisfied under Section 10(b), unless otherwise provided by the Committee in the Award document:

(i) In the case of Non-409A Awards, to the extent permitted without causing the Award to become subject to Code Section 409A:

(A)	All forfeiture conditions and other restrictions applicable to Awards granted under the Plan shall lapse and such Awards shall be fully payable as of the time of the Change in Control without regard to vesting or other conditions, except to the extent of any waiver by the Participant and subject to applicable restrictions set forth in Section 12(a);
(B)	Any Award carrying a right to exercise that was not previously exercisable and vested shall become fully exercisable and vested as of the time of the Change in Control and shall remain exercisable and vested for the balance of the stated term of such Award without regard to any termination of employment or service by the Participant other than a termination for Cause, subject only to applicable restrictions set forth in Section 12(a); and
(C)	The Committee may, in its discretion, during the 60-day period immediately following the Change in Control, cancel an outstanding Option of SAR or permit the Participant to elect to surrender the outstanding Option or SAR in exchange for a cash payment equal to the excess of the Change in Control Price over the exercise price of such Option or grant price of such SAR, multiplied by the number of shares of Stock covered by such Option or SAR, and, with respect to other types of Awards denominated in shares, to cancel such an Award or permit the Participant to elect to surrender the Award in exchange for a cash payment equal to the Change in Control Price multiplied by the number of shares of Stock covered by such Award.

(ii) In the case of 409A Awards, if and to the extent permitted under Code Section 409A (for this purpose, if Section 409A would permit any of the following events to occur following 409A Ownership/Control Change but not otherwise, such event shall occur only if a Change in Control also constitutes a 409A Ownership/Control Change):

(A) All deferral of settlement, forfeiture conditions and other restrictions applicable to an unvested Award granted under the Plan shall lapse and such Awards shall be fully payable as of the time of the Change in Control without regard to deferral and vesting conditions, except to the extent of any waiver by the Participant (if permitted under Section 409A) and subject to applicable restrictions set forth in Section 12(a);

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(B)

Any Award carrying a right to exercise that was not previously exercisable and vested shall become fully exercisable and vested as of the time of the Change in Control and shall remain exercisable and vested for the balance of the stated term of such Award without regard to any termination of employment or service by the Participant other than a termination for Cause, subject only to applicable restrictions set forth in Section 12(a); and

(C)

The Committee may, in its discretion, during the 60-day period immediately following the Change in Control, provide for the cancellation of an outstanding Option of SAR or permit the Participant to elect to surrender the outstanding Option or SAR in exchange for a cash payment equal to the excess of the Change in Control Price over the exercise price of such Option or grant price of such SAR multiplied by the number of shares of Stock covered by such Option or SAR, and, with respect to other types of Awards denominated in shares, to cancel such an Award or permit the Participant to elect to surrender the Award in exchange for a cash payment equal to the Change in Control Price multiplied by the number of shares of Stock covered by such Award.

     (b) Effect of “Change in Control” on Performance-Based Awards. In the event of a “Change in Control,” with respect to an outstanding Award subject to achievement of performance goals and conditions, such performance goals and conditions shall be deemed to be met or exceeded if and to the extent so provided by the Committee in the Award document governing such Award or other agreement with the Participant, to the maximum extent permitted under Section 409A in the case of 409A Awards.

     (c) Definition of “Change in Control.” A “Change in Control” shall be deemed to have occurred if, after the Effective Date, there shall have occurred any of the following:

(i) Any “person,” as such term is used in Section 13(d) and 14(d) of 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), acquires voting securities of the Company and immediately thereafter is a “20% Beneficial Owner.” For purposes of this provision, a “20% Beneficial Owner” shall mean a person who is 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 voting securities; provided that the term “20% Beneficial Owner” shall not include any person who, at all times following such an acquisition of securities, remains eligible to file a Schedule 13G pursuant to Rule 13d-1(b) under the Exchange Act, or remains exempt from filing a Schedule 13D under Section 13(d)(6)(b) of the Exchange Act, with respect to all classes of Company voting securities; and provided further, that a person who is a “Purchaser” as defined in Amendment No. 2, dated as of September 21, 2002, to the Rights Agreement, dated as of October 27, 1998, as amended through the Effective Date, by and between the Company and The Bank of New York, as successor Rights Agent (the “Rights Agreement”), or who acquires beneficial ownership of Stock from a “Purchaser” as a result of a transfer of Preferred Shares and/or Warrants pursuant to and in accordance with Section 4.10 of the Preferred Stock and Warrant Purchase Agreement, dated as of September 21, 2002, shall not be deemed a 20% Beneficial Owner hereunder unless such person constitutes an “Acquiring Person” under the Rights Agreement as in effect at the Effective Date;

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(ii)	During any period of two consecutive years commencing on or after the Effective Date, 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 (the “Continuing Directors”) cease for any reason to constitute at least a majority thereof;
(iii)	The shareholders of the Company have approved a merger, consolidation, recapitalization, or reorganization of the Company, or a reverse stock split of any class of voting securities of the Company, or the consummation of any such transaction if shareholder approval is not obtained, other than any such transaction which would result in at least 60% of the combined voting power of the voting securities of the Company or the surviving entity outstanding immediately after such transaction being beneficially owned by persons who together beneficially owned at least 80% of the combined voting power of the voting securities of the Company outstanding immediately prior to such transaction, with the relative voting power of each such continuing holder compared to the voting power of each other continuing holder not substantially altered as a result of the transaction; provided that, for purposes of this paragraph (iii), such continuity of ownership (and preservation of relative voting power) shall be deemed to be satisfied if the failure to meet such 60% threshold (or to substantially preserve such relative voting power) is due solely to the acquisition of voting securities by an employee benefit plan of the Company, such surviving entity or a subsidiary thereof; and provided further, that, if consummation of the corporate transaction referred to in this Section 10(c)(iii) is subject, at the time of such approval by shareholders, to the consent of any government or governmental agency or approval of the shareholders of another entity or other material contingency, no Change in Control shall occur until such time as such consent and approval has been obtained and any other material contingency has been satisfied;
(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 (or any transaction having a similar effect); provided that, if consummation of the transaction referred to in this Section 10(c)(iv) is subject, at the time of such approval by shareholders, to the consent of any government or governmental agency or approval of the shareholders of another entity or other material contingency, no Change in Control shall occur until such time as such consent and approval has been obtained and any other material contingency has been satisfied; and
(v)	any other event which the Board of Directors of the Company determines shall constitute a Change in Control for purposes of this Plan.

     (d) Definition of “409A Ownership/Control Change.” A “409A Ownership/Control Change” shall be deemed to have occurred if a Change in Control occurs which constitutes a change in the ownership or effective control of the Company, or in the ownership of a substantial portion of the assets of the Company, within the meaning of Code Section 409A(a)(2)(A)(v).

     (e) Definition of “Change in Control Price.” The “Change in Control Price” means an amount in cash equal to the higher of (i) the amount of cash and fair market value of property

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that is the highest price per share paid (including extraordinary dividends) in any transaction triggering the Change in Control or any liquidation of shares following a sale of substantially all assets of the Company, or (ii) the highest Fair Market Value per share at any time during the 60-day period preceding and 60-day period following the Change in Control.

     (f) Termination of Employment After Change in Control Negotiations Have Commenced. For purposes of this Section 10, a termination of a Participant’s employment 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 within 24 months of the commencement date of such negotiations.

     11. Additional Award Forfeiture Provisions.

     (a) Forfeiture of Options and Other Awards and Gains Realized Upon Prior Option Exercises or Award Settlements. Unless otherwise determined by the Committee, each Award granted hereunder, other than Awards granted to non-employee directors, shall be subject to the following additional forfeiture conditions, to which the Participant, by accepting an Award hereunder, agrees. If any of the events specified in Section 11(b)(i), (ii), or (iii) occurs (a “Forfeiture Event”), all of the following forfeitures will result:

(i)

The unexercised portion of the Option, whether or not vested, and any other Award not then settled (except for an Award that has not been settled solely due to an elective deferral by the Participant and otherwise is not forfeitable in the event of any termination of service of the Participant) will be immediately forfeited and canceled upon the occurrence of the Forfeiture Event; and

(ii)

The Participant will be obligated to repay to the Company, in cash, within five business days after demand is made therefor by the Company the total amount of Award Gain (as defined herein) realized by the Participant upon each exercise of an Option or settlement of an Award (regardless of any elective deferral) that occurred on or after (A) the date that is six months prior to the occurrence of the Forfeiture Event, if the Forfeiture Event occurred while the Participant was employed by the Company or a subsidiary or affiliate, or (B) the date that is six months prior to the date the Participant’s employment by the Company or a subsidiary or affiliate terminated, if the Forfeiture Event occurred after the Participant ceased to be so employed. For purposes of this Section, the term “Award Gain” shall mean (i), in respect of a given Option exercise, the product of (X) the Fair Market Value per share of Stock at the date of such exercise (without regard to any subsequent change in the market price of shares) minus the exercise price times (Y) the number of shares as to which the Option was exercised at that date, and (ii), in respect of any other settlement of an Award granted to the Participant, the Fair Market Value of the cash or Stock paid or payable to Participant (regardless of any elective deferral) less any cash or the Fair Market Value of any Stock or property (other than an Award or award which would have itself then been forfeitable hereunder and excluding any payment of tax withholding) paid by the Participant to the Company as a condition of or in connection such settlement.

     (b) Events Triggering Forfeiture. The forfeitures specified in Section 11(a) will be triggered upon the occurrence of any one of the following Forfeiture Events at any time during the Participant’s employment by the Company or a subsidiary or affiliate and resulting in his or her termination of employment, or during the one-year period following termination of such employment:

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(i)	The Participant, acting alone or with others, directly or indirectly, prior to a Change in Control, (A) engages, either as employee, employer, consultant, advisor, or director, or as an owner, investor, partner, or stockholder unless the Participant’s interest is insubstantial, in any business in an area or region in which the Company conducts business at the date the event occurs, which is directly in competition with a business then conducted by the Company or a subsidiary or affiliate; (B) induces any customer or supplier of the Company or a subsidiary or affiliate, or a telephone company with which the Company or a subsidiary or affiliate has a business relationship, to curtail, cancel, not renew, or not continue his or her or its business with the Company or any subsidiary or affiliate; or (C) induces, or attempts to influence, any employee of or service provider to the Company or a subsidiary or affiliate to terminate such employment or service. The Committee shall, in its discretion, determine which lines of business the Company conducts on any particular date and which third parties may reasonably be deemed to be in competition with the Company. For purposes of this Section 11(b)(i), a Participant’s interest as a stockholder is insubstantial if it represents beneficial ownership of less than five percent of the outstanding class of stock, and a Participant’s interest as an owner, investor, or partner is insubstantial if it represents ownership, as determined by the Committee in its discretion, of less than five percent of the outstanding equity of the entity;
(ii)	The Participant discloses, uses, sells, or otherwise transfers, except in the course of employment with or other service to the Company or any subsidiary or affiliate, any confidential or proprietary information of the Company or any subsidiary or affiliate, including but not limited to information regarding the Company’s current and potential customers, organization, employees, finances, and methods of operations and investments, so long as such information has not otherwise been disclosed to the public or is not otherwise in the public domain, except as required by law or pursuant to legal process, or the Participant makes statements or representations, or otherwise communicates, directly or indirectly, in writing, orally, or otherwise, or takes any other action which may, directly or indirectly, disparage or be damaging to the Company or any of its subsidiaries or affiliates or their respective officers, directors, employees, advisors, businesses or reputations, except as required by law or pursuant to legal process; or
(iii)	The Participant fails to cooperate with the Company or any subsidiary or affiliate in any way, including, without limitation, by making himself or herself available to testify on behalf of the Company or such subsidiary or affiliate in any action, suit, or proceeding, whether civil, criminal, administrative, or investigative, or otherwise fails to assist the Company or any subsidiary or affiliate in any way, including, without limitation, in connection with any such action, suit, or proceeding by providing information and meeting and consulting with members of management of, other representatives of, or counsel to, the Company or such subsidiary or affiliate, as reasonably requested.

     (c) Agreement Does Not Prohibit Competition or Other Participant Activities. Although the conditions set forth in this Section 11 shall be deemed to be incorporated into an Award, a Participant is not thereby prohibited from engaging in any activity, including but not limited to competition with the Company and its subsidiaries and affiliates. Rather, the non-occurrence of the Forfeiture Events set forth in Section 11(b) is a condition to the Participant’s right to realize and retain value from his or her compensatory Options and Awards, and the consequence under the Plan if the Participant engages in an activity giving rise to any such Forfeiture Event are the forfeitures specified herein. The Company and the Participant shall not be precluded by this provision or otherwise from entering into other agreements concerning the subject matter of Sections 11(a) and 11(b).

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     (d) Committee Discretion. The Committee may, in its discretion, waive in whole or in part the Company’s right to forfeiture under this Section, but no such waiver shall be effective unless evidenced by a writing signed by a duly authorized officer of the Company. In addition, the Committee may impose additional conditions on Awards, by inclusion of appropriate provisions in the document evidencing or governing any such Award.

     12. General Provisions.

     (a) Compliance with Legal and Other Requirements. The Company may, to the extent deemed necessary or advisable by the Committee and subject to Section 12(k), postpone the issuance or delivery of Stock or payment of other benefits under any Award until completion of such registration or qualification of such Stock or other required action under any federal or state law, rule or regulation, listing or other required action with respect to any stock exchange or automated quotation system upon which the Stock or other securities of the Company are listed or quoted, or compliance with any other obligation of the Company, as the Committee may consider appropriate, and may require any Participant to make such representations, furnish such information and comply with or be subject to such other conditions as it may consider appropriate in connection with the issuance or delivery of Stock or payment of other benefits in compliance with applicable laws, rules, and regulations, listing requirements, or other obligations. The foregoing notwithstanding, in connection with a Change in Control, the Company shall take or cause to be taken no action, and shall undertake or permit to arise no legal or contractual obligation, that results or would result in any postponement of the issuance or delivery of Stock or payment of benefits under any Award or the imposition of any other conditions on such issuance, delivery or payment, to the extent that such postponement or other condition would represent a greater burden on a Participant than existed on the 90th day preceding the Change in Control.

     (b) Limits on Transferability; Beneficiaries. No Award or other right or interest of a Participant under the Plan shall be pledged, hypothecated or otherwise encumbered or subject to any lien, obligation or liability of such Participant to any party (other than the Company or a subsidiary or affiliate thereof), or assigned or transferred by such Participant otherwise than by will or the laws of descent and distribution or to a Beneficiary upon the death of a Participant, and such Awards or rights that may be exercisable shall be exercised during the lifetime of the Participant only by the Participant or his or her guardian or legal representative, except that Awards and other rights (other than ISOs and SARs in tandem therewith) may be transferred to one or more transferees during the lifetime of the Participant, and may be exercised by such transferees in accordance with the terms of such Award, but only if and to the extent such transfers are permitted by the Committee, subject to any terms and conditions which the Committee may impose thereon (which may include limitations the Committee may deem appropriate in order that offers and sales under the Plan will meet applicable requirements of registration forms under the Securities Act of 1933 specified by the Securities and Exchange Commission). A Beneficiary, transferee, or other person claiming any rights under the Plan from or through any Participant shall be subject to all terms and conditions of the Plan and any Award document applicable to such Participant, except as otherwise determined by the Committee, and to any additional terms and conditions deemed necessary or appropriate by the Committee.

     (c) Adjustments. In the event that any large, special and non-recurring dividend or other distribution (whether in the form of cash or property other than Stock), recapitalization, forward or reverse split, Stock dividend, reorganization, merger, consolidation, spin-off, combination, repurchase, share exchange, liquidation, dissolution or other similar corporate transaction or event affects the Stock such that an adjustment is determined by the Committee to be appropriate and, in the case of any outstanding Award, necessary in order to prevent dilution or enlargement of the rights of the Participant, then the Committee shall, in an equitable manner as determined by the Committee, adjust any or all of (i) the number and kind of shares of Stock which may be delivered in connection with Awards granted thereafter, including the number of shares available in Pool 1 and Pool 2, (ii) the number and kind of shares of Stock by which

27

annual per-person Award limitations are measured under Section 5 and Section 8 and the calculated annual run-rate limitation under Section 4(c), (iii) the number and kind of shares of Stock subject to or deliverable in respect of outstanding Awards and (iv) the exercise price, grant price or purchase price relating to any Award or, if deemed appropriate, the Committee may make provision for a payment of cash or property to the holder of an outstanding Option. In addition, the Committee is authorized to make adjustments in the terms and conditions of, and the criteria included in, Awards (including Performance Awards and performance goals and any hypothetical funding pool relating thereto) in recognition of unusual or nonrecurring events (including, without limitation, events described in the preceding sentence, as well as acquisitions and dispositions of businesses and assets) affecting the Company, any subsidiary or affiliate or other business unit, or the financial statements of the Company or any subsidiary or affiliate, or in response to changes in applicable laws, regulations, accounting principles, tax rates and regulations or business conditions or in view of the Committee’s assessment of the business strategy of the Company, any subsidiary or affiliate or business unit thereof, performance of comparable organizations, economic and business conditions, personal performance of a Participant, and any other circumstances deemed relevant; provided that no such adjustment shall be authorized or made if and to the extent that the existence of such authority (i) would cause Options, SARs, or Performance Awards granted under the Plan to Participants designated by the Committee as Covered Employees and intended to qualify as “performance-based compensation” under Code Section 162(m) and regulations thereunder to otherwise fail to qualify as “performance-based compensation” under Code Section 162(m) and regulations thereunder, or (ii) would cause the Committee to be deemed to have authority to change the targets, within the meaning of Treasury Regulation 1.162-27(e)(4)(vi), under the performance goals relating to Options or SARs granted to Covered Employees and intended to qualify as “performance-based compensation” under Code Section 162(m) and regulations thereunder.

     (d) Tax Provisions.

(i)

Withholding. The Company and any subsidiary or affiliate is authorized to withhold from any Award granted, any payment relating to an Award under the Plan, including from a distribution of Stock, or any payroll or other payment to a Participant, amounts of withholding and other taxes due or potentially payable in connection with any transaction involving an Award, and to take such other action as the Committee may deem advisable to enable the Company and Participants to satisfy obligations for the payment of withholding taxes and other tax obligations relating to any Award. This authority shall include authority to withhold or receive Stock or other property and to make cash payments in respect thereof in satisfaction of a Participant’s withholding obligations, either on a mandatory or elective basis in the discretion of the Committee, or in satisfaction of other tax obligations. Other provisions of the Plan notwithstanding, only the minimum amount of Stock deliverable in connection with an Award necessary to satisfy statutory withholding requirements will be withheld, unless withholding of any additional amount of Stock will not result in additional accounting expense to the Company.

(ii)

Required Consent to and Notification of Code Section 83(b) Election. No election under Section 83(b) of the Code (to include in gross income in the year of transfer the amounts specified in Code Section 83(b)) or under a similar provision of the laws of a jurisdiction outside the United States may be made unless expressly permitted by the terms of the Award document or by action of the Committee in writing prior to the making of such election. In any case in which a Participant is permitted to make such an election in connection with an Award, the Participant shall notify the Company of such election within ten days of filing notice of the election with the Internal Revenue Service or other

28

	governmental authority, in addition to any filing and notification required pursuant to regulations issued under Code Section 83(b) or other applicable provision.
(iii)	Requirement of Notification Upon Disqualifying Disposition Under Code Section 421(b). If any Participant shall make any disposition of shares of Stock delivered pursuant to the exercise of an ISO under the circumstances described in Code Section 421(b) (i.e., a disqualifying disposition), such Participant shall notify the Company of such disposition within ten days thereof.

     (e) Changes to the Plan. The Board may amend, suspend or terminate the Plan or the Committee’s authority to grant Awards under the Plan without the consent of stockholders or Participants; provided, however, that any amendment to the Plan shall be submitted to the Company’s stockholders for approval not later than the earliest annual meeting for which the record date is at or after the date of such Board action if such stockholder approval is required by any federal or state law or regulation or the rules of the New York Stock Exchange or any other stock exchange or automated quotation system on which the Stock may then be listed or quoted, or if such amendment would materially increase the number of shares reserved for issuance and delivery under the Plan, and the Board may otherwise, in its discretion, determine to submit other amendments to the Plan to stockholders for approval; and provided further, that, without the consent of an affected Participant, no such Board action may materially and adversely affect the rights of such Participant under any outstanding Award (for this purpose, actions that alter the timing of federal income taxation of a Participant will not be deemed material unless such action results in an income tax penalty on the Participant). Without the approval of stockholders, the Committee will not amend or replace previously granted Options or SARs in a transaction that constitutes a “repricing,” as such term is used in Section 303A.08 of the Listed Company Manual of the New York Stock Exchange. With regard to other terms of Awards, the Committee shall have no authority to waive or modify any such Award term after the Award has been granted to the extent the waived or modified term would be mandatory under the Plan for any Award newly granted at the date of the waiver or modification.

     (f) Right of Setoff. The Company or any subsidiary or affiliate may, to the extent permitted by applicable law, deduct from and set off against any amounts the Company or a subsidiary or affiliate may owe to the Participant from time to time, including amounts payable in connection with any Award, owed as wages, fringe benefits, or other compensation owed to the Participant, such amounts as may be owed by the Participant to the Company, including but not limited to amounts owed under Section 11(a), although the Participant shall remain liable for any part of the Participant’s payment obligation not satisfied through such deduction and setoff. By accepting any Award granted hereunder, the Participant agrees to any deduction or setoff under this Section 12(f).

     (g) Unfunded Status of Awards; Creation of Trusts. The Plan is intended to constitute an “unfunded” plan for incentive and deferred compensation. With respect to any payments not yet made to a Participant or obligation to deliver Stock pursuant to an Award, nothing contained in the Plan or any Award shall give any such Participant any rights that are greater than those of a general creditor of the Company; provided that the Committee may authorize the creation of trusts and deposit therein cash, Stock, other Awards or other property, or make other arrangements to meet the Company’s obligations under the Plan. Such trusts or other arrangements shall be consistent with the “unfunded” status of the Plan unless the Committee otherwise determines with the consent of each affected Participant.

     (h) Nonexclusivity of the Plan. Neither the adoption of the Plan by the Board nor its submission to the stockholders of the Company for approval shall be construed as creating any limitations on the power of the Board or a committee thereof to adopt such other incentive arrangements, apart from the Plan, as it may deem desirable, including incentive arrangements

29

and awards which do not qualify under Code Section 162(m), and such other arrangements may be either applicable generally or only in specific cases.

     (i) Payments in the Event of Forfeitures; Fractional Shares. Unless otherwise determined by the Committee, in the event of a forfeiture of an Award with respect to which a Participant paid cash consideration, the Participant shall be repaid the amount of such cash consideration. No fractional shares of Stock shall be issued or delivered pursuant to the Plan or any Award. The Committee shall determine whether cash, other Awards or other property shall be issued or paid in lieu of such fractional shares or whether such fractional shares or any rights thereto shall be forfeited or otherwise eliminated.

     (j) Compliance with Code Section 162(m). It is the intent of the Company that Options and SARs granted to Covered Employees and other Awards designated as Awards to Covered Employees subject to Section 7 shall constitute qualified “performance-based compensation” within the meaning of Code Section 162(m) and regulations thereunder, unless otherwise determined by the Committee at the time of allocation of an Award. Accordingly, the terms of Sections 7(b), (c), and (d), including the definitions of Covered Employee and other terms used therein, shall be interpreted in a manner consistent with Code Section 162(m) and regulations thereunder. The foregoing notwithstanding, because the Committee cannot determine with certainty whether a given Participant will be a Covered Employee with respect to a fiscal year that has not yet been completed, the term Covered Employee as used herein shall mean only a person designated by the Committee as likely to be a Covered Employee with respect to a specified fiscal year. If any provision of the Plan or any Award document relating to a Performance Award that is designated as intended to comply with Code Section 162(m) does not comply or is inconsistent with the requirements of Code Section 162(m) or regulations thereunder, such provision shall be construed or deemed amended to the extent necessary to conform to such requirements, and no provision shall be deemed to confer upon the Committee or any other person discretion to increase the amount of compensation otherwise payable in connection with any such Award upon attainment of the applicable performance objectives.

     (k) Certain Limitations on Awards to Ensure Compliance with Section 409A. For purposes of this Plan, references to an award term or event (including any authority or right of the Company or a Participant) being “permitted” under Section 409A mean, for a 409A Award, that the term or event will not cause the Participant to be liable for payment of interest or a tax penalty under Section 409A and, for a Non-409A Award, that the term or event will not cause the Award to be treated as subject to Section 409A. Other provisions of the Plan notwithstanding, the terms of any 409A Award and any Non-409A Award, including any authority of the Company and rights of the Participant with respect to the Award, shall be limited to those terms permitted under Section 409A, and any terms not permitted under Section 409A shall be automatically modified and limited to the extent necessary to conform with Section 409A. For this purpose, other provisions of the Plan notwithstanding, the Company shall have no authority to accelerate distributions relating to 409A Awards in excess of the authority permitted under Section 409A, and any distribution subject to Section 409A(a)(2)(A)(i) (separation from service) to a “key employee” as defined under Section 409A(a)(2)(B)(i), shall not occur earlier than the earliest time permitted under Section 409A(a)(2)(B)(i).

     (l) Governing Law. The validity, construction, and effect of the Plan, any rules and regulations relating to the Plan and any Award document shall be determined in accordance with the laws of the State of Delaware, without giving effect to principles of conflicts of laws, and applicable provisions of federal law.

     (m) Awards to Participants Outside the United States. The Committee may modify the terms of any Award under the Plan made to or held by a Participant who is then

30

resident or primarily employed outside of the United States in any manner deemed by the Committee to be necessary or appropriate in order that such Award shall conform to laws, regulations, and customs of the country in which the Participant is then resident or primarily employed, or so that the Award otherwise will have appropriate terms that advance the purposes of the Plan. An Award may be modified under this Section 12(m) in a manner that is inconsistent with the express terms of the Plan, so long as such modifications will not contravene any applicable law or regulation or result in actual liability under Section 16(b) for the Participant whose Award is modified.

     (n) Limitation on Rights Conferred under Plan. Neither the Plan nor any action taken hereunder shall be construed as (i) giving any Eligible Person or Participant the right to continue as an Eligible Person or Participant or in the employ or service of the Company or a subsidiary or affiliate, (ii) interfering in any way with the right of the Company or a subsidiary or affiliate to terminate any Eligible Person’s or Participant’s employment or service at any time (subject to the terms and provisions of any separate written agreements), (iii) giving an Eligible Person or Participant any claim to be granted any Award under the Plan or to be treated uniformly with other Participants and employees, or (iv) conferring on a Participant any of the rights of a stockholder of the Company unless and until the Participant is duly issued or transferred shares of Stock in accordance with the terms of an Award or an Option is duly exercised. Except as expressly provided in the Plan and an Award document, neither the Plan nor any Award document shall confer on any person other than the Company and the Participant any rights or remedies thereunder.

     (o) Severability; Entire Agreement. If any of the provisions of this Plan or any Award document is finally held to be invalid, illegal or unenforceable (whether in whole or in part), such provision shall be deemed modified to the extent, but only to the extent, of such invalidity, illegality or unenforceability, and the remaining provisions shall not be affected thereby; provided, that, if any of such provisions is finally held to be invalid, illegal, or unenforceable because it exceeds the maximum scope determined to be acceptable to permit such provision to be enforceable, such provision shall be deemed to be modified to the minimum extent necessary to modify such scope in order to make such provision enforceable hereunder. The Plan and any Award documents contain the entire agreement of the parties with respect to the subject matter thereof and supersede all prior agreements, promises, covenants, arrangements, communications, representations and warranties between them, whether written or oral with respect to the subject matter thereof.

     (p) Plan Effective Date and Termination. The Plan shall become effective if, and at such time as, the stockholders of the Company have approved it by the affirmative votes of the holders of a majority of the voting securities of the Company present, or represented, and entitled to vote on the subject matter at a duly held meeting of stockholders (provided that the total vote cast on the proposal represents over 50% in interest of all securities entitled to vote on the proposal). Upon such approval of the Plan by the stockholders of the Company, no further awards shall be granted under the Preexisting Plans, but any outstanding awards under the Preexisting Plans shall continue in accordance with their terms. Any elections made by non-employee directors and their respective Deferral Accounts established pursuant to the 1998 Directors’ Stock Plan or 2001 Stock Award and Incentive Plan shall continue as if made or established pursuant to the Plan until any such election is changed by such Participant in accordance with the provisions of this Plan. Unless earlier terminated by action of the Board of Directors, the authority of the Committee to make grants under the Plan shall terminate on the date that is ten years after the latest date upon which stockholders of the Company have approved the Plan, and the Plan will remain in effect until such time as no Stock remains available for delivery under the Plan and the Company has no further rights or obligations under the Plan with respect to outstanding Awards under the Plan.

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i            Note to draft: This provision is designed to meet the guidelines of Institutional Shareholder Services (ISS), including ISS’s 2005 changes. There are two basic approaches to the new ISS rules on share counting: (i) treat all shares as available for full-value awards, but provide for aggressive share counting; (ii) treat a portion of the shares as available solely for options, stock SARs and similar awards that are not full-value awards, and provide for only limited share recaptures for those shares. As drafted, this provision is a hybrid, setting out the basic rule in clause (ii) but allowing non-full value shares to be shifted to become a reduced number of full-value award shares with more aggressive share counting. This is consistent with past ISS interpretations, but is yet to be vetted with ISS.

     The provision allows for a greater number of Full-Value Awards to be granted by expanding Pool 1, with a reduction in Pool 2 (i.e., reducing shares available for Options, stock SARs and other non-Full-Value Awards). The reduction ratio based on ISS modeling, is the ratio of ((value of a share used for a Full-Value Award) divided by (binomial value of an option in the ISS model)). Thus, if value of a Full-Value Award share is $30 and binomial value of an option is $10, the ratio is 3:1, so Pool 2 would be reduced by 3 for each share added to Pool 1 for Full-Value Awards. Significantly, this feature permits the Committee to elect to treat Options and SARs as Full-Value Awards to take advantage of more favorable share-counting rules. If stock SARs are granted and treated as coming from Pool 1, the recapture of shares should be significant, thereby conserving plan shares as compared to the usage from Pool 2.

ii            Note to draft: Consider whether the recent ISS rule changes will require that cash SARs or other cash equity awards be treated as tying up Plan shares while they are outstanding. They do not appear to do this explicitly.

iii            Note to draft: An issue exists whether an election to be paid in the form of an Option represents an Option feature that makes the award a 409A Award. A stock SAR that was designed as a 409A Award could be used for this purpose.

EX-10.16

Exhibit 10.16

NON-QUALIFIED STOCK OPTION AGREEMENT

     NON-QUALIFIED STOCK OPTION AGREEMENT (this “Option Agreement”) made as of the date specified on Annex A attached hereto (the “Grant Date”), between R.H. Donnelley Corporation, a Delaware corporation (the “Company”), and the undersigned individual (the “Participant”), pursuant to the R.H. Donnelley Corporation 2005 Stock Award and Incentive Plan (as may be amended from time to time, the “2005 Plan”), a copy of which you may access electronically on the RHD Intranet under “Human Resources”. Unless otherwise defined herein, the terms defined in the 2005 Plan shall have the same defined meanings in this Option Agreement.

     In consideration of the mutual covenants hereinafter set forth and for other good and valuable consideration, the validity and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound hereunder, agree as follows:

     1. Grant of Option. The Company hereby grants to the Participant the right and option (this “Option”) to purchase all or any part of an aggregate of the number of shares specified on Annex A of the Company’s Common Stock, par value $1.00 per share (the “Shares”). This Option is in all respects limited and conditioned as hereinafter provided, and is subject to the terms and conditions of the 2005 Plan (which terms and conditions are and automatically shall be incorporated herein by reference and made a part hereof and shall control in the event of any conflict with any terms of this Option Agreement). This Option is a non-qualified Option and not an Incentive Stock Option.

     2. Exercise Price. The exercise price per share of the Shares purchasable under this Option is specified on Annex A (the “Exercise Price”), which is equal to the Fair Market Value of Stock as of the Grant Date.

     3. Term. Unless earlier terminated pursuant to the 2005 Plan or this Option Agreement, this Option shall expire on the expiration date specified on Annex A (the “Expiration Date”), which is the seventh anniversary of the Grant Date. This Option shall not be exercisable on or after the Expiration Date.

     4. Exercise of Option. Unless otherwise specified on Annex A, this Option may be exercised in three equal installments of the Shares on each of the first three anniversaries of the Grant Date, so that this Option shall be exercisable as to all Shares on the last such anniversary. Any portion of this Option that becomes exercisable in accordance with the foregoing shall remain exercisable, subject to the 2005 Plan or this Option Agreement (including without limitation Paragraph 8), until the Expiration Date or until other termination of this Option in accordance with the 2005 Plan. Prior to the exercise of this Option and delivery of the resulting Shares, the Participant shall not have any rights of a stockholder with respect to this Option or the Shares subject to this Option.

     5. Method of Exercising Option. (a) Subject to the terms and conditions of the 2005 Plan and this Option Agreement, this Option may be exercised upon written notice to the Company at its principal office, which is currently located at 1001 Winstead Drive, Cary, NC 27513, Attention: Vice President — Compensation. Such notice (a suggested form of which is

1

attached as Annex B) shall state the Participant’s election to exercise this Option and the number of shares with respect to which it is being exercised; shall be signed by the Participant (or permitted assignee or legal representative); shall, if the Company so requests, be accompanied by the investment representation statement referred to in Paragraph 6; and shall be accompanied by payment of the full Exercise Price of the Shares with respect to which this Option is exercised. The Exercise Price shall be paid to the Company:

     (i) in cash or its equivalent;

     (ii) in Stock previously acquired by the Participant; provided that such shares of Stock have been owned by the Participant for more than 6 months on the date of exercise and have a Fair Market Value as of the date of exercise equal to the Exercise Price of the Shares with respect to which this Option is exercised; or

     (iii) in any combination of (i) or (ii) above.

In the event such Exercise Price is to be paid, in whole or in part, with shares of Stock, the Committee may impose additional requirements on the payment of the Exercise Price through the surrender of such Stock.

     (b) Upon receipt of such notice and payment, the Company, as promptly as practicable, shall deliver or cause to be delivered a certificate or certificates representing the Shares with respect to which this Option is so exercised. The certificate or certificates for the Shares as to which this Option shall have been so exercised shall be registered in the name of the person or persons so exercising this Option (or, if this Option shall be exercised by the Participant and if the Participant shall so request in the notice exercising this Option, shall be registered in the name of the Participant and the Participant’s spouse, jointly, with right of survivorship or a trust established by the Participant for estate planning purposes) and shall be delivered as provided above to or upon the written order of the person or persons exercising this Option. In the event this Option is exercised by any person or persons after the legal disability or death of the Participant, such notice shall be accompanied by appropriate proof of the right of such person or persons to exercise this Option. All Shares that shall be purchased upon the exercise of this Option as provided herein shall be fully paid and non-assessable by the Company.

     (c) Notwithstanding any provision in this Paragraph 5 to the contrary, this Option may be exercised in such other manner consistent with the 2005 Plan and applicable law as from time to time may be authorized in writing by the Company with respect to such “cashless” option exercise arrangements as the Company from time to time may maintain with securities brokers. Any such arrangements and written authorizations may be terminated at any time by the Company without notice to the Participant.

     6. Shares to be Purchased for Investment. In the event the offer and sale of Shares to be purchased upon the exercise of this Option are not covered by a then effective registration

2

statement under the Securities Act of 1933, as amended (the “Securities Act”), the Company may require as a condition to such exercise the Participant (or other person entitled to exercise this Option) to deliver to the Company an investment representation statement, as well as any other documentation or information as the Committee shall reasonably request. The Company shall be entitled to restrict the transferability of the shares issued upon any such exercise to the extent necessary to avoid a risk of violation of the Securities Act or of any state laws or regulations. Such restrictions may, at the discretion of the Company, be noted or set forth in full on the share certificates issued upon exercise of this Option.

     7. Non-Transferability of Option; Forfeiture. (a) This Option shall not be pledged, hypothecated or otherwise encumbered or subject to any lien, obligation or liability of the Participant to any party (other than the Company or its subsidiary or affiliate), or assigned or transferred by the Participant, other than by will or the laws of descent and distribution or to a Beneficiary upon the death of the Participant, and during the lifetime of the Participant, this Option shall be exercisable only by the Participant or his or her guardian or legal representative, except that this Option may be transferred to one or more transferees during the lifetime of the Participant and may be exercised by such transferees in accordance with the terms of this Option, but only if and to the extent such transfers are permitted by the Committee, subject to any terms and conditions which the Committee may impose thereon (including limitations the Committee may deem appropriate in order that offers and sales of Shares will meet applicable requirements of registration forms under the Securities Act specified by the Securities and Exchange Commission). A Beneficiary, transferee or other person claiming any rights under the 2005 Plan from or through the Participant shall be subject to all terms and conditions of the 2005 Plan and this Option Agreement, except as otherwise determined by the Committee, and to any additional terms and conditions deemed necessary or appropriate by the Committee.

     (b) This Option, any Shares purchased hereunder and any gains realized upon exercise of this Option are subject to forfeiture under certain circumstances in accordance with Section 11 of the 2005 Plan.

     8. Termination of Employment. (a) Exercisability Upon Termination by Death, Disability or Retirement. If the Participant’s employment by the Company or any subsidiary or affiliate terminates by reason of death, Disability (as defined below) or Retirement (as defined below), this Option may be exercised until the earlier to occur of one year after the date of such termination or the Expiration Date, to the full extent of this Option, regardless of the extent to which it was exercisable at the time of such death, Disability or Retirement; provided, however, that in the event of Early Retirement (as defined below), the entire vested portion of this Option and 50% of the unvested portion of this Option shall be exercisable during such period. Upon expiration of any such post-termination exercise period, this Option shall terminate.

     (b) Effect of Other Termination. Unless otherwise determined by the Committee, if the Participant’s employment by the Company or any subsidiary or affiliate terminates for any reason, other than death, Disability or Retirement or for Cause, this Option shall be exercisable during the period of 90 days after such termination or until the Expiration Date, whichever period is shorter, but only to the extent to which this Option was exercisable at the time of such termination. If such

3

termination is for Cause, then this Option shall terminate upon such termination, unless otherwise determined by the Committee. Upon expiration of any such post-termination exercise period, this Option shall terminate.

     (c) Definitions. The term “Disability” shall have the meaning defined for such term in the long-term disability plan of the Company, as in effect from time to time, and the term “Retirement” shall mean your termination after your attaining (i) age 50 years with 20 years of service with the Company or any of its subsidiaries or affiliates (“Early Retirement”), (ii) age 55 years with 10 years of service with the Company or any of its subsidiaries or affiliates or (iii) age 65 years without regard to years of such service.

     9. Change in Control. Notwithstanding Section 10 of the 2005 Plan, upon a Change in Control, this Option shall terminate automatically with respect to all unvested Shares covered by this Option at that time and the Participant shall be entitled to an amount of cash equal to the excess of the Change in Control Price over the Exercise Price, multiplied by the number of unvested Shares, and all vested shares shall remain subject to and governed by Section 10 of the Plan; provided, however, that the transactions contemplated by that certain Preferred Stock and Warrant Purchase Agreement, dated as of September 21, 2002, by and among the Company and the investors listed therein (as amended and supplemented to date and from time to time, the “Preferred Stock and Warrant Purchase Agreement”), including, without limitation, the initial issuance of the Preferred Shares and the Warrants (each as defined in the Preferred Stock and Warrant Purchase Agreement) and any other issuances or other matters provided therein, shall not constitute a Change in Control as defined in Section 10(c) of the 2005 Plan.

     10. No Guarantee of Continued Employment or Other Service. THE PARTICIPANT ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO PARAGRAPH 4 IS EARNED ONLY BY CONTINUING AS AN EMPLOYEE AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER). THE PARTICIPANT FURTHER ACKNOWLEDGES AND AGREES THAT THIS OPTION AGREEMENT AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED EMPLOYMENT FOR THE VESTING PERIOD, FOR ANY PERIOD OR AT ALL, AND SHALL NOT INTERFERE IN ANY WAY WITH THE PARTICIPANT’S RIGHT TO TERMINATE OR THE COMPANY’S RIGHT TO TERMINATE THE PARTICIPANT AT ANY TIME, WITH OR WITHOUT CAUSE.

     11. Withholding. The Company and any subsidiary or affiliate is authorized to withhold from any payment relating to this Option, including from a distribution of Stock, or any payroll or other payment to the Participant, amounts of withholding and other taxes due or potentially payable in connection with any transaction involving this Option, and to take such other action as the Committee may deem advisable to enable the Company and the Participant to satisfy obligations for the payment of withholding taxes and other tax obligations relating to this Option. This authority shall include authority to withhold or receive Stock or other property and to make cash payments in respect thereof in satisfaction

4

of a Participant’s withholding obligations, either on a mandatory or elective basis in the discretion of the Committee. Notwithstanding any provision in the 2005 Plan to the contrary, only the minimum amount of Stock deliverable in connection with this Option necessary to satisfy statutory withholding requirements will be withheld.

     12. Governing Law; Entire Agreement; Option Surrender. (a) The validity, construction and effect of this Option Agreement shall be determined in accordance with the laws of the State of Delaware, without giving effect to principles of conflicts of law, and applicable provisions of federal law.

     (b) The 2005 Plan and this Option Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and the Participant with respect to the subject matter hereof. Any modification of this Option Agreement must be in writing signed by the Company (oral statements by any person cannot modify this Option Agreement). Decisions of the Committee with respect to the administration and interpretation of the 2005 Plan and this Option Agreement shall be final, conclusive and binding on all persons interested therein.

     (c) As a condition to the right to exercise this Option, the Participant must not have theretofore delivered to the Company a written document signed by the Participant surrendering the Option to the Company.

IN WITNESS WHEREOF, the Company has caused this Option Agreement to be duly executed by its duly authorized officers and the Participant has executed this Option Agreement, each on Annex A, as of the Grant Date.

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EX-10.17

Exhibit 10.17

Amy W. Clark
AVP – Compensation
 
R. H. Donnelley
1001 Winstead Drive
Cary, NC 27513
Tel: 919.297.1209

{Date}

TO:     {Officer Name}

RE:     2005 Annual Incentive Plan

We are very pleased to announce this year’s Annual Incentive Program (AIP). Assuming and following shareholder approval, this program will be governed under the terms of the 2005 Stock Award and Incentive Plan (“2005 Plan"), a copy of which will be available to you electronically on the RHD intranet under “Human Resources.” Unless otherwise defined herein, the terms defined in the 2005 Plan have the same defined meanings in this letter (this “Award Agreement”).

The terms of this year’s program are as follows:

1. Performance Criteria: Performance Awards made under the AIP are based on the performance of the Company during the 2005 fiscal year (the “AIP Performance Period”) relative to Sprint Publication Sales, SBC Publication Sales, EBITDA, EPS and Free Cash Flow. The performance measures, targets, and an explanation of factors that will be included in achievement calculation for this year’s plan are detailed on Attachment A. These financial performance measures are as approved by the Compensation & Benefits Committee of the Board of Directors (the” Committee”) at the beginning of the AIP Performance Period. Attachment B provides definitions and calculations of the components that comprise the AIP performance target. All amounts as defined or calculated are subject to adjustments determined by management and approved by the Compensation Committee.

2. Performance Award Levels: Your target award under this plan is equal to {percentage}% of your current base salary. A portion of your award will be paid in cash and a portion in deferred shares of R. H. Donnelley stock (deferred stock). At target, the cash component is {percentage}% of your current base salary and the deferred stock component is {percentage}% of your current base salary.

The payout percentage under each goal area is determined through straight-line interpolation between each level, and above 200%. No amount will be payable with respect to a given performance measure if the threshold performance is not achieved. The maximum award is 300% of target.

3. Award Payment: Cash Component: You will receive the cash portion of your AIP payout as soon as reasonably practicable after the end of the AIP Performance Period in respect of which it has been earned and after approval by the Committee. Deferred stock: The deferred stock component initially will be set as a dollar amount (as a percentage of base salary) and then converted into a number of shares based upon the average of the closing stock price of the Company’s common stock during the ten trading days following the Committee’s approval of the full year financial results vs. targets (generally in February of the following year). Once converted into shares, the

Officer 2005 AIP Agreement Page 1 of 3

deferred stock will be paid out as follows: 50% on the first anniversary of the date of conversion and 50% on the second anniversary of the date of conversion.

4. Termination of Employment: If your employment is terminated by the Company “for cause” or if you voluntarily terminate your employment at any time before your payout under this plan, you will forfeit your Performance Award in its entirety and will receive no payment hereunder whatsoever.

If your employment is terminated before the end of the AIP Performance Period due to your death, Disability (as defined below), Retirement (as defined below), assignment to a different position for which you become no longer eligible to receive an AIP award, grant of a leave of absence or other termination of employment (other than for Cause or as a result of your voluntary termination), the Committee may determine, in its sole and absolute discretion, to pay to you a pro rata portion of this Performance Award. Such pro rata Performance Award will be based on the period of your actual participation and the Company’s actual financial performance against the above referenced performance measures during the full AIP Performance Period. The pro rata Performance Award (if any) will be paid to you after the end of the AIP Performance Period. In such case, the Committee may also determine, in its sole and absolute discretion, to pay to you a pro rata portion of either component or both components of this Performance Award. Under such circumstances, any deferred share payout would be converted into shares as of the date of termination and would not be subject to the vesting provisions set forth above.

The term “Disability” shall have the meaning defined for such term in the long-term disability plan of the Company, as in effect from time to time, and the term “Retirement” shall mean your termination after your attaining (i) age 55 years with 10 years of service with the Company or any of its subsidiaries or affiliates or (ii) age 65 years without regard to years of such service.

5. Effect of a Change in Control: Notwithstanding the foregoing, if in connection with a Change in Control you Retire, are assigned to a different position for which you become no longer eligible to receive an AIP award, are placed on a leave of absence or your employment is terminated for any other reason (other than for Cause or as a result of your voluntary termination) before the end of the AIP Performance Period, then you shall be entitled to receive both components of your AIP payout based on the Company’s actual financial performance against the above referenced performance measures for the full AIP Performance Period, without pro-ration, as if you had continued to be employed for the full AIP Performance Period. The deferred stock component would be converted into shares as of the date of termination and would not be subject to the vesting provisions set forth above. In the event that, in the sole and absolute discretion of the Committee, such actual financial performance cannot be accurately measured against such performance measures, each component of your AIP payout shall be paid out at no less than 100% of your target Award for that component. Except as specifically provided for in this “Effect of a Change in Control” provision, in connection with a Change in Control, this Performance Award will be subject to Section 10 of the Plan (including without limitation Section 10(f) of the Plan).

6. Miscellaneous Terms:

A. Encumbrance: This Performance Award will not be pledged, hypothecated or otherwise encumbered or subject to any lien, obligation or liability of you to any party (other than the Company or its subsidiary or affiliate), or assigned or transferred by you, other than by will or the laws of descent and distribution or to a Beneficiary upon your death. A Beneficiary, transferee or other person claiming any rights under the 2005 Plan from or through you will be subject to all

Officer 2005 AIP Agreement Page 2 of 3

terms and conditions of the 2005 Plan and this Award Document, except as otherwise determined by the Committee, and to any additional terms and conditions deemed necessary or appropriate by the Committee.

B. Forfeiture: This Performance Award is subject to forfeiture under certain circumstances in accordance with Section 11 of the 2005 Plan.

C. Decisions of the Compensation Committee: The decisions of the Committee (or, the Board, as may be applicable) as to the computation of various AIP performance measures and other determinations to be made with respect to this Performance Award will be final, binding and conclusive on you, the Company and any other interested person.

D. “At Will” Employment: ANY PAYMENT UNDER THIS PERFORMANCE AWARD IS EARNED ONLY BY CONTINUING AS AN EMPLOYEE AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED OR BEING GRANTED THIS PERFORMANCE AWARD). THIS AWARD DOCUMENT AND THE PAYOUT SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF EMPLOYMENT FOR ANY PERIOD OR AT ALL, AND WILL NOT INTERFERE IN ANY WAY WITH YOUR RIGHT TO TERMINATE OR THE COMPANY’S RIGHT TO TERMINATE YOUR EMPLOYMENT AT ANY TIME, WITH OR WITHOUT CAUSE.

E. Taxes: The Company and any subsidiary or affiliate is authorized to withhold from any payment relating to this Performance Award amounts of withholding and other taxes due or potentially payable in connection with any transaction involving this Performance Award, and to take such other action as the Committee may deem advisable to enable you and the Company to satisfy obligations for the payment of withholding taxes and other tax obligations relating to this Performance Award.

F. Laws: The validity, construction and effect of this Award Document will be determined in accordance with the laws of the State of Delaware, without giving effect to principles of conflicts of law, and applicable provisions of federal law. Any modification of this Award Document must be in writing signed by the Company (oral statements by any person cannot modify this Award Document).

Please let me know if you have any questions.

Sincerely,

/s/ Amy W. Clark

Amy W. Clark
AVP — Compensation

Officer 2005 AIP Agreement Page 3 of 3

EX-10.19

Exhibit 10.19

STOCK APPRECIATION RIGHTS GRANT AGREEMENT

     STOCK APPRECIATION RIGHTS AGREEMENT (this “SAR Agreement”) made as of the date specified on Annex A attached hereto (the “Grant Date”), between R.H. Donnelley Corporation, a Delaware corporation (the “Company”), and the undersigned individual (the “Participant”), pursuant to the R.H. Donnelley Corporation 2005 Stock Award and Incentive Plan (as may be amended from time to time, the “2005 Plan”), a copy of which you may access electronically on the RHD Intranet under “Human Resources”. Unless otherwise defined herein, the terms defined in the 2005 Plan shall have the same defined meanings in this SAR Agreement.

     In consideration of the mutual covenants hereinafter set forth and for other good and valuable consideration, the validity and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound hereunder, agree as follows:

     1. Grant of SAR. The Company hereby grants to the Participant the right to receive the aggregate dollar value of appreciation (collectively, “Appreciation") in the Fair Market Value of the Company’s Common Stock on the number of shares (the “Granted Shares") specified on Annex A, computed as the difference between (a) the aggregate Fair Market Value of the Granted Shares on the Grant Date (the “Grant Price") and (b) the aggregate Fair Market Value of the Granted Shares on the Exercise Date (as defined below) (the “Appreciation Price"). This grant shall be referred to as the SAR. Such Appreciation shall be payable only in Paid Shares (as defined below). This SAR is in all respects limited and conditioned as hereinafter provided, and is subject to the terms and conditions of the 2005 Plan (which terms and conditions are and automatically shall be incorporated herein by reference and made a part hereof and shall control in the event of any conflict with any terms of this SAR Agreement).

     2. Term. Unless earlier terminated pursuant to the 2005 Plan or this SAR Agreement, this SAR shall expire on the expiration date specified on Annex A (the “Expiration Date”), which is the seventh anniversary of the Grant Date. This SAR shall not be exercisable on or after the Expiration Date.

     3. Exercise of SAR. Unless otherwise specified on Annex A, this SAR may be exercised in three equal installments of the Shares on each of the first three anniversaries of the Grant Date, so that this SAR shall be exercisable as to all Shares on the last such anniversary. Any portion of this SAR that becomes exercisable in accordance with the foregoing shall remain exercisable, subject to the 2005 Plan or this SAR Agreement (including without limitation Paragraph 8), until the Expiration Date or until other termination of this SAR in accordance with the 2005 Plan. Prior to the exercise of this SAR and delivery of the resulting Shares, the Participant shall not have any rights of a stockholder with respect to this SAR or the Shares subject to this SAR.

     4. Method of Exercising SAR.

     (a) Subject to the terms and conditions of the 2005 Plan and this SAR Agreement, this SAR may be exercised upon written notice to the Company at its principal office, which is currently located at 1001 Winstead Drive, Cary, NC, 27513. Such notice (a suggested form of which is attached as Annex B) shall state the Participant’s election to exercise this SAR and the number of Granted Shares with respect to which it is being exercised, and shall be signed by the Participant (or permitted assignee or legal representative).

1

     (b) Upon receipt of such notice, the Company, as promptly as practicable, shall deliver or cause to be delivered a certificate or certificates representing (a) such number of Shares calculated by dividing (i) the portion of the Appreciation (including all) applicable to the number of Granted Shares to which this SAR is so exercised by (ii) the Fair Market Value of R. H. Donnelley Common Stock on the date such notice was received by the Company (the “Exercise Date"), less (b) any shares withheld to satisfy obligations for the payment of withholding taxes and other tax obligations relating to this SAR, as specified in paragraph 10 (the sum of (a) less (b) being referred to herein as the “Paid Shares"). The certificate or certificates for the number of Paid Shares so determined shall be registered in the name of the person or persons so exercising this SAR (or, if this SAR shall be exercised by the Participant and if the Participant shall so request in the notice exercising this SAR, shall be registered in the name of the Participant and the Participant’s spouse, jointly, with right of survivorship or a trust established by the Participant for estate planning purposes) and shall be delivered as provided above to or upon the written order of the person or persons exercising this SAR. In the event this SAR is exercised by any person or persons after the legal disability or death of the Participant, such notice shall be accompanied by appropriate proof of the right of such person or persons to exercise this SAR. All Paid Shares that shall be delivered upon the exercise of this SAR as provided herein shall be fully paid and non-assessable by the Company.

     5. Shares to be Purchased for Investment. In the event the offer and sale of Shares subject to this SAR are not covered by a then effective registration statement under the Securities Act of 1933, as amended (the “Securities Act”), the Company may require as a condition to any exercise of this SAR that the Participant (or other person entitled to exercise this SAR) deliver to the Company an investment representation statement, as well as any other documentation or information as the Committee shall reasonably request. The Company shall be entitled to restrict the transferability of the Shares issued upon any such exercise to the extent necessary to avoid a risk of violation of the Securities Act or of any state laws or regulations. Such restrictions may, at the discretion of the Company, be noted or set forth in full on the Share certificates issued upon exercise of this SAR.

     6. Non-Transferability of SAR; Forfeiture.

     (a) Neither this SAR nor the Granted Shares subject thereto shall be pledged, hypothecated or otherwise encumbered or subject to any lien, obligation or liability of the Participant to any party (other than the Company or its subsidiary or affiliate), or assigned or transferred by the Participant, other than by will or the laws of descent and distribution or to a Beneficiary upon the death of the Participant, and during the lifetime of the Participant, this SAR shall be exercisable only by the Participant or his or her guardian or legal representative, except that this SAR may be transferred to one or more transferees during the lifetime of the Participant and may be exercised by such transferees in accordance with the terms of this SAR, but only if and to the extent such transfers are permitted by the Committee, subject to any terms and conditions which the Committee may impose thereon (including limitations the Committee may deem appropriate in order that offers and sales of Shares will meet applicable requirements of registration forms under the Securities Act specified by the Securities and Exchange Commission). A Beneficiary, transferee or other person claiming any rights under the 2005 Plan from or through the Participant shall be subject to all terms and conditions of the 2005 Plan and this SAR Agreement, except as otherwise determined by the Committee, and to any additional terms and conditions deemed necessary or appropriate by the Committee.

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     (b) This SAR, any Shares delivered hereunder and any gains realized upon exercise of this SAR are subject to forfeiture under certain circumstances in accordance with Section 11 of the 2005 Plan.

     7. Termination of Employment.

     (a) Exercisability Upon Termination by Death, Disability or Retirement. If the Participant’s employment by the Company or any subsidiary or affiliate terminates by reason of death, Disability (as defined below) or Retirement (as defined below), this SAR may be exercised until the earlier to occur of one year after the date of such termination or the Expiration Date, to the full extent of this SAR, regardless of the extent to which it was exercisable at the time of such death, Disability or Retirement; provided, however, that in the event of Early Retirement (as defined below), the entire vested portion and 50% of any unvested portion of this SAR shall be exercisable during such period. Upon expiration of any such post-termination exercise period, this SAR shall terminate.

     (b) Effect of Other Termination. Unless otherwise determined by the Committee, if the Participant’s employment by the Company or any subsidiary or affiliate terminates for any reason, other than death, Disability or Retirement or for Cause, this SAR shall be exercisable during the period of 90 days after such termination or until the Expiration Date, whichever period is shorter, but only to the extent to which this SAR was exercisable at the time of such termination. If such termination is for Cause, then this SAR shall terminate upon such termination, unless otherwise determined by the Committee. Upon expiration of any such post-termination exercise period, this SAR shall terminate.

     (c) Definitions. The term “Disability” shall have the meaning defined for such term in the long-term disability plan of the Company, as in effect from time to time, and the term “Retirement” shall mean your termination after your attaining (i) age 50 years with 20 years of service with the Company or any of its subsidiaries or affiliates (“Early Retirement”), (ii) age 55 years with 10 years of service with the Company or any of its subsidiaries or affiliates or (iii) age 65 years without regard to years of such service.

     8. Change in Control. Notwithstanding Section 10 of the 2005 Plan, upon a Change in Control, this SAR shall terminate automatically with respect to all unvested Shares covered by this SAR at that time and the Participant shall be entitled to an amount of cash equal to the excess of the Change in Control Price over the Grant Price, multiplied by the number of unvested Shares covered by this SAR, and all vested Shares covered by this SAR shall remain subject to and governed by Section 10 of the Plan. In addition, any and all performance conditions specified herein shall automatically be deemed satisfied with respect to all Shares covered by this SAR at the greater (more favorable to Participant) of (a) the performance required to achieve the target award at 100% or (b) performance to date assuming it would have continued at the same level over the remainder of the performance period. Notwithstanding the foregoing, the transactions contemplated by that certain Preferred Stock and Warrant Purchase Agreement, dated as of September 21, 2002, by and among the Company and the investors listed therein (as amended and supplemented to date and from time to time, the “Preferred Stock and Warrant Purchase Agreement”), including, without limitation, the initial issuance of the Preferred Shares and the Warrants (each as defined in the Preferred Stock and Warrant Purchase Agreement) and any other issuances or other matters provided therein, shall not constitute a Change in Control as defined in Section 10(c) of the 2005 Plan.

3

     9. No Guarantee of Continued Employment or Other Service. THE PARTICIPANT ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO PARAGRAPH 3 IS EARNED ONLY BY CONTINUING AS AN EMPLOYEE AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS SAR OR ACQUIRING SHARES HEREUNDER). THE PARTICIPANT FURTHER ACKNOWLEDGES AND AGREES THAT THIS SAR AGREEMENT AND THE VESTING PROVISIONS SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED EMPLOYMENT FOR THE VESTING PERIOD, FOR ANY PERIOD OR AT ALL, AND SHALL NOT INTERFERE IN ANY WAY WITH THE PARTICIPANT’S RIGHT TO TERMINATE OR THE COMPANY’S RIGHT TO TERMINATE THE PARTICIPANT AT ANY TIME, WITH OR WITHOUT CAUSE.

     10. Withholding. The Company and any subsidiary or affiliate is authorized to withhold from the distribution of Paid Shares relating to this SAR, amounts of withholding and other taxes due or potentially payable in connection with any transaction involving this SAR, and to take such other action as the Committee may deem advisable to enable the Company and the Participant to satisfy obligations for the payment of withholding taxes and other tax obligations relating to this SAR. This authority shall include authority to withhold or receive Stock or other property and to make cash payments in respect thereof in satisfaction of a Participant’s withholding obligations, either on a mandatory or elective basis in the discretion of the Committee. Notwithstanding any provision in the 2005 Plan to the contrary, only the minimum amount of Stock deliverable in connection with this SAR necessary to satisfy statutory withholding requirements will be withheld.

     11. Governing Law; Entire Agreement; SAR Surrender.

     (a) The validity, construction and effect of this SAR Agreement shall be determined in accordance with the laws of the State of Delaware, without giving effect to principles of conflicts of law, and applicable provisions of federal law.

     (b) The 2005 Plan and this SAR Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and the Participant with respect to the subject matter hereof. Any modification of this SAR Agreement must be in writing signed by the Company (oral statements by any person cannot modify this SAR Agreement). Decisions of the Committee with respect to the administration and interpretation of the 2005 Plan and this SAR Agreement shall be final, conclusive and binding on all persons interested therein.

     (c) As a condition to the right to exercise this SAR, the Participant must not have theretofore delivered to the Company a written document signed by the Participant surrendering the SAR to the Company.

IN WITNESS WHEREOF, the Company has caused this SAR Agreement to be duly executed by its duly authorized officers and the Participant has executed this SAR Agreement, each on Annex A, as of the Grant Date.

4

EX-14

Exhibit 14

R.H. DONNELLEY CORPORATION
POLICY ON BUSINESS CONDUCT

TABLE OF CONTENTS

Chairman’s Letter	1
Statement of Values	2
Policy on Business Conduct	3
Complying with Applicable Laws	3
Observing the Ethical Standards of Society	3
Loyalty to R.H. Donnelley	3
Failure to Comply; Reporting Violations; Non-Retaliation	4
Duty of Managers	4
Questions and Answers	5
Employee Diversity	6
Harassment	6
Sexual Harassment	6
Questions and Answers	7
Employee Privacy	8
Questions and Answers	8
Ethical Business Practices	8
Unfair Trade Practices; Deception and Fraud	8
Questions and Answers	9
Bribery	10
Questions and Answers	11
Licensing and Advertising Guidelines	11
Misappropriation of Proprietary Property	11
Questions and Answers	12
Unauthorized Copying or Use	13
Questions and Answers	14
Environment, Health & Safety	14
Document Creation and Retention	15
Books and Records	15
Accounting, Auditing and Public Reporting Matters	16
Questions and Answers	17
Foreign Corrupt Practices Act	18
Antitrust and Competition	18

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TABLE OF CONTENTS

Dealing with Competitors	19
Dealing with Customers and Suppliers	19
Other Anti-Competitive Practices	20
Social Discussions and Company Communications	21
Questions and Answers	23
Conflicts of Interest	24
Positions with Outside Companies	25
Employees as Consultants	25
Purchases	26
Safeguarding Assets; Use of Company Resources and the Internet	26
Confidential Information and Trade Secrets	27
Communications with Attorneys	27
Gifts and Entertainment	28
Questions and Answers	29
Insider Trading	30
Generally	30
Speculative Transactions	31
Questions and Answers	31
Communications Outside of the Company	33
Political and Community Activities	33
Data Privacy	34
How We Solve Ethical Issues	34
Policy Administration	35
Administration	35
Interpretation	35
Training	35
Attestation	36
Conflict with Other Policies	36
Reporting of Potential Violations	36
Seeking Guidance	37
Disciplinary Policy; At Will Employment	37
Audits, Investigations, Remedial Action and Certifications	37
Requests for Exception	38
Useful Contact Information	39

ii

CHAIRMAN’S LETTER

To Our Employees:

Integrity in every aspect of the way we conduct our business is a key element of our corporate culture. We never want anyone in our organization to compromise sound standards of ethical behavior even if that action is based upon a sincere belief that it might actually help us improve our financial or operational performance. We place a high value on honesty, fair dealing and ethical business practices. Let us do our best each day to maintain our exceptional standards. In doing so, we will contribute immensely to the success of our customers, employees, communities, stockholders and our Company.

This Policy is designed to help you understand what R.H. Donnelley expects of you in terms of ethical and legal business conduct. Please read it carefully and keep it handy for reference in the event that ethical or legal issues arise. It does not address every ethical or legal issue, but the basics are covered to facilitate your general understanding. In addition, to help resolve ethical questions not covered in this document, we have included a simple procedure for you to follow under the heading “How We Solve Ethical Issues.” We are confident that it will help you make the right decisions.

If a potential course of action seems questionable, always seek guidance before you act. We encourage and demand open communications regarding any possible violation of our ethical principles and business practices and forbid retaliation of any kind. We clearly want you to be sensitive to situations that could result in illegal, unethical or improper conduct. You also should be alert to activities that even look improper. If in doubt, err on the safe side and seek guidance or encourage others to do so before anyone acts.

R.H. Donnelley’s reputation is in the hands of all of us. Let us strive to continually demonstrate fairness, integrity, professionalism and honesty – the hallmark of our Company since Reuben H. Donnelley founded our Company over a century ago.

David C. Swanson
Chairman and Chief Executive Officer

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STATEMENT OF VALUES

The mission of R.H. Donnelley is to provide innovative, cost-effective advertising and marketing solutions to local businesses in order to help them enhance their profitability. All of the human and financial resources of our Company, the honesty, integrity, skills and dedication of our employees and the quality of our products and services will always be deployed in a way so as to maximize the ability of our customers to succeed. By doing this in accordance with our shared values relating to ethics, customers, constructive change, community, ourselves and our stockholders, we are confident that we will all abundantly succeed.

Ethics

We will abide by the highest standards of ethical conduct, fairness, honesty, responsibility and integrity, so that in all of our relationships we can take pride in ourselves, our co-workers, our individual departments and business units and in R.H. Donnelley.

Customers

We will strive relentlessly not simply to meet, but to exceed, our customers’ expectations. Our goal is to provide what our customers demand with responsiveness, accuracy, completeness and speed, by offering unparalleled service at a reasonable price.

Constructive Change

Our growth as a company, as individuals and as professionals will be inexorably linked with our ability to stimulate, foresee and promptly react to the ever-changing business and cultural environments in which we operate. Our ability to be innovative and proactive with respect to constructive change will be one of the foremost strengths of our Company.

Community

We will proudly serve the civic and charitable needs of the communities in which we live and work and always conduct ourselves, both at and away from work, in a manner that enhances our reputation in our communities and instills trust and pride in us within our communities.

Ourselves

We will respect and treat each other with dignity and tolerance, as individuals who yearn for the opportunity to contribute and succeed. We will hold ourselves personally accountable and responsible to both our employees and our customers for quality, integrity and continuous improvement in all the work that we do.

Stockholders

We will accept responsibility for being effective stewards of our stockholders’ resources and zealous advocates of our stockholders’ interests, so that through our operational and financial performance they are properly rewarded for their trust and investment in R.H. Donnelley and are equally proud of our accomplishments.

Living and working in accordance with these values and continually building both customer and employee satisfaction will create a rewarding work environment, as well as value for our stockholders.

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POLICY ON BUSINESS CONDUCT

Since 1886, when R.H. Donnelley’s original business was founded, RHD employees have built a reputation for the highest standards of integrity and responsibility. It is the duty of each of us to enhance and never tarnish that image. We owe that duty first and foremost to ourselves and our fellow employees, as well as to RHD’s stockholders and customers and everyone else with whom we deal. We should, in short, always conduct ourselves in such a way as to make the Company and each of us proud. Just as ethics have guided our cherished past, ethics will guide our exciting future.

This document is designed to introduce you to certain basic principles and to help you understand how you should apply these principles in your daily business activities. This Policy on Business Conduct confirms the basic elements of honesty, integrity, fairness, responsibility, professionalism and good judgment that all RHD employees are expected to observe. It is not a comprehensive rulebook, rather it is a statement of the way that RHD does business, reflecting our core values and undying commitment to “doing the right thing” in all that we do. All of our policies are based heavily on trust and respect for the individual. We understand that ethical business conduct depends upon the cooperation and emphatic support of all of us and we are confident that all of you will do your “fair share” in this important endeavor.

References throughout this Policy to “R.H. Donnelley,” “RHD,” the “Company,” and “us” mean R.H. Donnelley Corporation and all of our divisions, business units and subsidiaries, and references to “manager” means Manager, General Manager, Supervisor, Team Leader, Process Leader, Group Leader, Director, Assistant Vice President, Vice President, and/or President, as appropriate, and any other person with supervisory authority over, and/or responsibility for, your work at the Company. Nothing in this document is intended to create any right or entitlement for a third party and no third party has any right to rely on the contents hereof.

Complying with Applicable Laws

You must not take any action on behalf of R.H. Donnelley that violates the letter or spirit of any law or regulation. You must strictly comply with all laws and regulations whether or not they apply to the Company’s business. Violations of law can result in heavy fines, jail terms, expensive lawsuits and other serious consequences to both you and the Company, including compromising the reputation we have worked so hard to build and will endeavor to maintain.

Observing the Ethical Standards of Society

As stated above in R.H. Donnelley’s Statement of Values, you must maintain the highest standards of personal ethics, responsibility and integrity so that in all our relationships we can have pride in ourselves and in our Company.

Loyalty to R.H. Donnelley

You must avoid any action that would put your own interests in conflict with the best interests of R.H. Donnelley and its stockholders. Your personal and outside business interests and relationships must not affect your judgment with respect to business decisions that you make on behalf of R.H. Donnelley.

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Failure to Comply; Reporting Violations; Non-Retaliation

No business transaction or other conduct that violates or that is otherwise inconsistent with these principles and/or the following policies will be tolerated. Illegal or unethical conduct cannot be justified by claiming that it benefited the Company (even if true, it’s irrelevant) or was directed by a higher authority within the organization. No one at RHD is authorized to conduct themselves or direct others in a manner inconsistent with this Policy. Likewise, employees cannot use other employees or contractors, agents, consultants, family members or other third parties to perform any act prohibited by this Policy.

Violators will be subject to disciplinary action, which may include, among other things, immediate termination of employment for cause. If you become aware of a violation of the principles, policies or procedures set forth herein, you should immediately report the nature of the violation and the name of the violator, if known, to your manager, your department head, a representative of the Human Resources or Legal Departments or contact our Ethics Hotline either electronically through EthicsPoint or by calling 888-310-1194. EthicsPoint offers complete anonymity if you so desire. Where appropriate, you may also contact our Disclosure Committee, Internal Audit department, external auditors or independent members of our Board of Directors. See the last page of this Policy for contact information for all of these reporting channels.

However, generally such matters should first be raised with immediate supervisors. This may provide valuable insights or perspectives for both the employee and the manager and helps develop constructive relationships and skill sets. It also encourages resolution of the matter within the appropriate work unit and may prevent inappropriate escalation of immaterial matters. If you do not feel comfortable bringing a matter to the attention of your manager or do not believe that your manager has dealt with the matter properly, you certainly should raise the matter with the appropriate department head or function head or, if necessary, the other reporting channels described above. The most important point is that possible violations should be reported promptly and that the Company supports all of these means for reporting them. As described below, the Company has and enforces a strict non-retaliation policy.

You will not be penalized for reporting a violation in good faith or for cooperating in the investigation or remediation of such a violation. Furthermore, retaliation, or threats of retaliation, against a person who reports a possible violation or who cooperates in any such investigation or remediation will not be tolerated. Failure to report violations or to fully cooperate in any investigation of suspected or reported violations or in any remedial or disciplinary action, or engaging in any retaliatory conduct, may also subject you to such disciplinary action. See “Policy Administration – Reporting of Potential Violations” and “ - Disciplinary Policy; At Will Employment.”

Duty of Managers

Managers have an additional responsibility to serve as a role model for others within their organizations, to exemplify the highest standards of ethical conduct and to encourage open dialogue regarding the ethical and legal ramifications of business decisions and actions. They are also charged with ensuring that this Policy and all Company policies are communicated to, and understood and observed by, their entire organization.

The remainder of this document describes specific areas of law and Company policies that are most likely to be implicated by the work of R.H. Donnelley employees. To avoid even the appearance of impropriety, in many cases, the Company’s policies go beyond what the strict letter of the law

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requires. This Policy is not all-inclusive, nor are you expected to become a legal expert by reading this document. However, this document will alert you to significant legal and ethical issues that can arise in your job and instruct you how to deal with them. If in doubt about an issue, consult your manager, a Human Resources representative, the Legal Department or contact our Ethics Hotline either electronically through EthicsPoint or by calling 888-310-1194. Problems can usually be minimized by seeking advice earlier rather than later when it may become more difficult to reverse damage that has already occurred. See “How We Solve Ethical Issues” below for a helpful process you can use to consider and resolve potential issues.

Questions and Answers

Q: To whom does this Policy apply?

A: The Policy on Business Conduct applies to all Company employees (including part-time and seasonal workers as well as interns), including the CEO, senior financial officers and other members of senior management, as well as the Board of Directors. All Company employees will be required to periodically sign or electronically acknowledge an Attestation certifying that they have received this Policy, read and understood it and agree to abide by it.

Q: What should I do if I learn about a legal or ethical violation?

A: If you believe that a law, this Policy, or any other Company policy has been violated, please contact your manager, your department head, a representative of the Human Resources or Legal Departments or contact our Ethics Hotline either electronically through EthicsPoint or by calling 888-310-1194. Sometimes you may not be comfortable approaching someone in your own department or may wish to remain anonymous. This may be the case, for example, if you have been asked by your manager to do something you believe might violate a law or this Policy. In this event, you may call the Human Resources or Legal Departments, contact our Ethics Hotline or, where appropriate, depending on the nature of the violation or inquiry, contact our Disclosure Committee, Internal Audit department, external auditors or independent members of our Board of Directors. See the last page of this Policy for contact information for all of these reporting channels. We will maintain confidentiality and anonymity to the greatest extent practicable under the circumstances. EthicsPoint, our web-based reporting tool, offers complete anonymity if you so desire.

Q: Won’t reporting a suspected violation subject me to retaliation?

A: Retaliation, or threats of retaliation, against any person who reports in good faith a possible violation of law or Company policy is strictly forbidden and will not be tolerated. Retaliation, or threats of retaliation, will subject the violator to disciplinary action, which may include, among other things, immediate termination of employment for cause. However, this retaliation policy will not shield any participant in wrongdoing from disciplinary action for improper conduct.

Q: What should I do if I need guidance on an issue?

A: Never hesitate to seek guidance. Always err on the safe side — there are no “dumb” questions in this area. Your Human Resources representative is a great resource for you to use when you need guidance. You may also consult with the Legal Department or contact our Ethics Hotline either electronically through EthicsPoint or by calling 888-310-1194. Contact information is included on the last page of this document. Again, confidentiality and anonymity will be maintained to the greatest extent practicable.

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If you would rather write to report a violation or seek guidance, please address your letter to:

Ethics Hotline

R.H. Donnelley Corporation

One Manhattanville Road

Purchase, New York 10577

Please indicate how you prefer to be contacted, should the need arise. All written correspondence will be reviewed by the Vice President, Human Resources and the General Counsel and shared with the Chairperson of the Corporate Governance Committee and/or Audit and Finance Committee of our Board of Directors.

EMPLOYEE DIVERSITY

R.H. Donnelley’s success has always reflected the individual and collective ability of our dedicated employees. The Company employs, trains, promotes and compensates individuals based upon job-related qualifications and abilities, without regard to race, color, religion, national origin, sex, age, disability or any other characteristic protected by law.

Our goal is to build an organization that rewards superior performance and encourages the full participation of all members of our diverse work force and that enables them to utilize the full range of their various talents, skills and abilities in the service of our customers and stockholders. We expect each of our employees to be treated with respect, tolerance and dignity and to extend that exact same treatment to our customers, colleagues and competitors alike. Throughout R.H. Donnelley, we are fully committed to providing equal opportunity in employment, promotion, transfer, salary administration, benefit plans and training programs without regard to race, color, religion, national origin, sex, age, disability or any other characteristic protected by law. R.H. Donnelley firmly believes that equal employment opportunity is essential for the continued success of our business, and we are firmly committed to it.

R.H. Donnelley is committed to providing a supportive work environment, free of unlawful discrimination or any form of harassment. To further this goal, it is the policy throughout R.H. Donnelley that no form of unlawful discriminatory, abusive conduct or harassment by or toward any employee will be tolerated.

Harassment

It is the policy throughout R.H. Donnelley to promote and maintain a safe and healthy work environment in which all employees are treated with respect and dignity. Discrimination and/or harassment of any form is potentially illegal and, consequently, strictly prohibited by the Company. This policy applies not only to the work place, but also at all Company-sponsored events.

     Sexual Harassment

Sexual harassment is one, but not the only, form of prohibited conduct. No associate, female or male, should be subjected to unwelcome sexual overtures or advances, whether physical, verbal or written. One or any combination of the following three criteria determines whether conduct constitutes sexual harassment:

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• If submission to the conduct is either an expressed or implied term or condition of employment.

• If submission to, or rejection of, the conduct is used as the basis for an employment decision affecting the person to whom the conduct is directed.

• If the conduct has the effect of unreasonably interfering with the affected person’s work performance or creating an hostile or abusive work environment.

Sexual harassment can include any activity that creates a hostile or offensive environment, whether such activity is intentional or not, happens during or outside normal business hours or is carried out by a manager, co-worker, customer or vendor. This could include such conduct as displaying “pin-up” calendars or sexually demeaning pictures or screen savers, telling sexually oriented jokes, making sexually offensive remarks or engaging in unwanted sexual teasing, or subjecting another employee to pressure for dates, sexual advances or unwelcome touching. The bottom line is that R.H. Donnelley expects courteous, mutually respectful, non-coercive, and non-sexual interaction between employees.

Engaging in a romantic relationship with someone within your reporting structure exposes the Company to serious risk and is therefore strongly discouraged. If such a situation develops, the supervisory level employee must work with their manager or Human Resources to promptly eliminate the reporting relationship.

See the R.H. Donnelley Human Resources Employee Handbook for the Company’s full policy regarding sexual harassment.

     Questions and Answers

Q: What should employees and managers do to prevent sexual harassment?

A: Each manager and employee has an affirmative duty to try to keep his or her workplace free of sexual harassment and intimidation. Managers must make it clear that no one is required to endure insulting, degrading or exploitive treatment, sexual or otherwise. In addition, managers should immediately report to the Human Resources Department any complaints they receive from their employees concerning sexual or other harassment, and follow any instructions from the Human Resources or Legal Departments regarding investigating complaints or enforcing this Policy.

Q: What should I do if I have a discrimination or harassment problem?

A: If you feel you are having a problem with an individual, you should inform the individual that you believe they are subjecting you to discrimination and/or harassment and report such behavior by promptly talking to your manager or another manager, your department head, a Human Resources representative, the Legal Department or contact our Ethics Hotline either electronically through EthicsPoint or by calling 888-310-1194. You can talk to any of these groups without any fear of reprisal or retaliation. All allegations of unlawful discrimination or harassment will receive a prompt, thorough and impartial investigation by the Human Resources and/or Legal Departments in accordance with R.H. Donnelley policies and procedures. All information will be held in confidence to the extent possible, consistent with the rights of the accuser and the accused.

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Employee Privacy

While we respect each other’s privacy, R.H. Donnelley also must ensure an efficient and legally compliant work environment. To that end, you should have no expectation that your communications at work or using Company facilities will be private. RHD has the absolute right to monitor or review workplace communications, including internet, e-mail, telephone and voicemail communications, for any reason, with or without notice. RHD also has the right to search employees’ work spaces at any time, for any reason, with or without notice. See also “Conflicts of Interest – Safeguarding Assets; Use of Company Resources and the Internet.”

     Questions and Answers

Q: When I was away on vacation, my supervisor accessed my e-mail system. I had several personal messages that she may have seen. Does she have the right to access my e-mail system without my permission?

A: Yes, RHD reserves the right to review your e-mail for any reason. Your Company e-mail account belongs to the Company and should be used solely for business purposes. While infrequent, incidental personal use may be acceptable, you have no right to expect any privacy with respect to personal items.

ETHICAL BUSINESS PRACTICES

R.H. Donnelley’s Statement of Values requires that employees conduct themselves according to the highest standards of integrity, fairness, responsibility, professionalism, and business ethics. You must never let any misguided sense of corporate loyalty lead you to disobey the law or customary ethical standards. Besides being the “right” thing to do morally, ethical conduct makes good business sense. Customers, suppliers and others may choose not to do business with us if they feel we have mistreated them or are unethical business people.

Business conduct is also regulated by many laws. The laws most relevant to our business deal with fraud, deceptive acts, bribery, licensing, misappropriation of proprietary property, workplace health and safety and books and records. These areas are discussed below. In a later section, we will address laws relating to anti-competitive business practices and how they relate to us.

Unfair Trade Practices; Deception and Fraud

In our highly competitive marketplace, R.H. Donnelley will achieve a competitive advantage by accurately representing our products, services, benefits and prices. Anytime we make a promise we can’t keep, some hard-earned customer trust and loyalty is lost, and our valuable reputation is tarnished. You should avoid creating misleading impressions, omitting important facts or making false claims about our or our competitors’ offerings. While RHD needs to aggressively market its products and services, we must do so within the confines of ethical business practices and applicable laws. No illegal or unethical activity to obtain business, including offering bribes or kickbacks, is ever acceptable. Our reputation will be enhanced by fair and honest business practices.

Accordingly, you must not engage in any form of unfair, fraudulent or deceptive practice against the Company or any customer, supplier, co-worker, competitor or any other third party. Generally speaking, a practice can be unfair, even if it is not deceptive, if it is exploitive or inequitable and if, in addition to being morally objectionable, it is also seriously detrimental to the Company, co-workers,

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consumers, competitors or others. The basis of deception or fraud is a misrepresentation, which in its simplest form is a statement — whether made in writing, orally or electronically — that is not true or complete.

In order to avoid any suggestion of deception or fraud, you should note the following:

• Representations as a whole can be misleading, even though every statement considered separately is literally true.

• Failure to disclose important additional or qualifying information may be a misrepresentation.

• Representations should not shade the truth or mislead.

• Representations should not claim characteristics, good or bad, for a product or service that it does not have.

• Representations concerning the characteristics of the Company’s or its competitors’ products and services must be accurate and capable of being proven so by facts.

• The financial and other books and records of the Company must not be falsified. Examples include filing false expense reports or submitting inaccurate sales results. See also “ - Books and Records,” “-Accounting, Auditing and Public Reporting Matters” and “ - Foreign Corrupt Practices Act” below.

Misrepresentations by any RHD employee in connection with, or otherwise purposely circumventing, any sales compensation plan is a form of deceit against the Company and is strictly forbidden. An example would be to split out one account into two pieces so that one piece can be submitted as new business and thus earn a higher commission rate.

Other prohibited business practices include forgery and interference with contractual relations. You should never sign any business or legal document, such as an advertising order, application or contract, on behalf of a customer, supplier or any other third party. To do so could constitute forgery, which could subject you and the Company to criminal and civil liability. In rare cases, a third party may authorize you to sign documents on their behalf in a formal, written document, which is called a power of attorney. Even in such cases, you must consult the Legal Department before you sign any document on behalf of any third party. You also cannot interfere with a competitor’s contractual relationship by urging a customer or potential customer to breach its contract with the competitor. Generally, you may suggest that a customer exercise termination or non-renewal rights contained in a competitor’s contract consistent with the terms and conditions set forth in that contract, but you should not review that contract or offer legal advice regarding any such contract.

     Questions and Answers

Q: Our competitor’s salespeople are claiming that their product is better than ours. Can I dispute those claims with our customer?

A: You can dispute the claim if you have proof to back up any statements you make about the Company, its products or the competitor or its products. If you know of anyone making claims about R.H. Donnelley that you feel are untrue, promptly notify your manager, department head, the Legal

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Department or contact our Ethics Hotline either electronically through EthicsPoint or by calling 888-310-1194. Do not take it upon yourself to attempt to rectify the problem.

Q: My boss asked me how a sales call to a prospective customer went. I mentioned that the customer seemed very interested, but was locked into a three-year contract with one of our competitors that still had two years to go. My boss told me to follow up immediately to convince the customer that no contract was “written in stone” and he shouldn’t be so timid about walking away from the other contract. I do not feel comfortable telling the customer what to do about his contract.

A: You are correct to feel uncomfortable. It is against Company policy to interfere with the contracts of competitors. You might suggest that the customer review his contract to see if he has a right to terminate early, but never advise a customer to violate a contract or offer advice on how to interpret a competitor’s contract.

Bribery

You must not engage in commercial or governmental bribery. This means you cannot give or offer money or anything else of value to anyone with whom the Company does business, or who might do business with the Company, if the purpose of the gift is to encourage that person to do something corrupt, deceptive or otherwise opposed to the person’s responsibilities. Similarly, you cannot give or offer money or anything else of value to anyone with whom the Company does business or who might do business with the Company if it is intended to impact their judgment with respect to a business decision.

• May I exchange gifts with non-government business contacts?

Within common sense limits, yes. It is a common and accepted business practice to give and receive inexpensive, customary gifts and business courtesies in the course of business relations with non-government personnel. Customary gifts and business courtesies include meals, entertainment, tickets to sports or social events and other gifts of nominal value. Anything outside of these bounds is strictly prohibited. See “Conflicts of Interest — Gifts and Entertainment” below for a further discussion of permissible gifts.

• May I exchange gifts with employees of the government?

Generally, no. In the United States, many federal, state and local laws prohibit any government employee from soliciting or accepting entertainment, meals, gifts or other things of value. Dealings with government officials outside the United States are covered by foreign laws, as well as by the “Foreign Corrupt Practices Act” discussed below. Direct all inquiries to the Legal Department for any concerns or questions arising in this area.

• What do I do if I receive an inappropriate request?

Just say no! If you are asked by a customer, supplier, government official or other party to make or to take a bribe, kickback or other prohibited payment or gift, you should tell the person that you cannot make or take such bribe, kickback or other prohibited payment or gift and will not consider the request, and immediately inform your manager and the Legal Department about the incident or contact our Ethics Hotline either electronically through EthicsPoint or by calling 888-310-1194.

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     Questions and Answers

Q: XYZ Corporation has been a customer for years but may not renew its contract this year. Can I promise to donate our surplus office equipment to the favorite charity of the president of XYZ Corporation if he renews the contract?

A: No, you cannot promise such a donation. This promise could be seen as a bribe because it appears that you are trying to influence XYZ Corporation’s decision to renew the contract in a way unrelated to our services or the contract terms we are offering. Remember, anything of value — not just cash — can qualify as a bribe and it need not be made directly to the ultimate decision maker to be improper. A bribe does not have to be accepted to expose you and the Company to liability.

Licensing and Advertising Guidelines

Many of the businesses to which we sell advertising are engaged in trades, professions and other lines of business that are subject to state and local licensing and related regulations. In addition, many of these businesses may be subject to federal, state and local laws or regulations regarding the content of their advertising. As the publisher of advertising, in general, we are not responsible or liable for ensuring our advertisers’ compliance with these licensing and advertising regulations. In the past, we have been contacted and requested by many licensing and other state and local regulatory authorities to help enforce these regulations. While we do not encourage, support or condone noncompliance with these regulations, and while we will generally endeavor to be a good corporate citizen by reasonably cooperating with appropriate authorities in their investigations or prosecutions of noncompliance, in general, it is beyond the scope of our business to enforce these regulations by requiring advertisers to include or exclude certain content with respect to their advertising. Should you receive any inquiry or request from a governmental agency or another advertiser regarding these matters, or should you otherwise have any questions or concerns regarding this subject, please promptly refer them to your manager, department head, the Legal Department or contact our Ethics Hotline either electronically through EthicsPoint or by calling 888-310-1194. In rare cases where we may agree to assist governmental agencies in enforcing these regulations, we will adopt and publish clear written guidelines regarding what steps we will and will not take.

Misappropriation of Proprietary Property

RHD’s policy is to respect the intellectual property rights of others, including patents, trademarks, copyrights and trade secrets. Patents apply to inventions such as devices, processes, software and even business methods. Trademarks refer to words, phrases or slogans that identify a particular entity as the source of goods and/or services. Copyright law applies to any original work of authorship, such as a writing, photographs, music, software, graphics and other art work. Trade secret law applies to any confidential information that has some value because it is not generally known to the public. Liability for the unauthorized use of others’ intellectual property can be enormous, and thus it is imperative that employees contact the Legal Department immediately if they believe an intellectual property issue may have arisen.

During the course of your employment you may gain access to, or otherwise become aware of, the confidential and/or proprietary information and/or property of our customers, business partners and other third parties. Among the many things our customers count on is protection of their privacy and property rights. Some of this property may be legally protected by patents, trademarks, copyrights, and/or trade secrets. You must not use this information and/or property for any purpose unrelated to the work of RHD authorized by the customer, business partner or third party without first obtaining the

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advice and consent of the Legal Department. In addition, no employee may divulge (except to another employee who needs access to perform their job duties) or use any confidential or proprietary property obtained in the course of employment, except in order to perform his or her job duties for RHD that have been authorized by the owner of the confidential or proprietary property. Any unauthorized use could infringe the intellectual or other property rights of the rightful owner and subject you and the Company to significant liability, including criminal liability in the case of copyright infringement.

Because of the significant risks associated with improperly disclosing information which has been provided to us in confidence, we should receive such information only when there is a clear commercial reason for doing so, and then only under the terms and conditions of a written confidentiality agreement which has been drafted or reviewed by the Legal Department and approved and executed by senior management. While we should always be alert to our competitive surroundings and obtain as much information as possible about the markets in which we operate, we must do so only in accordance with applicable legal standards (see “Antitrust and Competition” below) and sound and ethical commercial practices. Illegal or unethical means to gather competitive information are prohibited. Customer or other third party communications — including voice and data — are confidential and must never be tampered with, recorded, covertly listened to or divulged without written approval from the participants, unless authorized by applicable law. We must never be a party to any situation in which such proprietary or confidential information has been improperly obtained from any other company, such as through a former employee. If any employee is approached with any offer of confidential or proprietary information which the employee has reason to believe may have been obtained improperly, the employee must immediately discuss the matter with their manager and the Human Resources or Legal Departments or contact our Ethics Hotline either electronically through EthicsPoint or by calling 888-310-1194.

This is a very complex area of the law and setting forth an exhaustive list of the types of property covered by this Policy is not possible, but in general, if you would expect and desire a third party who had possession of similar property of or information about RHD to refrain from disclosing and/or using that property or information for its own purposes, then you should likewise refrain. See “Conflicts of Interest – Confidential Information and Trade Secrets” below for a further discussion of confidential and proprietary information.

     Questions and Answers

Q: One of my peers who used to work for a competitor gave me a copy of their marketing plan for one of our markets that he said he brought with him when he left. This information would benefit our group tremendously in developing our marketing plan. Is it okay to use this information?

A: Absolutely not! Competitors’ marketing plans are proprietary information. How would you feel if that competitor had access to your plans? The new employee should not have shared this information with you. Using this information would violate this Policy and may well lead to a lawsuit against RHD. In such circumstances, immediately notify your manager, the Legal Department or contact our Ethics Hotline either electronically through EthicsPoint or by calling 888-310-1194. This situation may also give rise to antitrust concerns, see “Antitrust and Competition” below.

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Unauthorized Copying or Use

It is against the law to make copies of the copyrighted works of others or to use them without proper permission. Protected works include most commercial publications, computer software, video and audio tapes and certain databases. R.H. Donnelley has an enormous investment in the business information and software we own and we make every effort to protect our own rights, so we must be especially sensitive to the property rights of others. The law does permit limited “fair use” of protected works, but the business use of an unauthorized copy is not likely to be “fair use.”

• When is copying permitted?

These are some of the limited circumstances where copying is permitted:

• Making a summary of copyrighted material and including it in Company publications or reports together with brief quotations, but identifying the source of the material.

• Occasional copying of a part of an article or book for limited, personal use, but not extensive or regular copying of a publication to reduce subscription costs or broaden internal distribution.

• Making a copy of a computer program as an archival or backup copy if permitted by the terms of the license agreement.

Example: A company pays $1,000 a year for its subscription to a weekly industry newsletter. It would not be a fair use to make 12 complete copies each week for its regional sales managers. It may be a fair use to occasionally copy a portion of the newsletter and circulate it to the regional offices.

Direct any inquiries to the Legal Department for any specific concerns in this area.

• Can I copy software from one office computer to another office computer for my convenience?

Generally, no. The use of “pirated” or illegally obtained software is strictly prohibited and may violate law. Most software programs used by R.H. Donnelley employees are owned by other parties that license us to use the software under specific conditions, including specific office sites and even specific computers. In addition to the legal problems created by the unauthorized use of software, computer “viruses” are often spread this way.

The following activities are prohibited:

• Using any software on any computer owned or leased by R.H. Donnelley in violation of the terms of the license for that software; for example, on a computer or at a site not permitted by the license or by users other than those permitted by the license.

• Making copies of software supplied on an office computer for use on another office computer or on a computer outside the office unless authorized by the applicable license agreement.

If in doubt, please consult the Business Support Center in Information Technology Services or the Legal Department.

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     Questions and Answers

Q: Is it against Company policy to copy a software program for use at home, if the home use is for business purposes?

A: The terms of the license of the particular program must be consulted to determine whether it is permissible to copy the program for use at home. Some software licenses do explicitly permit such use where the home user is also the predominant user of the program in the office. If the license does not include such permission, then the program should not be copied. Consult the Business Support Center in Information Technology Services or the Legal Department with questions or concerns.

Q: I would like to send out a competitor’s brochure to the salespeople that report to me to read so that they understand what the competition is selling. Is this type of copying a violation of the copyright law?

A: Probably not. There is no specific rule stating exactly how many copies are permissible. The analysis of what is a permitted “fair use” necessitates a close examination of the facts and the law. Any employee considering substantial copying should consult the Legal Department beforehand so that it can recommend a course of action that is consistent both with the rights of copyright owners and R.H. Donnelley’s interest as an owner of copyrighted materials and competitor in the marketplace. In this case, you should also ensure that your salespeople understand they should not provide copies of the materials to customers and to refrain from misrepresenting the competitor’s products to customers.

Environment, Health & Safety

RHD is committed to conducting its business activities in strict compliance with the letter and spirit of all environmental, health and safety laws and regulations of all jurisdictions in which we do business. The Company believes it is our obligation to act as a responsible steward of the environment in the communities where we operate and live. We are committed to operating in a way that protects and preserves our environment and natural resources and maintains a healthy, safe and environmentally sound workplace.

We are also committed to maintaining a drug-free workplace. Substance abuse poses serious health and safety risks not only to the abusers, but to all employees who work with them. RHD is dedicated to pursuing a substance abuse-free environment to improve the health and well being of all employees and to enhance the Company’s ability to compete in an increasingly difficult marketplace. The R.H. Donnelley Human Resources Employee Handbook sets forth a formal policy and guidelines that are designed to prevent substance abuse in the workplace. In addition to pre-employment drug testing, employees may be tested where they display aberrant or uncharacteristic behavior or there is a reasonable suspicion of drug or alcohol use.

• What are the potential consequences of violating the law?

The threat to employees that could result from unsafe working conditions is clear. We should also recognize that damage to the environment could be long lasting and have a significant adverse impact on many people. Violating environmental laws, such as those regarding pollution, contamination and hazardous waste, could also have serious business and personal consequences. The Company and its officers, directors and employees could be liable for substantial cleanup costs,

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penalties and fines. In some cases, responsible employees and corporate officers could even be charged with criminal violations.

Although such liability is more likely to arise in the case of companies engaged in manufacturing or industrial operations, as distinguished from the service activities of R.H. Donnelley, environmental, health and safety laws are far-reaching and may affect our work in many ways. We should be cognizant of these and diligent in preventing and/or promptly reporting and remedying potential violations.

What can I do to help?

Your active commitment and participation are vital in assisting the Company in making compliance with environmental, health and safety laws a priority. This depends on employees familiarizing themselves with the law to the extent that it applies to their jobs and making compliance an integral part of their work. Compliance depends on ethical choices and decisions that may be as basic as reporting any unsafe health or safety conditions, following fire drill and emergency-response procedures and supporting recycling, recovery and reuse programs. Local office policies will contain more detailed information regarding your responsibilities in this important area.

Because these laws can be complex, you are encouraged to discuss any issues or questions or report any concerns to your manager, the Human Resources or Legal Departments or contact our Ethics Hotline either electronically through EthicsPoint or by calling 888-310-1194.

Document Creation and Retention

Almost all business records and communications may become subject to public disclosure in the course of litigation or governmental investigations. Business communications are also often obtained by outside parties or the media in the ordinary course. You should therefore attempt to be as clear, concise, truthful and accurate as possible when creating any document, whether written or electronic. Avoid exaggeration, profanity, guesswork, legal conclusions and derogatory characterizations of people or their motives. This policy applies to communications of all kinds, including e-mail and “informal” notes or memos. See also “Antitrust and Competition” below for additional guidelines on memoranda and email.

Documents and records must be retained for the periods of time specified by each department’s or business unit’s records-retention policies. If you are aware of an imminent or ongoing investigation, litigation, audit or examination initiated by the Company, any government agency, a customer or other third party, you should retain all documents, including e-mails and other electronic records, in your custody or control relating to the matter under review. Please note that the alteration, destruction, mutilation, concealing or falsification of a document with the intent of making it unavailable for any ongoing or known contemplated official proceeding or investigation is punishable by up to 20 years in prison. In addition, such actions could subject the Company to substantial sanctions and fines. If you are not sure whether a document can be destroyed, consult your manager, department head or the Legal Department before doing so.

Books and Records

RHD relies on accurate information and records to make responsible business decisions. Therefore, we require honest and accurate recording, reporting and retention of all business-related and financial information.

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     Falsification of Records. All of R.H. Donnelley’s funds and other assets and all its transactions must be properly documented, fully accounted for and promptly recorded in the appropriate books and records of the Company, in conformity with generally accepted accounting principles (“GAAP”) and the Company’s system of internal accounting controls. Federal securities laws require that R.H. Donnelley’s books and records accurately reflect all transactions, including any payment of money, transfer of property or furnishing of services. Failure to abide by these laws may result in criminal or civil penalties for the Company or employee. R.H. Donnelley employees shall therefore observe the following standards:

• False or artificial entries shall not be made in the Company’s books or records for any reason. Examples of falsification include making records appear as though payments were made to one person when, in fact, they were made to another, submitting expense reports that do not accurately reflect the true nature of the expense, and the creation of any other records that do not accurately reflect the true nature of the transaction. It is very important that no employee ever create or participate in the creation of any records that are intended to mislead anyone or conceal anything that is improper.

• Undisclosed or unrecorded funds or assets (“slush funds”) or similar funds or accounts are strictly prohibited.

• The use of any funds or other assets of, or the providing of any services by, R.H. Donnelley for any purpose that is unlawful under the laws of the United States, any state thereof or any jurisdiction, foreign or domestic, is strictly prohibited.

• No payment on behalf of the Company will be approved or made with the intention or understanding that a part or all of such payment is to be used for any purpose other than that described by the documentation supporting the payment.

• Senior management will be responsible for establishing and maintaining a system of internal controls that allow for the monitoring and enforcement of compliance with this Policy.

     Expense Reimbursement. It is R.H. Donnelley’s policy to reimburse employees for all reasonable expenses incurred in connection with Company business if appropriate supporting documentation is submitted in a timely manner. Expenditures for entertainment of business firms or individuals that do or are seeking to do business with R.H. Donnelley will be reimbursed only if they are reasonable, occur infrequently, and are not inconsistent with ordinary business practices under the circumstances. See “Conflicts of Interest – Gifts and Entertainment” below.

Accounting, Auditing and Public Reporting Matters

R.H. Donnelley is committed to ensuring that the highest legal and ethical standards are utilized in the preparation and public reporting of all financial and non-financial information regarding the Company. In that regard, RHD encourages any employee that has any concerns regarding any procedure, policy, action, or inaction related to accounting, auditing or our public disclosures to report such concerns to their manager or department head. If you are unsatisfied with the response from your manager or department head or if the matter may involve your manager or department head, you should address your concerns to the Chief Financial Officer, General Counsel, Director of Internal Audit, or the Company’s Disclosure Committee. If you would rather discuss the matter with an external party, you may contact a representative of the Company’s independent auditor (presently

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PricewaterhouseCoopers), independent members of our Board of Directors or our Ethics Hotline electronically through EthicsPoint. EthicsPoint is completely anonymous and confidential if you desire anonymity. Relevant contact information appears on the last page of this document.

All such concerns will be reported to the Audit and Finance Committee of the Board of Directors by management and/or the independent auditors. You may report this information without any fear of reprisal or retaliation. Any employee that engages in reprisal or retaliation is in violation of this Policy and will be subject to disciplinary action, up to an including immediate termination for cause.

We are obligated to publicly report much financial and non-financial information about the company in a complete, accurate, timely and understandable manner. We have developed and maintain disclosure controls and procedures that are reasonably designed to enable us to publicly report this information. Likewise, our internal accounting controls help ensure that financial transactions are recorded timely and accurately, conform to GAAP and fairly present the Company’s financial condition and results of operations. All employess must cooperate with the internal and external auditors and furnish all information they seek and honestly and fully answer all questions they pose.

Misrepresentation of material financial or non-financial information or other questionable accounting or auditing practices may result in fraudulent, incomplete, inaccurate or untimely reporting, including misleading financial statements or other material disclosure about the Company. Accordingly, you must not undermine the integrity of any information within the reporting chain and shall not fraudulently influence, coerce, manipulate, or mislead any internal or independent auditor during the course of any audit or their procedures.

The United States securities laws also prohibit selective disclosure of material non-public information about the Company. Accordingly, while timely and accurate disclosure is legally required and of paramount importance, we have established a centralized disclosure system and have designated a limited number of Company spokespersons, who are solely authorized to publicly speak on the Company’s behalf and otherwise provide public disclosure regarding the Company. Therefore, unless so designated, you may not speak on the Company’s behalf or publicly disclose any information about the Company, and you must forward all press or investment community inquiries to Investor Relations. See “Communications Outside the Company.”

     Questions and Answers

Q: I am a secretary and have been asked to fill out an expense report for my boss. I know that his wife accompanied him on the trip for purely personal reasons and that he has included his wife’s expenses in the report without approval of higher management, although no one can easily tell from the invoices. What should I do?

A: If you feel comfortable doing so, ask him if he inadvertently included his wife’s expenses. If you know an expense report as submitted is fraudulent, you must report it to your boss’s manager, the department head, the Human Resources or Legal Departments or contact our Ethics Hotline either electronically through EthicsPoint or by calling 888-310-1194.

Q: I think that the Vice President of my business unit submitted sales figures for the quarter that were much higher than our actual sales. The Vice President is under a lot of pressure to meet sales goals. What should I do?

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A: If you feel comfortable doing so, talk to the Vice President about your concern. If you don’t feel comfortable, or if after speaking with the Vice President, you still think the figures are misleading, report your concern to your manager, department head, the Legal Department or contact our Ethics Hotline either electronically through EthicsPoint or by calling 888-310-1194. Submitting false financial results can result in fraud charges against the Company and expose the Company to substantial criminal and civil liability.

Foreign Corrupt Practices Act

The U.S. Foreign Corrupt Practices Act prohibits corporations and individuals from doing certain things, directly or indirectly, to obtain or retain business or to influence a person working in a foreign official capacity. It is illegal to pay, offer to pay or authorize the payment of anything of value to any non-U.S. government official, government employee, political party or political candidate for these purposes. While the Company presently does not have material non-US operations, no employee shall make any payment or offer that is prohibited by the Act. Prohibited payments include cash, gifts and free samples, use of automobiles and aircraft, payment of non-essential travel and entertainment expense, overbilling of sales with the expectation that part of the sale price will be returned to the buyer and making contributions to “charities” chosen by an official. Simply making an offer to pay can be a punishable act, even if such offers are not accepted or never paid.

The Act also requires that the Company assure that its books and records accurately reflect the true nature of the transactions represented and that the Company maintain internal accounting control systems. Notwithstanding the limited applicability of the Act to our present operations, it is absolutely against Company policy for any employee to cause books and records to be inaccurate in any way. For additional information, see “Books and Records” above.

ANTITRUST AND COMPETITION

RHD will not tolerate any business transaction or conduct that violates the letter or spirit of the antitrust and competition laws that apply to the Company’s business. The antitrust and competition laws define acceptable behavior for competing in the marketplace. The general aim of these laws is to promote competition and let businesses compete fairly on the basis of quality, price, service and other valid business criteria.

United States federal and many state laws prohibit agreements or actions that might eliminate or discourage competition, “bring about a monopoly” or artificially maintain prices or otherwise illegally hamper or distort normal commerce. In addition to criminal fines and jail terms, antitrust violations often allow a private party to recover three times the actual money damages suffered. Antitrust lawsuits have frequently resulted in judgments against companies amounting to tens of millions and, on occasion, hundreds of millions of dollars. Obviously, antitrust violations are to be avoided at all costs.

The antitrust laws are deliberately broad and general in their language. They contain sweeping provisions against restraints that threaten a competitive business economy, but they provide no definitive list of those activities. This means employees must pay careful attention to possible anticompetitive implications of the Company’s business activities. The Legal Department should be contacted in all cases of doubt.

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Dealing with Competitors

Competitors are not permitted to agree among themselves on their respective prices or terms of sale, or to divide territories, suppliers or customers among themselves. Agreements of this type are among the most serious of antitrust offenses.

Some of the arrangements with competitors that are illegal are:

     Price Agreements. Any agreement or understanding among competitors to fix, control, stabilize or otherwise affect prices is illegal. You should never communicate with a competitor about current or future prices, pricing policies, bids, costs, discounts, promotions, terms and conditions of sale, credit terms, freight charges or royalties. The basic rule is simple: the Company must, on its own, determine the prices and conditions of sale of its products and services.

     Allocation of Territories, Suppliers or Customers. It is illegal for competitors to divide or allocate sales territories, suppliers or customers among themselves. Never agree with a competitor to sell or refrain from selling in any geographic area or to deal or not deal with any customers/suppliers or class of customers or suppliers or to divide or share a customer’s or supplier’s business, or to bid or not bid (or the amount you will bid) for a customer’s business.

     Boycotts and Refusal to Deal. It is illegal for competitors or a supplier and a customer to agree that they will not sell to, or buy from, particular individuals or firms. Generally, the Company has the legal right to refuse to buy from or sell to anyone. However, the Company must reach any such decision independently, without consulting with actual or potential competitors or customers. In some cases, a decision to refuse to deal with a company with a dominant market share — even though made independently — is illegal.

     In addition, disclosing the Company’s confidential bid or soliciting information about a competitor’s confidential bid or proposal may be considered a form of hidden agreement that impairs competition and must be avoided.

• What do I do if I receive an inappropriate request?

If you are asked by a competitor to enter into an illegal or questionable agreement regarding pricing, customers, suppliers, territories or any other terms or conditions of sale, you should do all of the following:

• Tell the competitor that such discussions are inappropriate and may be illegal.

• Immediately cease, or remove yourself from, those discussions and tell the competitor never to discuss the subject with you again.

• Immediately inform your manager and the Legal Department about the incident or contact our Ethics Hotline either electronically through EthicsPoint or by calling 888-310-1194.

Dealing with Customers and Suppliers

Some of the arrangements with customers and suppliers that can cause antitrust problems are:

     Exclusive Dealing and Reciprocity. Exclusive dealing arrangements, in which the Company agrees to buy from or sell to only certain customers or suppliers, or reciprocal arrangements, in which

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buying a supplier’s product is conditioned on the supplier also buying the Company’s services, may be illegal. Consult with the Legal Department before discussing any exclusive dealing or reciprocal relationships with any third parties.

     Tying Arrangements. “Tying arrangements,” or conditioning the sale of one product or service on the customer’s purchase of another product or service, may be illegal. This is especially true if the Company has substantial market share with respect to the first product. Discuss any plans to offer bundled sales of two or more products with the Legal Department before making any presentations to customers.

Other Anti-Competitive Practices

Other potentially illegal anti-competitive practices include:

     Predatory Pricing. Pricing below cost (the law does not clearly define what the appropriate measure of “cost” is) by companies with a dominant market share, with the aim of forcing competitors out of a market.

     Disparagement. False or misleading statements critical of competitors or others.

     Interference with the Contracts of Competitors. Urging or suggesting that a customer or prospect violate a contract with a competitor. Generally, you are permitted to suggest that a customer exercise rights in a contract, such as exercising a termination option or not renewing a license, but you should not review that contract or license or offer legal advice on any such contract or license.

     Price Discrimination. Charging competing customers different prices for the same commodity or tangible product sold to them at about the same time where the effect may be to substantially lessen competition. Although the federal price discrimination law generally does not apply to R.H. Donnelley’s service businesses, a number of states in the United States have similar laws that may apply to services.

Price discrimination may be legal in some situations. For example, the Company may sell products at different prices if it can prove that the discount offer that resulted in a lower price to one or more customers was made known to all competing customers and that all such customers could, as a practical matter, take advantage of the discount if they desired to do so. The Company may also sell to one customer at a lower price than another in order to meet, but not beat, a competitor’s offer at a lower price. Caution: In order to avoid even the appearance of impropriety, you may not contact the competitor to verify the price it is charging. Instead, you must look to other objective evidence such as a copy of the competitor’s offer provided or shown to you by the customer (provided the customer does not inform you that she or he is obligated not to disclose the offer to the Company). Whenever a price is lowered to meet competition, be sure to document the reasons why and the evidence on which you relied in doing so.

     Monopolization. It is illegal for a company to monopolize or attempt to monopolize a market, i.e., to dominate a market by anti-competitive methods. While RHD believes it does not have a dominant or monopolistic position in any relevant market, nor any reasonable probability of achieving such a position, we cannot be sure that a regulator or court will not define a relevant market so narrowly as to raise a monopolization concern with respect to RHD. Therefore, all employees should

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avoid any conduct which could be construed as an attempt to monopolize. Many of the other actions described above could be used as evidence of an attempt to monopolize.

     Participation in Trade Associations. There is no exemption in the antitrust laws for joint activity taken under the umbrella of a trade association or in connection with a trade association meeting. In fact, in many criminal antitrust prosecutions, at least one trade association meeting is alleged to have been involved in the conspiracy. Because of the type and size of the trade associations with which the Company may have involvement, all employees need to be particularly sensitive to potential antitrust issues in their dealings with such trade associations. Because of the possible antitrust issues that can arise in conjunction with trade association activities, no employee should participate in, or remain present at, any discussion among competitors at a trade association meeting, or other gathering of association members or participants, concerning:

• prices or factors that determine prices;

• costs;

• credit terms or other terms or conditions of sale;

• profits;

• allocation of territories among competitors;

• allocation of customers or suppliers among competitors; or

• refusal to deal with customers or suppliers.

If an employee becomes aware of such a discussion or any other discussion, the purpose or direction of which is to thwart competition on the merits, the employee should (a) cease her or his participation in the discussion and insist on an immediate end to that discussion, or , if the discussion is not ended immediately, leave the discussion or meeting immediately and insist that his or her departure be noted in the minutes (if minutes are being recorded); and (b) immediately advise your manager and the Legal Department or contact our Ethics Hotline either electronically through EthicsPoint or by calling 888-310-1194. Outside antitrust counsel will be contacted in appropriate circumstances. In general, a lawyer familiar with antitrust issues should be in attendance at any trade association meeting at which any of the above issues could possibly arise.

Employees must notify their managers and the Legal Department of their participation in any association believed to have any of the following characteristics or policies:

• an absence of attorney representation at association meetings;

• restrictions on members dealing with, or competing with, anyone;

• restrictions on membership to the competitive detriment of excluded competitors;

• restrictions on competitors or association members participating in association activities to the competitive detriment of excluded competitors;

• restrictions on dissemination of information to non-members of the association to the competitive detriment of the non-members; or

• policies or practices that may thwart competition on the merits (such as dissemination of competitively-sensitive, company-specific information).

Social Discussions and Company Communications

Remember, the practices outlined above do not have to be covered by formal or written agreements to be illegal. Any kind of casual understanding between two companies that, for example, a business practice adopted by one would be followed by the other may be used in court to prove an illegal

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agreement. Even social conversations can be used as evidence that an agreement existed. Memos and other written communications that use casual or inappropriate language might some day be examined by a government agency or opposing lawyer. Using loose language may raise questions about conduct that is entirely legal and may undermine what otherwise would have been our successful efforts to comply with the antitrust and competition laws.

Example: Sales managers of two competing companies met socially after work. After a few drinks, kidding around they verbally “agreed” that it would be great if they reduced their workload by not chasing after the same customers. The bartender overheard the conversation. In actuality, neither sales manager stopped selling to any particular customers. Later, one company acquired most of the business from law firms in the region, while the other company acquired most of the business from accounting firms. This led to an investigation into market allocation of both companies, and the bartender’s testimony was used against them.

• Aren’t my files, memos and e-mail confidential?

No! Except for certain “privileged” communications with lawyers, all Company documents and computer files, including the most casual note or e-mail message, may have to be disclosed to government enforcement organizations or private parties in lawsuits against the Company. You should also know that stamping documents “restricted” or “confidential” does not protect them from being disclosed in court.

• How can I avoid being tripped up by my own memos and e-mail?

Because violations can be found based not only on what companies have done but what they appear to have done, it is important to avoid loose language. To that end:

• Report facts, be concise and objective, and, where appropriate (such as with respect to a competitor’s price schedule), indicate where the information came from to establish that there is no collusion with competitors.

• Do not draw legal conclusions.

• Avoid expressions that may imply guilt, such as, “Please destroy after reading” or “We stole this customer from Acme Widget Corp.”

• Do not refer to “industry policies,” “industry price” or similar expressions that imply a common course of action exists.

• Do not use language that would suggest a false intent to harm competitors, such as, “this new program will ‘destroy’ the competition” or “establish a dominant position” or “building a dynasty.”

• Do not overstate your share of the market or refer to a market that is unreasonably narrow in order to make your market share appear larger.

• Do not distribute your own “sales aides” to customers. Only sales aides approved by the Company may be furnished to customers.

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• Consult with the Legal Department to understand when communications with a lawyer can be “privileged.”

Questions and Answers

Q: I work in sales and am friendly with a sales representative from one of our competitors. Our kids are on the same soccer team, so we see each other every week. Last weekend, we talked about a new sales promotion my company is offering. This promotion is no secret. Did I do anything wrong?

A: Yes. Because it is easy for such conversations to be misinterpreted, the Company’s policy is that its sales personnel should never discuss price or other terms of sale with competitors under any circumstances.

Q: Is it a violation of the antitrust laws to conduct studies analyzing RHD’s products and the products of a competitor?

A: No; the Company may properly conduct and publicize the results of comparisons of our products with the products of competitors. Comparative advertising is an acceptable form of advertising. Comparative advertising is, however, risky since it is subject to close scrutiny by the competitor who is likely to object if it is not scrupulously accurate. Making false statements about competitors in the course of comparative advertising is a classic example of commercial disparagement. Every reference to a competitor’s products by RHD employees to our customers, whether in a formal sales collateral or in an informal visit, is subject to this policy and should be reviewed in advance by the applicable marketing and Legal Departments to make certain that the reference is permissible comparative advertising and is not forbidden disparagement.

Q: What should I do if a customer asks me a direct question about a competitor’s products, prices or policies?

A: If you are certain that you know the correct answer, you may answer the customer in a direct and honest manner, then you should politely steer the discussions back to the Company’s products and services. If you do not know the answer or you are unsure, do not answer.

Q: How should we react or what should I do if I discover that a competitor is disparaging or making false statements about the Company’s products?

A: When confronted with an erroneous statement about RHD, the RHD employee should state the facts truthfully. Employees should not comment on the ethics of the source of the erroneous statements. If the source of the erroneous statements can be identified, or if the statements are particularly egregious, the employee should inform his or her manager, a department head, the Legal Department or contact our Ethics Hotline either electronically through EthicsPoint or by calling 888-310-1194. Do not take it upon yourself to attempt to rectify the problem.

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CONFLICTS OF INTEREST

Employees must avoid any action, investment, interest or association that might interfere, or appear to interfere, with their independent exercise of judgment in the best interests of the Company and its stockholders. Conflicts of interest arise when an employee’s position with R.H. Donnelley presents an opportunity for personal gain apart from the normal compensation provided through employment.

You must not be in a position where your personal or outside business interests could affect your decisions made on behalf of the Company. Individuals or companies with whom or which the Company does business, whether as customer, supplier or otherwise, must be chosen solely on the basis of the best interests of the Company.

• Are such conflicts really a big problem?

Favoritism toward outside businesses can cause the Company to buy higher-priced and/or lower-quality products or to provide its services at inadequate prices resulting in lower profits. Offering customers preferential terms can also violate antitrust laws and other regulations. Conflicts of interest, or even just the appearance of such conflict, can seriously harm your reputation and R.H. Donnelley’s and, therefore, must be avoided at all costs.

• Does this mean we can never do business with a company with which an employee is connected?

Sometimes such a company is the best possible supplier or customer. The decision whether to use that company should not be made by the employee having the relationship or interest; the decision should be made by management after disclosure of any conflicts and a thorough review of the relevant facts.

• What should I do if I find myself in an actual or potential conflict situation, or if I am about to enter into a transaction that could be objectively viewed as a conflict of interest by employees, customers, vendors or other parties?

If you find yourself in an actual or potential conflict situation, you must promptly notify your manager, in writing. If you are about to enter into such a transaction, you should review the situation with your manager in advance of entering into the transaction.

• What will my manager do?

If your manager has any doubt as to the propriety of the transaction, he or she will refer the matter to the department head or another executive officer. Conflicts involving department heads or executive officers should be resolved by the appropriate Vice President or the Chief Executive Officer. Managers are encouraged to consult with the Human Resources, Legal and Finance Departments, as appropriate, or contact our Ethics Hotline either electronically through EthicsPoint or by calling 888-310-1194.

You should not make decisions as part of your job that would have an impact on any company or business in which you have a significant financial or other interest. You should not acquire a significant interest in any supplier, customer or other company if you will be making decisions in your job that affect it, without approval by senior management after consultation with the Legal Department. You should also not hold any significant (more than five percent of your entire portfolio)

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investment in, or have any significant relationship (e.g., family member employed) with, any competitor of the Company. In such circumstance, to avoid impropriety or the appearance of impropriety, you must immediately notify your manager so that the Company may assess the situation. Please note that under certain circumstances, you may be required to divest any conflicting investment or terminate any conflicting relationship as a condition to continued employment with the Company.

Any interest in another company that would influence you to make a decision based on that company’s or your own interests rather than R.H. Donnelley’s best interest is considered “significant.” An interest can be financial, such as owning stock, or personal, such as a family or other close relationship with an owner of a company. If you are uncertain whether an interest is significant, you should disclose it to your manager, who can then decide whether or not you should be assigned to duties involving the company in question.

Example: You are an information technology manager. For many years, you have owned stock in Acme Software Company that is now worth $20,000. Your manager assigns you to develop specifications for the purchase of a new software package, and Acme is one of the major vendors for that software. You should inform your manager of your ownership of the Acme stock. Your manager will decide whether or not you should be taken off that particular assignment.

Employees are also prohibited from directly or indirectly bidding for, purchasing, leasing or otherwise acquiring any property or asset or pursuing a business opportunity if they are aware or should be aware that RHD may also be interested (or might be interested if they were so informed) in acquiring such property or asset or pursuing that same business opportunity. In such cases, the employee must immediately notify their manager of the opportunity and refrain from engaging in any transaction with respect to the opportunity unless authorized in writing by the Company.

Positions with Outside Companies

An employee serving as an officer or director of an outside company may be regarded as a representative of R.H. Donnelley and might find his or her duties with that company to be in conflict with R.H. Donnelley’s interests. You should accept such a position only after approval by senior management and consultation with the Legal Department.

An employee should not take a part-time or second job that could have a negative impact on such employee’s job performance at R.H. Donnelley or that may create a conflict of interest with the duties that the employee performs for the Company. If there is any question as to whether a conflict of interest exists or could objectively appear to exist, you should discuss it with your manager immediately.

Employees as Consultants

A manager should not hire a current RHD employee to work as a consultant or other independent contractor for the Company where payment is made outside normal payroll procedures. This applies without exception, regardless of whether or not the work is related to the duties of the employee’s position. There may be instances where special Company projects warrant exceptions to this policy, but only where payment is made within the normal payroll procedures. Such exceptions must be approved by the Human Resources Department. Former employees should be retained by RHD as consultants under only certain circumstances and must be approved by the Human Resources Department.

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Purchases

RHD will do business only with suppliers that embrace and demonstrate high principles of ethical business conduct and will not knowingly use suppliers who operate in violation of applicable laws or regulations, including environmental, employment or safety laws.

Procurement agreements should be written to clearly identify the services or products to be provided, the basis for payment and the applicable price. The price must not be excessive in light of industry practice and must be commensurate with the services or products provided. Do not make any commitments or enter into any oral or written agreement on behalf of the Company unless you have fiscal and signatory authority to do so. See the R.H. Donnelley Purchasing and Financial Policies and Procedures Manual for further detail on procurement activities.

The Company will contract with each of its suppliers only on the basis of quality, price, service and other valid business criteria. The fact that a supplier or potential supplier may also be a customer of the Company shall not be the basis for making purchasing decisions. No employee shall condition purchases from a supplier on the supplier’s patronage with the Company, nor shall any employee attempt to persuade suppliers to purchase from the Company simply because the Company buys from them.

As stated above, in general, the Company will not purchase products or materials from you or from a firm in which you have a substantial interest. There are exceptions where the product or material is commonplace, where the purchase is at a clearly competitive price and where the total purchases in a year are of nominal amount, with respect to both the Company and the vendor. In a situation that may give rise to an exception, you should discuss the matter with your manager before proceeding.

Safeguarding Assets; Use of Company Resources and the Internet

Safeguarding Company and customer assets is the responsibility of all employees. You should use and maintain such assets with care and respect, while guarding against waste and abuse. You should look for opportunities to improve performance while reducing costs. The use of Company time, materials, assets or facilities for purposes not directly related to Company business, or the removal or borrowing of Company property without permission, is absolutely prohibited.

You may not use R.H. Donnelley or any customer’s or supplier’s money, materials, supplies or other resources, including computers, to advance your outside business interests. Personal calls from office telephones should be kept to a minimum. While the Company recognizes that managers ask their secretaries for help with personal matters, such as typing letters and scheduling appointments from time to time, this should be the exception rather than the norm. Use of Company computers, including the Internet, for personal matters should be kept to a minimum and confined to non-business hours only.

All Internet, intranet and e-mail activities are to be conducted only for legitimate business purposes. The Company owns and has all rights to monitor, inspect, disclose and expunge all electronic files and records on Company systems, including all e-mail messages generated using Company facilities, and employees should have no expectation of ownership, use, or rights of privacy with respect to such files, messages and records. Employee use of all Company computing resources, including personal computers, networked services and Internet, intranet and
e-mail access (including Web surfing and Web site creation activities) must at all times comply with all Company policies and all applicable laws, including those relating to misappropriation of proprietary property, privacy,

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defamation, sexual and other forms of harassment, and unfair competition or trade practices. Employees are reminded that all online, e-mail and voice-mail activities, intentionally or not, are potentially public in nature. You must never act in a way that would bring liability, loss of credibility or embarrassment to yourself or the Company. Abuse of this policy may result in revocation of privileges or other disciplinary action, which may include, among other things, immediate termination of employment for cause.

Confidential Information and Trade Secrets

You must at all times maintain the confidentiality of Company and customer information that is not publicly known and not use it to seek personal gain. You shall not disclose or threaten disclosure of confidential information (whether the Company’s or another third party’s you obtained in the course of your employment) in order to curry favor or obtain some payment or benefit to which you are not legally entitled.

All employees may learn, to a greater or lesser degree, facts about the Company’s or a customer’s business, plans, operations or “secrets of success” that are not known to the general public or to competitors. Sensitive information such as customer lists, the terms offered or prices charged to particular customers, marketing or strategic plans, or proprietary product designs or systems developments are examples of confidential information or trade secrets. Similarly, during the course of performing their jobs, employees may obtain information concerning possible transactions with other companies or receive confidential information about other companies that the Company may be under an obligation to keep confidential. Such information is to be treated as Company confidential information. In addition to harming the Company, the misuse of confidential information could violate insider trading laws, as discussed below under “Insider Trading” or infringe the intellectual or other proprietary rights of others, as discussed above under “Ethical Business Conduct – Misappropriation of Proprietary Property;” and “–Unauthorized Copying or Use.” We should obtain confidentiality agreements from all third parties prior to disclosure of Company confidential information and the Legal Department should prepare and/or review all confidentiality agreements prior to their execution.

Employees must be careful not to discuss confidential or proprietary information with family members or business or social acquaintances or in places where they can be overheard, such as taxis, elevators, restaurants or other public places. Within the Company, confidential or proprietary information should be marked or labeled as “Confidential,” where appropriate, and should be divulged only to other employees who need the information to carry out their business responsibilities. It is also the responsibility of each employee to maintain the confidentiality of sensitive employee information, such as salary, bonus, performance-appraisal and remedial or disciplinary matters and disclose such matters to other employees only when required for business reasons.

Communications With Attorneys

Information you communicate to RHD attorneys or outside counsel retained by RHD in order to obtain legal advice generally is protected by the attorney–client privilege. This privilege protects from disclosure to others (including adverse parties in litigation) confidential communications between you and our attorneys for the purpose of obtaining legal advice on business matters. The privilege belongs to the Company, not to you. You should keep such communications confidential and refrain from sharing them with others, including fellow employees or your manager, unless so authorized or directed by the respective attorney. Because the privilege belongs to RHD, you should be aware that our attorneys may share any information you divulge with management. Our attorneys represent the Company and you should not consult them for advice regarding any personal matters.

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Gifts and Entertainment

To avoid both the reality and the appearance of improper relations with vendors or customers, the following standards will apply to the offer and receipt of gifts and entertainment by employees.

     Gifts. Employees may not offer, solicit or accept gifts of money under any circumstances, nor may they solicit non-money gifts, gratuities, or any other personal benefit or favor of any kind from a business firm or individual doing or seeking to do business with R.H. Donnelley

Except as provided below, employees may offer, and employees and members of their immediate families may accept, unsolicited, non-money gifts from a business firm or individual doing or seeking to do business with R.H. Donnelley or with whom we wish to do business, only if: (a) the gift is of nominal value (i.e., less than or equal to $100.00) or (b) the gift is promotional in nature. You should not regularly accept gifts of nominal value from the same source.

Non-money gifts of more than nominal value (i.e., more than $100.00) may be offered or accepted only if protocol, courtesy or other special circumstances exist. However, all such gifts must be reported to the Human Resources or Legal Departments, which will determine, on a facts and circumstances basis, if the employee may offer or keep the gift or must return it.

Entertainment. Employees may not encourage or solicit entertainment from a business firm or individual doing or seeking to do business with R.H. Donnelley. From time to time, employees may offer and/or accept entertainment, but only if the entertainment is reasonable, occurs infrequently and does not involve lavish expenditures.

• What gifts and favors are acceptable?

     Gifts that do not meet the test of nominal value, $100.00 or less, and/or that are designed to or might actually influence the business judgment of the recipient should be avoided or refused or returned to the donor as tactfully as possible. You should never give gifts designed to or that could influence the business judgment of the recipient.

Lunch and dinner invitations are generally acceptable. Take care that invitations are offered or accepted only occasionally and generally use common sense and good judgment (e.g., do not routinely dine at the finest restaurants or order expensive bottles of wine).

Participating in purely social functions is acceptable only in moderation, both in frequency and when the event is of reasonable cost.

Example: Extending or accepting an invitation to attend a ball game would generally be reasonable, but offering or accepting a trip to a distant location to attend a championship game would likely not. Any questions in this area should be referred to your manager, department head and/or the Human Resources or Legal Departments.

Questions and Answers

Q: I have a second job on weekends typing resumes. The Company’s computer equipment and software makes it easier to come in on the weekend to do the resumes at my desk than to do the work on my typewriter at home. I do not see how this hurts the Company.

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A: It violates our policy. Second jobs or self-employment must be kept totally separate from Company-related activities and materials. This includes use of Company time, materials, facilities and equipment. The Company’s communications system, including voice mail and e-mail, is intended for R.H. Donnelley employees engaged in R.H. Donnelley work and may not be used to conduct any outside business. This should be distinguished from an occasional personal use, which is permitted after-hours when it does not interfere with Company business or assigned duties and is otherwise consistent with other RHD policies.

Q: I am planning to place an ad in my local newspaper and on the Internet to sell my car. Is it OK for me to give my RHD e-mail address or RHD telephone, cell phone and/or pager numbers for responses?

A: No. Employees must always keep personal activities separate from Company business. This is not always possible, and occasionally you will need to make or receive a telephone call or an e-mail at work that relates to your personal business. However, you should not plan to handle the sale of your car or other significant non-RHD business activities using Company resources.

Q: My brother-in-law’s firm could provide the Company with a great service, and I know he will do a good job. How do I help R.H. Donnelley avoid a conflict of interest?

A: We can certainly benefit from using suppliers we know and trust, but any potential conflict must be handled through prompt and fair disclosure. If you are recommending the firm to another Company employee, be sure to disclose your relationship with the firm’s owner. If you normally are responsible for a purchase like this, do not make the final decision. Advise your manager of the relationship and let him or her make the decision.

Q: As a manager, I have been working with a Company supplier for a number of years. He recently offered to do some personal work for me at a substantial discount. Can I take him up on his offer?

A: No. The contractor would be granting you a special favor due to his relationship with the Company and possibly be trying to compromise your business judgment.

Q: I manage the relationship between the Company and a consultant. At Christmas time, the consultant sent me a bottle of wine. May I keep it?

A: Yes. A bottle of wine or liquor is considered a customary gift; however, a particularly rare and expensive bottle or a case of liquor would not be of nominal value (over $100) and you would have to refuse or return it.

Q: I think one of my co-workers has stolen a lap top computer. What do I do?

A: Theft of any kind is a violation of RHD’s policy and many laws. Please promptly advise your manager, department head, the Human Resources or Legal Department or contact our Ethics Hotline either electronically through EthicsPoint or by calling 888-310-1194.

Q: Is it a conflict of interest to restrict my flights to one airline or my hotel reservations to one chain in order to collect mileage awards?

A: RHD’s policy is that all travelers on business for the Company should take advantage of the lowest practical fare or rate offered for all transportation and accommodations. No vendor should be used to garner “frequent flyer bonus points” if another, more cost-effective alternative is available.

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Q: Can RHD employees sell products (e.g., Mary Kay cosmetics or Amway products) to RHD customers?

A: No. Solicitation by employees of other RHD employees or customers for any non-RHD product or service is strictly prohibited. This policy applies to the solicitation of customers at all times and to the solicitation of fellow employees during normal (for the subject employee) working hours, on RHD’s premises or at RHD-sponsored events off-premises. Employees should never use Company resources, including telephones, cell phones, pagers, fax machines or computers, to engage in any outside business activity. See “Day to Day Work Policies – Solicitation and Distribution Policy” in the R.H. Donnelley Human Resources Employee Handbook for further details regarding permissible or prohibited solicitation and distribution activities.

INSIDER TRADING

Generally

Insider trading is illegal. The insider trading laws of the United States prohibit buying or selling the Company’s securities while in possession of material, non-public information about the Company. You can also violate these laws by disclosing material, non-public information to another person if, as a result, that person — or any other person — buys or sells a security on the basis of that information. If you make such a disclosure, you can be punished, even if you yourself have no financial gain.

“Material” information is generally regarded as information that a reasonable investor would deem important in deciding whether to buy, hold or sell a security; in short, it is any information that could reasonably affect the price of the security. Examples of possible material information are sales or other financial results or issues, earnings, dividend actions, strategic plans, new products, important management or other personnel changes, acquisition, divestiture or other similar strategic plans, marketing plans and litigation or government actions. In light of the extreme volatility and price-sensitivity of today’s market, almost any form of information, positive or negative, could be viewed as material. And remember, materiality will be decided by a regulator, judge or jury with “20/20” hindsight.

“Non-public” means the information has not been broadly disseminated to the public. An employee who becomes aware of material information before it is publicly disclosed should refrain from trading in the Company’s stock until at least the third business day after such information is publicly disclosed. In this context, public disclosure means the Company has included the information in a filing it makes with the Securities and Exchange Commission (the “SEC”) or in a news announcement or other broadly disseminated press release. Even after material information has been publicly announced, the Company’s stockholders and the public must be given a reasonable time to digest the information and act upon it. Generally, two full trading days is sufficient.

The SEC takes insider trading very seriously and devotes significant resources to uncovering any improper activity and to vigorously prosecuting offenders. In addition to heavy fines and lengthy prison terms, a violator can be required to pay civil penalties of up to three times the profit gained, or loss avoided, by the unlawful transaction or disclosure. The Company may also have to pay substantial fines.

You may not buy or sell, or otherwise transfer, R.H. Donnelley securities while in possession of material, non-public information. In addition, you may not engage in any other action to take

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advantage of, or pass on to others, material, non-public information. This policy also applies to buying or selling securities of any other company while you have material, non-public information about that other company that you learned during the course of your employment with the Company. These same restrictions apply to your family members and others living in your household. You are responsible for ensuring their compliance with these restrictions.

Example: A secretary types an agreement that will allow the Company to enter a very profitable new line of business. She tells her sister-in-law who buys 1,000 shares of the Company’s stock. The day after the news is released, the stock price jumps $5 per share. The secretary likely has violated the insider trading laws and the Company’s policies, even though she did not personally make a profit.

Speculative Transactions

Because these actions can lead to the appearance of impropriety, we believe it is improper and inappropriate for our employees to engage in short-term or speculative transactions involving the securities of the Company. Therefore, it is the Company’s policy that members of the Board of Directors, officers and employees should not engage in any of the following activities with respect to securities of the Company:

• Trading in the Company’s securities on a short-term basis. Any securities of the Company purchased in the open market must be held for a minimum of six months, and ideally, longer. This rule does not apply to the purchase of securities upon the exercise of options that were granted by the Company.

• Purchases of the Company’s securities, including the exercise of options, on margin.

• Short sales of the Company’s securities.

• Buying or selling puts, calls, straddles, collars or other similar risk reduction devices with respect to the Company’s securities.

• Transactions in publicly-traded options relating to the Company’s securities (i.e., options that are not granted by the Company).

Questions and Answers

Q: May I buy or sell as soon as material information becomes public?

A: No. An employee who has material information before it is publicly disclosed should not make a trade until at least the third business day after it is publicly disclosed.

Q: Am I free to disclose non-material confidential information?

A: No. You must not disclose without authorization any confidential information that you learn about the Company’s (or any other company’s) business during the course of your employment. Also, confidential information should be shared, within the Company, only with those with a need to know it in order to do their jobs properly. You should make sure that all documents containing confidential information that you control are kept confidential. See “Conflicts of Interest - Confidential Information and Trade Secrets” above.

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Q: Our company is going to announce the withdrawal from the market of a new service that was recently introduced with much publicity, since it failed to draw customers as expected from our competitor’s service. This may result in our stock price going down and the competitor’s stock price going up. Is it appropriate to buy the competitor’s stock or sell our stock before the withdrawal is publicly announced?

A: No, because your decision to buy or sell was based on material, non-public information. Remember, whether non-public information is material is often judged in hindsight, based on whether the company’s stock price in fact moved up or down.

Q: I own some R.H. Donnelley stock that I would like to sell to help pay for a new car. I do not have any material, non-public information about RHD. Do I have to check with anyone before selling, or report the sale to anyone?

A: Unless you are an Assistant Vice President (or above) or member of the Board of Directors of R.H. Donnelley, who are subject to special policies and procedures, you do not have to check with or report to anyone. You may buy or sell stock whenever you wish as long as you are not in possession of material, non-public information. If you have any doubt whether information you have is material, consult the Legal Department before you act.

Q: Someone I used to work with is now a stock market analyst. Whenever he calls, he pretends it’s personal, but then asks what is happening at R.H. Donnelley. I am not sure what to say.

A: You should never discuss anything about the Company with an analyst or the press. See “Communications Outside of the Company” below for a discussion of how to deal with such inquiries.

Q: Is it considered a violation of the securities laws or of Company policy to reallocate profit participation plan (401(k)) funds based on material, non-public information?

A: Yes, if your reallocation of funds in your profit participation plan would impact your ownership of RHD stock. Trading in any way involving RHD securities (e.g. options, or other derivative securities) is subject to the insider trading laws and this Policy.

Q: If material, non-public information is passed down the line among a number of RHD employees and eventually it is determined a violation of the insider trading laws has occurred, are all the employees liable?

A: Yes, all of the employees could be implicated in securities violations and have violated this Policy. It is a violation of the securities laws for an individual to pass on material information to another person who buys or sells stock based on that information. The person making the disclosure can be found liable, even if the person does not financially benefit from the transaction. Violations of the securities laws can mean very substantial fines and lengthy prison terms. Refer any questions in this area to the Legal Department.

COMMUNICATIONS OUTSIDE OF THE COMPANY

You should not discuss any information about, or any issue regarding, the Company with any third party. You must not discuss confidential business issues with friends or acquaintances, even if they have no interest in our business. From time to time, you may receive calls from the press or securities analysts. Tell analysts or similar securities specialists who call that questions about the

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Company can only be answered by R.H. Donnelley’s Investor Relations representatives. Similarly, inquiries from the press should be directed to the Investor Relations or the Legal Department. You must also refrain from disclosing information about the Company or posting responses to other’s comments about the Company or any of our employees on Internet bulletin boards, such as Yahoo Finance. In the event that you encounter confidential information or objectionable comments about the Company in any public forum, please promptly notify the Investor Relations or Legal Departments. The relevant contact numbers of these departments are set forth on the last page of this document.

POLITICAL AND COMMUNITY ACTIVITIES

RHD has contributed to the economic and social development of its communities for over 100 years. In addition to the jobs created and the services provided, we encourage our employees to become actively involved in their communities. While you’re encouraged to participate in community affairs, you must make it clear that your views and actions are your own, and not those of RHD. In any event, employees should ensure that their outside activities do not interfere with their job performance. If you wish to use Company time or property to support civic or charitable efforts, you must obtain the approval of your manager first and comply with the Company’s Solicitation and Distribution Policy.

Corporations are not permitted to make political contributions in connection with any election involving any United States federal office. There are similar laws in many states and foreign countries. The Company encourages you to participate in the political process on your own time, as long as you take care not to imply that you are acting on behalf of the Company. Your personal contributions must not be made with, or reimbursed by, Company funds in U.S. federal, state or local campaigns. Individual participation must be completely voluntary and must occur during non-working hours. It may not involve the use of R.H. Donnelley funds, personnel time, equipment, supplies or facilities.

Lobbying or advocating legislation are also restricted by the United States and certain states and other countries. Under federal, state and local law, R.H. Donnelley may be required to register and report if its employees engage in lobbying activities. This may need to be done if you communicate with any members of federal, state or local legislative or executive office for the purpose of influencing any action on the Company’s behalf. Before any employee takes a public position on public issues or governmental actions on behalf of the Company, the Legal Department should be consulted. Employees who serve on governmental advisory boards should also be aware that there are restrictions on their ability to promote the Company’s business in conjunction with their work on such boards.

No one may pressure another employee to express a political view that is contrary to a personal view, or to contribute to a political action committee, political party or candidate, or charitable organization.

DATA PRIVACY

The Company recognizes that the measurable benefits that flow to citizens, businesses and government from the free movement of information must be balanced against an individual’s privacy interests. Therefore, the Company subscribes to the following information practices regarding personally identifiable data (i.e., information that identifies a particular individual such as name, address, phone number, social security number, etc.):

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Use

It is the Company’s policy to comply with laws and regulations governing the collection, use and distribution of personally identifiable data.

Security

We will take technical, contractual, administrative and physical steps to protect against unauthorized access to and disclosure of personally identifiable data.

Accuracy

We will strive to maintain the highest practicable level of accuracy of personally identifiable data.

HOW WE SOLVE ETHICAL ISSUES

With some ethical issues it is easy to know right from wrong. If the question involves a matter of law, our course is clear and unambiguous — we follow the letter and spirit of the law. But often the questions are not so clear cut. They present us with difficult choices. It is impossible to prepare in advance for all possible issues. So, the best course of action is to understand the way you should resolve such issues. These are simple, but key steps to keep in mind each time you confront a “tough call”:

• Get all the facts.

It is difficult enough to discern appropriate answers with the facts; it is impossible to reach intelligent solutions without them.

• Ask yourself: what specifically am I being asked to do?

It should enable you to bring into sharp focus the specific question you are faced with, and what alternatives you may have. Considering all available alternatives will often shed light on the best course of action.

• Clarify your responsibility.

Most situations we face involve shared responsibility. Are all the other responsible parties informed? By getting others involved, and “airing” the problem, the most appropriate course of action usually begins to come to light fairly quickly.

• Is it fair? Would I want everyone to know my decision? How would I feel about myself? Would I bet my job on it?

When the problem is not a clear cut matter of law or Company policy, these simple questions are often a useful guide. If a course of action seems unfair, examine why it seems unfair and who specifically may be wronged. Is it our customer? Stockholders? Company interests? Other employees? Public at large? In most cases, the best course for ethical purposes is the one that seems most fair to all concerned parties. Similarly, if the course of action is one of which you would be embarrassed or feel guilty about, or one you would not want publicized, then it is likely not an appropriate course of action to take. Ask yourself if you’re willing to risk your job. And remember, you can almost always seek guidance before acting.

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• Discuss the problem with your manager or supervisor.

This is basic guidance for almost all situations, and should be considered during each of these steps In most cases, your manager will have more experience and a broader perspective than you do, and will appreciate being brought into the decision-making process before it’s too late. Managers have a prime responsibility to help you resolve all problems, but especially ethical and legal issues.

• Ethics help is available.

In the rare case where it may not be appropriate to discuss an ethics issue with your manager, or you are not comfortable doing so, you can discuss it with your department head or feel free to contact the Human Resources or Legal Departments or contact our Ethics Hotline either electronically through EthicsPoint or by calling 888-310-1194. Contact information is included on the last page of this document.

POLICY ADMINISTRATION

Administration

This Policy has been developed under the supervision of, and has been expressly adopted by, the Corporate Governance Committee and the Audit and Finance Committee of the Board of Directors of R.H. Donnelley. These Committees are ultimately responsible for the administration of the Policy on Business Conduct. The Committees have delegated to the Human Resources and Legal Departments authority to administer the Policy on a daily basis, including investigating reported or suspected violations of the Policy, determining whether any violation has occurred and determining and implementing remedial and/or disciplinary action in response to any such violation. The Human Resources and Legal Departments will report regularly to these Committees or the entire Board of Directors, as appropriate, regarding matters relating to the administration of this Policy. These Committees will review this Policy at least annually and revise it as appropriate. Any significant revisions will be circulated to all employees and other affected parties. The Company reserves the right to modify, terminate and/or replace this Policy at any time at the Company’s discretion.

Interpretation

The Human Resources and Legal Departments of R.H. Donnelley are responsible for interpreting applying this Policy to specific situations when questions arise. They will seek the guidance of and defer to the judgment of the Audit and Finance and Corporate Governance Committees of the Board of Directors when appropriate. Any questions relating to how the Policy should be interpreted or applied should be addressed to the Human Resources or Legal Departments or contact our Ethics Hotline either electronically through EthicsPoint or by calling 888-310-1194. EthicsPoint offers complete anonymity if so desired. Contact information appears on the last page of this document. Any interpretations of this Policy will be at the sole discretion of the Company and all such interpretations will be final and binding.

Training

Following initial distribution of this Policy and any significant revision of the Policy in the future, the Human Resources and Legal Departments will either provide videotape or on-line comprehensive training or visit each office and make comprehensive live presentations regarding this Policy. In

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either event, they are always available to answer any questions you may have or you may contact our Ethics Hotline either electronically through EthicsPoint or by calling 888-310-1194.

Attestation

As part of the initial distribution of this Policy and as part of any subsequent significant revision of the Policy or as the Corporate Governance Committee or Audit and Finance Committee shall require, all employees will be required to sign or electronically acknowledge an Attestation certifying that you have received and read the Policy and agree to comply with it. Additionally, you will be required to acknowledge an Attestation on a periodic basis. Each newly-hired employee will be required to do the same. Repeated failure or refusal to sign or acknowledge the Attestation will be grounds for immediate termination for cause.

Consistent with the responsibilities set forth in the Policy, all officers and managers of the Company are responsible not only for reporting any potentially significant Policy violations, but also for reviewing this Policy with their subordinates and ensuring that the Attestation is signed or acknowledged when required.

Conflict With Other Policies

This Policy on Business Conduct does not include every policy of the Company and is not intended to replace (but rather clarify and supplement, to the extent relevant) any other existing polices of the Company (for example, the Human Resources Employee Handbook and the Policy on Trading in the Company’s Securities applicable to executive officers). All such existing policies remain in full force and effect. In the event that you believe that this Policy directly conflicts with any other Company policy, please bring the apparent conflict to the attention of the Human Resources or Legal Departments or contact our Ethics Hotline either electronically through EthicsPoint or by calling 888-310-1194, so that they can help you resolve the conflict or eliminate the conflict by revising one of the conflicting policies. To the extent you believe that this Policy conflicts with any applicable legal standard, please immediately seek the guidance of the Legal Department for help in resolving such conflict.

Reporting of Potential Violations

All employees should be alert and sensitive to situations that could result in violations of (a) federal, state or local laws, (b) the principles, policies and procedures set forth in the Policy on Business Conduct or (c) other important Company policies and procedures. Employees who believe that their own conduct or that of another employee or affected party may have violated any such law or any of these principles, policies and procedures have an affirmative obligation to promptly report the matter. Failure to report the matter may subject you to disciplinary action.

Such matters may be reported on a confidential or anonymous basis to the Human Resources or Legal Departments or you may or contact our Ethics Hotline either electronically through EthicsPoint or by calling 888-310-1194. EthicsPoint offers complete anonymity if you so desire. Where appropriate, you may also contact our Disclosure Committee, Internal Audit department, external auditors or independent members of our Board of Directors. We will maintain confidentiality and anonymity to the greatest extent practicable under the circumstances. See the last page of this Policy for contact information for all of these reporting channels.

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However, generally such matters should first be raised with immediate supervisors. This may provide valuable insights or perspectives for both the employee and the manager and helps develop constructive relationships and skill sets. It also encourages resolution of the matter within the appropriate work unit and may prevent inappropriate escalation of immaterial matters. If you do not feel comfortable bringing a matter to the attention of your manager or do not believe that your manager has dealt with the matter properly, you certainly should raise the matter with the appropriate department head or function head or, if necessary, the other reporting channels described above. The most important point is that possible violations should be reported promptly and that the Company supports all of these means for reporting them. As described above, the Company has and enforces a strict non-retaliation policy. EthicsPoint

Seeking Guidance

The Human Resources and Legal Departments are available when you need guidance or you may or contact our Ethics Hotline either electronically through EthicsPoint or by calling 888-310-1194. The Human Resources and Legal Departments have experienced employees who are able to assist and guide you in complying with the Company’s policies. Contact information is included on the last page of this document.

Disciplinary Policy; At Will Employment

The principles, policies and procedures set forth in this Policy and other relevant Company policies and procedures will be enforced at all levels. Employees who violate these principles, policies and procedures will be subject to appropriate disciplinary action, which may be imposed outside of existing progressive discipline policies. Disciplinary action may include, among other things, immediate termination for cause or demotion, restitution of losses, civil action or criminal prosecution. Nothing in this Policy changes the fact that all RHD employees are employees at will and may terminate their employment or have their employment terminated by the Company at any time, with or without cause or notice. See the Human Resources Employee Manual for more detailed information regarding at will employment.

Audits, Investigations, Remedial Action and Certifications

Compliance with this Policy and other Company policies may be monitored by periodic audits, which may or may not be announced in advance. All employees are required to cooperate fully with any such audits, as well as with any investigation of reported or suspected wrongdoing or with any remedial or disciplinary action imposed by the Company. In addition, employees are required to provide truthful, accurate information and to respond to requests for certifications in connection with audits, investigations and remedial actions. Failure to comply with any of these requirements will subject you to disciplinary action.

Requests for Exception

While all Company policies must be strictly adhered to, in certain cases, exceptions may be made where appropriate. An employee who believes that an exception to any of these policies is appropriate in a particular case should contact an immediate supervisor first. If the immediate supervisor agrees that an exception is appropriate, the approval of the Human Resources or the Legal Departments should be promptly sought before any action is taken. Exceptions for executive officers or Board members will be required to be approved by the Board of Directors (or one of its Committees) and may require prompt public disclosure.

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USEFUL CONTACT INFORMATION

ETHICS HOTLINE

EthicsPoint (confidential and anonymous electronic reporting)

On the Company’s intranet or available on the world wide web at www.ethicspoint.com.

Toll Free Hotline: 888-310-1194 (answered by HR or Legal)

C/o R.H. Donnelley Corporation
1001 Winstead Drive
Cary, North Carolina 27513

INDEPENDENT MEMBERS OF OUR

David Veit (general Policy items)
Chair of Corporate Governance Committee

C/o R.H. Donnelley Corporation
1001 Winstead Drive
Cary, North Carolina 27513

Written correspondence will not be opened by the Company and will be sent directly to Mr. Veit

HUMAN RESOURCES

Debbi Ryan (Overall)
(919) 297-1112

Lisabeth Lee (Corporate and Sales)
(919) 297-1208

Amy Clark (Compensation and Benefits)
(919) 297-1209

Lena Harrington (Publishing and IT)
(919) 297-1134

C/o R.H. Donnelley Corporation
1001 Winstead Drive
Cary, North Carolina 27513

LEGAL DEPARTMENT

Robert J. Bush (Overall)
(919) 297-1114

Andy Finkle (Conflicts of Interest and Antitrust)
(919) 297-1127

C/o R.H. Donnelley Corporation
1001 Winstead Drive
Cary, North Carolina 27513

DISCLOSURE COMMITTEE

Robert A. Gross, Chair
(919) 297-1174

Robert J. Bush, Secretary
(919) 297-1114

C/o R.H. Donnelley Corporation
1001 Winstead Drive
Cary, North Carolina 27513

BOARD OF DIRECTORS

Edwina Woodbury (financial Policy items)
Chair of Audit and Finance Committee

C/o R.H. Donnelley Corporation
1001 Winstead Drive
Cary, North Carolina 27513

Written correspondence will not be opened by the Company and will be sent directly to Ms. Woodbury

DIRECTOR OF INTERNAL AUDIT

Robert Green
(919) 297-1249

C/o R.H. Donnelley Corporation
1001 Winstead Drive
Cary, North Carolina 27513

PRICEWATERHOUSECOOPPERS

Jeff Barber, Audit Partner
(919) 755-3105

Pricewaterhouse Coopers LLP
150 Fayetteville Street Mall
Suite 2300
Raleigh, North Carolina 27601

INVESTOR RELATIONS

James Gruskin, AVP — Investor Relations
(919) 297-1128

Steven M. Blondy, Senior Vice President and Chief Financial Officer
(919) 297-1116

C/o R.H. Donnelley Corporation
1001 Winstead Drive
Cary, North Carolina 27513

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EX-31.1

CERTIFICATIONS Exhibit 31.1

I, David C. Swanson, certify that:

1. I have reviewed this quarterly report on Form 10-Q of R.H. Donnelley Corporation;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.) Designed such disclosure controls and procedures, or caused such disclosure controls or procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;

d.) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing equivalent functions):

a.) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 5, 2005	By:	/s/ David C. Swanson
		David C. Swanson
		Chairman and Chief Executive Officer

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EX-31.2

CERTIFICATIONS Exhibit 31.2

I, Steven M. Blondy, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of R.H. Donnelley Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.) Designed such disclosure controls and procedures, or caused such disclosure controls or procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;

d.) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing equivalent functions):

a.) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 5, 2005	By:	/s/ Steven M. Blondy
		Steven M. Blondy
		Senior Vice President and Chief Financial Officer

72

EX-31.3

CERTIFICATIONS Exhibit 31.3

I, David C. Swanson, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of R.H. Donnelley Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls or procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing equivalent functions):

a.) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 5, 2005	By:	/s/ David C. Swanson
		David C. Swanson
		President and Chief Executive Officer

73

EX-31.4

CERTIFICATIONS Exhibit 31.4

I, Steven M. Blondy, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of R.H. Donnelley Inc;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.) Designed such disclosure controls and procedures, or caused such disclosure controls or procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;

d.) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing equivalent functions):

a.) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 5, 2005	By:	/s/ Steven M. Blondy
		Steven M. Blondy
		Senior Vice President and Chief Financial Officer

74

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Quarterly Report on Form 10-Q of R.H. Donnelley Corporation for the period ending June 30, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned officers hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to such officer’s knowledge:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of R.H. Donnelley Corporation as of the dates and for the periods expressed in the Report.

/s/ David C. Swanson	/s/ Steven M. Blondy
David C. Swanson	Steven M. Blondy
Chairman and Chief Executive Officer	SVP and Chief Financial Officer
August 5, 2005	August 5, 2005

The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separate disclosure document.

75

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Quarterly Report on Form 10-Q of R.H. Donnelley Inc. for the period ending June 30, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned officers hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to such officer’s knowledge:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of R.H. Donnelley, Inc. as of the dates and for the periods expressed in the Report.

/s/ David C. Swanson	/s/ Steven M. Blondy
David C. Swanson	Steven M. Blondy
President and Chief Executive Officer	SVP and Chief Financial Officer
August 5, 2005	August 5, 2005

The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separate disclosure document.

76