-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QLyQ06gIVNQ51lewelly+7mfy34oeMWs7vQq2tswRziR9n1FNg1G3s7tqW4rzUdc rhDD3zwH9sUNKkLs8Zmcyg== 0000950135-96-004656.txt : 19961106 0000950135-96-004656.hdr.sgml : 19961106 ACCESSION NUMBER: 0000950135-96-004656 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961105 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PROVIDENCE JOURNAL CO CENTRAL INDEX KEY: 0000080816 STANDARD INDUSTRIAL CLASSIFICATION: TELEVISION BROADCASTING STATIONS [4833] IRS NUMBER: 050481966 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11813 FILM NUMBER: 96654317 BUSINESS ADDRESS: STREET 1: PROVIDENCE STREET 2: 75 FOUNTAIN ST CITY: PROVIDENCE STATE: RI ZIP: 02902 BUSINESS PHONE: 4012777031 MAIL ADDRESS: STREET 1: 75 FOUNTAIN STREET CITY: PROVIDENCE STATE: RI ZIP: 02902 10-Q 1 PROVIDENCE JOURNAL FORM 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ( X ) Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended: SEPTEMBER 30, 1996 ( ) 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 0-26928 ------- THE PROVIDENCE JOURNAL COMPANY (Exact name of registrant as specified in its charter) DELAWARE 05-0481966 - -------------------------------------------------------------- ----------------------------------- (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 75 Fountain Street. Providence. RI 02902-9985 - -------------------------------------------------------------- ---------- (Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (401) 277-7000 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such requirements for the past 90 days. Yes No X ----- ----- As of October 28, 1996 there were 26,544,803 shares of Class A Common Stock and 21,067,650 shares of Class B Common Stock outstanding. 2 PART 1. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS THE PROVIDENCE JOURNAL COMPANY AND SUBSIDIARIES Condensed Consolidated Balance Sheets (Dollars in thousands, except per share data)
(unaudited) September 30, December 31, 1996 1995 -------- -------- ASSETS Current assets: Cash and cash equivalents $ 11,350 $ 87 Short-term investments 3,349 - Accounts receivable, net of allowance for doubtful accounts of $3,535 in 1996 and $4,328 in 1995 52,908 56,321 Television program rights, net 21,916 16,536 Inventories 999 1,283 Deferred income taxes 7,112 7,112 Prepaids 6,424 1,296 Other current assets 7,137 2,440 Notes receivable 17,726 - Federal and state income taxes receivable 3,547 24,146 -------- -------- Total current assets 132,468 109,221 Investments in affiliated companies 9,512 22,171 Notes receivable 1,005 19,174 Television program rights, net 6,345 3,817 Property, plant and equipment, net of accumulated depreciation of $225,543 in 1996 and $204,880 in 1995 178,831 171,649 License costs, goodwill, and other intangible assets, net of accumulated amortization of $80,482 in 1996 and $67,025 in 1995 371,434 354,411 Investment in marketable securities available for sale 6,632 3,860 Other assets 27,658 22,927 -------- -------- $733,885 $707,230 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 12,385 $ 16,837 Accrued expenses and other current liabilities 49,939 49,504 Current installments of long-term debt 100 100 Current portion of television program rights payable 18,722 16,463 -------- -------- Total current liabilities 81,146 82,904 Long-term debt 159,700 243,998 Television program rights payable 6,589 5,509 Other liabilities and deferrals 110,854 111,580 -------- -------- Total liabilities 358,289 443,991 -------- -------- Commitments and contingencies - - Minority interest 13,220 - -------- -------- Stockholders' Equity: Class A common stock, par value $1.00 per share, authorized 150,000,000 shares; issued 26,543,003 in 1996; 17,331,300 in 1995 26,543 17,331 Class B common stock, par value $1.00 per share, authorized 46,825,000 shares; issued 21,067,650 in both 1996 and 1995 21,068 21,068 Additional paid-in capital 116,781 65 Retained earnings 197,573 226,028 Unrealized gain (loss) on securities available for sale, net 411 (1,253) -------- -------- Total stockholders' equity 362,376 263,239 -------- -------- $733,885 $707,230 ======== ========
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 2 3 THE PROVIDENCE JOURNAL COMPANY AND SUBSIDIARIES Condensed Consolidated Statements of Operations (Dollars in thousands, except per share data)
(unaudited) (unaudited) Quarter Ended Nine Months Ended ------------- ----------------- September 30, September 30, ------------- ------------- 1996 1995 1996 1995 ----------- ----------- ----------- ----------- Revenues: Broadcasting $ 51,652 $ 42,486 $ 149,819 $ 128,557 Publishing 31,739 30,294 95,176 92,967 Programming and Electronic Media 4,567 790 9,412 2,209 ----------- ----------- ----------- ----------- 87,958 73,570 254,407 223,733 ----------- ----------- ----------- ----------- Expenses: Operating 36,737 45,541 131,245 127,236 Selling, general, and administrative 39,985 15,759 87,478 55,272 Newspaper Consolidation Costs and Newspaper Restructuring Costs - 4,125 2,484 6,424 Depreciation and amortization 11,238 8,086 32,129 24,072 Stock-based compensation 1,605 (51) 14,941 1,946 Pension expense 273 356 701 747 ----------- ----------- ----------- ----------- Total expenses 89,838 73,816 268,978 215,697 ----------- ----------- ----------- ----------- Operating income (loss) (1,880) (246) (14,571) 8,036 Interest expense (4,226) (2,064) (15,246) (7,377) Equity in loss of affiliates (848) (1,513) (3,521) (4,538) Other income, net 1,550 1,673 4,285 2,955 ----------- ----------- ----------- ----------- Loss from continuing operations before income taxes (5,404) (2,150) (29,053) (924) Income tax expense (benefit) 3,177 453 (2,200) 2,563 ----------- ----------- ----------- ----------- Loss from continuing operations (8,581) (2,603) (26,853) (3,487) Loss on early extinguishment of debt, net of tax - (1,652) - (1,652) Discontinued operations, net of tax - - (3,578) - ----------- ----------- ----------- ----------- Loss before minority interests (8,581) (4,255) (30,431) (5,139) Minority interests 2,210 (598) 6,253 (2,559) ----------- ----------- ----------- ----------- Net loss $ (6,371) $ (4,853) $ (24,178) $ (7,698) =========== =========== =========== =========== Net loss per common share: From continuing operations $ (0.18) $ (0.07) $ (0.65) $ (0.09) From early extinguishment of debt - (0.04) - (0.04) From discontinued operations - - (0.09) - Minority interests 0.04 (0.02) 0.16 (0.07) ----------- ----------- ----------- ----------- Net loss per common share $ (0.14) $ (0.13) $ (0.58) $ (0.20) =========== =========== =========== =========== Weighted average shares outstanding 46,950,029 38,110,050 41,410,548 38,110,050 =========== =========== =========== ===========
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 3 4 THE PROVIDENCE JOURNAL COMPANY AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flow (Dollars in thousands)
(Unaudited) (Unaudited) Quarter Ended Nine Months Ended ------------- ----------------- September 30, September 30, ------------- ------------- 1996 1995 1996 1995 -------- -------- --------- -------- Operating activities: Cash flows provided by (used in) continuing operations $ 37,655 $(19,473) $ 35,439 $ 11,667 -------- -------- --------- -------- Investing activities: Investments in affiliates (283) (8,351) (30,484) (17,379) Additions to property, plant and equipment (2,862) (6,734) (17,784) (12,613) Proceeds from sale of assets - 8,239 - 8,239 (Increase) decrease in investment in discontinued operations through disposal date - 6,460 - (39,731) -------- -------- --------- -------- Cash flows used in investing activities (3,145) (386) (48,268) (61,484) -------- -------- --------- -------- Financing activities: Proceeds from long-term debt - 39,500 88,765 93,000 Payments on long-term debt (52,000) (10,727) (173,063) (26,107) Payments on television program rights payable (4,389) (3,736) (12,936) (11,839) Dividends paid - (2,422) (9,763) (7,266) Cash received from minority partners - - 12,000 - Issuance of Class A common stock 12,781 - 119,089 - -------- -------- --------- -------- Cash flows provided by (used in) financing activities (43,608) 22,615 24,092 47,788 -------- -------- --------- -------- Increase (decrease) in cash and cash equivalents (9,098) 2,756 11,263 (2,029) Cash and cash equivalents at the beginning of the period 20,448 112 87 4,897 -------- -------- --------- -------- Cash and cash equivalents at the end of the period $ 11,350 $ 2,868 $ 11,350 $ 2,868 ======== ======== ========= ========
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 4 5 THE PROVIDENCE JOURNAL COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Dollars in thousands, except per share data) NOTE 1--BASIS OF PRESENTATION The condensed consolidated financial statements present the financial position and results of operations of The Providence Journal Company ("Registrant") and its subsidiaries (collectively, the "Company"). All significant intercompany balances and transactions have been eliminated and minority interests have been recorded in consolidation. The results of operations for King Holding Corp. ("KHC"), America's Health Network ("AHN") and Television Food Network ("TVFN") have been consolidated in the accompanying condensed consolidated statements of operations since January 1, 1995; January 1, 1996; and May 1, 1996, respectively. The Company is a diversified communications company with operations and investments in several media and electronic communications businesses. The principal areas of the Company's activities are television broadcasting ("Broadcasting"), newspaper publishing ("Publishing") and programming and electronic media ventures ("Programming and Electronic Media", formerly called "Programming and New Media"). The accompanying condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles ("GAAP") for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. 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 and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. The results of operations for interim periods arc not necessarily indicative of the results that may be expected for the fiscal year. For further information, refer to the consolidated financial statements and accompanying notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 1995. Certain amounts in 1995 have been reclassified to conform to the 1996 presentation. Financial information in the Notes to Condensed Consolidated Financial Statements excludes discontinued operations, except where noted. NOTE 2 -- STOCK SPLIT AND PUBLIC OFFERING On June 18, 1996, the Board of Director's declared a 450 for 1 stock split of its issued and outstanding common stock as of that date. Such stock split has been reflected throughout these financial statements and this document. On June 25, 1996, the Company raised $106,277 net of underwriters' commission, in an initial public offering and direct placement of its Class A Common stock. The number of Class A shares sold to the public in the underwritten offering was 7,125,000 and the number of Class A shares sold to eligible employees in the direct placement program was 450,000. Expenses associated with the offering were approximately $2,200. On July 10, 1996, the Company issued an additional 1,068,750 Class A shares and raised an additional $14,995 net of underwriters' commission pursuant to the exercise of an overallotment option granted to the underwriters by the Company. The net proceeds from the offerings were used to repay a portion of the Company's outstanding debt. 5 6 THE PROVIDENCE JOURNAL COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Dollars in thousands, except per share data) NOTE 3 -- MERGER WITH A. H. BELO CORPORATION (THE "BELO MERGER") On September 26, 1996, the Company signed a definitive agreement to merge with A. H. Belo Corporation of Dallas, TX. ("Belo"). The exchange ratio in the transaction is .5333 share of Belo series A common stock plus $12.33 for every share of the Company's common stock. Shareholders will have the ability to select this exact mixture of consideration or, alternatively, all cash or all stock. Cash and stock elections will be subject to proration. The value of each package will be identical based on the value of Belo series A common stock. This value will be determined during a pricing period prior to the effective time. The deal is subject to shareholder, Federal Communications Commission ("FCC"), and various other approvals. NOTE 4 -- CASH EQUIVALENTS Cash equivalents are those short-term highly liquid investments generally with original maturities of 90 days or less. At September 30, 1996, cash equivalents consisted primarily of commercial paper and overnight investments and totaled $10,082. There were no cash equivalents at December 31, 1995. NOTE 5 -- CONSOLIDATION OF AHN AND TVFN During the nine months ended September 30, 1996, the Company invested $25,000 in AHN, a 24-hour basic cable television programming service devoted exclusively to health related issues and products. The Company's total investment through September 30, 1996 is $35,250 and its interest in AHN is approximately 65%. Effective January 1, 1996, the results of AHN's operations have been consolidated with the results of operations of the Company. Prior to January 1, 1996, the Company accounted for this investment under the equity method of accounting. In May, 1996, the Company purchased the equity partnership interests held by Landmark Programming, Inc. ("Landmark") and Scripps Howard Publishing, Inc. ("Scripps"), two of the partners of TVFN, for respective purchase prices of approximately $12,650 and $11,400. Prior to such purchase, Landmark and Scripps each owned a 10.8% and 9.7% general partnership interest, respectively, in TVFN. The Company's investment in TVFN through September 30, 1996, including these purchases and funding of its share of operating losses, totaled $47,900 which represents an equity interest of approximately 46%. The Company now holds three of the five voting seats on the TVFN management committee. As a result of the purchases, TVFN became a controlled subsidiary of the Company and was consolidated into the Company's results of operations effective May 1, 1996. The following table presents unaudited pro forma summary results of operations as if AHN and TVFN had been consolidated in operations since January 1, 1995, and accordingly, includes adjustments for additional' amortization and interest expense and related income tax benefits. It does not purport to be indicative of what would have actually occurred had the consolidation occurred on January 1, 1995 nor is it indicative of results which may occur in the future:
Pro forma (Unaudited) ----------------------------------------------- Quarters Ended Nine Months Ended -------------- ----------------- September 30, September 30, ------------- ------------- 1996 1995 1996 1995 -------- -------- -------- -------- Revenues $ 87,958 $ 73,522 $ 258,244 $ 227,282 Loss from continuing operations (8,581) (7,145) (30,411) (14,506) Loss from discontinued operations - - (3,578) - Extradordinary item - (1,652) - (1,652) Minority interests 2,210 1,192 7,676 1,868 -------- --------- --------- --------- Net loss (6,371) (7,605) (26,313) (14,290) ======== ========= ========= ========= Net loss per common share $ (0.14) $ (0.20) $ (0.64) $ (0.37) ======== ========= ========= =========
6 7 THE PROVIDENCE JOURNAL COMPANY AND SUBSIDIARIES .: NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Dollars in thousands, except per share data) NOTE 6-- NOTES RECEIVABLE In September 1990, the Company advanced the Lowell Sun Publishing Company and Lowell Sun Realty Company (collectively, the "Lowell Sun Companies") $25,650 and agreed to provide a $6,500 revolving credit facility. The loan and revolving credit facility which were originally due in March 1996 arc subject to a forbearance agreement until January 2, 1997. Amounts bear interest at a floating rate of prime plus 1.25%. The advance is collateralized by all assets of the Lowell Sun Companies and a pledge of a majority of Lowell Sun Companies' stock. The principal balance due from the Lowell Sun Companies totaled $23,575 at both September 30, 1996 and December 31, 1995. NOTE 7 -- LONG-TERM DEBT At September 30, 1996 and December 31, 1995, long-term debt consists of the following:
September 30, December 31, 1996 1995 -------- -------- Revolving credit and term loan facility at rates of interest averaging 7.91% in 1996 and 7.52% in 1995, respectively $150,000 $234,298 Industrial revenue bonds ("IRB") payable at various rates of interest averaging 3.5% payable through December 2022 9,800 9,800 -------- -------- Total long-term debt $159,800 $244,098 Less current installments 100 100 -------- -------- Long-term debt, excluding current installments $159,700 $243,998 ======== ========
On October 5, 1995, the Company incurred indebtedness pursuant to a credit agreement with a syndicate of banks (the "Credit Agreement"). The Credit Agreement consists of a $75,000 term loan and a $300,000 revolving credit facility. The $75,000 term loan provided for under the Credit Agreement is due 2004. The revolving credit facility decreases quarterly commencing December 31, 1996 by a pro-rata portion of the following annual amounts in the years indicated: 1996--$4,000; 1997--$10,500; 1998--$14,500; 1999--$21,500; 2000--$53,250; 2001- $65,750; 2002- $67,750; 2003- $62,750. The indebtedness evidenced by the Credit Agreement is secured by guarantees from all of the material subsidiaries of the Company and a first priority pledge of all such material subsidiaries' capital stock. The Credit Agreement provides for borrowings indexed, as the Company may from time to time elect, to the Eurodollar rate, the certificate of deposit rate, or the "base" rate of the agent, plus the "spread" over such rates. The "spread" will be determined by the ratio of the total debt of the Company to the operating cash flow of the Company (as defined by the Credit Agreement). The Credit Agreement contains customary events of default, financial covenants, covenants restricting the incurrence of debt (other than under the Credit Agreement), investments and encumbrances on assets and covenants limiting mergers and acquisitions. The Credit Agreement provides for the mandatory prepayment of amounts outstanding and a reduction in the commitment under certain circumstances. Effective October 8, 1996, the Credit Agreement was amended to reduce the $300,000 revolving credit facility to $150,000 and to allow for the merger of the Company with Belo (see note 3). In connection with the Credit Agreement, the Company maintains an interest rate swap arrangement in the notional amounts of $200,000 in 1996, $175,000 in 1997 and $150,000. in 1998 and 1999. The Company recorded additional 7 8 THE PROVIDENCE JOURNAL COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Dollars in thousands, except per share data) interest expense associated with the swap during the quarter and nine months ended September 30, 1996 of $595 and $1,755, respectively and $359 and $699 for the corresponding 1995 periods. The fair value of interest rate swaps is the amount at which they could be settled, based upon estimates obtained from dealers. At September 30, 1996, the Company would be required to pay approximately $1,849 to settle outstanding interest rate swaps. NOTE 8 -- NET INCOME (LOSS) PER SHARE AND DIVIDENDS PER COMMON SHARE Net income (loss) per share is based on the weighted average number of shares of Class A and Class B common stock outstanding during the period. Restricted stock units and stock options are both considered common stock equivalents. Common stock equivalents were anti-dilutive for all periods in which the common stock equivalents were outstanding. There were no other dilutive securities outstanding at September 30, 1996. Accordingly, only basic earnings per share is presented in the income statement. Cash dividends of $0.0636 per share were declared and paid in the first quarter of 1996. A special dividend of $0.1907 per share was declared and paid in the quarter ended June 30, 1996. Dividends of $0.0636 per share were declared and paid in each of the first, second and third quarters of 1995. NOTE 9 -- STOCK-BASED COMPENSATION PLANS As described in Note 13 to the Consolidated Financial Statements in the Company's 1995 Annual Report, the Company has various stock-based compensation plans. On May 8, 1996, the stockholders of the Company approved amendments to the Options Plans which, among other things, increased the number of shares reserved under the 1994 Providence Journal Employee Stock Option Plan (the "Employee Plan") from 1,687,500 to 3,600,000 and similarly increased the number of shares reserved under the 1994 Providence Journal Non-Employee Director Stock Option Plan (the "Director Plan") from 180,000 to 238,500. The number of Class A common shares reserved for the stock-based compensation plans equal 4,569,300 consisting of 730,800 for the RSU plan and 3,838,500 for the Option Plans. In the first quarter of 1996, the Company recorded a charge to continuing operations of $11,397 and a pre-tax charge to discontinued operations of $5,421 to reflect the vested amount of an estimated $20,530 adjustment to the stock-based compensation plans. Of the $3,712 which was unvested at March 31, 1996, $1,273 became vested in each of the second and third quarters of 1996. The $20,530 adjustment to the stock-based compensation plans was pursuant to which participants in the Company's incentive stock units plan ("IUP"), restricted stock unit plan ("RSU") and certain stock option plans ("Option Plans") would receive additional consideration to the extent the value ascribed to the Company's former cable operations had increased upon a final determination. The Company's cable operations were merged with Continental Cablevision, Inc. ("Continental") in October, 1995 (the "Continental Merger"). Continental and US West Media Group ("UMG") jointly announced a merger of their operations in February, 1996 (the "US West Merger"). On October 9, 1996, U.S. West and Continental announced the terms under which they expect to close their merger. Assuming trading values of UMG common stock at that date, the Company would record a $6.3 million credit (or approximately $4.1 million, net of tax) to the income statement upon settlement of certain affected stock-based compensation programs to reflect the partial reversal of previously recorded expense related to these plans. Of the $6.3 million, $4.3 million would be included in continuing operations and $2.0 million in discontinued operations. The ultimate adjustment to stock-based compensation, if any, will be reflected in the income statement upon settlement of the affected compensation plans, expected to be in the fourth quarter of 1996. This final amount of additional consideration will be paid in cash. Following the payout of the additional consideration, the IUP will be fully liquidated and terminated. Pursuant to the Company's merger agreement with Belo, all outstanding stock options will be settled in cash by Belo at the closing of the Belo Merger. See note 3. 8 9 THE PROVIDENCE JOURNAL COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Dollars in thousands, except per share data) At the end of September, the Company issued 542,753 shares of Class A common stock to holders of units in settlement of the RSU Plan which became fully vested at that time. The following table sets forth information relative to these stock-based compensation plans:
Option Plans ------------ 1994 1995 1996 Restricted ---- ---- ---- ---------- Options Options Options Stock Units ------- ------- ------- ----------- Options outstanding at December 31, 1995 280,350 376,200 - 567,450 Options granted in 1996 993,150 Options canceled (2,250) - (6,300) - Options exercised (25,200) - - - Stock issued (542,753) Adjustments - taxes on units (24,697) Options outstanding at September 30, 1996 252,900 376,200 986,850 - ======== ======== ======== ======= Options exercisable at September 30, 1996 147,824 114,301 - - ======== ======== ======== ======= Option exercise price $ 1.47 $ 11.27 $ 15.00 - ======== ======== ======== =======
NOTE 10 -- NEWSPAPER RESTRUCTURING In the first and second quarter of 1996, the Company recorded additional charges to operations of approximately $1,150 and $1,334, respectively, relating to early retirement costs and voluntary separation benefits in connection with the plan of reorganization and restructuring of the Company's Publishing business adopted by the Company in the fourth quarter of 1995 (the "Newspaper Restructuring") at which time a $6,800 charge was recorded. No additional expenses were incurred in the third quarter of 1996. NOTE 11 -- INCOME TAXES The Company's effective tax rate for continuing operations differs from the federal statutory income tax rate due principally to state taxes and permanent state and federal tax differences related to the non-deductible amortization of goodwill. 9 10 THE PROVIDENCE JOURNAL COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Dollars in thousands, except per share data) NOTE 12 -- CONTINGENT LIABILITIES On January 17, 1995, Cable LPI. Inc. ("Cable LP") brought a declaratory judgment action against Providence Journal Company, ("Old PJC"), Colony Communications, Inc., ("Colony"), and Dynamic CableVision, Inc. ("Dynamic") in the Circuit Court of the Eleventh Judicial Circuit in and for Dade County, Florida. Colony was a cable television subsidiary of Old PJC, which was transferred to Continental in connection with the Continental Merger. This case relates to the Dynamic Partnership, in which Dynamic is the general partner with an 89.8% interest and Cable LP is the limited partner with a 10.2% interest. In this action, Cable LP claimed that (i) Dynamic was obligated to offer to sell Dynamic's general partnership interest to Cable LP before Old PJC entered into the Merger Agreement with Continental and (ii) Dynamic's offer to purchase Cable LP's limited partnership interest for $13.1 million triggered a right of first refusal entitling Cable LP to purchase the general partnership interest for $115 million. Cable LP sought a declaration by the court that the right of first refusal it is asserting applies. A motion to strike allegations of bad faith and breach of fiduciary duty against Old PJC, Colony and Dynamic was granted by the court, and an answer to the Complaint and a Counterclaim was filed by them on March 16, 1995, seeking a declaratory judgment that Cable LP unreasonably refused consent to the transfer of the general partner's interest to Continental and that a purported transfer of Cable LP's interest in the Dynamic Partnership to a partnership to be managed by Adelphia Communications, Inc. violates Dynamic's right of first refusal under the Dynamic Partnership Agreement. The case was tried in December 1995. A final declaratory judgment in this action in favor of Cable LP was entered on May 21, 1996. Such judgment requires, among other matters, Dynamic and Colony to negotiate with Cable LP on a price to transfer Dynamic's interest in the general partnership to Cable LP. The Company appealed this judgment and moved to stay the effect of the judgment during the pendency of the appeal. On June 10, 1996, a hearing was held on the Company's motion to stay. At such hearing, the judge declined to grant or deny the Company's motion to stay at that time. In the event that, as a result of such litigation, Dynamic is ultimately required to sell its interest in the Dynamic Partnership to Cable LP, the Continental Merger agreement provides that the Company will pay to Continental simultaneously with the closing of such sale an amount equal to the sum of (i) the amount (if any) by which the consideration received by Dynamic for the sale of such interest is less than $115 million plus (ii) the taxes which would have been payable assuming the purchase price for such interest equaled $115 million. The Company is unable to predict at this time what the ultimate outcome of this litigation might be. Should any loss resulting from this litigation ultimately prove to be probable and reasonably estimable, such loss, at that time, would result in a charge to stockholders' equity to reflect the estimated decrease in net proceeds received from the disposal of the cable assets in 1995 pursuant to the Continental Merger agreement. Such a charge could have a material effect upon the Company's financial condition. If any payment obligations are ultimately required under the terms of the Continental Merger agreement, it is currently anticipated that such payments could be up to $40 million and could have a material effect upon the Company's liquidity position. NOTE -- 13 SUBSEQUENT EVENT On October 2, 1996, the owners of Linkatel Pacific, LP ("Linkatel") an alternative access business in Orange County, CA signed a definitive agreement to sell that business to Next.link Communications LLC for $42.5 million. The transaction was simultaneously closed in escrow pending California Public Utility Commission approval. The Company's interest in Linkatel is valued at approximately $14.5 million in this transaction. The sale will result in an estimated pre-tax gain of approximately $10 million (or approximately $7 million, net of tax) upon final closing. 10 11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following unaudited tables present a summary of financial results and other data for the quarter and nine months ended September 30, 1996 and 1995 on a consolidated basis and for each of the Company's three segments: Broadcasting, Publishing and Programming and Electronic Media. The information should be read in conjunction with the condensed consolidated financial statements of the Company and respective notes thereto, included elsewhere in this document. SUMMARY OF FINANCIAL RESULTS - CONSOLIDATED
Quarter Ended Nine Months Ended September 30, September 30, -------------------- --------------------- 1996 1995 1996 1995 -------- ------- -------- -------- OPERATING DATA: (dollars in thousands) Revenues: Broadcasting $ 51,652 $42,486 $149,819 $128,557 Publishing 31,739 30,294 95,176 92,967 Programming and Electronic Media 4,567 790 9,412 2,209 -------- ------- -------- -------- 87,958 73,570 254,407 223,733 -------- ------- -------- -------- Expenses: Operating and administrative expenses: Broadcasting 32,619 29,685 94,504 86,244 Publishing, excluding Newspaper Consolidation and Newspaper Restructuring Costs 25,189 27,852 79,468 84,073 Programming and Electronic Media 15,765 1,064 35,395 2,958 Corporate 3,149 2,699 9,356 9,233 -------- ------- -------- -------- Total 76,722 61,300 218,723 82,508 Depreciation and amortization 11,238 8,086 32,129 24,072 Stock-based compensation 1,605 (51) 14,941 1,946 Pension expense 273 356 701 747 Newspaper Consolidation Costs and Newspaper Restructuring Costs(1) - 4,125 2,484 6,424 -------- ------- -------- -------- Total expenses 89,838 73,816 268,978 215,697 -------- ------- -------- -------- Operating income (loss) (1,880) (246) (14,571) 8,036 Interest expense (4,226) (2,064) (15,246) (7,377) Equity in loss of affiliates (2) (848) (1,513) (3,521) (4,538) Other income, net 1,550 1,673 4,285 2,955 -------- ------- -------- -------- Loss from continuing operations before income taxes (5,404) (2,150) (29,053) (924) Income tax expense (benefit) 3,177 453 (2,200) 2,563 -------- ------- -------- -------- Loss from continuing operations (8,581) (2,603) (26,853) (3,487) Loss from early extinguishment of debt, net of tax - (1,652) - (1,652) Discontinued operations, net of tax - - (3,578) - -------- ------- -------- -------- Loss before minority interests (8,581) (4,255) (30,431) (5,139) Minority interests 2,210 (598) 6,253 (2,559) -------- ------- -------- -------- Net loss $ (6,371) $(4,853) $(24,178) $ (7,698) ======== ======= ======== ======== OTHER DATA: EBITDA (3): Broadcasting $ 19,033 $12,801 $ 55,315 $ 42,313 Publishing 6,550 2,442 15,708 8,894 -------- ------- -------- -------- Core EBITDA 25,583 15,243 71,023 51,207 Programming and Electronic Media (11,198) (274) (25,983) (749) Corporate (3,149) (2,699) (9,356) (9,233) -------- ------- -------- -------- Total EBITDA $ 11,236 $12,270 $ 35,684 $ 41,225 ======== ======= ======== ======== Notes to table - -------------------- (1) See notes 1 and 2 of the table "Summary of Financial Results - Publishing" (2) Includes equity in loss of Linkatel Pacific, L.P. of $ 323 and $239 for the third quarter 1996 and 1995 and $936 and $625 for the nine months 1996 and 1995 respectively. (3) EBITDA is defined by the Company as operating income (loss) plus Newspaper Consolidation Costs and Newspaper Restructuring Costs plus depreciation, amortization, stock-based compensation, and pension expense. EBITDA is not intended to represent cash flow from operations and should not be considered as an alternative to operating or net income computed in accordance with GAAP as an indicator of the Company's operating performance or as an alternative to cash flows from operating activities (as determined in accordance with GAAP) as a measure of liquidity.
11 12 SUMMARY OF FINANCIAL RESULTS - BROADCASTING
Quarter Ended Nine Months Ended September 30, September 30, -------------------- ---------------------- 1996 1995 1996 1995 ------- ------- -------- -------- (dollars in thousands) OPERATING DATA: Revenues: National $25,267 $22,457 $ 70,989 $ 64,531 Local and regional 31,463 23,594 92,822 75,373 Other 3,097 3,067 9,473 8,638 Agency commissions (8,175) (6,632) (23,465) (19,985) ------- ------- -------- -------- Net revenues 51,652 42,486 149,819 128,557 ------- ------- -------- -------- Expenses: Operating and administrative expenses 32,619 29,685 94,504 86,244 Depreciation and amortization 6,849 5,120 20,370 15,017 ------- ------- -------- -------- Total expenses 39,468 34,805 114,874 101,261 ------- ------- -------- -------- Operating income $12,184 $ 7,681 $ 34,945 $ 27,296 ======= ======= ======== ======== OTHER DATA: EBITDA (1) $19,033 $12,801 $ 55,315 $ 42,313 EBITDA as percentage of net revenues 36.8% 30.1% 36.9% 32.9% Corporate expense allocations 172 164 514 538 Program rights amortization 4,500 4,265 13,321 12,877 Program rights payments (4,389) (3,736) (12,936) (11,839) ------- ------- -------- -------- Broadcast Cash Flow (2) $19,316 $13,494 $ 56,214 $ 43,889 ======= ======= ======== ======== Notes to table - ---------------------- (1) EBITDA is defined by the Company as operating income (loss) plus Newspaper Consolidation Costs and Newspaper Restructuring Costs plus depreciation, amortization, stock-based compensation, and pension expense. Neither EBITDA nor Broadcast Cash Flow (defined below) is intended to represent cash flow from operations and should not be considered as an alternative to operating or net income computed in accordance with GAAP as an indicator of the Company's operating performance or as an alternative to cash flows from operating activities (as determined in accordance with GAAP) as a measure of liquidity. (2) Broadcast Cash Flow is defined by the Company as Broadcasting EBITDA plus corporate expense allocations, plus program rights amortization less program rights payments. See also note 1 to this table.
12 13 SUMMARY OF FINANCIAL RESULTS. PUBLISHING
Quarter Ended Nine Months Ended September 30, September 30, --------------------- --------------------- 1996 1995 1996 1995 -------- -------- -------- -------- (dollars in thousands) OPERATING DATA: Revenues: Advertising $ 22,887 $ 21,632 $ 69,015 $ 67,018 Circulation 8,492 8,077 25,023 23,996 Other 360 585 1,138 1,953 -------- -------- -------- -------- Total revenues 31,739 30,294 95,176 92,967 Expenses: Operating and administrative expenses 25,189 27,852 79,468 84,073 Depreciation 2,657 2,667 8,008 8,166 -------- -------- -------- -------- Total expenses 27,846 30,519 87,476 92,239 -------- -------- -------- -------- Operating income (loss) before newspaper consolidation and newspaper restructuring costs 3,893 (225) 7,700 728 Newspaper Consolidation Costs (1) and Newspaper Restructuring Costs (2) - (4,125) (2,484) (6,424) -------- -------- -------- -------- Operating income (loss) $ 3,893 $ (4,350) $ 5,216 $ (5,696) ======== ======== ======== ======== OTHER DATA: EBITDA (3) $ 6,550 $ 2,442 $ 15,708 $ 8,894 EBITDA as a percentage of revenues 20.6% 8.1% 16.5% 9.6% ======== ======== ======== ======== Average Net Paid Circulation: Daily 171,526 177,220 171,048 180,663 Sunday 247,215 259,792 248,900 260,696 Notes to table - -------------------- (1) Newspaper Consolidation Costs are those costs incurred in 1995 to consolidate the Company's morning and afternoon daily newspapers into one daily newspaper (the "Newspaper Consolidation"). (2) Newspaper Restructuring Costs are estimated severance costs associated with the Newspaper Restructuring. In the fourth quarter of 1995, a charge to operations of $6,800 was recorded pursuant to this plan. In the first and second quarters of 1996, such costs increased approximately $1,150 and $1,334, respectively. (3) EBITDA is defined by the Company as operating income (loss) plus Newspaper Consolidation Costs and Newspaper Restructuring Costs plus depreciation, amortization, stock-based compensation, and pension expense. EBITDA is not intended to represent cash flow from operations and should not be considered as an alternative to operating or net income computed in accordance with GAAP as an indicator of the Company's operating performance or as an alternative to cash flows from operating activities (as determined in accordance with GAAP) as a measure of liquidity.
13 14 SUMMARY OF FINANCIAL RESULTS - PROGRAMMING AND ELECTRONIC MEDIA
Quarter Ended Nine Months Ended September 30, September 30, -------------------- -------------------- 1996 1995 1996 1995 -------- ------- -------- ------- (dollars in thousands) OPERATING DATA: Revenues $ 4,567 $ 790 $ 9,412 $ 2,209 Operating expenses 15,765 1,064 35,395 2,958 Depreciation and amortization 1,490 31 3,058 92 -------- ------- -------- ------- Operating loss $(12,688) $ (305) $(29,041) $ (841) ======== ======= ======== ======= EQUITY IN LOSS OF AFFILIATES AHN (1) - (290) - (805) TVFN (2) - (922) (1,078) (2,946) Peapod, LP (344) - (966) - Partner Stations Network (181) (62) (541) (162) -------- ------- -------- ------- Total equity in loss of affiliates $ (525) $(1,274) $ (2,585) $(3,913) ======== ======= ======== ======= OTHER DATA: EBITDA (3) $(11,198) $ (274) $(25,983) $ (749) ======== ======= ======== =======
Programming and Electronic Media operating businesses include:
Amounts Invested Cumulative Amounts in Quarter Invested Through Ownership % as of Ended September 30, 1996 September 30, 1996 September 30, 1996 ------------------------ ------------------ ------------------ CONSOLIDATED BUSINESSES: AHN (1) $ - $ 35,250 65% TVFN (2) 3,200 47,900 46% NWCN 826 7,877 100% projo.com (formerly "Rhode Island Horizons") 175 1,219 100% ------ -------- Subtotal 4,201 92,246 ------ -------- INVESTMENTS IN AFFILIATES: Peapod, LP - 6,338 15% Partner Stations Network, L.P. 147 2,105 16% ------ -------- Subtotal 147 8,443 ------ -------- OTHER: StarSight Telecast, Inc. - 5,939 5% ------ -------- Total Investments $4,348 $106,628 ====== ======== Note to tables - -------------- (1) AHN was consolidated into the Company's results of operations effective January 1, 1996. During the second quarter of 1996, other investors invested approximately $12,000 in AHN. (2) TVFN was consolidated into the Company's results of operations effective May 1, 1996. In the second quarter, the Company purchased the equity ownership interests held by two of the TVFN partners for $24,050; investments in the third quarter of 1996 were to fund the Company's share of TVFN operating losses. (3) EBITDA is defined by the Company as operating income (loss) plus Newspaper Consolidation Costs and Newspaper Restructuring Costs plus depreciation, amortization, stock-based compensation, and pension expense. EBITDA is not intended to represent cash flow from operations and should not be considered as an alternative to operating or net income computed in accordance with GAAP as an indicator of the Company's operating performance or as an alternative to cash flows from operating activities (as determined in accordance with GAAP) as a measure of liquidity.
14 15 The following table presents a summary of the Company's capitalization as of September 30, 1996: SUMMARY - CAPITALIZATION OF THE COMPANY
As of September 30, 1996 ------------------ (dollars in thousands) Long-term debt, including current installments: Revolving credit and term loan facility $150,000 Industrial Revenue Bonds 9,800 -------- Total Long-term debt, including current installments 159,800 -------- Less cash and short-term investments (1) Cash and cash equivalents 11,350 Short-term investments 3,349 -------- 14,699 -------- Net Debt 145,101 Stockholders' Equity 362,376 -------- Total capitalization $507,477 ======== (1) Excludes investment in StarSight Telecast, Inc. which had a cost basis of $5,939 and a fair market value of $6,632 at September 30, 1996.
15 16 RECENT DEVELOPMENTS Subsequent to September 30, 1996, the following significant developments have occurred: Clarification of terms of US West Media Group ("UMG") and Continental Merger As discussed in note 9 to the condensed consolidated financial statements, on October 9, 1996 US West and Continental announced the terms under which they expect to close their merger. Assuming current trading values of UMG common stock on that date, the Company would record a $6.3 million credit (or approximately $4.1 million, net of tax) to the income statement upon settlement of certain affected stock-based compensation plans to reflect the partial reversal of previously recorded expense related to these plans. Of the $6.3 million, $4.3 million would be included in continuing operations and $2.0 million in discontinued operations. The ultimate adjustment to stock-based compensation, if any, will be reflected in the income statement upon settlement of the affected compensation plans, expected to be in the fourth quarter of 1996. Linkatel Pacific, LP sale On October 2, 1996, the owners of Linkatel an alternative access business in Orange County, CA signed a definitive agreement to. sell that business to Nextlink Communications LLC for $42.5 million. The transaction was simultaneously closed in escrow pending California Public Utility Commission approval. The Company's interest in Linkatel is valued at approximately $14.5 million in this transaction. The sale will result in an estimated pre-tax gain of approximately $10 million (or approximately $7 million, net of tax) upon final closing. DEVELOPMENTS IN THE NINE MONTHS ENDED SEPTEMBER 30, 1996 Merger with A.H. Belo Corporation On September 26, 1996, the Company signed a definitive agreement to merge with Belo. The exchange ratio in the transaction is .5333 share of Belo series A common stock plus $12.33 for every share of the Company's common stock. Shareholders will have the ability to select this exact mixture of consideration or, alternatively, all cash or all stock. Cash and stock elections will be subject to proration. The value of each package will be identical based on the value of the Belo series A common stock. This value will be determined during a pricing period prior to the effective time. The deal is subject to shareholder, FCC, and various other approvals. Initial Public Offering On June 25, 1996, the Company raised $106.3 million, net of underwriters' commission, in an initial public offering and direct placement of its Class A Common stock. The number of Class A shares sold to the public in the underwritten offering was 7,125,000 and the number of Class A shares sold to eligible employees in the direct placement program was 450,000. Expenses associated with the offering were approximately $2.2 million. On July 10, 1996, the Company issued an additional 1,068,750 Class A shares and raised an additional $15.0 million, net of underwriters' commission pursuant to the exercise of an overallotment option granted to the underwriters by the Company. The net proceeds from the offerings were used to repay a portion of the Company's outstanding debt. Increased Ownership Interest in Television Food Network, G.P. As discussed in note 5 to the condensed consolidated financial statements, in May 1996, the Company purchased the equity partnership interests held by Landmark and Scripps, two of the partners of TVFN, for respective purchase prices of approximately $12.6 million and $11.4 million. Prior to such purchase, Landmark and Scripps each owned a 10.8% and 9.7% general parmership interest, respectively, in TVFN. The Company's investment in TVFN through September 30, 1996, including these purchases and funding of its share of operating losses, totaled $47.9 million, which represents an equity interest of approximately 46%. The Company now holds three of the five voting seats on the TVFN management committee. As a result of the purchases, TVFN became a controlled subsidiary of the Company and was consolidated into the Company's results of operations beginning in May, 1996. 16 17 Increased Ownership Interest in America's Health Network On May 9, 1996 the Company increased its investment in AHN to $35.3 million which represents an equity interest of approximately 65%. The Company does not anticipate any additional funding of its share of operating losses for the remainder of 1996 but is committed to investing an additional $19.5 million by the first quarter of 1997 upon the achievement of certain operating milestones, including entering into carriage agreements and meeting certain revenue and ratings objectives. Execution of a Local Marketing Agreement -- KONG(TV) in Seattle, Washington In May 1996, the Company entered into a ten-year local marketing agreement ("LMA") with KONG (TV) ("KONG"), which holds a permit to construct a television station in the Seattle, Washington market, and has an option to purchase the station at an agreed upon exercise price payable at the Company's option in cash or in shares of the Company's class A common stock. The option is exercisable by either the Company or KONG after such time as the FCC permits ownership of two television stations in a single market. The present duopoly rules prohibit attributable interests in two television stations in the same designated market area. Although the FCC is currently reviewing ownership rules, there can be no assurance that the FCC will change or repeal the duopoly rules. Under the agreement, the Company will spend approximately $2.0 million for equipment in the first year and, once operational, will provide annual programming and marketing services to the LMA station pursuant to which the Company will receive all advertising revenues. Until the option to purchase the station is exercised, the Company is required to make annual payments to KONG of approximately $0.4 million in years one through five and $0.7 million in years six through ten of the contract term. Execution of a Local Marketing Agreement -- KSKN- TV in Spokane, Washington At the end of June, 1996 the Company entered into a ten-year LMA with KSKN-TV ("KSKN"), channel 22 in Spokane, Washington and has an option to purchase the station at an agreed upon exercise price payable at the Company's option in cash or in shares of the Company's Class A common stock. The option is exercisable by either the Company or KSKN after such time as the FCC permits ownership of two television stations in a single market. Under the agreement, the Company will spend approximately $1.5 million for equipment and will provide annual programming and marketing services to the LMA station pursuant to which the Company will receive all advertising revenues. Until the option to purchase the station is exercised, the Company is required to make annual payments to KSKN of approximately $0.24 million per year through October, 1997 and $0.36 million per year thereafter. Litigation As discussed in note 12 to the condensed consolidated financial statements, a declaratory judgment action was brought by Cable LP on January 17, 1995, against Old PJC, among other parties, claiming that a subsidiary of Colony, a wholly owned subsidiary of Old PJC, had breached a right of first refusal entitling Cable LP to purchase a general partnership interest in a cable system transferred to Continental in connection with the merger agreement. A final declaratory judgment in this action in favor of Cable LP was entered on May 21, 1996. Such judgment requires, among other matters, Dynamic and Colony to negotiate with Cable LP on a price to transfer Dynamic's interest in the general partnership to Cable LP. The Company has appealed this judgment and moved to stay the effect of the judgment during the pendency of the appeal. On June 10, 1996, a hearing was held on the Company's motion to stay. At such hearing, the judge declined to grant or deny the Company's motion to stay at that time. The Company is unable to predict at this time what the ultimate outcome of this litigation might be. In accordance with applicable accounting principles, should any loss resulting from this litigation ultimately prove to be probable and reasonably estimable, such loss, at that time, would result in a charge to stockholders' equity to reflect the estimated decrease in net proceeds received from the disposal of the cable assets in 1995 pursuant to the merger agreement. Such a charge could have a material effect upon the Company's financial condition. If any payment obligations are ultimately required under the terms of the merger agreement, it is currently anticipated that such payments could be up to $40 million and could have a material effect upon the Company's liquidity position. It is currently contemplated that any such payment would be funded by borrowings under the Company's revolving credit facility. 17 18 RESULTS OF OPERATIONS-QUARTER & NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 Consolidated Consolidated revenues for the third quarter of 1996 increased 19.6% to $88.0 million from $73.6 million for the same period last year. Revenues for the nine months ended September 30, 1996 were $254.4 million, an increase of 13.7%, compared to $223.7 million for the 1995 period. Continued strong growth in the third quarter of 1996 in Broadcasting revenues contributed significantly to the increase in consolidated revenues for the period. Broadcasting revenues for the quarter increased 21.6% to $51.7 million for the 1996 period compared to $42.5 million for the 1995 period. Broadcasting revenues for the nine months ended September 30, 1996 of $149.8 million are 16.5% greater than Broadcasting revenues of $128.6 million for the same period in 1995. Publishing revenues of $31.7 million for the third quarter of 1996 have improved $1.4 million, or 4.8%, over the third quarter of 1995 revenues of $30.3 million, reflecting improved economic conditions in the Rhode Island economy. The third quarter's results led to an overall increase of $2.2 million in Publishing revenues to $95.2 million from $93.0 million for the nine months ended September 30, 1996 and 1995, respectively. Programming and Electronic Media segment revenues of $4.6 million for the quarter and $9.4 million for the nine months ended September 30, 1996 have increased over revenues for the same 1995 periods of $0.8 million and $2.2 million, respectively, primarily due to the consolidation of TVFN in May, 1996. The remaining businesses in the Programming and Electronic Media segment are in the early development phase of operations. Consolidated operating and administrative expenses increased $15.4 million for the third quarter of 1996 primarily due to the effects of consolidating AHN since January 1, 1996 and TVFN since May 1, 1996, which together added $13.7 million in operating and administrative expenses to the third quarter of 1996 in the Programming and Electronic Media segment. For the nine months ended September 30, 1996, AHN and TVFN added $29.1 million in operating and administrative expense causing a 19.8%, or $36.2 million increase in consolidated operating and administrative expenses for the 1996 nine months over the same period last year. Broadcasting operating and administrative expenses increased 9.9% for the quarter and 9.6% for the nine months ended September 30, 1996 over the same periods last year due primarily to Olympic promotional costs during the third quarter and the incremental costs of a start-up news operation in Honolulu. Publishing operating and administrative expenses decreased 9.6%, or $2.7 million, for the third quarter of 1996 compared to 1995 and decreased 5.5%, or $4.6 million, for the nine months ended September 30, 1996 to $79.5 million from $84.1 million for the 1995 period primarily due to net payroll and related cost savings from the Newspaper Consolidation and Newspaper Restructuring and reductions in newsprint expense. Corporate operating and administrative expenses for the third quarter of 1996 increased slightly over of the 1995 period and remained relatively flat for the nine months ended September 30, 1996 compared with the same period in 1995. Consolidated depreciation and amortization expense increased $3.1 million for the third quarter of 1996 to $11.2 million from $8.1 million in the 1995 period and increased $8.0 million to $32.1 million from $24.1 million for the nine months ended September 30, 1996. The increases are due primarily to the additional amortization expense in 1996 of approximately $1.8 million per quarter attributable to the step-up in carrying value of the intangible assets acquired in the October, 1995 acquisition of the Company's joint venture partner's interest in KHC (the "Kelso Buyout"). The consolidation of TVFN and AHN contributed $1.1 million and $2.4 million to the increase in depreciation expense for the quarter and nine months ended September 30, 1996. In the first quarter of 1996, the Company recorded an $11.4 million charge (of which $10.1 million related to the IUP plan) to continuing operations and a $5.4 million (pre-tax) charge to discontinued operations to reflect the vested portion of an estimated $20.5 million adjustment to stock-based compensation plans. Of the $3.7 million which was unvested at March 31, 1996, $1.3 million became vested and was charged to operations in each of the second and third quarters of 1996. The $20.5 million adjustment to the stock-based compensation plans reflects additional consideration which participants in the Company's IUP, restricted stock unit plan and certain stock option plans will receive to the extent the value ascribed to the Company's former cable operations has increased upon a final determination. The Company's cable operations were merged with Continental in October, 1995. In February, 1996, Continental and US West Media Group jointly announced the US West Merger. The final amount of additional consideration is subject to the closing of the US West Merger, expected by the end of 1996. As discussed in note 9 and under "-Recent Developments" above, at recent trading values of UMG common stock the amount paid would be $6.3 million less than that which has been recorded as expense by the Company under these plans. The ultimate adjustment to the income statement, if any, will be determined at the closing of the US West/Continental merger and simultaneous settlement of these affected plans. 18 19 In the first and second quarters of 1996, the Company recorded additional charges to operations of approximately $1.1 million and $1.3 million, respectively, relating to early retirement costs and voluntary separation benefits in connection with a plan of reorganization and restructuring of the Company's Publishing business adopted by the Company in the fourth quarter of 1995 (the "Newspaper Restructuring") at which time a $6.8 million charge was recorded. The following table illustrates the current status of the restructuring accrual by component (in millions):
Employee Outplacement Severance Costs & Other costs Total --------------- ------------- ----- Balance at December 31, 1995 $ 6.5 $ 0.3 $ 6.8 Charge to first quarter operations 1.1 1.1 Charge to second quarter operations 1.3 1.3 Utilization of accrual (0.5) (0.2) (0.7) Funding by pension plan (6.3) (6.3) ----- ------ ------ Balance at September 30, 1996 $ 2.1 $ 0.1 $ 2.2 ===== ====== ======
The remaining costs in the accrual are expected to be paid over several years extending to the year 2004 in accordance with terms of applicable severance packages. The Newspaper Restructuring and the Newspaper Consolidation are expected to generate combined savings of approximately $11.0 million per year and a net full-time equivalent ("FIE") reduction of 175 of the Publishing work force. Interest expense increased $2.1 million m $4.2 million for the third quarter of 1996 from $2.1 million in the same period last year and increased $7.8 million to $15.2 million for the nine months ended September 30, 1996 from $7.4 million for the same period in 1995 due to increased interest charged to continuing operations in the 1996 period. In 1995, approximately 75% of the debt was attributable to cable operations and accordingly the related interest expense was allocated to discontinued cable operations. Effective interest rates were 8.9% for the quarter and 8.3% year to date for 1996 compared to 8.0% for the 1995 quarter and 8.6% for the 1995 nine month period. As a result of the additional stock-based compensation expense, additional Newspaper Restructuring charges, and consolidations of AHN and TVFN together offsetting the operating results of Broadcasting and Publishing, the loss from continuing operations for the third quarter and nine months ended September 30, 1996 was $8.6 million and $26.9 million, respectively, compared to loss from continuing operations of $2.6 million and loss of $3.5 million, respectively for the same periods in 1995. The minority interest credits of $2.2 million and $6.3 million for the quarter and nine months in 1996, respectively, represents the minority partners' share of AHN and TVFN losses for those periods. The minority interest charges of $0.6 million and $2.6 million, respectively, in the 1995 periods represent the minority partner's share of King Holding Corp. ("KHC") income for those periods in 1995. Including the discontinued operations charge discussed above, net loss for the third quarter and nine months ended September 30, 1996 was $6.4 million and $24.2 million, respectively, compared to net loss of $4.9 million for third quarter of 1995 and $7.7 million for the nine months ended September 30, 1995. Consolidated EBITDA (defined below), excluding Programming and Electronic Media and corporate expenses ("Core EBITDA") increased substantially at 67.8% to $25.6 million in the third quarter of 1996 from $15.2 million in the third quarter of 1995 leading to a year to date increase of 38.7% to $71.0 million for the nine months ended September 30, 1996 from $51.2 million for the same period in 1995. Broadcasting experienced 48.7% EBITDA growth in the third quarter of 1996 to $19.0 million from $12.8 million in the 1995 period. For the nine months ending September 30, 1996 and 1995, Broadcasting EBITDA was $55.3 million and $42.3 million, respectively, an increase of 30.7%. Broadcasting EBITDA margins for the quarter and nine months ended September 30, 1996 improved to 36.8% and 36.9%, respectively. Publishing EBITDA increased $4.1 million, or 168.2%, in the third quarter of 1996 and grew 76.6% for the nine month 1996 period to $15.7 million from $8.9 million in the nine month 1995 period. Primarily because of the consolidation of the start-up venture AHN and NWCN in 1996 and losses at TVFN, the Programming and Electronic Media segment EBITDA was a loss of $11.2 million in the third quarter of 1996 and a loss of $26.0 million for the nine months ended September 30, 1996. EBITDA, a common performance indicator used in the industry, is defined by the Company as operating income (loss) plus Newspaper Consolidation Costs, Newspaper Restructuring Costs, depreciation, amortization, stock-based compensation, and pension expense. EB1TDA is not intended to represent cash flow from operations and should not be considered as an alternative to operating or net income computed in accordance with GAAP as an indicator of the Company's operating performance or as an alternative to cash flows from operating activities (as determined in accordance with GAAP) as a measure of liquidity. 19 20 Broadcasting Broadcasting consists of nine owned and operated stations and four (one of which is under construction) stations operated under LMAs in which the Company provides marketing and programming services. These thirteen stations serve markets in Seattle, WA; Portland, OR; Charlotte, NC; Albuquerque, NM; Louisville, KY; Honolulu, HI; Spokane, WA; Tucson, AZ; and Boise, ID. The KONG and KSKN LMAs did not contribute significantly to the operating results for the quarter or nine months ended September 30, 1996 as these were not fully operational for these periods. Broadcasting revenues for the quarter increased 21.6% to $51.7 million for the 1996 period compared to $42.5 million for the 1995 period. Coupled with the 11.6% increase exhibited in the first quarter of 1996 and 16.2% increase in the second quarter of 1996, Broadcasting revenues for the nine months ended September 30, 1996 of $149.8 million are 16.5% greater than Broadcasting revenues of $128.6 million for the same period last year. Net revenues from the Company's NBC affiliates increased 28.5% for the quarter and 21.9% year to date for 1996 over the 1995 periods. Net revenue growth for the third quarter of 1996 was balanced across all network affiliates. Net revenue growth for the third quarter of 1996 was particularly strong in Seattle (14.2%), Charlotte (48.0%), Honolulu (67.7%), Spokane (23.8%) and Boise (24.1%). Net revenues in Louisville grew 9.6% and the Fox affiliates in Albuquerque and Tucson were slightly down for the third quarter of 1996. National advertising revenues increased 12.5% for the third quarter of 1996 to $25.3 million from $22.5 million for the 1995 period. Local and regional advertising increased 33.4% in the third quarter of 1996 to $31.5 million from $23.6 million for the same period in 1995. Coverage of the Summer Olympics contributed approximately $4.0 million in incremental revenue and political revenue contributed approximately $2.5 million in incremental revenue for the third quarter of 1996. For the nine months ended September 30, 1996, Broadcasting national advertising revenues increased 10.0% to $71.0 million from $64.5 million for the 1995 period and local and regional advertising increased 23.2% to $92.8 million from $75.4 million over the same period last year. Broadcasting operating and administrative expenses increased 9.9% to $32.6 million in the third quarter of 1996 from $30.0 million for the 1995 period and increased 9.6% for the nine months ended September 30, 1996 to $94.5 million compared to $86.2 million for the same period last year. This increase reflects the incremental costs of a start-up news operation and promotion expenses in Honolulu (required by KHNL's affiliation switch from Fox to NBC on January 1, 1996) coupled with the increased news costs associated with weather coverage in the Northwest. Contributing to the increase in the third quarter of 1996 are over $1.0 million of one-time costs associated with the coverage and promotion of the Summer Olympics as well as sports related costs in Seattle and Tucson. Depreciation and amortization expense increased $1.7 million for the quarter and $5.3 million for the nine months ended September 30, 1996 compared to the 1995 periods reflecting the increased amortization associated with the step-up in carrying value of intangible assets acquired in the Kelso Buyout. Operating income for the third quarter of 1996 increased $4.5 million to $12.2 million in 1996 from $7.7 million in 1995. Year to date operating income for the Broadcasting segment is $34.9 million for the 1996 period compared to $27.3 million for the 1995 period, an increase of 28.0%. Broadcasting experienced a 48.7% EBITDA growth in the third quarter of 1996 to $19.0 million from $12.8 million in the 1995 period. This $6.2 million increase in EBITDA represents a 67.4% margin on the $9.2 million increase in revenues for the quarter. For the nine months ending September 30, 1996 and 1995, Broadcasting EBITDA was $55.3 million and $42.3 million, respectively, an increase of 30.7%. Broadcasting EBITDA margins for the quarter and nine months ended September 30, 1996 improved to 36.8% and 36.9%, respectively. The NBC affiliated stations showed a 71.2% growth in 1996 third quarter EBITDA and 46.8% growth for the 1996 nine month EBITDA over the same periods last year. The ABC affiliated stations showed a 44.4% growth in 1996 third quarter EBITDA and 7.3% growth for the 1996 nine month EBITDA over the same periods last year. Broadcast Cash Flow, which represents Broadcasting EBITDA adjusted to add back corporate expense allocations plus program rights amortization less program rights payments, similarly grew 43.1% for the 1996 third quarter and 28.1% for the 1996 nine months compared to the same 1995 periods. Broadcast Cash Flow is not, however, intended to represent cash flow from operations and should not be considered as an alternative to operating or net income computed in accordance with GAAP as an indicator of the Company's operating performance or as an alternative to cash flows from operating activities (as determined in accordance with GAAP) as a measure of liquidity. 20 21 Publishing Publishing revenues of $31.7 million for the third quarter of 1996 have improved $1.4 million, or 4.8%, over the third quarter of 1995 revenues of $30.3 million due in part to improving economic conditions in Rhode Island. Advertising revenues improved in the third quarter of 1996 and are 5.8% greater than the third quarter of 1995. As a result of price increases and the Newspaper Consolidation in July of 1995, average daily circulation for the nine months ended September 30, 1996 decreased 5.3% to 171,048 from an average of 180,663 for the nine months ended September 30, 1995. Average Sunday circulation for the 1996 nine months was 248,900, down 4.5% from 260,696 for the same period last year, largely because of increased price. Despite the decline in circulation levels, circulation revenues are up 5.1% for the third quarter and 4.3% for the nine months ended September 30, 1996 as a result of price increases. Steady growth in the first nine months has led to an overall increase of $2.2 million in Publishing revenues to $95.2 million from $93.0 million for the nine months ended September 30, 1996 and 1995, respectively. Publishing operating and administrative expenses decreased 9.6%, or $2.7 million, for the third quarter of 1996 to $25.2 million from $27.9 million for the 1995 period and decreased 5.5%, or $4.6 million, for the nine months ended September 30, 1996 to $79.5 million from $84.1 million for the 1995 period. These declines were primarily due to payroll savings which totaled $1.2 million for the third quarter of 1996 and $3.9 million year to date primarily due to the Newspaper Consolidation and Newspaper Restructuring partially offset by a charge recorded in the third quarter of $0.6 million and $1.6 million year to date in 1996 for Publishing employee gainsharing and bonus incentives. A reduction in newsprint costs of $1.1 million in the third quarter of 1996 and $0.2 million for the nine months ended September 30, 1996 also contributed to the reduced operating expenses. Of the $1.1 million favorable newsprint variance for the third quarter of 1996 compared to 1995, $0.4 million was caused by reduced consumption and $0.7 million resulted from a 15% decrease in the average price per ton paid this quarter compared to the same quarter last year. As previously discussed, management approved a plan of reorganization and restructuring of substantially all departments of Publishing at the end of 1995 in an effort to improve efficiencies. Under the plan, the Company targeted a reduction in work force of approximately 100 full-time equivalents through a combination of early retirement and voluntary and involuntary separation assistance plans. A charge of $6.8 million was recorded in the fourth quarter of 1995 relating to employee severance costs, outplacement, and other costs associated with the restructuring. As a result of a greater than anticipated response to the voluntary programs, management recorded an additional charge to operations of $1.1 million in the first quarter of 1996 and $1.3 million in the second quarter of 1996. The Company expects annual savings from the Newspaper Restructuring and Newspaper Consolidation to be approximately $7.0 million and $4.0 million, respectively. Substantially all costs under both these plans have been or will be paid by the Company's pension plans (in which plan assets exceed plan obligations). Due to increased revenues and primarily due to reduced payroll and newsprint expenses during the quarter, Publishing posted a $3.9 million operating profit for the third quarter of 1996 compared to a loss of $4.4 million in 1995. For the nine months ending September 30, 1996. Publishing had operating income of $5.2 million compared to a loss of $5.7 million for the same period last year. Publishing EBITDA increased $4.1 million, or 168.2%, in the third quarter of 1996 and grew 76.6% for the nine month 1996 period to $15.7 million from $8.9 million in the nine month 1995 period. Programming and Electronic Media In December, 1995 the Company launched the NorthWest Cable News ("NWCN") channel, which provides 24-hour news service to cable television viewers in Washington, Oregon, and Idaho, and in the third quarter of 1995 launched Rhode Island Horizons (renamed projo. com on October 1, 1996), its electronic on-line information service. Beginning in May, 1995, the Company made new investments in AHN, a 24-hour health cable programming channel that launched on March 25, 1996. In July, 1995, the Company invested in Peapod, an existing interactive grocery delivery service. Through the first nine months of 1996, the 21 22 Company continues to fund its share of the operations of its investment in TVFN and AHN. In 1995, the Company grouped these investments together in a new segment called "Programming and Electronic Media." The Company made investments in its Programming and Electronic Media businesses during the quarter ended September 30, 1996, totaling $4.4 million including $3.2 million in TVFN. Total cumulative investments through September 30, 1996 in the Programming and Electronic Media segment total $106.6 million. Effective January 1, 1996, the Company consolidated its investment in AHN, and effective May 1, 1996 consolidated its investment in TVFN reflecting management's decision to expand its holdings in these entities and grow this segment. These investments were previously accounted for under the equity method of accounting. In addition to AHN and TVFN, the Company currently consolidates its wholly owned businesses NWCN and projo.com (formerly Rhode Island Horizons). On July 31, 1996, Rhode Island Horizons ceased service on the Prodigy network in order to focus attention on fully developing its web site, http://www.projo.com, which launched on October 1, 1996. Programming and Electronic Media segment revenues of $4.6 million for quarter and $9.4 million for the nine months in 1996 have increased over revenues for the same 1995 periods of $0.8 million and $2.2 million, respectively, primarily due to the consolidation of TVFN in May, 1996. TVFN accounted for $3.0 million of the segment's revenue for the third quarter and $5.2 million for the nine months ended September 30, 1996. NWCN accounted for $0.9 million and $2.2 million of the segment's revenues for the third quarter and nine months ended September 30, 1996, respectively. The remaining businesses in the Programming and Electronic Media segment are in the early development phase of operations. Subscribers for TVFN have grown 30.7% to 17.3 million as of September 30, 1996 compared to 13.3 million as of September 30, 1995. AHN has 3.4 million subscribers and NWCN has 1.4 million subscribers as of September 30, 1996. The effects of consolidating AHN since January, 1996 and TVFN since May, 1996, together added $13.7 million in operating and administrative expenses to the third quarter of 1996 in the Programming and Electronic Media segment. For the nine months ended September 30, 1996, AHN and TVFN added $29.1 million in operating expenses in the Programming and Electronic Media segment. Primarily because of the consolidation of TVFN and the start-up ventures NWCN and AHN in 1996, the Programming and Electronic Media segment operating losses were $12.7 million and $29.0 million, respectively, for the third quarter and nine months ended September 30, 1996. 22 23 LIQUIDITY AND CAPITAL RESOURCES The Company has historically funded its working capital, debt service, capital expenditure and dividend requirements primarily through cash provided by its operating activities. Significant acquisitions or investments have historically been funded primarily through long-term debt borrowings under credit facilities. Cash Flows from Operations The following table identifies significant cash inflows and outflows from operations for the quarter and nine months ended September 30, 1996. It is intended to enhance the reader's understanding of, and reconciles EBITDA to, the cash flows provided by (used in) operations as presented in the Company's condensed consolidated statement of cash flows for the quarter and nine months ended September 30, 1996 included elsewhere in this Form 10-Q. Cash inflows (outflows) from operations can be analyzed as follows (in millions):
Quarter Nine Months Ended Ended September September 30, 1996 30, 1996 -------- ----------- EBITDA: Broadcasting $ 19.0 $ 55.3 Publishing 6.5 15.7 Programming and Electronic Media (11.2) (26.0) Corporate (3.1) (9.3) ------- ------- Total 11.2 35.7 Program rights amortization 4.5 13.3 Interest expense (4.2) (15.2) Other income 1.6 4.3 Income tax refunds received, net of payments made 26.0 25.0 Other working capital items, primarily accounts payable accounts receivable and prepaids (1.3) (15.2) ------- ------- Cash flow from operations before one-time cash payouts 37.8 47.9 One-time cash payouts IRS and state tax settlements (1) (3.5) Payment of working capital and other cable-related disposal adjustments (2) (0.1) (8.9) ------- ------- Cash flow provided by operations $ 37.7 $ 35.5 ======= ======= Note to table - ------------- (1) Relates to amounts paid in connection with final settlements reached with Internal Revenue Service and applicable states relating to examinations of the Company's income tax returns for the years 1984 through 1989. (2) Includes working capital and other basis adjustments in disposal of cable operations of $4.3 million and approximately $4.6 million in cash paid for severance costs associated with the cable operations disposed of.
Investments The Company made significant investments in its Programming and Electronic Media businesses during the nine months ended September 30, 1996, totaling $64.1 million including $25.0 million in AHN and $35.3 million in TVFN. See also "- Developments in the Nine Months Ended September 30, 1996" discussed earlier. The Company is committed to investing an additional $19.5 million in AHN by the first quarter of 1997 upon the achievement of certain operating milestones, including entering into carriage agreements and meeting certain revenue and ratings objectives. Dividends On May 8, 1996, the Board of Directors of the Company declared a dividend of $0.1907 per share which was paid on June 14, 1996. There were no dividends declared in the third quarter of 1996. Combined with dividends paid during the first quarter of 1996, total dividends paid per share for the nine months ended September 30, 1996 equals $0.2542. No additional dividends are contemplated for 1996 or the foreseeable future. Dividends paid for the quarter and nine months ended September 30, 1995 equaled $0.0636 and $0.1907, respectively. 23 24 Financing As discussed in Note 7 of the condensed consolidated financial statements included elsewhere in this Form 10-Q, the Company's total debt outstanding at September 30, 1996 was $159.8 million. The net decrease in debt during the nine months ended September 30, 1996 was a result of the application to outstanding debt balances of $119.0 million net proceeds raised from the Company's initial public offering and direct placement of Class A shares discussed previously, plus receipt of income tax refunds net of payments of approximately $25 million offset by the funding of the above described investing and operating activities. The amount of credit available under its revolving credit facility at September 30, 1996 was $225.0 million which was subsequently reduced by $150 million effective October 8, 1996. The Company's debt to equity ratio at September 30, 1996 was 0.44 to 1.00. Pursuant to the Belo Merger agreement, the Company has agreed that at no time will the Company permit net debt (as defined by the merger agreement) to exceed $175 million. Future Funding and Capital Resources The Company anticipates that amounts available under its revolving credit facility, as amended, and cash flow from operations will be sufficient to meet the liquidity requirements described above under "Liquidity and Capital Resources" and those discussed under "- Recent Developments" and "- Developments in the Nine Months Ended September 30, 1996". The Company does not intend to make significant acquisitions or investments and does not believe it will be required to meet significant liquidity requirements other than described above. However to the extent that the Company makes significant acquisitions or investments or is required to meet significant liquidity requirements other than described above, the Company may need to obtain additional financing. There can be no assurance that such additional financing will be available on terms acceptable to the Company. INFLATION Certain of the Company's expenses, such as those for wages and benefits increase with general inflation. However, the Company does not believe that its results of operations have been, or will be, adversely affected by inflation, provided that it is able to increase its advertising rates periodically. 24 25 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS On January 17, 1995, Cable LP brought a declaratory judgment action against Old PJC, Colony and Dynamic in the Circuit Court of the Eleventh Judicial Circuit in and for Dade County, Florida. Colony was a cable television subsidiary of Old PJC, which was transferred to Continental in connection with the Continental Merger. This case relates to the Dynamic Partnership, in which Dynamic is the general partner with an 89.8% interest and Cable LP is the limited partner with a 10.2% interest. In this action, Cable LP claimed that (i) Dynamic was obligated to offer to sell Dynamic's general partnership interest to Cable LP before Old PJC entered into the Merger Agreement with Continental and (ii) Dynamic's offer to purchase Cable LP's limited partnership interest for $13.1 million triggered a right of first refusal entitling Cable LP to purchase the general partnership interest for $115 million. Cable LP sought a declaration by the court that the right of first refusal it is asserting applies. A motion to strike allegations of bad faith and breach of fiduciary duty against Old PJC, Colony and Dynamic was granted by the court, and an answer to the Complaint and a Counterclaim was filed by them on March 16, 1995, seeking a declaratory judgment that Cable LP unreasonably refused consent to the transfer of the general partner's interest to Continental and that a purported transfer of Cable LP's interest in the Dynamic Partnership to a partnership to be managed by Adelphia Communications, Inc. violates Dynamic's right of first refusal under the Dynamic Partnership Agreement. The case was tried in December 1995. A final declaratory judgment in this action in favor of Cable LP was entered on May 21, 1996. Such judgment requires, among other matters, Dynamic and Colony to negotiate with Cable LP on a price to transfer Dynamic's interest in the general partnership to Cable LP. The Company appealed this judgment and moved to stay the effect of the judgment during the pendency of the appeal. On June I0, 1996, a hearing was held on the Company's motion to stay. At such hearing, the judge declined to grant or deny the Company's motion to stay at this time. In the event that, as a result of such litigation, Dynamic is ultimately required to sell its interest in the Dynamic partnership to Cable LP, the Continental Merger agreement provides that the Company will pay to Continental simultaneously with the closing of such sale an amount equal to the sum of (i) the amount (if any) by which the consideration received by Dynamic for the sale of such interest is less than $115 million plus (ii) the taxes which would have been payable assuming the purchase price for such interest equaled $115 million. The Company is unable to predict at this time what the ultimate outcome of this litigation might be. Should any loss resulting from this litigation ultimately prove to be probable and reasonably estimable, such loss, at that time, would result in a charge to stockholders' equity to reflect the estimated decrease in net proceeds received from the disposal of the cable assets in 1995 pursuant to the Continental Merger agreement. Such a charge could have a material effect upon the Company's financial condition. If any payment obligations are ultimately required under the terms of the Continental Merger agreement, it is currently anticipated that such payments could be up to $40 million and could have a material effect upon the Company's liquidity position. It is currently contemplated that any such payment would be funded by borrowings under the Company's revolving credit facility. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources". See also the discussion of this action in the Company's Annual Report on Form 10-K for the year ended December 31, 1995 and the Company's Quarterly Reports on Form 10-Q filed as amended on June 11, 1996 for the first quarter of 1996 and filed on August 14, 1996 for the second quarter of 1996. The Company is party to various claims, legal actions and complaints arising in the ordinary course of business. In the opinion of management, all such matters are adequately covered by insurance or, if not so covered, are without merit or are of such kind, or involve such amounts, that unfavorable disposition would not have a material effect on the consolidated financial position or results of operations of the Company. ITEM 2. CHANGES IN SECURITIES Not applicable. ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not applicable. 25 26 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. ITEM 5. OTHER INFORMATION Not applicable. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits required to be filed by Item 601 of Regulation S-K: 2.1 Agreement and Plan of Merger, dated as of September 26, 1996 among the Providence Journal Company, A.H. Belo Corporation and A.H. Finance Company (incorporated by reference to Exhibit 2.1 of the Company's Current Repont on Form 8-K dated September 26, 1996). 2.2 Stockholders Agreement dated as of September 26, 1996 among the Providence Journal Company and each of the parties signatory thereto. 3.1 Certificate of Incorporation of The Providence Journal Company, as amended (incorporated by reference to Exhibit 3.1 of the Company's Registration Statement on Form S-1 (File No. 333- 02703)) 3.2 By-laws of The Providence Journal Company, as amended (incorporated by reference to Exhibit 3.2 of the Company's Registration Statement on Form S-1 (File No. 333-02703)) 4.1 Form of Rights Agreement between The Providence Journal Company and The First National Bank of Boston, as Rights Agent (incorporated by reference to Exhibit 4.1 of the Company's Current Report on Form 8-K dated May 8, 1996) as amended by a First Amendment to Rights Agreement dated September 26, 1996 10.1 The Providence Journal Company 1994 Employee Stock Option Plan, as amended (incorporated by reference to Exhibit 10.1 of the Company's Registration Statement on Form S-1 (File No. 333- 02703)) 10.2 The Providence Journal Company 1994 Non-Employee Director Stock Option Plan, as amended (incorporated by reference to Exhibit 10.2 of the Company's Registration Statement on Form S-1 (File No. 333-02703)) 10.3 Form of Change of Control Agreement, together with list of all executive officers who are a party to such agreements and the details in which such documents differ from the form of the document as so filed 10.4 Partnership Interest Purchase and Sale Agreement dated April 2, 1996 between the Company and Landmark Programming, Inc. (incorporated by reference to Exhibit 10.10 of the Company's Registration Statements on Form S-1 (File No. 333-02703)) 10.5 Partnership Interest Purchase and Sale Agreement dated April 2, 1996 between the Company and Scripps Howard Publishing, Inc. (incorporated by reference to Exhibit 10.11 of the Company's Registration Statement on Form S-1 (File No. 333-02703)) 10.6 Stockholders Agreement dated as of September 26, 1996 among A.H. Belo Corporation and each of the other parties signatory thereto 27 Financial Data Schedule (b) Reports on Form 8-K Current Report on Form 8-K dated September 26, 1996. 26 27 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. Dated: November 5, 1996 THE PROVIDENCE JOURNAL COMPANY By: /s/ Thomas N. Matlack ------------------------------------------------- Thomas N. Matlack Vice President-Finance and Chief Financial Officer (principal financial officer) By: /s/ Robert G. Colucci ------------------------------------------------- Robert G. Colucci Corporate Controller (chief accounting officer) By: /s/ John L. Hammond ------------------------------------------------- John L. Hammond Vice President-General Counsel and Chief Administrative Officer 27 EX-2.2 2 STOCKHOLDERS AGREEMENT 1 Exhibit 2.2 STOCKHOLDERS AGREEMENT STOCKHOLDERS AGREEMENT, dated as of September 26, 1996 (this "Agreement"), by and among The Providence Journal Company, a Delaware corporation (the "Company"), and each of the other parties signatory hereto (each a "Stockholder" and, collectively, the "Stockholders"). W I T N E S S E T H: - - - - - - - - - - WHEREAS, concurrently herewith, the Company, A.H. Belo Corporation, a Delaware corporation ("Acquiror"), and A H Finance Company, a Delaware corporation and a direct wholly-owned subsidiary of Acquiror ("Sub"), are entering into an Agreement and Plan of Merger (as such agreement may hereafter be amended from time to time, the "Merger Agreement"; initially capitalized and other terms used but not defined herein shall have the meanings ascribed to them in the Merger Agreement), pursuant to which the Company will be merged with and into Sub (the "Merger"); WHEREAS, each of the Stockholders Beneficially Owns (as defined herein) the number of shares, par value $1.67 per share, of Series A and/or Series B Common Stock of Acquiror (the "Shares" or "Acquiror Common Stock") set forth opposite such Stockholder's name on Schedule I hereto; WHEREAS, as an inducement and a condition to entering into the Merger Agreement, the Company has required that the Stockholders agree, and the Stockholders have agreed, to enter into this Agreement; NOW, THEREFORE, in consideration of the foregoing and the mutual premises, representations, warranties, covenants and agreements contained herein, the parties hereto hereby agree as follows: 1. PROVISIONS CONCERNING ACQUIROR COMMON STOCK. Each Stockholder hereby agrees with the Company that, during the period commencing on the date hereof and continuing until the first to occur of the Effective Time and termination of the Merger Agreement in accordance with its terms, at any meeting of Acquiror's stockholders, however called, or in connection with any written consent of Acquiror's stockholders, such Stockholder shall vote (or, in the case of joint ownership, use all reasonable efforts to cause to be voted) the Shares Beneficially Owned (as defined below) by such Stockholder, whether heretofore owned or hereafter acquired, (i) in favor of the issuance of shares of Series A Common Stock of Acquiror (the "Series A Stock") pursuant to the Merger Agreement and any actions required in furtherance thereof and hereof; (ii) against any action or agreement that would result in a breach in any respect of any covenant, representation or warranty or any other obligation or agreement of 2 Acquiror under the Merger Agreement (after giving effect to any materiality or similar qualifications contained therein); and (iii) except as otherwise agreed to in writing in advance by the Company, against any changes in a majority of the persons who constitute the board of directors of Acquiror. Such Stockholder shall not enter into any agreement or understanding with any person the effect of which would be inconsistent or violative of the provisions and agreements contained in Section 1 or 2 hereof. For purposes of this Agreement, "Beneficially Own" or "Beneficial Ownership" with respect to any securities shall mean a person's having direct ownership of and the right to vote such securities in his or her individual capacity. 2. OTHER COVENANTS, REPRESENTATIONS AND WARRANTIES. Each Stockholder hereby represents and warrants to the Company as follows: (a) OWNERSHIP OF SHARES. Such Stockholder is the record and Beneficial Owner of the number of Shares set forth opposite such Stockholder's name on Schedule I hereto. On the date hereof, the Shares set forth opposite such Stockholder's name on Schedule I hereto constitute all of the Shares Beneficially Owned by such Stockholder. Such Stockholder has sole voting power with respect to the matters set forth in Section 1 hereof with respect to all of the Shares set forth opposite such Stockholder's name on Schedule I hereto with no limitations, qualifications or restrictions on such rights. (b) POWER; BINDING AGREEMENT. Such Stockholder has the legal capacity, power and authority to enter into and perform all of such Stockholder's obligations under this Agreement. The execution, delivery and performance of this Agreement by such Stockholder will not violate any law, regulation or court order or any other agreement to which such Stockholder is a party including, without limitation, any voting agreement, Stockholder agreement or voting trust. This Agreement has been duly and validly executed and delivered by such Stockholder and constitutes a valid and binding agreement of such Stockholder, enforceable against such Stockholder in accordance with its terms. If such Stockholder is married and such Stockholder's Shares constitute community property, this Agreement has been duly authorized, executed and delivered by, and constitutes a valid and binding agreement of, such Stockholder's spouse, enforceable against such person in accordance with its terms. (c) RESTRICTION ON TRANSFER, PROXIES AND NON-INTERFERENCE. Such Stockholder shall not, directly or indirectly: (i) except as contemplated by the Merger Agreement, offer for sale, sell, transfer, tender, pledge, encumber, assign or otherwise dispose of, or enter into any contract, option or other arrangement or understanding with respect to or consent to the offer for sale, sale, transfer, tender, pledge, encumbrance, assignment or other disposition of, any or all of such Stockholder's Shares or any interest therein; (ii) grant any proxies or powers of attorney, deposit any Shares into a voting trust or enter into a voting agreement with respect to any Shares; or (iii) take any action that would make any representation or warranty of such Stockholder contained herein untrue or incorrect or have the effect of preventing or disabling such Stockholder from performing such Stockholder's obligations under this Agreement; PROVIDED, HOWEVER, that, notwithstanding clause (i) of this sentence, (x) such Stockholder shall be permitted to transfer any of such Stockholder's Shares to a trust or similar entity for estate planning purposes so long as such Stockholder retains, or another Stockholder acquires, (1) sole power to vote such Shares 2 3 (and votes such Shares in accordance with this Agreement) and (2) investment power over such shares (and causes such trust or similar entity to retain such Shares until the termination of this Agreement); (y) such Stockholder shall be permitted to make one or more gifts or charitable donations of such Shares up to such number of Shares as represents no more than 10% of the voting power represented by the aggregate number of such Stockholder's Shares on the date hereof; and (z) such Stockholder may pledge or margin any of such Stockholder's Shares so long as such Stockholder retains sole power to vote such Shares (and votes in accordance with this Agreement) for the term of this Agreement (provided that such pledge or margin transaction shall be made only to or with a financial institution extending credit to such Stockholder in the ordinary course of such financial institution's business and unrelated to any transaction or transactions involving an attempt to acquire control of the Company). (d) RELIANCE BY THE COMPANY. Such Stockholder understands and acknowledges that the Company is entering into the Merger Agreement in reliance upon such Stockholder's execution and delivery of this Agreement. 3. STOP TRANSFER. Each Stockholder agrees with, and covenants to, the Company that such Stockholder shall not request that Acquiror register the transfer (book-entry or otherwise) of any certificate or uncertificated interest representing any of such Stockholders' Shares, unless such transfer is made in compliance with this Agreement. In the event of a stock dividend or distribution, or any change in the Acquiror Common Stock by reason of any stock dividend, split-up, recapitalization, combination, exchange of shares or the like, the term "Shares" shall be deemed to refer to and include the Shares as well as all such stock dividends and distributions and any shares into which or for which any or all of the Shares may be changed or exchanged. 4. TERMINATION. Except as otherwise provided herein, the covenants and agreements contained herein with respect to the Shares shall terminate upon the earlier of (a) the termination of the Merger Agreement in accordance with its terms and (b) the Effective Time. 5. STOCKHOLDER CAPACITY. No person executing this Agreement who is or becomes during the term hereof a director of Acquiror or a trustee of a trust makes any agreement or understanding herein in his or her capacity as such director or trustee. Each Stockholder signs solely in his or her capacity as the Beneficial Owner of such Stockholder's Shares. 6. Miscellaneous. -------------- (a) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes all other prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof. (b) CERTAIN EVENTS. Each Stockholder agrees that this Agreement and the obligations hereunder shall attach to such Stockholder's Shares and shall be binding upon any person to which legal or beneficial ownership of such Shares shall pass, whether by operation of law or otherwise. Notwithstanding any transfer of Shares, the transferor shall remain liable for the performance of all obligations under this Agreement of the transferor. 3 4 (c) ASSIGNMENT. This Agreement shall not be assigned by operation of law or otherwise without the prior written consent of the other party. (d) AMENDMENTS, WAIVERS, ETC. This Agreement may not be amended, changed, supplemented, waived or otherwise modified or terminated, with respect to any one or more Stockholders, except upon the execution and delivery of a written agreement executed by the relevant parties hereto; PROVIDED, HOWEVER, that Schedule I hereto may be supplemented by the Company and one or more stockholders of Acquiror by adding the name and other relevant information concerning any stockholder of the Company who agrees to be bound by the terms of this Agreement without the agreement of any other party hereto, and thereafter such added stockholder shall be treated as a "Stockholder" for all purposes of this Agreement. (e) NOTICES. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly received if so given) by hand delivery, telegram, telex or telecopy, or by mail (registered or certified mail, postage prepaid, return receipt requested) or by any courier service, such as Federal Express, providing proof of delivery. All communications hereunder shall be delivered to the respective parties at the following addresses: If to any Stockholder: At the address set forth on Schedule I hereto with a copy to: Michael J. McCarthy, Esq. Senior Vice President and General Counsel A.H. Belo Corporation 400 South Record Street Dallas, Texas 75202 Telephone: (214) 977-6600 Facsimile: (214) 977-8209 and Gibson, Dunn & Crutcher LLP 200 Park Avenue New York, NY 10166 Telephone: (212) 351-4000 Facsimile: (212) 351-4035 Attention: E. Michael Greaney, Esq. 4 5 If to the Company: The Providence Journal Company 75 Fountain Street Providence, Rhode Island 02902 Telephone: (401) 277-7000 Facsimile: (401) 277-7889 Attention: Stephen Hamblett and John L. Hammond, Esq. with a copy to: Wachtell, Lipton, Rosen & Katz 51 West 52nd Street New York, NY 10166 Telephone: (212) 403-1000 Facsimile: (212) 403-2000 Attention: Daniel A. Neff, Esq. and Edwards & Angell 2700 Hospital Trust Tower Providence, RI 02903 Telephone: (401) 274-9200 Facsimile: (401) 276-6611 Attention: Walter G.D. Reed, Esq. or to such other address as the person to whom notice is given may have previously furnished to the others in writing in the matter set forth above. (f) SEVERABILITY. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or portion of any provision in such jurisdiction, and this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision or portion of any provision had never been contained herein. (g) SPECIFIC PERFORMANCE. Each of the parties hereto recognizes and acknowledges that a breach by it of any covenants or agreements contained in this Agreement will cause the other party to sustain damage for which it would not have an adequate remedy at law for money damages, and therefore each of the parties hereto agrees that in the event of any such breach the aggrieved party shall be entitled to the remedy of specific performance of such covenants and agreements and injunctive and other equitable relief in addition to any other remedy to which it may be entitled, at law or in equity. (h) NO WAIVER. The failure of any party hereto to exercise any right, power or remedy provided under this Agreement or otherwise available in respect hereof at law or in 5 6 equity, or to insist upon compliance by any other party hereto with its obligations hereunder, and any custom or practice of the parties at variance with the terms hereof, shall not constitute a waiver by such party of its right to exercise any such or other right, power or remedy or to demand such compliance. (i) GOVERNING LAW. This Agreement shall be governed and construed in accordance with the laws of the State of Delaware, without giving effect to the principles of conflicts of law thereof. (j) COUNTERPARTS. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, but all of which, taken together, shall constitute one and the same Agreement. IN WITNESS WHEREOF, the Company and each Stockholder have caused this Agreement to be duly executed as of the day and year first above written. THE PROVIDENCE JOURNAL COMPANY By: /s/ Stephen Hamblett ----------------------------------------- Name: Stephen Hamblett Title: Chairman of the Board, Chief Executive Officer and Publisher STOCKHOLDERS: /s/ Robert W. Decherd --------------------------------------------- Robert W. Decherd /s/ Maureen H. Decherd --------------------------------------------- Maureen H. Decherd /s/ Dealey D. Herndon --------------------------------------------- Dealey D. Herndon /s/ James M. Moroney, Jr. --------------------------------------------- James M. Moroney, Jr. /s/ Helen Claire Wilhoit Moroney --------------------------------------------- Helen Claire Wilhoit Moroney 6 7 /s/ John W. Bassett, Jr. --------------------------------------------- John W. Bassett, Jr. 7 8 ACKNOWLEDGED AND AGREED TO (with respect to Section 3): A.H. BELO CORPORATION By: /s/ Robert W. Decherd --------------------------------------- Name: Robert W. Decherd Title: Chairman of the Board, President and Chief Executive Officer 8 9 Schedule I to Stockholders Agreement ----------------------
Name and Address Number of Shares Owned - ---------------- ------------------------------- Series A Series B --------- --------- Robert W. Decherd 583,509 1,972,908 A.H. Belo Corporation 400 South Record Street Dallas, Texas 75202 Dealey D. Herndon 1,048,146 1,305,624 322 Congress Avenue Austin, Texas 78701 James M. Moroney, Jr. 494,235 154,922 A.H. Belo Corporation 400 South Record Street Dallas, Texas 75202 John W. Bassett, Jr. 3,200 3,200 A.H. Belo Corporation 400 South Record Street Dallas, Texas 75202
9 EX-10.3 3 CHANGE OF CONTROL AGREEMENT 1 Exhibit 10.3 ------------ The Providence Journal Company List of Executive Officers with Change of Control Agreements ------------------------------- Stephen Hamblett Plan A Jack Clifford Plan A Howard G. Sutton Plan A John L. Hammond Plan A Thomas N. Matlack Plan A John A. Bowers Plan A John E. Hayes Plan A Joel P. Rawson Plan B Michael B. Isaacs Plan C Paul H. McTear, Jr. Plan C Joel N. Stark Plan C Harry Dyson Plan C Robert G. Colucci Plan C 2 Change of Control Agreement Plan A ------ Key Points ---------- APPLICABILITY. The Agreement is applicable only in the event of a "change of control". This term is defined in the Agreement to include, among other things, a merger of the Company with another company or a sale of the assets or a substantial portion of the stock of the Company to a third party. TERM OF EMPLOYMENT. The term of employment of the Executive commences upon the occurrence of a change of control and continues for three years, unless earlier terminated because of (a) death or disability or (b) a termination event, in each case as further described below. In addition, if a change of control occurs and if Executive's employment is terminated prior to the date on which the change of control occurs and if it is reasonably demonstrated by Executive that such termination arose in connection with or in anticipation of a change of control, the term of employment commences on the date immediately prior to such termination of employment. During the three-year term of employment, the Executive will have a position which is reasonably commensurate with the position Executive held during the six-month period immediately preceding the change of control at a location within 60 miles of Providence City Hall. Also, the Executive will have the same salary and bonus, as well as reasonably comparable benefits, continuing full participation in the Company's stock incentive plans and supplemental retirement plans, and equivalent job perquisites. TERMINATION - NOT FOR CAUSE. In the event the Executive is terminated other than for "cause", as defined below, the Company will pay Executive a lump sum amount equal to three times the sum of: (a) Executive's highest annual base salary in effect at any time during the three-year period immediately preceding Executive's termination and (b) the average cash bonus received from the Company for the three most recent fiscal years of the Company or the target bonus opportunity immediately preceding Executive's termination, whichever is higher. Also, Executive will continue to participate in all benefit plans for three years after the termination or, if earlier, Executive's eligibility for comparable benefit plans with another employer. TERMINATION - CONSTRUCTIVE. If Executive resigns in certain circumstances, Executive will be deemed to have been terminated other than for cause and will receive the pay and benefits described above. These circumstances include breaches by the Company, such as failure to pay the salary and bonus or provide an appropriate position or any requirement that Executive travel away from the office significantly more than prior to the change of control during the term of employment. TERMINATION - FOR CAUSE. Discharge for cause is defined as willful misconduct, including theft, embezzlement or other serious crimes and intentional wrongful disclosure of material confidential information. In such event, Executive receives no payments or benefits. DEATH OR TOTAL DISABILITY. If Executive dies or suffers a total disability (defined as inability to carry out job responsibilities for 365 consecutive days) during the term of employment, the Agreement terminates and no further payment to Executive is due, except for unpaid wages and vacation pay actually earned prior to the date of death or disability. If Executive dies during the term of employment after being terminated other than for cause, Executive's beneficiary or estate will receive the remaining payments. 3 RESIGNATION. If Executive resigns during the term of employment for any reason not contemplated by the provisions on constructive termination, Executive shall receive as severance pay an amount equal to six months base salary in addition to all salary, bonus and other incentive compensation earned through the date of resignation. PAYMENT OF FEES, COSTS AND EXPENSES. If Executive determines in good faith that the Company has failed to comply with the Agreement or in certain other circumstances, the Executive may require the Company in the event of the likelihood of a change of control or upon a change of control to use its best efforts to provide a letter of credit securing payment of Executive's legal fees and expenses incurred to obtain the benefits contemplated by the Agreement. ADDITIONAL PAYMENTS IN CONNECTION WITH TAX LIABILITY. If amounts payable under the Agreement are subject to the excise tax imposed by Section 4999 of the Internal Revenue Code, the Company will pay to Executive in cash an additional amount necessary (the "gross-up amount") to cause the total payments (including the gross-up amount) and benefits received by Executive to be equal to the total payments and benefits Executive would have received if such Section 4999 had not been applicable except that if the payments (excluding the gross-up amount) do not exceed 110% of the greatest amount (the "reduced amount") that could be paid to Executive which would not give rise to an excise tax, then no gross-up amount shall be paid and Executive shall receive the reduced amount. ACCELERATION OF PAYMENT IN CONNECTION WITH STOCK PLANS. Upon a change of control and termination of employment, the Company shall vest and pay to Executive within thirty days of such termination in a single payment an amount equal to the value of all benefits accrued by Executive pursuant to the terms of any restricted stock, stock unit plan or stock option plan. CONFIDENTIALITY. The Executive is prohibited by the Agreement from disclosing the Company's trade secrets or other confidential information. 4 Change of Control Agreement Plan B ------ Key Points ---------- APPLICABILITY. The Agreement is applicable only in the event of a "change of control". This term is defined in the Agreement to include, among other things, a merger of the Company with another company or a sale of the assets or a substantial portion of the stock of the Company to a third party. TERM OF EMPLOYMENT. The term of employment of the Executive commences upon the occurrence of a change of control and continues for three years, unless earlier terminated because of (a) death or disability or (b) a termination event, in each case as further described below. During the three-year term of employment, the Executive will have a position which is reasonably commensurate with the position Executive held during the six-month period immediately preceding the change of control at a location within 60 miles of Providence City Hall. Also, the Executive will have the same salary and bonus, as well as reasonably comparable benefits, continuing full participation in the Company's stock incentive plans and supplemental retirement plans, and equivalent job perquisites. TERMINATION - NOT FOR CAUSE. In the event the Executive is terminated other than for "cause", as defined below, the Company will pay Executive a lump sum amount equal to 200% of (a) Executive's highest annual base salary in effect at any time during the three-year period immediately preceding Executive's termination and (b) the average cash bonus received from the Company for the three most recent fiscal years of the Company or the target bonus opportunity immediately preceding Executive's termination, whichever is higher. Also, Executive will continue to participate in all benefit plans for two years after the termination or, if earlier, Executive's eligibility for comparable benefit plans with another employer. TERMINATION - CONSTRUCTIVE. If Executive resigns in certain circumstances, Executive will be deemed to have been terminated other than for cause and will receive the pay and benefits described above. These circumstances include breaches by the Company, such as failure to pay the salary and bonus or provide an appropriate position or any requirement that Executive travel away from the office significantly more than prior to the change of control during the term of employment. TERMINATION - FOR CAUSE. Discharge for cause is defined as willful misconduct, including theft, embezzlement or other serious crimes, intentional wrongful disclosure of material confidential information and intentional breach of the non-competition requirements of the Agreement (described below). In such event, Executive receives no payments or benefits. DEATH OR TOTAL DISABILITY. If Executive dies or suffers a total disability (defined as inability to carry out job responsibilities for 365 consecutive days) during the term of employment, the Agreement terminates and no further payment to Executive is due, except for unpaid wages and vacation pay actually earned prior to the date of death or disability. If Executive dies during the term of employment after being terminated other than for cause, Executive's beneficiary or estate will receive the remaining payments. RESIGNATION. If Executive resigns during the term of employment for any reason not contemplated by the provisions on constructive termination, Executive shall receive as severance pay an amount equal to six months base salary in addition to all salary, bonus and other incentive compensation earned through the date of resignation. PAYMENT OF FEES, COSTS AND EXPENSES. If Executive determines, in good faith that the Company has failed to comply with the Agreement or in certain other circumstances, the Executive may require the Company 5 in the event of the likelihood of a change of control or upon a change of control to use its best efforts to provide a letter of credit securing payment of Executive's legal fees and expenses incurred to obtain the benefits contemplated by the Agreement. ADDITIONAL PAYMENTS IN CONNECTION WITH TAX LIABILITY. If amounts payable under the Agreement during the term of employment prior to any termination are subject to the excise tax imposed by Section 4999 of the Internal Revenue Code, the Company will pay to Executive in cash an additional amount necessary to cause the total payments (including this additional amount) and benefits received by Executive to be equal to the total payments and benefits Executive would have received if such Section 4999 had not been applicable. ACCELERATION OF PAYMENT IN CONNECTION WITH STOCK PLANS. Upon termination of employment, the Company shall vest and pay to Executive in a single payment an amount equal to the value of all benefits accrued by Executive pursuant to the terms of any restricted stock, stock unit plan or stock option plan if such payment is not a "parachute payment" under Section 280G of the Internal Revenue Code. If such payment would be a "parachute payment", then the value of Executive's benefits pursuant to any stock plans shall be deposited in a trust for the benefit of Executive with an independent corporate fiduciary. EXCESS PARACHUTE PAYMENTS. Payments or benefits to which Executive is entitled under "Termination-Not For Cause" above will be reduced to the extent requested by Executive so that Executive will not be liable for the excise tax levied on "excess parachute payments" under Section 4999 of the Internal Revenue Code. NON-COMPETITION. If Executive receives the lump sum payment described above, Executive may not without the prior written consent of the Company engage in any competitive activity. A "competitive activity" is defined as the management of a business enterprise if such business enterprise engages in substantial and direct competition with the Company (as constituted on the date of termination) and if such enterprises's sales of any product or service competitive with any products or service of the Company amounted to 25% of such enterprise's net sales for its most recently completed fiscal year and if the Company's net sales of said product or service amounted to 25% of the Company's net sales for its most recently completed fiscal year. CONFIDENTIALITY. The Executive is prohibited by the Agreement from disclosing the Company's trade secrets or other confidential information. 6 Change of Control Agreement Plan C ------ Key Points ---------- APPLICABILITY. The Agreement is applicable only in the event of a "change of control". This term is defined in the Agreement to include, among other things, a merger of the Company with another company or a sale of the assets or a substantial portion of the stock of the Company to a third party. TERM OF EMPLOYMENT. The term of employment of the Executive commences upon the occurrence of a change of control and continues for two years, unless earlier terminated because of (a) death or disability or (b) a termination event, in each case as further described below. During the two-year term of employment, the Executive will have a position which is reasonably commensurate with the position Executive held during the six-month period immediately preceding the change of control at a location within 60 miles of Providence City Hall. Also, the Executive will have the same salary and bonus, as well as reasonably comparable benefits. TERMINATION - NOT FOR CAUSE. In the event the Executive is terminated other than for "cause", as defined below, the Company will pay Executive a lump sum amount equal to 150% of (a) Executive's highest annual base salary in effect at any time during the three-year period immediately preceding Executive's termination and (b) the amount of the target bonus opportunity immediately preceding Executive's termination. Also, Executive will continue to participate in all benefit plans for one year after the termination or, if earlier, Executive's eligibility for comparable benefit plans with another employer. TERMINATION - CONSTRUCTIVE. If Executive resigns in certain circumstances, Executive will be deemed to have been terminated other than for cause and will receive the pay and benefits described above. These circumstances include breaches by the Company, such as failure to pay the salary and bonus or provide an appropriate position during the term of employment. TERMINATION - FOR CAUSE. Discharge for cause is defined as willful misconduct, including theft, embezzlement or other serious crimes, intentional wrongful disclosure of material confidential information and intentional breach of the non-competition requirements of the Agreement (described below). In such event, Executive receives no payments or benefits. DEATH OR TOTAL DISABILITY. If Executive dies or suffers a total disability (defined as inability to carry out job responsibilities for 365 consecutive days) during the term of employment, the Agreement terminates and no further payment to Executive is due, except for unpaid wages and vacation pay actually earned prior to the date of death or disability. If Executive dies during the term of employment after being terminated other than for cause, Executive's beneficiary or estate will receive the remaining payments. RESIGNATION. If Executive resigns during the term of employment for any reason not contemplated by the provisions on constructive termination, Executive shall receive all salary, bonus and other incentive compensation earned through the date of resignation. PAYMENT OF FEES, COSTS AND EXPENSES. If Executive determines in good faith that the Company has failed to comply with the Agreement or in certain other circumstances, the Executive may require the Company in the event of the likelihood of a change of control or upon a change of control to use its best efforts to provide a letter of credit securing payment of Executive's legal fees and expenses incurred to obtain the benefits contemplated by the Agreement. 7 EXHIBIT 10.3 AMENDED AND RESTATED AGREEMENT ------------------------------ AGREEMENT, amended and restated this 18th day of September, 1996, by and between _____________("Executive") and THE PROVIDENCE JOURNAL COMPANY, a Delaware corporation (the "Company"). W I T N E S S E T H: WHEREAS, the Company wishes to assure itself of continuity of management in the event of any actual or threatened change in the control of the Company; and WHEREAS, the Company and the Executive desire to embody in a written agreement the terms and conditions under which the Executive shall be employed by the Company in the event of any actual or threatened change of control of the Company and wish to amend and restate the agreement between the parties dated as of_________________; NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the parties hereto agree as follows: Section 1. Definitions. ----------------------- 1.1. CHANGE OF CONTROL. "Change of Control" shall mean a change of control of the Company of a nature that would be required to be reported in response to Item 6(e) of Schedule 8 14A of Regulation 14A (or in response to any similar item on any similar schedule or form) promulgated under the Securities Exchange Act of 1934, as amended (the "Act"), whether or not the Company is then subject to such reporting requirements. Further, without limiting the generality of the foregoing, such a Change of Control shall be deemed to have occurred if any of the following events takes place: (a) The Company is a party to a merger, consolidation, sale of assets or other reorganization, or a proxy contest, as a consequence of which members of the Board of Directors in office immediately prior to such transaction or event constitute less than a majority of the Board of Directors thereafter; (b) During any period of twenty-four consecutive months, individuals who at the beginning of such period constitute the Board of Directors (including for this purpose any new director whose election or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such period) cease for any reason to constitute at least a majority of the Board of Directors; or (c) At any time when the outstanding voting securities of the Company are required to be registered under Section 12 of the Act, any "person" (as such term is used in Sections -2- 9 13(d) and 14(d) of the Act) is or becomes the "beneficial owner", as defined in Rule 13d-3 under the Act, directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities; PROVIDED, HOWEVER, this clause (c) shall not apply to the acquisition by a person of securities of the Company representing 20% or more, but not in excess of 50% of the combined voting power of the Company's then outstanding securities if such acquisition of securities has been approved by a vote of at least two thirds of the directors in office just prior to the issuance or sale of securities to such person. For purposes of this paragraph (c), the term "person" shall exclude any person or group who on the date hereof is the beneficial owner, directly or indirectly, of securities representing 10% or more of the combined voting power of the Company's presently outstanding securities. 1.2. EFFECTIVE DATE. "Effective Date" shall mean the date on which a Change of Control occurs. Anything in this Agreement to the contrary notwithstanding, if a Change of Control occurs and if the Executive's employment with the Company is terminated prior to the date on which the Change of Control occurs, and if it is reasonably demonstrated by the Executive that such termination of employment (i) was at the request of a third party who has taken steps reasonably calculated to effect a Change of Control or (ii) otherwise arose in connection with -3- 10 or anticipation of a Change of Control, then for all purposes of this Agreement the "Effective Date" shall mean the date immediately prior to the date of such termination of employment. 1.3. TERM OF EMPLOYMENT. "Term of Employment" shall mean the period commencing on the Effective Date and ending on the earliest of: (a) Executive's death or Total Disability (as hereinafter defined); (b) termination of the Term of Employment pursuant to Section 4 below; (c) three (3) years from the Effective Date. Neither the expiration of the Term of Employment nor the termination of the Agreement will relieve the Company of the obligation to provide Executive, in accordance with the terms hereof, the payments, benefits and coverage to which he has become entitled under the Agreement. 1.4. TOTAL DISABILITY. "Total Disability" shall mean a mental or physical condition which in the reasonable opinion of the Company renders the Executive unable or incompetent to carry out the job responsibilities attendant to his office, which condition shall have existed for a period of 365 or more consecutive days. If any controversy should arise as -4- 11 to whether a disability exists, the Executive or the Company may require that the Executive be examined by a physician and in such case the choice of such a physician shall be made by mutual agreement between the Executive and the Company. If they are unable to agree, the examining physician shall be a physician in the Providence metropolitan area who has been designated by the Dean of the Division of Biological and Medical Sciences of Brown University, Providence, Rhode Island. Section 2. Employment. ---------------------- 2.1. CAPACITY AND SITUS OF EMPLOYMENT. The Company agrees to employ Executive throughout the Term of Employment, during which (a) Executive's position (including status, offices and titles), authority, duties and responsibilities shall be at least commensurate in all material respects with those held, exercised and assigned at any time during the six month period immediately preceding the Change of Control, and (b) Executive's situs of employment will be at the Company's executive headquarters in Providence, Rhode Island or such other location within a sixty (60) mile radius of the Providence City Hall (hereinafter referred to as the "Area") to which the Company's executive headquarters may be moved. 2.2. SERVICES OF THE EXECUTIVE. Executive agrees, subject to Sections 4.3 and 4.4 below, to remain in the -5- 12 Company's employ during the Term of Employment, on the terms described in Section 2.1. Excluding periods of vacation and sick leave to which Executive is entitled, Executive agrees to devote substantially all of his attention, energy and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge responsibilities assigned to Executive hereunder, to use his best efforts to perform such responsibilities faithfully and efficiently. Executive may (a) serve on corporate, civic and charitable boards or committees, (b) deliver lectures and fulfill speaking engagements and (c) manage personal investments, so long as such activities do not interfere with the performance of Executive's responsibilities. To the extent that any such activities have been conducted by Executive prior to the Change of Control, such prior conduct, and any subsequent conduct similar in nature and scope, shall not be deemed to interfere with the performance of Executive's responsibilities. Section 3. Compensation & Benefits During the Term of Employment. ----------------------------------------------------------------- 3.1. COMPENSATION. The Company will pay as compensation to Executive for his services as an employee during the Term of Employment -6- 13 (a) base annual salary at a rate equal to or greater than the rate of base salary in effect for Executive immediately prior to the Change of Control; plus (b) provide an annual bonus opportunity (as a percentage of base salary) equal to or greater than the annual bonus plan in effect prior to a Change of Control. 3.2. BENEFITS. In addition, for his services as an employee during the Term of Employment, Executive will receive all life, disability, accident and group health insurance benefits, retirement and deferred compensation, and all other fringe benefits and payments under additional benefit plans, all in an amount or with a value at least equal to those benefits being provided by the Company to the Executive immediately prior to the Change in Control, including but not limited to the following -- (a) Executive will participate fully in the Company's Retirement Plan and The Providence Journal Qualified Compensation Deferral Plan (the "401(k) Plan") (and/or any successor plan or plans) (the Company's Retirement Plan and 401(k) Plan and any successor plan or plans are hereinafter referred to as the "Plans") with benefit accruals under the Retirement Plan and Company contributions for the benefit of Executive under the 401(k) Plan at least at the same level as -7- 14 immediately prior to the Change of Control, or Executive will receive annual cash payments from the Company each at least equal to the total value of such benefit accruals and Company contributions for him under the Plans for the last fiscal year of the Company ending prior to the Change of Control. In addition, Executive will participate fully in the Company's Excess Benefit Plan, Restricted Stock Plan, any stock option plan, any Supplemental Executive Retirement Plan (SERP) or any successor plan (the "Excess Plan"), with benefit accruals under the Excess Plan and Supplemental Executive Retirement Plan (SERP) at least at the same level as immediately prior to the Change of Control, or Executive will receive annual cash payments from the Company each at least equal to the total value of such benefit accruals under the Excess Plan for the last fiscal year of the Company ending prior to the Change of Control; (b) Executive will participate fully, together with his dependents and beneficiaries, in all life insurance plans, accident and health plans and other welfare plans, maintained or sponsored by the Company immediately prior to the Change of Control, or receive substantially equivalent coverage (or the full value -8- 15 thereof in cash annually in advance from the Company); (c) Executive will participate fully in additional benefit plans offered by the Company to executives immediately prior to or after the Change of Control; and (d) Executive will receive fringe benefits and job perquisites (which shall not include any benefit referred to elsewhere in this Section 3), including automobile, paid vacation, club memberships, first class travel, spousal travel, paid financial assistance, executive physical examinations, office, office furnishings and equipment and support staff, at least equivalent to those provided to Executive immediately prior to the Change of Control, as well as reimbursement, upon proper accounting, of reasonable expenses and disbursements incurred by Executive in the course of his duties. 3.3. ACCELERATION OF PAYMENT OF DEFERRED COMPENSATION. Contemporaneous with the Change of Control, all amounts accrued by Executive under the terms of The Providence Journal Company & Subsidiaries Deferred Compensation Plan, the Management Incentive Compensation Plan, the Long Term Incentive Plan, or any similar compensation or benefit plans, shall be vested -9- 16 and paid to Executive in a single payment within thirty (30) days of the Executive's termination of employment. Section 4. Termination of Employment. ------------------------------------- 4.1. TERMINATION OTHER THAN FOR CAUSE. In the event Executive's employment is terminated by the Company during the Term of Employment for any reason other than "Cause" (as defined in Section 4.5 below), the Company will pay Executive, as liquidated damages a lump sum cash payment, payable within ten (10) days of his termination, equal to three times the sum of (i) Executive's highest annual base salary in effect at any time during the three-year period immediately preceding his termination (including in base salary for this purpose any amount contributed by the Company on his behalf to the Company's 401(k) Plan) plus (ii) the average cash bonus received from the Company for the three most recent full fiscal years of the Company preceding the year of termination or the target bonus immediately preceding his termination, whichever is higher. 4.2. PARTICIPATION IN BENEFIT PLANS. In the event of a termination described in Section 4.1 above, Executive, together with his dependents and beneficiaries, will continue following his termination to participate fully, in accordance with Section 3.2(b) above, in all life insurance plans, accident and health plans and other welfare plans, maintained or -10- 17 sponsored by the Company immediately prior to the termination, or receive substantially equivalent coverage (or the full value thereof in cash) from the Company, until the earlier of (a) the Executive's eligibility for comparable benefit plans with another employer and (b) the third anniversary of his termination. 4.3. Resignation By Executive - Constructive Termination. ---------------------------------------------------- (a) If Executive resigns during the Term of Employment in accordance with Section 4.3(b) below, his employment will be deemed to have been terminated by the Company for reasons other than Cause (and he will be deemed to have offered to continue to provide services to the Company), and he will be entitled to all the payments and rights and benefits described in Sections 4.1 and 4.2. (b) Executive may resign in accordance with this Section 4.3 upon the occurrence of any of the following events (in each case, "Good Reason"): (i) any reduction of, or failure to pay, Executive's base annual salary or annual bonus in breach of Section 3.1 above; (ii) any failure by the Company to provide the benefits required by Section 3.2 above or -11- 18 to make any payment which might be due in accordance with Section 3.3 above; (iii) assignment to Executive of any duties inconsistent in any respect with his position (including status, offices, and titles), authority, duties or responsibilities as contemplated by Section 2.1 above or any other action by the Company which results in a diminution of such position, authority, duties or responsi bilities; (iv) as a result of the Change of Control and a change in circumstances thereafter significantly affecting Executive's position, including, without limitation, a change in scope of the business or other activities for which he was responsible immediately prior to the Change of Control, he has been rendered substantially unable to carry out, or has been substantially hindered in the performance of, any of the authority, duties or responsibilities contemplated by Section 2.1 above; -12- 19 (v) the failure of the Company after a Change of Control to comply with and satisfy Section 7.1 or 7.2 below; (vi) relocation by the Company of its principal executive offices or any event that causes Executive to have his principal location of work changed to any location outside the Area; (vii) any requirement by the Company that Executive travel away from his office in the course of his duties significantly more than the number of consecutive days or aggregate days in any calendar year than was required of him prior to the Change of Control; or (viii) without limiting the generality or effect of the foregoing, any material breach of this Agreement by the Company or any successor thereto or transferee of substantially all of the assets thereof. For purposes of this Section 4.3, any good faith determination of "Good Reason" made by the Executive shall be conclusive. -13- 20 4.4. RESIGNATION BY EXECUTIVE. If Executive resigns during the Term of Employment without Good Reason, with thirty (30) days notice to the Company, he shall receive as severance pay an amount equal to six (6) months base salary in addition to base salary, annual bonus, and all other incentive compensation earned during the calendar year of his resignation. In addition all vested deferred and incentive compensation shall become payable. 4.5. TERMINATION FOR CAUSE. If Executive is dismissed by the Company for Cause, he will not be entitled to payments or benefits provided under Section 4.1 or 4.2. "Cause" means the intentional commission by Executive of theft, embezzlement or other serious and substantial crimes against the Company, or intentional wrongful disclosure of confidential information of the Company which materially affects the Company. For purposes of this definition, no act or omission shall be considered to have been "intentional" unless it was not in good faith and Executive had knowledge at the time that the act or omission was not in the best interest of the Company. Executive shall not be deemed to have been terminated for "Cause" hereunder unless and until there shall have been delivered to Executive a copy of a resolution, duly adopted by the affirmative vote of not less than three-quarters of the Board of Directors of the Company then in office, at a meeting of the Board called and held for such purpose finding that, in -14- 21 the good faith opinion of the Board, Executive committed an intentional act set forth above and specifying the particulars thereof in detail. Nothing herein shall limit the right of Executive or his beneficiaries to contest the validity or propriety of any such determination. 4.6. DISPUTE RESOLUTION. If Executive's employment is alleged to be terminated for Cause or if Executive's right to resign under Section 4.3 or 4.4 is disputed, Executive may initiate binding arbitration in Rhode Island before the American Arbitration Association (AAA) and under its rules by serving a notice to arbitrate upon the Company and AAA or, at Executive's election, institute judicial proceedings, in either case within 90 days of the effective date of his termination or, if later, his receipt of notice of termination or such longer period as may be reasonably necessary for Executive to take such action if illness or incapacity should impair his taking such action within the 90-day period. Provided the Executive initiates such action in good faith the Company agrees (i) to pay the costs and expenses (including fees of counsel to the Executive) of any such arbitration or judicial proceeding, and (ii) to pay interest to Executive on any amounts found to be due to Executive hereunder during any period of time that such amounts are withheld pending arbitration and/or judicial proceedings. Such interest will be at the base rate most recently announced by Rhode Island Hospital Trust National Bank -15- 22 (or its successor) prior to the commencement of the arbitration or litigation. The Company and Executive agree that any arbitration award shall be binding and may be enforced by any court of competent jurisdiction. 4.7. Death or Total Disability of the Executive. ------------------------------------------- (a) If Executive dies or suffers a Total Disability during the Term of Employment, then this Agreement shall terminate and the Company, its successors and assigns shall be relieved and discharged of any and all obligations whatsoever to make further payment to Executive pursuant to the terms of this Agreement after the date of death or Total Disability of Executive, except as to base salary earned for services actually rendered and vacation pay accrued prior to the date of death or Total Disability of Executive. In the case of Total Disability of Executive, the Executive will continue to receive full compensation hereunder during the 365 day period prior to a determination of Total Disability. (b) If Executive dies or suffers a total disability following a termination of employment which entitled him to payments and benefits under this Section 4 but prior to receipt of all such payments and benefits, his beneficiary (as designated to the Company in writing) or, if none, his estate, will be entitled to receive all unpaid amounts and benefits due under this Agreement. -16- 23 4.8. ENFORCEMENT OF RIGHTS. Termination of Executive's employment, whether or not giving rise to payments or benefits under this Section 4, will not in any way prevent Executive from enforcing rights to payments or benefits under Section 3 relating to periods during which he was employed. Section 5. Certain Additional Payments by the Company. ------------------------------------------------------ (a) Anything in this Agreement to the contrary notwithstanding and except as set forth below, in the event it shall be determined that any payment or distribution by the Company to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 5) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed -17- 24 with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing provisions of this Section 5(a), if it shall be determined that the Executive is entitled to a Gross-Up Payment, but that the Payments do not exceed 110% of the greatest amount (the "Reduced Amount") that could be paid to the Executive such that the receipt of Payments would not give rise to any Excise Tax, then no Gross-Up Payment shall be made to the Executive and the Payments, in the aggregate, shall be reduced to the Reduced Amount. (b) Subject to the provisions of Section 5(c), all determinations required to be made under this Section 5, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by KPMG Peat Marwick or such other certified public accounting firm as may be designated by the Executive (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the receipt of notice from the Executive that there has been a Payment, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the -18- 25 Change of Control, the Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 5, shall be paid by the Company to the Executive within five days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 5(c) and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive. -19- 26 (c) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall: (i) give the Company any information reasonably requested by the Company relating to such claim, (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (iii) cooperate with the Company in good faith in order effectively to contest such claim, and -20- 27 (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 5(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, -21- 28 from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 5(c), the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to the Company's complying with the requirements of Section 5(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 5(c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such -22- 29 denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. Section 6. Payment of Fees, Costs and Expenses. ----------------------------------------------- It is the intent of the Company that the Executive not be required to incur the expenses associated with the enforcement of his rights under this Agreement by litigation or other legal action or arbitration proceeding because the cost and expense thereof would substantially detract from the benefits intended to be extended to the Executive hereunder. Accordingly, if Executive determines in good faith that the Company has failed to comply with any of its obligations under this Agreement or if the Company or any other person takes any action to declare this Agreement void or unenforceable, or institutes any litigation or arbitration proceeding designed to deny, or to recover from, the Executive the benefits intended to be provided to the Executive under Section 6 hereof, the Company will promptly, upon request of the Executive in the event of the likelihood of a Change of Control or upon a Change f Control, use its best efforts to secure an irrevocable standby letter of credit (the "Letter of Credit"), issued by Rhode Island Hospital Trust National Bank or another bank of -23- 30 comparable or greater size (the "Bank") for the benefit of the Executive providing that the fees and expenses of counsel selected from time to time by the Executive pursuant to this Section 6 or in proceedings contemplated by Section 4.6 shall be paid, or reimbursed to the Executive if paid by the Executive, on a regular, periodic basis upon presentation by the Executive to the Bank of a statement or statements prepared by such counsel in accordance with its customary practices. The Company shall pay all amounts and take all action necessary to maintain the Letter of Credit during the Term of Employment and for one (1) year thereafter and if, notwithstanding the Company's complete discharge of such obligations, such Letter of Credit shall be terminated or not renewed, the Company shall obtain a replacement irrevocable clean letter of credit drawn upon a commercial bank selected by the Company and reasonably acceptable to the Executive, upon substantially the same terms and conditions as contained in the Letter of Credit, or any similar arrangement which, in any case, assures the Executive the benefits of this Agreement without incurring any cost or expense for enforcement against the Company or the defense thereof. Section 7. Merger or Acquisition. --------------------------------- 7.1. ASSUMPTION OF OBLIGATIONS. If the Company is at any time before or after a Change of Control merged, consolidated or reorganized into or with any other corporation or -24- 31 other entity (whether or not the Company is the surviving entity), or if substantially all of the assets of the Company are transferred to another corporation or other entity, the entity arising from such merger, consolidation or reorganization, or the acquirer of such assets, shall (by agreement in form and substance satisfactory to Executive) expressly assume the obligations of Company under this Agreement. 7.2. EXECUTIVE'S RIGHTS TO BENEFITS. In the event of any merger, consolidation, reorganization or sale of assets described above, nothing contained in this Agreement will detract from or otherwise limit Executive's right to or privilege of participation in any stock option or purchase plan or restricted stock plan or any bonus, profit sharing, savings, pension, group insurance, hospitalization or other incentive or benefit plan or arrangement which may be or become applicable to executives of the corporation resulting from such merger or consolidation or the corporation, acquiring such assets of the Company. 7.3. REFERENCES. In the event of any merger, consolidation, reorganization or transfer of assets described above, references to the Company in this Agreement shall, unless the context suggests otherwise, be deemed to include the entity resulting from such merger or consolidation or the acquirer of such assets of the Company. -25- 32 Section 8. Confidentiality. --------------------------- 8.1. CONFIDENTIALITY. The executive agrees that from the date hereof he will not disclose or release to any other person or entity, the Company's trade secrets, confidential business practices, client lists, the details of this Agreement, or other proprietary information without written authorization from the Company. Nothing shall be deemed a Company trade secret, confidential business practice or other proprietary information that is public knowledge. Section 9. Change of Control Following Certain Circumstances. ------------------------------------------------------------- Notwithstanding any provision herein to the contrary, should a Change of Control occur subsequent to Executive's death, Total Disability or retirement from the Company, the remainder of any benefits owed under the terms of The Providence Journal Company & Subsidiaries Deferred Compensation Plan, Management Incentive Compensation Plan, Long Term Incentive Plan, any stock plans or other non-qualified deferred compensation plan, including interest, shall be paid in full on the date of the Change of Control. Section 10. Termination of this Agreement. ------------------------------------------ -26- 33 Either the Company or Executive may, by giving 60 days written notice to the other party, terminate this Agreement as of the third or any subsequent annual anniversary of the occurrence of a Change of Control. Section 11. Withholding of Taxes. --------------------------------- All payments required to be made by the Company hereunder to Executive or his dependents, beneficiaries or estate will be subject to the withholding or such amounts relating to tax and/or other payroll deductions as may be required by law. Section 12. Amendment. ---------------------- No amendment, change or modification of this Agreement may be made except in writing, signed by or on behalf of both parties. Section 13. Miscellaneous. -------------------------- 13.1. BINDING EFFECT. The provisions of this Agreement shall be binding upon and shall inure to the benefit of Executive, his executors, administrators, legal representatives and assigns, and the Company and its successors and assigns. 13.2. GOVERNING LAW. The validity, interpretation and effect of this Agreement shall be governed by and construed in accordance with the laws of the State of Rhode Island. -27- 34 13.3. SEVERABILITY. The invalidity or enforceability of any provision of this Agreement shall not affect the validity of any other provision. 13.4. NO SET-OFF. There shall be no right of set-off or counterclaim, in respect of any claim, debt or obligation, against any payments to Executive, his dependents, beneficiaries or estate provided for in this Agreement, and nothing in this Agreement shall relieve the Company of its obligations to Executive under any other agreement, plan, contract or arrangement. No right, benefit or interest hereunder shall be subject to anticipation, alienation, sale, assignment, encumbrance, charge, pledge, hypothecation or set-off in respect of any claim, debt or obligation, or to execution, attachment, levy or similar process or assignment by operation of law. Any attempt, voluntary or involuntary, to effect any action specified in the immediately preceding sentence shall, to the full extent permitted by law, be null, void and of no effect. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and such amounts shall not be reduced whether or not the Executive obtains other employment 13.5. REMEDIES. The Company and Executive agree that, because of the unique nature of this Agreement, failure -28- 35 of either party to carry out or abide by the obligations under this Agreement could cause irreparable injury; accordingly, the parties agree that, in addition to any other remedies available to either party, any such failure by either party to perform or abide by this Agreement shall be subject to appropriate equitable remedies, including specific performance and injunctive relief. 13.6. ASSIGNABILITY. No right or interest to or in any payments shall be assignable by the Executive; PROVIDED, HOWEVER, that this provision shall not preclude him from designating one or more beneficiaries to receive any amount that may be payable after his death and shall not preclude the legal representative of his estate from assigning any right hereunder to the person or persons entitled thereto under his will or, in the case of intestacy, to the person or persons entitled thereto under the laws of intestacy applicable to his estate. The term "beneficiaries" as used in this Agreement shall mean a beneficiary or beneficiaries so designated to receive any such amount, or if no beneficiary has been so designated, the legal representative of the Executive's estate. 13.7. COUNTERPARTS; HEADINGS. This Change of Control Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. The -29- 36 headings of the sections of this Agreement are inserted for convenience only and shall not constitute a part hereof. 13.8. ENTIRE AGREEMENT. This instrument contains the entire agreement of the parties pertaining to the subject matter contained herein and supersedes and is in lieu of any and all other employment arrangements having effect as of the effective date. 13.9. NOTICES. All notices given hereunder shall be in writing and shall be delivered personally or sent by prepaid registered or certified mail, return receipt requested, addressed as follows: If to the Company: The Providence Journal Company 75 Fountain Street Providence, RI 02902 Attention: Vice President-Human Resources If to the Executive: All notices shall be deemed to be given on the date received at the address of the addressee, or if delivered personally, on the date delivered. -30- 37 IN WITNESS WHEREOF, the Company and Executive have each caused this Agreement to be duly executed and delivered as of the date set forth above. ATTEST: THE PROVIDENCE JOURNAL COMPANY --------------------------------- By: Title: WITNESS: - ------------------------- --------------------------------- [Name of Executive] -31- EX-10.6 4 STOCKHOLDERS AGREEMENT 1 EXHIBIT 10.6 STOCKHOLDERS AGREEMENT STOCKHOLDERS AGREEMENT, dated as of September 26, 1996 (this "Agreement"), by and among A.H. Belo Corporation, a Delaware corporation ("Parent"), and each of the other parties signatory hereto (each a "Stockholder" and, collectively, the "Stockholders"). W I T N E S S E T H: WHEREAS, concurrently herewith, Parent, A H Finance Company, a Delaware corporation and a direct wholly-owned subsidiary of Parent ("Sub"), and The Providence Journal Company, a Delaware corporation (the "Company"), are entering into an Agreement and Plan of Merger (as such agreement may hereafter be amended from time to time, the "Merger Agreement"; initially capitalized and other terms used but not defined herein shall have the meanings ascribed to them in the Merger Agreement), pursuant to which the Company will be merged with and into Sub (the "Merger"); WHEREAS, each of the Stockholders Beneficially Owns (as defined herein) the number of shares, par value $1.00 per share, of Class A and/or Class B Common Stock of the Company (the "Shares" or "Company Common Stock") set forth opposite such Stockholder's name on Schedule I hereto; WHEREAS, as an inducement and a condition to entering into the Merger Agreement, Parent has required that the Stockholders agree, and the Stockholders have agreed, to enter into this Agreement; NOW, THEREFORE, in consideration of the foregoing and the mutual premises, representations, warranties, covenants and agreements contained herein, the parties hereto hereby agree as follows: 1. Provisions Concerning Company Common Stock. Each Stockholder hereby agrees with Parent that, during the period commencing on the date hereof and continuing until the first to occur of the Effective Time and termination of the Merger Agreement in accordance with its terms, at any meeting of the Company's stockholders, however called, or in connection with any written consent of the Company's stockholders, such Stockholder shall vote (or, in the case of joint ownership, use all reasonable efforts to cause to be voted) the Shares Beneficially Owned (as defined below) by such Stockholder, whether heretofore owned or hereafter acquired, (i) in favor of approval of the Merger Agreement and any actions required in furtherance thereof and hereof; (ii) against any action or agreement that would result in a breach in any respect of any covenant, representation or warranty or any other obligation or agreement of the Company under the Merger Agreement (after giving effect to any materiality or similar qualifications contained therein); and (iii) except as otherwise agreed to in writing in advance by Parent, 2 against (x) any takeover proposal (other than the Merger and the transactions contemplated by the Merger Agreement) or (y) any changes in a majority of the persons who constitute the board of directors of the Company. Such Stockholder shall not enter into any agreement or understanding with any person the effect of which would be inconsistent or violative of the provisions and agreements contained in Section 1 or 2 hereof. For purposes of this Agreement, "Beneficially Own" or "Beneficial Ownership" with respect to any securities shall mean a person's having direct ownership of and the right to vote such securities in his or her individual capacity. 2. Other Covenants, Representations and Warranties. Each Stockholder hereby represents and warrants to Parent as follows: (a) Ownership of Shares. Such Stockholder is the record and Beneficial Owner of the number of Shares set forth opposite such Stockholder's name on Schedule I hereto. On the date hereof, the Shares set forth opposite such Stockholder's name on Schedule I hereto constitute all of the Shares Beneficially Owned by such Stockholder. Such Stockholder has voting power with respect to the matters set forth in Section 1 hereof with respect to all of the Shares set forth opposite such Stockholder's name on Schedule I hereto, with no limitations, qualifications or restrictions on such rights. (b) Power; Binding Agreement. Such Stockholder has the legal capacity, power and authority to enter into and perform all of such Stockholder's obligations under this Agreement. The execution, delivery and performance of this Agreement by such Stockholder will not violate any law, regulation or court order or any other agreement to which such Stockholder is a party including, without limitation, any voting agreement, Stockholder agreement or voting trust. This Agreement has been duly and validly executed and delivered by such Stockholder and constitutes a valid and binding agreement of such Stockholder, enforceable against such Stockholder in accordance with its terms. If such Stockholder is married and such Stockholder's Shares constitute community property, this Agreement has been duly authorized, executed and delivered by, and constitutes a valid and binding agreement of, such Stockholder's spouse, enforceable against such person in accordance with its terms. (c) Restriction on Transfer, Proxies and Non-Interference. Such Stockholder shall not, directly or indirectly: (i) except as contemplated by the Merger Agreement, offer for sale, sell, transfer, tender, pledge, encumber, assign or otherwise dispose of, or enter into any contract, option or other arrangement or understanding with respect to or consent to the offer for sale, sale, transfer, tender, pledge, encumbrance, assignment or other disposition of, any or all of such Stockholder's Shares or any interest therein; (ii) grant any proxies or powers of attorney, deposit any Shares into a voting trust or enter into a voting agreement with respect to any Shares; or (iii) take any action that would make any representation or warranty of such Stockholder contained herein untrue or incorrect or have the effect of preventing or disabling such Stockholder from performing such Stockholder's obligations under this Agreement; provided, however, that, notwithstanding clause (i) of this sentence, (x) such Stockholder shall be permitted to transfer any of such Stockholder's Shares to a trust or similar entity for estate planning purposes so long as such Stockholder retains, or another Stockholder acquires, (1) sole power to vote such Shares 2 3 (and votes such Shares in accordance with this Agreement) and (2) investment power over such shares (and causes such trust or similar entity to retain such Shares until the termination of this Agreement); (y) such Stockholder shall be permitted to make one or more gifts or charitable donations of such Shares up to such number of Shares as represents no more than 10% of the voting power represented by the aggregate number of such Stockholder's Shares on the date hereof; and (z) such Stockholder may pledge or margin any of such Stockholder's Shares so long as such Stockholder retains sole power to vote such Shares (and votes in accordance with this Agreement) for the term of this Agreement (provided that such pledge or margin transaction shall be made only to or with a financial institution extending credit to such Stockholder in the ordinary course of such financial institution's business and unrelated to any transaction or transactions involving an attempt to acquire control of the Company). (d) Other Potential Acquirors. Such Stockholder (i) shall immediately cease any existing discussions or negotiations, if any, with any parties conducted heretofore with respect to any acquisition of all or any material portion of the assets of, or any equity interest in, the Company or its subsidiaries or any business combination with the Company or its subsidiaries, in his, her or its capacity as such, and (ii) from and after the date hereof until termination of the Merger Agreement, unless and until the Company is permitted to take such actions under Section 4.02 of the Merger Agreement, shall not, in such capacity, directly or indirectly, initiate, solicit or knowingly encourage (including, without limitation, by way of furnishing non-public information or assistance), or take any other action to facilitate knowingly, any inquiries or the making of any takeover proposal. (e) Reliance by Parent. Such Stockholder understands and acknowledges that Parent is entering into, and causing Sub to enter into, the Merger Agreement in reliance upon such Stockholder's execution and delivery of this Agreement. 3. Stop Transfer. Each Stockholder agrees with, and covenants to, Parent that such Stockholder shall not request that the Company register the transfer (book-entry or otherwise) of any certificate or uncertificated interest representing any of such Stockholders' Shares, unless such transfer is made in compliance with this Agreement. In the event of a stock dividend or distribution, or any change in the Company Common Stock by reason of any stock dividend, split-up, recapitalization, combination, exchange of shares or the like, the term "Shares" shall be deemed to refer to and include the Shares as well as all such stock dividends and distributions and any shares into which or for which any or all of the Shares may be changed or exchanged. 4. Termination. Except as otherwise provided herein, the covenants and agreements contained herein with respect to the Shares shall terminate upon the earlier of (a) the termination of the Merger Agreement in accordance with its terms and (b) the Effective Time. 5. Stockholder Capacity. No person executing this Agreement who is or becomes during the term hereof a director of the Company or trustee of a trust makes any agreement or understanding herein in his or her capacity as such director or trustee. Each Stockholder signs solely in his or her capacity as the Beneficial Owner of such Stockholder's Shares. 6. Miscellaneous. 3 4 (a) Entire Agreement. This Agreement constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes all other prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof. (b) Certain Events. Each Stockholder agrees that this Agreement and the obligations hereunder shall attach to such Stockholder's Shares and shall be binding upon any person to which legal or beneficial ownership of such Shares shall pass, whether by operation of law or otherwise. Notwithstanding any transfer of Shares, the transferor shall remain liable for the performance of all obligations under this Agreement of the transferor. (c) Assignment. This Agreement shall not be assigned by operation of law or otherwise without the prior written consent of the other party; provided, however, that Parent may assign, in its sole discretion, its rights and obligations hereunder to any direct wholly-owned subsidiary of Parent, but no such assignment shall relieve Parent of its obligations hereunder if such assignee does not perform such obligations. (d) Amendments, Waivers, Etc. This Agreement may not be amended, changed, supplemented, waived or otherwise modified or terminated, with respect to any one or more Stockholders, except upon the execution and delivery of a written agreement executed by the relevant parties hereto; provided, however, that Schedule I hereto may be supplemented by Parent and one or more stockholders of the Company by adding the name and other relevant information concerning any stockholder of the Company who agrees to be bound by the terms of this Agreement without the agreement of any other party hereto, and thereafter such added stockholder shall be treated as a "Stockholder" for all purposes of this Agreement. (e) Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly received if so given) by hand delivery, telegram, telex or telecopy, or by mail (registered or certified mail, postage prepaid, return receipt requested) or by any courier service, such as Federal Express, providing proof of delivery. All communications hereunder shall be delivered to the respective parties at the following addresses: If to any Stockholder: At the address set forth on Schedule I hereto The Providence Journal Company 75 Fountain Street Providence, Rhode Island 02902 Telephone: (401) 277-7000 Facsimile: (401) 277-7889 Attention: Stephen Hamblett and John L. Hammond, Esq. 4 5 with a copy to: Wachtell, Lipton, Rosen & Katz 51 West 52nd Street New York, New York 10019 Telephone: (212)403-1218 Facsimile: (212) 403-2000 Attention: Daniel A. Neff, Esq. and Edwards & Angell 2700 Hospital Trust Tower Providence, RI 02903 Telephone: (401) 274-9200 Facsimile: (401) 276-6611 Attention: Walter G.D. Reed, Esq. If to Parent or Sub: Michael J. McCarthy, Esq. Senior Vice President and General Counsel A.H. Belo Corporation 400 South Record Street Dallas, Texas 75202 Telephone: (214) 977-6600 Facsimile: (214) 977-8209 with a copy to: Gibson, Dunn & Crutcher LLP 200 Park Avenue New York, NY 10166 Telephone: (212) 351-4000 Facsimile: (212-351-4035 Attention: E. Michael Greaney, Esq. or to such other address as the person to whom notice is given may have previously furnished to the others in writing in the matter set forth above. (f) Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or portion of any provision in such jurisdiction, and this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision or portion of any provision had never been contained herein. 5 6 (g) Specific Performance. Each of the parties hereto recognizes and acknowledges that a breach by it of any covenants or agreements contained in this Agreement will cause the other party to sustain damage for which it would not have an adequate remedy at law for money damages, and therefore each of the parties hereto agrees that in the event of any such breach the aggrieved party shall be entitled to the remedy of specific performance of such covenants and agreements and injunctive and other equitable relief in addition to any other remedy to which it may be entitled, at law or in equity. (h) No Waiver. The failure of any party hereto to exercise any right, power or remedy provided under this Agreement or otherwise available in respect hereof at law or in equity, or to insist upon compliance by any other party hereto with its obligations hereunder, and any custom or practice of the parties at variance with the terms hereof, shall not constitute a waiver by such party of its right to exercise any such or other right, power or remedy or to demand such compliance. (i) Governing Law. This Agreement shall be governed and construed in accordance with the laws of the State of Delaware, without giving effect to the principles of conflicts of law thereof. (j) Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, but all of which, taken together, shall constitute one and the same Agreement. 6 7 IN WITNESS WHEREOF, Parent and each Stockholder have caused this Agreement to be duly executed as of the day and year first above written. A.H. BELO CORPORATION By: /s/ Robert W. Decherd ------------------------------------- Name: Robert W. Decherd Title: Chairman of the Board, President and Chief Executive Officer STOCKHOLDERS: /s/ Stephen Hamblett ----------------------------------------- Stephen Hamblett /s/ Jack C. Clifford ----------------------------------------- Jack C. Clifford /s/ John A. Bowers ----------------------------------------- John A. Bowers /s/ John L. Hammond ----------------------------------------- John L. Hammond /s/ Thomas N. Matlack ----------------------------------------- Thomas N. Matlack /s/ John E. Hayes ----------------------------------------- John E. Hayes /s/ Paul H. McTear, Jr. ----------------------------------------- Paul H. McTear, Jr. /s/ Michael B. Isaacs ----------------------------------------- Michael B. Isaacs /s/ Mindy C. Isaacs ----------------------------------------- Spousal consent, if applicable 7 8 /s/ Harry Dyson ----------------------------------------- Harry Dyson /s/ Robert G. Colucci ----------------------------------------- Robert G. Colucci /s/ Joel P. Rawson ----------------------------------------- Joel P. Rawson /s/ Joel N. Stark ----------------------------------------- Joel N. Stark /s/ Howard G. Sutton ----------------------------------------- Howard G. Sutton /s/ F. Remington Ballou ----------------------------------------- F. Remington Ballou /s/ Henry P. Becton, Jr. ----------------------------------------- Henry P. Becton, Jr. /s/ Fanchon M. Burnham ----------------------------------------- Fanchon M. Burnham /s/ Kay K. Clarke ----------------------------------------- Kay K. Clarke /s/ Peter B. Freeman ----------------------------------------- Peter B. Freeman /s/ Benjamin P. Harris, III ----------------------------------------- Benjamin P. Harris, III /s/ Paul A. Maeder ----------------------------------------- Paul A. Maeder /s/ Gwill E. York ----------------------------------------- Spousal consent, if applicable 8 9 STOCKHOLDERS: /s/ Trygve E. Myhren ----------------------------------------- Trygve E. Myhren /s/ John W. Rosenblum ----------------------------------------- John W. Rosenblum /s/ W. Nicholas Thorndike ----------------------------------------- W. Nicholas Thorndike /s/ John W. Wall ----------------------------------------- John W. Wall /s/ Mary S. Wall ----------------------------------------- Spousal consent, if applicable /s/ Patrick R. Wilmerding ----------------------------------------- Patrick R. Wilmerding 9 10 ACKNOWLEDGED AND AGREED TO (with respect to Section 3): THE PROVIDENCE JOURNAL COMPANY By: /s/ Stephen Hamblett -------------------------------------- Name: Stephen Hamblett Title: Chairman of the Board, Chief Executive Office and Publisher 10 11 Schedule I to Stockholders Agreement
Name and Address Number of Shares Owned - ---------------- ---------------------- Class A Class B -------- ------- Stephen Hamblett 338,474 66,600 35 Benefit Street Providence, RI 02906 Jack C. Clifford 106,147 2 Tallwood Drive Barrington, RI 02806 John A. Bowers 49,831 2 Maryland Drive W. Warwick, RI 02893 John L. Hammond 21,402 54 Cindy Ann Drive East Greenwich, RI 02818 Thomas N. Matlack 16,635 17 Woodhaven Road Barrington, RI 02806 John E. Hayes 40,055 32 Mallard Cove Way Barrington, RI 02806 Paul H. McTear, Jr. 20,612 11 Gladys Drive North Kingstown, RI 02852 Michael B. Isaacs 20,609 46 Bunker Hill Lane East Greenwich, RI 02818 Harry Dyson 19,209 24 Metcalf Drive Cumberland, RI 02864 Robert G. Colucci 2,004 10 Pineridge Drive Smithfield, RI 02917
11 12 Schedule I to Stockholders Agreement
Name and Address Number of Shares Owned - ---------------- ---------------------- Class A Class B ------- ------- Joel P. Rawson 60 235 Collins Taft Road Harrisville, RI 02830 Joel N. Stark 16,245 137 Briarcliff Avenue Warwick, RI 02889 Howard G. Sutton 21,595 11 Courageous Circle Bristol, RI 02809 F. Remington Ballou 18,450 10,800 25 John Street Providence, RI 02906 Henry P. Becton, Jr. 10,100 0 338 Boston Post Road Weston, MA 02134 Fanchon M. Burnham 52,650 66,150 3554 Edmunds Street NW Washington, DC 20007 Kay K. Clarke 3,827 0 89 River Road East Haddam, CT 06423 Peter B. Freeman 139,950 180,000 100 Alumni Avenue Providence, RI 02906 Benjamin P. Harris, III 18,914 21,600 130 Prospect Street Providence, RI 02906 Paul A. Maeder 82 0 17 Lowell Street Cambridge, MA 02138
12 13 Schedule I to Stockholders Agreement
Name and Address Number of Shares Owned - ---------------- ---------------------- Class A Class B ------- ------- Trygve E. Myhren 158,696 0 30 Appletree Lane Barrington, RI 02806 or 760 Potato Patch Drive Vail, CO 81657 John W. Rosenblum 4,050 0 Route 3, Box 53 Crozet, VA 22932 W. Nicholas Thorndike 64,800 48,600 150 Dudley Street Brookline, MA 02146 John W. Wall 19,800 32,400 106 Prospect Street Providence, RI 02906 Patrick R. Wilmerding 58,874 129,312 35 Crafts Road Chestnut Hill, MA 02167-1823
13 EX-27 5 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE PROVIDENCE JOURNAL COMPANY CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE QUARTER ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 US DOLLARS 3-MOS SEP-30-1996 JUL-01-1996 SEP-30-1996 1 11,350 3,349 52,908 0 999 132,468 178,831 0 733,885 81,146 0 47,611 0 0 314,765 733,885 0 87,958 0 89,838 0 0 (4,226) (5,404) 3,177 (8,581) 0 0 0 (6,371) (0.14) (0.14)
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