<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 28, 1997
Commission file number 1-6714
THE WASHINGTON POST COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 53-0182885
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO)
1150 15TH ST., N.W., WASHINGTON, D.C. 20071
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (202) 334-6000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
Class B Common Stock, par value New York Stock Exchange
$1.00 per share
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Aggregate market value of the Company's voting stock held by non-affiliates
on February 27, 1998, based on the closing price for the Company's Class B
Common Stock on the New York Stock Exchange on such date: approximately
$2,520,000,000.
Shares of common stock outstanding at February 27, 1998:
Class A Common Stock - 1,739,250 shares
Class B Common Stock - 8,342,020 shares
Documents partially incorporated by reference:
Definitive Proxy Statement for the Company's 1998 Annual Meeting of
Stockholders (incorporated in Part III to the extent provided in Items
10, 11, 12 and 13 hereof).
<PAGE> 2
PART I
ITEM 1. BUSINESS.
The principal business activities of The Washington Post Company (the
"Company") consist of newspaper publishing (principally The Washington Post),
television broadcasting (through the ownership and operation of six
network-affiliated stations), the ownership and operation of cable television
systems, and magazine publishing (principally Newsweek magazine).
Information concerning the consolidated operating revenues,
consolidated income from operations and identifiable assets attributable to the
principal segments of the Company's business for the last three fiscal years is
contained in Note M to the Company's Consolidated Financial Statements appearing
elsewhere in this Annual Report on Form 10-K. (Revenues for each segment are
shown in such Note M net of intersegment sales, which did not exceed 0.2% of
consolidated operating revenues.)
During each of the last three years the Company's operations in
geographic areas outside the United States (consisting primarily of the
publication of the international editions of Newsweek) accounted for less than
6% of the Company's consolidated revenues and less than 2% of its consolidated
income from operations, and the identifiable assets attributable to such
operations represented less than 2% of the Company's consolidated assets.
NEWSPAPER PUBLISHING
THE WASHINGTON POST
The Washington Post is a morning and Sunday newspaper primarily
distributed by home delivery in the Washington, D.C. metropolitan area,
including large portions of Virginia and Maryland.
The following table shows the average paid daily (including Saturday)
and Sunday circulation of The Post for the twelve-month periods ended September
30 in each of the last five years, as reported by the Audit Bureau of
Circulations ("ABC") for the years 1993-1996 and as estimated by The Post for
the twelve-month period ended September 30, 1997 (for which period ABC had not
completed its audit as of the date of this report) from the semiannual
publisher's statements submitted to ABC for the six-month periods ended March
31, 1997 and September 30, 1997:
<TABLE>
<CAPTION>
AVERAGE PAID CIRCULATION
------------------------
DAILY SUNDAY
----- ------
<S> <C> <C>
1993................................ 823,752 1,152,272
1994................................ 821,956 1,152,441
1995................................ 807,818 1,140,498
1996................................ 800,295 1,129,519
1997................................ 787,987 1,112,817
</TABLE>
A price increase for home-delivered copies of the daily and Sunday
newspaper went into effect on February 3, 1997, raising the rate per four-week
period from $10.20 to $10.60. On January 8, 1996 that rate had been raised to
$10.20 from $9.80. The rate charged to subscribers for Sunday-only
home-delivered copies of the newspaper for each four-week period has been $6.00
since 1991. On April 6, 1992, the newsstand price for the Sunday newspaper was
increased from $1.25 (which price had been in effect since 1986) to $1.50. The
newsstand price for the daily newspaper has been $0.25 since 1981.
General advertising rates were increased by approximately 3.6% on January
1, 1997, and approximately another 4.6% on January 1, 1998. Rates for most
categories of classified and retail
1
<PAGE> 3
advertising were increased by approximately 3.4% on February 1, 1997, and
approximately an additional 4.2% on February 1, 1998.
The following table sets forth The Post's advertising inches (excluding
preprints) and number of preprints for the past five years:
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total Inches (in thousands)............... 3,394 3,391 3,212 3,070 3,192
Full-Run Inches...................... 3,165 3,133 2,950 2,814 2,897
Part-Run Inches...................... 229 258 262 256 294
Preprints (in millions)................... 1,142 1,325 1,416 1,445 1,549
</TABLE>
The Post also publishes The Washington Post National Weekly Edition, a
tabloid which contains selected articles and features from The Washington Post
edited for a national audience. The National Weekly Edition has a basic
subscription price of $48.00 per year and is delivered by second class mail to
approximately 92,000 subscribers.
The Post has about 550 full-time editors, correspondents, reporters and
photographers on its staff, draws upon the news reporting facilities of the
major wire services and maintains correspondents in 20 news centers abroad and
in New York City, Los Angeles, Chicago, Miami, Richmond, Baltimore, Annapolis
and Austin, Texas.
THE HERALD
The Company owns The Daily Herald Company, publisher of The Herald in
Everett, Washington, about 30 miles north of Seattle. The Herald is published
mornings seven days a week and is primarily distributed by home delivery in
Snohomish County. The Daily Herald Company also provides commercial printing
services and in July 1996 acquired four controlled-circulation weekly community
newspapers (collectively know as The Enterprise Newspapers) that are distributed
in south Snohomish County.
The Herald's average paid circulation as reported to ABC for the twelve
months ended September 30, 1997, was 54,692 daily (including Saturday) and
64,159 Sunday. The aggregate average weekly circulation of The Enterprise
Newspapers during the twelve-month period ended December 31, 1997, was
approximately 57,000 copies.
The Herald and The Enterprise Newspapers together employ approximately 70
editors, reporters and photographers.
THE GAZETTE NEWSPAPERS
The Gazette Newspapers, Inc., another subsidiary of the Company, publishes
one paid-circulation and 25 controlled-circulation weekly community newspapers
(collectively known as The Gazette Newspapers) in Montgomery and Frederick
Counties and parts of Prince George's and Carroll Counties, Maryland. During
1997 The Gazette Newspapers had an aggregate average weekly circulation of more
than 390,000 copies. This subsidiary also produces 11 military newspapers (most
of which are weekly) under agreements where editorial material is supplied by
local military bases; these newspapers had a combined 1997 circulation of over
157,000 copies.
The Gazette Newspapers have approximately 80 editors, reporters and
photographers on their combined staffs.
The Gazette Newspapers, Inc. also operates a commercial printing business
which it acquired in 1996.
2
<PAGE> 4
TELEVISION BROADCASTING
Through subsidiaries the Company owns six VHF television stations located
in Detroit, Michigan; Houston, Texas; Miami, Florida; Orlando, Florida; San
Antonio, Texas; and Jacksonville, Florida; which are respectively the 9th, 11th,
16th, 22nd, 38th and 54th largest broadcasting markets in the United States.
Each of the Company's stations is affiliated with a national network. Although
network affiliation agreements generally have limited terms, each of the
Company's television stations has maintained a network affiliation continuously
for at least 20 years.
The Company's 1997 net operating revenues from national and local
television advertising and network compensation were as follows:
<TABLE>
<S> <C>
National............................ $ 131,834,000
Local............................... 169,419,000
Network............................. 34,288,000
----------
Total.......................... $ 335,541,000
</TABLE>
The following table sets forth certain information with respect to each
of the Company's television stations:
<TABLE>
<CAPTION>
STATION LOCATION AND EXPIRATION EXPIRATION TOTAL COMMERCIAL
YEAR COMMERCIAL NATIONAL DATE OF DATE OF STATIONS IN DMA(b)
OPERATION MARKET NETWORK FCC NETWORK
COMMENCED RANKING(a) AFFILIATION LICENSE AGREEMENT ALLOCATED OPERATING
--------- ---------- ----------- ------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
WDIV 9th NBC Oct. 1, June 30, VHF-4 VHF-4
Detroit, Mich. 2005 2004 UHF-6 UHF-5
1947
KPRC 11th NBC Aug. 1, June 30, VHF-3 VHF-3
Houston, Tx. 1998 2004 UHF-11 UHF-10
1949
WPLG 16th ABC Feb. 1, Dec. 31, VHF-5 VHF-5
Miami, Fla. 2005 2004 UHF-8 UHF-8
1961
WKMG 22nd CBS Feb. 1, Apr. 6, VHF-3 VHF-3
Orlando, Fla. 2005 2005 UHF-10 UHF-9
1954
KSAT 38th ABC Aug. 1, Dec. 31, VHF-4 VHF-3
San Antonio, Tx. 1998 2004 UHF-6 UHF-5
1957
WJXT 54th CBS Feb. 1, July 10, VHF-2 VHF-2
Jacksonville, Fla. 2005 2001 UHF-6 UHF-4
1947
</TABLE>
(a) Source: 1997/98 DMA Market Rankings, Nielsen Media Research, Fall 1997,
based on television homes in DMA (see note (b) below).
(b) Designated Market Area ("DMA") is a market designation of A.C. Nielsen
which defines each television market exclusive of another, based on measured
viewing patterns.
3
<PAGE> 5
The Company acquired the assets of WKMG on September 4, 1997, in exchange
for the assets of VHF television station WFSB, a CBS affiliate in Hartford,
Connecticut which had been owned by the Company for many years, plus a cash
payment.
REGULATION OF BROADCASTING AND RELATED MATTERS
The Company's television broadcasting operations are subject to the
jurisdiction of the Federal Communications Commission under the Communications
Act of 1934, as amended. Under authority of such Act the FCC, among other
things, assigns frequency bands for broadcast and other uses; issues, revokes,
modifies and renews broadcasting licenses for particular frequencies; determines
the location and power of stations and establishes areas to be served; regulates
equipment used by stations; and adopts and implements regulations and policies
which directly or indirectly affect the ownership, operations and profitability
of broadcasting stations.
Each of the Company's television stations holds an FCC license which is
renewable upon application for an eight-year period.
After proceedings that extended over many years, in December 1996 the FCC
formally approved technical standards for digital advanced television ("DTV").
DTV is a flexible system that will permit broadcasters to utilize a single
digital channel in various ways, including providing one channel of
high-definition television programming with greatly enhanced image and sound
quality or several channels of lower-definition television programming
("multicasting"), and is capable of accommodating subscription video and data
services. Broadcasters may offer a combination of services, so long as they
transmit at least one stream of free video programming on the DTV channel. The
FCC has assigned to each existing full power television station (including each
station owned by the Company) a second channel to implement DTV while present
television operations are continued on that station's existing channel. Although
in some cases a station's DTV channel may only permit operation over a smaller
geographic service area than that available using its existing channel, the
FCC's stated goal in assigning channels was to provide stations with DTV service
areas that will be generally consistent with their existing service areas. Under
FCC rules and the Balanced Budget Act of 1997, station owners will be required
to surrender one channel in 2006 and thereafter provide service solely in the
DTV format. The deadlines that have been established for each of the Company's
stations to construct DTV facilities range from May 1999 to May 2002, depending
upon the size of the market in which the station is licensed.
The Company anticipates that the conversion to DTV broadcasting will
require significant capital expenditures but cannot otherwise predict what
effects the DTV conversion eventually will have upon its television broadcast
operations. The FCC's assignment of DTV channels and its DTV rules may be
subject to judicial review. In addition, the FCC is expected to take additional
actions to refine its DTV decisions. Among the issues the FCC now is considering
is how to implement the requirement of the Telecommunications Act of 1996 that
it charge broadcasters a fee for offering subscription services on the DTV
channel. The FCC also will consider whether and how to extend cable systems'
obligations for mandatory carriage of certain broadcast television signals to
the DTV channel. Deliberations on this issue likely will include the question of
whether cable systems will be required to carry all the channels broadcast by a
television station that multicasts on its DTV channel and whether cable systems
should be required to retransmit DTV signals in the same definition in which
originally broadcast. Finally, the Clinton Administration has established an
advisory committee to consider whether additional public interest obligations
should be imposed on broadcasters' digital operations and to make
recommendations for such additional requirements to the FCC.
The FCC also is conducting proceedings dealing with such matters as the
standards to be applied to broadcast renewal applications, multiple ownership
restrictions, regulations pertaining to cable
4
<PAGE> 6
television (discussed below under "Cable Television Division - Regulation of
Cable Television and Related Matters"), and various proposals to further the
development of alternative video delivery systems that would compete in varying
degrees with both cable television and television broadcasting operations. The
multiple ownership rules were relaxed by amendments to the Communications Act
enacted in 1996 and broadcast companies are now permitted to own an unlimited
number of television stations as long as the combined service areas of such
stations do not include more than 35% of the U.S. population. Separately, the
Clinton Administration has suggested that broadcasters be required to provide
free time for political candidates. The Company is unable to determine what
impact the various proceedings and other matters described in this paragraph may
ultimately have on the Company's television broadcast operations.
CABLE TELEVISION DIVISION
As of the end of 1997 the Company (through subsidiaries) provided basic
cable service to approximately 637,000 subscribers (representing about 74% of
the 860,000 homes passed by the systems) and had in force more than 389,000
subscriptions to premium program services.
During 1997 the Company acquired a cable television system serving
16,000 subscribers in Cleveland, Mississippi, and also completed a transaction
in which it traded systems it owned in the Chicago suburbs and in California for
systems located in Minnesota, Mississippi and Oklahoma. The systems it acquired
in the foregoing trade serve an aggregate of about 21,000 more subscribers than
the systems it disposed of in connection therewith. The Company also has entered
into definitive agreements to acquire a cable television system serving
approximately 36,000 subscribers in Anniston, Alabama, and to exchange a system
it currently owns in Texas for a system in Oklahoma which serves about 2,300
more subscribers than the Texas system. In addition, the Company is a party to
agreements in principle providing for the purchase by the Company of a cable
television system serving approximately 7,000 subscribers in Mississippi and the
sale by the Company of 14 of its smaller systems which serve in the aggregate
about 29,000 subscribers.
The Company's cable systems are located in 17 Midwestern, Southern and
Western states and typically serve smaller communities; thus 34 of the Company's
current systems pass fewer than 10,000 dwelling units, 15 pass 10,000-25,000
dwelling units, and only 12 pass more than 25,000 dwelling units, of which the
two largest are in Modesto and Santa Rosa, California, each serving more than
48,000 basic subscribers.
REGULATION OF CABLE TELEVISION AND RELATED MATTERS
The Company's cable operations are subject to various requirements
imposed by local, state and federal governmental authorities. The franchises
granted by local governmental authorities are typically nonexclusive and limited
in time and generally contain various conditions and limitations relating to
payment of fees to the local authority, determined generally as a percentage of
revenues. Additionally, franchises often regulate the conditions of service and
technical performance, and contain various types of restrictions on
transferability. Failure to comply with such conditions and limitations may give
rise to rights of termination by the franchising authority.
The Cable Television Consumer Protection and Competition Act of 1992
(the "1992 Cable Act"), requires or authorizes the imposition of a wide range of
regulations on cable television operations. The three major areas of regulation
are (i) the rates charged for certain cable television services, (ii) required
carriage ("must carry") of some local broadcast stations, and (iii)
retransmission consent rights for commercial broadcast stations.
5
<PAGE> 7
Among other things, the Telecommunications Act of 1996 altered the
preexisting regulatory environment by expanding the definition of "effective
competition" (a condition that precludes regulation of the rates charged by a
cable system for basic and optional tiers of service), relaxing cost-of-service
rules, raising the threshold for FCC investigations of rate complaints,
terminating rate regulations for some small cable systems, and providing for the
elimination of rate regulation for all cable systems regardless of size by March
31, 1999. For cable systems that do not fall within the effective-competition or
small-system exemptions (including all of the cable systems owned by the
Company), monthly subscription rates for the basic tier of cable service may be
regulated by municipalities, subject to procedures and criteria established by
the FCC, and the FCC may regulate the rates charged for optional tiers of
service. Rates charged by cable television systems for pay-per-view service, for
per-channel premium program services and for advertising are all exempt from
regulation. Cable television systems may also add channels to an unregulated new
product tier, but the channels must be new to the system as of October 1, 1994.
Legislation has been introduced in the current Congress which would eliminate
the March 31, 1999, sunset for cable television system rate regulation; if
enacted, this legislation would have the effect of continuing such regulation
subject to the effective-competition and other exceptions described above.
In April 1993 the FCC adopted a "freeze" on rate increases for
regulated services (i.e., the basic and optional tiers). Later that year the FCC
promulgated benchmarks for determining the reasonableness of rates for such
services. The benchmarks provided for a percentage reduction in the rates that
were in effect when the benchmarks were announced. Under the FCC's approach
cable operators may exceed the benchmarks if they can show in a cost-of-service
proceeding that higher rates are needed to earn a reasonable return on
investment, which the Commission established in March 1994 to be 11.25%. Also,
the FCC has adopted so-called "going forward" rules which permit cable operators
to increase their benchmarked rates for regulated services when new channels are
added and to offset the effects of inflation, equipment upgrades, and higher
programming, franchising and regulatory fees.
Pursuant to the "must-carry" rules a commercial television broadcast
station may, under certain circumstances, insist on carriage of its signal on
cable systems located within the station's market area, while a noncommercial
public station may insist on carriage of its signal on cable systems located
within either the station's predicted Grade B contour or 50 miles of the
station's transmitter. As a result of these obligations (the constitutionality
of which has been upheld by the U.S. Supreme Court) certain of the Company's
cable systems have had to carry broadcast stations that they might not otherwise
have elected to carry, and the freedom the Company's systems would otherwise
have to drop signals previously carried has been reduced.
At three-year intervals beginning in October 1993 commercial
broadcasters have had the right to forego must-carry rights and insist instead
that their signals not be carried without their prior consent. Before October
1993 some of the broadcast stations carried by the Company's cable television
systems opted for retransmission consent and initially took the position that
they would not grant consent without commitments by the Company's systems to
make cash payments. As a result of case-by-case negotiations, the Company's
cable systems were able to continue carrying virtually all of the stations
insisting on retransmission consent without having to agree to pay any stations
for the privilege of carrying their signals. However some commitments were made
to carry other program services offered by a station or an affiliated company,
to provide advertising availabilities on cable for sale by a station and to
distribute promotional announcements with respect to a station. Many of these
agreements between broadcast stations and the Company's cable systems expired at
the end of 1996 and the expired agreements were replaced by new agreements
having comparable terms.
6
<PAGE> 8
The FCC will soon be considering the extent to which the must-carry and
retransmission consent requirements described above will apply to broadcasters'
DTV operations. Such an extension of must-carry requirements could result in the
Company's cable systems being required to delete some existing programming to
make room for broadcasters' DTV channels.
Various other provisions in current Federal law may significantly
affect the costs or profits of cable television systems. These matters include a
prohibition on exclusive franchises, restrictions on the ownership of competing
video delivery services, restrictions on transfers of cable television
ownership, consumer protection measures, and various regulations intended to
facilitate the development of competing video delivery services. Other
provisions benefit the owners of cable systems by restricting regulation of
cable television in many significant respects, requiring that franchises be
granted for reasonable periods of time, providing various remedies and
safeguards to protect cable operators against arbitrary refusals to renew
franchises, and limiting franchise fees to 5% of revenues.
Apart from its authority under the 1992 Cable Act and the
Telecommunications Act of 1996, the FCC regulates various other aspects of cable
television operations. Since 1990 cable systems have been required to black out
from the distant broadcast stations they carry syndicated programs for which
local stations have purchased exclusive rights and requested exclusivity. Other
long-standing FCC rules require cable systems to delete under certain
circumstances duplicative network programs broadcast by distant stations. The
FCC also imposes certain technical standards on cable television operators,
exercises the power to license various microwave and other radio facilities
frequently used in cable television operations, regulates the assignment and
transfer of control of such licenses, and oversees compliance with certain
affirmative action and equal employment opportunity obligations applicable to
cable systems. In addition, pursuant to the Pole Attachment Act, the FCC
exercises authority to disapprove unreasonable rates charged to cable operators
by telephone and power utilities for utilizing space on utility poles or in
underground conduits.
The Copyright Act of 1976 grants to cable television systems, under
certain terms and conditions, the right to retransmit the signals of television
stations pursuant to a compulsory copyright license. Those terms and conditions
include the payment of certain license fees set forth in the statute or
established by subsequent administrative regulations. The compulsory license
fees have been increased on several occasions since this Act went into effect.
In 1994 the availability of the compulsory copyright license was extended to
"wireless cable" and direct broadcast satellite operators, although in the
latter case the license right is currently limited to independent and
network-affiliated stations whose over-the-air signal (or a signal carrying the
same network's programming) is not available at the subscriber's location. Some
pending legislative proposals would modify or eliminate the compulsory copyright
licensing scheme, and the FCC and others have urged that the compulsory license
be phased out for local or distant broadcast signals or both.
The general prohibition on telephone companies operating cable systems
in areas where they provide local telephone service was eliminated by the
Telecommunications Act of 1996. Telephone companies now can provide video
services in their telephone service areas under four different regulatory plans.
First, they can provide traditional cable television service and be subject to
the same regulations as the Company's cable television systems (including
compliance with local franchise and any other local or state regulatory
requirements). Second, they can provide "wireless cable" service, which is
described below, and not be subject to either cable regulations or franchise
requirements. Third, they can provide video services on a common-carrier basis,
under which they would not be required to obtain local franchises but would be
subject to common-carrier regulation (including a prohibition against exercising
control over programming content). Finally, they can operate so-called "open
video systems" without local franchises and be subject to reduced regulatory
burdens. The Act contains detailed requirements
7
<PAGE> 9
governing the operation of open video systems, including the nondiscriminatory
offering of capacity to third parties and limiting to one-third of total system
capacity the number of channels the operator can program when demand exceeds
available capacity. In addition, the rates charged by an open video system
operator to a third party for the carriage of video programming must be just and
reasonable as determined in accordance with standards to be established by the
FCC. (Cable operators and others not affiliated with a telephone company may
also become operators of open video systems.) The Act also generally prohibits
telephone companies from acquiring or owning an interest in existing cable
systems operating in their service areas.
The Telecommunications Act of 1996 balances this grant of video
authority to telephone companies by removing regulatory barriers to the offering
of telephone services by cable companies and others. The Act preempts state and
local laws that have barred local telephone competition in some states. In
addition, the Act requires local telephone companies to permit cable companies
and other competitors to connect with the telephone network and requires
telephone companies to give competitors access to the essential features and
functionalities of the local telephone network (such as switching capability,
signal carriage from the subscriber's residence to the switching center and
directory assistance) on an unbundled basis. As an alternative method of
providing local telephone service, the Act permits cable companies and others to
purchase telephone service on a wholesale basis and then resell it to their
subscribers.
During the past several years, the FCC has adopted various rule changes
intended to facilitate the development of so-called "wireless cable," a video
service that is capable of distributing approximately 30 television channels in
a local area by over-the-air microwave transmission using analog technology and
is capable of providing a greater number of channels using digital compression
technologies. The FCC also is expected to issue licenses in the near future for
a new digital wireless cable service which may utilize up to 1,300 megahertz of
spectrum in the 28 and 31 gigahertz bands and is intended to provide large
numbers of video channels as well as voice and data transmission services.
Wireless cable services are not required to obtain franchises from local
governmental authorities and generally operate under fewer regulatory
requirements than conventional cable television systems.
Litigation is pending in various courts in which prohibitions on cable
television operations without a franchise and various franchise requirements are
being challenged as unlawful under the First Amendment, the antitrust laws and
on other grounds. If successful, such litigation could facilitate the
development of duplicative cable facilities that would compete with existing
cable systems.
The regulation of certain cable television rates pursuant to the
authority granted to the FCC has negatively impacted the revenues of the
Company's cable systems. The Company is unable to predict what effect the other
matters discussed above may ultimately have on its cable television business.
MAGAZINE PUBLISHING
NEWSWEEK
Newsweek is a weekly news magazine published both domestically and
internationally by Newsweek, Inc., a subsidiary of the Company. In gathering,
reporting and writing news and other material for publication, Newsweek
maintains news bureaus in 9 U.S. and 13 foreign cities.
The domestic edition of Newsweek is comprised of over 100 different
geographic or demographic editions which carry substantially identical news and
feature material but enable advertisers to direct messages to specific market
areas or demographic groups. Domestically, Newsweek ranks second in circulation
among the three leading weekly news magazines (Newsweek, Time and U.S. News &
World Report). Its average weekly domestic circulation rate base and its
percentage of the total weekly
8
<PAGE> 10
domestic circulation rate base of the three leading weekly news magazines for
the past five years are set forth in the following table:
<TABLE>
<CAPTION>
NEWSWEEK AVERAGE PERCENTAGE OF
WEEKLY CIRCULATION THREE LEADING
RATE BASE NEWS MAGAZINES
--------- --------------
<S> <C> <C>
1993................................ 3,100,000 32.7%
1994................................ 3,100,000 33.0%
1995................................ 3,100,000 33.0%
1996................................ 3,100,000 33.4%
1997................................ 3,100,000 34.0%
</TABLE>
Newsweek is sold on newsstands and through subscription mail order
sales derived from a number of sources, principally direct mail promotion. The
basic one-year subscription price is $41.08. Most subscriptions are sold at a
discount from the basic price. Since January 1992 Newsweek's newsstand price has
been $2.95 per copy.
The total number of Newsweek's domestic advertising pages and gross
domestic advertising revenues as reported by Publishers' Information Bureau,
Inc., together with Newsweek's percentages of the total number of advertising
pages and total advertising revenues of the three leading weekly news magazines,
for the past five years have been as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF NEWSWEEK
NEWSWEEK THREE LEADING GROSS PERCENTAGE OF
ADVERTISING NEWS ADVERTISING THREE LEADING
PAGES* MAGAZINES REVENUES* NEWS MAGAZINES
------ --------- --------- --------------
<S> <C> <C> <C> <C>
1993....................... 2,102 33.3% $ 260,673,000 32.3%
1994....................... 2,057 32.1% 276,074,000 32.4%
1995....................... 2,279 34.1% 328,886,000 34.9%
1996....................... 2,520 36.6% 381,621,000 37.0%
1997....................... 2,633 35.4% 406,324,000 35.1%
</TABLE>
* ADVERTISING PAGES AND GROSS ADVERTISING REVENUES ARE THOSE REPORTED
BY PUBLISHERS' INFORMATION BUREAU, INC. PIB COMPUTES GROSS ADVERTISING
REVENUES FROM BASIC ONE-TIME RATES AND THE NUMBER OF ADVERTISING PAGES
CARRIED. PIB FIGURES THEREFORE MATERIALLY EXCEED ACTUAL GROSS ADVERTISING
REVENUES, WHICH REFLECT LOWER RATES FOR MULTIPLE INSERTIONS. NET REVENUES
AS REPORTED IN THE COMPANY'S CONSOLIDATED STATEMENTS OF INCOME ALSO EXCLUDE
AGENCY FEES AND CASH DISCOUNTS, WHICH ARE INCLUDED IN THE GROSS ADVERTISING
REVENUES SHOWN ABOVE. PAGE AND REVENUE FIGURES EXCLUDE AFFILIATED
ADVERTISING.
Newsweek's advertising rates are based on its average weekly
circulation rate base and are competitive with the other weekly news magazines.
Effective with the January 13, 1997 issue, national advertising rates were
increased by an average of 3.5%. Beginning with the issue dated January 12,
1998, national advertising rates were increased again by an average of 4.0%.
Newsweek Business Plus, which is published 39 times a year, is a
demographic edition of Newsweek distributed to high-income professional and
managerial subscribers and subscribers in zip-code-defined areas. Advertising
rates for this edition, which has a circulation rate base of 1,000,000 copies,
were increased an average of 3.5% in January 1997 and by an additional 4.0% in
January 1998.
Newsweek's other demographic edition, Newsweek Woman, which was
published 13 times during 1997, has a circulation rate base of 700,000 selected
female subscribers. At the beginning of 1997
9
<PAGE> 11
advertising rates for this edition were increased by an average of 3.5%, with an
additional average increase of 4.0% instituted early in 1998.
Internationally, Newsweek is published in an Atlantic edition covering
the British Isles, Europe, the Middle East and Africa, a Pacific edition
covering Japan, Korea and Southeast Asia, and a Latin America edition, all of
which are in the English language. Editorial copy solely of domestic interest is
eliminated in the international editions and is replaced by other international,
business or national coverage primarily of interest abroad.
Since 1984 a section of Newsweek articles has been included in The
Bulletin, an Australian weekly news magazine which also circulates in New
Zealand. In 1986 a Japanese-language edition of Newsweek, Newsweek Nihon Ban,
began publication in Tokyo pursuant to an arrangement with a Japanese publishing
company which translates editorial copy, sells advertising in Japan and prints
and distributes the edition. Newsweek Hankuk Pan, a Korean-language edition of
Newsweek, began publication in 1991 pursuant to a similar arrangement with a
Korean publishing company. Since 1996 Newsweek en Espanol, a Spanish-language
edition of Newsweek intended primarily for distribution in Latin America, has
been published under an agreement with a Miami-based publishing company which
translates editorial copy, prints and distributes the edition and jointly sells
advertising with Newsweek. Distribution of this edition in Spain began in early
1997. Also, a Russian-language newsweekly modeled after Newsweek began
publication in May 1996 pursuant to licensing and advisory agreements entered
into by Newsweek with a Russian publishing and broadcasting company. This
magazine includes selected stories translated from Newsweek's various U.S. and
foreign editions and is called Itogi (which means "summing-up" in Russian).
The average weekly circulation rate base, advertising pages and gross
advertising revenues of Newsweek's international editions (including The
Bulletin insertions but not including the foreign-language editions of Newsweek)
for the past five years have been as follows:
<TABLE>
<CAPTION>
AVERAGE WEEKLY GROSS
CIRCULATION ADVERTISING ADVERTISING
RATE BASE PAGES* REVENUES*
--------- ------ ---------
<S> <C> <C> <C>
1993....................... 745,000 2,128 $ 68,347,000
1994....................... 748,000 2,351 79,900,000
1995....................... 750,000 2,502 90,968,000
1996....................... 752,000 2,446 92,638,000
1997....................... 767,000 2,287 89,330,000
</TABLE>
* ADVERTISING PAGES AND GROSS ADVERTISING REVENUES ARE THOSE REPORTED
BY LNA INTERNATIONAL. LNA COMPUTES GROSS ADVERTISING REVENUES FROM BASIC
ONE-TIME RATES AND THE NUMBER OF ADVERTISING PAGES CARRIED. LNA FIGURES
THEREFORE MATERIALLY EXCEED ACTUAL GROSS ADVERTISING REVENUES, WHICH
REFLECT LOWER RATES FOR MULTIPLE INSERTIONS. NET REVENUES AS REPORTED IN
THE COMPANY'S CONSOLIDATED STATEMENTS OF INCOME ALSO EXCLUDE AGENCY FEES
AND CASH DISCOUNTS, WHICH ARE INCLUDED IN THE GROSS ADVERTISING REVENUES
SHOWN ABOVE. PAGE AND REVENUE FIGURES EXCLUDE AFFILIATED ADVERTISING.
For 1998 the average weekly circulation rate base for Newsweek's
English-language international editions (including The Bulletin insertions) will
be 752,000 copies. Newsweek's rate card estimates the average weekly circulation
for 1998 for the Japanese-, Korean-, Russian- and Spanish-language editions will
be 140,000, 120,000, 85,000 and 43,000 copies, respectively.
10
<PAGE> 12
Since 1994 Newsweek has produced a weekly news magazine for online
distribution. This magazine, Newsweek Interactive, integrates text, photos and
audio and is currently available on the America Online service.
In August 1996 the United States Food and Drug Administration issued
final rules designed to restrict the marketing of tobacco products to minors.
These rules, which among other things would limit advertising for tobacco
products in print publications whose youth readership exceeds certain levels to
black and white, text-only "tombstone" ads, were scheduled to go into effect on
August 28, 1997. Shortly before the effective date a United States District
Court in North Carolina held that the FDA's proposed advertising rules exceeded
its authority and stayed the application of those rules. This ruling has been
appealed to the United States Court of Appeals for the Fourth Circuit, which has
not yet rendered a decision on the matter. Also, during 1997 a comprehensive
litigation settlement was arrived at by tobacco companies, certain states and
other parties which, if implemented, would impose various advertising
restrictions on tobacco companies. The Company cannot now predict whether the
FDA rules described above will ultimately go into effect or what other actions
may eventually be taken to restrict tobacco advertising. However such
advertising accounts for only about 1% of Newsweek's operating revenues and
negligible revenues at The Washington Post and the Company's other publications.
Moreover, Federal law has prohibited the carrying of advertisements for
cigarettes or smokeless tobacco by commercial radio and television stations for
many years. Thus the Company believes that any restrictions on tobacco
advertising which may eventually be put into effect would not have a material
adverse effect on Newsweek or on any of the Company's other business operations.
POST-NEWSWEEK BUSINESS INFORMATION
Post-Newsweek Business Information, Inc. (formerly TechNews, Inc.),
another subsidiary of the Company, publishes controlled-circulation trade
periodicals and produces trade shows for the information technology industry.
For several years PNBI has published Washington Technology, a biweekly
tabloid newspaper for government information systems integrators with a
circulation of about 40,000 copies. During 1997 PNBI launched two new
publications: TechCapital, a bimonthly magazine for mid-Atlantic technology
entrepreneurs and technology financiers and investors throughout the country;
and Integration Management, a biweekly magazine that provides news and analysis
for computer systems integrators and their corporate clients. TechCapital and
Integration Management have circulations of about 50,000 and 65,000 copies,
respectively.
At year-end 1997, PNBI acquired various trade periodical and trade show
assets from Reed Elsevier, Inc. Included in this transaction were Government
Computer News, a periodical published 32 times a year for managers who buy
information technology products and services for use by federal, state or local
governments, GCN State & Local, a monthly periodical specifically for
information technology buyers for state and local governments, and Reseller
Management, a monthly magazine for value-added resellers of information
technology products and services. Government Computer News, GCN State & Local
and Reseller Management have circulations of about 87,000, 55,000, and 85,000
copies, respectively. Also included in the transaction with Reed Elsevier was
FOSE, a trade show held each spring in Washington, D.C. for information
technology decision makers in various levels of government as well as
information technology executives, and FedNet/FedImaging, a trade show held in
the late fall in Washington, D.C. for government personnel with responsibilities
for networked computing and related electronic information systems or for
imaging technologies.
In December 1997 PNBI also acquired the assets of Newsbytes News
Network, a newswire service that electronically distributes almost 100 stories a
day about the computer, software and
11
<PAGE> 13
telecommunications industries to newspapers, magazines, online services and
other subscribers around the world.
OTHER ACTIVITIES
KAPLAN EDUCATIONAL CENTERS
Kaplan Educational Centers, Inc., a subsidiary of the Company, owns the
Kaplan Educational Centers, which are engaged in preparing students for a broad
range of admissions tests and licensing examinations including SAT's, LSAT's,
GMAT's and GRE's, and nursing and medical boards. In 1997 the Kaplan Centers had
over 125,000 enrollments and provided courses through more than 150 permanent
educational centers located throughout the United States and in Canada, Puerto
Rico and London. In addition, Kaplan licenses material for certain of its
courses to third parties who in turn offer Kaplan courses in other foreign
locations.
Kaplan also owns Score Learning Corporation, which offers
computer-based multimedia curricula, individualized tutoring and other learning
enrichment services to students in kindergarten through grade twelve. Score's
services are being provided in facilities separate from existing Kaplan Centers
due to differing configuration and equipment requirements. During 1997 Score
served more than 13,000 students and currently operates 37 centers located in
California, Massachusetts, Connecticut, New York, and Virginia.
DIGITAL INK
The Company's Digital Ink Co. subsidiary develops news and information
products for distribution by computers, fax and telephone. Since July 1996
Digital Ink has operated washingtonpost.com, a World Wide Web site on the
Internet that features the full editorial text of The Washington Post and most
of The Post's classified advertising as well as original content created by
Digital Ink's staff and content obtained from other sources. In December 1997
Digital Ink debuted several new city guide features on washingtonpost.com,
including an arts and entertainment guide, a community resource guide and an
online yellow pages directory, each of which focuses on the metropolitan
Washington, D.C. area.
LEGI-SLATE
Legi-Slate, Inc., another subsidiary of the Company, provides its
customers with access to a computerized database containing detailed information
on the legislative and regulatory activities of the United States government.
The Legi-Slate database contains both abstracts and the full text of every bill
and resolution introduced in Congress, the entire Congressional Record and every
document published in the Federal Register. Content compiled by Legi-Slate
includes detailed legislative histories, complete voting records and the Daily
CFR(TM) service, a daily update of the Code of Federal Regulations. The database
also includes relevant editorial material which is both licensed from third
parties and produced by Legi-Slate's own editorial staff. State Capital
Strategies, Inc., a subsidiary of Legi-Slate, provides customers with online
access to a database containing the information necessary to track legislative
activity in all 50 states and also offers custom monitoring services.
INTERNATIONAL HERALD TRIBUNE
The Company beneficially owns 50% of the outstanding common stock of
the International Herald Tribune, S.A.S., a French company which publishes the
International Herald Tribune in Paris, France. This English-language newspaper
has an average daily paid circulation of almost 195,000 copies and is
distributed in over 180 countries.
12
<PAGE> 14
COWLES MEDIA COMPANY
A subsidiary of the Company owns approximately 3.9 million shares
(equal to about 28%) of the outstanding common stock of Cowles Media Company,
most of which was acquired in 1985. Cowles owns the Minneapolis-St. Paul Star
Tribune and a number of smaller publications. At special meetings held on March
19, 1998, stockholders of Cowles and of McClatchy Newspapers, Inc. ("McClatchy")
approved a series of transactions pursuant to which Cowles will be merged into a
subsidiary of a newly created McClatchy holding company ("New McClatchy") and
each share of Cowles common stock will be converted into a right to receive
(based on elections made by stockholders) either $90.50 in cash, shares of stock
in New McClatchy, or a combination of cash and New McClatchy stock. The
Company's subsidiary has submitted an election to be paid in cash for all its
Cowles shares. However, depending on the elections made by other Cowles
stockholders, such subsidiary may be required to accept up to approximately 15%
of the consideration otherwise payable to it in the form of New McClatchy stock.
At the present time the Company is unable to predict when these transactions
will close and, indeed, no assurance can be given that such a closing will occur
or will occur on the terms summarized above.
MOFFET, LARSON & JOHNSON
The Company owns 80% of the outstanding common stock of Moffet, Larson
& Johnson, Inc., a telecommunications engineering firm specializing in the
design and development of advanced mobile, broadcast and common carrier radio
systems.
PASS SPORTS
Pro Am Sports System, Inc. ("PASS") is a Detroit-based regional cable
sports network that provides programming to cable television subscribers in
Michigan and northwest Ohio. On September 29, 1997, a subsidiary of the Company
sold substantially all the assets of PASS to Fox Sports Detroit, LLC.
PRODUCTION AND RAW MATERIALS
The Washington Post is produced at the newspaper's principal place of
business and plant in downtown Washington, D.C., and at its satellite printing
plants in Fairfax County, Virginia, and Southeast Washington, D.C. The Post is
building a new production facility in Prince George's County, Maryland, and is
expanding its Fairfax County facility. New press equipment is being installed in
both plants and is expected to be fully operational by late 1998 or early 1999.
At that time production at the newspaper's two Washington, D.C.
facilities will be discontinued.
All editions of The Herald and The Enterprise Newspapers are produced
at The Daily Herald Company's plant in Everett, Washington. The Gazette
Newspapers are printed at the commercial printing facility acquired by The
Gazette Newspapers, Inc. in 1996.
Newsweek's domestic edition is produced by three independent contract
printers at five separate plants in the United States; advertising inserts and
photo-offset films for the domestic edition are also produced by independent
contractors. The international editions of Newsweek are printed in England, Hong
Kong, Singapore, Switzerland and Hollywood, Florida; insertions for The Bulletin
are printed in Australia. In September 1997 Newsweek and a subsidiary of Time,
Inc. formed a jointly owned company which will be based in England and provide
production and distribution services for the Atlantic editions of both Newsweek
and Time.
All Post-Newsweek Business Information publications are produced by
independent contract printers.
13
<PAGE> 15
In 1997 The Washington Post consumed about 245,000* tons of newsprint
purchased from a number of suppliers, including Bowater Incorporated, which
supplied approximately 30% of The Post's 1997 newsprint requirements. About 40%
of the newsprint The Post purchases from Bowater Incorporated is provided by
Bowater Mersey Paper Company Limited, 49% of the common stock of which is owned
by the Company (the majority interest being held by a subsidiary of Bowater
Incorporated). Bowater Mersey owns and operates a newsprint mill near Halifax,
Nova Scotia, and owns extensive woodlands that provide part of the mill's wood
requirements. In 1997 Bowater Mersey produced about 260,000 tons of newsprint.
On December 1, 1997, a subsidiary of the Company sold the 35% limited
partnership interests it held in each of Bear Island Paper Company, which owns
and operates a newsprint mill in Doswell, Virginia, and Bear Island Timberlands
Company, which owns woodlands that supply a portion of the wood used by the Bear
Island mill. During 1997 The Post purchased about 20% of its newsprint
requirements from Bear Island Paper Company.
The announced price of newsprint (excluding discounts) was
approximately $750 per ton throughout 1997. Discounts from the announced price
of newsprint can be substantial and prevailing discounts decreased during the
year. The Post believes it has adequate newsprint available through contracts
with its various suppliers. About 85% of the newsprint used by The Post includes
some recycled content. The Company owns 80% of the stock of Capitol Fiber Inc.,
which handles and sells to recycling industries old newspapers and other paper
collected in Washington, D.C., Maryland and northern Virginia.
In 1997 the operations of The Daily Herald Company and The Gazette
Newspapers, Inc. consumed approximately 9,200 and 14,200 tons of newsprint,
respectively, which was obtained in each case from various suppliers.
Approximately 70% of the newsprint used by The Daily Herald Company and 20% of
the newsprint used by The Gazette Newspapers, Inc. includes some recycled
content.
The domestic edition of Newsweek consumed about 37,100 tons of paper in
1997, the bulk of which was purchased from eight major suppliers. The current
cost of body paper (the principal paper component of the magazine) is
approximately $1,120 per ton.
Over 90% of the aggregate domestic circulation of Newsweek is delivered
by second-class mail, most Newsweek subscriptions are solicited by either first-
or third-class mail, and all Post-Newsweek Business Information publications are
delivered by second-class mail. Thus substantial increases in postal rates for
these classes of mail could have a significant negative impact on the operating
income of these business units.
COMPETITION
The Washington Post competes in the Washington, D.C. metropolitan area
with The Washington Times, a newspaper which has published weekday editions
since 1982 and Saturday and Sunday editions since 1991. The Post also encounters
competition in varying degrees from newspapers published in suburban and
outlying areas, other nationally circulated newspapers, and from television,
radio, magazines and other advertising media, including direct mail advertising.
In February 1997 The New York Times launched a Washington Edition which is
printed locally and includes television channel listings and weather for the
Washington, D.C. area. The New York Times has been available in retail
- ------------------
* ALL REFERENCES IN THIS REPORT TO NEWSPRINT TONNAGE AND PRICES REFER TO
SHORT TONS (2,000) AND NOT TO METRIC TONS (2,204.6 POUNDS) WHICH ARE OFTEN USED
IN NEWSPRINT PRICE QUOTATIONS.
14
<PAGE> 16
outlets and by home delivery in the Washington, D.C. area for many years, during
which time the papers were printed at The Time's New York-area plant and trucked
to local distributors.
The Herald circulates principally in Snohomish County, Washington; its
chief competitors are the Seattle Times and the Seattle Post-Intelligencer,
which are daily and Sunday newspapers published in Seattle and whose Snohomish
County circulation is principally in the southwest portion of the county. Since
1983 the two Seattle newspapers have consolidated their business and production
operations and combined their Sunday editions pursuant to a joint operating
agreement, although they continue to publish separate daily newspapers. The
Enterprise Newspapers are distributed in south Snohomish County where their
principal competitors are the Seattle Times and The Journal Newspapers, a group
of weekly controlled-circulation newspapers. Numerous other weekly and
semi-weekly newspapers and shoppers are distributed in The Herald's and The
Enterprise Newspapers' principal circulation areas.
The circulation of The Gazette Newspapers is limited to Montgomery and
Frederick Counties and parts of Prince George's and Carroll Counties, Maryland
(areas where The Washington Post also circulates). The Gazette Newspapers
compete in varying degrees with many advertising vehicles available in their
service areas, including The Potomac and Bethesda/Chevy Chase Almanacs and The
Western Montgomery Bulletin, weekly controlled-circulation community newspapers,
The Montgomery Sentinel, a weekly paid-circulation community newspaper, The
Prince George's Sentinel, a weekly controlled-circulation community newspaper
(which also has a weekly paid-circulation edition), The Montgomery and Prince
George's Journals, daily paid-circulation community newspapers, and The
Frederick News-Post, a daily paid-circulation community newspaper.
The Company's television stations compete for audiences and advertising
revenues with television and radio stations and cable television systems serving
the same or nearby areas, with direct broadcast satellite services and to a
lesser degree with other media such as newspapers and magazines. Both
independent stations and stations affiliated with the Fox Network, the United
Paramount Network and the Warner Brothers Network are becoming increasingly
competitive, and Paxson Communications Corp. has announced plans to launch a new
broadcast network in August 1998 which will reach more than 80% of U.S.
television households. Cable television systems operate in substantial portions
of the Company's broadcast markets where they compete for television viewing by
importing out-of-market television signals and by distributing pay-cable,
advertiser-supported and other programming that is originated for cable systems.
In addition, direct broadcast satellite or "DBS" services provide nationwide
distribution of television programming (including in some cases pay-per-view
programming and programming packages unique to DBS) using small receiving dishes
and digital transmission technologies. Because they lack a compulsory copyright
license that would permit such distributions, DBS operators are effectively
prohibited from distributing the signals of any network affiliated television
station except in areas where the over-the-air signal of the same network's
local affiliate is not available. Several lawsuits were filed in late 1996 which
allege that certain DBS operators have not been complying with this restriction;
plaintiffs in one or more of these lawsuits include the CBS and Fox television
networks and various network affiliated television stations (including one of
the Company's Florida stations.) In January 1998, DBS carrier Echostar began
offering a service that delivers the signals of local network affiliated
stations to unserved households in six U.S. markets. Echostar is seeking changes
in existing laws to permit it to offer this service to all subscribers in these
markets. A new venture by Capitol Broadcasting also is seeking legislation to
permit transmission of local television signals by satellite but intends to
carry the signals of all full power television stations in all markets. The
transmission of local television signals by DBS services may be advantageous for
the local stations included in such offerings but could increase the competition
faced by local stations that are not included. The Company's television stations
may also become subject to increased competition from low power television
stations, wireless cable services, satellite master antenna systems (which can
carry pay-cable
15
<PAGE> 17
and similar program material) and prerecorded video programming. Further, the
deployment of high definition and other improved television technologies may
enhance the ability of some of these other video providers to compete more
effectively for viewers with the local television broadcasting stations owned by
the Company.
Cable television systems operate in a highly competitive environment.
In addition to competing with the direct reception of television broadcast
signals by the viewer's own antenna, such systems (like existing television
stations) are subject to competition from various other forms of television
program delivery. In particular, DBS services (which are discussed in more
detail in the preceding paragraph) have been growing rapidly and are now a
significant competitive factor. The Company's cable television systems also
compete with wireless cable services in a number of their markets and may face
additional competition from such services in the future. Moreover, the
Telecommunications Act of 1996 permits telephone companies to own and operate
cable television systems in the same areas where they provide telephone services
and thus may lead to the provision of competing program delivery services by
local telephone companies.
According to figures compiled by Publishers' Information Bureau, Inc.,
of the 217 magazines reported on by the Bureau, Newsweek ranked fifth in total
advertising revenues in 1997, when it received approximately 3.2% of all
advertising revenues of the magazines included in the report. The magazine
industry is highly competitive both within itself and with other advertising
media which compete for audience and advertising revenue.
The publications and trade shows of Post-Newsweek Business Information
compete with many other advertising vehicles and sources of similar information.
In particular, Government Computer News faces competition from Federal Computer
Week, a publication of IDG Communications, and Reseller Management and
Integration Management, face competition from IDG's Solutions Integrator, CMP
Media's Computer Reseller News and VAR Business, and Ziff-Davis Publishing's
Smart Reseller.
Kaplan Educational Centers competes in each of its product lines with a
variety of regional and national test preparation businesses, as well as with
individual tutors and in-school preparation for standardized tests. Score
Learning Corporation competes with other regional and national learning centers,
individual tutors and other after school learning activities. Kaplan and Score
also compete with books and interactive computer software that focus on one or
more of the areas in which these units provide services.
Digital Ink faces competition from many other online services as well
as from alternative methods of delivering news and information. In addition,
Internet-based and other online services are carrying increasing amounts of
advertising and over time such services could adversely affect the Company's
print publications and television broadcasting operations, all of which rely on
advertising for the majority of their revenues. Several companies are offering
online services containing information and advertising tailored for specific
metropolitan areas, including the Washington, D.C. metropolitan area. Digital
Cities (an 80%-owned subsidiary of America Online) produces Digital-City
Washington, which can be accessed by subscribers to the AOL service and is part
of AOL's nationwide network of local online sites. During the last 18 months
both Microsoft and Yahoo! launched Washington, D.C.-oriented online services.
Also, in February 1997 Bell Atlantic began commercial operation of an
interactive yellow pages service on the World Wide Web which includes
information of local interest as well as a nationwide residential white pages
directory and Big Yellow(TM), an electronic directory of 16 million businesses
across the United States.
The Company's publications and television broadcasting and cable
operations also compete for readers' and viewers' time with various other
leisure-time activities.
16
<PAGE> 18
The future of the Company's various business activities depends on a
number of factors, including the general strength of the economy, population
growth and the level of economic activity in the particular geographic and other
markets it serves, the impact of technological innovations on entertainment,
news and information dissemination systems, overall advertising revenues, the
relative efficiency of publishing and broadcasting compared to other forms of
advertising and, particularly in the case of television broadcasting and cable
operations, the extent and nature of government regulations.
EXECUTIVE OFFICERS
The executive officers of the Company, each of whom is elected for a
one-year term at the meeting of the Board of Directors immediately following the
Annual Meeting of Stockholders held in May of each year, are as follows:
Donald E. Graham, age 52, has been Chairman of the Board of the Company
since September 1993 and Chief Executive Officer of the Company since May 1991.
Mr. Graham served as President of the Company from May 1991 until September 1993
and prior to that had been a Vice President of the Company for more than five
years. Mr. Graham also is Publisher of The Washington Post, having occupied that
position since 1979.
Alan G. Spoon, age 46, is President and Chief Operating Officer of the
Company. Mr. Spoon served as Executive Vice President and Chief Operating
Officer of the Company from May 1991 until September 1993 and had previously
been a Vice President of the Company since July 1987. Mr. Spoon also served as
the Company's Vice President-Finance from July 1987 until November 1989, and as
President of Newsweek, Inc. from September 1989 until May 1991.
Katharine Graham, age 80, is Chairman of the Executive Committee of the
Company's Board of Directors. Mrs. Graham previously served as Chairman of the
Board of the Company from 1973 until September 1993 and as the Company's Chief
Executive Officer from 1973 until May 1991.
Diana M. Daniels, age 48, has been Vice President and General Counsel
of the Company since November 1988 and Secretary of the Company since September
1991. Ms. Daniels served as General Counsel of the Company from January 1988 to
November 1988 and prior to that had been Vice President and General Counsel of
Newsweek, Inc.
since 1979.
Beverly R. Keil, age 51, has been Vice President-Human Resources of the
Company since 1986; from 1982 through 1985 she was the Company's Director of
Human Resources.
John B. Morse, Jr., age 51, has been Vice President-Finance of the
Company since November 1989. He joined the Company as Vice President and
Controller in July 1989, and prior to that had been a partner of Price
Waterhouse.
EMPLOYEES
The Company and its subsidiaries employ approximately 7,440 persons on
a full-time basis.
The Washington Post has approximately 2,770 full-time employees. About
1,910 of The Post's full-time employees and about 405 part-time employees are
represented by one or another of nine unions. Collective bargaining agreements
are currently in effect with locals of the following unions covering the
full-time and part-time employees and expiring on the dates indicated: 1,255
employees in the editorial, newsroom and commercial departments represented by
the Communications Workers of America (November 12, 1998); 129 paperhandlers and
general workers represented by the Graphic Communications Union (June 1, 2000);
45 machinists represented by the International Association of Machinists
(January 13, 2001); 44 photoengravers-platemakers represented by the Graphic
Arts
17
<PAGE> 19
International Union (February 17, 2001); 29 electricians represented by the
International Brotherhood of Electrical Workers (June 17, 2001); 114 building
service employees represented by the Service Employees International Union
(April 30, 2001); 36 engineers, carpenters and painters represented by the
International Union of Operating Engineers (March 31, 2002); and 131
typographers represented by the Communications Workers of America (October 2,
2000). The collective bargaining agreements covering 360 mailers and 170
mailroom helpers represented by the Communications Workers of America expired on
June 15, 1997; these employees remain at work under the terms of the expired
contracts and negotiations over the terms of replacement contracts are
continuing.
Of the approximately 255 full-time and 150 part-time employees at The
Daily Herald Company, about 70 full-time and 15 part-time employees are
represented by one or another of three unions. The newspaper's collective
bargaining agreement with the Graphic Communications International Union, which
represents press operators, will expire on March 15, 2000. Its agreement with
the International Brotherhood of Teamsters, which represents bundle haulers,
will expire on May 31, 1998, and its agreement with the Communications Workers
of America, which represents printers and mailers, will expire on October 31,
1998.
Newsweek has approximately 715 full-time employees (including about 170
editorial employees represented by the Communications Workers of America under a
collective bargaining agreement which will expire in December 1998).
The Company's broadcasting operations have approximately 975 full-time
employees, of whom about 250 are union-represented. Of the eight collective
bargaining agreements covering union-represented employees, one has expired and
is being renegotiated. Two other collective bargaining agreements will expire in
1998.
The Company's Cable Television Division has approximately 1,110
full-time employees. Kaplan Educational Centers, Inc. and Score Learning
Corporation together employ approximately 730 persons on a full-time basis
(which number does not include substantial numbers of part-time employees who
serve in instructional and clerical capacities). The Gazette Newspapers, Inc.
has approximately 290 full-time and 70 part-time employees. Robinson Terminal
Warehouse Corporation (the Company's newsprint warehousing and distribution
subsidiary), Legi-Slate, State Capital Strategies, Digital Ink, Post-Newsweek
Business Information and Moffet, Larson & Johnson each employ fewer than 200
persons. None of these units' employees is represented by a union.
ITEM 2. PROPERTIES.
The Company owns the publishing plant and principal offices of The
Washington Post in downtown Washington, D.C., including both a seven-story
building in use since 1950 and a connected nine-story office building on
contiguous property completed in 1972 in which are located the Company's
principal executive offices. Additionally, the Company owns land on the corner
of 15th and L Streets, N.W., in Washington, D.C., adjacent to The Washington
Post plant and office building. This land is leased on a long-term basis to the
owner of a multi-story office building which was constructed on the site in
1982. The Company rents a number of floors in this building. The Company also
owns and occupies a small office building on L Street which is next to The
Post's downtown plant.
In 1980 the Company built a satellite printing plant on 13 acres of
land owned by the Company in Fairfax County, Virginia, and in 1981 purchased the
printing plant of the defunct Washington Star located in Southeast Washington,
D.C. In early 1996 the Company purchased a 17-acre tract of undeveloped land in
Prince George's County, Maryland, where a new printing and distribution facility
for The Post is being constructed. The Company also owns undeveloped land near
Dulles Airport in Fairfax
18
<PAGE> 20
County, Virginia (39 acres), in Prince George's County, Maryland (34 acres).
During 1997 the Company sold a 10-acre parcel of undeveloped land it owned in
Montgomery County, Maryland.
The Herald owns its plant and office building in Everett, Washington;
it also owns two warehouses adjacent to its plant and a small office building in
Lynnwood, Washington, that is currently leased to a third party.
The Gazette Newspapers, Inc. owns a two-story brick building that
serves as headquarters for The Gazette Newspapers and a separate two-story brick
building that houses its commercial printing business. It also owns a one-story
brick building that formerly served as its headquarters and is currently leased
to a third party. All of these properties are located in Gaithersburg, Maryland.
Satellite editorial and sales offices for The Gazette Newspapers are located in
leased premises.
The principal offices of Newsweek are located at 251 West 57th Street
in New York City, where Newsweek rents space on nine floors. The lease on this
space will expire in 2009 but is renewable for a 15-year period at Newsweek's
option at rentals to be negotiated or arbitrated. In May 1997, Newsweek sold its
Mountain Lakes, N.J. facility to a third party and leased back a portion of this
building to house its accounting, production and distribution departments. The
lease on this space will expire in 2007 but is renewable for two 5-year periods
at Newsweek's option.
The headquarters offices of the Company's broadcasting operations are
located in Hartford, Connecticut, where they occupy premises under a lease which
expires in 2002. The facilities that house the operations of each of the
Company's television stations are all owned by subsidiaries of the Company.
The headquarters offices of the Cable Television Division are currently
located in leased premises in Phoenix, Arizona. Later in 1998 such offices will
be relocated to a three-story office building in Phoenix which was recently
purchased by the Division. The majority of the offices and head-end facilities
of the Division's individual cable systems are located in buildings owned by the
Division. Substantially all the tower sites used by the Division are leased.
Robinson Terminal Warehouse Corporation owns two wharves and several
warehouses in Alexandria, Virginia. These facilities are adjacent to the
business district and occupy approximately seven acres of land. Robinson also
owns two partially developed tracts of land in Fairfax County, Virginia,
aggregating about 22 acres. These tracts are near The Washington Post's existing
satellite printing plant and include several warehouses. In 1992 Robinson
purchased approximately 23 acres of undeveloped land on the Potomac River in
Charles County, Maryland, for the possible construction of additional warehouse
capacity.
Kaplan Educational Centers, Inc. owns a six-story building located at
131 West 56th Street in New York City, which serves as the Manhattan Educational
Center, and a one-story building in Brooklyn, New York, which houses Kaplan's
printing and production facilities. Kaplan's headquarters offices are located at
888 Seventh Avenue in New York City, where Kaplan rents space on three floors
under a lease which expires in 2007. All Kaplan educational centers outside of
Manhattan and all Score Learning Corporation facilities (including Score's
headquarters offices in San Francisco, California) occupy leased premises.
The offices of Legi-Slate and State Capital Strategies are located in
Washington, D.C. and Raleigh, North Carolina respectively; and the offices of
Digital Ink and Moffet, Larson & Johnson are located in separate facilities in
Arlington, Virginia. Post-Newsweek Business Information has its headquarters
office in Vienna, Virginia and also maintains office space in Silver Spring,
Maryland and Waltham, Massachusetts. The office space for each of these units is
leased.
19
<PAGE> 21
ITEM 3. LEGAL PROCEEDINGS.
The Company and its subsidiaries are parties to various civil lawsuits
that have arisen in the ordinary course of their businesses, including actions
for libel and invasion of privacy. Management does not believe that any
litigation pending against the Company will have a material adverse effect on
its business or financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The Company's Class B Common Stock is traded on the New York Stock
Exchange under the symbol "WPO." The Company's Class A Common Stock is not
publicly traded.
The high and low sales prices of the Company's Class B Common Stock
during the last two years were:
<TABLE>
<CAPTION>
1997 1996
---- ----
Quarter High Low High Low
------- ---- --- ---- ---
<S> <C> <C> <C> <C>
January - March..................... $ 361 $ 325 $ 300 $ 278
April - June........................ 413 335 324 277
July - September.................... 448 400 350 300
October - December.................. 491 426 352 325
</TABLE>
During 1997 the Company repurchased 846,290 shares of its Class B
Common Stock in unsolicited transactions at prices no higher than the last sale
price on the New York Stock Exchange. Of the total number of shares repurchased
in 1997, 832,250 shares were included in trading volume reported on that year's
consolidated tape and accounted for about 33% of such volume.
At February 12, 1998, there were 23 holders of record of the Company's
Class A Common Stock and 1,281 holders of record of the Company's Class B Common
Stock.
Both classes of the Company's Common Stock participate equally as to
dividends. Quarterly dividends were paid at the rate of $1.20 per share during
1997 and $1.15 per share during 1996.
ITEM 6. SELECTED FINANCIAL DATA.
See the information for the years 1993 through 1997 contained in the
table titled "Ten-Year Summary of Selected Historic Financial Data" which is
included in this Annual Report on Form 10-K and listed in the index to financial
information on page 25 hereof (with only the information for such years to be
deemed filed as part of this Annual Report on Form 10-K).
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
See the information contained under the heading "Management's
Discussion and Analysis of Results of Operations and Financial Condition" which
is included in this Annual Report on Form 10-K and listed in the index to
financial information on page 25 hereof.
20
<PAGE> 22
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See the Company's Consolidated Financial Statements at December 28,
1997, and for the periods then ended, together with the report of Price
Waterhouse LLP thereon and the information contained in Note N to said
Consolidated Financial Statements titled "Summary of Quarterly Operating Results
(Unaudited)," which are included in this Annual Report on Form 10-K and listed
in the index to financial information on page 25 hereof.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information contained under the heading "Executive Officers" in
Item 1 hereof and the information contained under the headings "Nominees for
Election by Class A Stockholders," "Nominees for Election by Class B
Stockholders" and "Section 16(a) Beneficial Ownership Reporting Compliance" in
the definitive Proxy Statement for the Company's 1998 Annual Meeting of
Stockholders is incorporated herein by reference thereto.
ITEM 11. EXECUTIVE COMPENSATION.
The information contained under the headings "Compensation of
Directors," "Executive Compensation," "Retirement Plans," "Compensation
Committee Report on Executive Compensation," "Compensation Committee Interlocks
and Insider Participation," and "Performance Graph" in the definitive Proxy
Statement for the Company's 1998 Annual Meeting of Stockholders is incorporated
herein by reference thereto.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information contained under the heading "Stock Holdings of Certain
Beneficial Owners and Management" in the definitive Proxy Statement for the
Company's 1998 Annual Meeting of Stockholders is incorporated herein by
reference thereto.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information contained under the heading "Certain Transactions" in
the definitive Proxy Statement for the Company's 1998 Annual Meeting of
Stockholders is incorporated herein by reference thereto.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) THE FOLLOWING DOCUMENTS ARE FILED AS PART OF THIS REPORT:
(i) Financial Statements and Financial Statement Schedules
As listed in the index to financial information on
page 25 hereof.
21
<PAGE> 23
(ii) Exhibits
As listed in the index to exhibits on page 52 hereof.
(b) REPORTS ON FORM 8-K.
No reports on Form 8-K were filed during the last quarter of
the period covered by this report.
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) 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, ON MARCH 23, 1998.
THE WASHINGTON POST COMPANY
(Registrant)
By /s/ John B. Morse, Jr.
-------------------------
John B. Morse, Jr.
Vice President-Finance
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934,
THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES INDICATED ON MARCH 23, 1998:
Donald E. Graham Chairman of the Board and Chief
Executive Office (Principal Executive
Officer) and Director
Alan G. Spoon President, Chief Operating Officer and
Director
Katharine Graham Chairman of the Executive Committee of
the Board and Director
John B. Morse, Jr. Vice President-Finance (Principal
Financial and Accounting Officer)
Warren E. Buffett Director
Daniel B. Burke Director
James E. Burke Director
Martin Cohen Director
George J. Gillespie, III Director
Ralph E. Gomory Director
Donald R. Keough Director
Barbara Scott Preiskel Director
William J. Ruane Director
22
<PAGE> 24
Richard D. Simmons Director
George W. Wilson Director
By /s/ John B. Morse, Jr.
------------------------
John B. Morse, Jr.
Vice President-Finance
An original power of attorney authorizing Donald E. Graham, Alan G.
Spoon, Katharine Graham and John B. Morse, Jr., and each of them, to sign all
reports required to be filed by the Registrant pursuant to the Securities
Exchange Act of 1934 on behalf of the above-named directors and officers has
been filed with the Securities and Exchange Commission.
23
<PAGE> 25
[THIS PAGE INTENTIONALLY LEFT BLANK]
24
<PAGE> 26
INDEX TO FINANCIAL INFORMATION
THE WASHINGTON POST COMPANY
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Financial Statements and Schedules:
Report of Independent Accountants .............................................................. 26
Consolidated Statements of Income for the Three Fiscal Years
Ended December 28, 1997 ..................................................................... 27
Consolidated Balance Sheets at December 28, 1997 and December 29, 1996 ......................... 28
Consolidated Statements of Cash Flows for the Three Fiscal Years
Ended December 28, 1997 ..................................................................... 30
Consolidated Statements of Changes in Common Shareholders' Equity for the Three
Fiscal Years Ended December 28, 1997 ........................................................ 31
Notes to Consolidated Financial Statements ..................................................... 32
Financial Statement Schedules for the Three Fiscal Years Ended December 28, 1997:
II - Valuation and Qualifying Accounts ................................................ 44
Management's Discussion and Analysis of Results of Operations and Financial
Condition (Unaudited) .......................................................................... 45
Ten-Year Summary of Selected Historical Financial Data (Unaudited) ...................................... 50
</TABLE>
All other schedules have been omitted either because they are not
applicable or because the required information is included in the consolidated
financial statements or the notes thereto referred to above.
25
<PAGE> 27
REPORT OF INDEPENDENT ACCOUNTANTS
To The Board of Directors and Shareholders of
The Washington Post Company
In our opinion, the consolidated financial statements, including the financial
statement schedule, referred to under Item 14(a)(i) on page 21 and listed in the
index on page 25 present fairly, in all material respects, the financial
position of The Washington Post Company and its subsidiaries at December 28,
1997 and December 29, 1996, and the results of their operations and their cash
flows for each of the three fiscal years in the period ended December 28, 1997,
in conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
Washington, D.C.
January 27, 1998
26
<PAGE> 28
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------------------
DECEMBER 28, DECEMBER 29, DECEMBER 31,
(in thousands, except share amounts) 1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
OPERATING REVENUES
Advertising .................................................. $ 1,236,877 $ 1,172,706 $ 1,094,620
Circulation and subscriber ................................... 519,620 490,973 453,330
Other ........................................................ 199,756 189,766 171,499
----------- ----------- -----------
1,956,253 1,853,445 1,719,449
----------- ----------- -----------
OPERATING COSTS AND EXPENSES
Operating .................................................... 1,019,869 1,007,057 948,088
Selling, general, and administrative ......................... 449,996 414,280 403,064
Depreciation and amortization of property, plant,
and equipment ............................................. 71,478 65,103 65,850
Amortization of goodwill and other intangibles ............... 33,559 29,836 31,429
----------- ----------- -----------
1,574,902 1,516,276 1,448,431
----------- ----------- -----------
INCOME FROM OPERATIONS .......................................... 381,351 337,169 271,018
Equity in earnings of affiliates ............................. 9,955 19,702 24,512
Interest income .............................................. 3,471 5,359 7,974
Interest expense ............................................. (1,252) (1,514) (5,600)
Other income (expense), net .................................. 69,549 (499) 13,492
----------- ----------- -----------
INCOME BEFORE INCOME TAXES ...................................... 463,074 360,217 311,396
PROVISION FOR INCOME TAXES ...................................... 181,500 139,400 121,300
----------- ----------- -----------
NET INCOME ...................................................... 281,574 220,817 190,096
REDEEMABLE PREFERRED STOCK DIVIDENDS ............................ (956) (680) --
----------- ----------- -----------
NET INCOME AVAILABLE FOR COMMON SHARES .......................... $ 280,618 $ 220,137 $ 190,096
=========== =========== ===========
BASIC EARNINGS PER COMMON SHARE ................................. $ 26.23 $ 20.08 $ 17.16
=========== =========== ===========
DILUTED EARNINGS PER COMMON SHARE ............................... $ 26.15 $ 20.05 $ 17.15
=========== =========== ===========
</TABLE>
The information on pages 32 through 43 is an integral part of the financial
statements.
27
<PAGE> 29
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 28, DECEMBER 29,
(in thousands, except share amounts) 1997 1996
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents.......................................... $ 21,117 $ 102,278
Accounts receivable, net .......................................... 244,203 233,063
Inventories ....................................................... 19,213 24,427
Other current assets .............................................. 23,959 22,863
----------- -----------
308,492 382,631
INVESTMENTS IN AFFILIATES ............................................ 154,791 199,278
PROPERTY, PLANT, AND EQUIPMENT
Buildings ......................................................... 188,836 188,527
Machinery, equipment, and fixtures ................................ 800,435 768,509
Leasehold improvements ............................................ 39,017 28,883
----------- -----------
1,028,288 985,919
Less accumulated depreciation and amortization .................... (577,445) (594,195)
----------- -----------
450,843 391,724
Land .............................................................. 33,953 34,332
Construction in progress .......................................... 168,954 85,307
----------- -----------
653,750 511,363
GOODWILL AND OTHER INTANGIBLES, less accumulated amortization of
$241,308 and $207,768 ............................................. 679,714 544,349
DEFERRED CHARGES AND OTHER ASSETS .................................... 280,570 232,790
----------- -----------
$ 2,077,317 $ 1,870,411
=========== ===========
</TABLE>
The information on pages 32 through 43 is an integral part of the financial
statements.
28
<PAGE> 30
<TABLE>
<CAPTION>
DECEMBER 28, DECEMBER 29,
(in thousands, except share amounts) 1997 1996
----------- -----------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities .................................... $ 213,824 $ 194,186
Federal and state income taxes .............................................. 18,352 5,381
Deferred subscription revenue ............................................... 80,186 82,069
Short-term borrowings ....................................................... 296,394 --
----------- -----------
608,756 281,636
OTHER LIABILITIES .............................................................. 241,234 223,878
DEFERRED INCOME TAXES .......................................................... 31,306 30,147
----------- -----------
881,296 535,661
----------- -----------
COMMITMENTS AND CONTINGENCIES
REDEEMABLE PREFERRED STOCK, Series A, $1 par value, with a redemption and
liquidation value of $1,000 per share; 23,000 shares authorized; 11,947
shares issued and outstanding ............................................... 11,947 11,947
PREFERRED STOCK, $1 par value; 977,000 shares authorized ....................... -- --
COMMON SHAREHOLDERS' EQUITY
Common stock
Class A common stock, $1 par value; 7,000,000 shares authorized; 1,739,250
and 1,779,250 shares issued and outstanding ........................... 1,739 1,779
Class B common stock, $1 par value; 40,000,000 shares
authorized; 18,260,750 and 18,220,750 shares
issued; 8,349,962 and 9,131,165 shares outstanding .................... 18,261 18,221
Capital in excess of par value .............................................. 33,415 26,455
Retained earnings ........................................................... 2,231,341 2,002,359
Cumulative foreign currency translation adjustment .......................... (464) 4,663
Unrealized gain on available-for-sale securities (net of taxes) ............. 31 3,155
Cost of 9,910,913 and 9,089,585 shares of Class B
common stock held in treasury ............................................ (1,100,249) (733,829)
----------- -----------
1,184,074 1,322,803
----------- -----------
$ 2,077,317 $ 1,870,411
=========== ===========
</TABLE>
The information on pages 32 through 43 is an integral part of the financial
statements.
29
<PAGE> 31
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Fiscal year ended
-------------------------------------------
DECEMBER 28, DECEMBER 29, DECEMBER 31,
(in thousands) 1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ...................................................................... $ 281,574 $ 220,817 $ 190,096
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of property, plant, and equipment .............. 71,478 65,103 65,850
Amortization of goodwill and other intangibles ............................... 33,559 29,836 31,429
Gain from disposition of businesses, net ..................................... (44,560) (3,112) (1,341)
Equity in earnings of affiliates, net of distributions ....................... (6,996) (11,099) (18,090)
Provision for deferred income taxes .......................................... 3,089 (4,273) 5,408
Change in assets and liabilities:
Increase in accounts receivable, net ...................................... (8,438) (31,444) (25,579)
Decrease (increase) in inventories ........................................ 5,214 2,339 (6,388)
Increase (decrease) in accounts payable and accrued liabilities ........... 19,638 26,923 (15,507)
(Decrease) increase in income taxes payable ............................... (13,709) 1,887 (3,099)
(Increase) decrease in other assets and other liabilities, net ............ (27,537) (19,635) 13,074
Other ........................................................................ 6,785 10,093 10,605
--------- --------- ---------
Net cash provided by operating activities ................................. 320,097 287,435 246,458
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net proceeds from sale of businesses ............................................ 120,208 3,517 32,743
Purchases of property, plant, and equipment ..................................... (214,573) (79,981) (121,697)
Purchases of marketable debt securities ......................................... -- -- (55,649)
Maturities and sales of marketable debt securities .............................. -- 12,821 67,453
Investments in certain businesses ............................................... (178,943) (147,471) (1,757)
Other ........................................................................... (3,187) 784 552
--------- --------- ---------
Net cash used in investing activities ..................................... (276,495) (210,330) (78,355)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on debt ...................................................... -- (50,209) --
Net short-term borrowings ....................................................... 296,394 -- --
Issuance of redeemable preferred stock .......................................... -- 11,947 --
Dividends paid .................................................................. (52,592) (51,164) (48,887)
Common shares repurchased ....................................................... (368,565) (32,302) (89,584)
--------- --------- ---------
Net cash used in financing activities ..................................... (124,763) (121,728) (138,471)
--------- --------- ---------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ............................... (81,161) (44,623) 29,632
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR ..................................... 102,278 146,901 117,269
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR ........................................... $ 21,117 $ 102,278 $ 146,901
========= ========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the year for:
Income taxes ................................................................. $ 164,000 $ 142,000 $ 122,000
Interest ..................................................................... $ 350 $ 5,115 $ 5,102
</TABLE>
The information on pages 32 through 43 is an integral part of the financial
statements.
30
<PAGE> 32
CONSOLIDATED STATEMENTS OF CHANGES
IN COMMON SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
CUMULATIVE UNREALIZED
FOREIGN GAIN ON
CLASS A CLASS B CAPITAL IN CURRENCY AVAILABLE-
COMMON COMMON EXCESS OF RETAINED TRANSLATION FOR-SALE TREASURY
(in thousands, except share amounts) STOCK STOCK PAR VALUE EARNINGS ADJUSTMENT SECURITIES STOCK
------ ------- --------- ---------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1995........................... $1,843 $18,157 $21,273 $1,691,497 $5,328 $2,933 $ (614,098)
Net income for the year.......................... 190,096
Dividends paid on common stock --
$4.40 per share................................. (48,887)
Repurchase of 361,106 shares of
Class B common stock............................ (89,584)
Issuance of 20,465 shares of Class B common
stock, net of restricted stock award forfeitures 3,403 1,478
Change in foreign currency translation
adjustment...................................... 209
Change in unrealized gain on available-for-sale
securities (net of taxes)....................... 291
Conversion of Class A common stock to
Class B common stock............................ (39) 39
Other............................................ 265
------ ------- ------- ---------- ----- ------ -----------
Balance, December 31, 1995......................... 1,804 18,196 24,941 1,832,706 5,537 3,224 (702,204)
Net income for the year.......................... 220,817
Dividends paid on common stock --
$4.60 per share................................. (50,484)
Dividends paid on redeemable preferred stock..... (680)
Repurchase of 103,642 shares of
Class B common stock............................ (32,302)
Issuance of 8,644 shares of Class B common
stock, net of restricted stock award forfeitures 1,173 677
Change in foreign currency translation
adjustment...................................... (874)
Change in unrealized gain on available-for-sale
securities (net of taxes)....................... (69)
Conversion of Class A common stock to
Class B common stock............................ (25) 25
Other............................................ 341
------ ------- ------- ---------- ----- ------ -----------
Balance, December 29, 1996......................... 1,779 18,221 26,455 2,002,359 4,663 3,155 (733,829)
Net income for the year.......................... 281,574
Dividends paid on common stock --
$4.80 per share................................. (51,636)
Dividends paid on redeemable preferred stock..... (956)
Repurchase of 846,290 shares of
Class B common stock............................ (368,565)
Issuance of 24,962 shares of Class B common
stock, net of restricted stock award forfeitures 6,025 2,145
Change in foreign currency translation
adjustment...................................... (5,127)
Change in unrealized gain on available-for-sale
securities (net of taxes)....................... (3,124)
Conversion of Class A common stock to
Class B common stock............................ (40) 40
Other............................................ 935
------ ------- ------- ---------- ----- ------ -----------
Balance, December 28, 1997....................... $1,739 $18,261 $33,415 $2,231,341 $(464) $ 31 $(1,100,249)
====== ======= ======= ========== ===== ====== ===========
</TABLE>
The information on pages 32 through 43 is an integral part of the financial
statements.
31
<PAGE> 33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Washington Post Company (the company) operates principally in four areas of
the media business: newspaper publishing, television broadcasting, magazine
publishing, and cable television. Segment data is set forth in Note M.
FISCAL YEAR. The company reports on a 52-53 week fiscal year ending on the
Sunday nearest December 31. The fiscal years 1997, 1996, and 1995, which ended
December 28, 1997, December 29, 1996, and December 31, 1995, respectively,
included 52 weeks. With the exception of the newspaper publishing operations,
subsidiaries of the company report on a calendar-year basis.
PRINCIPLES OF CONSOLIDATION. The accompanying financial statements include the
accounts of the company and its subsidiaries; significant intercompany
transactions have been eliminated.
USE OF ESTIMATES. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements.
Actual results could differ from those estimates.
CASH EQUIVALENTS. Short-term investments with original maturities of 90 days or
less are considered cash equivalents.
INVESTMENTS IN MARKETABLE SECURITIES. Investments in marketable equity
securities available for sale are classified in "Deferred charges and other
assets" in the Consolidated Balance Sheets. Unrealized gains or losses (net of
taxes) relating to such investments are reported separately in the "Unrealized
gain on available-for-sale securities (net of taxes)" in the Consolidated
Balance Sheets.
INVENTORIES. Inventories are valued at the lower of cost or market. Cost of
newsprint is determined by the first-in, first-out method, and cost of magazine
paper is determined by the specific-cost method.
INVESTMENTS IN AFFILIATES. The company uses the equity method of accounting for
its investments in and earnings or losses of affiliates.
PROPERTY, PLANT, AND EQUIPMENT. Property, plant, and equipment is recorded at
cost and includes interest capitalized in connection with major long-term
construction projects. Replacements and major improvements are capitalized;
maintenance and repairs are charged to operations as incurred.
Depreciation is calculated using the straight-line method over the
estimated useful lives of the property, plant, and equipment: 3 to 12 years for
machinery and equipment, and 20 to 50 years for buildings. The costs of
leasehold improvements are amortized over the lesser of the useful lives or the
terms of the respective leases.
GOODWILL AND OTHER INTANGIBLES. Goodwill and other intangibles represent the
unamortized excess of the cost of acquiring subsidiary companies over the fair
values of such companies' net tangible assets at the dates of acquisition.
Goodwill and other intangibles are being amortized by use of the straight-line
method over various periods up to 40 years.
LONG-LIVED ASSETS. The recoverability of long-lived assets, including goodwill
and other intangibles, is assessed annually or whenever adverse events and
changes in circumstances indicate that previously anticipated undiscounted cash
flows warrant assessment.
PROGRAM RIGHTS. The broadcast subsidiaries are parties to agreements that
entitle them to show syndicated and other programs on television. The cost of
such program rights is recognized as the gross amount of the related liability
when the programs are available for broadcasting. The cost is charged to
operations using accelerated and straight-line rates that appropriately match
the cost of programming with associated revenues. The unamortized cost of such
rights and the liability for future payments under these agreements are included
in the Consolidated Balance Sheets.
DEFERRED SUBSCRIPTION REVENUE AND MAGAZINE SUBSCRIPTION PROCUREMENT COSTS.
Deferred subscription revenue, which primarily represents amounts received from
customers in advance of magazine and newspaper deliveries, is included in
revenues over the subscription term. Deferred subscription revenue to be earned
after one year is included in "Other liabilities" in the Consolidated Balance
Sheets. Magazine subscription procurement costs are charged to operations as
incurred.
INCOME TAXES. The provision for income taxes is determined using the asset and
liability approach. Under this approach, deferred income taxes represent the
expected future tax consequences of temporary differences between the carrying
amounts and tax bases of assets and liabilities.
FOREIGN CURRENCY TRANSLATION. Gains and losses on foreign currency transactions
and the translation of the accounts of the company's foreign operations where
the U.S. dollar is the functional currency are recognized currently in the
Consolidated Statements of Income. Gains and losses on translation of the
accounts of the company's foreign operations where the local currency is the
functional currency and the company's equity investments in its foreign
affiliates are accumulated and reported separately in the "Cumulative foreign
currency translation adjustment" in the Consolidated Balance Sheets.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS. The company provides certain health
care and life insurance benefits for retired employees. The expected cost of
providing these postretirement benefits is accrued over the years that employees
render services.
32
<PAGE> 34
STOCK-BASED COMPENSATION. The company accounts for stock-based compensation
using the intrinsic value method prescribed by Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees." Pro forma
disclosures of net income and earnings per share as if the fair-value based
method prescribed by Statement of Financial Accounting Standards (SFAS) No. 123,
"Accounting for Stock-Based Compensation" had been applied in measuring
compensation expense are provided in Note G.
EARNINGS PER SHARE. In 1997, the company adopted SFAS No. 128, "Earnings per
Share," which requires the presentation of both basic and diluted earnings per
share data for fiscal 1997 and all prior fiscal periods.
FAIR VALUE OF FINANCIAL INSTRUMENTS. The carrying amount of the company's cash
and cash equivalents, accounts receivable, accounts payable and accrued
liabilities, and short-term borrowings approximates fair value because of the
short maturity of those instruments.
B. ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts receivable at December 28, 1997, and December 29, 1996, consist of the
following (in thousands):
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Accounts receivable, less estimated
returns, doubtful accounts
and allowances of $49,706
and $48,388...................... $229,782 $220,168
Other............................... 14,421 12,895
-------- --------
$244,203 $233,063
======== ========
</TABLE>
Accounts payable and accrued liabilities at December 28, 1997, and
December 29, 1996, consist of the following (in thousands):
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Accounts payable and accrued
expenses......................... $136,368 $121,485
Accrued payroll and related benefits 48,115 41,083
Deferred tuition revenue............ 20,988 18,299
Due to affiliates (newsprint)....... 8,353 13,319
-------- --------
$213,824 $194,186
======== ========
</TABLE>
C. INVESTMENTS IN AFFILIATES
The company's investments in affiliates at December 28, 1997, and December 29,
1996, include the following (in thousands):
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Cowles Media Company................ $ 91,904 $ 86,087
Newsprint mills..................... 39,995 87,122
Other............................... 22,892 26,069
-------- --------
$154,791 $199,278
======== ========
</TABLE>
The company's investments in affiliates include a 28 percent interest in the
stock of Cowles Media Company (Cowles), which owns and operates the Minneapolis
Star Tribune and several other smaller properties.
At December 28, 1997 and December 29, 1996, the company's interest in
newsprint mills includes a 49 percent interest in the common stock of Bowater
Mersey Paper Company Limited, which owns and operates a newsprint mill in Nova
Scotia. At December 29, 1996, the company's interest in newsprint mills also
includes a 35 percent limited partnership interest in both Bear Island Paper
Company, which owns and operates a newsprint mill near Richmond, Virginia, and
Bear Island Timberlands Company, which owns timberland and supplies Bear Island
Paper Company with a major portion of its wood requirements (collectively "Bear
Island"). In December 1997, the company sold its interest in Bear Island for
approximately $92,800,000 (see Note K). Operating costs and expenses of the
company include newsprint supplied by Bowater, Inc. (parent to Bowater Mersey
Paper Company), and Bear Island Paper Company, the cost of which was
approximately $63,800,000 in 1997, $67,200,000 in 1996, and $73,600,000 in 1995.
The company's other affiliate investments represent a
50 percent common stock interest in the International Herald Tribune newspaper,
published near Paris, France, and a 50 percent common stock interest in the Los
Angeles Times-Washington Post News Service, Inc.
33
<PAGE> 35
Summarized financial data for the affiliates' operations, excluding Bear
Island financial position data at December 28, 1997 and including Bear Island's
results of operations through the date of sale, are as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Financial Position
Working capital......... $(41,614) $(31,042) $(82,505)
Property, plant, and
equipment............ 237,864 411,644 415,874
Total assets............ 586,842 788,024 791,748
Long-term debt.......... 84,593 158,999 165,284
Net equity.............. 211,024 304,828 265,918
Results of Operations
Operating revenues...... $879,884 $918,148 $904,482
Operating income........ 88,110 115,738 120,843
Net income.............. 49,273 68,918 69,070
</TABLE>
The following table summarizes the status and results of the company's
investments in affiliates (in thousands):
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Beginning investment................. $199,278 $189,053
Equity in earnings................... 9,955 19,702
Dividends and distributions
received.......................... (2,959) (8,603)
Foreign currency translation......... (5,128) (874)
Sale of interest in Bear Island...... (46,355) --
-------- --------
Ending investment.................... $154,791 $199,278
======== ========
</TABLE>
At December 28, 1997, the unamortized excess of the company's investments
over its equity in the underlying net assets of its affiliates at the dates of
acquisition was approximately $76,000,000. Amortization included in "Equity in
earnings of affiliates" in the Consolidated Statements of Income was
approximately $2,500,000 for the year ended December 28, 1997, and $2,600,000
for the years ended December 29, 1996, and December 31, 1995.
In November 1997, the management of Cowles and McClatchy Newspapers, Inc.,
announced that shareholders representing a majority of each of the respective
companies' outstanding voting shares have agreed to vote to approve a series of
transactions whereby Cowles and McClatchy will be merged into a newly created
company (New McClatchy). Under the terms of the proposed merger, each share of
Cowles stock will be converted into a right to receive (based on elections made
by Cowles stockholders) either $90.50 in cash or shares of stock in New
McClatchy, or a combination of cash and New McClatchy stock. The company owns
3,893,796 shares of Cowles stock and intends to submit an election requesting to
be paid in cash for all of its shares. However, depending on the elections made
by other Cowles stockholders, the company may be required to accept up to
approximately 15 percent of the consideration otherwise payable to it in the
form of New McClatchy stock. At December 28, 1997, the carrying value of the
company's investment in Cowles approximated $91,900,000. If and when the merger
described above is completed, the company will adjust the carrying value of such
investment and record the corresponding gain.
D. INCOME TAXES
The provision for income taxes consists of the following (in thousands):
<TABLE>
<CAPTION>
Current Deferred
-------- --------
1997
<S> <C> <C>
U.S. Federal......................... $149,003 $ 2,210
Foreign.............................. 915 (165)
State and local...................... 28,493 1,044
-------- --------
$178,411 $ 3,089
======== ========
1996
U.S. Federal......................... $120,612 $(3,575)
Foreign.............................. 718 598
State and local...................... 22,343 (1,296)
-------- --------
$143,673 $(4,273)
======== =======
1995
U.S. Federal......................... $ 96,630 $ 3,525
Foreign.............................. 608 1,215
State and local...................... 18,654 668
-------- -------
$115,892 $ 5,408
======== =======
</TABLE>
The provision for income taxes exceeds the amount of income tax determined
by applying the U.S. Federal statutory rate of 35 percent to income before taxes
as a result of the following (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
U.S. Federal statutory
taxes ................ $ 162,076 $ 126,076 $ 108,989
State and local taxes
net of U.S. Federal
income tax benefit ... 19,199 13,681 12,559
Amortization of goodwill
not deductible for
income tax purposes... 2,492 2,336 2,373
Other, net .............. (2,267) (2,693) (2,621)
--------- --------- ---------
Provision for income
taxes ................ $ 181,500 $ 139,400 $ 121,300
========= ========= =========
</TABLE>
34
<PAGE> 36
Deferred income taxes at December 28, 1997, December 29, 1996, and December
31, 1995, consist of the following (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Accrued postretirement
benefits................ $ 51,076 $ 49,363 $ 47,167
Other benefit obligations.. 34,358 26,634 20,963
Accounts receivable........ 9,127 8,399 6,765
Other...................... 8,319 12,373 9,134
--------- --------- ---------
Deferred tax asset......... 102,880 96,769 84,029
--------- --------- ---------
Property, plant, and
equipment............... 40,498 39,248 42,159
Prepaid pension cost....... 79,978 65,300 55,574
Affiliate operations....... 7,645 14,977 14,165
Investment tax credit...... 813 1,589 2,301
Other...................... 5,252 5,802 4,473
-------- --------- ---------
Deferred tax liability..... 134,186 126,916 118,672
-------- --------- ---------
Deferred income taxes...... $ 31,306 $ 30,147 $ 34,643
======== ========= =========
</TABLE>
E. DEBT
In 1996, the company established a five-year, $300,000,000 revolving credit
facility to provide for direct borrowings and also support the issuance of
short-term promissory notes. Under the terms of the credit agreement, interest
on borrowings is at floating rates (average outstanding rate of 5.8 percent at
December 28, 1997), and the company is required to pay a facility fee of .07
percent on used and unused portions of the facility. The agreement also contains
certain covenants, including a financial covenant that requires the company to
maintain common shareholders' equity of $850,000,000. At December 28, 1997 and
December 29, 1996, there were approximately $296,394,000 and zero borrowings
outstanding under the facility, respectively, and the company was in compliance
with all covenants. Interest expense incurred under the revolving credit
facility was approximately $552,000 and zero during 1997 and 1996, respectively.
In the first quarter of 1996, the company retired approximately $50,222,000
in debt outstanding, the only long-term debt then outstanding, bearing interest
at 10.1 percent.
F. REDEEMABLE PREFERRED STOCK
In connection with the acquisition of a cable television system during the first
quarter of 1996, the company issued 11,947 shares of its Series A Preferred
Stock and agreed to issue an additional 1,282 shares of such stock on February
23, 2000 (which additional number of shares is subject to reduction in the event
of any breach of the representations and warranties made by the seller in the
acquisition agreement).
The Series A Preferred Stock has a par value of $1.00 per share and a
liquidation preference of $1,000 per share; it is redeemable by the company at
any time on or after October 1, 2015 at a redemption price of $1,000 per share.
In addition, the holders of such stock have a right to require the company to
purchase their shares at the redemption price during an annual 60-day election
period, with the first such period beginning on February 23, 2001. Dividends on
the Series A Preferred Stock are payable four times a year at the annual rate of
$80.00 per share and in preference to any dividends on the company's common
stock. The Series A Preferred Stock is not convertible into any other security
of the company, and the holders thereof have no voting rights except with
respect to any proposed changes in the preferences and special rights of such
stock.
G. CAPITAL STOCK, STOCK AWARDS, AND STOCK OPTIONS
Capital Stock. Each share of Class A common stock and Class B common stock
participates equally in dividends. The Class B stock has limited voting rights
and as a class has the right to elect 30 percent of the Board of Directors; the
Class A stock has unlimited voting rights including the right to elect a
majority of the Board of Directors.
During 1997, 1996, and 1995, the company purchased a total of 846,290,
103,642 and 361,106 shares, respectively, of its Class B common stock at a cost
of approximately $368,565,000, $32,302,000, and $89,584,000.
Stock Awards. In 1982, the company adopted a Long-Term Incentive Compensation
Plan that, among other provisions, authorizes the awarding of Class B common
stock to key employees. Stock awards made under the Incentive Compensation Plan
are subject to the general restriction that stock awarded to a participant will
be forfeited and revert to company ownership if the participant's employment
terminates before the end of a specified period of service to the company. At
December 28, 1997, there were 107,966 shares reserved for issuance under the
Incentive Compensation Plan. Of this number, 34,331 shares were subject to
awards outstanding, and
35
<PAGE> 37
73,635 shares were available for future awards. Activity related to stock awards
for the years ended December 28, 1997, December 29, 1996, and December 31, 1995
was as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----------------------- -------------------- --------------------
Number Average Number Average Number Average
of Award of Award of Award
Shares Price Shares Price Shares Price
------ ---------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
Awards Outstanding
Beginning of year.. 30,490 $ 237.83 31,378 $ 237.85 26,860 $ 214.79
Awarded ........ 20,285 351.68 64 313.88 17,753 244.90
Vested ......... (13,521) 228.96 -- -- (12,472) 198.50
Forfeited ...... (2,923) 285.35 (952) 243.61 (763) 233.23
------ ------ ------
End of year ....... 34,331 $ 281.19 30,490 $ 237.83 31,378 $ 237.85
====== ====== ======
</TABLE>
For the share awards outstanding at December 28, 1997, the aforementioned
restriction will lapse in January 1999 for 15,321 shares, January 2001 for
18,010 shares, and January 2004 for 1,000 shares. Stock-based compensation costs
resulting from stock awards reduced net income by $1.2 million ($0.11 per share,
basic and diluted), $1.1 million ($0.10 per share, basic and diluted), and $1.1
million ($0.10 per share, basic and diluted) in 1997, 1996, and 1995,
respectively.
Stock Options. The Employee Stock Option Plan, which was adopted in 1971 and
amended in 1993, reserves 1,900,000 shares of the company's Class B common stock
for options to be granted under the plan. The purchase price of the shares
covered by an option cannot be less than the fair value on the granting date. At
December 28, 1997, there were 642,475 shares reserved for issuance under the
Stock Option Plan, of which 251,225 shares were subject to options outstanding
and 391,250 shares were available for future grants.
Changes in options outstanding for the years ended December 28, 1997,
December 29, 1996, and December 31, 1995 were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
--------------------- ---------------------- ----------------------
Number Average Number Average Number Average
of Option of Option of Option
Shares Price Shares Price Shares Price
------- ---------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Beginning of year.. 178,625 $ 270.21 168,525 $ 258.59 164,500 $ 255.35
Granted ........ 80,200 583.62 19,500 343.94 9,000 298.75
Exercised ...... (7,600) 234.20 (9,400) 214.89 (3,475) 204.81
Canceled ....... -- -- (1,500) 268.50
------- ------- -------
End of year ....... 251,225 $ 371.35 178,625 $ 270.21 168,525 $ 258.59
======= ======= =======
</TABLE>
Of the shares covered by options outstanding at the end of 1997, 133,900 are
now exercisable, 21,425 will become exercisable in 1998, 68,425 will become
exercisable in 1999, 16,175 will become exercisable in 2000, and 11,300 will
become exercisable in 2001.
Information related to stock options outstanding at December 28, 1997 is as
follows:
<TABLE>
<CAPTION>
Weighted
average Weighted Weighted
Number remaining average Number average
Range of outstanding contractual exercise exercisable exercise
exercise prices at 12/28/97 life (yrs.) price at 12/28/97 price
- --------------- ----------- ------------ -------- ------------ ---------
<S> <C> <C> <C> <C> <C>
$173 - 200 22,900 1.8 $192.00 22,900 $192.00
205 - 319 128,625 4.4 275.08 71,125 244.44
343 - 350 21,000 9.1 344.35 4,875 343.94
472 43,700 10.0 472.00 - -
733 35,000 10.0 733.00 35,000 733.00
</TABLE>
All options were granted at an exercise price equal to or greater than the
fair market value of the company's common stock at the date of grant. The
weighted-average fair value at date of grant for options granted during 1997,
1996, and 1995 was $87.94, $96.53 and $77.12, respectively. The fair value of
options at date of grant was estimated using the Black-Scholes method with the
following assumptions:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Expected life (years).. 7 7 7
Interest rate ......... 5.84% 6.26% 5.61%
Volatility ............ 14.2 % 14.6 % 14.3 %
Dividend yield ........ 1.5 % 1.5 % 1.5 %
</TABLE>
Had the fair values of options granted in 1997, 1996, and 1995 been
recognized as compensation expense, net income would have been reduced by $1.6
million ($.15 per share, basic and diluted), $0.4 million ($.04 per share, basic
and diluted) and $0.1 million ($.01 per share, basic and diluted), in 1997,
1996, and 1995, respectively.
Average Number of Shares Outstanding. Basic earnings per share are based on the
weighted average number of shares of common stock outstanding during each year.
Diluted earnings per common share are based upon the weighted average number of
shares of common stock outstanding each year, adjusted for the dilutive effect
of shares issuable under outstanding stock options. Basic and diluted weighted
average share information for 1997, 1996, and 1995 is as follows:
<TABLE>
<CAPTION>
Basic Dilutive Diluted
Weighted Effect of Weighted
Average Stock Average
Shares Options Shares
---------- ------- ----------
<S> <C> <C> <C>
1997.................... 10,699,713 33,278 10,732,991
1996.................... 10,963,761 16,036 10,979,797
1995.................... 11,074,978 10,537 11,085,515
</TABLE>
36
<PAGE> 38
H. RETIREMENT PLANS
The company and its subsidiaries have various funded and unfunded pension and
incentive savings plans and in addition, contribute to several multi-employer
plans on behalf of certain union-represented employee groups. Substantially all
of the company's employees, including some located in foreign countries, are
covered by these plans. Pension benefit for all retirement plans combined was
$12,200,000, $3,900,000, and $600,000 in 1997, 1996, and 1995, respectively.
The costs for the company's defined benefit pension plans are actuarially
determined and include amortization of prior service costs over various periods,
generally not exceeding 20 years. The company's policy is to fund the costs
accrued for its defined benefit plans.
The following table sets forth the funded status of the defined benefit
plans and amounts recognized in "Deferred charges and other assets" in the
Consolidated Balance Sheets at December 28, 1997, and December 29, 1996 (in
thousands):
<TABLE>
<CAPTION>
1997 1996
----------- ---------
<S> <C> <C>
Actuarial present value of
accumulated plan benefits,
including vested benefits of
$232,385 and $212,158 ............ $ 240,414 $ 219,154
=========== =========
Plan assets at fair value,
primarily listed securities ...... $ 1,014,531 $ 731,999
Projected benefit obligation for
service rendered to date ......... (284,278) (261,266)
----------- ---------
Plan assets in excess of projected
benefit obligation ............... 730,253 470,733
Prior service cost not yet recognized
in periodic pension cost ......... 14,824 15,987
Less unrecognized net gain from
past experience different from
that assumed ..................... (512,669) (277,049)
Less unrecognized net asset
(transition amount) being
recognized over approximately
17 years ......................... (38,271) (45,937)
----------- ---------
Prepaid pension cost ................ $ 194,137 $ 163,734
=========== =========
</TABLE>
The net pension benefit for the years ended December 28, 1997, December 29,
1996, and December 31, 1995, consists of the following components (in
thousands):
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Service cost for benefits
earned during the
period ................ $ 10,567 $ 10,373 $ 10,623
Interest cost on projected
benefit obligation .... 19,433 17,741 15,430
Actual return on plan
assets ................ (294,212) (129,756) (162,253)
Net amortization and
deferral .............. 233,985 78,373 116,812
--------- --------- ---------
Net pension benefit ...... $ (30,227) $ (23,269) $ (19,388)
========= ========= =========
</TABLE>
The weighted average discount rate of 7.5 percent and rate of increase in
future compensation levels of 4 percent were used in determining the actuarial
present value of the projected benefit obligation in 1997, 1996, and 1995. The
expected long-term rate of return on assets was 9 percent in 1997, 1996, and
1995.
Contributions to multi-employer pension plans, which are generally based on
hours worked, amounted to $2,000,000 in 1997, $1,700,000 in 1996, and $1,800,000
in 1995.
The costs of unfunded retirement plans are charged to expense when accrued.
The company's liability for such plans, which is included in "Other liabilities"
in the Consolidated Balance Sheets, was $54,235,000 at December 28, 1997, and
$51,600,000 at December 29, 1996.
37
<PAGE> 39
I. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The company and its subsidiaries provide health care and life insurance benefits
to certain retired employees. These employees become eligible for benefits after
meeting minimum age and service requirements.
The following table sets forth the amounts included in "Other liabilities"
in the Consolidated Balance Sheets at December 28, 1997, and December 29, 1996
(in thousands):
<TABLE>
<CAPTION>
1997 1996
-------- --------
Accumulated postretirement benefit obligation:
<S> <C> <C>
Retirees .................................. $ 50,213 $ 49,806
Fully eligible active plan
participants ........................... 16,937 7,828
Other active plan participants ............ 34,105 36,125
-------- --------
101,255 93,759
Unrecognized prior service costs
arising from plan amendments .............. 3,744 4,123
Unrecognized net gain from past
experience different from
that assumed .............................. 12,968 15,911
-------- --------
Accrued postretirement
benefit cost .............................. $117,967 $113,793
======== ========
</TABLE>
Net periodic postretirement benefit cost for 1997, 1996, and 1995 includes
the following components (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Service cost for benefits
earned during the period $ 3,511 $ 2,939 $ 2,719
Interest cost on accumulated
post-retirement benefit
obligation .............. 6,973 6,546 6,515
Amortization of prior
service costs ........... (378) (290) (290)
Amortization of gains ...... (1,576) (909) (1,296)
------- ------- -------
Net periodic postretirement
benefit cost ............ $ 8,530 $ 8,286 $ 7,648
======= ======= =======
</TABLE>
The assumed health care cost trend rate used in measuring the benefit
obligation at December 28, 1997 was 10.8 percent for pre-age 65 benefits (10.3%
for post-age 65 benefits) decreasing to 5.5 percent in the year 2015 and
thereafter. The discount rate used in determining the benefit obligation at
December 28, 1997 and December 29, 1996 was 7.5 percent.
The effect on the accumulated postretirement benefit obligation of a 1
percent increase each year in the health care cost trend rate used would result
in increases of approximately $11,800,000 in the obligation at December 28, 1997
and $1,500,000 in the aggregate service and interest components of the 1997
expense.
The company's policy is to fund the above-mentioned benefits as claims and
premiums are paid. The cash expenditures for postretirement benefits were
approximately $3,700,000 in 1997, $3,850,000 in 1996, and $2,980,000 in 1995.
J. LEASE AND OTHER COMMITMENTS
The company leases primarily real property under operating agreements. Many of
the leases contain renewal options and escalation clauses that require payments
of additional rent to the extent of increases in the related operating costs.
At December 28, 1997, future minimum rental payments under noncancelable
operating leases approximate the following (in thousands):
<TABLE>
<S> <C>
1998.............................................. $ 25,300
1999.............................................. 23,300
2000.............................................. 19,600
2001.............................................. 15,300
2002.............................................. 11,900
Thereafter........................................ 50,100
--------
$145,500
========
</TABLE>
Minimum payments have not been reduced by minimum sublease rentals of
$3,300,000 due in the future under noncancelable subleases.
Rent expense under operating leases included in operating costs and expenses
was approximately $27,800,000, $24,900,000, and $22,900,000 in 1997, 1996, and
1995, respectively. Sublease income was approximately $400,000, $800,000, and
$1,600,000 in 1997, 1996, and 1995, respectively.
The company's broadcast subsidiaries are parties to certain agreements that
commit them to purchase programming to be produced in future years. At December
28, 1997, such commitments amounted to approximately $55,500,000. If such
programs are not produced, the company's commitment would expire without
obligation.
In conjunction with the construction of new newspaper production facilities
in the Washington, D.C. area, the company has entered into certain commitments
to purchase plant and equipment. As of December 28, 1997, the open commitments
relating to this project were approximately $89,000,000. The company expects
this project to be completed in late 1998.
38
<PAGE> 40
K. ACQUISITIONS AND DISPOSITIONS
Acquisitions. In February 1997, the company acquired cable systems serving
approximately 16,000 subscribers in Cleveland, Mississippi. In December 1997,
the company acquired the publishing rights to two computer services industry
trade periodicals and the rights to conduct two computer industry trade shows.
The aggregate purchase price for these acquisitions approximated $108,400,000.
In January and February 1996, the company acquired cable systems in
Texarkana and Columbus, Missouri serving approximately 39,700 subscribers. In
August 1996, the company acquired cable systems in Prescott, Arizona serving
approximately 26,300 subscribers. The aggregate purchase price for these
acquisitions approximated $129,000,000.
The company also spent $10,500,000 and $18,500,000 in 1997 and 1996,
respectively, for other smaller business acquisitions.
All acquisitions discussed above were accounted for using the purchase
method and, accordingly, the assets and liabilities of the companies acquired
have been recorded at their estimated fair values at the date of acquisition.
The excess of the cost over the fair value of net assets acquired is being
amortized over periods from 15 to 20 years. Pro forma results of operations for
1997, 1996, and 1995, assuming the acquisitions occurred at the beginning of
1995, are not materially different from reported results of operations.
Exchanges. In June 1997, the company exchanged the assets of certain cable
systems with Tele-Communications, Inc. This trade resulted in an increase of
about 21,000 subscribers for the company.
In September 1997, the company completed a transaction with Meredith
Corporation whereby the company exchanged the assets of WFSB-TV, the CBS
affiliate in Hartford, Connecticut and approximately $60,000,000 for the assets
of WCPX-TV, the CBS affiliate in Orlando, Florida.
The assets obtained in these transactions were recorded at the carrying
value of the assets exchanged plus cash consideration. No gain or loss resulted
from these exchange transactions.
Dispositions. In September 1997, the company sold the assets of its PASS Sports
subsidiary for approximately $27,400,000. In December 1997, the company sold its
35 percent limited partnership interest in both Bear Island Paper Company and
Bear Island Timberlands Company for approximately $92,800,000. The gains
resulting from these dispositions, which are included in "Other income
(expense), net" in the Consolidated Statements of Income, increased 1997 net
income by approximately $44,560,000 and basic and diluted earnings per share by
$4.16 and $4.15, respectively.
In January 1995, the company sold substantially all of its 70 percent
limited partnership interest in American Personal Communications (APC) to its
partner, APC, Inc., and others, for approximately $33,000,000. The resulting
gain, which is included in "Other income (expense), net" in the Consolidated
Statements of Income, increased 1995 net income by $8,400,000 and basic and
diluted earnings per share by $0.75.
In September 1995, the company wrote off its investment in Mammoth Micro
Productions, a producer and publisher of multimedia CD-ROM titles, originally
acquired in 1994 for approximately $23,000,000. The loss resulting from the
write-off, which is included in "Operating costs and expenses" in the
Consolidated Statements of Income, decreased 1995 net income by approximately
$5,600,000 and basic and diluted earnings per share by $0.51.
L. CONTINGENCIES
The company and its subsidiaries are parties to various civil lawsuits that have
arisen in the ordinary course of their businesses, including actions for libel
and invasion of privacy. Management does not believe that any litigation pending
against the company will have a material adverse effect on its business or
financial condition.
39
<PAGE> 41
M. BUSINESS SEGMENTS
The company operates principally in four areas of the media business: newspaper
publishing, television broadcasting, magazine publishing, and cable television.
Newspaper operations involve the publication of newspapers in the
Washington, D.C. area and Everett, Washington, and newsprint warehousing and
recycling facilities.
Broadcast operations are conducted primarily through six VHF television
stations. All stations are network-affiliated, with revenues derived primarily
from sales of advertising time.
Magazine operations consist of the publication of a weekly news magazine,
Newsweek, which has one domestic and three international editions, and beginning
in 1997, the publication of six business periodicals for the computer services
industry and the Washington-area technology community. Revenues from both
newspaper and magazine publishing operations are derived from advertising and,
to a lesser extent, from circulation.
Cable television operations consist of over 50 cable systems offering basic
cable and pay television services to approximately 637,000 subscribers in 16
midwestern, western, and southern states. The principal source of revenues is
monthly subscription fees charged for services.
Other businesses include the operations of educational centers engaged in
preparing students for admissions tests and licensing examinations and offering
academic enrichment programs, an engineering firm which provides services to the
telecommunications industry, a regional sports cable system (sold in September
1997, see Note K), an online information service devoted to federal and state
legislation and regulations, and a digital media and electronic information
services provider. The results of APC and Mammoth Micro Productions are included
in other businesses prior to their disposition in January 1995 and September
1995, respectively.
Income from operations is the excess of operating revenues over operating
expenses including corporate expenses, which are allocated based on relative
operating revenues to operations of the segments. In computing income from
operations by segment, the effects of equity in earnings of affiliates, interest
income, interest expense, other income and expense items, and income taxes are
not included.
Identifiable assets by segment are those assets used in the company's
operations in each business segment. Investments in affiliates are discussed in
Note C. Corporate assets are principally cash and cash equivalents and
investments in marketable securities.
40
<PAGE> 42
<TABLE>
<CAPTION>
Newspaper Magazine Cable Other
(in thousands) Publishing Broadcasting Publishing Television Businesses Consolidated
- -------------- ---------- ------------ ---------- ---------- ---------- ------------
1997
<S> <C> <C> <C> <C> <C> <C>
Operating revenues ........................ $ 812,896 $338,373 $389,853 $257,732 $ 157,399 $1,956,253
Income (loss) from operations ............. $ 162,721 $159,620 $ 38,015 $ 51,549 $ (30,554) $ 381,351
Equity in earnings of affiliates .......... 9,955
Interest income, net ...................... 2,219
Other income, net ......................... 69,549
-----------
Income before income taxes ................ $ 463,074
===========
Identifiable assets ....................... $ 515,745 $436,760 $323,573 $502,642 $ 114,890 $1,893,610
Investments in affiliates ................. 154,791
Corporate assets .......................... 28,916
-----------
Total assets ........................... $ 2,077,317
===========
Depreciation and amortization of property,
plant, and equipment ................... $ 19,104 $ 11,011 $ 4,484 $ 30,672 $ 6,207 $ 71,478
Amortization of goodwill and other
intangibles............................. $ 874 $ 12,213 $ 136 $ 19,371 $ 965 $ 33,559
Capital expenditures ...................... $ 110,070 $ 11,651 $ 3,022 $ 73,156 $ 16,674 $ 214,573
1996
Operating revenues ........................ $ 763,935 $335,156 $377,063 $229,695 $ 147,596 $1,853,445
===========
Income (loss) from operations ............. $ 116,773 $155,026 $ 22,823 $ 56,023 $ (13,476) $ 337,169
Equity in earnings of affiliates .......... 19,702
Interest income, net ...................... 3,845
Other expense, net ........................ (499)
-----------
Income before income taxes ................ $ 360,217
===========
Identifiable assets ....................... $ 420,601 $377,799 $226,411 $452,525 $ 86,070 $1,563,406
Investments in affiliates ................. 199,278
Corporate assets .......................... 107,727
-----------
Total assets ........................... $ 1,870,411
===========
Depreciation and amortization of property,
plant, and equipment ................... $ 20,386 $ 10,482 $ 4,610 $ 25,075 $ 4,550 $ 65,103
Amortization of goodwill and other
intangibles............................. $ 830 $ 11,252 $ 16,785 $ 969 $ 29,836
Capital expenditures ...................... $ 19,441 $ 10,923 $ 4,798 $ 37,362 $ 7,457 $ 79,981
1995
Operating revenues ........................ $ 729,172 $306,108 $352,619 $194,142 $ 137,408 $1,719,449
===========
Income (loss) from operations ............. $ 109,737 $132,351 $ 15,008 $ 41,019 $ (27,097) $ 271,018
Equity in earnings of affiliates .......... 24,512
Interest income, net ...................... 2,374
Other income, net ......................... 13,492
-----------
Income before income taxes ................ $ 311,396
===========
Identifiable assets ....................... $ 399,090 $387,462 $204,947 $322,443 $ 73,055 $1,386,997
Investments in affiliates ................. 189,053
Corporate assets .......................... 156,843
-----------
Total assets ........................... $ 1,732,893
===========
Depreciation and amortization of property,
plant, and equipment ................... $ 18,248 $ 9,958 $ 4,633 $ 28,819 $ 4,192 $ 65,850
Amortization of goodwill and other
intangibles............................. $ 800 $ 11,253 $ 12,150 $ 7,226 $ 31,429
Capital expenditures ...................... $ 61,879 $ 9,265 $ 4,145 $ 40,050 $ 6,358 $ 121,697
</TABLE>
41
<PAGE> 43
N. SUMMARY OF QUARTERLY OPERATING RESULTS (UNAUDITED)
Quarterly results of operations for the years ended December 28, 1997, and
December 29, 1996, are as follows (in thousands, except per share amounts):
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
1997
Operating revenues
Advertising .................................... $ 278,528 $ 327,949 $ 286,074 $ 344,326
Circulation and subscriber ..................... 123,674 128,901 134,238 132,807
Other .......................................... 51,899 44,525 58,063 45,269
--------- --------- --------- ---------
454,101 501,375 478,375 522,402
--------- --------- --------- ---------
Operating costs and expenses
Operating ...................................... 243,504 246,478 253,565 276,322
Selling, general, and administrative ........... 106,886 118,875 107,186 117,049
Depreciation and amortization of
property, plant, and equipment .............. 17,790 17,871 18,007 17,810
Amortization of goodwill and other intangibles.. 7,953 8,214 8,382 9,010
--------- --------- --------- ---------
376,133 391,438 387,140 420,191
--------- --------- --------- ---------
Income from operations ............................ 77,968 109,937 91,235 102,211
Other income (expense)
Equity in earnings of affiliates ............... 125 3,331 4,712 1,787
Interest income ................................ 1,112 1,079 725 554
Interest expense ............................... (165) (158) (182) (747)
Other income (expense), net .................... (846) 1,668 23,471 45,257
--------- --------- --------- ---------
Income before income taxes ........................ 78,194 115,857 119,961 149,062
Provision for income taxes ........................ 30,500 44,500 48,410 58,090
--------- --------- --------- ---------
Net income ........................................ 47,694 71,357 71,551 90,972
Redeemable preferred stock dividends .............. (478) (239) (239) 0
--------- --------- --------- ---------
Net income available for common shares ............ $ 47,216 $ 71,118 $ 71,312 $ 90,972
========= ========= ========= =========
Basic earnings per common share ................... $ 4.35 $ 6.62 $ 6.66 $ 8.66
========= ========= ========= =========
Diluted earnings per common share ................. $ 4.35 $ 6.60 $ 6.64 $ 8.63
========= ========= ========= =========
Basic average number of common shares outstanding.. 10,844 10,744 10,708 10,502
Diluted average number of common shares
outstanding..................................... 10,866 10,772 10,743 10,544
</TABLE>
42
<PAGE> 44
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
1996
Operating revenues
Advertising .................................... $ 252,807 $ 310,459 $ 274,719 $ 334,720
Circulation and subscriber ..................... 117,070 121,488 124,916 127,498
Other .......................................... 46,742 40,905 60,691 41,430
--------- --------- --------- ---------
416,619 472,852 460,326 503,648
--------- --------- --------- ---------
Operating costs and expenses
Operating ...................................... 242,482 253,639 245,763 265,173
Selling, general, and administrative ........... 100,792 100,562 103,937 108,988
Depreciation and amortization of
property, plant, and equipment .............. 16,160 16,004 15,979 16,960
Amortization of goodwill and other intangibles.. 6,985 7,162 7,427 8,262
--------- --------- --------- ---------
366,419 377,367 373,106 399,383
--------- --------- --------- ---------
Income from operations ............................ 50,200 95,485 87,220 104,265
Other income (expense)
Equity in earnings of affiliates ............... 7,353 7,807 2,537 2,005
Interest income ................................ 1,224 1,175 1,358 1,602
Interest expense ............................... (1,083) (139) (168) (124)
Other income (expense), net ....................... 2,867 (689) (53) (2,625)
--------- --------- --------- ---------
Income before income taxes ........................ 60,561 103,639 90,894 105,123
Provision for income taxes ........................ 23,619 40,421 35,503 39,857
--------- --------- --------- ---------
Net income ........................................ 36,942 63,218 55,391 65,266
Redeemable preferred stock dividends .............. (202) -- (478) --
--------- --------- --------- ---------
Net income available for common shares ............ $ 36,740 $ 63,218 $ 54,913 $ 65,266
========= ========= ========= =========
Basic earnings per common share ................... $ 3.34 $ 5.76 $ 5.01 $ 5.97
========= ========= ========= =========
Diluted earnings per common share ................. $ 3.34 $ 5.76 $ 5.00 $ 5.96
========= ========= ========= =========
Basic average number of common shares outstanding.. 10,997 10,970 10,957 10,931
Diluted average number of common shares
outstanding..................................... 11,011 10,970 10,975 10,953
</TABLE>
The sum of the four quarters may not necessarily be equal to the annual amounts
reported in the Consolidated Statements of Income due to rounding.
43
<PAGE> 45
SCHEDULE II
THE WASHINGTON POST COMPANY
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
ADDITIONS -
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END OF
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS PERIOD
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Year Ended December 31, 1995
Allowance for doubtful accounts and returns..... $33,436,000 $49,980,000 $47,341,000 $36,075,000
Allowance for advertising rate adjustments and
discounts....................................... 6,507,000 7,253,000 7,871,000 5,889,000
----------- ----------- ----------- -----------
$39,943,000 $57,233,000 $55,212,000 $41,964,000
=========== =========== =========== ===========
Year Ended December 29, 1996
Allowance for doubtful accounts and returns..... $36,075,000 $52,658,000 $49,072,000 $39,661,000
Allowance for advertising rate adjustments and
discounts....................................... 5,889,000 8,995,000 6,157,000 8,727,000
----------- ----------- ----------- -----------
$41,964,000 $61,653,000 $55,229,000 $48,388,000
=========== =========== =========== ===========
Year Ended December 28, 1997
Allowance for doubtful accounts and returns..... $39,661,000 $54,163,000 $53,990,000 $39,834,000
Allowance for advertising rate adjustments and
discounts....................................... 8,727,000 11,095,000 9,950,000 9,872,000
----------- ----------- ----------- -----------
$48,388,000 $65,258,000 $63,940,000 $49,706,000
=========== =========== =========== ===========
</TABLE>
44
<PAGE> 46
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
This analysis should be read in conjunction with the consolidated financial
statements and the notes thereto.
RESULTS OF OPERATIONS -- 1997 COMPARED TO 1996
Net income in 1997 was $281.6 million, an increase of 28 percent over net income
of $220.8 million in 1996. Basic and diluted earnings per share rose 31 and 30
percent to $26.23 and $26.15, respectively, in 1997. The company's 1997 net
income includes $28.5 million from the sale of the company's investment in Bear
Island Paper Company, L.P., and Bear Island Timberlands Company, L.P., as well
as $16.0 million relating to the sale of the assets of its PASS Sports
subsidiary. Excluding these non-recurring gains, net income increased 7 percent
in 1997 and basic and diluted earnings per share each increased 10 percent.
Revenues for 1997 totaled $1.956 billion, an increase of 6 percent from
$1.853 billion in 1996. Advertising revenues increased 5 percent in 1997, and
circulation and subscriber revenues increased 6 percent. Other revenues
increased 5 percent. Substantially all of the increase in advertising revenues
was generated by the newspaper and magazine divisions. The increase in
circulation and subscriber revenues is due to growth at the cable division and
the increase in other revenues is attributable to higher tuition revenues at
Kaplan partially offset by reduced fees for engineering services at MLJ.
Costs and expenses for the year increased 4 percent to $1.575 billion, from
$1.516 billion in 1996. In addition to the normal growth in the costs of
operations, the cost and expense increase is attributable to companies acquired
in 1997, expansion of Kaplan's business offerings, increased spending for new
media activities offset partially by decreased newsprint and magazine paper
costs, and other favorable cost experience at Newsweek.
Operating income increased 13 percent to $381.4 million in 1997.
NEWSPAPER DIVISION. Newspaper division revenues increased 6 percent to $812.9
million, from $763.9 million in 1996. Advertising revenues at the newspaper
division rose 8 percent over the previous year. At The Washington Post,
advertising revenues increased 8 percent as a result of strong volume increases
and, to a lesser extent, higher rates. Classified revenues at The Washington
Post increased 12 percent due to higher recruitment volume and associated rates.
The Washington Post's retail revenues rose 4 percent due to higher rates and a 1
percent increase in volume. Other advertising revenues (including general and
preprint) at The Washington Post increased 8 percent. General advertising and
preprint volume each increased 8 percent over 1996.
Circulation revenues for the newspaper division increased 1 percent in 1997
resulting mostly from rate increases enacted in the beginning of 1997 at The
Washington Post. Average daily circulation at The Washington Post fell 1.5
percent, while Sunday circulation declined 1.3 percent.
Newspaper division operating margin in 1997 increased to 20 percent from 15
percent in 1996. The increase in 1997 operating margin is primarily attributable
to increased advertising revenues and lower newsprint expense (down 9 percent).
Average newsprint prices paid by the newspaper division in 1997 declined about
14 percent from 1996, the positive effects of which were partially offset by a 4
percent increase in newsprint consumed.
BROADCAST DIVISION. Revenues at the broadcast division rose 1 percent to $338.4
million over last year. An increase in advertising from a number of industry
categories, including restaurants, utilities, banks and finance, as well as an
overall revenue share increase, allowed the broadcast division to offset the
approximate $30.0 million in non-recurring advertising revenues generated in
1996 from political and Olympics-related advertising. Network revenues were down
slightly from 1996.
Competitive market position remained strong for the television stations. Four
stations were ranked number one in the latest ratings period, sign-on to
sign-off, in their markets; one station was ranked a strong number two; one
station was ranked number three.
The operating margin at the broadcast division increased to 47 percent, from
46 percent in 1996. Excluding amortization of goodwill and intangibles,
operating margins for 1997 and 1996 were 51 percent and 50 percent,
respectively. The improvement in the 1997 operating margin is due to increased
advertising revenues and benefits derived from 1997 expense control initiatives
which, in total, outpaced higher expenses associated with the new station, WCPX
(renamed WKMG).
MAGAZINE DIVISION. Magazine division revenues, which beginning in 1997 also
included the company's business information unit, rose 3 percent to $389.9
million due primarily to increased advertising revenues at the Newsweek domestic
edition. The Newsweek domestic advertising revenue increase over the prior year
resulted from a 6 percent increase in domestic advertising pages sold in 1997
versus 1996. Total circulation revenues for the magazine division increased 1
percent in 1997.
Operating margin of the magazine division increased to 10 percent in 1997,
from 6 percent in 1996. The increase in operating margin is primarily
attributable to the operating results of Newsweek, including the higher sales of
domestic advertising pages, reduced magazine paper costs, realized savings from
prior year outsourcing initiatives, and other favorable cost experience.
CABLE DIVISION. Revenues at the cable division increased 12 percent to $257.7
million in 1997. Basic and tier, pay, and advertising revenue categories showed
improvement over 1996. Increased subscribers in 1997 accounted for the majority
of the total increase in revenues. The number of basic subscribers increased 7
percent to 637,300. About 37,000 subscribers
45
<PAGE> 47
were added in 1997 as a result of cable system acquisitions and exchanges and
the remainder by internal growth.
Cable operating cash flow increased 4 percent to $101.6 million, from $97.9
million in 1996. Operating margin at the cable division was 20 percent in 1997
compared to 24 percent in 1996, reflecting the effects of increased depreciation
and amortization in 1997 from recent cable system acquisitions and capital
improvements.
OTHER BUSINESSES. In 1997, revenues from other businesses, including Kaplan,
MLJ, LEGI-SLATE, Digital Ink, and PASS Sports (nine months of 1997), increased 7
percent over the prior year to $157.4 million. The majority of the increase in
other businesses revenues is attributable to Kaplan, where revenues increased 21
percent. Student enrollments at Kaplan increased 3 percent in 1997. Partially
offsetting the revenue increase generated by Kaplan was a decrease in
engineering consulting revenues at MLJ.
Other businesses recorded an operating loss in 1997 of $30.1 million,
compared to a loss of $13.5 million in 1996. The 1997 operating loss generated
by other businesses is directly attributable to the company's investing
activities in new media, the 1997 decline in MLJ's revenues, and, to a lesser
extent, the start-up costs associated with Kaplan's significant expansion of its
Score elementary education business. Offsetting these losses was improved and
continued profitability from Kaplan's core test preparation business.
EQUITY IN EARNINGS OF AFFILIATES. The company's equity in earnings of affiliates
for 1997 declined to $10.0 million, from $19.7 million in 1996, reflecting the
effect of lower earnings at the company's affiliated newsprint mills for the
majority of 1997 compared to 1996. The decline in earnings at the affiliated
newsprint mills is due to lower average newsprint prices charged by the mills in
1997 versus 1996.
NON-OPERATING ITEMS. Interest income, net of interest expense, was $2.2 million,
compared to $3.8 million in 1996. Increased spending in 1997 for acquisitions,
capital expenditures, and stock repurchases resulted in less invested cash in
1997 versus 1996, causing a decline in interest income. Other income (expense),
net in 1997 was $69.5 million, compared with an expense of $0.5 million in 1996.
The increase in other income is attributable to the 1997 gains arising from the
company's sale of its investment in Bear Island Paper Company, L.P., and Bear
Island Timberlands Company, L.P., as well as the sale of the assets of the PASS
Sports subsidiary.
INCOME TAXES. The effective tax rate in both 1997 and 1996 was approximately 39
percent.
RESULTS OF OPERATIONS -- 1996 COMPARED TO 1995
Net income in 1996 was $220.8 million, an increase of 16 percent over net income
of $190.1 million in 1995. Basic and diluted earnings per share each rose 17
percent to $20.08 and $20.05, respectively, in 1996. The company's 1995 net
income included $8.4 million ($0.75 per share basic and diluted) from the sale
of the company's investment in American PCS, L.P. (APC), as well as an after-tax
charge of $5.6 million ($0.51 per share basic and diluted) relating to the
write-off of the company's interest in Mammoth Micro Productions. Excluding
these items, net income and earnings per share (basic and diluted) increased 18
percent and 19 percent, respectively, in 1996.
Revenues for 1996 totaled $1.853 billion, an increase of 8 percent from
$1.719 billion in 1995. Advertising revenues increased 7 percent in 1996, and
circulation and subscriber revenues increased 8 percent. Other revenues
increased 11 percent. The broad cast, newspaper, and magazine divisions all
contributed significantly to the improvement in advertising revenues. The
increase in circulation and subscriber revenues was principally due to growth at
the cable division. About two-thirds of growth in other revenues over 1995 was
attributable to new businesses acquired in 1996.
Costs and expenses for 1996 increased 5 percent to $1.516 billion, from
$1.448 billion in 1995. Approximately one-half of the increase is attributable
to businesses acquired in 1996, while the remainder of the increase reflects
normal growth in the costs of operations.
Operating income increased 24 percent to $337.2 million, from $271.0 million
in 1995.
NEWSPAPER DIVISION. Newspaper division revenues increased 5 percent to $763.9
million, from $729.2 million in 1995. Advertising revenues at the newspaper
division rose 4 percent over 1995. At The Washington Post, advertising revenues
increased 3 percent as higher rates offset a decline in volume. Retail revenues
at The Washington Post declined 4 percent as a result of a 9 percent decline in
inches. Classified revenues rose 13 percent in 1996 primarily as a result of
higher recruitment volume and associated rates. Other advertising revenues
(including general and preprint) at The Washington Post increased 2 percent.
General advertising volume was essentially unchanged from 1995, though preprint
volume at The Washington Post increased 2 percent.
Circulation revenues for the newspaper division rose 2 percent in 1996 due to
a home delivery price increase at The Washington Post. For the 12-month period
ended September 30, 1996, both daily and Sunday circulation at The Washington
Post declined 1 percent. The Washington Post's share of the market was 48.5
percent penetration in its daily editions and 63.9 percent penetration in its
Sunday editions.
Newspaper division operating margin in 1996 remained at 15 percent,
consistent with 1995. The previously mentioned increases in advertising and
circulation revenues were offset by higher newsprint expense (up 4 percent) and
other normal operating cost increases.
BROADCAST DIVISION. Revenues at the broadcast division rose 9 percent over 1995
to $335.2 million, with both national and
46
<PAGE> 48
local advertising revenues increasing by 10 percent. The improvement for 1996 is
attributable almost entirely to political and Olympics-related advertising as
other categories generally remained unchanged. Network revenues rose 12 percent
in 1996.
Viewership remained strong for the television stations. Four stations were
ranked number one in the latest ratings period, sign-on to sign-off, in their
markets; one station was ranked a strong number two; one station was ranked
number three.
The increases in advertising and network compensation were partially offset
by normal operating cost increases of about 4 percent. As a result, the
operating margin at the broadcast division increased to 46 percent, from 43
percent in 1995. Excluding amortization of goodwill and intangibles, operating
margins for 1996 and 1995 were 50 percent and 47 percent, respectively.
MAGAZINE DIVISION. Newsweek revenues in 1996 increased 7 percent to $377.1
million due primarily to increased advertising revenues at the domestic edition.
Advertising revenues rose 11 percent overall, 16 percent at the domestic
edition. The domestic improvement was due to a 9 percent increase in page volume
as well as the realization of higher advertising rates. Total circulation
revenues for 1996 increased 1 percent over 1995. In 1996 the domestic and
international editions published 52 weekly issues versus 51 issues in 1995.
At Newsweek, the operating margin increased to 6 percent, from 4 percent in
1995. The increased cost of magazine paper, one-time costs associated with the
magazine's decision to outsource its fulfillment operations, and higher general
operating costs offset much of the revenue increase.
CABLE DIVISION. Revenues at the cable division increased 18 percent to $229.7
million in 1996 over 1995. All revenue categories -- basic, tier, pay,
pay-per-view, advertising, and other -- showed improvement from 1995. About
two-thirds of the total increase is attributable to higher average subscriber
counts, with the remainder due to higher rates and increased advertising. During
1996, the number of domestic basic subscribers rose by 15 percent to 594,000.
About 66,000 subscribers were added as a result of cable system acquisitions and
the remainder by internal growth.
Operating margin at the cable division was 24 percent, compared to 21 percent
in 1995. Cable cash flow increased 19 percent to $97.9 million, from $82.0
million in 1995. About half of the improvement in cash flow is attributable to
the results of cable systems acquired in 1996.
OTHER BUSINESSES. In 1996, revenues from other businesses, including Kaplan,
MLJ, PASS Sports, LEGI-SLATE, and Digital Ink, increased 7 percent to $147.6
million, from $137.4 million in 1995. Half of the increase related to Kaplan,
where tuition revenues increased 6 percent. Most of the remainder was due to
PASS Sports, which experienced revenue growth of 18 percent.
Other businesses recorded an operating loss in 1996 of $13.5 million,
compared with a loss of $27.1 million in 1995. The 1995 results included the
write-off of Mammoth Micro Productions as previously mentioned. If all costs
associated with Mammoth Micro Productions are excluded from the 1995 results,
other businesses operating losses amounted to $5.3 million in 1995. The increase
in the 1996 operating loss over this latter amount reflects the company's
increased expenditures for digital media and electronic information services and
other new business ventures.
EQUITY IN EARNINGS OF AFFILIATES. The company's equity in earnings of affiliates
for 1996 declined to $19.7 million, from $24.5 million in 1995. The reduction in
earnings resulted from lower income at the company's affiliated newsprint mills,
which were adversely affected by declining newsprint prices beginning in
mid-1996.
NON-OPERATING ITEMS. Interest income, net of interest expense, was $3.8 million,
compared with $2.4 million in 1995. The increase was a result of lower interest
expense following the retirement of the company's remaining long-term debt in
March 1996. Other income (expense), net in 1996 was a loss of $0.5 million,
compared with income of $13.5 million in 1995. The gain from the sale of the
company's investment in APC is included in the 1995 amount.
INCOME TAXES. The effective tax rate in both 1996 and 1995 was approximately 39
percent.
FINANCIAL CONDITION: CAPITAL RESOURCES AND LIQUIDITY
From 1995 through 1997, the company spent approximately $1.235 billion on
purchases of additional property, plant, and equipment, investments in new
businesses, and the repurchase of Class B common stock. The company also retired
its $50.2 million of long-term debt.
During 1997, the company acquired various businesses for an aggregate
purchase price of about $118.9 million. These acquisitions included, among
others, cable systems serving approximately 16,000 subscribers, the publishing
rights to two computer services industry trade periodicals, the rights to
conduct two computer industry trade shows, and a company that produces job fairs
serving the information systems and technology industry. In 1996, the company
purchased cable systems serving about 66,000 subscribers in four states, for
about $129 million, including $11.9 million of the company's redeemable Series A
Preferred Stock. The company also acquired various other new businesses in 1996
for an aggregate purchase price of about $18.5 million. These acquisitions
include, among others, Comprint, Inc., a commercial printer in the Maryland
suburbs of Washington, D.C., Score Learning Corp., which provides educational
services to students in grades K through 12, and TechNews, Inc., a producer of
business publications for the computer services industry and the Washington-area
technology community.
47
<PAGE> 49
During 1997, the company exchanged the assets of certain cable systems with
Tele-Communications, Inc. resulting in an increase of about 21,000 subscribers
for the company. The company also completed, in 1997, a transaction with
Meredith Corporation whereby the company exchanged the assets of WFSB-TV, the
CBS affiliate in Hartford, Connecticut and $60.0 million in cash for the assets
of WCPX-TV (renamed WKMG), the CBS affiliate in Orlando, Florida.
During 1997, the company sold its 35 percent interest in both Bear Island
Paper Company, L.P., and Bear Island Timberlands Company, L.P., for
approximately $92.8 million. The company also sold the assets of its PASS Sports
subsidiary in 1997 for approximately $27.4 million. In 1995, the company
divested substantially all of its 70 percent limited partnership in APC for a
sales price of approximately $33 million.
During 1997, 1996, and 1995, the company repurchased 846,290, 103,642, and
361,106 shares, respectively, of its Class B common stock at a cost of $368.6
million, $32.3 million, and $89.6 million, respectively. The annual dividend
rate for 1998 was increased to $5.00 per share, from $4.80 per share in 1997,
$4.60 per share in 1996, and $4.40 per share in 1995.
The company estimates that in 1998 it will spend approximately $225.0 million
for plant and equipment, principally for various projects at the newspaper and
cable divisions. This estimate includes about $90.0 million to be expended as
part of a project to provide new production facilities for The Washington Post
newspaper. This project is expected to be substantially completed in late 1998.
In November 1997, the management of Cowles and McClatchy Newspapers, Inc.,
announced that shareholders representing a majority of each of the respective
companies' outstanding voting shares have agreed to vote to approve a series of
transactions whereby Cowles and McClatchy will be merged into a newly created
company (New McClatchy). Under the terms of the proposed merger, each share of
Cowles stock will be converted into a right to receive (based on elections made
by Cowles stockholders) either $90.50 in cash or shares of stock in New
McClatchy, or a combination of cash and New McClatchy stock. The company owns
3,893,796 shares of Cowles stock and intends to submit an election requesting to
be paid in cash for all of its shares. However, depending on the elections made
by other Cowles stockholders, the company may be required to accept up to
approximately 15 percent of the consideration otherwise payable to it in the
form of New McClatchy stock. At December 28, 1997, the carrying value of the
company's investment in Cowles approximated $91,900,000. If and when the merger
described above is completed, the company will adjust the carrying value of such
investment and record the corresponding gain.
At December 28, 1997, the company had $21 million in cash and cash
equivalents. In early 1996, the company established a five-year, $300 million
revolving credit facility with a group of banks to provide for general corporate
purposes and support the issuance of commercial paper. At December 28, 1997, the
company had issued approximately $296.4 million in commercial paper borrowings
at an average interest rate of 5.8 percent. The average short-term borrowings
outstanding during 1997 were approximately $10.7 million. In February 1998, the
company borrowed an additional $45.0 million under a short-term unsecured note
bearing interest at 5.76 percent. The company expects to fund the majority of
its estimated capital needs through internally generated funds. In management's
opinion, the company will have ample liquidity to meet its various cash needs in
1998.
Many computer systems experience problems handling dates beyond the year
1999. Therefore, some computer hardware and software will need to be modified
prior to the year 2000 in order to remain functional. The company has formed a
year 2000 task force which is assessing the readiness of the company's computer
systems and software. The task force has also begun seeking confirmations from
key vendors stating that materials and services provided to the company will not
be interrupted by year 2000 processing issues. The company plans to implement
the system and programming changes necessary to address year 2000 issues, and
does not believe based upon present facts that the cost of such actions will
have a material effect on the company's results of operations or financial
condition.
48
<PAGE> 50
[THIS PAGE INTENTIONALLY LEFT BLANK]
49
<PAGE> 51
TEN-YEAR SUMMARY OF SELECTED HISTORICAL FINANCIAL DATA
See Notes to Consolidated Financial Statements for the summary of significant
accounting policies and additional information relative to the years 1995 -
1997.
<TABLE>
<CAPTION>
(in thousands, except per share amounts) 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
RESULTS OF OPERATIONS
Operating revenues ....................................... $ 1,956,253 $ 1,853,445 $ 1,719,449
Income from operations ................................... $ 381,351 $ 337,169$ $ 271,018
Income before cumulative effect of changes in accounting
principle .............................................. $ 281,574 $ 220,817 $ 190,096
Cumulative effect of change in method of accounting
for income taxes ....................................... -- -- --
Cumulative effect of change in method of accounting
for postretirement benefits other than pensions ........ -- -- --
----------- ----------- -----------
Net income ............................................... $ 281,574 $ 220,817 $ 190,096
=========== =========== ===========
PER SHARE AMOUNTS
Basic earnings per common share
Income before cumulative effect of changes in accounting
principles ........................................... $ 26.23 $ 20.08 $ 17.16
Cumulative effect of changes in accounting principles .. -- -- --
----------- ----------- -----------
Net income ............................................. $ 26.23 $ 20.08 $ 17.16
=========== =========== ===========
Basic average shares outstanding ....................... 10,700 10,964 11,075
Diluted earnings per share
Income before cumulative effect of changes in accounting
principles ........................................... $ 26.15 $ 20.05 $ 17.15
Cumulative effect of changes in accounting principles .. -- -- --
----------- ----------- -----------
Net income ............................................. $ 26.15 $ 20.05 $ 17.15
=========== =========== ===========
Diluted average shares outstanding ..................... 10,733 10,980 11,086
Cash dividends ........................................... $ 4.80 $ 4.60 $ 4.40
Common shareholders' equity .............................. $ 117.36 $ 121.24 $ 107.60
FINANCIAL POSITION
Current assets ........................................... $ 308,492 $ 382,631 $ 406,570
Working capital .......................................... (300,264) 100,995 98,393
Property, plant, and equipment ........................... 653,750 511,363 457,359
Total assets ............................................. 2,077,317 1,870,411 1,732,893
Long-term debt ........................................... -- -- --
Common shareholders' equity .............................. 1,184,074 1,322,803 1,184,204
</TABLE>
50
<PAGE> 52
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990 1989 1988
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 1,613,978 $ 1,498,191 $ 1,450,867 $ 1,380,261 $ 1,438,640 $ 1,444,094 $ 1,367,613
$ 274,875 $ 238,980 $ 232,112 $ 192,866 $ 281,768 $ 313,691 $ 233,290
$ 169,672 $ 153,817 $ 127,796 $ 118,721 $ 174,576 $ 197,893 $ 269,117
-- 11,600 -- -- -- -- --
-- -- -- (47,897) -- -- --
- ----------- ----------- ----------- ----------- ----------- ----------- -----------
$ 169,672 $ 165,417 $ 127,796 $ 70,824 $ 174,576 $ 197,893 $ 269,117
=========== =========== =========== =========== =========== =========== ===========
$ 14.66 $ 13.10 $ 10.81 $ 10.00 $ 14.46 $ 15.51 $ 20.92
-- 0.98 -- (4.04) -- -- --
- ----------- ----------- ----------- ----------- ----------- ----------- -----------
$ 14.66 $ 14.08 $ 10.81 $ 5.96 $ 14.46 $ 15.51 $ 20.92
=========== =========== =========== =========== =========== =========== ===========
11,577 11,746 11,827 11,874 12,073 12,755 12,864
$ 14.65 $ 13.10 $ 10.80 $ 10.00 $ 14.45 $ 15.50 $ 20.91
-- 0.98 -- (4.04) -- -- --
- ----------- ----------- ----------- ----------- ----------- ----------- -----------
$ 14.65 $ 14.08 $ 10.80 $ 5.96 $ 14.45 $ 15.50 $ 20.91
=========== =========== =========== =========== =========== =========== ===========
11,582 11,750 11,830 11,876 12,081 12,768 12,873
$ 4.20 $ 4.20 $ 4.20 $ 4.20 $ 4.00 $ 1.84 $ 1.56
$ 99.32 $ 92.84 $ 84.17 $ 78.12 $ 76.31 $ 75.40 $ 67.50
$ 375,879 $ 625,574 $ 524,975 $ 472,219 $ 471,669 $ 553,188 $ 493,736
102,806 367,041 242,627 183,959 175,807 283,118 235,698
411,396 363,718 390,804 390,313 394,979 370,597 352,113
1,696,868 1,622,504 1,568,121 1,487,661 1,496,509 1,532,211 1,422,267
50,297 51,768 51,842 51,915 126,988 152,061 154,751
1,126,933 1,087,419 993,005 924,285 905,112 941,522 868,240
</TABLE>
51
<PAGE> 53
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
NUMBER
<S> <C> <C>
3.1 -- Certificate of Incorporation of the Company as amended through May 12, 1988, and the
Certificate of Designation for the Company's Series A Preferred Stock filed January 22, 1996
(incorporated by reference to Exhibit 3.1 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995).
3.2 -- By-Laws of the Company as amended through September 9, 1993 (incorporated by reference to
Exhibit 3 to the Company's Quarterly Report on Form 10-Q for the quarter ended October 3,
1993).
4.1 -- Credit Agreement dated as of March 17, 1998, among the Company, Citibank, N.A., Wachovia Bank
of Georgia, N.A., and the other Lenders named therein.
10.1 -- The Washington Post Company Annual Incentive Compensation Plan as amended and restated
effective June 30, 1995 (incorporated by reference to Exhibit 10.1 to the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1996).*
10.2 -- The Washington Post Company Long-Term Incentive Compensation Plan as amended and restated
effective June 30, 1995 (incorporated by reference to Exhibit 10.2 to the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1996).*
10.3 -- The Washington Post Company Stock Option Plan as amended and restated through March 12, 1998.*
10.4 -- The Washington Post Company Supplemental Executive Retirement Plan as amended and restated effective
December 31, 1993 (incorporated by reference to Exhibit 10.4 to the Company's Annual Report on
Form 10-K for the fiscal year ended January 2, 1994).*
10.5 -- The Washington Post Company Deferred Compensation Plan effective November 15, 1996
(incorporated by reference to Exhibit 10 to the Company's Quarterly Report on Form 10-Q for
the quarter ended September 29, 1996.)*
11 -- Calculation of earnings per share of common stock.
21 -- List of subsidiaries of the Company.
23 -- Consent of independent accountants.
24 -- Power of attorney dated March 13, 1997 (incorporated by reference to Exhibit 24 to the Company's
Annual Report on Form 10-K for the fiscal year ended December 28, 1997).
27 -- Financial Data Schedule.
</TABLE>
- ---------
* A management contract or compensatory plan or arrangement required to
be included as an exhibit hereto pursuant to Item 14(c) of Form 10-K.
52
<PAGE> 1
EXHIBIT 4.1
EXECUTION COPY
U.S. $500,000,000
CREDIT AGREEMENT
Dated as of March 17, 1998
Among
THE WASHINGTON POST COMPANY
as Borrower
and
THE INITIAL LENDERS NAMED HEREIN
as Initial Lenders
and
CITIBANK, N.A.
as Administrative Agent
and
WACHOVIA BANK, N.A.
as Documentation Agent
<PAGE> 2
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms........................................ 1
SECTION 1.02. Computation of Time Periods.................................. 15
SECTION 1.03. Accounting Terms............................................. 15
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Revolving Credit Advances................................ 16
SECTION 2.02. Making the Revolving Credit Advances......................... 16
SECTION 2.03. The Competitive Bid Advances................................. 18
SECTION 2.04. Fees......................................................... 22
SECTION 2.05. Termination, Reduction or Increase of the Commitments........ 22
SECTION 2.06. Repayment.................................................... 25
SECTION 2.07. Interest on Revolving Credit Advances........................ 25
SECTION 2.08. Interest Rate Determination.................................. 25
SECTION 2.09. Optional Conversion of Revolving Credit Advances............. 27
SECTION 2.10. Optional Prepayments of Revolving Credit Advances............ 27
SECTION 2.11. Increased Costs.............................................. 27
SECTION 2.12. Illegality................................................... 29
SECTION 2.13. Payments and Computations.................................... 30
SECTION 2.14. Taxes........................................................ 31
SECTION 2.15. Sharing of Payments, Etc..................................... 33
SECTION 2.16. Use of Proceeds.............................................. 33
ARTICLE III
CONDITIONS TO EFFECTIVENESS AND LENDING
SECTION 3.01. Conditions Precedent to Effectiveness of
Sections 2.01 and 2.03........................... 34
SECTION 3.02. Conditions Precedent to Each Revolving Credit Borrowing...... 35
SECTION 3.03. Conditions Precedent to Each Competitive Bid Borrowing....... 35
SECTION 3.04. Determinations Under Section 3.01............................ 36
<PAGE> 3
ii
PAGE
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrower............... 36
ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01. Affirmative Covenants........................................ 37
SECTION 5.02. Negative Covenants........................................... 40
SECTION 5.03. Financial Covenant........................................... 41
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default............................................ 42
ARTICLE VII
THE AGENT
SECTION 7.01. Authorization and Action..................................... 44
SECTION 7.02. Agent's Reliance, Etc........................................ 44
SECTION 7.03. Citibank and Affiliates...................................... 45
SECTION 7.04. Lender Credit Decision....................................... 45
SECTION 7.05. Indemnification.............................................. 45
SECTION 7.06. Successor Agent.............................................. 46
SECTION 7.07. Co-Agent..................................................... 46
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc.............................................. 46
SECTION 8.02. Notices, Etc................................................. 47
<PAGE> 4
iii
PAGE
SECTION 8.03. No Waiver; Remedies......................................... 47
SECTION 8.04. Costs and Expenses.......................................... 47
SECTION 8.05. Right of Set-off............................................ 49
SECTION 8.06. Binding Effect.............................................. 49
SECTION 8.07. Assignments and Participations.............................. 49
SECTION 8.08. Confidentiality............................................. 52
SECTION 8.09. Governing Law............................................... 52
SECTION 8.10. Execution in Counterparts................................... 53
SECTION 8.11. Jurisdiction, Etc........................................... 53
SECTION 8.12. Waiver of Jury Trial........................................ 54
<PAGE> 5
iv
Schedules
Schedule I - List of Applicable Lending Offices
Schedule 5.02(a) - Existing Liens
Exhibits
Exhibit A-1 - Form of Revolving Credit Note
Exhibit A-2 - Form of Competitive Bid Note
Exhibit B-1 - Form of Notice of Revolving Credit Borrowing
Exhibit B-2 - Form of Notice of Competitive Bid Borrowing
Exhibit C - Form of Assignment and Acceptance
Exhibit D - Form of Assumption Agreement
Exhibit E - Form of Opinion of Counsel for the Borrower
<PAGE> 6
CREDIT AGREEMENT
Dated as of March 17, 1998
The Washington Post Company, a Delaware corporation (the
"Borrower"), the banks, financial institutions and other institutional lenders
(the "Initial Lenders") listed on the signature pages hereof, Citibank, N.A.
("Citibank"), as administrative agent (the "Agent") for the Lenders (as
hereinafter defined), and Wachovia Bank, N.A. ("Wachovia"), as documentation
agent (the "Co-Agent") for the Lenders, agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As used in this
Agreement, the following terms shall have the following meanings (such meanings
to be equally applicable to both the singular and plural forms of the terms
defined):
"Advance" means a Revolving Credit Advance or a Competitive
Bid Advance.
"Affiliate" means, as to any Person, any other Person that,
directly or indirectly, controls, is controlled by or is under common
control with such Person or is a director or executive officer of such
Person. For purposes of this definition, the term "control" (including
the terms "controlling", "controlled by" and "under common control
with") of a Person means the possession, direct or indirect, of the
power to vote 10% or more of the Voting Stock of such Person or to
direct or cause the direction of the management and policies of such
Person, whether through the ownership of Voting Stock, by contract or
otherwise.
"Agent's Account" means the account of the Agent maintained by
the Agent at Citibank with its office at 399 Park Avenue, New York, New
York 10043, Account No. 3685-2248, Attention: Bruce MacKenzie.
"Applicable Lending Office" means, with respect to each
Lender, such Lender's Domestic Lending Office in the case of a Base
Rate Advance and such Lender's Eurodollar Lending Office in the case of
a Eurodollar Rate Advance and, in the case of a Competitive Bid
Advance, the office of such Lender notified by such Lender to the Agent
as its Applicable Lending Office with respect to such Competitive Bid
Advance.
"Applicable Margin" means, as of any date, a percentage per
annum determined by reference to the Performance Level in effect on
such date as set forth below:
<PAGE> 7
2
<TABLE>
<CAPTION>
Performance Applicable Margin Applicable Margin for
Level for Eurodollar Rate
Base Rate Advances Advances
============== ================== =====================
<S> <C> <C>
I 0% 0.100%
II 0% 0.095%
III 0% 0.150%
IV 0% 0.250%
V 0% 0.300%
============== ================== =====================
</TABLE>
"Applicable Percentage" means, as of any date, a percentage
per annum determined by reference to the Performance Level in effect on
such date as set forth below:
Performance Level Applicable
Percentage
================= ==========
I 0.050%
II 0.055%
III 0.075%
IV 0.125%
V 0.175%
================== ==========
<PAGE> 8
3
"Assignment and Acceptance" means an assignment and acceptance
entered into by a Lender and an Eligible Assignee, accepted and
approved by the Agent and approved by the Borrower, in substantially
the form of Exhibit C hereto.
"Assuming Lender" means an Eligible Assignee not previously a
Lender that becomes a Lender hereunder pursuant to Section 2.05(b).
"Assumption Agreement" means an agreement in substantially the
form of Exhibit D hereto by which an Eligible Assignee agrees to become
a Lender hereunder pursuant to Section 2.05(b), in each case agreeing
to be bound by all obligations of a Lender hereunder.
"Base Rate" means a fluctuating interest rate per annum in
effect from time to time, which rate per annum shall at all times be
equal to the higher of:
(a) the rate of interest announced publicly by
Citibank in New York, New York, from time to time, as
Citibank's base rate; and
(b) 1/2 of one percent per annum above the Federal
Funds Rate.
"Base Rate Advance" means a Revolving Credit Advance that
bears interest as provided in Section 2.07(a)(i).
"Borrowing" means a Revolving Credit Borrowing or a
Competitive Bid Borrowing.
"Business Day" means a day of the year on which banks are not
required or authorized by law to close in New York City and, if the
applicable Business Day relates to any Eurodollar Rate Advances, on
which dealings are carried on in the London interbank market.
"Commercial Paper Rating" means, as of any date, the lowest
rating that has been most recently announced by either S&P or Moody's,
as the case may be, for short term public unsecured senior debt issued
by the Borrower. For purposes of the foregoing, (a) if any rating
established by S&P or Moody's shall be changed, such change shall be
effective as of the date on which such change is first announced
publicly by the rating agency making such change; and (b) if S&P or
Moody's shall change the basis on which ratings are established, each
reference to the Commercial Paper Rating announced by S&P or Moody's,
as the case may be, shall refer to the then equivalent rating by S&P
or Moody's, as the case may be.
<PAGE> 9
4
"Commitment" means, with respect to any Lender at any time (i)
the amount set forth opposite such Lender's name on the signature pages
hereof, (ii) if such Lender has become a Lender hereunder pursuant to
an Assumption Agreement, the amount set forth as its Commitment in such
Assumption Agreement or (iii) if such Lender has entered into one or
more Assignments and Acceptances, set forth for such Lender in the
Register maintained by the Agent pursuant to Section 8.07(d), as such
amount may be increased, terminated or reduced, as the case may be, at
or prior to such time pursuant to Section 2.05.
"Commitment Date" has the meaning specified in Section
2.05(b)(i).
"Commitment Increase" has the meaning specified in Section
2.05(b)(i).
"Competitive Bid Advance" means an advance by a Lender to the
Borrower as part of a Competitive Bid Borrowing resulting from the
competitive bidding procedure described in Section 2.03 and refers to a
Fixed Rate Advance or a LIBO Rate Advance.
"Competitive Bid Borrowing" means a borrowing consisting of
simultaneous Competitive Bid Advances from each of the Lenders whose
offer to make one or more Competitive Bid Advances as part of such
borrowing has been accepted under the competitive bidding procedure
described in Section 2.03.
"Competitive Bid Note" means a promissory note of the Borrower
(bearing an original or facsimile signature) payable to the order of
any Lender, in substantially the form of Exhibit A-2 hereto, evidencing
the indebtedness of the Borrower to such Lender resulting from a
Competitive Bid Advance made by such Lender.
"Confidential Information" means information that the Borrower
furnishes to the Agent, Co-Agent or any Lender in a writing designated
as confidential, but does not include any such information that is or
becomes generally available to the public or that is or becomes
available to the Agent or such Lender from a source other than the
Borrower that is not, to the best of the Agent's, the Co-Agent's or
such Lender's knowledge, acting in violation of a confidentiality
agreement with or for the benefit of the Borrower.
"Consolidated" refers to the consolidation of accounts in
accordance with GAAP.
"Continuing Directors" means individuals who at the date
hereof are directors of the Borrower and any other director (i) whose
election or nomination was approved by a majority of the then
Continuing Directors or (b) who was nominated by management at a time
when Continuing Directors constituted a majority of the board of
directors of the Borrower.
<PAGE> 10
5
"Convert", "Conversion" and "Converted" each refers to a
conversion of Revolving Credit Advances of one Type into Revolving
Credit Advances of the other Type pursuant to Section 2.08 or 2.09.
"Debt" of any Person means, without duplication, (a) all
indebtedness of such Person for borrowed money, (b) all obligations of
such Person for the deferred purchase price of property or services
(other than trade payables not overdue by more than 120 days incurred
in the ordinary course of such Person's business), (c) all obligations
of such Person evidenced by notes, bonds, debentures or other similar
instruments, (d) all obligations of such Person created or arising
under any conditional sale or other title retention agreement with
respect to property acquired by such Person (even though the rights and
remedies of the seller or lender under such agreement in the event of
default are limited to repossession or sale of such property), (e) all
obligations of such Person as lessee under leases that have been or
should be, in accordance with GAAP, recorded as capital leases, (f) all
obligations, contingent or otherwise, of such Person in respect of
acceptances, letters of credit or similar extensions of credit, (g) all
Debt of others referred to in clauses (a) through (f) above or clause
(h) below guaranteed directly or indirectly in any manner by such
Person, or in effect guaranteed directly or indirectly by such Person
through an agreement (1) to pay or purchase such Debt or to advance or
supply funds for the payment or purchase of such Debt, (2) to purchase,
sell or lease (as lessee or lessor) property, or to purchase or sell
services, primarily for the purpose of enabling the debtor to make
payment of such Debt or to assure the holder of such Debt against loss,
(3) to supply funds to or in any other manner invest in the debtor
(including any agreement to pay for property or services irrespective
of whether such property is received or such services are rendered) or
(4) otherwise to assure a creditor against loss, and (h) all Debt
referred to in clauses (a) through (g) above secured by (or for which
the holder of such Debt has an existing right, contingent or otherwise,
to be secured by) any Lien on property (including, without limitation,
accounts and contract rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such Debt.
"Default" means any Event of Default or any event that would
constitute an Event of Default but for the requirement that notice be
given or time elapse or both.
"Domestic Lending Office" means, with respect to any Initial
Lender, the office of such Lender specified as its "Domestic Lending
Office" opposite its name on Schedule I hereto and, with respect to any
other Lender, the office of such Lender specified as its "Domestic
Lending Office" in the Assumption Agreement or in the Assignment and
Acceptance pursuant to which it became a Lender, or such other office
of such Lender as such Lender may from time to time specify to the
Borrower and the Agent.
<PAGE> 11
6
"Downgrade" means, with respect to any Lender, the lowest
rating that has been most recently announced for any class of
non-credit enhanced long-term senior unsecured debt issued by such
Lender is lower than BBB- by S&P or Baa3 by Moody's.
"Effective Date" has the meaning specified in Section 3.01.
"Eligible Assignee" means (i) a Lender; (ii) an Affiliate of a
Lender; (iii) a commercial bank organized under the laws of the United
States, or any State thereof, and having total assets in excess of
$5,000,000,000; (iv) a savings and loan association or savings bank
organized under the laws of the United States, or any State thereof,
and having total assets in excess of $5,000,000,000; (v) a commercial
bank organized under the laws of any other country that is a member of
the Organization for Economic Cooperation and Development or has
concluded special lending arrangements with the International Monetary
Fund associated with its General Arrangements to Borrow or of the
Cayman Islands, or a political subdivision of any such country, and
having total assets in excess of $5,000,000,000 so long as such bank is
acting through a branch or agency located in the United States or in
the country in which it is organized or another country that is
described in this clause (v); (vi) the central bank of any country that
is a member of the Organization for Economic Cooperation and
Development; and (vii) any other Person approved by the Agent and the
Borrower, such approval not to be unreasonably withheld or delayed;
provided, however, that neither the Borrower nor an Affiliate of the
Borrower shall qualify as an Eligible Assignee.
"Environmental Action" means any action, suit, demand, demand
letter, claim, notice of non-compliance or violation, notice of
liability or potential liability, consent order or consent agreement
relating in any way to any Environmental Law, Environmental Permit or
Hazardous Materials or arising from alleged injury or threat of injury
to health, safety or the environment, including, without limitation,
(a) by any governmental or regulatory authority for enforcement,
cleanup, removal, response, remedial or other actions or damages and
(b) by any governmental or regulatory authority or any third party for
damages, contribution, indemnification, cost recovery, compensation or
injunctive relief.
"Environmental Law" means any federal, state, local or foreign
statute, law, ordinance, rule, regulation, code, order, judgment or
decree relating to pollution or protection of the environment, health,
safety or natural resources, including, without limitation, those
relating to the use, handling, transportation, treatment, storage,
disposal, release or discharge of Hazardous Materials.
"Environmental Permit" means any permit, approval,
identification number, license or other authorization required under
any Environmental Law.
<PAGE> 12
7
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and
rulings issued thereunder.
"ERISA Affiliate" means any Person that for purposes of Title
IV of ERISA is a member of the Borrower's controlled group, or under
common control with the Borrower, within the meaning of Section 414(b)
or (c) of the Internal Revenue Code or, solely for purposes of Sections
302 and 303 of ERISA and Section 412 of the Internal Revenue Code, is
treated as a single employer under Section 414(b), (c), (m) and (o) of
the Internal Revenue Code.
"ERISA Event" means (a) (i) the occurrence of a reportable
event, within the meaning of Section 4043 of ERISA, with respect to any
Plan unless the 30-day notice requirement with respect to such event
has been waived by the PBGC, or (ii) the requirements of subsection (1)
of Section 4043(b) of ERISA (without regard to subsection (2) of such
Section) are met with a contributing sponsor, as defined in Section
4001(a)(13) of ERISA, of a Plan, and an event described in paragraph
(9), (10), (11), (12) or (13) of Section 4043(c) of ERISA is reasonably
expected to occur with respect to such Plan within the following 30
days; (b) the application for a minimum funding waiver with respect to
a Plan; (c) the provision by the administrator of any Plan of a notice
of intent to terminate such Plan pursuant to Section 4041(a)(2) of
ERISA (including any such notice with respect to a plan amendment
referred to in Section 4041(e) of ERISA); (d) the cessation of
operations at a facility of the Borrower or any ERISA Affiliate in the
circumstances described in Section 4062(e) of ERISA; (e) the withdrawal
by the Borrower or any ERISA Affiliate from a Multiple Employer Plan
during a plan year for which it was a substantial employer, as defined
in Section 4001(a)(2) of ERISA; (f) the conditions for the imposition
of a lien under Section 302(f) of ERISA shall have been met with
respect to any Plan; (g) the adoption of an amendment to a Plan
requiring the provision of security to such Plan pursuant to Section
307 of ERISA; or (h) the institution by the PBGC of proceedings to
terminate a Plan pursuant to Section 4042 of ERISA, or the occurrence
of any event or condition described in Section 4042 of ERISA that
constitutes grounds for the termination of, or the appointment of a
trustee to administer, a Plan.
"Eurocurrency Liabilities" has the meaning assigned to that
term in Regulation D of the Board of Governors of the Federal Reserve
System, as in effect from time to time.
"Eurocurrency Reserve Requirements" means the aggregate of the
maximum reserve percentages (including any marginal, special, emergency
or supplemental reserves) expressed as a decimal established by the
Board of Governors of the Federal Reserve System and any other banking
authority to which any Lender is subject and applicable to Eurocurrency
Liabilities, or any similar category of assets or liabilities relating
to
<PAGE> 13
8
eurocurrency fundings. Eurocurrency Reserve Requirements shall be
adjusted automatically on and as of the effective date of any change in
any reserve percentage.
"Eurodollar Lending Office" means, with respect to any Initial
Lender, the office of such Lender specified as its "Eurodollar Lending
Office" opposite its name on Schedule I hereto and, with respect to any
other Lender, the office of such Lender specified as its "Eurodollar
Lending Office" in the Assumption Agreement or in the Assignment and
Acceptance pursuant to which it became a Lender (or, if no such office
is specified, its Domestic Lending Office), or such other office of
such Lender as such Lender may from time to time specify to the
Borrower and the Agent.
"Eurodollar Rate" means, for any Interest Period for each
Eurodollar Rate Advance comprising part of the same Revolving Credit
Borrowing, an interest rate per annum equal to the average (rounded
upward to the nearest whole multiple of 1/16 of 1% per annum, if such
average is not such a multiple) of the rate per annum at which deposits
in U.S. dollars are offered to the principal office of each of the
Reference Banks in London, England by prime banks in the London
interbank market at 11:00 A.M. (London time) two Business Days before
the first day of such Interest Period in an amount substantially equal
to such Reference Bank's Eurodollar Rate Advance comprising part of
such Revolving Credit Borrowing to be outstanding during such Interest
Period and for a period equal to such Interest Period. The Eurodollar
Rate for any Interest Period for each Eurodollar Rate Advance
comprising part of the same Revolving Credit Borrowing shall be
determined by the Agent on the basis of applicable rates furnished to
and received by the Agent from the Reference Banks two Business Days
before the first day of such Interest Period, subject, however, to the
provisions of Section 2.08.
"Eurodollar Rate Advance" means a Revolving Credit Advance
that bears interest as provided in Section 2.07(a)(ii).
"Events of Default" has the meaning specified in Section 6.01.
"Federal Funds Rate" means, for any period, a fluctuating
interest rate per annum equal for each day during such period to the
weighted average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds
brokers, as published for such day (or, if such day is not a Business
Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day that is a
Business Day, the average of the quotations for such day on such
transactions received by the Agent from three Federal funds brokers of
recognized standing selected by it with the consent of the Borrower.
"Fixed Rate Advances" has the meaning specified in Section
2.03(a)(i).
<PAGE> 14
9
"GAAP" has the meaning specified in Section 1.03.
"Graham Interests" shall mean Katharine Graham and her
siblings, their descendants and any relative by marriage of the
foregoing, and any trust for the benefit of any of the foregoing
whether as an income or residual beneficiary.
"Hazardous Materials" means (a) petroleum and petroleum
products, byproducts or breakdown products, radioactive materials,
asbestos-containing materials, polychlorinated biphenyls and radon gas
and (b) any other chemicals, materials or substances designated,
classified or regulated as hazardous or toxic under any Environmental
Law and any pollutant or contaminant regulated under the Clean Water
Act, 33 U.S.C. Sections 1251 et seq., or the Clean Air Act, 42 U.S.C.
Sections 7401 et seq.
"Increase Date" has the meaning specified in Section
2.05(b)(i).
"Increasing Lender" has the meaning specified in Section
2.05(b)(i).
"Information Memorandum" means the information memorandum
dated February 25, 1998 used by the Agent in connection with the
syndication of the Commitments.
"Interest Period" means, for each Eurodollar Rate Advance
comprising part of the same Revolving Credit Borrowing and each LIBO
Rate Advance comprising part of the same Competitive Bid Borrowing, the
period commencing on the date of such Eurodollar Rate Advance or LIBO
Rate Advance or the date of the Conversion of any Base Rate Advance
into such Eurodollar Rate Advance and ending on the last day of the
period selected by the Borrower pursuant to the provisions below and,
thereafter, with respect to Eurodollar Rate Advances, each subsequent
period commencing on the last day of the immediately preceding Interest
Period and ending on the last day of the period selected by the
Borrower pursuant to the provisions below. The duration of each such
Interest Period shall be one, two, three or six months or, if available
to all the Lenders, nine or twelve months, as the Borrower may, upon
notice received by the Agent not later than 11:00 A.M. (New York City
time) on the third Business Day prior to the first day of such Interest
Period, select; provided, however, that:
(i) the Borrower may not select any Interest Period
that ends after the Termination Date in effect at the time of
such selection;
(ii) Interest Periods commencing on the same date for
Eurodollar Rate Advances comprising part of the same Revolving
Credit Borrowing or for LIBO Rate Advances comprising part of
the same Competitive Bid Borrowing shall be of the same
duration;
<PAGE> 15
10
(iii) whenever the last day of any Interest Period
would otherwise occur on a day other than a Business Day, the
last day of such Interest Period shall be extended to occur
on the next succeeding Business Day, provided, however, that,
if such extension would cause the last day of such Interest
Period to occur in the next following calendar month, the
last day of such Interest Period shall occur on the next
preceding Business Day; and
(iv) whenever the first day of any Interest Period
occurs on a day of an initial calendar month for which there
is no numerically corresponding day in the calendar month
that succeeds such initial calendar month by the number of
months equal to the number of months in such Interest Period,
such Interest Period shall end on the last Business Day of
such succeeding calendar month.
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended from time to time, and the regulations promulgated and
rulings issued thereunder.
"Lenders" means the Initial Lenders, each Assuming Lender that
shall become a party hereto pursuant to Section 2.05(b) and each Person
that shall become a party hereto pursuant to Section 8.07.
"LIBO Rate" means, for any Interest Period for all LIBO Rate
Advances comprising part of the same Competitive Bid Borrowing, an
interest rate per annum equal to the average (rounded upward to the
nearest whole multiple of 1/16 of 1% per annum, if such average is not
such a multiple) of the rate per annum at which deposits in U.S.
dollars are offered to the principal office of each of the Reference
Banks in London, England by prime banks in the London interbank market
at 11:00 A.M. (London time) two Business Days before the first day of
such Interest Period in an amount substantially equal to the amount
that would be the Reference Banks' respective ratable shares of such
Borrowing if such Borrowing were to be a Revolving Credit Borrowing to
be outstanding during such Interest Period and for a period equal to
such Interest Period. The LIBO Rate for any Interest Period for each
LIBO Rate Advance comprising part of the same Competitive Bid Borrowing
shall be determined by the Agent on the basis of applicable rates
furnished to and received by the Agent from the Reference Banks two
Business Days before the first day of such Interest Period, subject,
however, to the provisions of Section 2.08.
"LIBO Rate Advances" has the meaning specified in Section
2.03(a)(i).
"Lien" means any lien, security interest or other charge or
encumbrance of any kind, or any other type of preferential arrangement,
including, without limitation, the lien
<PAGE> 16
11
or retained security title of a conditional vendor and any easement,
right of way or other encumbrance on title to real property.
"Margin Stock" has the meaning assigned to such term under
Regulation U of the Board of Governors of the Federal Reserve System of
the United States as from time to time in effect and all official
rulings and interpretations thereunder or thereof.
"Material Adverse Change" means any material adverse change in
the business, financial condition or results of operations of the
Borrower and its Subsidiaries taken as a whole.
"Material Adverse Effect" means a material adverse effect on
(a) the business, financial condition or results of operations of the
Borrower and its Subsidiaries taken as a whole, (b) the rights and
remedies of the Agent or any Lender under this Agreement or any Note or
(c) the ability of the Borrower to perform its obligations under this
Agreement or any Note.
"Moody's" means Moody's Investors Service, Inc.
"Multiemployer Plan" means a multiemployer plan, as defined in
Section 4001(a)(3) of ERISA, to which the Borrower or any ERISA
Affiliate is making or accruing an obligation to make contributions, or
has within any of the preceding five plan years made or accrued an
obligation to make contributions.
"Multiple Employer Plan" means a single employer plan, as
defined in Section 4001(a)(15) of ERISA, that (a) is maintained for
employees of the Borrower or any ERISA Affiliate and at least one
Person other than the Borrower and the ERISA Affiliates or (b) was so
maintained and in respect of which the Borrower or any ERISA Affiliate
could have liability under Section 4064 or 4069 of ERISA in the event
such plan has been or were to be terminated.
"Non-Recourse Debt" shall mean Debt of the Borrower or its
Subsidiaries incurred (a) as to which neither the Borrower nor any of
its Subsidiaries (i) provides credit support (including any
undertaking, agreement or instrument which would constitute Debt) or
has given or made other written assurances regarding repayment or the
maintenance of capital or liquidity except such assurances as may be
approved by the Required Lenders (such approval not to be unreasonably
withheld or delayed), (ii) is directly or indirectly liable or (iii)
constitutes the lender and (b) the obligees of which will have recourse
solely to certain identified assets (the loss of which would not
reasonably be expected to have a Material Adverse Effect) for repayment
of the principal of and interest on such Debt and
<PAGE> 17
12
any fees, indemnities, expenses, reimbursements or other amounts of
whatever nature accrued or payable in connection with such Debt.
"Note" means a Revolving Credit Note or a Competitive Bid
Note.
"Notice of Competitive Bid Borrowing" has the meaning
specified in Section 2.03(a).
"Notice of Revolving Credit Borrowing" has the meaning
specified in Section 2.02(a).
"PBGC" means the Pension Benefit Guaranty Corporation (or any
successor).
"Performance Level" means, as of any date of the
determination, the level set forth below as then in effect, as
determined in accordance with the following provisions of this
definition:
Level I:Public Debt Rating of not lower than AA+ by S&P or not
lower than Aa1 by Moody's.
Level II:Public Debt Rating of lower than Level I but not
lower than AA- by S&P or Aa3 by Moody's; or, if no Public Debt
Rating is available from S&P or Moody's, Commercial Paper
Rating of not lower than A-1+ by S&P and P-1 by Moody's.
Level III:
Public Debt Rating of lower than Level II but not lower than
A- by S&P or A3 by Moody's; or, if no Public Debt Rating is
available from S&P or Moody's, Commercial Paper Rating of not
lower than A-2 from S&P and P-2 from Moody's.
Level IV:
Public Debt Rating of lower than Level III but not lower than
BBB by S&P or Baa2 by Moody's or, if no Public Debt Rating is
available from S&P or Moody's, Commercial Paper Rating of not
lower than A-3 from S&P and P-3 by Moody's.
Level V:
Public Debt Rating or Commercial Paper Rating lower than
Level IV or no Public Debt Rating or Commercial Paper Rating.
For purposes of the foregoing, (a) if only one of S&P and
Moody's shall have in effect a Public Debt Rating, the
Performance Level shall be determined by reference to the
available rating, (b) if the Public Debt Ratings established
by S&P
<PAGE> 18
13
and Moody's shall fall within different Performance
Levels, the Performance Level shall be based upon the higher
rating, provided that if the lower of such ratings is more
than one level below the higher of such ratings, the
Performance Level shall be based on the level immediately
above such lower rating, (c) if only one of S&P and Moody's
shall have in effect a Commercial Paper Rating, the
Performance Level shall be determined by reference to the
available rating and (d) if the Commercial Paper Ratings
established by S&P and Moody's shall fall within different
Performance Levels, the Performance Level shall be based upon
the lower rating.
"Permitted Liens" means any of the following:
(a) Liens for taxes, assessments and governmental
charges or levies to the extent not required to be paid under
Section 5.01(b) hereof;
(b) Liens imposed by law, such as materialmen's,
mechanics', carriers', workmen's and repairmen's Liens and
other similar Liens arising in the ordinary course of
business securing obligations (other than Debt) that (i) are
not overdue for a period of more than 120 days or (ii) are
being contested in good faith and by proper proceedings and
as to which appropriate reserves are being maintained in
accordance with GAAP;
(c) Pledges or deposits to secure obligations under
workers' compensation laws or similar legislation or to
secure public or statutory obligations;
(d) Liens securing the performance of or payment in
respect of, bids, tenders, government contracts (other than
for the repayment of Debt), surety and appeal bonds and other
obligations of a similar nature incurred in the ordinary
course of business; and
(e) Easements, rights of way and other encumbrances
on title to real property that do not materially adversely
affect the use of such property for its present purposes.
"Person" means an individual, partnership, corporation
(including a business trust), joint stock company, trust,
unincorporated association, joint venture, limited liability company or
other entity, or a government or any political subdivision or agency
thereof.
<PAGE> 19
14
"Plan" means a Single Employer Plan or a Multiple Employer
Plan subject to the provisions of Title IV of ERISA or Section 412 of
the Internal Revenue Code or Section 302 of ERISA.
"Pro Rata Share" of any amount means, with respect to any
Lender at any time, the product of such amount times a fraction the
numerator of which is the amount of such Lender's Commitment at such
time and the denominator of which is the aggregate of the Commitments
of the Lenders at such time.
"Public Debt Rating" means, as of any date, the lowest rating
that has been most recently announced by either S&P or Moody's, as the
case may be, for any class of non-credit enhanced long-term senior
unsecured debt issued by the Borrower. For purposes of the foregoing,
(a) if any rating established by S&P or Moody's shall be changed, such
change shall be effective as of the date on which such change is first
announced publicly by the rating agency making such change; and (b) if
S&P or Moody's shall change the basis on which ratings are
established, each reference to the Public Debt Rating announced by S&P
or Moody's, as the case may be, shall refer to the then equivalent
rating by S&P or Moody's, as the case may be.
"Reference Banks" means Citibank, Wachovia and The Bank of New
York.
"Register" has the meaning specified in Section 8.07(d).
"Required Lenders" means at any time Lenders owed at least a
majority in interest of the then aggregate unpaid principal amount of
the Revolving Credit Advances owing to Lenders, or, if no such
principal amount is then outstanding, Lenders having at least a
majority in interest of the Commitments.
"Revolving Credit Advance" means an advance by a Lender to the
Borrower as part of a Revolving Credit Borrowing and refers to a Base
Rate Advance or a Eurodollar Rate Advance (each of which shall be a
"Type" of Revolving Credit Advance).
"Revolving Credit Borrowing" means a borrowing consisting of
simultaneous Revolving Credit Advances of the same Type made by each of
the Lenders pursuant to Section 2.01.
"Revolving Credit Note" means a promissory note of the
Borrower (bearing an original or facsimile signature) payable to the
order of any Lender, in substantially the form of Exhibit A-1 hereto,
evidencing the aggregate indebtedness of the Borrower to such Lender
resulting from the Revolving Credit Advances made by such Lender.
<PAGE> 20
15
"S&P" means Standard & Poor's Ratings Group, a division of The
McGraw-Hill Companies, Inc.
"Shareholders' Equity" means "shareholders' equity" as such
term is construed in accordance with GAAP and as reported in the
Borrower's reports and registration statements filed with the
Securities and Exchange Commission or any national securities exchange.
"Significant Subsidiary" shall mean any Subsidiary that would
be a "significant subsidiary" within the meaning of Rule 1-02 of the
SEC's Regulation S-X.
"Single Employer Plan" means a single employer plan, as
defined in Section 4001(a)(15) of ERISA, that (a) is maintained for
employees of the Borrower or any ERISA Affiliate and no Person other
than the Borrower and the ERISA Affiliates or (b) was so maintained
and in respect of which the Borrower or any ERISA Affiliate could have
liability under Section 4069 of ERISA in the event such plan has been
or were to be terminated.
"Subsidiary" of any Person means any corporation, partnership,
joint venture, limited liability company, trust or estate of which (or
in which) more than 50% of (a) the issued and outstanding capital stock
having ordinary voting power to elect a majority of the Board of
Directors of such corporation (irrespective of whether at the time
capital stock of any other class or classes of such corporation shall
or might have voting power upon the occurrence of any contingency), (b)
the interest in the capital or profits of such limited liability
company, partnership or joint venture or (c) the beneficial interest in
such trust or estate is at the time directly or indirectly owned or
controlled by such Person, by such Person and one or more of its other
Subsidiaries or by one or more of such Person's other Subsidiaries.
"Termination Date" means the earlier of March 17, 2003 and the
date of termination in whole of the Commitments pursuant to Section
2.05 or 6.01.
"Unused Commitment" means, with respect to any Lender at any
time, (a) such Lender's Commitment at such time minus (b) the sum of
(i) the aggregate principal amount of all Revolving Credit Advances
made by such Lender and outstanding at such time, plus (ii) such
Lender's Pro Rata Share of the aggregate principal amount of the
Competitive Bid Advances then outstanding.
"Voting Stock" means capital stock issued by a corporation, or
equivalent interests in any other Person, the holders of which are
ordinarily, in the absence of contingencies, entitled to vote for the
election of not less than a majority of the directors (or persons
<PAGE> 21
16
performing similar functions) of such Person, even if the right so to
vote has been suspended by the happening of such a contingency.
SECTION 1.02. Computation of Time Periods. In this Agreement
in the computation of periods of time from a specified date to a later specified
date, the word "from" means "from and including" and the words "to" and "until"
each mean "to but excluding".
SECTION 1.03. Accounting Terms. All terms of an accounting or
financial nature shall be construed in accordance with generally accepted
accounting principles ("GAAP"), as in effect from time to time; provided,
however, that if the Borrower notifies the Agent that the Borrower wishes to
amend any covenant in Article V or any related definition to eliminate the
effect of any change in GAAP occurring after the date of this Agreement on the
operation of such covenant, or if the Agent notifies the Borrower that the
Required Lenders wish to amend Article V or any related definition for such
purpose, then the Borrower's compliance with such covenant shall be determined
on the basis of GAAP in effect immediately before the relevant change in GAAP
became effective, until either such notice is withdrawn or such covenant is
amended in a manner satisfactory to the Borrower and the Required Lenders.
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Revolving Credit Advances. Each Lender
severally agrees, on the terms and conditions hereinafter set forth, to make
Revolving Credit Advances to the Borrower from time to time on any Business Day
during the period from the Effective Date until the Termination Date in an
amount for each such Advance not to exceed such Lender's Unused Commitment. Each
Revolving Credit Borrowing shall be in an aggregate amount of $5,000,000 or an
integral multiple of $1,000,000 in excess thereof (or, if less, an aggregate
amount equal to the amount by which the aggregate amount of a proposed
Competitive Bid Borrowing requested by the Borrower exceeds the aggregate amount
of Competitive Bid Advances offered to be made by the Lenders and accepted by
the Borrower in respect of such Competitive Bid Borrowing, if such Competitive
Bid Borrowing is made on the same date as such Revolving Credit Borrowing) and
shall consist of Revolving Credit Advances of the same Type made on the same day
by the Lenders ratably according to their respective Commitments. Within the
limits of each Lender's Unused Commitment in effect from time to time, the
Borrower may borrow under this Section 2.01, prepay pursuant to Section 2.10 and
reborrow under this Section 2.01.
SECTION 2.02. Making the Revolving Credit Advances. (a) Each
Revolving Credit Borrowing shall be made on notice, given not later than 11:00
A.M. (New York City time) on the third Business Day prior to the date of the
proposed Revolving Credit Borrowing in the case
<PAGE> 22
17
of a Revolving Credit Borrowing consisting of Eurodollar Rate Advances, or the
date of the proposed Revolving Credit Borrowing in the case of a Revolving
Credit Borrowing consisting of Base Rate Advances, by the Borrower to the
Agent, which shall give to each Lender prompt notice thereof by telecopier or
telex. Each such notice of a Revolving Credit Borrowing (a "Notice of Revolving
Credit Borrowing") shall be by telephone, confirmed at once in writing, or
telecopier or telex in substantially the form of Exhibit B-1 hereto, specifying
therein the requested (i) date of such Revolving Credit Borrowing, (ii) Type of
Advances comprising such Revolving Credit Borrowing, (iii) aggregate amount of
such Revolving Credit Borrowing, and (iv) in the case of a Revolving Credit
Borrowing consisting of Eurodollar Rate Advances, initial Interest Period for
each such Revolving Credit Advance. Each Lender shall, before 1:00 P.M. (New
York City time) on the date of such Revolving Credit Borrowing, make available
for the account of its Applicable Lending Office to the Agent at the Agent's
Account, in same day funds, such Lender's ratable portion of such Revolving
Credit Borrowing. After the Agent's receipt of such funds and upon fulfillment
of the applicable conditions set forth in Article III, the Agent will make such
funds available to the Borrower at the Agent's address referred to in Section
8.02.
(b) Anything in subsection (a) above to the contrary
notwithstanding, (i) the Borrower may not select Eurodollar Rate Advances for
any Revolving Credit Borrowing if the aggregate amount of such Revolving Credit
Borrowing is less than $10,000,000 or if the obligation of the Lenders to make
Eurodollar Rate Advances shall then be suspended pursuant to Section 2.08 or
2.12 and (ii) the Eurodollar Rate Advances may not be outstanding as part of
more than fifteen separate Revolving Credit Borrowings.
(c) Each Notice of Revolving Credit Borrowing shall be
irrevocable and binding on the Borrower. In the case of any Revolving Credit
Borrowing that the related Notice of Revolving Credit Borrowing specifies is to
be comprised of Eurodollar Rate Advances, the Borrower shall indemnify each
Lender against any loss, cost or expense incurred by such Lender as a result of
any failure to fulfill on or before the date specified in such Notice of
Revolving Credit Borrowing for such Revolving Credit Borrowing the applicable
conditions set forth in Article III, including, without limitation, any loss
(excluding loss of anticipated profits), cost or expense incurred by reason of
the liquidation or reemployment of deposits or other funds acquired by such
Lender to fund the Revolving Credit Advance to be made by such Lender as part of
such Revolving Credit Borrowing when such Revolving Credit Advance, as a result
of such failure, is not made on such date.
(d) Unless the Agent shall have received notice from a Lender
prior to the date of any Revolving Credit Borrowing that such Lender will not
make available to the Agent such Lender's ratable portion of such Revolving
Credit Borrowing, the Agent may assume that such Lender has made such portion
available to the Agent on the date of such Revolving Credit Borrowing in
accordance with subsection (a) of this Section 2.02 and the Agent may, in
reliance upon such assumption, make available to the Borrower on such date a
corresponding amount. If
<PAGE> 23
18
and to the extent that such Lender shall not have so made such ratable portion
available to the Agent, such Lender and the Borrower severally agree to repay
to the Agent forthwith on demand such corresponding amount together with
interest thereon, for each day from the date such amount is made available to
the Borrower until the date such amount is repaid to the Agent, at (i) in the
case of the Borrower, the interest rate applicable at the time to the Advances
comprising such Borrowing and (ii) in the case of such Lender, the Federal
Funds Rate. If such Lender shall repay to the Agent such corresponding amount,
such amount so repaid shall constitute such Lender's Revolving Credit Advance
as part of such Revolving Credit Borrowing for purposes of this Agreement.
(e) The failure of any Lender to make the Revolving Credit
Advance to be made by it as part of any Borrowing shall not relieve any other
Lender of its obligation, if any, hereunder to make its Revolving Credit Advance
on the date of such Revolving Credit Borrowing but no Lender shall be
responsible for the failure of any other Lender to make the Revolving Credit
Advance to be made by such other Lender on the date of any Revolving Credit
Borrowing.
SECTION 2.03. The Competitive Bid Advances. (a) Each Lender
severally agrees that the Borrower may make Competitive Bid Borrowings under
this Section 2.03 from time to time on any Business Day during the period from
the date hereof until the date occurring 30 days prior to the Termination Date
in the manner set forth below; provided that the amount of each Competitive Bid
Borrowing shall not exceed the aggregate amount of the Unused Commitments of the
Lenders on such Business Day.
(i)The Borrower may request a Competitive Bid Borrowing under
this Section 2.03 by delivering to the Agent, by telecopier or telex, a
notice of a Competitive Bid Borrowing (a "Notice of Competitive Bid
Borrowing"), in substantially the form of Exhibit B-2 hereto,
specifying therein the requested (v) date of such proposed Competitive
Bid Borrowing, (w) aggregate amount of such proposed Competitive Bid
Borrowing, (x) in the case of a Competitive Bid Borrowing consisting of
LIBO Rate Advances, Interest Period, or in the case of a Competitive
Bid Borrowing consisting of Fixed Rate Advances, maturity date for
repayment of each Fixed Rate Advance to be made as part of such
Competitive Bid Borrowing (which maturity date may not be earlier than
the date occurring 30 days after the date of such Competitive Bid
Borrowing or later than the earlier of (I) 360 days after the date of
such Competitive Bid Borrowing and (II) the Termination Date), (y)
interest payment date or dates relating thereto, and (z) other terms
(if any) to be applicable to such Competitive Bid Borrowing, not later
than 10:00 A.M. (New York City time) (A) at least one Business Day
prior to the date of the proposed Competitive Bid Borrowing, if the
Borrower shall specify in the Notice of Competitive Bid Borrowing that
the rates of interest to be offered by the Lenders shall be fixed rates
per annum (the Advances comprising any such Competitive Bid Borrowing
being referred to herein as "Fixed Rate Advances") and (B) at least
four Business Days prior to the date of the
<PAGE> 24
19
proposed Competitive Bid Borrowing, if the Borrower shall instead
specify in the Notice of Competitive Bid Borrowing that the rates of
interest be offered by the Lenders are to be based on the LIBO Rate
(the Advances comprising such Competitive Bid Borrowing being referred
to herein as "LIBO Rate Advances"). Each Notice of Competitive Bid
Borrowing shall be irrevocable and binding on the Borrower. The Agent
shall in turn promptly notify each Lender of each request for a
Competitive Bid Borrowing received by it from the Borrower by sending
such Lender a copy of the related Notice of Competitive Bid Borrowing.
(ii)Each Lender may, if, in its sole discretion, it elects to
do so, irrevocably offer to make one or more Competitive Bid Advances
to the Borrower as part of such proposed Competitive Bid Borrowing at a
rate or rates of interest specified by such Lender in its sole
discretion, by notifying the Agent (which shall give prompt notice
thereof to the Borrower), before 9:30 A.M. (New York City time) on the
date of such proposed Competitive Bid Borrowing, in the case of a
Competitive Bid Borrowing consisting of Fixed Rate Advances and before
10:00 A.M. (New York City time) three Business Days before the date of
such proposed Competitive Bid Borrowing, in the case of a Competitive
Bid Borrowing consisting of LIBO Rate Advances, of the minimum amount
and maximum amount of each Competitive Bid Advance which such Lender
would be willing to make as part of such proposed Competitive Bid
Borrowing (which amounts may, subject to the proviso to the first
sentence of this Section 2.03(a), exceed such Lender's Commitment), the
rate or rates of interest therefor and such Lender's Applicable Lending
Office with respect to such Competitive Bid Advance; provided that if
the Agent in its capacity as a Lender shall, in its sole discretion,
elect to make any such offer, it shall notify the Borrower of such
offer at least 30 minutes before the time and on the date on which
notice of such election is to be given to the Agent by the other
Lenders. If any Lender shall elect not to make such an offer, such
Lender shall so notify the Agent, before 10:00 A.M. (New York City
time) on the date on which notice of such election is to be given to
the Agent by the other Lenders, and such Lender shall not be obligated
to, and shall not, make any Competitive Bid Advance as part of such
Competitive Bid Borrowing; provided that the failure by any Lender to
give such notice shall not cause such Lender to be obligated to make
any Competitive Bid Advance as part of such proposed Competitive Bid
Borrowing.
(iii)The Borrower shall, in turn, before 10:30 A.M. (New York
City time) on the date of such proposed Competitive Bid Borrowing, in
the case of a Competitive Bid Borrowing consisting of Fixed Rate
Advances and before 11:00 A.M. (New York City time) three Business Days
before the date of such proposed Competitive Bid Borrowing, in the case
of a Competitive Bid Borrowing consisting of LIBO Rate Advances,
either:
<PAGE> 25
20
(x) cancel such Competitive Bid Borrowing by giving
the Agent notice to that effect, or
(y) accept one or more of the offers made by any
Lender or Lenders pursuant to paragraph (ii) above, in its
sole discretion, by giving notice to the Agent of the
amount of each Competitive Bid Advance (which amount shall be
equal to or greater than the minimum amount, and equal to or
less than the maximum amount, notified to the Borrower by the
Agent on behalf of such Lender for such Competitive Bid
Advance pursuant to paragraph (ii) above) to be made by each
Lender as part of such Competitive Bid Borrowing, and reject
any remaining offers made by Lenders pursuant to paragraph
(ii) above by giving the Agent notice to that effect. The
Borrower shall accept the offers made by any Lender or Lenders
to make Competitive Bid Advances in order of the lowest to the
highest rates of interest offered by such Lenders. If two or
more Lenders have offered the same interest rate, the amount
to be borrowed at such interest rate will be allocated among
such Lenders in proportion to the amount that each such Lender
offered at such interest rate.
(iv)If the Borrower notifies the Agent that such Competitive
Bid Borrowing is cancelled pursuant to paragraph (iii)(x) above, the
Agent shall give prompt notice thereof to the Lenders and such
Competitive Bid Borrowing shall not be made.
(v)If the Borrower accepts one or more of the offers made by
any Lender or Lenders pursuant to paragraph (iii)(y) above, the Agent
shall in turn promptly notify (A) each Lender that has made an offer as
described in paragraph (ii) above, of the date and aggregate amount of
such Competitive Bid Borrowing and whether or not any offer or offers
made by such Lender pursuant to paragraph (ii) above have been accepted
by the Borrower, (B) each Lender that is to make a Competitive Bid
Advance as part of such Competitive Bid Borrowing, of the amount of
each Competitive Bid Advance to be made by such Lender as part of such
Competitive Bid Borrowing, and (C) each Lender that is to make a
Competitive Bid Advance as part of such Competitive Bid Borrowing, upon
receipt, that the Agent has received forms of documents appearing to
fulfill the applicable conditions set forth in Article III. Each Lender
that is to make a Competitive Bid Advance as part of such Competitive
Bid Borrowing shall, before 12:00 noon (New York City time) on the date
of such Competitive Bid Borrowing specified in the notice received from
the Agent pursuant to clause (A) of the preceding sentence or any later
time when such Lender shall have received notice from the Agent
pursuant to clause (C) of the preceding sentence, make available for
the account of its Applicable Lending Office to the Agent at the
Agent's Account, in same day funds, such Lender's portion of such
Competitive Bid Borrowing. Upon fulfillment of the applicable
conditions set forth in Article III and after receipt by the Agent of
such funds, the Agent will make such funds available to the Borrower at
the
<PAGE> 26
21
Agent's address referred to in Section 8.02. Promptly after each
Competitive Bid Borrowing the Agent will notify each Lender of the
amount of the Competitive Bid Borrowing.
(vi)If the Borrower notifies the Agent that it accepts one or
more of the offers made by any Lender or Lenders pursuant to paragraph
(iii)(y) above, such notice of acceptance shall be irrevocable and
binding on the Borrower. The Borrower shall indemnify each Lender
against any loss, cost or expense incurred by such Lender as a result
of any failure to fulfill on or before the date specified in the
related Notice of Competitive Bid Borrowing for such Competitive Bid
Borrowing the applicable conditions set forth in Article III,
including, without limitation, any loss (excluding loss of anticipated
profits), cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by such Lender to fund
the Competitive Bid Advance to be made by such Lender as part of such
Competitive Bid Borrowing when such Competitive Bid Advance, as a
result of such failure, is not made on such date.
(b) Each Competitive Bid Borrowing shall be in an aggregate
amount of $10,000,000 or an integral multiple of $1,000,000 in excess thereof
and, following the making of each Competitive Bid Borrowing, the Borrower shall
be in compliance with the limitation set forth in the proviso to the first
sentence of subsection (a) above.
(c) Within the limits and on the conditions set forth in this
Section 2.03, the Borrower may from time to time borrow under this Section 2.03,
repay or prepay pursuant to subsection (d) below, and reborrow under this
Section 2.03, provided that a Competitive Bid Borrowing shall not be made within
one Business Day of the date of any other Competitive Bid Borrowing.
(d) The Borrower shall repay to the Agent for the account of
each Lender that has made a Competitive Bid Advance, on the maturity date of
each Competitive Bid Advance (such maturity date being that specified by the
Borrower for repayment of such Competitive Bid Advance in the related Notice of
Competitive Bid Borrowing delivered pursuant to subsection (a)(i) above and
provided in the Competitive Bid Note evidencing such Competitive Bid Advance),
the then unpaid principal amount of such Competitive Bid Advance. The Borrower
shall have no right to prepay any principal amount of any Competitive Bid
Advance unless, and then only on the terms, specified by the Borrower for such
Competitive Bid Advance in the related Notice of Competitive Bid Borrowing
delivered pursuant to subsection (a)(i) above and set forth in the Competitive
Bid Note evidencing such Competitive Bid Advance.
(e) The Borrower shall pay interest on the unpaid principal
amount of each Competitive Bid Advance from the date of such Competitive Bid
Advance to the date the principal amount of such Competitive Bid Advance is
repaid in full, at the rate of interest for such
<PAGE> 27
22
Competitive Bid Advance specified by the Lender making such Competitive Bid
Advance in its notice with respect thereto delivered pursuant to subsection
(a)(ii) above, payable on the interest payment date or dates specified by the
Borrower for such Competitive Bid Advance in the related Notice of Competitive
Bid Borrowing delivered pursuant to subsection (a)(i) above, as provided in the
Competitive Bid Note evidencing such Competitive Bid Advance. The Borrower
shall pay interest on the amount of overdue principal and, to the fullest
extent permitted by law, interest in respect of each Competitive Bid Advance
owing to a Lender, payable in arrears on the date or dates interest is payable
thereon, at a rate per annum equal at all times to 1% per annum above the rate
per annum required to be paid on such Competitive Bid Advance under the terms
of the Competitive Bid Note evidencing such Competitive Bid Advance unless
otherwise agreed in such Competitive Bid Note.
(f) The indebtedness of the Borrower resulting from each
Competitive Bid Advance made to the Borrower as part of a Competitive Bid
Borrowing shall be evidenced by a separate Competitive Bid Note of the Borrower
payable to the order of the Lender making such Competitive Bid Advance.
SECTION 2.04. Fees. (a) Facility Fee. The Borrower agrees to
pay to the Agent for the account of each Lender a facility fee on the aggregate
amount of such Lender's Commitment in effect from time to time from the
Effective Date in the case of each Initial Lender and from the later of the
Effective Date and the effective date specified in the Assumption Agreement or
in the Assignment and Acceptance, as the case may be, pursuant to which it
became a Lender in the case of each other Lender until the Termination Date at a
rate per annum equal to the Applicable Percentage in effect from time to time,
payable in arrears quarterly on the last day of each March, June, September and
December, commencing March 31, 1998, and on the Termination Date.
(b) Agent's Fees. The Borrower shall pay to the Agent for its
own account such fees as may from time to time be agreed between the Borrower
and the Agent.
SECTION 2.05. Termination, Reduction or Increase of the
Commitments. (a) Termination or Reduction. The Borrower shall have the right,
upon at least three Business Days' notice to the Agent, to terminate in whole or
reduce ratably in part the respective Unused Commitments of the Lenders,
provided that each partial reduction shall be in the aggregate amount of
$10,000,000 or an integral multiple of $1,000,000 in excess thereof. The
aggregate amount of the Commitments once reduced as provided in this Section
2.05(a), may not be reinstated, except as provided in Section 2.05(b) below.
(b) Increase in Aggregate of the Commitments. (i) The Borrower
may at any time, by notice to the Agent, propose that the aggregate amount of
the Commitments be increased (such aggregate amount being, a "Commitment
Increase"), effective as at a date prior to the
<PAGE> 28
23
Termination Date (an "Increase Date") as to which agreement is to be reached by
an earlier date specified in such notice (a "Commitment Date"); provided,
however, that (A) the Borrower may not propose more than two Commitment
Increases in any calendar year, (B) the minimum proposed Commitment Increase
per notice shall be $25,000,000, (C) in no event shall the aggregate amount of
the Commitments at any time exceed $750,000,000, (D) the applicable Performance
Level on such Increase Date shall be Level I, Level II or Level III and (E) no
Default shall have occurred and be continuing on such Increase Date. The Agent
shall notify the Lenders thereof promptly upon its receipt of any such notice.
The Agent agrees that it will cooperate with the Borrower in discussions with
the Lenders and other Eligible Assignees with a view to arranging the proposed
Commitment Increase through the increase of the Commitments of one or more of
the Lenders (each such Lender that is willing to increase its Commitment
hereunder being an "Increasing Lender") and the addition of one or more other
Eligible Assignees as Assuming Lenders and as parties to this Agreement;
provided, however, that it shall be in each Lender's sole discretion whether to
increase its Commitment hereunder in connection with the proposed Commitment
Increase; and provided further that the minimum Commitment of each such
Assuming Lender that becomes a party to this Agreement pursuant to this Section
2.05(b), shall be at least equal to $15,000,000. If any of the Lenders agree to
increase their respective Commitments by an aggregate amount in excess of the
proposed Commitment Increase, the proposed Commitment Increase shall be
allocated among such Lenders in proportion to their respective Commitments
immediately prior to the Increase Date. If agreement is reached on or prior to
the applicable Commitment Date with any Increasing Lenders and Assuming Lenders
as to a Commitment Increase (which may be less than but not greater than
specified in the applicable notice from the Borrower), such agreement to be
evidenced by a notice in reasonable detail from the Borrower to the Agent on or
prior to the applicable Commitment Date, such Assuming Lenders, if any, shall
become Lenders hereunder as of the applicable Increase Date and the Commitments
of such Increasing Lenders and such Assuming Lenders shall become or be, as the
case may be, as of the Increase Date, the amounts specified in such notice;
provided that:
(x)the Agent shall have received (with copies for each Lender,
including each such Assuming Lender) by no later than 10:00 A.M. (New
York City time) on the applicable Increase Date (1) certified copies of
resolutions of the Board of Directors of the Borrower approving the
Commitment Increase and (2) an opinion of counsel for the Borrower
(which may be in-house counsel), in substantially the form of Exhibit E
hereto;
(y)each such Assuming Lender shall have delivered to the
Agent, by no later than 10:00 A.M. (New York City time) on such
Increase Date, an appropriate Assumption Agreement in substantially
the form of Exhibit D hereto, duly executed by such Assuming Lender
and the Borrower; and
(z)each such Increasing Lender shall have delivered to the
Agent by, no later than 10:00 A.M. (New York City time) on such
Increase Date, (A) its existing Revolving
<PAGE> 29
24
Credit Note and (B) confirmation in writing satisfactory to the Agent
as to its increased Commitment.
(ii) In the event that the Agent shall have received notice
from the Borrower as to its agreement to a Commitment Increase on or prior to
the applicable Commitment Date and each of the actions provided for in clauses
(x) through (z) above shall have occurred prior to 10:00 A.M. (New York City
time) on the applicable Increase Date to the satisfaction of the Agent, the
Agent shall notify the Lenders (including any Assuming Lenders) and the Borrower
of the occurrence of such Commitment Increase by telephone, confirmed at once in
writing, telecopier, telex or cable and in any event no later than 1:00 P.M.
(New York City time) on such Increase Date and shall record in the Register the
relevant information with respect to each Increasing Lender and Assuming Lender.
Each Increasing Lender and each Assuming Lender shall, before 2:00 P.M. (New
York City time) on the applicable Increase Date, make available for the account
of its Applicable Lending Office to the Agent at the Agent's Account, in same
day funds, in the case of such Assuming Lender, an amount equal to such Assuming
Lender's ratable portion of the Revolving Credit Borrowings then outstanding
(calculated based on its Commitment as a percentage of the aggregate Commitments
outstanding after giving effect to the relevant Commitment Increase) and, in the
case of such Increasing Lender, an amount equal to the excess of (i) such
Increasing Lender's ratable portion of the Revolving Credit Borrowings then
outstanding (calculated based on its Commitment as a percentage of the aggregate
Commitments outstanding after giving effect to the relevant Commitment Increase)
over (ii) such Increasing Lender's Pro Rata Share of the Revolving Credit
Borrowings then outstanding (calculated based on its Commitment (without giving
effect to the relevant Commitment Increase) as a percentage of the aggregate
Commitments (without giving effect to the relevant Commitment Increase). After
the Agent's receipt of such funds from each such Increasing Lender and each such
Assuming Lender, the Agent will promptly thereafter cause to be distributed like
funds to the other Lenders for the account of their respective Applicable
Lending Offices in an amount to each other Lender such that the aggregate amount
of the outstanding Revolving Credit Advances owing to each Lender after giving
effect to such distribution equals such Lender's Pro Rata Share of the Revolving
Credit Borrowings then outstanding (calculated based on its Commitment as a
percentage of the aggregate Commitments outstanding after giving effect to the
relevant Commitment Increase). Within five Business Days after the Borrower
receives notice from the Agent, the Borrower, at its own expense, shall execute
and deliver to the Agent, Revolving Credit Notes payable to the order of each
Assuming Lender, if any, and, each Increasing Lender, dated as of the applicable
Increase Date, in a principal amount equal to such Lender's Commitment after
giving effect to the relevant Commitment Increase, and substantially in the form
of Exhibit A-1 hereto. The Agent, upon receipt of such Revolving Credit Notes,
shall promptly deliver such Revolving Credit Notes to the respective Assuming
Lenders and Increasing Lenders.
(iii) In the event that the Agent shall not have received
notice from the Borrower as to such agreement on or prior to the applicable
Commitment Date or the Borrower shall, by
<PAGE> 30
25
notice to the Agent prior to the applicable Increase Date, withdraw its
proposal for a Commitment Increase or any of the actions provided for above in
clauses (i)(x) through (i)(z) shall not have occurred by 10:00 A.M. (New York
City time) on the such Increase Date, such proposal by the Borrower shall be
deemed not to have been made. In such event, any actions theretofore taken
under clauses (i)(x) through (i)(z) above shall be deemed to be of no effect
and all the rights and obligations of the parties shall continue as if no such
proposal had been made.
SECTION 2.06. Repayment. The Borrower shall repay to the Agent
for the ratable account of the Lenders on the Termination Date the aggregate
principal amount of the Revolving Credit Advances then outstanding.
SECTION 2.07. Interest on Revolving Credit Advances. (a)
Scheduled Interest. The Borrower shall pay interest on the unpaid principal
amount of each Revolving Credit Advance owing to each Lender from the date of
such Revolving Credit Advance until such principal amount shall be paid in full,
at the following rates per annum:
(i)Base Rate Advances. During such periods as such Revolving
Credit Advance is a Base Rate Advance a rate per annum equal at all
times to the sum of (x) the Base Rate in effect from time to time plus
(y) the Applicable Margin in effect from time to time, payable in
arrears quarterly on the last day of each March, June, September and
December during such periods and on the date such Base Rate Advance
shall be Converted or paid in full.
(ii)Eurodollar Rate Advances. During such periods as such
Revolving Credit Advance is a Eurodollar Rate Advance, a rate per annum
equal at all times during each Interest Period for such Revolving
Credit Advance to the sum of (x) the Eurodollar Rate for such Interest
Period for such Revolving Credit Advance plus (y) the Applicable Margin
in effect from time to time, payable in arrears on the last day of such
Interest Period and, if such Interest Period has a duration of more
than three months, on each day that occurs during such Interest Period
every three months from the first day of such Interest Period and on
the date such Eurodollar Rate Advance shall be Converted or paid in
full.
(b) Default Interest. The Borrower shall pay interest on (i)
overdue principal of each Revolving Credit Advance owing to each Lender, payable
in arrears on the dates referred to in clause (a)(i) or (a)(ii) above, at a rate
per annum equal at all times to 1% per annum above the rate per annum required
to be paid on such Revolving Credit Advance pursuant to clause (a)(i) or (a)(ii)
above and (ii) to the fullest extent permitted by law, the amount of any overdue
interest, fee or other amount payable hereunder, from the date such amount shall
be due until such amount shall be paid in full, payable in arrears on the date
such amount shall be paid in full and on demand, at a rate per annum equal at
all times to 1% per annum above the rate per annum required to be paid on Base
Rate Advances pursuant to clause (a)(i) above.
<PAGE> 31
26
SECTION 2.08. Interest Rate Determination. (a) Each Reference
Bank agrees to furnish to the Agent timely information for the purpose of
determining each Eurodollar Rate and each LIBO Rate. If any one or more of the
Reference Banks shall not furnish such timely information to the Agent for the
purpose of determining any such interest rate, the Agent shall determine such
interest rate on the basis of timely information furnished by the remaining
Reference Banks. The Agent shall give prompt notice to the Borrower and the
Lenders of the applicable interest rate determined by the Agent for purposes of
Section 2.07(a)(i) or (ii), and the rate, if any, furnished by each Reference
Bank for the purpose of determining the interest rate under Section 2.07(a)(ii).
(b) If, with respect to any Eurodollar Rate Advances, the
Required Lenders notify the Agent that the Eurodollar Rate for any Interest
Period for such Advances will not adequately reflect the cost to such Required
Lenders of making, funding or maintaining their respective Eurodollar Rate
Advances for such Interest Period, the Agent shall forthwith so notify the
Borrower and the Lenders, whereupon (i) each Eurodollar Rate Advance will
automatically, on the last day of the then existing Interest Period therefor,
Convert into a Base Rate Advance, and (ii) the obligation of the Lenders to
make, or to Convert Revolving Credit Advances into, Eurodollar Rate Advances
shall be suspended until the Agent shall notify the Borrower and the Lenders
that the circumstances causing such suspension no longer exist.
(c) If the Borrower shall fail to select the duration of any
Interest Period for any Eurodollar Rate Advances in accordance with the
provisions contained in the definition of "Interest Period" in Section 1.01, the
Agent will forthwith so notify the Borrower and the Lenders and the Borrower
shall be deemed to have selected an Interest Period of one month.
(d) Upon the occurrence and during the continuance of any
Event of Default under Section 6.01(a), (i) each Eurodollar Rate Advance will
automatically, on the last day of the then existing Interest Period therefor,
Convert into a Base Rate Advance and (ii) the obligation of the Lenders to
make, or to Convert Advances into, Eurodollar Rate Advances shall be suspended.
(e) If fewer than two Reference Banks furnish timely
information to the Agent for determining the Eurodollar Rate or LIBO Rate for
any Eurodollar Rate Advances or LIBO Rate Advances, as the case may be, the
Eurodollar Rate or the LIBO Rate for such Eurodollar Rate Advance or LIBO Rate
Advance, as the case may be, shall be an interest rate per annum determined by
the Agent to be the offered rate per annum at which deposits in U.S. dollars
appears on the Dow Jones Markets Page 3750 (or any successor page) as of 11:00
A.M. (London time), or in the event such offered rate is not available from the
Dow Jones Markets Page 3750,
(i)the Agent shall forthwith notify the Borrower and the
Lenders that the interest rate cannot be determined for such Eurodollar
Rate Advances or LIBO Rate Advances, as the case may be,
<PAGE> 32
27
(ii)with respect to Eurodollar Rate Advances, each such
Advance will automatically, on the last day of the then existing
Interest Period therefor, Convert into a Base Rate Advance (or if such
Advance is then a Base Rate Advance, will continue as a Base Rate
Advance), and
(iii)the obligation of the Lenders to make Eurodollar Rate
Advances or LIBO Rate Advances or to Convert Revolving Credit Advances
into Eurodollar Rate Advances shall be suspended until the Agent shall
notify the Borrower and the Lenders that the circumstances causing such
suspension no longer exist.
SECTION 2.09. Optional Conversion of Revolving Credit
Advances. The Borrower may on any Business Day, upon notice given to the Agent
not later than 11:00 A.M. (New York City time) on the third Business Day prior
to the date of the proposed Conversion and subject to the provisions of Sections
2.08 and 2.12, Convert all Revolving Credit Advances of one Type comprising the
same Borrowing into Revolving Credit Advances of the other Type; provided,
however, that any Conversion of Base Rate Advances into Eurodollar Rate Advances
shall be in an amount not less than the minimum amount specified in Section
2.02(b) and no Conversion of any Revolving Credit Advances shall result in more
separate Revolving Credit Borrowings than permitted under Section 2.02(b). Each
such notice of a Conversion shall, within the restrictions specified above,
specify (i) the date of such Conversion, (ii) the Revolving Credit Advances to
be Converted, and (iii) if such Conversion is into Eurodollar Rate Advances, the
duration of the initial Interest Period for each such Advance. Each notice of
Conversion shall be irrevocable and binding on the Borrower.
SECTION 2.10. Optional Prepayments of Revolving Credit
Advances. The Borrower may, in the case of Eurodollar Rate Advances, upon at
least two Business Days' notice to the Agent, and in the case of Base Rate
Advances, upon notice to the Agent not later than 11:00 A.M. on the date of such
proposed prepayment, stating in each case the proposed date and aggregate
principal amount of the prepayment, and if such notice is given the Borrower
shall, prepay the outstanding principal amount of the Revolving Credit Advances
comprising part of the same Revolving Credit Borrowing in whole or ratably in
part, together with accrued interest to the date of such prepayment on the
principal amount prepaid; provided, however, that (x) each partial prepayment
shall be in an aggregate principal amount of $5,000,000 for any Base Rate
Advance or $10,000,000 for any Eurodollar Rate Advance or, in each case, an
integral multiple of $1,000,000 in excess thereof and (y) in the event of any
such prepayment of a Eurodollar Rate Advance, the Borrower shall be obligated to
reimburse the Lenders in respect thereof pursuant to Section 8.04(c).
SECTION 2.11. Increased Costs. (a) If, after the date hereof,
due to either (i) the introduction of or any change in or in the interpretation
of any law or regulation or (ii) the compliance with any guideline or request
from any central bank or other governmental authority
<PAGE> 33
28
(whether or not having the force of law), there shall be any increase in the
cost to any Lender (other than in respect of Eurocurrency Liabilities) of
agreeing to make or making, funding or maintaining Eurodollar Rate Advances
(excluding for purposes of this Section 2.11 any such increased costs resulting
from (i) Taxes or Other Taxes (as to which Section 2.14 shall govern) and (ii)
changes in the basis of taxation of overall net income or overall gross income
by the United States or by the foreign jurisdiction or state under the laws of
which such Lender is organized or has its Applicable Lending Office or any
political subdivision thereof), then the Borrower shall from time to time, upon
demand by such Lender (with a copy of such demand to the Agent), pay to the
Agent for the account of such Lender additional amounts sufficient to
compensate such Lender for such increased cost. A certificate as to the amount
of such increased cost, setting forth in reasonable detail the basis therefor
and the computation thereof, submitted to the Borrower and the Agent by such
Lender, shall be conclusive and binding for all purposes, absent manifest
error. Notwithstanding the foregoing, none of the Lenders shall deliver the
notice and certificate described in this Section 2.11(a) to the Borrower in
respect of any increased costs except in accordance with the internal policy of
such Lender as to the exercise of similar rights and remedies in similar
circumstances.
(b) If any Lender determines that compliance with any law or
regulation or any guideline or request from any central bank or other
governmental authority (whether or not having the force of law) in either case
enacted, adopted or made after the date hereof, affects or would affect the
amount of capital required or expected to be maintained by such Lender or any
corporation controlling such Lender and that the amount of such capital is
increased by or based upon the existence of such Lender's commitment to lend
hereunder and other commitments of this type, then, upon demand by such Lender
(with a copy of such demand to the Agent), the Borrower shall pay to the Agent
for the account of such Lender, from time to time as specified by such Lender,
additional amounts sufficient to compensate such Lender or such corporation for
the reduction of the rate of return on such Lender's capital or on the capital
of such corporation, to the extent that such Lender reasonably determines such
increase in capital to be allocable to the existence of such Lender's
commitment to lend hereunder. A certificate as to such amounts, setting forth
in reasonable detail the basis therefor and the computation thereof, submitted
to the Borrower and the Agent by such Lender shall be conclusive and binding
for all purposes, absent manifest error. Notwithstanding the foregoing, none of
the Lenders shall deliver the notice and certificate described in this Section
2.11(b) to the Borrower in respect of any requirements of additional capital
except in accordance with the internal policy of such Lender as to the exercise
of similar rights and remedies in similar circumstances.
(c) If any Lender shall give notice to the Agent and the
Borrower at any time to the effect that Eurocurrency Reserve Requirements are,
or are scheduled to become, effective and that such Lender is or will be
generally subject to such Eurocurrency Reserve Requirements (without regard to
whether such Lender will be able to benefit from proration or offsets that may
be available from time to time under Regulation D) as a result of which such
Lender will incur
<PAGE> 34
29
additional costs, then such Lender shall, for each day from the later of the
date of such notice and the date on which such Eurocurrency Reserve
Requirements become effective, be entitled to additional interest on each
Eurodollar Rate Advance made by it at a rate per annum determined for such day
(rounded upward to the nearest 100th of 1%) equal to the remainder obtained by
subtracting (i) the Eurodollar Rate for such Eurodollar Rate Advance from (ii)
the rate obtained by dividing such Eurodollar Rate by a percentage equal to
100% minus the then applicable Eurocurrency Reserve Requirements. Such
additional interest will be payable in arrears to the Agent, for the account of
such Lender, on each date that interest is payable on such Eurodollar Rate
Advance. Any Lender which gives a notice under this paragraph (c) shall
promptly withdraw such notice (by written notice of withdrawal given to the
Agent and the Borrower) in the event Eurocurrency Reserve Requirements cease to
apply to it or the circumstances giving rise to such notice otherwise cease to
exist.
(d) Notwithstanding anything to the contrary herein contained,
no Lender shall be entitled to claim any additional amounts pursuant to this
Section 2.11 arising with respect to any period of time prior to the date that
is 60 days prior to the date on which notice of such claim and the basis
therefor is first given to the Borrower pursuant to this Section 2.11.
SECTION 2.12. Illegality. (a) Notwithstanding any other
provision of this Agreement, if any Lender shall notify the Agent that the
introduction of or any change in or in the interpretation of any law or
regulation makes it unlawful, or any central bank or other governmental
authority asserts that it is unlawful, for any Lender or its Eurodollar Lending
Office to perform its obligations hereunder to make Eurodollar Rate Advances or
LIBO Rate Advances or to fund or maintain Eurodollar Rate Advances or LIBO Rate
Advances hereunder, (i) each Eurodollar Rate Advance or LIBO Rate Advance, as
the case may be, of such Lender will automatically, upon such demand, Convert
into a Base Rate Advance or an Advance that bears interest at the rate set
forth in Section 2.07(a)(i), as the case may be, and (ii) the obligation of
such Lender to make Eurodollar Rate Advances or LIBO Rate Advances or to
Convert Revolving Credit Advances into Eurodollar Rate Advances shall be
suspended until the Agent shall notify the Borrower and the Lenders that the
circumstances causing such suspension no longer exist. If any Lender shall
exercise its rights under this Section 2.12(a), all payments and prepayments of
principal which would otherwise have been applied to repay the Eurodollar Rate
Advances or LIBO Rate Advances that would have been made by such Lender or the
converted Eurodollar Rate Advances or LIBO Rate Advances of such Lender shall
instead be applied to repay the Base Rate Advances or Advances bearing interest
at the rate set forth in Section 2.07(a)(i), as the case may be, made by such
Lender in lieu of, or resulting from the conversion of, such Eurodollar Rate
Advances or LIBO Rate Advances, and all distributions of payments in respect of
interest shall be made to the Lenders ratably based on the interest rates
applicable to their respective Advances.
(b) For purposes of this Section 2.12, a notice to the
Borrower by any Lender shall be effective as to each Eurodollar Rate Advance or
LIBO Rate Advance, if lawful, on the last day
<PAGE> 35
30
of the Interest Period currently applicable to such Eurodollar Rate Advance or
LIBO Rate Advance; in all other cases such notice shall be effective on the
date of receipt by the Borrower.
SECTION 2.13. Payments and Computations. (a) The Borrower
shall make each payment hereunder and under the Notes not later than 12:00 noon
(New York City time) on the day when due in U.S. dollars to the Agent at the
Agent's Account in same day funds. The Agent will promptly thereafter cause to
be distributed like funds relating to the payment of principal or interest or
facility fees ratably (other than amounts payable pursuant to Section 2.03,
2.11, 2.14 or 8.04(c)) to the Lenders for the account of their respective
Applicable Lending Offices, and like funds relating to the payment of any other
amount payable to any Lender to such Lender for the account of its Applicable
Lending Office, in each case to be applied in accordance with the terms of this
Agreement. Upon its acceptance of an Assignment and Acceptance and recording of
the information contained therein in the Register pursuant to Section 8.07(c),
from and after the effective date specified in such Assignment and Acceptance,
the Agent shall make all payments hereunder and under the Notes in respect of
the interest assigned thereby to the Lender assignee thereunder, and the parties
to such Assignment and Acceptance shall make all appropriate adjustments in such
payments for periods prior to such effective date directly between themselves.
Upon any Assuming Lender becoming a Lender hereunder as a result of the
effectiveness of a Commitment Increase pursuant to Section 2.05(b) and upon the
Agent's receipt of such Lender's Assumption Agreement and recording the
information contained therein in the Register, from and after the applicable
Increase Date, the Agent shall make all payments hereunder and under the Notes
in respect of the interest assumed thereby to the Assuming Lender.
(b) All computations of interest based on Citibank's base rate
shall be made by the Agent on the basis of a year of 365 or 366 days, as the
case may be, and all computations of interest based on the Eurodollar Rate or
the Federal Funds Rate and of facility fees shall be made by the Agent on the
basis of a year of 360 days, in each case for the actual number of days
(including the first day but excluding the last day) occurring in the period for
which such interest or facility fees are payable. Each determination by the
Agent of an interest rate hereunder shall be conclusive and binding for all
purposes, absent manifest error.
(c) Whenever any payment hereunder or under the Notes shall be
stated to be due on a day other than a Business Day, such payment shall be made
on the next succeeding Business Day, and such extension of time shall in such
case be included in the computation of payment of interest or facility fee, as
the case may be; provided, however, that, if such extension would cause payment
of interest on or principal of Eurodollar Rate Advances or LIBO Rate Advances to
be made in the next following calendar month, such payment shall be made on the
next preceding Business Day.
(d) Unless the Agent shall have received notice from the
Borrower prior to the date on which any payment is due to the Lenders hereunder
that the Borrower will not make such
<PAGE> 36
31
payment in full, the Agent may assume that the Borrower has made such payment
in full to the Agent on such date and the Agent may, in reliance upon such
assumption, cause to be distributed to each Lender on such due date an amount
equal to the amount then due such Lender. If and to the extent the Borrower
shall not have so made such payment in full to the Agent, each Lender shall
repay to the Agent forthwith on demand such amount distributed to such Lender
together with interest thereon, for each day from the date such amount is
distributed to such Lender until the date such Lender repays such amount to the
Agent, at the Federal Funds Rate.
SECTION 2.14. Taxes. (a) Any and all payments by the Borrower
hereunder or under the Notes shall be made, in accordance with Section 2.13,
free and clear of and without deduction for any and all present or future taxes,
levies, imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, excluding, in the case of each Lender and the Agent, taxes
imposed on its overall net income, and franchise taxes imposed on it in lieu of
net income taxes, by the jurisdiction under the laws of which such Lender or the
Agent (as the case may be) is organized or any political subdivision thereof
and, in the case of each Lender, taxes imposed on its overall net income, and
franchise taxes imposed on it in lieu of net income taxes, by the jurisdiction
of such Lender's Applicable Lending Office or any political subdivision
thereof, and further excluding, if any Lender is found as the result of a
determination (as defined in Section 1313(a) of the Internal Revenue Code) to
be a conduit entity participating in a conduit financing arrangement as defined
in Treasury Regulations promulgated under Section 7701(1) of the Internal
Revenue Code, the excess of the United States taxes imposed with respect to
such Lender over the amount of United States taxes that would have been imposed
with respect to such Lender if such determination had not been made with
respect to such Lender (all such non-excluded taxes, levies, imposts,
deductions, charges, withholdings and liabilities in respect of payments
hereunder or under the Notes being hereinafter referred to as "Taxes"). If the
Borrower shall be required by law to deduct any Taxes from or in respect of any
sum payable hereunder or under any Note to any Lender or the Agent, (i) the sum
payable shall be increased as may be necessary so that after making all
required deductions (including deductions applicable to additional sums payable
under this Section 2.14) such Lender or the Agent (as the case may be) receives
an amount equal to the sum it would have received had no such deductions been
made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall
pay the full amount deducted to the relevant taxation authority or other
authority in accordance with applicable law.
(b) In addition, the Borrower agrees to pay any present or
future stamp or documentary taxes or any other excise or property taxes, charges
or similar levies that arise from any payment made hereunder or under the Notes
or from the execution, delivery or registration of, performing under, or
otherwise with respect to, this Agreement or the Notes (hereinafter referred to
as "Other Taxes").
(c) The Borrower shall indemnify each Lender and the Agent for
the full amount of Taxes or Other Taxes (including, without limitation, any
taxes imposed by any
<PAGE> 37
32
jurisdiction on amounts payable under this Section 2.14) imposed on or paid by
such Lender or the Agent (as the case may be) and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto.
This indemnification shall be made within 30 days from the date such Lender or
the Agent (as the case may be) makes written demand therefor.
(d) Within 30 days after the date of any payment of Taxes, the
Borrower shall furnish to the Agent, at its address referred to in Section 8.02,
the original or a certified copy of a receipt evidencing payment thereof. In the
case of any payment hereunder or under the Notes by or on behalf of the Borrower
through an account or branch outside the United States or by or on behalf of the
Borrower by a payor that is not a United States person, if the Borrower
determines that no Taxes are payable in respect thereof, the Borrower shall
furnish, or shall cause such payor to furnish, to the Agent, at such address, an
opinion of counsel acceptable to the Agent stating that such payment is exempt
from Taxes. For purposes of this subsection (d) and subsection (e), the terms
"United States" and "United States person" shall have the meanings specified in
Section 7701 of the Internal Revenue Code.
(e) Each Lender organized under the laws of a jurisdiction
outside the United States, on or prior to the date of its execution and delivery
of this Agreement in the case of each Initial Lender and on the date of the
Assumption Agreement or the Assignment and Acceptance, as the case may be,
pursuant to which it becomes a Lender in the case of each other Lender, and from
time to time thereafter as requested in writing by the Borrower (but only so
long as such Lender remains lawfully able to do so), shall provide each of the
Agent and the Borrower with two original Internal Revenue Service forms 1001 or
4224, as appropriate, or any successor or other form prescribed by the Internal
Revenue Service, certifying that such Lender is exempt from or entitled to a
reduced rate of United States withholding tax on payments pursuant to this
Agreement or the Notes. If the forms provided by a Lender at the time such
Lender first becomes a party to this Agreement indicate a United States interest
withholding tax rate in excess of zero, withholding tax at such rate shall be
considered excluded from Taxes unless and until such Lender provides the
appropriate forms certifying that a lesser rate applies, whereupon withholding
tax at such lesser rate only shall be considered excluded from Taxes for periods
governed by such forms; provided, however, that, if at the date of the
Assumption Agreement or the Assignment and Acceptance, as the case may be,
pursuant to which a Lender assignee becomes a party to this Agreement, the
Lender assignor was entitled to payments under subsection (a) in respect of
United States withholding tax with respect to interest paid at such date, then,
to such extent, the term Taxes shall include (in addition to withholding taxes
that may be imposed in the future or other amounts otherwise includable in
Taxes) United States withholding tax, if any, applicable with respect to the
Lender assignee on such date. If any form or document referred to in this
subsection (e) requires the disclosure of information, other than information
necessary to compute the tax payable and information required on the date hereof
by Internal Revenue Service form 1001 or 4224, that the Lender reasonably
considers to be confidential, the Lender shall give notice thereof to the
<PAGE> 38
33
Borrower and shall not be obligated to include in such form or document such
confidential information.
(f) For any period with respect to which a Lender has failed
to provide the Borrower with the appropriate form described in Section 2.14(e)
(other than if such failure is due to a change in law occurring subsequent to
the date on which a form originally was required to be provided, or if such form
otherwise is not required under the first sentence of subsection (e) above),
such Lender shall not be entitled to indemnification under Section 2.14(a) or
(c) with respect to Taxes imposed by the United States by reason of such
failure; provided, however, that should a Lender become subject to Taxes because
of its failure to deliver a form required hereunder, the Borrower shall take
such steps as the Lender shall reasonably request to assist the Lender to
recover such Taxes.
(g) Any Lender claiming any additional amounts payable
pursuant to this Section 2.14 agrees to use reasonable efforts (consistent with
its internal policy and legal and regulatory restrictions) to change the
jurisdiction of its Eurodollar Lending Office if the making of such a change
would avoid the need for, or reduce the amount of, any additional amounts that
may thereafter accrue and would not, in the reasonable judgment of such Lender,
be otherwise disadvantageous to such Lender.
SECTION 2.15. Sharing of Payments, Etc. If any Lender shall
obtain any payment (whether voluntary, involuntary, through the exercise of any
right of set-off, or otherwise) on account of the Revolving Credit Advances
owing to it (other than pursuant to Section 2.11, 2.14 or 8.04(c)) in excess of
its ratable share of payments on account of the Revolving Credit Advances
obtained by all the Lenders, such Lender shall forthwith purchase from the other
Lenders such participations in the Revolving Credit Advances owing to them as
shall be necessary to cause such purchasing Lender to share the excess payment
ratably with each of them; provided, however, that if all or any portion of such
excess payment is thereafter recovered from such purchasing Lender, such
purchase from each Lender shall be rescinded and such Lender shall repay to the
purchasing Lender the purchase price to the extent of such recovery together
with an amount equal to such Lender's ratable share (according to the proportion
of (i) the amount of such Lender's required repayment to (ii) the total amount
so recovered from the purchasing Lender) of any interest or other amount paid or
payable by the purchasing Lender in respect of the total amount so recovered.
The Borrower agrees that any Lender so purchasing a participation from another
Lender pursuant to this Section 2.15 may, to the fullest extent permitted by
law, exercise all its rights of payment (including the right of set-off) with
respect to such participation as fully as if such Lender were the direct
creditor of the Borrower in the amount of such participation.
SECTION 2.16. Use of Proceeds. The proceeds of the Advances
shall be available (and the Borrower agrees that it shall use such proceeds) for
general corporate purposes of the
<PAGE> 39
34
Borrower and its Subsidiaries, including acquisitions, stock repurchases and
commercial paper backstop.
ARTICLE III
CONDITIONS TO EFFECTIVENESS AND LENDING
SECTION 3.01. Conditions Precedent to Effectiveness of
Sections 2.01 and 2.03. Sections 2.01 and 2.03 of this Agreement shall become
effective on and as of the first date (the "Effective Date") on which the
following conditions precedent have been satisfied:
(a)The Borrower shall have paid all accrued fees and expenses
of the Agent and the Lenders (including the accrued fees and expenses
of counsel to the Agent).
(b)On the Effective Date, the following statements shall be
true and the Agent shall have received for the account of each Lender a
certificate signed by a duly authorized officer of the Borrower, dated
the Effective Date, stating that:
(i) The representations and warranties contained in
Section 4.01 are correct in all material respects on and as
of the Effective Date, and
(ii) No event has occurred and is continuing that
constitutes a Default.
(c)The Agent shall have received on or before the Effective
Date the following, each dated such day, in form and substance
satisfactory to the Agent and (except for the Revolving Credit Notes)
in sufficient copies for each Lender:
(i) The Revolving Credit Notes to the order of the
Lenders, respectively.
(ii) Certified copies of the resolutions of the
Board of Directors of the Borrower approving this Agreement
and the Notes, and of all documents evidencing other
necessary corporate action and governmental approvals, if
any, with respect to this Agreement and the Notes.
(iii) A certificate of the Secretary or an Assistant
Secretary of the Borrower certifying the names and true
signatures of the officers of the Borrower authorized to sign
this Agreement and the Notes and the other documents to be
delivered hereunder.
<PAGE> 40
35
(iv) A favorable opinion of Diana M. Daniels,
general counsel for the Borrower, substantially in the form
of Exhibit E hereto and as to such other matters as any
Lender through the Agent may reasonably request.
(v) A favorable opinion of Shearman & Sterling,
counsel for the Agent, in form and substance satisfactory to
the Agent.
SECTION 3.02. Conditions Precedent to Each Revolving Credit
Borrowing. The obligation of each Lender to make an Advance on the occasion of
each Borrowing (other than a Competitive Bid Advance) shall be subject to the
conditions precedent that the Effective Date shall have occurred and on the date
of such Borrowing the following statements shall be true (and each of the giving
of the applicable Notice of Revolving Credit Borrowing and the acceptance by
the Borrower of the proceeds of such Revolving Credit Borrowing shall constitute
a representation and warranty by the Borrower that on the date of such Borrowing
such statements are true):
(a)the representations and warranties contained in Section
4.01 are correct in all material respects on and as of the date of such
Revolving Credit Borrowing, before and after giving effect to such
Revolving Credit Borrowing and to the application of the proceeds
therefrom, as though made on and as of such date except to the extent
such representations and warranties expressly relate to an earlier
date, and
(b)no event has occurred and is continuing, or would result
from such Revolving Credit Borrowing or from the application of the
proceeds therefrom, that constitutes a Default.
SECTION 3.03. Conditions Precedent to Each Competitive Bid
Borrowing. The obligation of each Lender that is to make a Competitive Bid
Advance on the occasion of a Competitive Bid Borrowing to make such Competitive
Bid Advance as part of such Competitive Bid Borrowing is subject to the
conditions precedent that (i) the Agent shall have received the written
confirmatory Notice of Competitive Bid Borrowing with respect thereto, (ii) on
or before the date of such Competitive Bid Borrowing, but prior to such
Competitive Bid Borrowing, the Agent shall have received a Competitive Bid Note
payable to the order of such Lender for each of the one or more Competitive Bid
Advances to be made by such Lender as part of such Competitive Bid Borrowing, in
a principal amount equal to the principal amount of the Competitive Bid Advance
to be evidenced thereby and otherwise on such terms as were agreed to for such
Competitive Bid Advance in accordance with Section 2.03, and (iii) on the date
of such Competitive Bid Borrowing the following statements shall be true (and
each of the giving of the applicable Notice of Competitive Bid Borrowing and the
acceptance by the Borrower of the proceeds of such Competitive Bid Borrowing
shall constitute a representation and warranty by the Borrower that on the date
of such Competitive Bid Borrowing such statements are true):
<PAGE> 41
36
(a)the representations and warranties contained in Section
4.01 are correct in all material respects on and as of the date of such
Competitive Bid Borrowing, before and after giving effect to such
Competitive Bid Borrowing and to the application of the proceeds
therefrom, as though made on and as of such date, and
(b)no event has occurred and is continuing, or would result
from such Competitive Bid Borrowing or from the application of the
proceeds therefrom, that constitutes a Default.
SECTION 3.04. Determinations Under Section 3.01. For purposes
of determining compliance with the conditions specified in Section 3.01, each
Lender shall be deemed to have consented to, approved or accepted or to be
satisfied with each document or other matter required thereunder to be
consented to or approved by or acceptable or satisfactory to the Lenders unless
an officer of the Agent responsible for the transactions contemplated by this
Agreement shall have received notice from such Lender prior to the date that
the Borrower, by notice to the Lenders, designates as the proposed Effective
Date, specifying its objection thereto. The Agent shall promptly notify the
Lenders and the Borrower of the occurrence of the Effective Date.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrower.
The Borrower represents and warrants as follows:
(a)The Borrower is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
(b)The execution, delivery and performance by the Borrower of
this Agreement and the Notes, and the consummation of the transactions
contemplated hereby, are within the Borrower's corporate powers, have
been duly authorized by all necessary corporate action, and do not
contravene (i) the Borrower's charter or by-laws or (ii) law or any
contractual restriction binding on or affecting the Borrower.
(c)No authorization or approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body
or any other third party is required for the due execution, delivery
and performance by the Borrower of this Agreement or the Notes.
<PAGE> 42
37
(d)This Agreement has been, and each of the Notes when
delivered hereunder will have been, duly executed and delivered by the
Borrower. This Agreement is, and each of the Notes when delivered
hereunder will be, the legal, valid and binding obligation of the
Borrower enforceable against the Borrower in accordance with their
respective terms.
(e)The Consolidated balance sheet of the Borrower and its
Subsidiaries as at December 29, 1996, and the related Consolidated
statements of income and cash flows of the Borrower and its
Subsidiaries for the fiscal year then ended, accompanied by an opinion
of Price Waterhouse LLP, independent public accountants copies of which
have been furnished to each Lender, fairly present the Consolidated
financial condition of the Borrower and its Subsidiaries as at such
date and the Consolidated results of the operations of the Borrower
and its Subsidiaries for the periods ended on such date, all in
accordance with generally accepted accounting principles consistently
applied. Between December 29, 1996 and the date hereof, there has been
no Material Adverse Change.
(f)There is no pending or threatened action, suit,
investigation, litigation or proceeding, including, without limitation,
any Environmental Action, affecting the Borrower or any of its
Subsidiaries before any court, governmental agency or arbitrator that
(i) is pending or threatened on the date hereof and is reasonably
likely to have a Material Adverse Effect or (ii) purports to affect the
legality, validity or enforceability of this Agreement or any Note or
the consummation of the transactions contemplated hereby.
(g)The Borrower is not, and immediately after the application
by the Borrower of the proceeds of each Advance will not be an
"investment company" within the meaning of the Investment Company Act
of 1940, as amended.
(h)After giving effect to the application of the proceeds of
each Advance, not more than 25% of the value of the assets of the
Borrower and its Subsidiaries (as determined in good faith by the
Borrower) subject to the provisions of Section 5.02(a) or subject to
any restriction contained in any agreement or instrument between the
Borrower and any Lender or any Affiliate of any Lender relating to Debt
and within the scope of Section 6.01(d) will consist of or be
represented by Margin Stock.
<PAGE> 43
38
ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01. Affirmative Covenants. So long as any Advance
shall remain unpaid or any Lender shall have any Commitment hereunder, the
Borrower will:
(a)Compliance with Laws, Etc. Comply, and cause each of its
Subsidiaries to comply, in all material respects, with all applicable
laws, rules, regulations and orders, such compliance to include,
without limitation, compliance with ERISA and Environmental Laws,
except to the extent that any failures to so comply, individually or in
the aggregate, would not be reasonably likely to have a Material
Adverse Effect; provided, however, that neither the Borrower nor any of
its Subsidiaries shall be required to comply with any law, rule,
regulation or order to the extent it is being contested in good faith
and by proper proceedings and as to which appropriate reserves are
being maintained.
(b)Payment of Taxes, Etc. Pay and discharge, and cause each of
its Subsidiaries to pay and discharge, before the same shall become
delinquent, all material taxes, assessments and governmental charges or
levies imposed upon it or upon its property; provided, however, that
neither the Borrower nor any of its Subsidiaries shall be required to
pay or discharge any such tax, assessment, charge or claim that is
being contested in good faith and by proper proceedings and as to which
appropriate reserves are being maintained.
(c)Maintenance of Insurance. Maintain, and cause each of its
Significant Subsidiaries to maintain, insurance with responsible and
reputable insurance companies or associations in such amounts and
covering such risks as is usually carried by companies engaged in
similar businesses and owning similar properties in the same general
areas in which the Borrower or such Significant Subsidiary operates.
(d)Preservation of Corporate Existence, Etc. Preserve and
maintain its corporate existence, rights (charter and statutory) and
franchises if the loss or failure to maintain the same could,
individually or in the aggregate, be reasonably likely to have a
Material Adverse Effect; provided, however, that the Borrower may
consummate any merger or consolidation permitted under Section 5.02(b).
(e)Visitation Rights. At any reasonable time and from time to
time on reasonable notice and at reasonable intervals, permit the Agent
or any of the Lenders, or any agents or representatives thereof, to
visit the properties of the Borrower and any of its Subsidiaries and to
discuss the affairs, finances and accounts of the Borrower and any of
its Subsidiaries with any of their officers or directors and, during
the continuance of any
<PAGE> 44
39
Default, to examine and make copies of and abstracts from the records
and books of account of the Borrower and any of its Subsidiaries and
to discuss the affairs, finances and accounts of the Borrower and any
of its Subsidiaries with their independent certified public
accountants.
(f)Keeping of Books. Keep, and cause each of its Subsidiaries
to keep, proper books of record and account, in which entries shall be
made of all financial transactions and the assets and business of the
Borrower and each such Subsidiary in accordance with generally accepted
accounting principles in effect from time to time.
(g)Maintenance of Properties, Etc. Maintain and preserve, and
cause each of its Significant Subsidiaries to maintain and preserve,
all of its properties that are used or useful in the conduct of its
business in good working order and condition, ordinary wear and tear
excepted, except to the extent that any failure to do so, individually
or in the aggregate, would not be reasonably likely to have a Material
Adverse Effect.
(h)Primary Business. The Borrower shall continue to be engaged
primarily in lines of business as carried on at the date hereof or
lines of business related thereto.
(i)Reporting Requirements. Furnish to the Lenders:
(i) as soon as available and in any event within 55
days after the end of each of the first three quarters of
each fiscal year of the Borrower, the Consolidated balance
sheet of the Borrower and its Subsidiaries as of the end of
such quarter and Consolidated statements of income and cash
flows of the Borrower and its Subsidiaries for the period
commencing at the end of the previous fiscal year and ending
with the end of such quarter, duly certified (subject to
year-end audit adjustments) by the chief financial officer of
the Borrower as having been prepared in accordance with
generally accepted accounting principles and certificates of
the chief financial officer of the Borrower as to compliance
with the terms of this Agreement, provided that in the event
of any change in GAAP used in the preparation of such
financial statements, the Borrower shall also provide, if
necessary for the determination of compliance with Section
5.03, a statement of reconciliation conforming such financial
statements to GAAP;
(ii) as soon as available and in any event within
105 days after the end of each fiscal year of the Borrower, a
copy of the annual audit report for such year for the
Borrower and its Subsidiaries, containing the Consolidated
balance sheet of the Borrower and its Subsidiaries as of the
end of such fiscal year and Consolidated statements of income
and cash flows of the Borrower and its Subsidiaries for such
fiscal year, in each case accompanied by an opinion by Price
Waterhouse LLP or
<PAGE> 45
40
other independent public accountants of recognized national
standing, provided that in the event of any change in GAAP
used in the preparation of such financial statements, the
Borrower shall also provide, if necessary for the
determination of compliance with Section 5.03, a statement of
reconciliation conforming such financial statements to GAAP;
(iii) as soon as possible and in any event within
seven days after the occurrence of each Default continuing on
the date of such statement, a statement of the chief
financial officer of the Borrower setting forth details of
such Default and the action that the Borrower has taken and
proposes to take with respect thereto;
(iv) promptly after the sending or filing thereof,
copies of all quarterly and annual reports and proxy
solicitations that the Borrower sends to its public
securityholders generally, and copies of all reports on Form
8-K and registration statements for the public offering
(other than pursuant to employee Plans) of securities that
the Borrower files with the Securities and Exchange
Commission or any national securities exchange;
(v) promptly after the commencement thereof, notice
of all actions and proceedings before any court, governmental
agency or arbitrator affecting the Borrower or any of its
Subsidiaries of the type described in Section 4.01(f); and
(vi) such other information respecting the Borrower
or any of its Subsidiaries as any Lender through the Agent
may from time to time reasonably request.
SECTION 5.02. Negative Covenants. So long as any Advance shall
remain unpaid or any Lender shall have any Commitment hereunder, the Borrower
will not:
(a)Liens, Etc. Create or suffer to exist, or permit any of its
Subsidiaries to create or suffer to exist, any Lien on or with respect
to any of its properties (which for purposes of this subsection (a)
shall be deemed not to include shares of the Borrower's capital stock),
whether now owned or hereafter acquired, or assign, or permit any of
its Subsidiaries to assign, any right to receive income, other than:
(i) Permitted Liens,
(ii) purchase money Liens upon or in any real
property or equipment acquired or held by the Borrower or any
Subsidiary in the ordinary course of business to secure the
purchase price of such property or equipment or to secure
<PAGE> 46
41
Debt incurred solely for the purpose of financing the
acquisition of such property or equipment, or Liens existing
on such property or equipment at the time of its acquisition
(other than any such Liens created in contemplation of such
acquisition that were not incurred to finance the acquisition
of such property) or extensions, renewals or replacements of
any of the foregoing for the same or a lesser amount,
provided, however, that no such Lien shall extend to or cover
any properties of any character other than the real property
or equipment being acquired (or, in the case of improvements
to real property, the real property being improved), and no
such extension, renewal or replacement shall extend to or
cover any properties not theretofore subject to the Lien
being extended, renewed or replaced,
(iii) the Liens existing on the Effective Date and
described on Schedule 5.02(a) hereto,
(iv) Liens securing Debt payable to the Borrower,
(v)other Liens securing Debt in an aggregate principal amount
not to exceed at any time outstanding an amount equal to 20%
of Consolidated Shareholders' Equity, and
(vi) the replacement, extension or renewal of any
Lien permitted by clause (iii) above upon or in the same
property theretofore subject thereto or the replacement,
extension or renewal (without increase in the amount) of the
Debt secured thereby.
(b)Mergers, Etc. Merge or consolidate with or into, or convey,
transfer, lease or otherwise dispose of (whether in one transaction or
in a series of transactions) all or substantially all of its assets
(whether now owned or hereafter acquired) to, any Person, provided that
the Borrower may merge or consolidate with any other Person so long as
the Borrower is the surviving corporation and provided further that no
Default shall have occurred and be continuing at the time of such
proposed transaction or would result therefrom.
(c)Accounting Changes. Make or permit, or permit any of its
Subsidiaries to make or permit, any change in accounting policies or
reporting practices, except as permitted by generally accepted
accounting principles and, in the case of any significant change,
concurred with by the Borrower's independent public accountants.
SECTION 5.03. Financial Covenant. So long as any Advance shall
remain unpaid or any Lender shall have any Commitment hereunder, the Borrower
will maintain Consolidated Shareholders' Equity of not less than $850,000,000.
<PAGE> 47
42
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the following
events ("Events of Default") shall occur and be continuing:
(a)The Borrower shall fail to pay any principal of any Advance
when the same becomes due and payable (or, if any such failure is due
solely to technical or administrative difficulties relating to the
transfer of such principal payment, within two Business Days after the
same becomes due and payable); or the Borrower shall fail to pay any
interest on any Advance or make any other payment of fees or other
amounts payable under this Agreement or any Note within three Business
Days after the same becomes due and payable; or
(b)Any representation or warranty made by the Borrower herein
or by the Borrower (or any of its officers) in connection with this
Agreement shall prove to have been incorrect in any material respect
when made; or
(c)(i) The Borrower shall fail to perform or observe any term,
covenant or agreement contained in Section 5.01(d) or (i)(iii), 5.02 or
5.03, or (ii) the Borrower shall fail to perform or observe any other
term, covenant or agreement contained in this Agreement on its part to
be performed or observed if such failure shall remain unremedied for 20
days after written notice thereof shall have been given to the Borrower
by the Agent or any Lender; or
(d)The Borrower or any of its Subsidiaries shall fail to pay
any principal of or premium or interest on any Debt (other than
Non-Recourse Debt) that is outstanding in a principal amount of at
least $40,000,000 in the aggregate (but excluding Debt outstanding
hereunder) of the Borrower or such Subsidiary (as the case may be),
when the same becomes due and payable (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise), and such
failure shall continue after the applicable grace period, if any,
specified in the agreement or instrument relating to such Debt; or any
other event shall occur or condition shall exist under any agreement or
instrument relating to any such Debt and shall continue after the
applicable grace period, if any, specified in such agreement or
instrument, if the effect of such event or condition is to accelerate,
or to permit the acceleration of, the maturity of such Debt; or
(e)The Borrower or any of its Significant Subsidiaries shall
generally not pay its debts as such debts become due, or shall admit in
writing its inability to pay its debts
<PAGE> 48
43
generally, or shall make a general assignment for the benefit of
creditors; or any proceeding shall be instituted by or against the
Borrower or any of its Significant Subsidiaries seeking to adjudicate
it a bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief, or
composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking the
entry of an order for relief or the appointment of a receiver,
trustee, custodian or other similar official for it or for any
substantial part of its property and, in the case of any such
proceeding instituted against it (but not instituted by it), either
such proceeding shall remain undismissed or unstayed for a period of
60 days, or in such proceeding the entry of an order for relief
against, or the appointment of a receiver, trustee, custodian or other
similar official for, it or for any substantial part of its property
shall occur; or the Borrower or any of its Significant Subsidiaries
shall take any corporate action to authorize any of the actions set
forth above in this subsection (e); or
(f)Any judgment or order of a court of competent jurisdiction
for the payment of money in excess of $20,000,000 shall be rendered
against the Borrower or any of its Significant Subsidiaries and either
(i) enforcement proceedings shall have been legally commenced by any
creditor upon such judgment or order or (ii) there shall be any period
of 60 consecutive days during which a stay of enforcement of such
judgment or order, by reason of a pending appeal or otherwise, shall
not be in effect provided, however, that any such judgment or order
shall not be an Event of Default under this Section 6.01(f) if and for
so long as (x) the amount of such judgment or order is covered by a
valid and binding policy of insurance between the defendant and the
insurer covering payment thereof and (y) such insurer, which shall be
rated at least "A-" by A.M. Best Company, has been notified of, and has
not disputed the claim made for payment of, the amount of such judgment
or order; or
(g)(i) Any Person or two or more Persons acting in concert
(other than the Graham Interests) shall have acquired beneficial
ownership (within the meaning of Rule 13d-3 of the Securities and
Exchange Commission under the Securities Exchange Act of 1934),
directly or indirectly, of Voting Stock of the Borrower (or other
securities convertible into such Voting Stock) representing 30% or more
of the combined voting power of all Voting Stock of the Borrower and
such combined voting power exceeds the then current voting power of the
Voting Stock of the Borrower (or other securities convertible into such
Voting Stock) controlled by the Graham Interests; or (ii) Continuing
Directors of the Borrower shall cease for any reason to constitute a
majority of the board of directors of the Borrower; or
(h)The Borrower or any of its ERISA Affiliates shall incur
liability as a result of one or more of the following: (i) the
occurrence of any ERISA Event; (ii) the partial or complete withdrawal
of the Borrower or any of its ERISA Affiliates from a
<PAGE> 49
44
Multiemployer Plan; or (iii) the reorganization or termination of a
Multiemployer Plan; and, in the reasonable opinion of the Required
Lenders, such incurrence would be likely to result in a Material
Adverse Effect, provided that any such liability in an amount not to
exceed $20,000,000 shall be deemed not to be likely to result in a
Material Adverse Effect;
then, and in any such event, the Agent (i) shall at the request, or may with the
consent, of the Required Lenders, by notice to the Borrower, declare the
obligation of each Lender to make Advances to be terminated, whereupon the same
shall forthwith terminate, and (ii) shall at the request, or may with the
consent, of the Required Lenders, by notice to the Borrower, declare the Notes,
all interest thereon and all other amounts payable under this Agreement to be
forthwith due and payable, whereupon the Notes, all such interest and all such
amounts shall become and be forthwith due and payable, without presentment,
demand, protest or further notice of any kind, all of which are hereby expressly
waived by the Borrower; provided, however, that in the event of an actual or
deemed entry of an order for relief with respect to the Borrower under the
Federal Bankruptcy Code, (A) the obligation of each Lender to make Advances
shall automatically be terminated and (B) the Notes, all such interest and all
such amounts shall automatically become and be due and payable, without
presentment, demand, protest or any notice of any kind, all of which are hereby
expressly waived by the Borrower.
ARTICLE VII
THE AGENT
SECTION 7.01. Authorization and Action. Each Lender hereby
appoints and authorizes the Agent to take such action as agent on its behalf and
to exercise such powers and discretion under this Agreement as are delegated to
the Agent by the terms hereof, together with such powers and discretion as are
reasonably incidental thereto. As to any matters not expressly provided for by
this Agreement (including, without limitation, enforcement or collection of the
Notes), the Agent shall not be required to exercise any discretion or take any
action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the instructions of
the Required Lenders, and such instructions shall be binding upon all Lenders
and all holders of Notes; provided, however, that the Agent shall not be
required to take any action that exposes the Agent to personal liability or that
is contrary to this Agreement or applicable law. The Agent agrees to give to
each Lender prompt notice of each notice given to it by the Borrower pursuant to
the terms of this Agreement.
SECTION 7.02. Agent's Reliance, Etc. Neither the Agent nor any
of its directors, officers, agents or employees shall be liable for any action
taken or omitted to be taken by it or them under or in connection with this
Agreement, except for its or their own gross negligence or willful misconduct.
Without limitation of the generality of the foregoing, the Agent: (i) may treat
<PAGE> 50
45
the payee of any Note as the holder thereof until the Agent receives and accepts
an Assignment and Acceptance entered into by the Lender that is the payee of
such Note, as assignor, and an Eligible Assignee, as assignee, as provided in
Section 8.07; (ii) may consult with legal counsel (including counsel for the
Borrower), independent public accountants and other experts selected by it and
shall not be liable for any action taken or omitted to be taken in good faith
by it in accordance with the advice of such counsel, accountants or experts;
(iii) makes no warranty or representation to any Lender and shall not be
responsible to any Lender for any statements, warranties or representations
(whether written or oral) made in or in connection with this Agreement; (iv)
shall not have any duty to ascertain or to inquire as to the performance or
observance of any of the terms, covenants or conditions of this Agreement on
the part of the Borrower or to inspect the property (including the books and
records) of the Borrower; (v) shall not be responsible to any Lender for the
due execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement or any other instrument or document furnished pursuant
hereto; and (vi) shall incur no liability under or in respect of this Agreement
by acting upon any notice, consent, certificate or other instrument or writing
(which may be by telecopier, telegram or telex) reasonably believed by it to be
genuine and signed or sent by the proper party or parties.
SECTION 7.03. Citibank and Affiliates. With respect to its
Commitment, the Advances made by it and the Note issued to it, Citibank shall
have the same rights and powers under this Agreement as any other Lender and may
exercise the same as though it were not the Agent; and the term "Lender" or
"Lenders" shall, unless otherwise expressly indicated, include Citibank in its
individual capacity. Citibank and its Affiliates may accept deposits from, lend
money to, act as trustee under indentures of, accept investment banking
engagements from and generally engage in any kind of business with, the
Borrower, any of its Subsidiaries and any Person who may do business with or own
securities of the Borrower or any such Subsidiary, all as if Citibank were not
the Agent and without any duty to account therefor to the Lenders.
SECTION 7.04. Lender Credit Decision. Each Lender acknowledges
that it has, independently and without reliance upon the Agent or any other
Lender and based on the financial statements referred to in Section 4.01 and
such other documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the Agent or
any other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement.
SECTION 7.05. Indemnification. The Lenders agree to indemnify
the Agent (to the extent not reimbursed by the Borrower), ratably according to
the respective principal amounts of the Revolving Credit Notes then held by each
of them (or if no Revolving Credit Notes are at the time outstanding or if any
Revolving Credit Notes are held by Persons that are not Lenders, ratably
according to the respective amounts of their Commitments), from and against any
and all
<PAGE> 51
46
liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever that may be imposed on, incurred by, or asserted against the Agent in
any way relating to or arising out of this Agreement or any action taken or
omitted by the Agent under this Agreement, provided that no Lender shall be
liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the Agent's gross negligence or willful misconduct. Without
limitation of the foregoing, each Lender agrees to reimburse the Agent promptly
upon demand for its ratable share of any out-of-pocket expenses (including
counsel fees) incurred by the Agent in connection with the preparation,
execution, delivery, administration, modification, amendment or enforcement
(whether through negotiations, legal proceedings or otherwise) of, or legal
advice in respect of rights or responsibilities under, this Agreement, to the
extent that the Agent is not reimbursed for such expenses by the Borrower.
SECTION 7.06. Successor Agent. The Agent may resign at any
time by giving written notice thereof to the Lenders and the Borrower and may be
removed at any time with or without cause by the Required Lenders. Upon any such
resignation or removal, the Required Lenders shall have the right to appoint a
successor Agent. If no successor Agent shall have been so appointed by the
Required Lenders, and shall have accepted such appointment, within 30 days after
the retiring Agent's giving of notice of resignation or the Required Lenders'
removal of the retiring Agent, then the retiring Agent may, on behalf of the
Lenders, appoint a successor Agent, which shall be a commercial bank organized
under the laws of the United States of America or of any State thereof and
having a combined capital and surplus of at least $500,000,000. Upon the
acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, discretion, privileges and duties of the retiring Agent, and the
retiring Agent shall be discharged from its duties and obligations under this
Agreement. After any retiring Agent's resignation or removal hereunder as Agent,
the provisions of this Article VII shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Agent under this Agreement.
SECTION 7.07. Co-Agent. Wachovia has been designated as
Co-Agent in recognition of its Commitment, and the use of such title does not
impose on Wachovia any duties or obligations greater than those of any other
Lender.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc. No amendment or waiver of any
provision of this Agreement or the Revolving Credit Notes, nor consent to any
departure by the Borrower therefrom, shall in any event be effective unless the
same shall be in writing and signed by the
<PAGE> 52
47
Required Lenders, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given; provided,
however, that no amendment, waiver or consent shall, unless in writing and
signed by all the Lenders, do any of the following: (a) waive any of the
conditions specified in Section 3.01, (b) increase the Commitments of the
Lenders other than as provided in Section 2.05(b), (c) reduce the principal of,
or interest on, the Revolving Credit Notes or any fees or other amounts payable
hereunder, (d) postpone any date fixed for any payment of principal of, or
interest on, the Revolving Credit Notes or any fees or other amounts payable
hereunder, (e) change the percentage of the Commitments or of the aggregate
unpaid principal amount of the Revolving Credit Notes that shall be required
for the Lenders or any of them to take any action hereunder or (f) amend this
Section 8.01; provided further that no amendment, waiver or consent shall,
unless in writing and signed by the Agent in addition to the Lenders required
above to take such action, affect the rights or duties of the Agent under this
Agreement or any Note.
SECTION 8.02. Notices, Etc. All notices and other
communications provided for hereunder shall be in writing (including telecopier,
telegraphic or telex communication) and telecopied, telegraphed, telexed or
delivered, if to the Borrower, at its address at 1150 15th Street, N.W.,
Washington, D.C. 20071, Attention: Treasurer; if to any Initial Lender, at its
Domestic Lending Office specified opposite its name on Schedule I hereto; if to
any other Lender, at its Domestic Lending Office specified in the Assumption
Agreement or the Assignment and Acceptance pursuant to which it became a Lender;
and if to the Agent, at its address at Two Penns Way, Suite 200, New Castle,
Delaware 19720, Attention: Brian Maxwell; or, as to the Borrower or the Agent,
at such other address as shall be designated by such party in a written notice
to the other parties and, as to each other party, at such other address as shall
be designated by such party in a written notice to the Borrower and the Agent.
All such notices and communications shall, when hand delivered, telecopied,
telegraphed or telexed, be effective when received. Delivery by telecopier of an
executed counterpart of any amendment or waiver of any provision of this
Agreement or the Notes or of any Exhibit hereto to be executed and delivered
hereunder shall be effective as delivery of a manually executed counterpart
thereof.
SECTION 8.03. No Waiver; Remedies. No failure on the part of
any Lender or the Agent to exercise, and no delay in exercising, any right
hereunder or under any Note shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
SECTION 8.04. Costs and Expenses. (a) The Borrower agrees to
pay on demand all reasonable out-of-pocket costs and expenses of the Agent in
connection with the preparation, execution, delivery, administration,
modification and amendment of this Agreement, the Notes and the other documents
to be delivered hereunder, including, without limitation, (A) all due diligence,
syndication (including printing, distribution and bank meetings), transportation
and duplication
<PAGE> 53
48
expenses, and (B) the reasonable fees and expenses of counsel for the Agent
with respect thereto and with respect to advising the Agent as to its rights
and responsibilities under this Agreement. The Borrower further agrees to pay
on demand all reasonable out-of-pocket costs and expenses of the Agent and the
Lenders, if any (including, without limitation, reasonable counsel fees and
expenses), in connection with the enforcement (whether through negotiations,
legal proceedings or otherwise) of this Agreement, the Notes and the other
documents to be delivered hereunder, including, without limitation, reasonable
fees and expenses of counsel for the Agent and each Lender in connection with
the enforcement of rights under this Section 8.04(a).
(b) The Borrower agrees to indemnify and hold harmless the
Agent and each Lender and each of their Affiliates and their officers,
directors, employees, agents and advisors (each, an "Indemnified
Party") from and against any and all claims, damages, losses,
liabilities and expenses (including, without limitation, reasonable
fees and expenses of counsel) that may be incurred by or asserted or
awarded against any Indemnified Party, in each case arising out of or
in connection with or by reason of, or in connection with the
preparation for a defense of, any investigation, litigation or
proceeding arising out of, related to or in connection with the Notes,
this Agreement, any of the transactions contemplated herein or the
actual or proposed use of the proceeds of the Advances, whether or not
such investigation, litigation or proceeding is brought by the
Borrower, its directors, shareholders or creditors or an Indemnified
Party or any other Person or any Indemnified Party is otherwise a party
thereto and whether or not the transactions contemplated hereby are
consummated, except to the extent such claim, damage, loss, liability
or expense is found in a final, non-appealable judgment by a court of
competent jurisdiction to have resulted from such Indemnified Party's
gross negligence or willful misconduct or breach of its obligations
under this Agreement.
(c) If any payment of principal of, or Conversion of, any
Eurodollar Rate Advance or LIBO Rate Advance is made by the Borrower to
or for the account of a Lender other than on the last day of the
Interest Period for such Advance, as a result of a payment or
Conversion pursuant to Section 2.08(d) or (e), 2.09, 2.10 or 2.12,
acceleration of the maturity of the Notes pursuant to Section 6.01 or
for any other reason, or by an Eligible Assignee to a Lender other than
on the last day of an Interest Period for such Advance upon an
assignment of rights and obligations under this Agreement pursuant to
Section 8.07 as a result of a demand by the Borrower pursuant to
Section 8.07(a), the Borrower shall, upon demand by such Lender (with a
copy of such demand to the Agent), pay to the Agent for the account of
such Lender any amounts required to compensate such Lender for any
additional losses, costs or expenses that it may reasonably incur as a
result of such payment or Conversion, including, without limitation,
any loss (excluding loss of anticipated profits), cost or expense
incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by any Lender to fund or maintain such Advance.
(d) Without prejudice to the survival of any other agreement
of the Borrower hereunder, the agreements and obligations of the
Borrower contained in Sections 2.11, 2.14 and
<PAGE> 54
49
8.04 shall survive the payment in full of principal, interest and all other
amounts payable hereunder and under the Notes.
SECTION 8.05. Right of Set-off. Upon (i) the occurrence and
during the continuance of any Event of Default and (ii) the making of the
request or the granting of the consent specified by Section 6.01 to authorize
the Agent to declare the Notes due and payable pursuant to the provisions of
Section 6.01, each Lender and each of its Affiliates is hereby authorized at any
time and from time to time, to the fullest extent permitted by law, to set off
and apply any and all deposits (general or special, time or demand, provisional
or final) at any time held and other indebtedness at any time owing by such
Lender or such Affiliate to or for the credit or the account of the Borrower
against any and all of the obligations of the Borrower now or hereafter existing
under this Agreement and the Note held by such Lender, whether or not such
Lender shall have made any demand under this Agreement or such Note and although
such obligations may be unmatured. Each Lender agrees promptly to notify the
Borrower after any such set-off and application, provided that the failure to
give such notice shall not affect the validity of such set-off and application.
The rights of each Lender and its Affiliates under this Section are in addition
to other rights and remedies (including, without limitation, other rights of
set-off) that such Lender and its Affiliates may have.
SECTION 8.06. Binding Effect. This Agreement shall become
effective (other than Sections 2.01 and 2.03, which shall only become effective
upon satisfaction of the conditions precedent set forth in Section 3.01) when it
shall have been executed by the Borrower and the Agent and when the Agent shall
have been notified by each Initial Lender that such Initial Lender has executed
it and thereafter shall be binding upon and inure to the benefit of the
Borrower, the Agent and each Lender and their respective successors and assigns,
except that the Borrower shall not have the right to assign its rights hereunder
or any interest herein without the prior written consent of the Lenders.
SECTION 8.07. Assignments and Participations. (a) Each Lender
may with the consent of the Agent and the Borrower (which consent shall not be
unreasonably withheld or delayed) and, if demanded by the Borrower (following a
demand by such Lender pursuant to Section 2.11 or 2.14 or following such
Lender's Downgrade) at a time when no Default has occurred and is continuing
upon at least five Business Days' notice to such Lender and the Agent, will
assign to one or more Persons all or a portion of its rights and obligations
under this Agreement (including, without limitation, all or a portion of its
Commitment, the Revolving Credit Advances owing to it and the Revolving Credit
Note or Notes held by it); provided, however, that (i) each such assignment
shall be of a constant, and not a varying, percentage of all rights and
obligations under this Agreement (other than any right to make Competitive Bid
Advances, Competitive Bid Advances owing to it and Competitive Bid Notes), (ii)
except in the case of an assignment to a Person that, immediately prior to such
assignment, was a Lender or an assignment of all of a Lender's rights and
obligations under this Agreement, the amount of the Commitment
<PAGE> 55
50
of the assigning Lender being assigned pursuant to each such assignment
(determined as of the date of the Assignment and Acceptance with respect to
such assignment) shall in no event be less than $10,000,000 or an integral
multiple of $1,000,000 in excess thereof and the amount of the Commitment of
such Lender remaining after such assignment shall not be less than $10,000,000
or shall be zero, (iii) each such assignment shall be to an Eligible Assignee,
(iv) each such assignment made as a result of a demand by the Borrower pursuant
to this Section 8.07(a) shall be arranged by the Borrower after consultation
with the Agent and shall be either an assignment of all of the rights and
obligations of the assigning Lender under this Agreement or an assignment of a
portion of such rights and obligations made concurrently with another such
assignment or other such assignments that together cover all of the rights and
obligations of the assigning Lender under this Agreement, (v) no Lender shall
be obligated to make any such assignment as a result of a demand by the
Borrower pursuant to this Section 8.07(a) unless and until such Lender shall
have received one or more payments from either the Borrower or one or more
Eligible Assignees in an aggregate amount at least equal to the aggregate
outstanding principal amount of the Advances owing to such Lender, together
with accrued interest thereon to the date of payment of such principal amount
and all other amounts payable to such Lender under this Agreement, and (vi)
unless such assignment is demanded by the Borrower, the parties to each such
assignment shall execute and deliver to the Agent, for its acceptance and
recording in the Register, an Assignment and Acceptance, together with any
Revolving Credit Note subject to such assignment and a processing and
recordation fee of $3,500. Upon such execution, delivery, acceptance and
recording, from and after the effective date specified in each Assignment and
Acceptance, (x) the assignee thereunder shall be a party hereto and, to the
extent that rights and obligations hereunder have been assigned to it pursuant
to such Assignment and Acceptance, have the rights and obligations of a Lender
hereunder and (y) the Lender assignor thereunder shall, to the extent that
rights and obligations hereunder have been assigned by it pursuant to such
Assignment and Acceptance, relinquish its rights and be released from its
obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender's
rights and obligations under this Agreement, such Lender shall cease to be a
party hereto).
(b) By executing and delivering an Assignment and Acceptance,
the Lender assignor thereunder and the assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (i) other than as
provided in such Assignment and Acceptance, such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other instrument or document
furnished pursuant hereto; (ii) such assigning Lender makes no representation or
warranty and assumes no responsibility with respect to the financial condition
of the Borrower or the performance or observance by the Borrower of any of its
obligations under this Agreement or any other instrument or document furnished
pursuant hereto; (iii) such assignee confirms that it has received a copy of
this Agreement, together with
<PAGE> 56
51
copies of the financial statements referred to in Section 4.01 and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment and Acceptance; (iv) such
assignee will, independently and without reliance upon the Agent, such
assigning Lender or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement; (v) such
assignee confirms that it is an Eligible Assignee; (vi) such assignee appoints
and authorizes the Agent to take such action as agent on its behalf and to
exercise such powers and discretion under this Agreement as are delegated to
the Agent by the terms hereof, together with such powers and discretion as are
reasonably incidental thereto; and (vii) such assignee agrees that it will
perform in accordance with their terms all of the obligations that by the terms
of this Agreement are required to be performed by it as a Lender.
(c) Upon its receipt of an Assignment and Acceptance executed
by an assigning Lender and an assignee representing that it is an Eligible
Assignee, together with any Revolving Credit Note or Notes subject to such
assignment, the Agent shall, if such Assignment and Acceptance has been
completed and is in substantially the form of Exhibit C hereto, (i) accept such
Assignment and Acceptance, (ii) record the information contained therein in the
Register and (iii) give prompt notice thereof to the Borrower. Within five
Business Days after its receipt of such notice, the Borrower, at its own
expense, shall execute and deliver to the Agent in exchange for the surrendered
Revolving Credit Note a new Note to the order of such Eligible Assignee in an
amount equal to the Commitment assumed by it pursuant to such Assignment and
Acceptance and, if the assigning Lender has retained a Commitment hereunder, a
new Revolving Credit Note to the order of the assigning Lender in an amount
equal to the Commitment retained by it hereunder. Such new Revolving Credit Note
or Notes shall be in an aggregate principal amount equal to the aggregate
principal amount of such surrendered Revolving Credit Note or Notes, shall be
dated the effective date of such Assignment and Acceptance and shall otherwise
be in substantially the form of Exhibit A-1 hereto.
(d) The Agent shall maintain at its address referred to in
Section 8.02 a copy of each Assignment and Acceptance delivered to and accepted
by it and a register for the recordation of the names and addresses of the
Lenders and the Commitment of, and principal amount of the Advances owing to,
each Lender from time to time (the "Register"). The entries in the Register
shall be conclusive and binding for all purposes, absent manifest error, and the
Borrower, the Agent and the Lenders may treat each Person whose name is recorded
in the Register as a Lender hereunder for all purposes of this Agreement. The
Register shall be available for inspection by the Borrower or any Lender at any
reasonable time and from time to time upon reasonable prior notice.
(e) Each Lender may sell participations to one or more banks
or other entities (other than the Borrower or any of its Affiliates) in or to
all or a portion of its rights and obligations under this Agreement (including,
without limitation, all or a portion of its
<PAGE> 57
52
Commitment, the Advances owing to it and the Note or Notes held by it) with the
consent of the Borrower (which consent shall not be unreasonably withheld or
delayed); provided, however, that (i) such Lender's obligations under this
Agreement (including, without limitation, its Commitment to the Borrower
hereunder) shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such
obligations, (iii) such Lender shall remain the holder of any such Note for all
purposes of this Agreement, (iv) the Borrower, the Agent and the other Lenders
shall continue to deal solely and directly with such Lender in connection with
such Lender's rights and obligations under this Agreement and (v) no
participant under any such participation shall have any right to approve any
amendment or waiver of any provision of this Agreement or any Note, or any
consent to any departure by the Borrower therefrom, except to the extent that
such amendment, waiver or consent would reduce the principal of, or interest
on, the Notes or any fees or other amounts payable hereunder, in each case to
the extent subject to such participation, or postpone any date fixed for any
payment of principal of, or interest on, the Notes or any fees or other amounts
payable hereunder, in each case to the extent subject to such participation.
(f) Any Lender may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
8.07, disclose to the assignee or participant or proposed assignee or
participant, any information relating to the Borrower furnished to such Lender
by or on behalf of the Borrower; provided that, prior to any such disclosure,
the assignee or participant or proposed assignee or participant shall agree to
preserve the confidentiality of any Confidential Information relating to the
Borrower received by it from such Lender.
(g) Notwithstanding any other provision set forth in this
Agreement, any Lender may at any time create a security interest in all or any
portion of its rights under this Agreement (including, without limitation, the
Advances owing to it and the Note or Notes held by it) in favor of any Federal
Reserve Bank in accordance with Regulation A of the Board of Governors of the
Federal Reserve System.
SECTION 8.08. Confidentiality. Neither the Agent nor any
Lender shall disclose any Confidential Information to any other Person without
the consent of the Borrower, other than (a) to the Agent's or such Lender's
Affiliates and their officers, directors, employees, accountants, auditors,
counsel, agents and advisors and, as contemplated by Section 8.07(f), to actual
or prospective assignees and participants, and then only on a confidential
basis, (b) as required by any law, rule or regulation or judicial process, (c)
to any rating agency when required by it, provided that, prior to any such
disclosure, such rating agency shall undertake to preserve the confidentiality
of any Confidential Information relating to the Borrower received by it from
such Lender and (d) as requested or required by any state, federal or foreign
authority or examiner regulating banks or banking.
<PAGE> 58
53
SECTION 8.09. Governing Law. This Agreement and the Notes
shall be governed by, and construed in accordance with, the laws of the State of
New York.
SECTION 8.10. Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement.
SECTION 8.11. Jurisdiction, Etc. (a) Each of the parties
hereto hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court or
federal court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or the Notes, or for recognition or enforcement of
any judgment, and each of the parties hereto hereby irrevocably and
unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in any such New York State court or, to
the extent permitted by law, in such federal court. Each of the parties hereto
agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. Nothing in this Agreement shall affect any
right that any party may otherwise have to bring any action or proceeding
relating to this Agreement or the Notes in the courts of any jurisdiction.
(b) Each of the parties hereto irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection that it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement or the Notes
in any New York State or federal court. Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
court.
<PAGE> 59
54
SECTION 8.12. Waiver of Jury Trial. Each of the Borrower, the
Agent and the Lenders hereby irrevocably waives all right to trial by jury in
any action, proceeding or counterclaim (whether based on contract, tort or
otherwise) arising out of or relating to this Agreement or the Notes or the
actions of the Agent or any Lender in the negotiation, administration,
performance or enforcement thereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly
authorized, as of the date first above written.
THE WASHINGTON POST COMPANY
By
--------------------------
Title:
CITIBANK, N.A.
as Agent
By
--------------------------
Title:
WACHOVIA BANK, N.A.
as Co-Agent
By
--------------------------
Title:
<PAGE> 60
55
Initial Lenders
Commitment
$100,000,000 CITIBANK, N.A.
By
--------------------------
Title:
$100,000,000 WACHOVIA BANK, N.A.
By
-------------------------------
Title:
$ 50,000,000 THE BANK OF NEW YORK
By
-------------------------------
Title:
$ 50,000,000 CRESTAR BANK
By
-------------------------------
Title:
$ 75,000,000 THE FIRST NATIONAL BANK
OF CHICAGO
By
-------------------------------
Title:
<PAGE> 61
56
$ 25,000,000 FIRST NATIONAL BANK OF
MARYLAND
By
-------------------------------
Title:
$ 50,000,000 FIRST UNION NATIONAL BANK
By
-------------------------------
Title:
$ 25,000,000 MELLON BANK, N.A.
By
-------------------------------
Title:
$ 25,000,000 RIGGS BANK, N.A.
By
-------------------------------
Title:
$500,000,000 Total of the Commitments
<PAGE> 62
SCHEDULE I
The Washington Post Company
APPLICABLE LENDING OFFICES
<TABLE>
<CAPTION>
NAME OF INITIAL LENDER DOMESTIC LENDING OFFICE EURODOLLAR LENDING OFFICE
- ---------------------- ----------------------- -------------------------
<S> <C> <C>
Citibank, N.A. 399 Park Avenue 399 Park Avenue
New York, New York 10043 New York, New York 10043
Wachovia Bank, N.A. 191 Peachtree Street, N.E. 191 Peachtree Street, N.E.
Atlanta, Georgia 30303 Atlanta, Georgia 30303
The Bank of New York One Wall Street One Wall Street
New York, New York 10286 New York, New York 10286
Crestar Bank 1445 New York Avenue NW 1445 New York Avenue NW
5th Floor 5th Floor
Washington, DC 20005 Washington, DC 20005
The First National Bank One First National Plaza One First National Plaza
of Chicago Chicago, Illinois 60670 Chicago, Illinois 60670
First National Bank of 601 13th Street NW 601 13th Street NW
Maryland Suite 1000 North Suite 1000 North
Washington, DC 20005 Washington, DC 20005
First Union National 301 S. College Street 301 S. College Street
Bank DC-5 DC-5
Charlotte, NC 28288-0735 Charlotte, NC 28288-0735
Mellon Bank, N.A. One Mellon Bank Center One Mellon Bank Center
500 Grant Street 500 Grant Street
Pittsburgh, PA 15258 Pittsburgh, PA 15258
Riggs Bank, N.A. 808 17th Street NW 808 17th Street NW
10th Floor 10th Floor
Washington, DC 20006 Washington, DC 20006
</TABLE>
<PAGE> 63
SCHEDULE 5.02(a)
EXISTING LIENS
None
<PAGE> 64
EXHIBIT A-1 - FORM OF
REVOLVING CREDIT
PROMISSORY NOTE
U.S.$_______________ Dated: March 17, 1998
FOR VALUE RECEIVED, the undersigned, THE WASHINGTON POST
COMPANY, a Delaware corporation (the "Borrower"), HEREBY PROMISES TO PAY to the
order of _________________________ (the "Lender") for the account of its
Applicable Lending Office on the Termination Date (each as defined in the Credit
Agreement referred to below) the principal sum of U.S.$[amount of the Lender's
Commitment in figures] or, if less, the aggregate principal amount of the
Revolving Credit Advances made by the Lender to the Borrower pursuant to the
Credit Agreement dated as of March 17, 1998 among the Borrower, the Lender and
certain other lenders parties thereto, Citibank, N.A., as Agent for the Lender
and such other lenders, and Wachovia Bank, N.A., as Co-Agent (as amended or
modified from time to time, the "Credit Agreement"; the terms defined therein
being used herein as therein defined), outstanding on the Termination Date.
The Borrower promises to pay interest on the unpaid principal
amount of each Revolving Credit Advance from the date of such Revolving Credit
Advance until such principal amount is paid in full, at such interest rates, and
payable at such times, as are specified in the Credit Agreement.
Both principal and interest are payable in lawful money of the
United States of America to Citibank, N.A., as Agent, at 399 Park Avenue, New
York, New York 10043, in same day funds. Each Revolving Credit Advance owing to
the Lender by the Borrower pursuant to the Credit Agreement, and all payments
made on account of principal thereof, shall be recorded by the Lender and, prior
to any transfer hereof, endorsed on the grid attached hereto which is part of
this Promissory Note.
This Promissory Note is one of the Revolving Credit Notes
referred to in, and is entitled to the benefits of, the Credit Agreement. The
Credit Agreement, among other things, (i) provides for the making of Revolving
Credit Advances by the Lender to the Borrower from time to time in an aggregate
amount not to exceed at any time outstanding the U.S. dollar amount first above
mentioned, the indebtedness of the Borrower resulting from each such Revolving
<PAGE> 65
2
Credit Advance being evidenced by this Promissory Note, and (ii) contains
provisions for acceleration of the maturity hereof upon the happening of certain
stated events and also for prepayments on account of principal hereof prior to
the maturity hereof upon the terms and conditions therein specified.
THE WASHINGTON POST COMPANY
By
-------------------------------
Title:
<PAGE> 66
ADVANCES AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
AMOUNT OF
AMOUNT OF PRINCIPAL PAID UNPAID PRINCIPAL NOTATION
DATE ADVANCE OR PREPAID BALANCE MADE BY
---- --------- -------------- ---------------- --------
<S> <C> <C> <C> <C>
</TABLE>
<PAGE> 67
EXHIBIT A-2 - FORM OF
COMPETITIVE BID
PROMISSORY NOTE
U.S.$_______________ Dated: March 17, 1998
FOR VALUE RECEIVED, the undersigned, THE WASHINGTON POST
COMPANY, a Delaware corporation (the "Borrower"), HEREBY PROMISES TO PAY to the
order of _________________________ (the "Lender") for the account of its
Applicable Lending Office (as defined in the Credit Agreement dated as of March
17, 1998 among the Borrower, the Lender and certain other lenders parties
thereto, Citibank, N.A., as Agent for the Lender and such other lenders, and
Wachovia Bank, N.A., as Co-Agent (as amended or modified from time to time, the
"Credit Agreement"; the terms defined therein being used herein as therein
defined)), on _______________, 199_, the principal amount of
U.S.$_______________.
The Borrower promises to pay interest on the unpaid principal
amount hereof from the date hereof until such principal amount is paid in full,
at the interest rate and payable on the interest payment date or dates provided
below:
[Interest Rate: _____% per annum (calculated on the basis of a year of
_____ days for the actual number of days elapsed).]
Both principal and interest are payable in lawful money of the
United States of America to Citibank, N.A. for the account of the Lender at the
office of Citibank, N.A., at 399 Park Avenue, New York, New York 10043 in same
day funds.
This Promissory Note is one of the Competitive Bid Notes
referred to in, and is entitled to the benefits of, the Credit Agreement. The
Credit Agreement, among other things, contains provisions for acceleration of
the maturity hereof upon the happening of certain stated events.
The Borrower hereby waives presentment, demand, protest and
notice of any kind. No failure to exercise, and no delay in exercising, any
rights hereunder on the part of the holder hereof shall operate as a waiver of
such rights.
<PAGE> 68
2
This Promissory Note shall be governed by, and construed in
accordance with, the laws of the State of New York.
THE WASHINGTON POST COMPANY
By
-------------------------------
Title:
<PAGE> 69
EXHIBIT B-1 - FORM OF NOTICE OF
REVOLVING CREDIT BORROWING
Citibank, N.A., as Agent
for the Lenders parties
to the Credit Agreement
referred to below
399 Park Avenue
New York, New York 10043 [Date]
Attention: _______________
Ladies and Gentlemen:
The undersigned, The Washington Post Company, refers to the
Credit Agreement, dated as of March 17, 1998 (as amended or modified from time
to time, the "Credit Agreement", the terms defined therein being used herein as
therein defined), among the undersigned, certain Lenders parties thereto,
Citibank, N.A., as Agent for said Lenders, and Wachovia Bank, N.A., as Co-Agent,
and hereby gives you notice, irrevocably, pursuant to Section 2.02 of the Credit
Agreement that the undersigned hereby requests a Revolving Credit Borrowing
under the Credit Agreement, and in that connection sets forth below the
information relating to such Revolving Credit Borrowing (the "Proposed Revolving
Credit Borrowing") as required by Section 2.02(a) of the Credit Agreement:
(i) The Business Day of the Proposed Revolving Credit
Borrowing is _______________, 199_.
(ii) The Type of Advances comprising the Proposed Revolving
Credit Borrowing is [Base Rate Advances] [Eurodollar Rate Advances].
(iii) The aggregate amount of the Proposed Revolving Credit
Borrowing is $_______________.
[(iv) The initial Interest Period for each Eurodollar Rate
Advance made as part of the Proposed Revolving Credit Borrowing is
_____ month[s].]
The undersigned hereby certifies that the following statements
are true on the date hereof, and will be true on the date of the Proposed
Revolving Credit Borrowing:
(A) the representations and warranties contained in Section
4.01 of the Credit Agreement are correct in all material respects,
before and after giving effect to the Proposed Revolving Credit
Borrowing and to the application of the proceeds therefrom,
<PAGE> 70
2
as though made on and as of such date, except to the extent they
expressly relate to an earlier date; and
(B) no event has occurred and is continuing, or would result
from such Proposed Revolving Credit Borrowing or from the application
of the proceeds therefrom, that constitutes a Default.
Very truly yours,
THE WASHINGTON POST COMPANY
By
-------------------------------
Title:
<PAGE> 71
EXHIBIT B-2 - FORM OF NOTICE OF
COMPETITIVE BID BORROWING
Citibank, N.A., as Agent
for the Lenders parties
to the Credit Agreement
referred to below
399 Park Avenue
New York, New York 10043 [Date]
Attention: _______________
Ladies and Gentlemen:
The undersigned, The Washington Post Company, refers to the
Credit Agreement, dated as of March 17, 1998 (as amended or modified from time
to time, the "Credit Agreement", the terms defined therein being used herein as
therein defined), among the undersigned, certain Lenders parties thereto,
Citibank, N.A., as Agent for said Lenders, and Wachovia Bank, N.A., as Co-Agent,
and hereby gives you notice, irrevocably, pursuant to Section 2.03 of the Credit
Agreement that the undersigned hereby requests a Competitive Bid Borrowing under
the Credit Agreement, and in that connection sets forth the terms on which such
Competitive Bid Borrowing (the "Proposed Competitive Bid Borrowing") is
requested to be made:
(A) Date of Competitive Bid Borrowing ______________________
(B) Amount of Competitive Bid Borrowing ______________________
(C) [Maturity Date] [Interest Period] ______________________
(D) Interest Rate Basis ______________________
(E) Interest Payment Date(s) ______________________
(F) ___________________ ______________________
(G) ___________________ ______________________
(H) ___________________ ______________________
The undersigned hereby certifies that the following statements
are true on the date hereof, and will be true on the date of the Proposed
Competitive Bid Borrowing:
(a) the representations and warranties contained in Section
4.01 are correct in all material respects, before and after giving
effect to the Proposed Competitive Bid Borrowing and to the application
of the proceeds therefrom, as though made on and as of such date,
except to the extent they expressly relate to an earlier date;
<PAGE> 72
2
(b) no event has occurred and is continuing, or would result
from the Proposed Competitive Bid Borrowing or from the application of
the proceeds therefrom, that constitutes a Default; and
(c) the aggregate amount of the Proposed Competitive Bid
Borrowing and all other Borrowings to be made on the same day under the
Credit Agreement is within the aggregate amount of the Unused
Commitments of the Lenders.
The undersigned hereby confirms that the Proposed Competitive
Bid Borrowing is to be made available to it in accordance with Section
2.03(a)(v) of the Credit Agreement.
Very truly yours,
THE WASHINGTON POST COMPANY
By
-------------------------------
Title:
<PAGE> 73
EXHIBIT C - FORM OF
ASSIGNMENT AND ACCEPTANCE
Reference is made to the Credit Agreement dated as of March
17, 1998 (as amended or modified from time to time, the "Credit Agreement")
among The Washington Post Company, a Delaware corporation (the "Borrower"), the
Lenders (as defined in the Credit Agreement), Citibank, N.A., as agent for the
Lenders (the "Agent"), and Wachovia Bank, N.A., as co-agent. Terms defined in
the Credit Agreement are used herein with the same meaning.
The "Assignor" and the "Assignee" referred to on Schedule I
hereto agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, and
the Assignee hereby purchases and assumes from the Assignor, an interest in and
to the Assignor's rights and obligations under the Credit Agreement as of the
date hereof (other than in respect of Competitive Bid Advances and Competitive
Bid Notes) equal to the percentage interest specified on Schedule 1 hereto of
all outstanding rights and obligations under the Credit Agreement (other than in
respect of Competitive Bid Advances and Competitive Bid Notes). After giving
effect to such sale and assignment, the Assignee's Commitment and the amount of
the Revolving Credit Advances owing to the Assignee will be as set forth on
Schedule 1 hereto.
2. The Assignor (i) represents and warrants that it is the
legal and beneficial owner of the interest being assigned by it hereunder and
that such interest is free and clear of any adverse claim; (ii) makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the
Credit Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Credit Agreement or any other
instrument or document furnished pursuant thereto; (iii) makes no representation
or warranty and assumes no responsibility with respect to the financial
condition of the Borrower or the performance or observance by the Borrower of
any of its obligations under the Credit Agreement or any other instrument or
document furnished pursuant thereto; and (iv) attaches the Revolving Credit Note
held by the Assignor and requests that the Agent exchange such Revolving Credit
Note for a new Revolving Credit Note payable to the order of the Assignee in an
amount equal to the Commitment assumed by the Assignee pursuant hereto or new
Revolving Credit Notes payable to the order of the Assignee in an amount equal
to the Commitment assumed by the Assignee pursuant hereto and the Assignor in an
amount equal to the Commitment retained by the Assignor under the Credit
Agreement, respectively, as specified on Schedule 1 hereto.
3. The Assignee (i) confirms that it has received a copy of
the Credit Agreement, together with copies of the financial statements referred
to in Section 4.01 thereof and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
this Assignment and Acceptance; (ii) agrees that it will, independently
<PAGE> 74
2
and without reliance upon the Agent, the Assignor or any other Lender and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
the Credit Agreement; (iii) confirms that it is an Eligible Assignee; (iv)
appoints and authorizes the Agent to take such action as agent on its behalf and
to exercise such powers and discretion under the Credit Agreement as are
delegated to the Agent by the terms thereof, together with such powers and
discretion as are reasonably incidental thereto; (v) agrees that it will perform
in accordance with their terms all of the obligations that by the terms of the
Credit Agreement are required to be performed by it as a Lender; and (vi)
attaches any U.S. Internal Revenue Service forms required under Section 2.14 of
the Credit Agreement.
4. Following the execution of this Assignment and Acceptance,
it will be delivered to the Agent for acceptance and recording by the Agent. The
effective date for this Assignment and Acceptance (the "Effective Date") shall
be the date of acceptance hereof by the Agent, unless otherwise specified on
Schedule 1 hereto.
5. Upon such acceptance and recording by the Agent, as of the
Effective Date, (i) the Assignee shall be a party to the Credit Agreement and,
to the extent provided in this Assignment and Acceptance, have the rights and
obligations of a Lender thereunder and (ii) the Assignor shall, to the extent
provided in this Assignment and Acceptance, relinquish its rights and be
released from its obligations under the Credit Agreement.
6. Upon such acceptance and recording by the Agent, from and
after the Effective Date, the Agent shall make all payments under the Credit
Agreement and the Revolving Credit Notes in respect of the interest assigned
hereby (including, without limitation, all payments of principal, interest and
facility fees with respect thereto) to the Assignee. The Assignor and Assignee
shall make all appropriate adjustments in payments under the Credit Agreement
and the Revolving Credit Notes for periods prior to the Effective Date directly
between themselves.
7. This Assignment and Acceptance shall be governed by, and
construed in accordance with, the laws of the State of New York.
8. This Assignment and Acceptance may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement. Delivery of an
executed counterpart of Schedule 1 to this Assignment and Acceptance by
telecopier shall be effective as delivery of a manually executed counterpart of
this Assignment and Acceptance.
<PAGE> 75
3
IN WITNESS WHEREOF, the Assignor and the Assignee have caused
Schedule 1 to this Assignment and Acceptance to be executed by their officers
thereunto duly authorized as of the date specified thereon.
<PAGE> 76
Schedule 1
to
Assignment and Acceptance
Percentage interest assigned: %
-----
Assignee's Commitment: $
----------
Aggregate outstanding principal amount of Revolving
Credit Advances assigned: $
----------
Principal amount of Revolving Credit Note payable to Assignee: $
----------
Principal amount of Revolving Credit Note payable to Assignor: $
----------
Effective Date:* , 199
--------------- -
[NAME OF ASSIGNOR], as Assignor
By
-------------------------------
Title:
Dated: , 199
---------------- -
[NAME OF ASSIGNEE], as Assignee
By
-------------------------------
Title:
Dated: , 199
---------------- -
Domestic Lending Office:
- --------
* This date should be no earlier than five Business Days after the
delivery of this Assignment and Acceptance to the Agent.
<PAGE> 77
2
[Address]
Eurodollar Lending Office:
[Address]
Accepted and Approved this
__________ day of _______________, 199_
CITIBANK, N.A., as Agent
By ____________________________________
Title:
Approved this __________ day
of _______________, 199_
THE WASHINGTON POST COMPANY
By ____________________________________
Title:
<PAGE> 78
EXHIBIT D - FORM OF
ASSUMPTION AGREEMENT
Dated: ________
The Washington Post Company
1150 15th Street, N.W.
Washington, D.C. 20071
Citibank, N.A., as Agent
399 Park Avenue
New York, New York 10043
Attention:
Ladies and Gentlemen:
Reference is made to the Credit Agreement dated as of March
17, 1998 among The Washington Post Company (the "Borrower"), the Lenders parties
thereto, Citibank, N.A., as Agent, and Wachovia Bank, N.A., as Co-Agent (the
"Credit Agreement"; terms defined therein being used herein as therein defined),
for such Lenders.
The undersigned (the "Assuming Lender") proposes to become an
Assuming Lender pursuant to Section 2.05(b) of the Credit Agreement and, in that
connection, hereby agrees that it shall become a Lender for purposes of the
Credit Agreement on [applicable Increase Date] and that its Commitment shall as
of such date be $__________.
The undersigned (i) confirms that it has received a copy of
the Credit Agreement, together with copies of the financial statements referred
to in Section 4.01(e) thereof, the most recent financial statements referred to
in Section 5.01(i) thereof and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
this Assumption Agreement; (ii) agrees that it will, independently and without
reliance upon the Agent or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under the Credit Agreement;
(iii) appoints and authorizes the Agent to take such action as agent on its
behalf and to exercise such powers under the Credit Agreement as are delegated
to the Agent by the terms thereof, together with such powers as are reasonably
incidental thereto; (iv) agrees that it will perform in accordance with their
terms all of the obligations which by the terms of the Credit Agreement are
required to be performed
<PAGE> 79
2
by it as a Lender; (v) confirms that it is an Eligible Assignee; (vi) specifies
as its Lending Office (and address for notices) the offices set forth beneath
its name on the signature pages hereof; and (vii) attaches the forms prescribed
by the Internal Revenue Service of the United States required under Section 2.14
of the Credit Agreement.
The Assuming Lender requests that the Borrower deliver to the
Agent (to be promptly delivered to the Assuming Lender) a Revolving Credit Note
payable to the order of the Assuming Lender, dated as of the [Increase Date] and
substantially in the form of Exhibit A-1 to the Credit Agreement.
The effective date for this Assumption Agreement shall be
[applicable Increase Date]. Upon delivery of this Assumption Agreement to the
Borrower and the Agent, and satisfaction of all conditions imposed under Section
2.05(b) as of [date specified above], the undersigned shall be a party to the
Credit Agreement and have the rights and obligations of a Lender thereunder. As
of [date specified above], the Agent shall make all payments under the Credit
Agreement in respect of the interest assumed hereby (including, without
limitation, all payments of principal, interest and commitment fees) to the
Assuming Lender.
This Assumption Agreement may be executed in counterparts and
by different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement. Delivery of an executed counterpart by
telecopier shall be effective as delivery of a manually executed counterpart of
this Assumption Agreement.
<PAGE> 80
3
This Assumption Agreement shall be governed by, and construed
in accordance with, the laws of the State of New York.
Very truly yours,
[NAME OF ASSUMING LENDER]
By ________________________
Name:
Title:
Domestic
Lending Office
(and address
for notices):
[Address]
Eurodollar Lending Office:
[Address]
Acknowledged and Agreed to:
THE WASHINGTON POST COMPANY
By ________________________
Name:
Title:
<PAGE> 81
EXHIBIT E
March __, 1998
To each of the Lenders parties
to the Credit Agreement dated
as of March 17, 1998 among
The Washington Post Company,
said Lenders, Citibank, N.A., as
Agent for said Lenders, and
Wachovia Bank, N.A.,
as Co-Agent
The Washington Post Company
Ladies and Gentlemen:
This opinion is furnished to you pursuant to Section
3.01(h)(iv) of the Credit Agreement, dated as of March 17, 1998 (the "Credit
Agreement"), among The Washington Post Company (the "Borrower"), the Lenders
parties thereto, Citibank, N.A., as Agent for said Lenders, and Wachovia Bank,
N.A., as Co-Agent. Terms defined in the Credit Agreement are used herein as
therein defined.
I am the General Counsel of the Borrower and as such I am
familiar with the Credit Agreement and the corporate proceedings taken by the
Borrower to authorize the execution and delivery of the Credit Agreement.
For purposes of this opinion, I have examined:
(1) The Credit Agreement.
(2) The documents furnished by the Borrower pursuant to
Article III of the Credit Agreement.
(3) The Certificate of Incorporation of the Borrower and all
amendments thereto (the "Charter").
(4) The by-laws of the Borrower and all amendments thereto
(the "By-laws").
<PAGE> 82
2
(5) A certificate of the Secretary of State of Delaware, dated
________ __, 199[8], attesting to the continued corporate existence and good
standing of the Borrower in that State.
In addition, I have examined the originals, or copies
certified to my satisfaction, of such other corporate records of the Borrower,
certificates of public officials and of officers of the Borrower, and
agreements, instruments and other documents, as I have deemed necessary as a
basis for the opinions expressed below. As to questions of fact material to such
opinions, I have, when relevant facts were not independently established by me,
relied upon certificates of the Borrower or its officers or of public officials.
I have assumed the due execution and delivery, pursuant to due authorization, of
the Credit Agreement by the Initial Lenders, the Agent and the Co-Agent.
My opinions expressed below are limited to the law of the
State of New York, the General Corporation Law of the State of Delaware and the
Federal law of the United States of America.
Based upon the foregoing and upon such investigation as I have
deemed necessary, I am of the following opinion:
1. The Borrower is a corporation validly existing and in good
standing under the laws of the State of Delaware.
2. The execution, delivery and performance by the Borrower of
the Credit Agreement and the Notes, and the consummation of the transactions
contemplated thereby, are within the Borrower's corporate powers, and have been
duly authorized by all necessary corporate action, and do not contravene (i) the
Charter or the By-laws or (ii) any law, rule or regulation applicable to the
Borrower (including, without limitation, Regulation X of the Board of Governors
of the Federal Reserve System) or (iii) to the best of my knowledge after
appropriate inquiry, (x) any contractual restriction or (y) any legal
restriction contained in orders, writs, judgments, awards, injunctions or
decrees applicable to the Borrower or its assets, in each case that affects or
purports to affect the Borrower's right to borrow money or the Borrower's
obligations under the Credit Agreement or Notes. The Credit Agreement and the
Notes delivered on the date hereof have been duly executed and delivered on
behalf of the Borrower.
3. No authorization, approval or other action by, and no
notice to or filing with, any United States Federal, New York or, to the extent
required under the General Corporation Law of the State of Delaware, Delaware
governmental authority or regulatory body is required for the due execution,
delivery and performance by the Borrower of the Credit Agreement and the Notes.
<PAGE> 83
3
4. The Credit Agreement is, and when executed and delivered in
connection with Borrowings, the Notes will be, legal, valid and binding
obligations of the Borrower enforceable against the Borrower in accordance with
their respective terms.
5. To the best of my knowledge after appropriate inquiry,
there are no pending or overtly threatened actions or proceedings against the
Borrower or any of its Subsidiaries before any court, governmental agency or
arbitrator that purport to affect the legality, validity, binding effect or
enforceability of the Credit Agreement or any of the Notes or the consummation
of the transactions contemplated thereby or that are likely to have a materially
adverse effect upon the financial condition or operations of the Borrower and
its Subsidiaries taken as a whole.
The opinions set forth above are subject to the following qualifications:
(a) My opinion in paragraph 4 above as to enforceability is
subject to the effect of any applicable bankruptcy, insolvency (including,
without limitation, all laws relating to fraudulent transfers), reorganization,
moratorium or similar law affecting creditors' rights generally.
(b) My opinion is paragraph 4 above as to enforceability is
subject to the effect of general principles if equity, including, without
limitation, concepts of materiality, reasonableness, good faith and fair dealing
(regardless of whether considered in a proceeding in equity or at law).
(c) Insofar as provisions contained in the Credit Agreement
provide for indemnification, the enforceability thereof may be limited by public
policy considerations.
(d) I express no opinion as to (i) Section 2.15 of the Credit
Agreement insofar as it provides that any Lender purchasing a participation from
another Lender pursuant thereto may exercise set-off of similar rights with
respect to such participation and (ii) the effect of the law of any jurisdiction
other than the State of New York wherein any Lender may be located or wherein
enforcement of the Credit Agreement or the Notes may be sought that limits the
rates of interest legally chargeable or collectible.
Very truly yours,
<PAGE> 1
EXHIBIT 10.3
THE WASHINGTON POST COMPANY
STOCK OPTION PLAN
As Amended and Restated
Effective March 12, 1998
1. Purpose of the Plan
The purpose of this Stock Option Plan (hereinafter called the
Plan) of The Washington Post Company, a Delaware corporation (hereinafter called
the Company), is to secure for the Company and its stockholders the benefits of
incentive inherent in the ownership of Class B Common Stock of the Company by
employees of the Company and its subsidiaries who will be responsible for its
future growth and continued success. It is generally recognized that stock
option plans aid in retaining and encouraging key employees of ability and in
attracting other able employees.
2. Stock Subject to the Plan
There are hereby authorized and reserved for issuance upon the
exercise of options to be granted from time to time under the Plan an aggregate
of 1,400,000 shares* of the Company's Class B Common Stock, which shares may be
in whole or in part, as the Board of Directors shall from time to time
determine, issued shares which shall have been reacquired by the Company or
authorized but unissued shares, whether now or hereafter authorized. If any
option granted under the Plan shall expire, terminate or be cancelled for any
reason without having been exercised in full, the corresponding number of
unpurchased shares which were reserved for issuance upon exercise thereof shall
again be available for the purposes of the Plan. To the extent that options
provide that the exercise of one shall reduce the number of shares purchasable
under the other, then, for purposes of the Plan, the Company shall be deemed to
have awarded options only for the aggregate number of shares which in fact may
be purchased under such options (and not for the number of shares covered by
both such options).
3. Administration of the Plan
The Plan shall be administered by the Committee referred to in
paragraph 4 (hereinafter called the Commit-
- --------
* Adjusted to give effect to stock splits in 1971, 1976 and 1978.
<PAGE> 2
2
tee). Subject to the express provisions of the Plan, the Committee shall have
plenary authority, in its discretion, to determine the individuals to whom, and
the time or times at which, options shall be granted and the number of shares to
be subject to each option; provided, however, that the aggregate fair market
value of the shares (determined as of the time the option is granted) for which
any employee may be granted an incentive stock option (as defined in Section
422A of the Internal Revenue Code of 1954, as it may be amended from time to
time) under all plans of the Company and its subsidiaries providing for the
grant of incentive stock options in any calendar year after 1980 shall not
exceed $100,000 plus any unused limit carryover to such year (as defined in
Section 422A of the Internal Revenue Code of 1954, as it may be amended from
time to time). In making such determinations, the Committee may take into
account the nature of the services rendered or expected to be rendered by the
respective employees, their present and potential contributions to the Company's
success, the anticipated number of years of effective service remaining and such
other factors as the Committee in its discretion shall deem relevant. Subject to
the express provisions of the Plan, the Committee shall also have plenary
authority to interpret the Plan, to prescribe, amend and rescind rules and
regulations relating to it, to determine the terms and provisions of the
respective options (which terms and provisions need not be the same in each
case), and to make all other determinations deemed necessary or advisable in
administering the Plan. The determinations of the Committee on the matters
referred to in this paragraph 3 shall be conclusive.
4. The Committee
The Committee shall consist of not less than three members of
the Board of Directors and shall be designated the Stock Option Committee of the
Board of Directors. No member of the Committee shall be eligible to receive an
option under the Plan. The Committee shall be appointed by the Board of
Directors, which may from time to time appoint members to the Committee in
substitution for or in addition to members previously appointed and may fill
vacancies, however caused, in the Committee; the Board of Directors shall also
designate one of the members of the Committee as its Chairman. The Committee
shall hold its meetings at such times and places as it may determine. A majority
of its members shall constitute a quorum. All determinations of the Committee
shall be made by a majority of its members. Any decision or determination
reduced to writing and signed by all the members shall be fully as effective as
if it had been made by a majority vote at a meeting duly called and held. The
Committee may appoint a secretary (who need not be a member of the Committee)
and may make such rules and regulations for the conduct of its
<PAGE> 3
3
business as it shall deem advisable. No member of the Committee shall be liable,
in the absence of bad faith, for any act or omission with respect to his service
on the Committee. Service on the Committee shall constitute service as a
Director of the Company so that the members of the Committee shall be entitled
to indemnification and reimbursement as Directors of the Company pursuant to its
Certificate of Incorporation.
5. Time of Granting of Options
Nothing contained in the Plan or in any resolution adopted or
to be adopted by the Board of Directors or by the stockholders of the Company
shall constitute the granting of any option hereunder. The action of the
Committee with respect to the granting of an option shall take place on such
date as a majority of the members of the Committee at a meeting shall make a
determination with respect to the granting of an option or, in the absence of a
meeting, on such date as a written Designation covering such option shall have
been executed by all the members of the Committee. The effective date of the
grant of an option (hereinafter called the Granting Date) shall be the date
specified by the Committee in its determination or Designation relating to the
award of such option.
6. Eligibility
Options may be granted only to key employees (which term shall
be deemed to include officers) who on the Granting Date are in the employ of the
Company or one of its present or future subsidiary corporations, as defined in
Section 425 of the Internal Revenue Code of 1954, as the same shall be amended
from time to time (hereinafter called Subsidiaries). A Director of the Company
or of a Subsidiary who is not also such an employee of the Company or one of its
Subsidiaries shall not be eligible to receive an option. During the life of the
Plan options may be granted to eligible employees whether or not they hold or
have held options under the Plan or other options previously granted by the
Company.
7. Option Prices
The purchase price of the Class B Common Stock under each
option shall be determined by the Committee, but shall not be less than 100% of
the fair market value of the Class B Common Stock on the Granting Date of such
option, as determined by the Committee. The purchase price of shares purchased
upon the exercise of an option is to be paid in full upon the issuance of such
shares, either in cash or by the surrender of whole shares of Class B Common
Stock having a fair market value, as determined by the Committee, equal to such
purchase price, or by a combination of cash and whole
<PAGE> 4
4
shares. If paid in cash, the purchase price paid for stock upon the exercise of
options shall be added to the general funds of the Company and used for
corporate purposes. If paid in whole or in part in shares, the shares
surrendered shall be held as Treasury shares.
In the alternative, the Committee may, in its discretion at
any time, determine whether to permit an optionee the right to elect to make a
"cashless exercise" of all or some portion of an option by tendering to the
Company some or all of the vested otherwise exercisable portion of the option in
return for a cash payment from the Company equal to the positive difference, if
any, between the fair market value of the number of shares of Class B Common
Stock covered by such tendered portion of the option and the aggregate option
price attributable to such shares. The Company shall cause appropriate tax
withholding to be made with respect to any such cash payment upon a "cashless
exercise" of an option by withholding the appropriate amount from the aggregate
proceeds made available through the "cashless exercise". Finally, an optionee
may direct, in connection with a "cashless exercise," that some or all of the
cash otherwise payable to the optionee from the Company be instead applied to
the payment of the option price of shares of Class B Common Stock with respect
to which the optionee has a vested currently exercisable option and which are
not the subject of the current "cashless exercise." As such, the optionee would
be using the value inherent in some existing options to create a source for
funding the exercise of other options. The Company shall effectuate appropriate
income tax withholding with respect to any "cashless exercise" used to fund the
purchase of shares of Class B Common Stock by withholding the appropriate amount
from the aggregate proceeds made available through the "cashless exercise"
(including the amount of tax withholding required with respect to the purchase
of such additional shares of Class B Common Stock) and applying the remaining
amount of consideration to the purchase of additional shares of Class B Common
Stock.
8. Option Types, Terms and Conditions
Options granted under the Plan shall be in the form of (a)
qualified stock options (as defined in Section 422 of the Internal Revenue Code
of 1954, as it may be amended from time to time) and/or (b) incentive stock
options (as defined in Section 422A of the Internal Revenue Code of 1954, as it
may be amended from time to time) and/or (c) non-qualified stock options which
would be restricted stock options as defined in Section 424(b) of the Internal
Revenue Code of 1954 but for the date of grant.
<PAGE> 5
5
The term of each option shall be for such period as the
Committee shall determine, but not more than five years from the Granting Date
in the case of qualified options, and not more than ten years from the Granting
Date in the case of incentive stock options and non-qualified options, subject
to earlier termination as the Committee may determine and as provided in
paragraphs 10 and 11 hereof.
The Committee shall, in its discretion, prescribe the terms
and conditions upon which options may be exercised, which terms and provisions
need not be the same in each case. Except as provided in paragraphs 10 and 11
below, no option may be exercised at any time unless the holder thereof is then
an employee of the Company or of a Subsidiary. An employee shall have none of
the rights of a stockholder with respect to any of the shares subject to option
until such shares shall be issued to him upon the exercise of his option.
The Committee may grant to holders of outstanding options, in
exchange for the surrender and cancellation of such options, new options (which
may be qualified stock options, incentive stock options and/or non-qualified
stock options) having purchase prices lower than the purchase prices provided in
the options so surrendered and cancelled and containing such other terms and
conditions as the Committee may prescribe in accordance with the provisions of
the Plan; provided that such new options shall provide for the purchase of not
more than 90% of the number of share covered by the options so surrendered and
cancelled and that the purchase price under such new options shall be determined
in accordance with paragraph 7 hereof.
Each qualified option and each incentive stock option granted
under the Plan shall by its terms comply with the specific requirements of
Section 422(b)(5) or Section 422A(b)(7) of the Internal Revenue Code of 1954, as
from time to time amended, in effect preventing the exercise of such option
while there are outstanding (within the meaning of Section 422(c) or Section
422A(c)(7) of said Code, as from time to time amended) certain other options
granted to the holder thereof.
The maximum number of shares subject to options which may be
granted under this Plan to any individual employee during the life of this Plan
shall not exceed 250,000 in the aggregate.
<PAGE> 6
6
9. Non-Transferability of Options
No option granted under the Plan shall be transferable
otherwise than by will or the laws of descent and distribution and an option may
be exercised, during the lifetime of the holder thereof, only by him.
10. Termination of Employment
In the event that the employment of an employee to whom an
option has been granted under the Plan shall be terminated (otherwise than by
reason of death), such option may, subject to the provisions of paragraphs 8 and
12, be exercised (only to the extent that the employee was entitled to do so at
the termination of his employment) at any time within three months after such
termination, but in no event after the expiration of the term of the option.
Notwithstanding the foregoing, the Committee may permit any option granted to an
employee whose employment is being terminated (otherwise than by reason of
death) to remain exercisable for such period as the Committee shall determine,
but in no event beyond the expiration of the term of the option. In the event
the Committee so extends the exercise period of an option held by a terminating
employee and such option is ex-exercisable as to additional shares in
installments, such installments shall continue to accrue after the termination
of employment unless the Committee determines that the exercise period shall be
extended only with respect to the number of shares purchasable at the date of
the termination of employment. Options granted under the Plan shall not be
affected by any change of employment so long as the holder continues to be an
employee of the Company or of a Subsidiary. Retirement pursuant to any
retirement plan of the Company or any Subsidiary shall be deemed to be a
termination of employment for the purposes of this paragraph. The Committee may
specify in the original terms of an option, or if not so specified shall
determine, whether any authorized leave of absence or absence on military or
governmental service or for any other reason shall constitute a termination of
employment for purposes of this paragraph. Nothing in the Plan or in any option
granted pursuant to the Plan (in the absence of an express provision to the
contrary) shall confer on any individual any right to continue in the employ of
the Company or any of its Subsidiaries or interfere in any way with the right of
the Company or any of its Subsidiaries to terminate his employment at any time.
11. Death of Holder of Option
Upon the death of the holder of an option granted under the
Plan, such option may be exercised (unless the option otherwise provides) for
the following specified number
<PAGE> 7
7
of shares by a legatee or legatees of such option under the holder's last will,
or by the holder's personal representatives or distributees, at any time within
one year after the holder's death, but in no event after the expiration of the
term of the option: (i) if death occurs while the holder is employed by the
Company or a subsidiary, to the extent of (a) the shares purchasable by such
holder at the date of his death plus (b) the additional shares covered by the
next installment, if any, of such option, or (ii) if death occurs within three
months after the termination of the holder's employment or during any extension
of the post-termination exercise period permitted by the Committee pursuant to
paragraph 10 hereof, to the extent of the shares purchasable by such holder at
the date of his death.
12. Employee's Agreement to Serve
The recipient of any option exercisable by the optionee within
twelve months of the Granting Date shall agree to serve in the employ of the
Company or, at the election of the Company from time to time, one of its
Subsidiaries, for such period as the Committee shall determine, which shall not
be less than twelve months following the Granting Date. The Committee shall be
authorized in its discretion to grant options not exercisable by the optionee
within twelve months of the Granting Date, in which case the recipient of such
option need not (unless otherwise determined by the Committee) agree to serve in
the employ of the Company or its Subsidiaries.
13. Adjustments in Class B Common Stock
Notwithstanding any other provision of the Plan, each option
may contain such provisions as the Committee shall determine to be appropriate
for the adjustment of the number and class of shares subject to such option, the
option price and the number of shares as to which the option shall be
exercisable at any time in the event of changes in the outstanding Class B
Common Stock by reason of any stock dividend, split-up, recapitalization,
combination or exchange of shares, merger, consolidation, separation,
reorganization, liquidation and the like. In the event of any such change in the
outstanding Class B Common Stock, the class and aggregate number of shares
available under the Plan shall be appropriately adjusted by the Committee, whose
determination shall be conclusive.
14. Amendment and Termination
Unless the Plan shall theretofore have been terminated as
hereinafter provided, the Plan shall terminate on, and no option shall be
granted thereunder after, December 31,
<PAGE> 8
8
1995, provided that the Board of Directors may at any time prior to that date
terminate the Plan. The Board of Directors shall have complete power and
authority to amend the Plan, provided, however, that the Board of Directors
shall not, without the affirmative vote of the holders of a majority of the
voting stock of the Company entitled to vote thereon, (i) increase the maximum
number of shares for which options may be granted under the Plan, (ii) change
the formula as to minimum option prices, (iii) extend the period during which
options may be granted or exercised or (iv) change the class of employees to
whom options may be granted. No termination or amendment of the Plan may,
without the consent of the individual to whom any option shall theretofore have
been granted, adversely affect the rights of such individual under such option.
15. Government and Other Regulations
The obligation of the Company to sell and deliver shares under
options granted under the Plan shall be subject to all applicable laws, rules
and regulations, and to such approvals by any governmental agencies as may be
required, including, but not by way of limitation, the effectiveness of a
Registration Statement under the Securities Act of 1933, as amended, as deemed
necessary or appropriate by counsel for the Company.
16. Other Actions
Nothing contained in the Plan shall be construed to limit the
authority of the Company to exercise its corporate rights and powers, including,
but not by way of limitation, the right of the Company (i) to grant options for
proper corporate purposes otherwise than under the Plan to any employee or other
person, firm, corporation or association or (ii) to grant options to, or assume
the option of, any person in connection with the acquisition, by purchase,
lease, merger, consolidation or otherwise, of the business and assets (in whole
or in part) of any person, firm, corporation or association.
<PAGE> 1
EXHIBIT 11
THE WASHINGTON POST COMPANY
AND SUBSIDIARIES
CALCULATION OF EARNINGS PER SHARE OF COMMON STOCK
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Fiscal Year
-----------------------------------------
1997 1996 1995
--------- --------- -------
<S> <C> <C> <C>
Weighted average shares outstanding
Class A Common 1,754 1,802 1,838
Class B Common (excluding shares
issuable upon exercise of
stock options - accounted
for below) 8,946 9,162 9,237
--------- --------- -------
Shares used in computation of basic 10,700 10,964 11,075
earnings per share
Add - Shares assumed issuable upon
exercise of stock options 172 109 111
Deduct - Shares assumed to be
purchased for Treasury with proceeds
from exercise of stock options (139) (93) (100)
--------- --------- -------
Shares used in computation of
diluted earnings per common share 10,733 10,980 11,086
========= ========= =======
Net income available for common shares $ 280,618 $ 220,137 $190,096
========= ========= ========
Basic earnings per common share $ 26.23 $ 20.08 $ 17.16
========= ========= ========
Diluted earnings per common share $ 26.15 $ 20.05 $ 17.15
========= ========= ========
</TABLE>
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE COMPANY
<TABLE>
<CAPTION>
Jurisdiction % of
of Voting
Incorporation Stock
or Owned
Name of Subsidiary Organization by Company
------------------ ------------ ----------
<S> <C> <C>
Bowater Mersey Paper Company Limited ...................................... Nova Scotia 49%
Cable One, Inc. ........................................................... Delaware 100%
Capitol Fiber, Inc. ....................................................... Maryland 80%
The Daily Herald Company .................................................. Washington 100%
Digital Ink Co. ........................................................... Delaware 100%
The Photo Store LLC .............................................. Maryland 50%
The Gazette Newspapers, Inc. .............................................. Maryland 100%
Greater Washington Publishing, Inc. ....................................... Delaware 100%
I.H.T. Corporation ........................................................ Delaware 50%
International Herald Tribune S.A.S. .............................. France 33-1/3%
International Herald Tribune S.A.S. ....................................... France 33-1/3%
Legi-Slate, Inc. .......................................................... Delaware 100%
State Capital Strategies, Inc. ................................... Delaware 100%
Los Angeles Times-Washington Post News
Service, Inc. ........................................................ D.C. 50%
Newsprint, Inc. ........................................................... Virginia 100%
Newsweek, Inc. ............................................................ New York 100%
Newsweek Productions, Inc. ....................................... Delaware 100%
Newsweek Services, Inc. .......................................... Delaware 100%
Newsweek Services (Canada), Inc. ................................. Delaware 100%
Post-Newsweek Business Information, Inc. .................................. Virginia 100%
Post-Newsweek Cable of North Dakota, Inc. ................................. Delaware 100%
Post-Newsweek Stations, Inc................................................ Delaware 100%
Post-Newsweek Stations, Florida, Inc. ............................ Florida 100%
Post-Newsweek Stations, Houston, Inc. ............................ Delaware 100%
Post-Newsweek Stations, Michigan, Inc. ........................... Delaware 100%
Post-Newsweek Stations, Orlando, Inc. ............................ Delaware 100%
Post-Newsweek Stations, San Antonio, Inc. ........................ Delaware 100%
</TABLE>
<PAGE> 2
SUBSIDIARIES OF THE COMPANY
(Continued)
<TABLE>
<CAPTION>
Jurisdiction % of
of Voting
Incorporation Stock
or Owned
Name of Subsidiary Organization by Company
------------------ ------------ ----------
<S> <C> <C>
Robinson Terminal Warehouse Corporation ................................... Delaware 100%
Kaplan Educational Centers, Inc. .......................................... Delaware 100%
LCP International Institute, Inc. ................................ California 100%
The Lendman Group, Inc............................................ Virginia 100%
HireSystems, Inc. ....................................... Virginia 100%
Score Learning Corporation ....................................... California 100%
Stanley H. Kaplan Educational Center of
Canada Ltd. ................................................. Ontario 100%
Stanley H. Kaplan Educational Center of
Puerto Rico, Inc. ........................................... Puerto Rico 100%
Recruiting Services, Inc. ........................................ Ohio 100%
WPC Telecommunications, Inc. .............................................. Delaware 100%
Moffet, Larson & Johnson, Inc. ................................... Delaware 80%
</TABLE>
.........
As permitted by Item 601(b)(21) of Regulation S-K, the foregoing list
omits certain subsidiaries which, if considered in the aggregate as a single
subsidiary, would not constitute a "significant subsidiary" as that term is
defined in Rule 1-02(v) of Regulation S-X.
2
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (Registration No. 2-42170) of The Washington Post Company,
and in the Prospectus constituting a part thereof, of our report dated January
27, 1998 appearing on page 26 of this Annual Report on Form 10-K, and to the
reference to us under the heading "Experts" in such Prospectus.
PRICE WATERHOUSE LLP
Washington, D.C.
March 23, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 28, 1997 AND THE
CONSOLIDATED BALANCE SHEET AS OF DECEMBER 28, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-28-1997
<PERIOD-END> DEC-28-1997
<CASH> 21,117
<SECURITIES> 0
<RECEIVABLES> 293,909
<ALLOWANCES> 49,706
<INVENTORY> 19,213
<CURRENT-ASSETS> 308,492
<PP&E> 1,231,195
<DEPRECIATION> 577,445
<TOTAL-ASSETS> 2,077,317
<CURRENT-LIABILITIES> 608,756
<BONDS> 0
11,947
0
<COMMON> 20,000
<OTHER-SE> 1,164,074
<TOTAL-LIABILITY-AND-EQUITY> 2,077,317
<SALES> 0
<TOTAL-REVENUES> 1,956,253
<CGS> 0
<TOTAL-COSTS> 1,019,869
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 65,258
<INTEREST-EXPENSE> 1,252
<INCOME-PRETAX> 463,074
<INCOME-TAX> 181,500
<INCOME-CONTINUING> 281,574
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 281,574
<EPS-PRIMARY> 26.23<F1>
<EPS-DILUTED> 26.15
<FN>
<F1>The information reported above under "EPS-PRIMARY" represents basic
earnings per share for the year ended December 28, 1997.
</FN>
</TABLE>
