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