AMENDED AND RESTATED PARTNERSHIP AGREEMENT

 

 

 

                   Amended and Restated Partnership Agreement

 

 

 

                                      For

 

 

                    Texas-New Mexico Newspapers Partnership

 

                         A Delaware General Partnership

 

                                  By and Among

 

                               Gannett Texas L.P.

 

                                       And

 

                        New Mexico - Texas MediaNews LLC

 

 

 

 

 

 

 

 

 

                                 MARCH 21, 2003

 

 

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                                TABLE OF CONTENTS

 

 

ARTICLE I       DEFINITIONS....................................................4

 

ARTICLE II      THE PARTNERSHIP................................................9

        2.1     Formation......................................................9

        2.2     Name...........................................................9

        2.3     Business Purpose...............................................9

        2.4     Registered Office and Agent....................................9

        2.5     Term...........................................................9

        2.6     Principal Place of Business...................................10

        2.7     The Partners..................................................10

        2.8     Fiscal Year...................................................10

        2.9     Representations and Warranties of the Parties.................10

 

ARTICLE III     CAPITAL STRUCTURE AND CONTRIBUTIONS...........................11

        3.1     Capital Contributions.........................................11

        3.2     No Other Mandatory Capital Contributions......................13

        3.3     No Right of Withdrawal........................................13

        3.4     Loans by Third Parties........................................13

 

ARTICLE IV      CAPITAL ACCOUNTS; ALLOCATION OF PROFITS AND LOSSES............13

        4.1     Capital Accounts..............................................13

        4.2     Book Allocation...............................................14

        4.3     Tax Allocations...............................................15

 

ARTICLE V       DISTRIBUTIONS.................................................16

        5.1     Distributions.................................................16

 

ARTICLE VI      ACCOUNTING AND REPORTS........................................16

        6.1     Books and Records.............................................17

        6.2     Reports to Partners...........................................17

        6.3     Annual Tax Returns............................................18

        6.4     Actions in Event of Audit.....................................19

        6.5     Tax Elections.................................................19

 

ARTICLE VII     ACTIONS BY PARTNERS...........................................19

        7.1     Meetings......................................................19

        7.2     Actions by the Partners.......................................19

 

ARTICLE VIII    MANAGEMENT....................................................20

        8.1     The Management Committee......................................20

        8.2     Removal of Members; Vacancies.................................20

        8.3     Meetings of the Management Committee; Notice..................21

        8.4     Quorum........................................................21

        8.5     Voting........................................................21

 

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        8.6     Certain Matters Requiring a Unanimous Vote of the

                Management Committee..........................................21

        8.7     Action by Consent.............................................23

        8.8     Executive Officers............................................23

        8.9     Provision of Services to Partnership by GANSAT................24

 

ARTICLE IX      TRANSFER OF PARTNERSHIP INTERESTS;

                ADDITIONAL AND SUBSTITUTE PARTNERS; PUT

                OPTION........................................................24

        9.1     Prohibited Transfers..........................................24

        9.2     Permitted Transfers by Partners...............................25

        9.3     Substitute Partner............................................25

        9.4     Involuntary Withdrawal by a Partner...........................26

        9.5     Right of First Refusal for Sale of Partnership Interests......26

        9.6     Tag-Along Rights Regarding Sales of Partnership

                Interests.....................................................28

        9.7     Gannett Drag-Along Rights.....................................29

        9.8     Admission of Additional Partners..............................30

        9.9     Acknowledgment of Pledge of Interests.........................30

        9.10    Rights of First Refusal with Respect to Certain Assets

                Offered to the Partners.......................................30

 

ARTICLE X       DISSOLUTION AND LIQUIDATION...................................31

        10.1    Dissolution...................................................31

        10.2    Election to Continue the Business.............................32

        10.3    Closing of Affairs............................................32

 

ARTICLE XI      AMENDMENT TO AGREEMENT........................................33

 

ARTICLE XII     INDEMNIFICATION...............................................33

        12.1    General.......................................................33

        12.2    Indemnification Obligations...................................34

        12.3    Exclusive Remedy..............................................34

        12.4    Third Party Claims............................................35

        12.5    Other Indemnification Claims..................................36

 

ARTICLE XIII    GENERAL PROVISIONS............................................36

        13.1    Mediation.....................................................36

        13.2    Notices.......................................................37

        13.3    Confidentiality...............................................37

        13.4    Entire Agreement, Etc.........................................38

        13.5    Construction Principles.......................................38

        13.6    Counterparts..................................................38

        13.7    Severability..................................................38

        13.8    Expenses......................................................39

        13.9    Governing Law and Venue.......................................39

        13.10   Binding Effect................................................39

 

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        13.11   Additional Documents and Acts.................................39

        13.12   No Third Party Beneficiary....................................40

        13.13   Waiver of Jury Trial..........................................40

 

 

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                   AMENDED AND RESTATED PARTNERSHIP AGREEMENT

 

                                       FOR

 

                     TEXAS-NEW MEXICO NEWSPAPERS PARTNERSHIP

 

                         A DELAWARE GENERAL PARTNERSHIP

 

 

 

     THIS  AMENDED  AND  RESTATED  PARTNERSHIP  AGREEMENT  of  Texas-New  Mexico

Newspapers  Partnership,  a Delaware general  partnership (the "Partnership") is

effective as of the 21st day of March,  2003 by and among  Gannett Texas L.P., a

Delaware  limited  partnership  ("Gannett") and New  Mexico-Texas  MediaNews LLC

("MediaNews"), a Delaware limited liability company and each other individual or

business  entity who may  hereafter  be admitted  from time to time as a Partner

hereunder. Gannett and MediaNews and any other individual and/or business entity

subsequently  admitted  shall be  known as and  referred  to as  "Partners"  and

individually as a "Partner".

 

 

 

                                    RECITALS

 

 

 

     WHEREAS, the Partnership was formed as a general partnership under the laws

of the State of Delaware on March 17, 2003; and

 

     WHEREAS,  this  Amended  and  Restated  Partnership  Agreement  amends  and

restates a  Partnership  Agreement  entered into by and among Gannett Texas L.P.

and New Mexico-Texas MediaNews LLC dated as of March 17, 2003;

 

     NOW,  THEREFORE,  in  consideration  of the  mutual  covenants  hereinafter

expressed, the Partners agree as follows:

 

 

                                   ARTICLE I

                                  DEFINITIONS

 

 

     "ADDITIONAL   CAPITAL   CONTRIBUTIONS"   means   any   additional   Capital

Contributions made pursuant to Section 3.1(b) of this Agreement.

 

     "ADDITIONAL  CONTRIBUTION  TERMS" shall have the meaning  ascribed to it in

Section 3.1(b) of this Agreement.

 

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     "ADDITIONAL   PARTNER"  means  any  additional   person   admitted  to  the

Partnership,  pursuant to Section 9.8 of this Agreement,  but does not include a

Substitute Partner.

 

     "AFFILIATE"  means any person controlled by,  controlling,  or under common

control with the entity in question.

 

     "BOOK  VALUE"  means,  with  respect to any asset of the  Partnership,  the

adjusted  basis of such asset as of the  relevant  date for  federal  income tax

purposes, except as follows:

 

          (i)  the initial Book Value of any asset  contributed  by a Partner to

the Partnership shall be the fair market value of such asset;

 

          (ii) the Book Values of all Partnership  assets (including  intangible

assets such as goodwill) shall be adjusted to equal their respective fair market

values as of the following times:

 

               (A)  the acquisition of an additional Interest in the Partnership

by any new or existing  Partner in exchange  for more than a DE MINIMIS  Capital

Contribution;

 

               (B)  the  distribution  by the  Partnership  to a Partner of more

than a DE MINIMIS amount of money or Partnership  property as consideration  for

an Interest in the Partnership; and

 

               (C)  the  liquidation  of the  Partnership  within the meaning of

Regulation section 1.704-1(b)(2) (iv)(f)(5)(ii);

 

          (iii) the Book Value of the Partnership  assets shall be increased (or

decreased)  to reflect  any  adjustments  to the  adjusted  basis of such assets

pursuant to Code section 734(b) or Code section  743(b),  but only to the extent

that such  adjustments  are taken into account in determining  Capital  Accounts

pursuant to Regulation section 1.704-1(b)(2)(iv)(m); and

 

          (iv) if the Book  Value of an asset has been  determined  or  adjusted

pursuant  to  subsection  (i),  (ii) or  (iii)  above,  such  Book  Value  shall

thereafter  be adjusted by the  Depreciation  taken into account with respect to

such  asset for  purposes  of  computing  Profits  and  Losses  and other  items

allocated pursuant to Section 4.2.

 

     The  foregoing  definition  of Book Value is  intended  to comply  with the

provisions of Regulation section  1.704-1(b)(2)(iv) and shall be interpreted and

applied consistently therewith.

 

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     "BUSINESS DAY" means any day (other than a day which is a Saturday,  Sunday

or legal holiday in the State of Texas).

 

     "BUSINESS PLAN" is defined in Section 8.1.

 

     "CAPITAL ACCOUNT" means, for each Partner,  the capital account  maintained

by the Partnership for such Partner as described in Section 4.1.

 

     "CAPITAL  CONTRIBUTION"  means the  amount of money and the other  property

(net of any liabilities  that the  Partnership is considered to assume,  or take

subject to, pursuant to Code Section 752, except to the extent such  liabilities

are in fact  discharged by the Partners  contributing  such  property)  which is

contributed  by a Partner to the  Partnership  pursuant  to Article  III hereof,

including Additional Capital Contributions.

 

     "CAPITAL EXPENDITURE" means all expenditures of a capital nature, including

those in relation to the construction of enlargements or additions to any of the

assets or facilities  owned by the Partnership or for any other  acquisitions or

improvements  thereto  of  a  capital  nature,  including,  without  limitation,

expenditures  for  materials,   labor,   equipment  permits,   consulting  fees,

accounting  and legal fees,  insurance  costs,  contractors'  fees, and land and

easement costs.

 

     "CHAIRMAN" is defined in Section 8.1(a).

 

     "CHIEF EXECUTIVE OFFICER" is defined in Section 8.8(a).

 

     "CHIEF FINANCIAL OFFICER" is defined in Section 8.8(b).

 

     "CODE" means the Internal Revenue Code of 1986, as amended.

 

     "CONTRIBUTION  AGREEMENT" means that  contribution  agreement  described in

Section 3.1 of the Agreement.

 

     "DEPRECIATION" means, for each Fiscal Year or part thereof, an amount equal

to the depreciation,  amortization,  or other cost recovery deduction  allowable

for federal income tax purposes with respect to an asset for such Fiscal Year or

part  thereof,  except  that if the  Book  Value of an  asset  differs  from its

adjusted basis for federal income tax purposes,  the depreciation,  amortization

 

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or other cost  recovery  deduction for such Fiscal Year or part thereof shall be

an amount  which bears the same ratio to such Book Value as the  federal  income

tax depreciation,  amortization or other cost recovery deduction for such Fiscal

Year or part thereof bears to such adjusted tax basis.  If such asset has a zero

adjusted  tax basis,  the  depreciation,  amortization  or other  cost  recovery

deduction  for each Fiscal Year shall be  determined  under a method  reasonably

selected by the Tax Matters Partner.

 

     "EXECUTIVE  OFFICERS" means the following officers of the Partnership:  its

president,  Chief  Executive  Officer,  Chief  Financial  Officer  and any other

individual who would be an "executive  officer" of the Partnership as determined

in accordance with Rule 3b-7  promulgated  under the Securities  Exchange Act of

1934.

 

     "FAIR  MARKET  VALUE  OF  THE  OFFERED  INTEREST"  is  defined  in  Section

9.5(f)(ii).

 

     "FISCAL  YEAR"  means the  fiscal  year of the  Partnership  as  defined in

Section 2.9 hereof.

 

     "FORMATION DATE" is defined in Section 2.5 of this Agreement.

 

     "GAAP" means generally accepted  accounting  principles,  as in effect from

time to time.

 

     "GANNETT" means Gannett Texas L.P.

 

     "INDEBTEDNESS"  means  those  obligations  for  borrowed  money  which were

assumed by the  Partnership  as a  consequence  of, or to which  property of the

Partnership  was subject  immediately  following the Partner's  initial  Capital

Contributions  (within the meaning of Section 3.1(a) hereof), with the exception

of any of the  foregoing  such  obligations  which are  included  in the Working

Capital Statements (as defined in the Contribution Agreement).

 

     "INTEREST"  means,  with respect to any Partner at any time, such Partner's

entire beneficial ownership interest in the Partnership and its property at such

time,  including such  Partner's  Capital  Account,  voting rights (if any), and

right to share in Profits and Losses, all items of income, gain, loss, deduction

and credit, distributions and all other benefits of the Partnership as specified

in this Agreement,  together with such Partner's  obligations to comply with all

of the terms of this Agreement.

 

     "INVOLUNTARY  TRANSFER" shall have the meaning  ascribed thereto in Section

9.4.

 

     "MAJORITY"   means  the  Partners  having  a  majority  of  the  Percentage

Interests.

 

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     "MEDIANEWS" means New Mexico-Texas MediaNews LLC.

 

     "PERCENTAGE  INTEREST" means, for each Partner,  such Partner's  percentage

interest as set forth in Section 3.1 hereof as such may be adjusted from time to

time in accordance with this Agreement.

 

     "PROFITS" and "LOSSES"  means,  for each Fiscal Year or part  thereof,  the

taxable  income or loss of the  Partnership  for such Fiscal Year  determined in

accordance  with Code  section  703(a) (for this  purpose,  all items of income,

gain,  loss or  deduction  required  to be stated  separately  pursuant  to Code

section  703(a)(1)  shall be  included  in  taxable  income or  loss),  with the

following adjustments:

 

          (i)  any income of the Partnership  that is exempt from federal income

tax shall be added to such taxable income or loss;

 

          (ii) any  expenditures  of the  Partnership  described in Code section

705(a)(2)(B)  or    treated   as   such   pursuant   to    Regulation    section

1.704-1(b)(2)(iv)(I) shall be subtracted from such taxable income or loss;

 

          (iii) any  Depreciation  for such Fiscal Year or part thereof shall be

taken into  account  in lieu of the  depreciation,  amortization  and other cost

recovery deductions taken into account in computing such taxable income or loss;

 

          (iv) gain  or loss  resulting  from  any  disposition  of  Partnership

property with respect to which gain or loss is recognized for federal income tax

purposes  shall be computed  with  reference  to the Book Value of the  property

disposed of, rather than the adjusted tax basis of such property;

 

          (v)  in the event the Book Value of any Partnership  asset is adjusted

pursuant to section (ii) or (iii) of the  definition of Book Value  hereof,  the

amount of such  adjustment  shall be taken into account as gain or loss from the

disposition of such assets for purposes of computing Profits and Losses; and

 

          (vi) such  taxable  income or loss shall be deemed not to include  any

income,  gain,  loss,  deduction  or other item  thereof  allocated  pursuant to

Section 4.3.

 

     "REGULATIONS"  means the income tax regulations  promulgated under the Code

by the Department of the Treasury,  as such regulations may be amended from time

to time.

 

     "SUBSTITUTE  PARTNER"  means a person who has become a  substitute  Partner

pursuant to Section 9.3 hereof, but does not include an Additional Partner.

 

     "TRANSFER"  means  any  sale,  assignment,   gift,  alienation,   or  other

disposition,  whether  voluntary  or by  operation of law (other than a transfer

which may arise by reason of death or incapacity), of an interest or any portion

 

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thereof,  but shall not  include  any  pledge,  hypothecation  or  granting of a

security interest in such Interest.

 

     "TRANSFEREE" means a purchaser, transferee, assignee (other than collateral

assignees) or any other person who takes,  in accordance  with the terms of this

Agreement, an Interest in the Partnership.

 

 

                                   ARTICLE II

                                THE PARTNERSHIP

 

 

     2.1  FORMATION.  The parties hereto have formed a partnership in accordance

with the further terms and provisions hereof. Each of the Partners shall execute

or cause to be executed from time to time all other  instruments,  certificates,

notices  and  documents,  and  shall do or  cause  to be done  all such  filing,

recording,  publishing  and other acts,  in each case,  as may be  necessary  or

appropriate from time to time to comply with all applicable requirements for the

formation and/or operation and, when  appropriate,  termination of a partnership

in the State of Delaware and all other jurisdictions where the Partnership shall

desire to conduct its business.

 

     2.2  NAME.   The  name  of  the  Partnership  shall  be  "Texas-New  Mexico

Newspapers  Partnership"  and its business shall be carried on in this name with

such variations and changes as the Management  Committee,  in its sole judgment,

deems  necessary  or  appropriate  to  comply  with  the   requirements  of  the

jurisdictions in which the Partnership's operations are conducted.

 

     2.3  BUSINESS  PURPOSE.  The purpose of the  Partnership is to carry on any

lawful  business  and to  engage  in any  lawful  act or  activity  for  which a

partnership  may be formed  under the laws of the State of  Delaware;  PROVIDED,

HOWEVER,  that the  business of the  Partnership  shall,  without the  unanimous

consent of the  Management  Committee,  be limited to  activities  involving the

ownership,  operation,  and  publication  (in  printed and  electronic  form) of

newspapers and related  publications and business activities directly related or

incidental to such  ownership,  operation  and  publication  including,  without

limitation, commercial printing, alternate distribution services and direct mail

activities.

 

     2.4  REGISTERED  OFFICE AND AGENT. The registered office of the Partnership

in the State of Delaware and its registered  agent for service of process on the

Partnership  in the State of Delaware  shall be as determined by the  Management

Committee.

 

     2.5  TERM.  The term of the  Partnership  commenced  on March 17, 2003 (the

"Formation  Date") and shall  continue  until  December 31, 2053 unless  earlier

dissolved and liquidated in accordance with Article XI hereof.

 

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     2.6  PRINCIPAL  PLACE OF  BUSINESS.  The  Partnership  shall  maintain  its

principal  place of business at 300 N. Campbell  Street,  El Paso, TX 79901,  or

such other  location or locations as the  Management  Committee may from time to

time select.

 

     2.7  THE  PARTNERS.  The name and place of  residence of each Partner is as

follows:

 

 

NAME                                            RESIDENCE

 

Gannett Texas L.P.                              c/o Gannett Co., Inc.

                                                7950 Jones Branch Drive

                                                McLean, VA 22107

 

New Mexico - Texas MediaNews  LLC  c/o          MediaNews Group, Inc,

                                                1560 Broadway, Suite 2100

                                                Denver, CO 80202

 

 

     2.8  FISCAL YEAR. Unless the Tax Matters Partner shall otherwise  determine

in accordance  with Section 706 of the Code, the fiscal year of the  Partnership

shall end on the last Sunday of each calendar  year, and the initial Fiscal Year

of the Partnership  shall commence on the Formation Date and end on December 28,

2003.

 

     2.9  REPRESENTATIONS  AND  WARRANTIES  OF THE PARTIES.  Each of the parties

represents and warrants that:

 

          (a)  It is a limited  partnership  or limited  liability  company duly

organized,  validly  existing  and  in  good  standing  under  the  laws  of the

jurisdiction of its organization;

 

          (b)  It has all  requisite  power  and  authority  to enter  into this

Agreement;  the execution  and delivery by such party of this  Agreement and the

consummation  by such party of the  transactions  contemplated  hereby have been

duly authorized by all necessary  partnership or corporate action on the part of

such party;  and this Agreement has been duly and validly executed and delivered

by such party and constitutes (assuming the due and valid execution and delivery

of this Agreement by the other parties), the legal, valid and binding obligation

of each party, enforceable against each party in accordance with its terms;

 

          (d)  The  execution,  delivery and  performance  by such party of this

Agreement will not, as of and after the Closing Date,  result in a breach of any

of the terms, provisions or conditions of any agreement to which such party is a

party which has a reasonable  likelihood of materially  and adversely  affecting

 

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the  operations,  properties  or business  of the  Partnership  or such  party's

obligations under this Agreement;

 

          (e)  The  execution  and delivery by such party of this  Agreement and

the  formation  of the  Partnership  does not require any filing by it with,  or

approval or consent of, any  governmental  authority  which has not already been

made.

 

 

                                  ARTICLE III

                      CAPITAL STRUCTURE AND CONTRIBUTIONS

 

 

     3.1  CAPITAL CONTRIBUTIONS.

 

          (a)  INITIAL CONTRIBUTIONS. Each of Gannett and MediaNews has made (or

will cause to be made) a Capital Contribution to the Partnership as set forth in

a contribution agreement among Gannett, Las Cruces Publishing Company, Northwest

New Mexico Publishing Company,  Carlsbad  Publishing  Company,  and New Mexico -

Texas  MediaNews  Group  Interactive,  Inc.  and dated as of March 14, 2003 (the

"Contribution Agreement"). As a result of such Capital Contributions,  effective

as of March 17, 2003,  Gannett has (or will have) a  Percentage  Interest in the

Partnership  of 66.2% and MediaNews has (or will have) a Percentage  Interest in

the Partnership of 33.8%. Except as provided in Section 3.1(e) below, Percentage

Interests  shall not be adjusted  on account of the payment of any sums,  or the

contribution  of any  property,  treated as a Capital  Contribution  without the

unanimous consent of the Partners.

 

          (b)  ADDITIONAL CAPITAL  CONTRIBUTIONS;  INTEREST;  AND OFFSET. At any

time,  and  from  time to time  after  the  Formation  Date  (i) the  Management

Committee,  in its sole and  absolute  discretion,  by unanimous  vote,  or (ii)

either the Chief Executive Officer or the Chief Financial  Officer,  each in his

sole and  absolute  discretion,  may  determine  that the  Partnership  requires

additional capital  contributions (the "Additional  Capital  Contributions") and

the amount, terms and conditions thereof.  Such Additional Capital Contributions

will be used by the  Partnership  for such  activities as are  designated by the

Management  Committee in its approval  resolution,  or as are  determined by the

Chief  Executive  Officer or the Chief  Financial  Officer,  as the case may be,

PROVIDED  THAT  the  Additional   Capital   Contributions  made  pursuant  to  a

determination by the Chief Executive  Officer or the Chief Financial Officer may

only be used by the Partnership to fund Capital  Expenditures in accordance with

the Business Plan which has been approved by the Management  Committee  pursuant

to  Section  8.1.  All  Additional  Capital  Contributions  will  be made by the

Partners  in  proportion  to  their  then-current  Percentage  Interests  in the

Partnership.   In  addition,  with  the  unanimous  consent  of  the  Management

Committee, Additional Capital Contributions may be obtained by the admittance of

Additional  Partners in  accordance  with Section  9.8. In the event  Additional

Partners are admitted,  the Percentage  Interests of the existing and Additional

Partners  shall be adjusted as determined by the  Management  Committee,  voting

unanimously.  From the date of the Management  Committee's,  the Chief Executive

Officer's or the Chief Financial  Officers'  determination,  as the case may be,

 

<PAGE>

 

that an Additional  Capital  Contribution  is required until it has been paid, a

Partner's  obligation to make that contribution  shall accrue interest at a rate

of 9% per annum until the obligation to make the Additional Capital Contribution

(and to pay all accrued but unpaid  interest,  if any, with respect thereto) has

been paid in full. All cash  distributions to which such Partner shall otherwise

be  entitled to receive  pursuant to Section  5.1(a)  hereof,  shall  instead be

retained by the  Partnership  and credited to the discharge of the obligation to

make such  Additional  Capital  Contribution  (and to pay all accrued but unpaid

interest,  if any,  with  respect  thereto).  Any amounts so  retained  shall be

treated as distributed to such Partner and, first paid to the Partnership in the

amount of the  accrued  interest  and,  second,  with  respect to the  remainder

thereof, contributed to the Partnership as an Additional Capital Contribution on

behalf of the Partner owing such obligation.

 

          (c)  CAPITAL CONTRIBUTIONS  REQUIRED UNDER SECTION 12.2; INTEREST; AND

OFFSET.  As provided in Section  12.2 of this  Agreement,  any Partner  owing an

indemnification  obligation to the Partnership arising under Article XII of this

Agreement  shall  make a  capital  contribution  in  cash or  other  immediately

available funds in the amount of such obligation promptly upon the determination

of such  obligation.  Furthermore,  from the date of the  determination  of such

obligation  until the date such  capital  contribution  is made in cash or other

immediately available funds, the amount of such obligation shall accrue interest

owing to the  Partnership  at a rate of 9 per cent per  annum,  and  until  such

obligation  (and all accrued  interest,  if any, with respect  thereto) has been

paid  in  full  in  cash  or  other   immediately   available  funds,  all  cash

distributions to which a Partner shall otherwise be entitled to receive pursuant

to Section  5.1(a)  hereof,  shall  instead be retained by the  Partnership  and

credited to the discharge of the  obligation  to make such capital  contribution

and to pay accrued but unpaid interest. Any amounts so retained shall be treated

as distributed to such Partner and, first paid to the  Partnership in the amount

of the accrued  interest and,  second,  with respect to the  remainder  thereof,

contributed to the Partnership as an additional  capital  contribution on behalf

of the Partner owing such obligation.

 

          (d)  OTHER  CONTRIBUTIONS.  At  any  time  during  the  term  of  this

Agreement,  any  Partner  may  offer  to  contribute  to the  Partnership  as an

additional  capital  contribution  any  newspapers,  mastheads or related assets

owned by it that are  located in the State of Texas or the State of New  Mexico.

Should the  Management  Committee,  by a  unanimous  vote,  agree to accept such

contribution,  the Capital  Account and, if determined by unanimous  vote of the

Management  Committee,  as  provided  in  Section  8.6  hereof,  the  Percentage

Interest,  of the  contributing  Partner will be adjusted  upward to reflect the

fair  market  value of such  contribution  (determined  in  accordance  with the

procedures set forth in Section  9.5(f)) and, if determined by unanimous vote of

the  Management  Committee,  as provided in Section 8.6 hereof,  the  Percentage

Interest of the other  Partners  will be adjusted  downward  proportionately  to

reflect the increase in the contributing Partner's Percentage Interest.

 

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          (e)  MEDIANEWS ADDITIONAL INTEREST.

 

               (i)  Subject to the terms and conditions of this Section  3.1(e),

at any time after June 30,  2005 and prior to the  occurrence  of a  Dissolution

Event,  MediaNews  shall have the option to increase its Percentage  Interest by

purchasing  an  additional  Interest  ("Additional  Interest")  to increase  its

Percentage  Interests to equal up to 40%,  based on the fair market value of the

Partnership  at the  time  of  closing  of such  transaction  as  calculated  in

accordance with the procedures set forth in Section 9.5(f);  provided,  however,

that the period of  negotiation  between  the  Partners  as set forth in Section

9.5(f)(ii)  shall be 90 days. Such option is only  exercisable by MediaNews once

per Fiscal Year by giving written notice to Gannett between July 1 and September

30 of each  year and is  conditional  upon  MediaNews  granting  Gannett  or its

Affiliate the opportunity to acquire an interest in assets owned by MediaNews or

any of its  Affiliates  (including,  for  example,  and without  limitation,  an

increased interest in the California Newspapers Partnership,  a Delaware general

partnership  among  certain  of  Gannett's  Affiliates,  certain  of  MediaNews'

Affiliates  and others) for a fair market value  equivalent  to the value of the

Additional  Interest  (determined in accordance with the procedures set forth in

Section 9.5(f)), on such commercial terms that are mutually acceptable.

 

     3.2  NO OTHER  MANDATORY  CAPITAL  CONTRIBUTIONS.  Except as  specified  in

Section 3.1(b), Section 3.1(c) or Section 12.2, no Partner shall be obligated to

make any Additional Capital Contribution to the Partnership's capital.

 

     3.3  NO RIGHT OF  WITHDRAWAL.  No Partner  shall have the right to withdraw

any  portion of such  Partner's  Capital  Contributions  to, or to  receive  any

distributions from, the Partnership,  except as provided in Articles V, IX and X

hereof.

 

     3.4  LOANS BY THIRD  PARTIES.  Subject to the  provisions  of  Section  8.6

hereof,  the  Partnership  may borrow funds or enter into other similar  credit,

guarantee,  financing  or  refinancing  arrangements  for any  purpose  from any

Partner  or  from  any  person  upon  such  terms  as the  Management  Committee

determines, in its sole and absolute discretion, are appropriate.

 

 

                                   ARTICLE IV

                               CAPITAL ACCOUNTS;

                        ALLOCATION OF PROFITS AND LOSSES

 

 

     4.1  CAPITAL  ACCOUNTS.  Each  Partner  shall  have a  capital  account  (a

"Capital Account") which account shall be (1) increased by the amount of (a) the

Capital  Contributions  of such Partner,  (b) the allocations to such Partner of

Profits  and  items of income  or gain  pursuant  to  Section  4.2,  and (c) any

positive  adjustment  to such Capital  Account by reason of an adjustment to the

Book Value of  Partnership  assets,  and (2)  decreased by the amount of (x) any

 

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cash and the Book  Value of any  property  (net of  liabilities  secured by such

property that such Partner is considered to assume or take subject to under Code

section 752) distributed to such Partner,  (y) the allocation to such Partner of

Losses  and  items  of loss  pursuant  to  Section  4.2,  and  (z) any  negative

adjustment to such Capital  Account by reason of an adjustment to the Book Value

of  Partnership  assets.  In the  event of a  revaluation  of the Book  Value of

Partnership assets, the Partners' Capital Accounts shall be adjusted in the same

manner as if gain or loss had been  recognized  on a sale of the assets at their

new Book Value. The provisions of this Agreement  relating to the maintenance of

Capital Accounts are intended to comply with Regulation section 1.704-1(b),  and

shall be interpreted and applied in a manner consistent with such Regulation.

 

     4.2  BOOK ALLOCATION.

 

          (a)  IN GENERAL.  This  Section  4.2 sets forth the general  rules for

book  allocations  of  Profits,  Losses and  similar  items to the  Partners  as

reflected in their Capital Accounts.

 

          (b)  PROFITS AND LOSSES. Profits shall be allocated to