PARTNERSHIP AGREEMENT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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                           THE YORK NEWSPAPER COMPANY

 

 

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                             PARTNERSHIP AGREEMENT

 

 

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                          DATED AS OF JANUARY 13, 1989

 

 

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                               1. THE PARTNERSHIP

 

1.1   Partners.................................................................1

1.2   Name and Principal Office................................................1

1.3   Purpose of Partnership...................................................1

1.4   Commencement; Term.......................................................1

1.5   Definitions - General....................................................2

 

        2. PARTNERSHIP INTERESTS, CONTRIBUTIONS AND DISTRIBUTIONS

 

2.1   Partnership Interests....................................................9

2.2   Capital Contributions and Maintenance of Capital Accounts................9

2.3   Distributions of Net Cash From Operations and Allocations of

      Net Income or Net Loss..................................................10

2.4   Special Allocations.....................................................10

2.5   Other Allocation Rules..................................................11

2.6   Binding Effect of Allocations...........................................12

2.7   Expenses Incurred Prior to the Formation of the Partnership.............12

2.8   Distributions to Partners; Funding of Losses............................12

 

                     3. MANAGEMENT OF THE PARTNERSHIP

 

3.1   Controlling Partner.....................................................12

3.2   Partner Representatives.................................................13

3.3   The Third Party.........................................................13

3.4   Meetings and Action of the Partner Representatives......................13

3.5   Actions by Partners.....................................................14

3.6   President and Other Management Personnel................................15

3.7   Indemnification.........................................................16

 

                   4. TRANSFER OF PARTNERSHIP INTERESTS

 

4.1   Prohibited Transfers....................................................18

4.2   Conditions to Transfer..................................................19

 

            5. DISSOLUTION AND TERMINATION OF THE PARTNERSHIP

 

5.1   Term....................................................................19

5.2   Termination of this Agreement; Dissolution of the Partnership...........20

5.3   Termination at End of Term..............................................22

 

                             6. MISCELLANEOUS

 

6.1   Notices.................................................................23

6.2   Non-Assignability.......................................................23

6.3   Entire Understanding....................................................23

 

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6.4   Headings................................................................23

6.5   Governing Law...........................................................23

6.6   Modification............................................................24

6.7   Severability............................................................24

6.8   Specific Performance....................................................24

6.9   No Third-Party Beneficiaries............................................24

6.10  No Waiver...............................................................24

6.11  Variation of Pronouns...................................................25

6.12  Survival................................................................25

6.13  Priority of Interpretation..............................................25

 

 

 

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                             PARTNERSHIP AGREEMENT

 

 

     This PARTNERSHIP AGREEMENT (the "Agreement"), dated as of January 13, 1989,

 

is entered into by and between  York  Newspapers,  Inc., a Delaware  corporation

 

("YNI") and a  wholly-owned  subsidiary  of Garden  State  Newspapers,  Inc.,  a

 

Delaware  corporation  ("Garden")  and  York  Daily  Record,  Inc.,  a  Delaware

 

corporation  (the  "Record")  and  an  eighty  percent  subsidiary  of  Carlsbad

 

Publishing Co., a Washington corporation ("Carlsbad").

 

1.   THE PARTNERSHIP.

 

     1.1  PARTNERS.   The  Record  and  YNI   (individually,   a  "Partner"  and

 

collectively,  the "Partners") hereby form a general  partnership under the laws

 

of the Commonwealth of Pennsylvania (the  "Partnership") for the purposes and on

 

the terms set forth herein.

 

     1.2  NAME AND PRINCIPAL  OFFICE.  The name of the Partnership shall be "THE

 

YORK NEWSPAPER COMPANY" or such other name as shall be mutually agreeable to the

 

Partners.  The Partnership  shall do business under the name "THE YORK NEWSPAPER

 

COMPANY" and its  principal  office shall be located in York,  Pennsylvania,  or

 

such  other  place  as  the  Partners   shall   designate  from  time  to  time.

 

     1.3  PURPOSE OF PARTNERSHIP. The purpose of the Partnership shall be (i) to

 

be the agency (as that term is defined in the Joint Operating  Agreement,  dated

 

the date hereof,  among the Record,  YNI and the Partnership (the "JOA")) and to

 

conduct all the activities,  have all of the rights and powers,  and perform all

 

of the duties and obligations, of the Agency set forth in the JOA and (ii) to do

 

any act and thing and to enter into any contract  incidental  to, or  necessary,

 

proper or advisable  for, the  accomplishment  of such  purposes,  to the extent

 

permitted by law.

 

     1.4  COMMENCEMENT;  TERM. The Partnership shall commence on the date hereof

 

and continue for a term ending at the close  business on the last day of the one

 

hundredth full fiscal year of the  Partnership  following the Effective Date (as

 

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that term is defined in the JOA), unless earlier  dissolved  pursuant to Section

 

5.2 hereof, or unless continued in accordance with the following. This Agreement

 

shall  automatically  renew for succeeding  renewal periods of twenty-five years

 

each,  unless  either of the  Partners  notifies  the other at least  five years

 

before the end of the initial  period,  or at least five years before the end of

 

the then current renewal period, of the election of the party giving such notice

 

to terminate this Agreement.  If such notice is given, then this Agreement shall

 

terminate at the end of the initial  period or the then current  renewal  period

 

during which such notice is given.

 

     1.5  DEFINITIONS  - GENERAL.  Capitalized  words and  phrases  used in this

 

Agreement have the following meanings:

 

          (a)  "Act"  means the  Pennsylvania  Uniform  Partnership  Act, as set

 

forth in 59 Pa. Stat. Ann. Section 301 ET SEQ., as amended from time to time (or

 

any corresponding provisions of succeeding law).

 

          (b)  "Affiliate"  means,  with  respect to any Person,  (i) any Person

 

directly or indirectly  controlling,  controlled by or under common control with

 

such Person,  (ii) any Person owning or  controlling  ten percent or more of the

 

outstanding  voting  securities of such Person,  (iii) any officer,  director or

 

general partner of such Person, or (iv) any Person who is an officer,  director,

 

general  partner,  trustee  or  holder  of ten  percent  or more  of the  voting

 

securities  of any  Person  described  in  clauses  (i)  through  (iii)  of this

 

sentence.

 

          (c)  "Agreement" or  "Partnership  Agreement"  means this  Partnership

 

Agreement, as amended from time to time. Words such as "herein,"  "hereinafter,"

 

"hereof,"  "hereto," and "hereunder" refer to this Agreement as a whole,  unless

 

the context otherwise requires.

 

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          (d)  "Capital Account" means, with respect to any Partner, the Capital

 

Account maintained for such Partner in accordance with the following provisions:

 

               (1)  To each  Partner's  Capital  Account there shall be credited

 

          such Partner's  Capital  Contributions,  such  Partner's  distributive

 

          share of Net  Income  and any  items in the  nature  of income or gain

 

          which are specially  allocated pursuant to Section 2.4 hereof, and the

 

          amount of any Partnership liabilities assumed by such Partner or which

 

          are secured by any Partnership Property distributed to such Partner.

 

               (2) To each Partner's Capital Account there shall be debited the

 

          amount of cash and the Gross Asset Value of any  Partnership  Property

 

          distributed  to  such  Partner  pursuant  to  any  provision  of  this

 

          Agreement, such Partner's distributive share of Net Loss and any items

 

          in the nature of  expenses  or losses  which are  specially  allocated

 

          pursuant to Section 2.4 hereof,  and the amount of any  liabilities of

 

          such Partner  assumed by the  Partnership  or which are secured by any

 

          property contributed by such Partner to the Partnership.

 

               (3)  In the event any interest in the  Partnership is transferred

 

          in accordance with the terms of this Agreement,  the transferee  shall

 

          succeed to the Capital  Account of the  transferror to the extent that

 

          it relates to the transferred interest.

 

               (4)  In  determining  the amount of any liability for purposes of

 

          Sections  1.5(d)(1)  and 1.5(d)(2)  hereof,  there shall be taken into

 

          account Code Section 752(c) and any other applicable provisions of the

 

          Code and Treasury Regulations.

 

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          The foregoing  provisions  and the other  provisions of this Agreement

 

relating to the  maintenance  of Capital  Accounts  are  intended to comply with

 

Treasury Regulations Section 1.704-1(b), and shall be interpreted and applied in

 

a manner consistent with such Treasury  Regulations.  In the event the President

 

shall  determine  that it is prudent  to modify the manner in which the  Capital

 

Accounts,  or any  debits or credits  thereto  (including,  without  limitation,

 

debits or credits  relating to  liabilities  which are secured by contributed or

 

distributed  property or which are assumed by the Partnership or Partners),  are

 

computed in order to comply with such  Treasury  Regulations,  the President may

 

make such modification,  subject to Section 5.1(h)(ii) of the JOA, provided that

 

the  modification  is not  likely  to  have a  material  effect  on the  amounts

 

distributable  to any Partner  pursuant to Section 5 hereof upon the dissolution

 

of the Partnership. Subject to Section 5.1(h)(ii) of the JOA, the President also

 

shall make any appropriate  modifications required if unanticipated events occur

 

that  might   otherwise  cause  this  Agreement  not  to  comply  with  Treasury

 

Regulations Section 1.704-1(b) .

 

          (e)  "Capital  Contribution" means the amount of money and the initial

 

Gross  Asset  Value  of any  property  (other  than  money)  contributed  to the

 

Partnership  with respect to the interests in the Partnership of each Partner in

 

accordance with Sections 1.4, 1.5, and 1.7 of the JOA.

 

          (f)  "Code" means the Internal  Revenue Code of 1986,  as amended from

 

time to time (or any corresponding provisions of succeeding law).

 

          (g)  "Depreciation"  means,  for each fiscal year or other period,  an

 

amount equal to the depreciation,  amortization or other cost recovery deduction

 

allowable with respect to an asset for such year or other period, except that if

 

the Gross Asset Value of an asset  differs from its  adjusted  basis for federal

 

income tax purposes at the beginning of such year or other period,  Depreciation

 

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shall be an amount  which  bears the same ratio to such  beginning  Gross  Asset

 

Value as the  federal  income  tax  depreciation,  amortization  or  other  cost

 

recovery  deduction  for such  year or  other  period  bears  to such  beginning

 

adjusted tax basis.

 

          (h)  "Gross Asset Value" means, with respect to any asset, the asset's

 

adjusted basis for federal income tax purposes, except as follows:

 

               (1)  The initial Gross Asset Value of any asset  contributed by a

 

          Partner to the  Partnership  shall be the gross fair  market  value of

 

          such asset, as determined pursuant to the JOA;

 

               (2)  The Gross Asset  Values of all  Partnership  assets shall be

 

          adjusted  to equal  their  respective  gross fair  market  values,  as

 

          determined  pursuant to Section  1.6 of the JOA,  as of the  following

 

          times:   (i)  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;   (ii)  the  distribution  by  the

 

          Partnership  to a  Partner  of  more  than  a  DE  MINIMIS  amount  of

 

          Partnership   Property  as  consideration   for  an  interest  in  the

 

          Partnership  if  the  President   reasonably   determines   that  such

 

          adjustment  is  necessary  or  appropriate  to  reflect  the  relative

 

          economic  interests  of the  Partners in the  Partnership,  subject to

 

          Section  5.1(h)(ii)  of the JOA;  and  (iii)  the  liquidation  of the

 

          Partnership  within  the  meaning  of  Treasury   Regulations  Section

 

          1.704-1(b)(2)(ii)(G);

 

               (3)  The Gross Asset Value of any Partnership  asset  distributed

 

          to any Partner  shall be the gross fair market  value of such asset on

 

          the date of distribution; and

 

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               (4)  The  Gross  Asset  Values  of  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  Treasury

 

          Regulations  Section  1.704-1(b)(2)(iv)(M)  and Section 2.4(d) hereof;

 

          provided,  however,  that Gross  Asset  Values  shall not be  adjusted

 

          pursuant  to  this  Section  1.5(h)(4)  to the  extent  the  President

 

          determines that an adjustment  pursuant to Section 1.5(h)(2) hereof is

 

          necessary or appropriate in connection  with a transaction  that would

 

          otherwise result in an adjustment  pursuant to this Section 1.5(h)(4),

 

          subject to Section 5.1(h)(ii) of the JOA.

 

               (5)  If the Gross Asset Value of an asset has been  determined or

 

          adjusted  pursuant  to  Sections  1.5(h)(1),  1.5(h)(2)  or  1.5(h)(4)

 

          hereof,  such Gross Asset Value  shall  thereafter  be adjusted by the

 

          Depreciation  taken  into  account  with  respect  to such  asset  for

 

          purposes of computing Net Income or Net Loss.

 

          (i)  "JOA" means that certain Joint Operating  Agreement  entered into

 

by and among The York Daily Record,  Inc., York  Newspapers,  Inc., and The York

 

Newspaper Company on the date hereof combining the business  functions,  but not

 

news and editorial functions, of the Partners.

 

          (j)  "Net Cash From  Operations"  means the gross cash  proceeds  from

 

Partnership  operations  less  the  portion  thereof  used  to pay or  establish

 

reserves for all  Partnership  expenses,  debt payments,  capital  improvements,

 

replacements,  and contingencies,  all as determined by the President. "Net Cash

 

From  Operations"  shall not be  reduced  by  depreciation,  amortization,  cost

 

recovery deductions or similar allowances.

 

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          (k)  "Net Income" and "Net Loss" means,  for each fiscal year or other

 

period,  an amount equal to the  Partnership's  taxable  income or loss for such

 

year or period,  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:

 

               (1)  Any income of the  Partnership  that is exempt from  federal

 

          income tax and not  otherwise  taken into  account  in  computing  Net

 

          Income or Net Loss  pursuant to this Section  1.5(k) shall be added to

 

          such taxable income or loss;

 

               (2)  Any  expenditures  of  the  Partnership  described  in  Code

 

          Section   705(a)(2)(B)   or  treated  as  Code  Section   705(a)(2)(B)

 

          expenditures     pursuant    to    Treasury     Regulations    Section

 

          1.704-1(b)(2)(iv)(I),   and  not  otherwise   taken  into  account  in

 

          computing Net Income or Net Loss pursuant to this Section 1.5(k) shall

 

          be subtracted from such taxable income or loss;

 

               (3)  In the event the Gross Asset value of any Partnership  asset

 

          is adjusted pursuant to Sections  1.5(h)(2) or 1.5(h)(3)  hereof,  the

 

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

 

          from the  disposition  of such asset for  purposes  of  computing  Net

 

          Income or Net Loss.

 

               (4)  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 by reference to the Gross Asset

 

          Value of the property disposed of,  notwithstanding  that the adjusted

 

          tax basis of such property differs from its Gross Asset Value:

 

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               (5)  In lieu of the  depreciation,  amortization,  and other cost

 

          recovery  deductions  taken into  account in  computing  such  taxable

 

          income or loss,  there shall be taken into  account  Depreciation  for

 

          such fiscal year or other period,  computed in accordance with Section

 

          1.5(g) hereof; and

 

               (6)  Notwithstanding  any other provision of this Section 1.5(k),

 

          any items which are specially allocated pursuant to Section 2.4 hereof

 

          shall not be taken into account in computing Net Income or Net Loss.

 

          (l)  "Partners"  means the Record  and YNI,  where no  distinction  is

 

required by the context in which the term is used  herein.  "Partner"  means any

 

one of the Partners.

 

          (m)  "Partnership"  means the partnership  continued  pursuant to this

 

Agreement and the partnership continuing the business of this Partnership in the

 

event of dissolution as herein provided.

 

          (n)  "Partnership  Property"  means  all  real and  personal  property

 

acquired by or contributed to the Partnership and any improvements  thereto, and

 

shall include both tangible and intangible property.

 

          (o)  "Person" means any individual, partnership, corporation, trust or

 

other entity.

 

          (p)  "Property" means the property which will be acquired and operated

 

by or contributed to the  Partnership in accordance with Sections 1.4 and 1.5 of

 

the JOA.

 

          (q)  "Treasury   Regulations"   means  the  Income   Tax   Regulations

 

promulgated  under the Code,  as such Treasury  Regulations  may be amended from

 

time  to  time  (including   corresponding  provisions  of  succeeding  Treasury

 

Regulations).

 

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2.   PARTNERSHIP INTERESTS, CONTRIBUTIONS AND DISTRIBUTIONS.

 

     2.1  PARTNERSHIP  INTERESTS.  Except as otherwise expressly provided herein

 

or in the  JOA,  the  respective  interests  of  the  Partners  in  the  assets,

 

liabilities,  profits and losses of the Partnership (the "Partnership Interest")

 

shall be as follows:

 

                       Record:            42.5%

 

                       YNI:               57.5%

 

Each Partner shall have at all times an interest as a tenant in  partnership  in

 

the assets and properties of the Partnership  equal to its Partnership  Interest

 

and neither  Partner shall have any separate  right,  title or interest in or to

 

any asset or property of the Partnership.

 

     2.2  CAPITAL CONTRIBUTIONS AND MAINTENANCE OF CAPITAL ACCOUNTS.

 

          (a)  Between  the date hereof and the  Effective  Date,  each  Partner

 

shall  contribute  funds for the interim funding of the Partnership as set forth

 

in Section 1.7 of the JOA. On the Effective Date, each Partner shall  contribute

 

to the  Partnership  the fair market value  (determined  in accordance  with the

 

valuation  procedures  set forth in Section 1.6 of the JOA) of  non-cash  assets

 

required  to be  contributed  by such  Partner to the  Partnership  pursuant  to

 

Sections  1.4 or 1.5 of the JOA, as the case may be, plus the amount of cash (if

 

any)  required  to be  contributed  pursuant  to  Section  1.6(d)  of  JOA.  The

 

Partnership shall assume the current liabilities of such Partner as set forth in

 

Sections 1.4 or 1.5 of the JOA, as the case may be.

 

          (b)  Each Partner's