SECOND AMENDED AND RESTATED PARTNERSHIP AGREEMENT

 

 

 

                          Second Amended and Restated

 

                             Partnership Agreement

 

 

 

                                      For

 

 

                       California Newspapers Partnership

                         A Delaware General Partnership

 

                                  By and Among

 

                            West Coast MediaNews LLC

 

                             Donrey Newspapers LLC

 

                 The Sun Company of San Bernardino, California

 

                          California Newspapers, Inc.

 

                             Media West--SBC, Inc.

 

                                      And

 

                             Media West--CNI, Inc.

 

 

 

 

 

                                                                    May 30, 2003

 

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                               TABLE OF CONTENTS

 

 

                             ARTICLE I DEFINITIONS

 

 

                           ARTICLE II THE PARTNERSHIP

 

2.1    Formation...............................................................6

2.2    Name....................................................................6

2.3    Business Purpose........................................................6

2.4    Registered Office and Agent.............................................6

2.5    Term....................................................................6

2.6    Principal Place of Business.............................................6

2.7    Title to Partnership Property...........................................6

2.8    The Partners............................................................7

2.9    Fiscal Year.............................................................7

2.10   Representations and Warranties of the Parties...........................7

 

              ARTICLE III CAPITAL STRUCTURE AND CONTRIBUTIONS

 

3.1    Capital Contributions...................................................8

3.2    No Other Mandatory Capital Contributions...............................10

3.3    No Right of Withdrawal.................................................10

3.4    Loans by Third Parties.................................................10

 

       ARTICLE IV CAPITAL ACCOUNTS; ALLOCATION OF PROFITS AND LOSSES

 

4.1    Capital Accounts.......................................................10

4.2    Book Allocation........................................................10

4.3    Tax Allocations........................................................11

 

                          ARTICLE V DISTRIBUTIONS

 

5.1    Distributions..........................................................12

 

                     ARTICLE VI ACCOUNTING AND REPORTS

 

6.1    Books and Records......................................................13

6.2    Reports to Partners....................................................13

6.3    Annual Tax Returns.....................................................14

6.4    Actions in Event of Audit..............................................15

6.5    Tax Elections..........................................................15

 

                      ARTICLE VII ACTIONS BY PARTNERS

 

7.1    Consents and Other Actions by Sun, California Newspapers,

       MWSB and MWCNI.........................................................15

7.2    Meetings...............................................................16

 

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7.3    Actions by the Partners................................................16

 

                          ARTICLE VIII MANAGEMENT

 

8.1    The Management Committee...............................................16

8.2    Removal of Members; Vacancies..........................................16

8.3    Meetings of the Management Committee; Notice...........................17

8.4    Quorum.................................................................17

8.5    Voting.................................................................17

8.6    Certain Matters Requiring a Unanimous Vote of the Management

       Committee..............................................................17

8.7    Action by Consent......................................................19

8.8    Executive Officers.....................................................19

8.9    Provision of Services to Partnership by MediaNews......................20

 

        ARTICLE IX TRANSFER OF PARTNERSHIP INTERESTS; ADDITIONAL AND

                            SUBSTITUTE PARTNERS

 

9.1    Prohibited Transfers...................................................20

9.2    Permitted Transfers by Partners........................................20

9.3    Substitute Partner.....................................................21

9.4    Involuntary Withdrawal by a Partner....................................21

9.5    Right of First Refusal for Sale of Partnership Interests...............21

9.6    Tag-Along Rights Regarding Sales of Partnership Interests..............23

9.7    West Coast MediaNews Drag-Along Rights.................................24

9.8    Admission of Additional Partners.......................................25

9.9    Donrey Put Option......................................................25

9.10   Reserved...............................................................27

9.11   Partnership Call Option Re Section 9.9 Put Option......................27

9.12   Acknowledgment of Pledges of Interests.................................27

 

                   ARTICLE X DISSOLUTION AND LIQUIDATION

 

10.1   Dissolution............................................................28

10.2   Election to Continue the Business......................................29

10.3   Closing of Affairs.....................................................29

 

                     ARTICLE XI AMENDMENT TO AGREEMENT

 

 

                        ARTICLE XII INDEMNIFICATION

 

12.1   General................................................................30

12.2   Indemnification Obligations............................................30

12.3   Exclusive Remedy.......................................................31

12.4   Third Party Claims.....................................................31

12.5   Other Indemnification Claims...........................................33

 

 

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                      ARTICLE XIII GENERAL PROVISIONS

 

13.1   Mediation..............................................................33

13.2   Notices................................................................33

13.3   Confidentiality........................................................34

13.4   Entire Agreement, Etc..................................................34

13.5   Construction Principles................................................35

13.6   Counterparts...........................................................35

13.7   Severability...........................................................35

13.8   Expenses...............................................................35

13.9   Governing Law..........................................................35

13.10  Binding Effect.........................................................35

13.11  Additional Documents and Acts..........................................35

13.12  No Third Party Beneficiary.............................................35

13.13  Formation of Subsidiary Limited Partnership............................35

 

 

                                    EXHIBITS

 

Exhibit 1 Schedule of Certain Partnership Assets and Liabilities  Transferred to

          Subsidiary Limited Partnership.

 

 

 

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               SECOND AMENDED AND RESTATED PARTNERSHIP AGREEMENT

 

                                      FOR

 

                       California Newspapers Partnership

                         A Delaware General Partnership

 

 

 

     THIS SECOND  AMENDED  AND  RESTATED  PARTNERSHIP  AGREEMENT  of  California

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

made and entered  into as of this 30th day of May,  2003 by and among West Coast

MediaNews LLC, a Delaware limited  liability  company ("West Coast  MediaNews"),

Donrey Newspapers LLC, an Arkansas limited liability company ("Donrey"), The Sun

Company  of  San  Bernardino,  California,  a  California  corporation  ("Sun"),

California Newspapers, Inc., a California corporation ("California Newspapers"),

Media West--SBC, Inc., a Delaware corporation ("MWSB"), Media West--CNI, Inc., a

Delaware corporation ("MWCNI," with Sun, California  Newspapers,  MWSB and MWCNI

being  sometimes  hereinafter  collectively  referred to as "Gannett")  and each

other  individual or business  entity who may hereafter be admitted from time to

time as a Partner  hereunder.  West Coast  MediaNews,  Donrey,  Sun,  California

Newspapers,  MWSB and MWCNI  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 as of March 31, 1999;

 

     WHEREAS, a Partnership  Agreement was entered into by West Coast MediaNews,

Donrey,  Sun and MWSB dated as of March 31, 1999 and was  amended  and  restated

pursuant to an Amended and Restated Partnership  Agreement dated as of September

30, 2000 (as so amended, the "Partnership Agreement"); and

 

     WHEREAS,  the Partners  desire to further amend and restate the Partnership

Agreement as of the date hereof;

 

     NOW,  THEREFORE,  in  consideration  of the  mutual  covenants  hereinafter

expressed, the Partners agree as follows:

 

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                                   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.

 

     "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.

 

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     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.

 

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

or legal holiday in the State of California).

 

     "BUSINESS  PLAN" means the business plan for the Partnership for the period

ending June 30, 1999,  substantially  in the form attached  hereto as Exhibit A,

and as adopted annually thereafter by the Management Committee.

 

     "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.

 

     "CODE" means the Internal Revenue Code of 1986, as currently 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

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.

 

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

president and 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" means March 31, 1999.

 

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

time to time.

 

     "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 and any obligation of

a  Partner  to pay money  which has been  assumed  by the  Partnership  with the

exception of any of the foregoing such obligations which are included on:

 

     (i)  the  working  capital  statement  described  in  Section  4.5  of  the

          Contribution  Agreement  dated as of March 3, 1999 by and among Garden

          State  Newspapers,  Inc. Alameda  Newspapers,  Inc., V & P Publishing,

          Inc., Internet Media Publishing,  Inc., DR Partners, Media West - SBC,

          Inc. and The Sun Company of San Bernardino, California; or

 

     (ii) the Gannett  Newspapers  Working  Capital  Statement as defined in the

          Contribution  Agreement  dated as of  September  15, 2000 by and among

          California  Newspapers,  Inc.,  Media  West-CNI,  Inc. and  California

          Newspapers Partnership.

 

     "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.

 

<PAGE>

 

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

Interests.

 

     "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

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

security interest in such Interest.

 

<PAGE>

 

     "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  FORMATTION. 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  "California  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 31, 1999 (the

"Formation  Date") and shall  continue  until  December 31, 2048 unless  earlier

dissolved and liquidated in accordance with Article XI hereof.

 

     2.6  PRINCIPAL  PLACE OF  BUSINESS.  The  Partnership  shall  maintain  its

principal place of business at 21221 Oxnard Street,  Woodland Hills,  California

91367 or such other location or locations as the  Management  Committee may from

time to time select.

 

     2.7  TITLE TO  PARTNERSHIP  PROPERTY.  Except as shown in Schedule B, legal

title to all property of the  Partnership  other than leased  property  shall be

held and conveyed in the name of the Partnership.

 

<PAGE>

 

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

follows:

 

 

NAME                                         RESIDENCE

 

West Coast MediaNews                         c/o MediaNews Group, Inc.

                                             1560 Broadway, Suite 2100

                                             Denver, CO 80202

 

Donrey                                       c/o Stephens Group, Inc.

                                             11 Center Street, Suite 2500

                                             Little Rock, AR 72201-4430

 

Sun                                          c/o Gannett Co., Inc.

                                             7950 Jones Branch Drive

                                             McLean, VA 22107

 

California Newspapers                        c/o Gannett Co., Inc.

                                             7950 Jones Branch Drive

                                             McLean, VA 22107

 

MWSB                                         50 W. Liberty Street

                                             Suite 802

                                             Reno, NV 89501

 

MWCNI                                        50 W. Liberty Street

                                             Suite 802

                                             Reno, NV 89501

 

     2.9  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  June  30 of  each  year,  and  the  initial  Fiscal  Year  of the

Partnership shall commence on the Formation Date and end on June 30, 1999.

 

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

represents and warrants that:

 

          (a)  It  is  a  corporation  or  limited  liability  corporation  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 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

 

<PAGE>

 

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

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

 

          (c)  Except  as set  forth in  Schedule  2.10(c)  hereto,  there is no

litigation  pending or, to the best knowledge of such party,  threatened against

such  party  which has a  reasonable  likelihood  of  materially  and  adversely

affecting the  operations,  properties or business of the  Partnership or any of

such party's obligations under this Agreement;

 

          (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

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 West Coast MediaNews, Donrey, Sun

and  MWSB has made (or  will  cause to be made) a  Capital  Contribution  to the

Partnership  as set  forth in the  Contribution  Agreement  among  Garden  State

Newspapers,  Inc., Alameda Newspapers,  Inc., V&P Publishing, Inc., and Internet

Media  Publishing,  Inc.  (on behalf of West Coast  MediaNews),  DR Partners (on

behalf of Donrey),  Sun and MWSB,  dated as of March 3, 1999 (the  "Contribution

Agreement").  Each of California Newspapers and MWCNI has made (or will cause to

be made) a Capital Contribution as set forth in the Contribution Agreement among

the Partnership,  California Newspapers and MWCNI dated as of September 15, 2000

(also,  for purposes of this  Agreement,  the  "Contribution  Agreement").  As a

result of such Capital  Contributions,  effective as of September 30, 2000, West

Coast  MediaNews has (or will have) a Percentage  Interest in the Partnership of

54.23%,  Donrey has (or will have) a Percentage  Interest in the  Partnership of

26.28%,  Sun has (or will have) a  Percentage  Interest  in the  Partnership  of

10.54%,  MWSB has (or will have) a  Percentage  Interest in the  Partnership  of

1.17%,  California  Newspapers  has (or will have) a Percentage  Interest in the

Partnership  of 7.00% and MWCNI has (or will have) a Percentage  Interest in the

Partnership of 0.78%.  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.  At any time, and from time to

time  after  the  Formation  Date,  the  Management  Committee,  in its sole and

absolute  discretion,  may, by unanimous  vote,  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

 

<PAGE>

 

designated  by  the  Management  Committee  in  its  approval  resolution.   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 determination 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. 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  California.  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.

 

<PAGE>

 

     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 such Partner's share of Partnership  assets,  and (2) decreased by

the  amount  of (x)  any  cash  and