##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549


FORM 10-K

(Mark one)

|                                            |  |                                                                                         
|------------------------------------------- |  | ----------------------------------------------------------------------------------------
|(X)                                         |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934    
|                                           
|For the fiscal year ended December 31, 2002
|                                           
|OR                                         
|                                           
|(   )                                       |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from  to

Commission file number 001-07155

R.H. DONNELLEY CORPORATION




(Exact name of registrant as specified in its charter)


|                                                            |  |                                     
|----------------------------------------------------------- |  | ------------------------------------
|Delaware                                                    |  | 13-2740040                          
|                                                            |  |                                     
|(State of Incorporation)                                    |  | (IRS Employer Identification
No.)   
|                                                           
|One Manhattanville Road, Purchase, N.Y                      |  | 10577                               
|                                                            |  |                                     
|(Address of principal executive offices)                    |  | (Zip Code)                          
|                                                            |  |                                     
|Registrants telephone number, including area code          |  | (914) 933-6400                      
|                                                            |  |                                     
|                                                            |  |                                     
|Securities registered pursuant to Section 12(b) of the Act: |  |                                     
|                                                            |  |                                     
|Title of Class                                              |  | Name of Exchange on Which Registered
|                                                            |  |                                     
|Common Stock, par value $1 per share                        |  | New York Stock Exchange             

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrants knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K. [ X ]

Indicate by check mark if the registrant is an accelerated filer (as defined in
Exchange Act Rule 12b-2)
Yes [ X ] No [ ]





---



##### Table of Contents



(continued)

The aggregate market value at June 28, 2002, the last day of our most recently
completed second quarter, of shares of the Registrants common stock (based
upon the closing price per share of $27.97 of such stock on The New York Stock
Exchange on such date) held by non-affiliates of the Registrant was
approximately $827,341,000. For purposes of this calculation, only those shares
held by directors and executive officers of the Registrant have been excluded
as held by affiliates. The aggregate market value at March 6, 2003 of shares
of the Registrants common stock (based upon the closing price per share of
$30.10 of such stock on The New York Stock Exchange on such date) held by
non-affiliates of the Registrant was approximately $916,247,000. For purposes of this
calculation, only those shares held by directors and executive officers of the
Registrant and shares beneficially owned by The Goldman Sachs Group, Inc., have
been excluded as held by affiliates. Such exclusion should not be deemed a
determination or an admission by the Registrant that such individuals or
entities are, in fact, affiliates of the Registrant. At March 6, 2003, there
were 30,500,983 outstanding shares of the Registrants common stock, not
including any shares of common stock beneficially owned by The Goldman Sachs
Group, Inc., only 58 shares of which are outstanding.

Commission file number 333-59287

R.H. DONNELLEY INC. *




(Exact name of registrant as specified in its charter)


|                                                   |  |                                  
|-------------------------------------------------- |  | ---------------------------------
|Delaware                                           |  | 36-2467635                       
|                                                   |  |                                  
|(State of Incorporation)                           |  | (IRS Employer Identification No.)
|                                                   |  |                                  
|One Manhattanville Road, Purchase, N.Y             |  | 10577                            
|                                                   |  |                                  
|(Address of principal executive offices)           |  | (Zip Code)                       
|                                                  
|Registrants telephone number, including area code |  | (914) 933-6400                   
|                                                   |  |                                  



---

|* |  | R.H. Donnelley Inc. is a wholly owned subsidiary of R.H. Donnelley
Corporation. R.H. Donnelley Inc. meets the conditions set forth in General
Instructions I 1(a) and (b) of Form 10-K and is therefore filing this report
with respect to R.H. Donnelley Inc. with the reduced disclosure format. R.H.
Donnelley Inc. became subject to the filing requirements of Section 15(d) on
October 1, 1998 in connection with the public offer and sale of its 91/8%
Senior Subordinated Notes. As of March 18, 2003, 100 shares of R.H. Donnelley
Inc. common stock, no par value, were outstanding.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Documents Incorporated By Reference

|         |  |                                                                                                |  |                                                                                                                                                                                                                                                                                                                          
|-------- |  | ---------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Part III |  |                                                                                                |  |                                                                                                                                                                                                                                                                                                                          
|         |  |                                                                                                |  |                                                                                                                                                                                                                                                                                                                          
|Item 10  |  | Directors and Executive Officers of the
Registrant                                             |  | Information
responsive to this
Item can be found
under the captions
Board of
Directors and
Section 16(a)
Beneficial
Ownership Reporting
Compliance in the
Companys Proxy
Statement to be
filed with the
Commission on or
about March 25,
2003.                                                                      
|Item 11  |  | Executive Compensation                                                                         |  | Information
responsive to this
Item can be found
under the caption
Director and
Executive
Compensation in
the Companys Proxy
Statement to be
filed with the
Commission on or
about March 25,
2003.                                                                                                                    
|Item 12  |  | Security Ownership of Certain
Beneficial Owners and Management and
Related Stockholder Matters |  | Information
responsive to this
Item can be found
under the caption
Security Ownership
of Certain
Beneficial Owners
and Management in
the Companys Proxy
Statement to be filed with the
Commission on or
about March 25,
2003.                                                                                         
|Item 13  |  | Certain Relationships and Related
Transactions                                                 |  | Information
responsive to this
Item can be found
under the caption
Director and
Executive
Compensation 
Compensation
Committee
Interlocks and
Insider
Participation;
Certain
Relationships and
Related Party
Transactions in
the Companys Proxy
Statement to be
filed with the
Commission on or
about March 25,
2003.

2



---

TABLE OF CONTENTS



|                                                                                       |                                                                                                         |  |  |  |  |  |  | 
|-------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I                                                                                
|                                                                                       | ITEM 1. BUSINESS                                                                                       
|                                                                                       | ITEM 2. PROPERTIES                                                                                     
|                                                                                       | ITEM 3. LEGAL PROCEEDINGS                                                                              
|                                                                                       | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                            
|PART II                                                                               
|                                                                                       | ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS                          
|                                                                                       | ITEM 6. SELECTED FINANCIAL DATA                                                                        
|                                                                                       | ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS          
|LIQUIDITY AND CAPITAL RESOURCES                                                       
|                                                                                       | ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK                                     
|                                                                                       | ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                                    
|INDEX TO FINANCIAL STATEMENTS                                                         
|REPORT OF INDEPENDENT ACCOUNTANTS                                                     
|R.H. DONNELLEY CORPORATION CONSOLIDATED BALANCE SHEETS                                
|R.H. DONNELLEY CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS                      
|R.H. DONNELLEY CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS                      
|R.H. DONNELLEY CORPORATION CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS DEFICIT
|R.H. DONNELLEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                 
|REPORT OF INDEPENDENT ACCOUNTANTS                                                     
|DONTECH COMBINED BALANCE SHEETS                                                       
|DONTECH COMBINED STATEMENTS OF OPERATIONS                                             
|DONTECH COMBINED STATEMENTS OF CASH FLOWS                                             
|DONTECH COMBINED STATEMENTS OF PARTNERS CAPITAL                                      
|DONTECH NOTES TO COMBINED FINANCIAL STATEMENTS                                        
|                                                                                       | ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES          
|PART III                                                                              
|                                                                                       | ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                                            
|                                                                                       | ITEM 11. EXECUTIVE COMPENSATION                                                                        
|                                                                                       | ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS
|                                                                                       | ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                                
|                                                                                       | ITEM 14. CONTROLS AND PROCEDURES                                                                       
|PART IV                                                                               
|                                                                                       | ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K                               
|SIGNATURES                                                                            
|SIGNATURES                                                                            
|CERTIFICATIONS                                                                        
|CERTIFICATIONS                                                                        
|CERTIFICATIONS                                                                        
|CERTIFICATIONS                                                                        
|EXHIBIT INDEX                                                                         
|INDENTURE: 8 7/8% SENIOR NOTES                                                        
|SUPPLEMENTAL INDENTURE: 8 7/8% SENIOR NOTES                                           
|GUARANTEES: 8 7/8% SENIOR NOTES                                                       
|INDENTURE: 10 7/8% SENIOR SUBORDINATED NOTES                                          
|SUPPLEMENTAL INDENTURE: 10 7/8% SENIOR SUB NOTES                                      
|GUARANTEES: 10 7/8% SENIOR SUBORDINATED NOTES                                         
|SUBSIDIARIES                                                                          
|CONSENT OF INDEPENDENT ACCOUNTANTS                                                    
|CERTIFICATION OF CEO                                                                  
|CERTIFICATION OF CFO/SENIOR VICE PRESIDENT                                            
|CERTIFICATION OF CEO                                                                  
|CERTIFICATION OF CFO/SENIOR VICE PRESIDENT                                            



---



##### Table of Contents






PART I




ITEM 1. BUSINESS

Except where otherwise indicated, the terms Company, Donnelley, we, us
and our refer to R.H. Donnelley Corporation and its direct and indirect
wholly owned subsidiaries. R.H. Donnelley Inc. is our wholly owned direct
subsidiary. Our executive offices are located at One Manhattanville Road,
Purchase, NY 10577 and our telephone number is (914) 933-6400. Our Internet
website address is www.rhd.com. We make available free of charge on our
website our annual, quarterly and current reports, including amendments to such
reports, as soon as practicable after we electronically file such material
with, or furnish such material to, the United States Securities and Exchange
Commission (SEC). Our filings can also be obtained from the SEC website at
www.sec.gov or by calling toll free the SEC Office of Public Reference at (800)
942-8090. However, the information found on our website or the SEC website is
not part of this annual report.

On January 3, 2003, we acquired all the outstanding common stock of Sprint
Corporations directory publishing business, Sprint Publishing & Advertising
(SPA). See Significant Business Development below. As a result,
commencing in 2003 our operating and financial results will no longer reflect
sales commissions or pre-press fees from or other transactions with SPA since
these intercompany transactions will be eliminated in consolidation. Rather,
we will report the full value of advertising sales and certain direct costs
under the deferral and amortization method. In order to facilitate discussion
of our historical results as opposed to our future results, we use the past
tense when referring to operating and financial results for the years 2000
through 2002.

The DonTech Partnership (DonTech), our 50/50 perpetual partnership with an
affiliate of SBC Communications Inc. (SBC), remains unchanged following the
SPA transaction and our financial presentation of DonTech will appear
consistently in both historical and future periods.

Significant Business Development

We acquired all the outstanding common stock of SPA for $2,213.5 million in
cash, after a preliminary working capital adjustment. The purchase price is
subject to a final working capital adjustment. SPA is the publisher of 260
revenue-generating yellow pages directories in 18 states. Prior to this
acquisition, we acted as a sales agent and pre-press publishing vendor for SPA
for 44 of these directories in 4 states. The acquisition transforms the
Company from a sales agent and pre-press vendor into a leading publisher of
yellow pages directories.

To finance the acquisition, we entered into a new $1,525 million Senior Secured
Credit Facility (Credit Facility), consisting of a $500 million tranche A
term loan (Term Loan A), a $900 million tranche B term loan (Term Loan B)
and a $125 million revolving credit facility (Revolver). We also issued $325
million 8 7/8% Senior Notes (the 8 7/8% Notes) and $600 million 10 7/8%
Senior Subordinated Notes (10 7/8% Notes and collectively with the 8 7/8%
Notes, the Notes). Finally, investment partnerships affiliated with The
Goldman Sachs Group, Inc. (collectively, the GS Funds)
purchased $200 million of our redeemable convertible cumulative preferred stock
(Preferred Stock) and warrants to purchase 1,650,000 shares of our common
stock.

To take advantage of favorable market conditions and to ensure the timely
consummation of the SPA acquisition, we issued the Notes and borrowed the Term
Loan B in December 2002. The total gross proceeds of $1,825 million were
deposited and held in escrow pending the SPA acquisition closing. The GS Funds
also invested an initial $70 million through the purchase of 70,000 shares of
Preferred Stock and warrants to purchase 577,500 shares of our common stock in
November 2002. This investment was a portion of their $200 million commitment.
At the closing of the SPA acquisition, the GS Funds purchased the remaining
$130 million of Preferred Stock and we borrowed the Term Loan A and $10 million
under the Revolver. See Managements Discussion and Analysis of Financial
Condition and Results of Operations in Item 7 for more information.

In connection with the SPA transaction, we entered into a directory services
license agreement, a trademark license agreement and a non-competition
agreement (collectively, the Directory Services Agreements) with Sprint
Corporation and/or certain of its affiliates (Sprint). The directory
services license agreement gives us the

3



---



##### Table of Contents



exclusive right to produce, publish and
distribute directories for Sprint in the markets where Sprint currently
provides local telephone service. The trademark license agreement gives us the
exclusive right to use certain Sprint trademarks, including the Sprint diamond
logo, in those markets. The non-competition agreement prohibits Sprint from
producing, publishing and distributing print directories or selling local
advertising in those markets, with certain limited exceptions. These
agreements are all interrelated and each has an initial term of 50 years,
subject to earlier termination under specified circumstances.

Prior to the acquisition, we provided sales agency and pre-press publishing
services to SPA. At December 31, 2002, we had an aggregate receivable of $43.3
million for commissions, pre-press publishing fees and priority distribution
income from SPA. As a result of the acquisition, these receivables became
intercompany items. Also, long-term liabilities at December 31, 2002 included
an amount due to Sprint of $7.0 million, which we paid in cash at the closing.

The acquisition was accounted for as a purchase business combination. The
purchase price was allocated to the tangible and identifiable intangible assets
acquired and liabilities assumed based on their respective fair values on the
acquisition date. The results of the SPA business will be included in our
consolidated results from and after the acquisition date. Accordingly, the
operating results of SPA are not included in our audited financial statements
at or for the year ended December 31, 2002.

Corporate Overview

We now publish 260 revenue-generating yellow pages directories in 18
states having a total circulation of more than 18 million, and serving
approximately 160,000 local and 4,000 national advertisers and are the sixth
largest directory publisher in the U.S. based on revenue. We have been in the
yellow pages business in various capacities for over 100 years. Prior to the
SPA acquisition, together with our business partners, we were one of the
leading independent marketers of yellow pages advertising in the United States.
Through DonTech, we continue to sell advertising for an additional 129
directories in Illinois and northwest Indiana with a total circulation of
approximately 10 million, serving approximately 100,000 local advertisers.

Historical Overview of R.H. Donnelley

Through 2002, we were one of the leading independent marketers of yellow pages
advertising in the United States. We sold advertising for more than 170 yellow
pages directories with a total circulation of over 15 million, representing
approximately $600 million of annual yellow pages advertising either directly
through our own sales force on behalf of SPA, or indirectly through DonTech.
Further, we provided pre-press publishing services for approximately 227 yellow
pages directories, including all of the directories for which we then sold
advertising.

We sold yellow pages advertising in certain markets in Florida, Nevada, North
Carolina and Virginia under contractual agreements with affiliates of Sprint.
We continue to sell yellow pages advertising in Illinois and northwest Indiana
through DonTech. These relationships have allowed SBC and Sprint to benefit
from our long-term presence in these markets, our yellow pages advertising
sales and pre-press publishing expertise, our established infrastructure and
our performance-focused, non-union employees. We, in turn, have benefited from
the relationships with SBC and Sprint as SBC is the major incumbent telephone
company in the Illinois and northwest Indiana markets and Sprint is the major
incumbent telephone company in the Florida, Nevada, North Carolina and Virginia
markets and one of two major incumbent telephone companies in the greater
Orlando market.

Historical R.H. Donnelley Businesses

Our operations historically have been organized into two segments: Directory
Advertising Services (DAS) and DonTech. The DAS segment included our sales agency relationship with
Sprint and pre-press publishing services for a number of yellow pages
publishers. DonTech contributes to consolidated earnings via a partnership
distribution and revenue participation income. See Note 12 to the Consolidated
Financial Statements in Item 8 for more information regarding our segments.

R.H. Donnelleys Former Relationship with Sprint

Our relationship with Sprint began in 1980 when we began publishing telephone
directories in certain markets in
4Table of Contents

North Carolina and Virginia for Central
Telephone Company, which subsequently changed its name to Centel and was
acquired by Sprint in 1993. The Sprint relationship was expanded in 1985 when
we entered into the UniDon Partnership with United Telephone Company of
Florida, presently a subsidiary of Sprint, to publish directories for United in
the Central Florida market.

The relationship further expanded in 1988 when we entered into the CenDon
Partnership (CenDon) with Centel to publish directories for Centel in certain
markets in Florida, Nevada (notably Las Vegas), North Carolina and Virginia.
The UniDon Partnership was replaced in 1994 with a sales agency agreement under
which we became the exclusive sales agent for four Sprint directories in
Central Florida. In 2000, the CenDon Partnership was restructured as a limited
liability company under which we acted as the exclusive sales agent for 40
Sprint directories in the same CenDon markets. In 2002, our sales
representatives sold approximately 39% of SPAs local advertising sales under
these agreements. SPA performed its own sales function in the remaining SPA
markets. We have also provided pre-press publishing services for those yellow
pages directories of Sprint that we sell advertising for under separate
agreements. The sales agency agreement with CenDon was scheduled to expire in
2010 and the sales agency agreement for Central Florida was scheduled to expire
in 2004.

R.H. Donnelleys Relationship with SBC

Our relationship with telephone companies presently owned by SBC began in 1908.
Since then, we have maintained a variety of contractual relationships with
these telephone companies regarding directory publication and advertising
sales. Under the current partnership agreement, DonTech is the exclusive sales
agent in perpetuity for the 129 yellow pages directories published by SBC in
Illinois and northwest Indiana. DonTech provides advertising sales services
for these directories and earns a commission from SBC. Under our agreements
with SBC, we have a 50% interest in the net profits of DonTech and receive
revenue participation income directly from an affiliate of SBC. The amount of
revenue participation income is based on a percentage of DonTech advertising
sales and is earned and recognized when a sales contract is executed. Revenue
participation income comprises approximately 80% to 85% of our total income
related to DonTech. We also provide certain pre-press publishing services to
SBC under a publishing services agreement that extends through 2008, and
billing and support services under separate agreements that extend through 2005
and 2008, respectively.

We account for our investment in DonTech under the equity method and record our
interest in the net profits of DonTech and revenue participation income as
partnership and joint venture income. DonTech is considered a separate
operating segment since, among other things, it has its own Board of Directors
and the employees of DonTech, including its officers and managers, are not our
employees. DonTechs Board of Directors consists of six members, two members
appointed by each partner and the two most senior officers of DonTech. Each
partner has one voting member and one advisory, non-voting member and, in
general, most major decisions are required to be made by the DonTech Board of
Directors and require the affirmative vote of both voting directors.

Historical Overview of SPA

SPA produces 260 Sprint-branded revenue-generating directories in 18 states
with an annual circulation of more than 18 million directories. SPAs
exclusive affiliation with Sprint significantly differentiates SPA from its
competitors in the markets it serves. In connection with the acquisition, we
entered into agreements that allow us to continue to use the names and logos
presently used by SPA on the cover and spine of the directories that are
distributed in Sprints local telephone service areas for a period of 50 years,
subject to earlier termination under specified circumstances.

SPA History

SPA began its operations as DirectoriesAmerica, which was formed in March 1986
to publish telephone directories for the United Telephone operating companies
(later renamed the Sprint-United telephone operating companies, and ultimately
renamed Sprint Corporation). DirectoriesAmerica primarily managed United
Telephones partnership with us and a separate relationship with L.M. Berry,
which sold directory advertising in and produced directories for other United
local telephone markets. In 1988, Sprint acquired two independent
Chicago-based publishers and merged them into what eventually became SPAs
Midwest Operations Division. In October 1992, an agreement was signed with
L.M. Berry to allow for the buyout of their sales agency agreement and the
eventual transfer of
5Table of ContentsL.M. Berry sales and production functions and employees to
SPA. Sprint acquired Centel Corporation in March 1993, and accordingly, SPA
assumed management control of Centel and Centels partnership interest in
CenDon. In 1995, the production employees from L.M. Berry transferred to SPA
and were consolidated in Bristol, Tennessee along with the rest of the SPA
production workforce. In June 1998, SPA acquired the 400-person Berry-Sprint
sales force in order to assume control over the entire SPA-sold local sales
channel. In June 2000, SPA completed the sale of the Midwest Operations
Division to focus its business solely on its utility operations in Sprint
markets.R.H. Donnelley Post-AcquisitionThe SPA acquisition transformed us from a directory sales agent and pre-press
vendor into a leading publisher of yellow pages directories. In addition to
the directories we publish, we will continue to receive revenue participation
income and 50% of the net profits of DonTech. We generate revenue primarily
from the sale of advertising in yellow and white pages, as well as revenue from
specialty products such as covers, tabs and coupons.Products and ServicesWe have two principal directory types: core books and community books. Core
books generally cover large population areas such as Lee County, Florida. Most
core books contain yellow pages, white pages and specialty sections such as
area information, guides and government pages. Community books typically cover
a sub-section of the area addressed by a core book. In Lee County, for
example, there are four community books, Sanibel-Captiva Island, South Fort
Myers, Cape Coral/North Fort Myers and Lehigh Acres, that together cover the
majority of the core Lee County directory, but not the entire market.
Community books also consist of yellow pages, white pages and specialty
sections.The table below details our principal revenue-generating product offerings.Principal Products

|                                             |  |                                                                                                                                              
|-------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------
|Type                                         |  | Description                                                                                                                                  
|                                             |  |                                                                                                                                              
|Stylized listings for
white and yellow pages |  | Listings appearing in-column consist of name,
address and telephone number and are available in
a variety of type styles and limited color   
|Trade items                                  |  | Advertising space, designed to promote brand name
of product or service, placed alphabetically
within the column listings of the yellow pages
|Space items                                  |  | Advertising space sold in 1/2 inch increments
appearing alphabetically within the column
listings of the yellow pages                        
|Display ads                                  |  | Advertising placed within a heading by size and
then by seniority  our ad sizes range from a
quarter column to a double full page           
|Color                                        |  | Various levels of color including spot-four
color, enhanced color, process photo and
hi-impact are available for display products            
|White page logos                             |  | Listings allowing space for illustrative art work                                                                                            

In addition to these principal products, we offer a broad range of specialty
products that advertisers use to differentiate and enhance their display of
information. An overview of our main revenue-generating specialty products
follows:

Specialty Products

|               |  |                                              
|-------------- |  | ---------------------------------------------
|Type           |  | Description                                  
|               |  |                                              
|Cover products |  | Advertising sold on the front and back covers

6



---



##### Table of Contents



|                                    |  |                                                                                                                          
|----------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------
|Type                                |  | Description                                                                                                              
|                                    |  |                                                                                                                          
|Tabs                                |  | Full page advertising bound into the directory,
offering front and back space printed on card stock
with a tab protrusion
|Ride-alongs                         |  | Advertisements placed inside the directory delivery bag                                                                  
|Blow-in cards                       |  | Loose postcard-like products inserted into directories                                                                   
|Guides (Internet, golf, menu, etc.) |  | Sections in the directories on a specific interest
area with feature information and banner advertising                  

Internet-based Directory and Electronic Products

Although historically SPA has not offered advertisers any material Internet
platform, we intend to market an Internet-based directory service to our
advertisers. We view our Internet-based directory as a complement to our print
directory product rather than as a stand-alone business. We intend to utilize
our existing sales force and customer relationships to enable us to provide an
electronic source of directory information. We intend to provide electronic
products that offer local content to consumers, require little incremental
effort by our sales force and utilize a low cost technical and production
platform. The DonTech sales force currently offers the SBC Smart Pages
Internet product.

We believe that increased usage of Internet-based directories will continue to
support overall usage and advertising rates in the U.S. directory advertising
industry. We will continue to explore new means to deliver our content to
consumers.

Business Cycle Overview

All of our directories generally have
a 12-month publication cycle
except Las Vegas, which has a semi-annual cycle. Our business
process generally spans 15 to 20 months from the beginning of the sales
campaign to the end of a directorys life and is comprised of several stages.
The marketing stage is generally completed before the end of the first month.
The sales stage begins once marketing is completed and depending on the size of
the geographic area covered by a directory, generally runs through the
following two to five months. The sales campaign closes approximately two
months prior to publication. Production and printing are completed following
sales and usually lasts two months. Finally, directories are distributed
during the final publication month. Customer service as well as billing and
collections stages are provided after distribution and throughout the 12-month
(or 6-month in the case of Las Vegas) publication cycle.

Sales

As a result of the SPA acquisition, we have combined the separate SPA and
Donnelley sales teams into a single sales organization. Sales are carried out
internally through premise representatives, telephone
representatives and letter renewals on the local level, and through national
account managers who work with Certified Marketing Representatives (CMRs)
serving national advertisers. We distinguish between national advertisers,
which advertise in 20 or more directories and span three or more states with at
least two different publishers from local advertisers, which are primarily
small and medium-sized businesses located within our markets. In general,
advertising from local advertisers account for approximately 85% of gross
revenue while advertising from national advertisers account for approximately
15% of gross revenue.

Local Sales Organization

Our local sales efforts are managed through three sales channels: premise
sales, telephone sales and letter renewal. Premise sales representatives
conduct sales calls at customers business locations and typically handle
higher dollar and more complex accounts. Telephone sales representatives handle
lower dollar value accounts and conduct their sales over the phone. The final
channel, letter renewal, is used to contact very low dollar value customers
that have renewed their account for the same product for several years.

7



---



##### Table of Contents



National Sales Organization

Our national sales channel is managed through our national sales department
located in Overland Park, Kansas. The national sales department seeks to
increase national directory revenues by developing and maintaining favorable
relationships with CMRs who are the yellow pages media buyers for national
advertisers. National account managers are the primary point of contact for
all communication and business dealings between SPA and CMRs. SPAs national
account managers and national sales representatives are accountable for overall
national revenue objectives.

Pre-press and Information Technology Management Services

Pre-press services include canvass and assignment preparation, graphics and ad
composition, contract processing, database management and pagination. We
provide one of the most comprehensive capabilities in the directory information
industry, including tools and information to effectively conduct sales and
marketing planning, sales management, sales compensation and customer service
activities. Our information management and publishing systems are located
primarily in facilities in Raleigh, North Carolina and in Bristol and
Blountville, Tennessee, with additional services provided in a facility in
Dunmore, Pennsylvania.

Printing & Distribution

All directories are printed by and we source all paper through our
long-standing relationship with printing vendor R.R. Donnelley. We currently
have two contracts for the printing of our directories with R.R. Donnelley that
expire in December 2005 and December 2007. Although we share a common family
heritage, no other common ownership or business relationship exists between
R.R. Donnelley and us.

The delivery of directories is facilitated through outsourcing relationships
with Product Development Corporation (PDC) and Special Directory Delivery
Service (SDDS). Delivery methods utilized in both initial and secondary
delivery to distribute directories to customers are selected based on factors
such as cost, quality, geography, and customer need. Primary delivery methods
include U.S. Postal Service and hand delivery and occasionally, we may also use
UPS or other types of expedited delivery methods. Frequently, a combination of
these methods is required to meet the needs of the marketplace.

SDDS is our principal secondary delivery vendor maintaining warehouses in Ohio,
Florida and Nevada to stock inventory for secondary delivery to new residents
and businesses that move into our local market areas following the completion
of initial distribution of the directory in that area.

Competition

Yellow Pages Advertising Sales

The U.S. directory advertising industry is highly competitive. More than 240
independent publishers operating in the United States compete with regional
bell operating company, or RBOC, directory publishers and other telephone
utility publishers. In most markets, we compete with one or more yellow pages
directory publishers, which are predominantly independent publishers. In some
markets, we compete on a limited basis with RBOC directory publishers in
adjacent markets. One of these publishers, Verizon Information Services, the
directory business affiliated with Verizon Communications, Inc., has announced
plans to publish directories and offer local Internet directory services in
markets beyond where Verizon Communications offers local phone service,
including in several SPA markets. Effectively, Verizon Information Services
will be competing as an independent publisher in those markets. While no other
RBOC or utility publisher has announced similar plans, no assurance can be
given that other RBOC or utility publishers will not do so in the future. Many
of these telephone utility publishers are larger than us and have greater
financial resources than we have. No assurances can be given that we will be
able to compete effectively with these other publishers for advertising sales
or acquisitions in the future.

We also compete for advertising sales with other media, including newspapers,
magazines, radio, direct mail, the Internet and television. Many of these
competitors are larger than us and have greater financial resources than we
have. Additionally, advances in technology have brought new participants, new
products and new channels to the industry, including increasing use of
electronic delivery of directory information as an advertising medium.

8



---



##### Table of Contents



In addition, the Telecommunications Act of 1996, which effectively opened local
telephone markets to increased competition, may adversely impact the market
position of telephone utilities, including those with which we have
relationships. Because the Telecommunications Act of 1996 has opened local
telephone markets to increased competition, no assurances can be given that
Sprint, or SBC will remain a dominant local telephone service provider in their
local service areas. If Sprint were no longer a dominant local telephone
service provider in any particular local service area, our license to be the
exclusive publisher for Sprint in its markets and to use the Sprint brand name
on our directories in those markets may not be as valuable as we presently
anticipate, and we may not realize some of the anticipated benefits under our
commercial arrangements with Sprint. If SBC were no longer the dominant local
telephone service provider in any DonTech service areas, our income from the
DonTech relationship would be adversely affected.

Internet

Since 1997, overall usage of printed yellow pages directories in the United
States has declined, which we believe is in part a result of increased usage of
Internet-based directory products. The yellow pages directory advertising
business is subject to changes arising from developments in technology,
including information distribution methods and users technological
preferences. The use of the Internet by consumers as a means to transact
commerce may result in new technologies being developed and services being
provided that could compete with our products and services. Our growth and
future financial performance may depend on our ability to develop and market
new products and services and create new distribution channels, while enhancing
existing products, services and distribution channels, in order to incorporate
the latest technological advances and accommodate changing user preferences,
including the use of the Internet.

Raw Materials

Our principal raw material is paper, which our printer currently purchases on
our behalf at agreed upon prices. These prices are at or near the spot market
price, as we do not currently have long-term purchase arrangements or
commitments from paper mills or other outside suppliers. Accordingly, we are
subject to price increases and delays in receiving this principal raw material.
Further, changes in the supply of, or demand for, paper could affect delivery
times and prices. Paper is one of our largest variable cost items and will
account for approximately 10% to 15% of annual operating expenses. As conditions
warrant, we may enter into longer term supply agreements in the future.

Intellectual Property

We own and control confidential information as well as a number of trade
secrets, trademarks, service marks, trade names, copyrights and other
intellectual property rights which, in the aggregate, are of material
importance to our business. We believe that the Donnelley name and related
names, marks and logos are, in the aggregate, material to our business. We are
licensed to use certain technology and other intellectual property rights owned
and controlled by others. As a result of the acquisition, we own an exclusive
license to produce, publish, and distribute directories for Sprint in those
markets where Sprint currently provides local telephone service. We also own
the exclusive license to use Sprints brand, including Sprints diamond logo,
on directories in those markets, and we acquired the Best Red Yellow Pages
tagline and the look and feel trademarks previously used by SPA. Although we
do not consider any individual trademark or other intellectual property to be
material to our operations, we believe that the licenses we acquired are
material, taken as a whole, to our business. We consider our trademarks,
service marks, databases, software and other intellectual property to be
proprietary and we rely on a combination of copyright, trademark, trade secret,
non-disclosure and contract safeguards for protection. We also benefit from
the use of both the phrase yellow pages and the walking fingers logo, which
we believe to be in the public domain in the United States.

9



---



##### Table of Contents



Employees

As of December 31, 2002, we had approximately 575 full-time employees. As a
result of the acquisition, we presently have approximately 1,550 full-time
employees. These numbers do not include the employees of DonTech, whom are not
our employees. None of our employees are covered by collective bargaining
agreements, and we consider relations with employees to be good.

Executive Officers of the Registrant

The following table sets forth information concerning the individuals who serve
as executive officers of the Company as of March 6, 2003.

|                                                                                                                                         |  |     |                         |             |  |                                                                                                                                                                                                                                                                                                                                                                   
|---------------------------------------------------------------------------------------------------------------------------------------- |  | --- | ----------------------- | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Name                                                                                                                                     |  | Age |                         | Position(s)
|                                                                                                                                         |  |     |                         |            
|David C. Swanson
Peter J. McDonald
Steven M. Blondy
George F. Bednarz
Robert J. Bush
Frank M. Colarusso
William C. Drexler
Debra M. Ryan |  |     | 48
52
43
49
37
45
49
51 |             |  | Chairman of the Board and Chief Executive Officer
Senior Vice President and President, Donnelley Media
Senior Vice President and Chief Financial Officer
Vice President, Publishing and Information Technology
Vice President, General Counsel and Corporate Secretary
Vice President and Treasurer
Vice President and Controller
Vice President  Human Resources

The executive officers serve at the pleasure of the Board of Directors. We
have been advised that there are no family relationships among any of the
officers listed, and there is no arrangement or understanding among any of them
and any other persons pursuant to which they were elected as an officer.

David C. Swansonhas served as Chief Executive Officer since May 2002 and was
appointed Chairman of the Board in December 2002. Prior to May 2002, Mr.
Swanson served as President and Chief Operating Officer since December 2000.
Prior to his appointment as President and Chief Operating Officer, Mr. Swanson
served as President of Donnelley Directory Services since 1999 and was a Senior
Vice President of the Company since 1998. Upon the spin-off of the Company
from The Dun & Bradstreet Corporation (D&B) in June 1998, Mr. Swanson was
appointed Executive Vice President-Corporate Strategy. Prior thereto, Mr.
Swanson served as Executive Vice President and General Manager for Proprietary
Operations from 1997, Executive Vice President Sales from 1995 and Vice
President and General Manager of Cincinnati Operations from 1993.

Peter J. McDonaldhas served as Senior Vice President of the Company and
President of Donnelley Media since September 2002. Mr. McDonald was a director
of the Company between May 2001 and September 2002. Previously, Mr. McDonald
served as President and Chief Executive Officer of SBC Directory Operations, a
publisher of yellow pages directories from October 1999 to April 2000. He was
President and Chief Executive Officer of Ameritech Publishings yellow pages
business from 1994 to 1999, when Ameritech was acquired by SBC. Mr. McDonald
was President and Chief Executive Officer of DonTech from 1993 to 1994. Prior
to that time, he served in a variety of sales positions at our Company, after
beginning his career at National Telephone Directory Corporation. Mr. McDonald
is also a past vice chairman of the Yellow Pages Publishers Association.

Steven M. Blondyhas served as Senior Vice President and Chief Financial
Officer since March 2002. Prior to joining the Company, Mr. Blondy served as
Senior Vice President  Corporate Development for Young & Rubicam, Inc., a
global marketing and communications company, from 1998 to 2000. Mr. Blondy
also served as Executive Vice President and Chief Financial Officer for Poppe
Tyson, a leading Internet and integrated marketing communications agency from
1996 to 1997. Mr. Blondy also served as Chief Financial Officer for Grundy
Worldwide, an independent producer of television programs in Europe and
Australia from 1994 to 1995. Prior to that, he spent 12 years in the
investment banking industry with Chase Manhattan and Merrill Lynch.

George F. Bednarzhas served as Vice President, Publishing and Information
Technology since April 2001. Previously, he served as Vice President & General
Manager  Publishing since 1999. Mr. Bednarz joined the Company in November
1995 to lead the start-up implementation of the Raleigh Information Center.
Prior to joining

10



---



##### Table of Contents



the Company, Mr. Bednarz spent 19 years at D&B, where he held executive
positions of increasing responsibility in various functions.

Robert J. Bushhas served as General Counsel since January 2001. During 2000,
Mr. Bush served as Vice President and Corporate Secretary, having joined the
Company in October 1999 as Assistant Vice President and Assistant General
Counsel. Prior to joining the Company, Mr. Bush was Assistant General Counsel
and Assistant Secretary at MIM Corporation, a pharmacy benefit management
company, from 1998 to 1999 and an Associate at the New York offices of Jones,
Day, Reavis & Pogue from 1993 to 1998.

Frank M. Colarussohas served as Vice President and Treasurer since June 1998.
Prior to that, he was Assistant Treasurer of D&B since 1996. Mr. Colarusso
joined D&B in 1986 and was named Manager, International Treasury Services in
1989 and Director of Corporate Finance in 1992. Prior to joining D&B, Mr.
Colarusso held management positions at Texaco Inc. and Sperry Corporation.

William C. Drexlerhas served as Vice President and Controller since June 1999.
Prior to that, Mr. Drexler served as Assistant Vice President of Finance since
1996. Mr. Drexler joined the Company in 1992 as Director of Accounting
Operations. In 1995, he was named Director of Financial Planning for
publishing and information services. Prior to joining the Company, Mr. Drexler
held financial management positions of increasing responsibility with a number
of manufacturing firms.

Debra M. Ryanhas served as Vice President-Human Resources since January 2002.
Prior to that, Ms. Ryan served as Assistant Vice President  Human Resources
since 1992. Ms. Ryan joined the Company in 1973 as a sales representative and
has held several management positions in the sales organization.




ITEM 2. PROPERTIES

After the acquisition and prior to giving effect to any potential facility
consolidation, we conduct our publishing operations from one owned and three
leased facilities with non-cancelable lease terms expiring at various dates
through 2012. Our publishing facilities are located in a leased 55,000 square
foot building in Raleigh, North Carolina, in an owned 25,000 square foot
facility in Bristol, Tennessee and in a leased 42,000 square foot facility in
Blountville, Tennessee. Our graphics center is located in a 20,000 square foot
building in Dunmore, Pennsylvania. We lease 35,000 square feet for our
corporate headquarters in Purchase, New York and 67,000 square feet of office
space in Overland Park, Kansas. The lease of our corporate headquarters
extends through 2011, but we have the option to cancel the lease in 2006 for a
nominal fee. The lease on the Overland Park facility extends through April
2005 but both the landlord and we have the right to cancel the lease upon 180
days prior written notice. We also lease space for local sales offices, which
are relatively small and have reasonably short terms. DonTech directly leases
its own sales offices and corporate headquarters. We believe that our
facilities are adequate for their current use.




ITEM 3. LEGAL PROCEEDINGS

We are involved in various legal proceedings arising in the ordinary course of
our business, as well as certain extraordinary litigation and tax matters
described below. We periodically assess our liabilities and contingencies in
connection with these matters based upon the latest information available to
us. For those matters where it is probable that we have incurred a loss and
the loss or range of loss can be reasonably estimated, we record reserves in
our consolidated financial statements. In other instances, we are unable to
make a reasonable estimate of any liability because of the uncertainties
related to both the probable outcome and amount or range of loss. As
additional information becomes available, we adjust our assessment and
estimates of such liabilities accordingly.

Based on our review of the latest information available, we believe our
ultimate liability in connection with pending legal proceedings, including the
extraordinary litigation and tax matters described below, will not have a
material adverse effect on our results of operations, cash flows or financial
position, as described further below.

In order to understand our potential exposure under the extraordinary
litigation and tax matters described below under the captions Information
Resources, Inc. and Tax Matters, you need to understand the relationship
between us and The Dun & Bradstreet Corporation, and certain of its
predecessors and affiliates that, through

11



---



##### Table of Contents



various corporate reorganizations and contractual commitments, have assumed
varying degrees of responsibility with respect to such matters.

In November 1996, the company then known as The Dun & Bradstreet Corporation
(D&B1) separated (the 1996 Distribution) through a spin-off into three
separate public companies: D&B1, ACNielsen Corporation (ACNielsen) and
Cognizant Corporation (Cognizant). In June 1998, D&B1 separated (the 1998
Distribution) through a spin-off into two separate public companies: D&B1,
which changed its name to R.H. Donnelley Corporation (Donnelley), and a new
company named The Dun & Bradstreet Corporation (D&B2). Later in 1998,
Cognizant separated (the Cognizant Distribution) through a spin-off into two
separate public companies: IMS Health Incorporated (IMS) and Nielsen Media
Research, Inc. (NMR). In September 2000, D&B2 separated (the 2000
Distribution) through a spin-off into two separate public companies: D&B2,
which changed its name to Moodys Corporation (Moodys), and a new company
named The Dun & Bradstreet Corporation (D&B3, and together with D&B1 and
D&B2, also referred to elsewhere in this Form 10-K as D&B). As a result of
the form of our separation from D&B, we are the corporate successor of, and
technically the defendant and taxpayer referred to below as D&B.

Rockland Yellow Pages

In 1999, Sandy Goldberg, Dellwood Publishing, Inc. and Rockland Yellow Pages
initiated a lawsuit against the Company and Bell Atlantic Corporation in the
United States District Court for the Southern District of New York. The
Rockland Yellow Pages is a proprietary directory that competes against a Bell
Atlantic directory in the same region, for which we served as Bell Atlantics
advertising sales agent through June 30, 2000. The complaint alleged that the
defendants disseminated false information concerning the Rockland Yellow Pages,
which resulted in damages to the Rockland Yellow Pages. In May 2001, the
District Court dismissed substantially all of plaintiffs claims, and in August
2001, the remaining claims were either withdrawn by the plaintiffs or dismissed
by the District Court. The plaintiffs then filed a complaint against the same
defendants in New York State Supreme Court, in Rockland County, alleging
virtually the same state law tort claim previously dismissed by the District
Court and seeking unspecified damages. In October 2001, defendants filed a
motion to dismiss this complaint. In May 2002, the Court granted defendants
motion to dismiss the complaint. Plaintiffs have filed an appeal of this
dismissal. Nonetheless, we presently do not believe that the final outcome of
this matter will have a material adverse effect on our results of operations or
financial condition.

Information Resources, Inc.

In 1996, Information Resources, Inc. (IRI), filed a complaint in the United
States District Court for the Southern District of New York, naming as
defendants the Company, as successor of D&B, ACNielsen Company and IMS
International Inc., at the time of the filing, all wholly owned subsidiaries of
D&B. IRI alleges, among other things, various violations of the antitrust
laws, including alleged violations of Sections 1 and 2 of the Sherman Act. The
complaint also alleges a claim of tortious interference with a contract and a
claim of tortious interference with a prospective business relationship. These
claims relate to the acquisition by defendants of Survey Research Group Limited
(SRG). IRI alleges SRG violated an alleged agreement with IRI when it agreed
to be acquired by the defendants and that the defendants induced SRG to breach
that agreement. IRI is seeking damages in excess of $350 million, which amount
IRI seeks to treble under antitrust laws. IRI is also seeking punitive damages
of an unspecified amount. No trial date has been set, and discovery is
ongoing. Under the agreements relating to the 1996 Distribution, Cognizant, AC
Nielsen and D&B agreed to conduct a joint defense and allocated liabilities
amongst themselves. Under the agreements relating to the 1998 Distribution,
D&B assumed the defense and agreed to indemnify us against any payments that we
may be required to make, including related legal fees. As required by those
agreements, Moodys Corporation, which subsequently separated from D&B in the
2000 Distribution, has agreed to be jointly and severally liable with D&B for
the indemnity obligation to us. At this stage in the proceedings, we are
unable to predict the outcome of this matter. While we cannot assure you as to
any outcome, management presently believes that D&B and Moodys have sufficient
financial resources, borrowing capacity and indemnity rights against IMS and
NMR (who succeeded to Cognizants indemnity obligations under the Cognizant
Distribution) to reimburse us for any payments we may be required to make and
related costs we may incur in connection with this matter.

12



---



##### Table of Contents



Tax Matters

D&B entered into global tax planning initiatives in the normal course of its
business, principally through tax-free restructurings of both their foreign and
domestic operations. The status of Internal Revenue Service (IRS) reviews of
these initiatives is summarized below.

Pursuant to a series of agreements relating to the 1996, 1998, Cognizant and
2000 Distributions, IMS and NMR are jointly and severally liable for, and must
pay one-half, and D&B and Moodys are jointly and severally liable for, and
must pay the other half, of any payments over $137 million for taxes, accrued
interest and other amounts resulting from unfavorable IRS rulings on the tax
matters summarized below (other than the matter summarized below as
Amortization Expense Deductions  1997-2002, for which D&B and Moodys
(jointly and severally) are solely responsible). D&B, on our behalf, was
contractually obligated to pay, and did pay, the first $137 million of tax
liability in connection with the matter summarized below as Utilization of
Capital Losses  1989-1990. Under the agreements relating to the 1998
Distribution, D&B agreed to assume the defense and to indemnify us for any tax
liability that may be assessed against us and any related costs and expenses
that we may incur in connection with any of these tax matters. Also, as
required by those agreements, Moodys Corporation has agreed to be jointly and
severally liable with D&B for the indemnity obligation to us. Under the
agreements relating to the 2000 Distribution, D&B and Moodys have, between
each other, agreed to each be financially responsible for 50% of any potential
liabilities that may arise to the extent such potential liabilities are not
directly attributable to each partys respective business operations.

While we cannot assure you as to any outcome in these matters, management
presently believes that D&B and Moodys have sufficient financial resources,
borrowing capacity and indemnity rights against IMS and NMR (who succeeded to
Cognizants indemnity obligations under the Cognizant Distribution) to
reimburse us for any payments we may be required to make and related costs we
may incur in connection with these tax matters.

Utilization of Capital Losses
 1989-1990
In 2000, D&B filed an amended tax return with respect to the utilization of
capital losses in 1989 and 1990 in response to a formal IRS assessment. The
amended tax return reflected an additional $561.6 million of tax and interest
due. In 2000, D&B paid the IRS $349.3 million while IMS (on behalf of itself
and NMR) paid approximately $212.3 million to the IRS. We understand that this
payment was made under dispute in order to stop additional interest from
accruing, that D&B is contesting the IRSs formal assessment and would also
contest the assessment of amounts, if any, in excess of the amounts paid, and
that D&B has filed a petition for a refund in the United States District Court.
This case is expected to go to trial in 2004.

Subsequent to making its payment to the IRS in 2000, IMS sought to obtain
partial reimbursement from NMR under the terms of the agreements relating to
the Cognizant Distribution. NMR paid IMS less than IMS sought. Accordingly, in
2001, IMS filed an arbitration proceeding against NMR claiming that NMR
underpaid to IMS its proper allocation of the above tax payments as provided by
the agreements relating to the Cognizant Distribution. Neither D&B nor we were
party to the Cognizant Distribution. IMS nonetheless sought to include us in
this arbitration, arguing that if NMR should prevail in its interpretation
against IMS, then IMS could seek to enforce the same interpretation against us
(as successor to D&B) under the agreements relating to the 1996 Distribution .
The arbitration panel ruled that we are a proper party to this arbitration
proceeding. A decision from the arbitration panel on the merits is expected
during 2003. If NMR should prevail in the arbitration against IMS and, in
turn, IMS should prevail against us, then we believe that our additional
liability would be approximately $15 million, net of tax benefits. While we
believe that the original interpretation of the tax allocation computation is
correct and that the claims of IMS are without merit, if NMR prevails against
IMS and in turn IMS prevails against us in this arbitration proceeding, as
noted above, D&B and Moodys would be jointly and severally obligated to
indemnify us against any such liability and related costs.

We believe the fact that D&B and IMS have already paid the IRS a substantial
amount of additional taxes with respect to the contested tax planning
strategies significantly mitigates our risk. While no assurances can be given,
we currently believe that D&B and Moodys have sufficient financial resources,
borrowing capacity and indemnity rights against IMS and NMR to reimburse us for
any payments we may be required to make and related costs we may incur with
respect to this matter.

13



---



##### Table of Contents



Royalty Expense Deductions 
1994-1996
During the second quarter of 2002, D&B (on our behalf) received a Notice of
Proposed Adjustment from the IRS with respect to a transaction entered into in
1993. In this Notice, the IRS proposed to disallow certain royalty expense
deductions claimed by D&B on its 1994, 1995 and 1996 tax returns. The IRS
previously concluded an audit of this transaction for taxable years 1993 and
1994 and did not disallow any similarly claimed deductions. We understand that
D&B disagrees with the position taken by the IRS in its Notice and has filed a
responsive brief to this effect with the IRS. If the IRS were to issue a
formal assessment consistent with the Notice, then a payment of the disputed
amounts would be required, if D&B opted to challenge the assessment in U.S.
District Court rather than in U.S. Tax Court. In the event of such challenge
by D&B, the required payment by D&B to the IRS would be up to $42 million ($48
million offset by a $6 million tax benefit). In verbal communications between
D&B and the IRS during 2002, we understand that the IRS has expressed some
willingness to withdraw its proposed disallowance of certain royalty expense
deductions of $7.5 million for 1994. However, we also understand that the IRS
has expressed its intent to seek penalties of $7.5 million for 1995 and 1996
based on its interpretation of applicable law. We have been advised that D&B
would challenge the IRSs interpretation. Again, under the agreements relating
to the 1998 and 2000 Distributions, D&B and Moodys have agreed to jointly and
severally defend and indemnify us against any such liability and related costs.

Notwithstanding the verbal communications with the IRS in 2002 noted above
regarding royalty expense deductions of $7.5 million for 1994, in a February
2003 letter to D&B (on our behalf) the IRS asserted that it intends to take a
position regarding prior tax years that would have the effect of disallowing a
portion of the 1994 royalty expense deduction, our share of which would be $5
million if the IRS prevailed. We understand that D&B disagrees with the IRSs
position. Also, in February 2003, D&B (on our behalf) received a Preliminary
Partnership Summary Report from the IRS that challenges the tax treatment of
certain royalty payments received by a partnership in which D&B was a partner.
As stated in its Report, the IRS would reallocate certain partnership income to
D&B, which if the IRS prevailed would require an additional payment from us of
$20 million (which includes tax, interest and penalty, net of associated tax
benefits).

Again, under the agreements relating to the 1998 and 2000 Distributions, D&B
and Moodys have agreed to jointly and severally defend and indemnify us
against any such liability and related costs.

Amortization Expense Deductions  1997-2002
We understand that the IRS has sought certain documentation from D&B with
respect to a transaction entered into in 1997 that produces amortization
expense deductions for D&B. While we understand that D&B believes the
deductions are appropriate, the IRS could ultimately challenge them and issue
an assessment. If the IRS were to prevail or the assessment were to be
challenged by us in U.S. District Court, we understand that D&B estimates that
its cash payment to the IRS with respect to deductions claimed to date and
including any potential assessment of penalties of $6.5 million, could be up to
$46.4 million, or $43 million net of associated tax benefits. This transaction
is scheduled to expire in 2012 and, unless earlier terminated by D&B, the cash
exposure, based on current interest rates and tax rates, would increase at a
rate of approximately $2.3 million per quarter (including potential penalties)
as future amortization expenses are deducted. Again, under the agreements
relating to the 1998 and 2000 Distributions, D&B and Moodys are required to
jointly and severally indemnify us against any such liability and related
costs.

As a result of our assessment of our exposure in these matters, especially in
light of our indemnity arrangements with D&B and Moodys, and their financial
resources, borrowing capacity and indemnity rights against IMS and NMR, no
material amounts have been accrued for in our consolidated financial statements
for any of these D&B-related litigation and tax matters.

Coastal Termite and Pest Control
In 2001, Marnan Group, Inc., doing business as Coastal Termite and Pest Control
(Coastal), filed a complaint in the United States District Court for the
Middle District of Florida against SPA. The complaint, as amended, alleged
that SPA breached certain directory advertising contracts between 1996 and
1999, fraudulently induced Coastal to enter into another directory advertising
contract and tortiously interfered with Coastals business relationships with
its customers. Coastal is seeking damages for lost contract benefits, lost
profits and diminution of business value in an unspecified amount, including
pre-judgment interest. In January 2002, SPA filed a motion to dismiss certain
of Coastals claims. In September 2002, the court denied SPAs motion to
dismiss. Nonetheless, we do not believe that the final outcome of this matter
will have a material adverse effect on our results of operations or financial

14



---



##### Table of Contents



condition. SPA had approximately $0.5 million reserved in its consolidated
financial statements for this matter, which amount was transferred to our
consolidated financial statements as a result of the acquisition.

Other matters
We are also involved in other legal proceedings, claims and litigation arising
in the ordinary conduct of our business. Although we cannot assure you of any
outcome, management presently believes that the outcome of such legal
proceedings will not have a material adverse effect on our results of
operations or financial condition.




ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the quarter ended December 31,
2002.

15



---



##### Table of Contents






PART II




ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Companys common stock trades on the New York Stock Exchange under the
symbol RHD. The table below indicates the high and low sales price of the
Companys common stock for each quarter of the last two years.

|            |  |      |       |      |  |      |       |     |  |   |       |  |  |   |       | 
|----------- |  | ---- | ----- | ---- |  | ---- | ----- | --- |  | - | ----- |  |  | - | ----- | 
|            |  | 2002 |       | 2001
|            |  |      |       |     
|            |  | High |       | Low  |  | High |       | Low
|            |  |      |       |      |  |      |       |    
|1st Quarter |  | $    | 30.96 |      |  | $    | 26.60 |     |  | $ | 29.00 |  |  | $ | 22.88 | 
|2nd Quarter |  | $    | 32.10 |      |  | $    | 27.30 |     |  | $ | 32.00 |  |  | $ | 25.41 | 
|3rd Quarter |  | $    | 27.91 |      |  | $    | 22.02 |     |  | $ | 32.30 |  |  | $ | 25.50 | 
|4th Quarter |  | $    | 29.92 |      |  | $    | 24.19 |     |  | $ | 30.60 |  |  | $ | 25.02 | 

At March 6, 2003, there were approximately 8,400 holders of record of the
Companys common stock. We have not paid any common dividends during the last
two years and do not expect to pay common dividends in the foreseeable future.
The Preferred Stock earns a cumulative dividend of 8%, compounded quarterly,
which we may pay in cash or permit to accrue, at our option. The Credit
Facility significantly limits our ability to pay the Preferred Stock dividends
in cash through 2004. The Stock Purchase Agreement with respect to the
Preferred Stock, Credit Facility and Indentures governing the Notes contain
various financial restrictions that place limitations on our ability to pay
dividends in the future (see Item 7, Managements Discussion and Analysis of
Financial Condition and Results of Operations  Liquidity and Capital
Resources for additional information regarding these instruments and
agreements).

On November 25, 2002, the GS
Funds purchased 70,000 shares of our Series B-1
Preferred Stock and warrants to purchase 577,500 shares of our common stock,
for aggregate gross consideration of $70 million. The Series B-1 Preferred
Stock was immediately convertible into common stock at a conversion price of
$24.05 per share, and the exercise price of the warrants is $26.28 per share.
On January 3, 2003, the GS Funds purchased 130,000 shares of our Preferred
Stock and warrants to purchase 1,072,500 shares of our common stock, for
aggregate gross consideration of $130 million. On January 3, 2003, the 70,000
shares of Series B-1 Preferred Stock automatically converted into 70,604 shares
of Preferred Stock. This Preferred Stock is immediately convertible into
common stock at a conversion price of $24.05 per share, and the exercise price
of the warrants is $28.62 per share. Both of these private placements of
securities were made in reliance on Rule 506 of the Securities Act of 1933. We
privately placed the Preferred Stock as part of the SPA acquisition financing.
No underwriters were involved in these transactions and no underwriting
discounts or commissions were paid. A closing payment of 1% of the
aggregate $200 million investment was paid to the GS
Funds and we reimbursed their transactions costs.

On December 3, 2002, we issued $325 million aggregate principal amount of 8
7/8% Senior Notes due 2010 and $600 million aggregate principal amount of 10
7/8% Senior Subordinated Notes due 2012. The Notes were privately placed in
order to partially fund the SPA acquisition. The initial purchasers of the
Notes were various institutional investors. We received net proceeds from the
sale of the Notes to the initial purchasers of $900.9 million, net of initial
purchasers discounts of $24.1 million. This private placement of debt
securities was made in reliance on Section 4(2) of the
Securities Act.

16



---



##### Table of Contents



Equity Compensation Plan Information

|                                                               |  |                      |           |                           |  |                               |       |                                |  |  |           | 
|-------------------------------------------------------------- |  | -------------------- | --------- | ------------------------- |  | ----------------------------- | ----- | ------------------------------ |  |  | --------- | 
|                                                               |  | Number of securities |           |                           |  |                               |       | Number of securities remaining
|                                                               |  | to be issued upon    |           | Weighted-average exercise |  | available for future issuance
|                                                               |  | exercise of          |           | price of outstanding      |  | under equity compensation    
|                                                               |  | outstanding options, |           | options, warrants and     |  | plans excluding securities   
|Plan category                                                  |  | warrants and rights  |           | rights                    |  | reflected in first column    
|                                                               |  |                      |           |                           |  |                              
|Equity compensation
plans approved by
security holders
(1)     |  |                      | 4,282,621 |                           |  | $                             | 20.97 |                                |  |  | 2,139,270 | 
|Equity compensation
plans not approved
by security holders
(2) |  |                      | 114,807   |                           |  |                               |      |                                |  |  |          | 
|                                                               |  |                      |           |                           |  |                               |       |                                |  |  |           | 
|Total                                                          |  |                      | 4,397,428 |                           |  | $                             | 20.97 |                                |  |  | 2,139,270 | 
|                                                               |  |                      |           |                           |  |                               |       |                                |  |  |           | 



|(1) |  | This includes our 2001 Stock Award and Incentive Plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | This includes our Key Employees Performance Unit Plan. Upon completion
of the respective performance period, a dollar amount of the award is
determined for each recipient based on the Companys actual financial
performance against economic profit and earnings per share goals. The
dollar amount is then converted into a number of performance shares by
dividing the dollar amount of the award by the Companys stock price
(calculated as the average of the high and low prices of the Companys
common stock on the 10 trading days subsequent to delivery of the
Companys respective audited financial statements to the Compensation and
Benefits Committee of the Companys Board of Directors) at that
time.

17



---



##### Table of Contents






ITEM 6. SELECTED FINANCIAL DATA

The following selected financial data are derived from our audited
consolidated financial statements. The audited consolidated financial
statements for 1998 assume we were a stand-alone entity for all periods and
include allocations through June 30, 1998 of certain assets, liabilities and
general and administrative expenses of D&B related to our business. The
information below also includes operating results of businesses that were
disposed of during 2000 and certain special items in 2000, 2001 and 2002.
Amounts related to these businesses and special items are presented in
footnotes 1 and 2. The information set forth below should be read in
conjunction with the audited consolidated financial statements and related
notes in Item 8 and with Managements Discussion and Analysis of Financial
Condition and Results of Operations in Item 7.

|                                            |  |                          |           |      |  |      |          |      |  |      |          |   |  |   |          |   |  |   |          |  
|------------------------------------------- |  | ------------------------ | --------- | ---- |  | ---- | -------- | ---- |  | ---- | -------- | - |  | - | -------- | - |  | - | -------- | -
|                                            |  | Years Ended December 31,
|                                            |  |                         
|(in thousands, except per share data)       |  | 2002                     |           | 2001 |  | 2000 |          | 1999 |  | 1998
|                                            |  |                          |           |      |  |      |          |      |  |     
|Statement of Operations Data (1)            |  |                          |           |      |  |      |          |      |  |      |          |   |  |   |          |   |  |   |          |  
|Net revenue                                 |  | $                        | 73,806    |      |  | $    | 76,739   |      |  | $    | 141,287  |   |  | $ | 181,905  |   |  | $ | 166,249  |  
|Partnership and joint venture income        |  |                          | 136,873   |      |  |      | 139,964  |      |  |      | 147,693  |   |  |   | 139,181  |   |  |   | 135,854  |  
|Operating income (2)                        |  |                          | 145,982   |      |  |      | 111,472  |      |  |      | 147,375  |   |  |   | 129,906  |   |  |   | 125,235  |  
|Net income                                  |  |                          | 67,177    |      |  |      | 49,815   |      |  |      | 124,758  |   |  |   | 55,151   |   |  |   | 61,268   |  
|Preferred dividend                          |  |                          | 24,702    |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  
|Net income available to common shareholders |  |                          | 42,475    |      |  |      | 49,815   |      |  |      | 124,758  |   |  |   | 55,151   |   |  |   | 61,268   |  
|Earnings Per Share                          |  |                          |           |      |  |      |          |      |  |      |          |   |  |   |          |   |  |   |          |  
|Basic                                       |  | $                        | 1.42      |      |  | $    | 1.65     |      |  | $    | 3.91     |   |  | $ | 1.64     |   |  | $ | 1.79     |  
|Diluted                                     |  | $                        | 1.40      |      |  | $    | 1.61     |      |  | $    | 3.83     |   |  | $ | 1.61     |   |  | $ | 1.77     |  
|Shares Used in Computing Earnings Per Share |  |                          |           |      |  |      |          |      |  |      |          |   |  |   |          |   |  |   |          |  
|Basic                                       |  |                          | 29,643    |      |  |      | 30,207   |      |  |      | 31,947   |   |  |   | 33,676   |   |  |   | 34,237   |  
|Diluted                                     |  |                          | 30,298    |      |  |      | 30,976   |      |  |      | 32,594   |   |  |   | 34,159   |   |  |   | 34,522   |  
|Dividends per share                         |  |                          |          |      |  |      |         |      |  |      |         |   |  |   |         |   |  | $ | 0.35     |  
|Balance Sheet Data (1)                      |  |                          |           |      |  |      |          |      |  |      |          |   |  |   |          |   |  |   |          |  
|Total assets                                |  | $                        | 2,223,375 |      |  | $    | 295,981  |      |  | $    | 365,284  |   |  | $ | 395,406  |   |  | $ | 385,841  |  
|Long-term debt                              |  |                          | 2,075,470 |      |  |      | 283,904  |      |  |      | 347,526  |   |  |   | 435,000  |   |  |   | 464,500  |  
|Shareholders deficit                       |  |                          | (30,600   | )    |  |      | (111,313 | )    |  |      | (108,510 | ) |  |   | (192,811 | ) |  |   | (224,770 | )



|(1) |  | Amounts above include the results of the Bell Atlantic, Cincinnati and
Get Digital Smart businesses disposed of in 2000 and one-time items from
the CenDon restructuring in 2000. See Item 7, Managements Discussion
and Analysis of Financial Condition and Results of Operations  Factors
Affecting Comparability for a discussion of these items. To facilitate
comparison of the financial data, the amounts related to these disposed
businesses and one-time items are as follows:
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                     |  |      |        |      |  |      |         |  |  |   |        | 
|------------------------------------ |  | ---- | ------ | ---- |  | ---- | ------- |  |  | - | ------ | 
|                                     |  | 2000 |        | 1999 |  | 1998
|                                     |  |      |        |      |  |     
|Net revenue                          |  | $    | 63,994 |      |  | $    | 106,986 |  |  | $ | 92,319 | 
|Partnership and joint venture income |  |      | 5,422  |      |  |      |        |  |  |   |       | 
|Operating income                     |  |      | 13,191 |      |  |      | 7,538   |  |  |   | 6,531  | 
|Total assets                         |  |      |       |      |  |      | 64,193  |  |  |   | 61,678 | 



|(2) |  | Operating income in 2001 includes a restructuring and special charge of
$18,556 and an investment impairment charge of $11,432. Operating income
in 2002 includes income of $6,405 from the reversal of the restructuring
and special charge and an investment impairment charge of $2,000. See
Item 7, Managements Discussion and Analysis of Financial Condition and
Results of Operations  Factors Affecting Comparability for a discussion
of these items.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

18



---



##### Table of Contents






ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Item should be read in conjunction with the audited, consolidated
financial statements and notes thereto that are included in Item 8. Unless
otherwise indicated, the terms Company, Donnelley, we, us and our
refer to R.H. Donnelley Corporation and its direct and indirect wholly owned
subsidiaries.

On January 3, 2003, we acquired all the outstanding common stock of SPA, Sprint
Corporations directory publishing business. See Significant Business
Development below. As a result, commencing in 2003 our operating and
financial results will no longer reflect sales commissions or pre-press fees
from or other transactions with SPA since these intercompany transactions will
be eliminated in consolidation. Rather, we will report the full value of
advertising sales and certain direct costs under the deferral and amortization
method. In order to facilitate discussion of our historical results as opposed
to our future results, we use the past tense when referring to operating and
financial results for the years 2000 through 2002.

DonTech remains unchanged following the SPA transaction and our financial
presentation of DonTech will appear consistently in both historical and future
periods.

Forward-Looking Information

Certain statements contained in this Annual Report on Form 10-K regarding R.H.
Donnelleys future operating results, performance, business plans or prospects
and any other statements not constituting historical fact are forward-looking
statements subject to the safe harbor created by the Private Securities
Litigation Reform Act of 1995. Where possible, words such as believe,
expect, anticipate, should, will, would, planned, estimated,
potential, goal, outlook, could, and similar expressions, are used to
identify such forward-looking statements. All forward-looking statements
reflect only our current beliefs and assumptions with respect to our future
results, business plans, and prospects, and are based solely on information
currently available to us. Accordingly, these statements are subject to
significant risks and uncertainties and our actual results, business plans and
prospects could differ significantly from those expressed in, or implied by,
these statements. We caution readers not to place undue reliance on, and we
undertake no obligation to update, any forward-looking statements. Such risks
and uncertainties include, without limitation, the following:

(1)  Our ability to meet our substantial debt service obligations
We have a substantial amount of debt and significant debt service obligations
in 2003 and thereafter. After closing the SPA acquisition, we had total
outstanding debt of $2,356.2 million at January 3, 2003. This debt was
comprised of borrowings of $1,410 million under our new $1,525 million Credit
Facility, $325 million 8 7/8% Senior Notes, $600 million 10 7/8% Notes and,
following a tender offer and exit consent solicitation, $21.2 million aggregate
remaining principal amount of the 9 1/8% Senior Subordinated Notes issued in
1998 (the Existing Notes). As a result of our significant amount of debt and
debt service obligations, we face increasing risks associated with, but not
limited to, the following:



| |  |  | our ability to obtain additional financing in excess of the
additional borrowing capacity under our $125 million revolving credit
facility on satisfactory terms to fund working capital requirements,
capital expenditures, acquisitions, investments, debt service
requirements and other general corporate requirements is limited;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | we are more vulnerable to general economic downturns, competition
and industry conditions, which could place us at a competitive
disadvantage compared to our competitors that are less leveraged;                                                                                                                                    
|
| |  |  | we face increased exposure to rising interest rates as a portion of
our debt is at variable interest rates;                                                                                                                                                                                                                           
|
| |  |  | we have reduced availability of cash flow to fund working capital
requirements, capital expenditures, acquisitions, investments and other
general corporate requirements because a substantial portion of our
cash flow will be needed to service our debt obligations; and                                                           
|
| |  |  | we have limited flexibility in planning for, or reacting to,
changes in our business and the industry in which we operate.                                                                                                                                                                                                            

19



---



##### Table of Contents



Our ability to pay principal and interest on our debt obligations will depend
upon our future operating performance and our ability to refinance debt. If we
are unable to service our debt and fund our business, we may be forced to
reduce or delay capital expenditures, seek additional debt financing or equity
capital, restructure or refinance our debt or sell assets. We cannot assure you
that we would be able to obtain additional financing, refinance existing debt
or sell assets on satisfactory terms or at all.

(2)  Restrictive covenants under the terms of our debt and Preferred Stock agreements
The indentures governing the Notes and the Credit Facility include a number of
significant restrictive covenants. These covenants could adversely affect us
by limiting our ability to plan for or react to market conditions or to meet
our capital needs. These covenants, among other things, restrict our ability
and the ability of our subsidiaries to:



| |  |  | incur additional debt;                                                                          
| | - |  | ------------------------------------------------------------------------------------------------
|
| |  |  | pay dividends on our equity interests or repurchase equity interests;                           
|
| |  |  | make certain investments;                                                                       
|
| |  |  | enter into certain types of transactions with affiliates;                                       
|
| |  |  | place restrictions on our restricted subsidiaries to pay dividends or make other payments to us;
|
| |  |  | use assets as security in other transactions; and                                               
|
| |  |  | sell certain assets or merge with or into other companies.                                      

In addition, the Credit Facility includes other and more restrictive covenants
and prohibits us from prepaying the Notes and Existing Notes while borrowings
under the Credit Facility are outstanding. The Credit Facility also requires
us to maintain certain financial ratios and meet other financial tests. The
failure to comply with these covenants could result in an event of default,
which, if not cured or waived, could require us to repay these borrowings
before their scheduled due date. If we were unable to make this repayment or
otherwise refinance these borrowings, the lenders under the Credit Facility
could foreclose on our assets. In addition, these lenders could elect to
declare all amounts borrowed under the Credit Facility, together with accrued
interest, to be due and payable, which, in some instances, would be an event of
default under the indentures governing the Notes. If we were unable to
refinance these borrowings on favorable terms, our results of operations and
financial condition could be adversely impacted by increased costs and less
favorable terms, including rates and covenants. Any future refinancing of the
Credit Facility is likely to contain similar restrictive covenants.

Furthermore, the terms of the purchase agreement with respect to our Preferred
Stock, among other things, restricts our ability and the ability of our
subsidiaries to:



| |  |  | incur additional debt;                                                               
| | - |  | -------------------------------------------------------------------------------------
|
| |  |  | pay dividends on shares of our common stock or repurchase shares of our common stock;
|
| |  |  | enter into certain types of transactions with affiliates; and                        
|
| |  |  | sell or acquire certain assets.                                                      

Our failure to comply with these terms would result in a breach of this
agreement, which could have a material adverse effect on our business. In
addition, without the consent of the GS Funds, we cannot issue shares of common
stock for 18 months following the sale of the Preferred Stock, which could
adversely affect our liquidity (see  Liquidity and Capital Resources for a
description of the Preferred Stock).

(3)  Declining usage of print yellow pages directories and changes in technology
Since 1997, overall usage of printed yellow pages directories in the United
States has declined. We cannot assure you that usage of our yellow pages
directories will remain stable and not decline. We believe that declines in
usage of printed directories are in part a result of increased usage of
Internet-based directory products. We cannot assure you that we will be able
to provide services over the Internet successfully or that we will be able to
compete successfully with other Internet-based directory services. Any
declines in usage could impair our ability to maintain or increase advertising
prices, cause businesses that purchase advertising in our yellow pages
directories to reduce or discontinue those purchases and discourage businesses
that do not purchase advertising in our yellow pages directories from doing so.
Any of the factors that may contribute to a decline in usage of our printed
directories, or a combination of them, could impair our revenues and have a
material adverse effect on our business.

20



---



##### Table of Contents



The yellow pages directory advertising business is subject to changes arising
from developments in technology, including information distribution methods and
users technological preferences. The use of the Internet by consumers as a
means to transact commerce may result in new technologies being developed and
services being provided that could compete with our products and services. As
a result of these factors, our growth and future financial performance may
depend on our ability to develop and market new products and services and
create new distribution channels, while enhancing existing products, services
and distribution channels, in order to incorporate the latest technological
advances and accommodate changing user preferences, including the use of the
Internet. If we fail to anticipate or respond adequately to changes in
technology and user preferences or are unable to finance the capital
expenditures necessary to respond to such changes, our results of operations or
financial condition could be materially adversely affected.

(4)  SBCs or DonTechs actions could adversely impact our business
DonTech is our 50/50 perpetual partnership with an affiliate of SBC
Communications Inc. (SBC). As the exclusive sales agent for SBC directories
in Illinois and northwest Indiana, DonTech is responsible for the management of
its sales forces, including compensation, recruiting and training and other
sales related matters. As the publisher, SBC has responsibility for and
control over all other matters, including, without limitation, product
development, pricing, scheduling, marketing, distribution, billing,
collections, credit and customer service. While we believe that DonTech and its
economic interests are generally aligned with those of SBC with respect to
SBCs yellow pages directory operations, SBC could implement policies and
decisions (in which DonTech or we would likely have little or no participation
or influence) and/or perform its obligations in a manner that could have a
material adverse effect on our results of operations or financial condition
and, potentially, on our relationship with SBC. We cannot assure you that any
such policies or decisions would not have a material adverse effect on our
results of operations, financial condition or our relationship with SBC. We
also maintain a large receivable balance from SBC and any liquidity
difficulties that SBC may experience could materially impact our results of
operations or financial condition.

The DonTech partnership agreement and related SBC contractual arrangements have
perpetual terms. These arrangements only terminate upon the occurrence of
certain enumerated events, including, without limitation, the unremedied
breaches of certain material provisions thereof, the mutual agreement of the
parties, the bankruptcy of a partner or parent or a change in control of a
partner (excluding a change in control of the ultimate parent company of the
partner). In addition, under applicable law, the contractual arrangements
potentially may not remain in effect in perpetuity. We cannot assure you that
the DonTech relationship will remain in full force and effect into perpetuity,
without material modification or at all, that DonTech and SBC will perform all
of their respective material obligations (particularly payment obligations)
under these agreements or that SBC will not seek to terminate these
arrangements. In the event any such party seeks to terminate these contractual
arrangements, the other party may dispute such attempted termination and, in
such case, a court or arbitrator may be required to determine the
appropriateness of any such attempted termination. We cannot assure you as to
the outcome of any such proceeding. Any such termination or material
modification of the agreements or failure by SBC or DonTech to perform their
respective material obligations would have a material adverse effect on our
results of operations or financial condition.

(5)  Competition
The U.S. directory advertising industry is highly competitive. More than 240
independent publishers operating in the United States compete with regional
bell operating company (RBOC) directory publishers and other telephone
utility publishers. In most markets, we compete with one or more yellow pages
directory publishers, which are predominantly independent publishers. In some
markets, we compete on a limited basis with RBOC directory publishers in
adjacent markets. One of these publishers, Verizon Information Services, the
directory business affiliated with Verizon Communications, Inc., has announced
plans to publish directories and offer local Internet directory services in
markets beyond where Verizon Communications offers local phone service,
including in several SPA markets. Effectively, Verizon Information Services
will be competing as an independent publisher in those markets. While no other
RBOC or utility publisher has announced similar plans, we cannot assure you
that other RBOC or utility publishers will not do so in the future. Many of
the parent companies of these telephone utility publishers are larger than us
and have greater financial resources than we have. No assurances can be given
that we will be able to compete effectively with these other publishers for
advertising sales or acquisitions in the future.

21



---



##### Table of Contents



We also compete for advertising sales with other media, including newspapers,
magazines, radio, direct mail, the Internet and television. Many of these
competitors are larger than us and have greater financial resources than we
have. Additionally, advances in technology have brought new participants, new
products and new channels to the industry, including increasing use of
electronic delivery of directory information as an advertising medium. We
cannot assure you that we will be able to successfully compete in responding to
any such developments.

In addition, the Telecommunications Act of 1996, which effectively opened local
telephone markets to increased competition, may adversely impact the market
position of telephone utilities, including those with which we have
relationships. Because the Telecommunications Act of 1996 has opened local
telephone markets to increased competition, we cannot assure you that Sprint,
or SBC will remain a dominant local telephone service provider in its local
service areas. If Sprint were no longer a dominant local telephone service
provider in any particular local service area, our license to be the exclusive
publisher for Sprint in its markets and to use the Sprint brand name on our
directories in those markets may not be as valuable as we presently anticipate,
and we may not realize some of the anticipated benefits under our commercial
arrangements with Sprint and its affiliates. If SBC was no longer a dominant
local telephone service provider in any DonTech service area, the financial
results we recognize from DonTech could be adversely affected.

(6)  Our ability to successfully integrate SPA into our operations
The integration of SPA into our operations involves a number of risks,
including:



| |  |  | difficulty integrating operations and personnel at different locations;                                                                                       
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | diversion of management attention;                                                                                                                            
|
| |  |  | potential disruption of ongoing business because of the unknown
reactions to the combination of SPA and us by vendors, customers and
other key constituencies;
|
| |  |  | difficulties in assimilating the technologies, services and products of SPA;                                                                                  
|
| |  |  | inability to retain key personnel;                                                                                                                            
|
| |  |  | inability to successfully incorporate acquired business components with our existing infrastructure; and                                                      
|
| |  |  | inability to maintain uniform standards, controls, procedures and policies.                                                                                   

If we are unable to effectively integrate operations and personnel in a timely
and efficient manner, we may not realize the benefits expected from the
acquisition. Failure to overcome these risks or any other problems encountered
in connection with the acquisition could slow our growth or lower our quality
of services, which could reduce customer demand.

(7)  Reliance on, and extension of credit to, small- and medium-sized businesses
A significant portion of our revenue is derived from selling advertising to
small- and medium-sized businesses. In the ordinary course of our yellow pages
publishing business, we extend credit to these advertisers for advertising
purchases. Small- and medium-sized businesses, however, tend to have fewer
financial resources and higher financial failure rates than large businesses.
In addition, collection procedures for delinquent accounts can take an extended
period of time and involve increased costs. Consequently, we could be
adversely affected by our dependence on and our extension of credit to small-
and medium-sized businesses.

(8)  Dependence on third-party providers of printing, distribution and delivery services
We depend on third parties for the printing and distribution of our
directories. We currently have two contracts for the printing of our
directories with R.R. Donnelley & Sons (R.R. Donnelley). Although these
contracts do not expire until December 2005 and December 2007, because of the
large print volume and specialized binding of directories, there are a limited
number of companies capable of servicing our printing needs. Accordingly, the
inability or unwillingness of R.R. Donnelley to provide printing services to us
on acceptable terms or at all could have a material adverse effect on our
business. No common ownership or other business affiliation exists between
R.R. Donnelley and us.

We also have contracts for the delivery of our directories to the individual
households and businesses in the geographic area covered by the directories.
These contracts are scheduled to expire in February 2004 and may be terminated
by our vendors upon 120 days written notice. There are a limited number of
companies capable of

22



---



##### Table of Contents



servicing our delivery needs. Accordingly, the inability or unwillingness of
our current vendors to provide delivery services to us on acceptable terms or
at all could have a material adverse effect on our business.

(9)  General Economic Factors
Our business results could be adversely affected by a prolonged national or
regional economic recession. Typically, our advertising revenues, as well as
those of yellow pages publishers in general, do not fluctuate widely with
economic cycles. However, such a prolonged national or regional economic
recession could have a material adverse effect on our business, results of
operations or financial condition. In addition, any residual economic effects
of, and uncertainties regarding (i) the terrorist attacks that occurred on
September 11, 2001, (ii) the general possibility, express threat or future
occurrence of similar terrorist or other related disruptive events, or (iii)
the threat of or the United States involvement in war, especially with respect
to the major markets in which we operate that depend heavily upon travel,
tourism or the military, could also adversely affect our business.

(10)  Fluctuations in the price and availability of paper
After the acquisition, our principal raw material is paper, which our printer
currently purchases on our behalf at agreed upon prices. These prices are at
or near the spot market price, as we do not currently have long-term purchase
arrangements or commitments from paper mills or other outside suppliers.
Accordingly, we are subject to price increases and delays in receiving this
principal raw material. Further, changes in the supply of, or demand for,
paper could affect delivery times and prices. As conditions warrant, we may
enter into longer term supply agreements in the future. Paper is one of our
largest variable cost items and will account for approximately 10% to 15% of
annual operating expenses. We cannot assure you that we will have available
necessary raw materials at reasonable prices or that any increases in paper
costs would not have a material adverse effect on our business, results of
operations or financial condition.

(11)  The sale of advertising to national accounts is coordinated by third parties that we do not control
We expect that approximately 15% of our revenues in 2003 will be derived from
the sale of advertising to national or large regional companies, such as rental
car companies, automobile repair shops and pizza delivery businesses, that
purchase advertising in several of our directories. In order to sell
advertising to these accounts, we contract with CMRs, who are independent third
parties that act as agents for national companies and design their
advertisements, arrange for the placement of those advertisements in
directories and provide billing services. As a result, our relationships with
these national advertisers depend significantly on the performance of these
third party CMRs whom we do not control. Although we believe that relationships
with these CMRs have been mutually beneficial, if some or all of the CMRs with
whom we have established relationships were unable or unwilling to provide
services to us on acceptable terms or at all, such inability or unwillingness
could materially adversely affect our business.

(12)  Turnover among our sales force or key management
Our success depends to a significant extent on our ability to identify, hire,
train and retain qualified sales personnel in each of the markets in which we
operate. We expend a significant amount of resources and management time on
identifying and training our sales representatives. Our ability to attract and
retain qualified sales personnel depends on numerous factors, including factors
outside of our control, such as conditions in the local employment markets in
which we operate. A decrease in the number of sales representatives could
adversely affect our results of operations, financial condition and liquidity,
as well as our ability to service our debt.

Furthermore, we depend on the continued services of key personnel, including
our experienced senior management team as well as our regional sales management
personnel. Although we believe that we could replace our senior management
team and other key employees within a reasonable time period should the need
arise, the loss of these key personnel could have a material adverse effect on
our business.

(13)  The loss of important intellectual property rights.
Some of our trademarks such as the Sprint and Donnelley brand names and
other intellectual property rights are important to our business. We rely upon
a combination of copyright and trademark laws as well as contractual
arrangements, including licensing agreements, particularly with respect to
Sprint markets, to establish and protect our intellectual property rights. We
are required from time to time to bring lawsuits against third parties in order
to protect our intellectual property rights. Similarly, we are, and from time
to time expect to be, party to proceedings where third parties challenge our
rights. We cannot be sure that any lawsuits or other actions brought by us
will be

23



---



##### Table of Contents



successful or that we will not be found to infringe the intellectual property
rights of third parties. Although we are not aware of any material
infringements of any trademark rights that are significant to our business, any
lawsuits, regardless of their outcome, could result in substantial costs and
diversion of resources and could have a material adverse effect on our
business, financial condition or results of operations. In addition, we only
have rights to use the Sprint name and diamond logo in certain markets. The
loss of important intellectual property rights such as trademarks could have a
material adverse effect upon our business, financial condition and results of
operations.

(14)  Impact of bankruptcy proceedings against Sprint during the term of the SPA commercial arrangements
Contract rights under the directory services license agreement, trademark
license agreement and non-competition agreement with Sprint constitute a
substantial portion of our commercial arrangements with Sprint. Pursuant to
these commercial arrangements, we are the exclusive directory publisher for
Sprint in the markets in which Sprint currently provides telephone service and,
under certain circumstances, in markets that are acquired by Sprint in the
future. If a bankruptcy case were to be commenced by or against Sprint, it is
possible that all or part of the directory services license agreement and/or
non-competition agreement could be considered an executory contract and could
therefore be subject to rejection by Sprint or a trustee appointed in a
bankruptcy case pursuant to Section 365 or Section 1123 of the United States
Bankruptcy Code.

If one or more of these agreements were rejected, the applicable agreement may
not be specifically enforceable, in which case we would have only an unsecured
claim for damages against Sprint for the breach of contract resulting from the
rejection. If the directory services license agreement were rejected, we
would, among other things, no longer be entitled to be Sprints exclusive
publisher of telephone directories in the affected markets. We could also lose
our right to enforce the provisions of the agreement under which we have the
right to license trademarks of successor local exchange carriers in the Sprint
markets. If the non-competition agreement was rejected and specific
enforcement was not available, Sprint would, among other things, no longer be
precluded from publishing print telephone directories or selling local
directory advertising in the applicable restricted markets.

Sprint has created a bankruptcy remote special purpose vehicle in the form of a
limited liability company and contributed and assigned the trademarks being
licensed to us under the trademark license agreement to this limited liability
company. The operating agreements of this limited liability company require,
among other things, that the board of managers of this entity include one
independent manager that is unaffiliated with Sprint. The consent of this
independent manager is required for the entity to take certain actions,
including, among other things, commencement of a bankruptcy proceeding.
Because the trademarks were contributed to this limited liability company, our
rights under the trademark license agreement are not subject to rejection in
the event of a bankruptcy proceeding involving Sprint unless there is also a
bankruptcy proceeding involving this limited liability company. Although we
believe that the likelihood of this entity being the subject of a bankruptcy
proceeding is limited by this structure and the governing provisions of the
operating agreement, if the trademark license agreement were rejected in a
bankruptcy proceeding, we would lose the right to use the Sprint brand name for
the SPA directories. We cannot assure you that any loss of rights under
certain of these arrangements with Sprint would not have a material adverse
effect on our financial condition or results of operations.

(15)  Our ability to enforce the non-competition agreement with Sprint
Sprint has agreed, in general, not to publish print telephone directories or
sell local advertising for use in directories in the acquired markets during
the term of the non-competition agreement. However, under state and federal
law, a covenant not to compete is only enforceable:



| |  |  | to the extent it is necessary to protect a legitimate business interest of the party seeking enforcement;
| | - |  | ---------------------------------------------------------------------------------------------------------
|
| |  |  | if it does not unreasonably restrain the party against whom enforcement is sought; and                   
|
| |  |  | if it is not contrary to the public interest.                                                            

Enforceability of a non-competition covenant is determined by a court based on
all of the facts and circumstances of the specific case at the time enforcement
is sought. For this reason, it is not possible for us to predict whether, or
to what extent, a court will enforce Sprints covenants not to compete against
us during the term of the non-competition agreement. If a court were to
determine that the non-competition agreement is unenforceable, Sprint could
compete directly against us in the directory publishing business in the
previously restricted markets. We cannot assure you that our inability to
enforce the non-competition agreement with Sprint would not have a material
adverse effect on

24



---



##### Table of Contents



our financial condition or results of operations.

Significant Business Development

On January 3, 2003, we completed the acquisition of SPA for $2,213.5 million in
cash, after a preliminary working capital adjustment. The purchase price is
subject to a final working capital adjustment. SPA is the publisher of 260
revenue-generating yellow pages directories in 18 states. Prior to this
acquisition, we acted as a sales agent and pre-press publishing vendor for SPA
for 44 of these directories in 4 states. The acquisition transforms the
Company from a sales agent and pre-press vendor into a leading publisher of
yellow pages directories.

To finance the acquisition, we entered into a new $1,525 million Credit
Facility, consisting of a $500 million Term Loan A, a $900 million Term Loan B
and a $125 million Revolver. We also issued $325 million 8 7/8% Notes and $600
million 10 7/8% Notes. Finally, the GS Funds purchased $200 million of
Preferred Stock.

To take advantage of favorable market conditions and to ensure the timely
consummation of the SPA acquisition, we issued the Notes and borrowed the Term
Loan B in December 2002. The total gross proceeds of $1,825 million were
deposited and held in escrow pending the SPA acquisition closing. The GS Funds
also invested an initial $70 million through the purchase of 70,000 shares of
Preferred Stock. This investment was a portion of their $200 million
commitment. At the closing of the SPA acquisition, the GS Funds purchased the
remaining $130 million of Preferred Stock and we borrowed the Term Loan A and
$10 million under the Revolver.

In connection with the transaction, we entered into a directory services
license agreement, a trademark license agreement and a non-competition
agreement with Sprint . The
directory services license agreement gives us the exclusive right to produce,
publish and distribute directories for Sprint in the markets where Sprint
currently provides local telephone service. The trademark license agreement
gives us the exclusive right to use certain Sprint trademarks, including the
Sprint diamond logo, in those markets. The non-competition agreement prohibits
Sprint from producing, publishing and distributing print directories or selling
local advertising in those markets, with certain limited exceptions. These
agreements are all interrelated and each has initial terms of 50 years, subject
to earlier termination under specified circumstances.

Prior to the acquisition, we provided sales agency and pre-press publishing
services to SPA. Accordingly, at December 31, 2002, we had an aggregate
receivable of $43.3 million for commissions, pre-press publishing fees and
priority distribution income from SPA. As a result of the acquisition, these
receivables became intercompany items and were included as part of the purchase
price. Also, long-term liabilities at December 31, 2002 include an amount due
to Sprint of $7.0 million, which we paid in cash at the closing.

The acquisition was accounted for as a purchase business combination and the
purchase price was allocated to the tangible and identifiable intangible assets
acquired and liabilities assumed based on their respective fair values on the
acquisition date. The results of the SPA business will be included in our
consolidated results from and after January 3, 2003, the acquisition closing
date. Accordingly, the results of SPA are not included in our audited
financial statements at or for the year ended December 31, 2002.

25



---



##### Table of Contents



The allocation of the purchase price to the fair value of assets acquired and
liabilities assumed is shown in the table below. The purchase price allocation
is preliminary and based on the best information currently available and could
change as additional information arises.

|                                         |                                              |                                                                                        |   |                 |       |  
|---------------------------------------- | -------------------------------------------- | -------------------------------------------------------------------------------------- | - | --------------- | ----- | -
|                                         |                                              |                                                                                        |   | ($ in millions)
|Calculation of allocable purchase price: |                                              |                                                                                        |   |                
|                                         | Cash                                         |                                                                                        | $ | 2,213.5         |      
|                                         | Allocable transaction costs                  |                                                                                        |   | 15.1            |      
|                                         |                                              |                                                                                        |   |                
|                                         | Total allocable purchase price               |                                                                                        | $ | 2,228.6         |      
|                                         |                                              |                                                                                        |   |                 |      
|Estimated allocation of purchase price:  |                                              |                                                                                        |   |                
|                                         | SPA net assets acquired                      |                                                                                        | $ | 85.6            |      
|                                         | Directory Services Agreements                |                                                                                        |   | 1,625.0         |      
|                                         | Customer relationships                       |                                                                                        |   | 260.0           |      
|                                         | Trade names                                  |                                                                                        |   | 30.0            |      
|                                         | Estimated profit on executed sales contracts |                                                                                        |   | 8.3             |      
|                                         | Fair value adjustments:                      |                                                                                        |   |                 |      
|                                         |                                              | Reverse pre-acquisition deferred revenue                                               |   |                 | 292.8 |  
|                                         |                                              | Reverse deferred directory costs associated with
directories published pre-acquisition |   |                 | (89.5 | )
|                                         |                                              | Eliminate SPA historical deferred tax and goodwill                                     |   |                 | (43.5 | )
|                                         |                                              | Other                                                                                  |   |                 | (14.5 | )
|                                         |                                              |                                                                                        |   |                
|                                         | Fair value of net assets acquired            |                                                                                        |   | 2,154.2         |      
|                                         | Goodwill                                     |                                                                                        |   | 74.4            |      
|                                         |                                              |                                                                                        |   |                
|                                         | Total purchase price                         |                                                                                        | $ | 2,228.6         |      
|                                         |                                              |                                                                                        |   |                 |      

The Company  Prior to the SPA Acquisition

The discussion below relates to the results of the Company for the three years
ended December 31, 2002. Through 2002, we were a leading independent marketer
of yellow pages advertising services in the United States. Our business was
organized into two reportable operating segments: the DonTech Partnership and
Directory Advertising Services.

DonTech

DonTech is a 50/50 perpetual partnership with an operating unit of SBC.
DonTech acts as the exclusive sales agent for yellow pages directories
published by SBC in Illinois and northwest Indiana and receives a commission
from SBC. Income from DonTech is comprised of our 50% interest in the net
profits of DonTech and revenue participation income received directly from an
affiliate of SBC. Revenue participation income is based on a percentage of
DonTech advertising sales and comprises approximately 80% to 85% of the total
annual income related to DonTech. Total income from DonTech accounted for 76%,
79% and 72% of operating income before General & Corporate costs and other
unallocated expenses for the years ended December 31, 2002, 2001 and 2000,
respectively. Certain general and administrative expenses incurred to support
this business are not allocated to the DonTech segment. As income from DonTech
accounts for a significant portion of our operating income, a material decline
in the advertising sales of DonTech would likely have a material adverse effect
on our results of operations and financial condition. We also provide certain
pre-press publishing services for those SBC directories for which DonTech sells
advertising, the income from which was included in our DAS segment as described
below. Although DonTech provides advertising sales of yellow pages and other
directory products similar to DAS, the partnership is considered a separate
operating segment since, among other things, the partnership has its own Board
of Directors and the employees of DonTech, including its officers and managers,
are not our employees. Following the SPA transaction, DonTech continues to act
as a sales agent for SBC and earn commissions when an advertising contract is
signed. Further, we will continue to account for DonTech under the equity
method of accounting.

26



---



##### Table of Contents



Historical Directory Advertising Services

Within our DAS segment, we sold yellow pages advertising for affiliated
entities of Sprint and performed pre-press publishing services for yellow pages
directories. We were the exclusive sales agent in the greater Orlando, Florida
market (Central Florida) for an operating unit of Sprint and the exclusive
sales agent in Nevada, Florida, Virginia and North Carolina for CenDon LLC
(CenDon), a joint venture with Centel Directory Company (Centel), a
subsidiary of Sprint. Other Sprint affiliates sold yellow pages advertising in
other markets in these states. We received sales commissions on all
advertising sold for Sprint and CenDon and a priority distribution on our
membership interest in CenDon. The amount of priority distribution earned was
based on a percentage of CenDon advertising sales. Prior to the acquisition, a
material decline in advertising sales in these markets could have had a
material adverse effect on our results of operations and financial condition.

The DAS segment also included pre-press publishing services provided to SBC and
Sprint for their respective yellow pages directories for which we sold
advertising under separately negotiated contracts. The agreement with SBC
extends through 2008. The agreement with Sprint was scheduled to expire in
2003. We also provided pre-press publishing services to an unaffiliated third
party under an agreement that expired at the end of 2002. We have jointly
agreed to an orderly transition of work that will take place during the first
quarter of 2003. Revenue from our pre-press publishing services operation
accounted for approximately 42%, 43% and 23% of total consolidated revenue in
2002, 2001 and 2000, respectively. However, going forward, revenue from
pre-press publishing services will account for a significantly lower percentage
of total revenue as consolidated revenues will be considerably higher. DAS
also included all information technology costs.

The results of the DAS segment for 2000 included the operating results of the
Cincinnati proprietary directory business, the Bell Atlantic sales agency
business, the Get Digital Smart Internet business and equity losses of
ChinaBig.com Limited (ChinaBig) through the dates of transactions that caused
changes in the reporting of each respective business. The 2000 results of DAS
also include a one-time operating income benefit of $15.8 million from the
restructuring and extension of the CenDon Partnership. See  Factors
Affecting Comparability below for more information.

Critical Accounting Policies

Certain amounts in our financial statements require that management make
assumptions and estimates based on the best available information at that time.
Actual results could vary from these estimates and assumptions. Those
accounting policies that involve assumptions or estimates on our part that
could have a material effect on results of operations or financial condition if
the actual results differ from the assumptions or estimates are presented
below. For additional information on our accounting policies, see Note 1 to the
Consolidated Financial Statements in Item 8.

Principles of Consolidation.The consolidated financial statements include
the accounts of R.H. Donnelley Corporation and its direct and indirect wholly
owned subsidiaries All intercompany transactions and balances have been
eliminated. DonTech is accounted for under the equity method as we do not have
control, but do have the ability to exercise significant influence over its
operating and financial policies. Accordingly, the results of DonTech are not
consolidated in our financial statements, but our share of its net profits is
reported as partnership and joint venture income in our Consolidated Statements
of Operations.

Revenue Recognition.During the three years ended December 31, 2002, we earned
sales commission revenue from the sale of advertising on behalf of Sprint and
fees for pre-press publishing services. As a sales agent for Sprint, we
recognized sales commission revenue at the time an advertising contract was
executed with a customer. Sales commission revenue was recorded net of
potential sales allowances, which were estimated, based on historical
experience. If an advertiser was not satisfied with its yellow pages
advertisement (e.g. misspelled business name, incorrect business address or
number, etc.), the publisher had discretion to adjust the contract value.
Since commissions were earned based on the aggregate value of advertising
contracts, our commissions would have also been adjusted under those
circumstances. Concurrent with the recognition of sales commission revenue, we
recorded a sales allowance of approximately 1% of sales commission revenue,
based on historical experience. The amount of sales allowance recorded was
subsequently adjusted based on actual results. Historically, the actual amount
of sales allowances was consistent with our estimates and significant
adjustments were not made. Revenue from pre-press publishing operations was
recognized as services were performed. We recognized no allowances for

27



---



##### Table of Contents



pre-press publishing services.

As a result of the acquisition, we will recognize revenue from the sale of
directory advertising in Sprint Yellow Pages® directories and certain related
direct costs under the deferral and amortization method, whereby revenues and
direct costs are recognized ratably over the life of a directory, which is
typically twelve months. Revenue recognition for pre-press publishing services
remains unchanged.

Trade Receivables.Trade receivables represented sales commissions earned
from the sale of advertising on behalf of Sprint and fees earned for pre-press
publishing services. We established an allowance for doubtful accounts for
sales commissions based upon historical experience and contractual limitations.
The sales agency agreement between Centel and us limited our exposure to bad
debts at a specified percentage of sales. Actual bad debts for CenDon
directories over the last three years exceeded our maximum contractual
exposure. Accordingly, an increase in the actual bad debt rate would not have
directly impacted our results of operations or financial condition. Under the
Central Florida sales agency agreement, our exposure to bad debts was not
contractually limited. We estimated our bad debt expense based on historical
experience and made subsequent adjustments, if necessary, based on actual
results. Receivables for sales commissions were billed to the publisher upon
directory publication and collected in accordance with contractual provisions,
typically in the same month of publication, but no later than nine months after
publication.

Receivables for pre-press publishing services were billed and collected in
accordance with the terms of the applicable agreement, generally a monthly pro
rata amount based on the annual contract value. If actual volumes exceeded
contracted volumes, an additional amount is billed to the publisher at
year-end. Although we will no longer bill Sprint for these services, we will
continue to bill and collect from SBC through the end of the contract in 2008.

After the acquisition, our receivables from advertising sales in Sprint Yellow
Pages® directories represent the full contract value of the advertisement as
opposed to a commission on the contract value. Rather than SPA being our trade
debtor, we have assumed a direct billing relationship with directory
advertisers. We bill most local advertisers on a monthly basis over the life of
a directory. See Concentration of Credit Risk below and   Forward Looking
Information  Reliance on, and extension of credit to, small- and medium-sized
businesses. SBC remains our trade debtor with respect to the sale of
advertising in DonTech markets.

Pension and Other Postretirement Benefits.Pension and other postretirement
benefits represent estimated amounts to be paid to employees in the future.
The accounting for benefits reflects the recognition of these benefit costs
over the employees approximate service period based on the terms of the plan
and the investment and funding decisions made. The determination of the
benefit obligations and the net periodic pension and other postretirement
benefit costs requires management to make assumptions regarding the discount
rate, return on retirement plan assets, increase in future compensation and
health care cost trends. Changes in these assumptions can have a significant
impact on the projected benefit obligation, funding requirement and net
periodic benefit cost. The assumed discount rate is the rate at which the
pension benefits could be settled. We use the rates on Aa corporate bonds as a
basis for determining our discount rate assumption. The expected long-term
rate of return on plan assets is based on the mix of assets held by the plan
and the expected long-term rates of return within each asset class. The
anticipated trend of future health care costs is based on historical experience
and external factors. See Note 9 to the Consolidated Financial Statements in
Item 8 for further information regarding our benefit plans.

Effective January 1, 2003, we reduced our rate of return on plan assets from
9.75% to 8.25%. As a result of low investment returns over the last few years,
as well as our outlook for the long-term, particularly for equity securities,
we determined that the assumed rate of return of 9.75% no longer reflected our
best estimate of future long-term returns. Based on the current investment
environment and the pension plans asset allocation, we determined that a
long-term rate of return of 8.25% better reflected our expectations for future
long-term returns. For the year ended December 31, 2002, pension income was
$1.7 million. Had our assumed rate of return on plan assets been 8.25% at the
beginning of 2002, pension income would have been approximately $0.6 million.
We estimate that pension expense will be approximately $1.2 million in 2003.

Earnings per Share.Basic earnings per common share (EPS) are generally
calculated by dividing income available to common shareholders by the weighted
average number of common shares outstanding. However, because the Preferred
Stock contains certain participation rights, EITF Topic D-95, Effect of
Participating Securities on the Computation of Basic Earnings Per Share,
(Topic D-95) requires that the dilutive effect of those securities be

28



---



##### Table of Contents



included in the weighted average number of shares outstanding. Furthermore,
Topic D-95 requires that the dilutive effect to be included in basic EPS may be
calculated using either the if-converted method or the two-class method.
However, the dilutive effect of the Preferred Stock cannot be less than that
which would result from the application of the two-class method. We have
elected to use the if-converted method in calculating basic EPS.

Diluted EPS are calculated by dividing net income by the weighted average
common shares outstanding plus common share equivalents. Common share
equivalents include stock options and warrants, the dilutive effect of which is
calculated using the treasury stock method, and Preferred Stock, the potential
dilutive effect of which is calculated using the if-converted method.

Concentration of Credit Risk.We maintain a significant receivable balance
from SBC for revenue participation income and pre-press publishing services.
The revenue participation receivable is subject to adjustment, based on
collections by SBC from individual advertisers; however, the adjustment is
limited based on contractual provisions. The receivables for revenue
participation and pre-press publishing services are recorded at net realizable
value. We do not foresee a material credit risk associated with the collection
of these receivables, although we can give no assurance that full payment will
continue to be received on a timely basis. At December 31, 2002, we also had
aggregate receivables from SPA for commissions, pre-press publishing fees and
priority distribution income of $43.3 million. As a result of the acquisition,
these receivables became intercompany items.

After the acquisition, a significant portion of our net revenue is derived from
selling advertising to local small- and medium-sized businesses. These
advertisers enter into twelve-month advertising sales contracts and typically
make monthly payments over the term of the contract. Some advertisers pre-pay
the full amount or a portion of the contract value. Most advertisers,
including all new advertisers, are subject to a credit review, and if the
advertiser qualifies, we extend credit to them for their advertising purchase.
Small- and medium-sized businesses tend to have fewer financial resources and
higher financial failure rates than large businesses. In addition, full
collection of delinquent accounts can take an extended period of time and
involve increased costs. While we do not believe that extending credit to our
local advertisers will have a material adverse affect on our results of
operations and financial condition, no assurances can be given. We do not
require collateral from our advertisers, although we do charge interest to
advertisers who do not pay within specified due dates. National advertising is
typically paid in full within 30 days of directory publication by the
associated CMR.

Employee Stock Options.We follow Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees and related interpretations (APB 25)
in accounting for our stock option plan, and, accordingly, no compensation
expense related to the issuance of stock options to employees or non-employee
directors has been recognized in the three years ended December 31, 2002. We
also grant stock options to certain key employees of DonTech. Because DonTech
employees are not our employees, current accounting rules require that we
recognize compensation expense over the vesting period based on the fair value
of the options. We recognized compensation expense of $0.2 million, $0.7
million and $0.2 million in 2002, 2001 and 2000, respectively.

In 2002, options to purchase 1,486,000 shares of our common stock (Founders
Grant) were granted to certain employees contingent on the consummation of the
SPA acquisition. Under APB 25, we will recognize expense of $5.1 million over
the next four years.

The following table reflects the pro forma net income and earnings per share
assuming we applied the fair value method of SFAS No. 123 Accounting for
Stock-Based Compensation. The pro forma disclosures shown are not necessarily
representative of the effects on income and earnings per share in future years.

|                                             |             |      |   |      |  |      |   |      |  |  |   |       | 
|-------------------------------------------- | ----------- | ---- | - | ---- |  | ---- | - | ---- |  |  | - | ----- | 
|(amounts in millions, except per share date) |             | 2002 |   | 2001 |  | 2000
|                                             |             |      |   |      |  |     
|Net income                                   |             |      |   |      |  |      |   |      |  |  |   |      
|                                             | As reported |      | $ | 67.2 |  |      | $ | 49.8 |  |  | $ | 124.8 | 
|                                             | Pro forma   |      | $ | 64.6 |  |      | $ | 47.6 |  |  | $ | 123.0 | 
|Net income available to common               |             |      |   |      |  |      |   |      |  |  |   |      
|                                             | As reported |      | $ | 42.5 |  |      | $ | 49.8 |  |  | $ | 124.8 | 
|                                             | Pro forma   |      | $ | 39.9 |  |      | $ | 47.6 |  |  | $ | 123.0 | 

29



---



##### Table of Contents



|                                             |             |      |   |      |  |      |   |      |  |  |   |      | 
|-------------------------------------------- | ----------- | ---- | - | ---- |  | ---- | - | ---- |  |  | - | ---- | 
|(amounts in millions, except per share date) |             | 2002 |   | 2001 |  | 2000
|                                             |             |      |   |      |  |     
|Basic earnings per share                     |             |      |   |      |  |      |   |      |  |  |   |     
|                                             | As reported |      | $ | 1.42 |  |      | $ | 1.65 |  |  | $ | 3.91 | 
|                                             | Pro forma   |      | $ | 1.33 |  |      | $ | 1.59 |  |  | $ | 3.85 | 
|Diluted earnings per share                   |             |      |   |      |  |      |   |      |  |  |   |     
|                                             | As reported |      | $ | 1.40 |  |      | $ | 1.61 |  |  | $ | 3.83 | 
|                                             | Pro forma   |      | $ | 1.32 |  |      | $ | 1.54 |  |  | $ | 3.78 | 

The fair value of stock options used to compute the pro forma disclosures is
estimated using the Black-Scholes option-pricing model with the following
weighted average assumptions:

|                        |  |         |     |         |  |         |     |   |  |  |     |  
|----------------------- |  | ------- | --- | ------- |  | ------- | --- | - |  |  | --- | -
|                        |  | 2002    |     | 2001    |  | 2000   
|                        |  |         |     |         |  |        
|Dividend yield          |  |         | 0   | %       |  |         | 0   | % |  |  | 0   | %
|Expected volatility     |  |         | 35  | %       |  |         | 35  | % |  |  | 35  | %
|Risk-free interest rate |  |         | 3.1 | %       |  |         | 4.8 | % |  |  | 6.6 | %
|Expected holding period |  | 4 years |     | 4 years |  | 4 years

In December 2002, the Financial Accounting Standards Board (FASB) issued FAS
148, Accounting for Stock-Based Compensation  Transition and Disclosure  an
amendment to FAS 123. This statement provides alternative methods of
transition for a voluntary change to the fair value method of accounting for
stock based employee compensation. In addition, the statement amends the
disclosure requirements of FAS 123 to require prominent disclosures in both
annual and interim financial statements about the method of accounting for
stock based employee compensation and the effect on reported results. The
statement is effective for calendar year 2003; however, at this time, we do not
intend to voluntarily adopt the provisions of FAS 123.

New Accounting Pronouncements

In April 2002, the FASB issued FAS 145, Rescission of FASB Statements No. 4,
44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections.
This statement, among other things, changes the way gains and losses from the
extinguishment of debt are reported. Previously, all gains and losses from the
extinguishment of debt were required to be reported as an extraordinary item,
net of related tax effect. Under FAS 145, gains and losses from the
extinguishment of debt should be reported as part of on-going operations,
unless the extinguishment of debt is both an unusual and infrequent event for
the entity. Previously reported extraordinary gains and losses from the
extinguishment of debt that are not unusual or infrequent should be
reclassified. This statement is effective for calendar year 2003; however, as
permitted, we adopted this statement at the end of 2002. Previously reported
extraordinary losses from the extinguishment of debt have been reclassified.
Accordingly, interest expense includes the write-off of deferred financing
costs associated with the prepayment of debt of $0.5 million, $0.7 million and
$1.1 million in 2002, 2001 and 2000, respectively. The adoption of this
statement did not impact previously reported net income.

In June 2002, the FASB issued FAS 146, Accounting for Costs Associated with
Exit or Disposal Activities. FAS 146 addresses the accounting and reporting
for costs associated with exit or disposal activities and nullifies Emerging
Issues Task Force Issue 94-3, Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring). This statement is effective for
transactions initiated after December 31, 2002 and is to be applied
prospectively.

In November 2002, the FASB issued FASB Interpretation No. 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others. This Interpretation elaborates on the
disclosures to be made by a guarantor in financial statements about its
obligations under certain guarantees that it has issued. It also clarifies
that a guarantor is required to recognize, at the inception of the guarantee, a
liability for the fair value of the obligation undertaken in issuing the
guarantee. The recognition and measurement provisions are applicable on a
prospective basis to guarantees issued or modified after December 31, 2002.
The disclosure requirements are effective for financial statements for periods
ending after December 15, 2002. We do not guarantee any obligations of third
parties (including DonTech); however its indirect subsidiaries jointly and
severally, fully and

30



---



##### Table of Contents



unconditionally guarantee the debt obligations of R.H. Donnelley Inc. See Note
13 to the Consolidated Financial Statements in Item 8.

See Note 1 to the Consolidated Financial Statements in Item 8 for additional
information on our accounting policies.

RESULTS OF OPERATIONS
Three Years Ended December 31, 2002

Factors Affecting Comparability

During 2000, the following transactions resulted in a pre-tax net gain of $86.5
million ($53.5 million after-tax) and a one-time operating income benefit of
$15.8 million:



| |  |  | We executed an agreement with affiliates of Bell Atlantic
Corporation, (now known as Verizon Communications, Bell Atlantic), for
the early termination of our sales agency agreements, sold our
Cincinnati proprietary operations and ceased operations of our Get
Digital Smart Internet business (GDS).
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | We restructured and extended the CenDon sales agency relationship
through 2010. The original relationship was set to expire in 2004.                                                                                                                                                                         
|
| |  |  | In connection with an investment by an unaffiliated third party in
ChinaBig, we became a passive investor, and as such, no longer
recognized our share of the losses of ChinaBig.                                                                                                                            

Disposition of Businesses and Related Cost Cutting Actions

On April 27, 2000, we sold our Cincinnati proprietary directory business to
Yellow Book USA, Inc. for $8 million.

On June 30, 2000, we entered into an agreement with Bell Atlantic for the early
termination of the directory services agreements, as amended (the Agency
Agreements) between Bell Atlantic and us. Pursuant to the Agency Agreements,
we served as exclusive sales agent for Bell Atlantic directories covering
substantially all of New York State. The Agency Agreements were scheduled to
expire in 2003 and 2005. Under the terms of the agreement, we received a
termination payment of $114 million and commission payments for those sales
that occurred prior to the closing.

In December 2000, we ceased operations of GDS. GDS was formally launched in
February 2000 in the Miami/Ft. Lauderdale market to test the economic viability
of providing a variety of products and services designed to deliver a
comprehensive package of Internet marketing and e-commerce capabilities to
small- and medium-sized local businesses. While the test demonstrated that
there was a demand for the products and services being offered, GDS was not
broadly capable of providing an adequate return on investment within its
originally planned time horizon. We recognized one-time costs of $2.9 million
related to the shutdown of the business.

We also implemented cost-cutting measures in 2000, including headcount
reductions, at our pre-press publishing facility in Raleigh and corporate
headquarters consistent with the new operating structure.

CenDon Partnership Restructuring and Extension

Effective for directories that published after June 30, 2000, we entered into a
series of agreements with SPA that effectively restructured the CenDon
Partnership as a limited liability company and extended the sales agency
arrangement through 2010 (CenDon Restructuring). Both the partnership
agreement and sales agency agreement were set to expire in 2004. The revised
arrangement focused our responsibilities on sales and certain pre-press
publishing services and established us as the exclusive sales agent for SPAs
directory products in the markets previously covered by the partnership
agreement. SPA assumed responsibility for the printing and delivery of
directories, which were previously performed by the CenDon Partnership, and
related support services such as marketing, customer service and collections,
which were previously performed by us. Under the revised arrangement, SPA
managed CenDon. We received sales commissions on all advertising sold, and in
consideration for transferring control over the publishing functions to SPA, we
also received a priority distribution. The priority

31



---



##### Table of Contents



distribution was designed to allow us to maintain the same level of
profitability that we would have earned under the predecessor CenDon
Partnership through its scheduled expiration date in 2004. Under the revised
arrangement, total payments from CenDon (sales commission plus priority
distribution) were expected to average approximately 37% of CenDon advertising
sales through 2004. Starting with sales into 2005 directories, we would not
have received a priority distribution but would have received a supplemental
sales commission for sales into 2005 through 2007 directories. Total payments
from CenDon (sales commission plus supplemental sales commission) in 2005 were
expected to be approximately 35% of CenDon advertising sales and to decline
four percentage points per year through 2007. For sales into 2008 through 2010
publications, we would have received our base 23% commission on CenDon
advertising sales.

Under the revised arrangement, revenue and related costs were recognized at the
time of sale, whereas, under the previous CenDon Partnership, where we shared
responsibility for the publishing and delivery functions, revenue and related
costs were recognized at the time of directory publication. Accordingly, a
one-time operating income benefit of $15.8 million was recorded in 2000 related
to advertising sales made and costs incurred prior to the effective date of the
agreement for directories that published subsequent to the effective date of
the agreement.

ChinaBig Investment and Impairment Charge

We presently have a nominal 18% interest in ChinaBig, which publishes yellow
pages directories and offers Internet directory services in the Peoples
Republic of China. In connection with an equity investment by an unaffiliated
third party and in order to facilitate the raising of additional capital and
provide greater flexibility, on June 15, 2000, ChinaBig and each existing
investor restructured the existing joint venture agreement of ChinaBig to,
among other things, significantly reduce our ability to influence the
operations of ChinaBig. As a result, we became a passive investor in ChinaBig
and began to account for this investment under the cost method. Prior to June
15, 2000, we accounted for this investment under the equity method. Therefore,
subsequent to June 15, 2000, equity losses of ChinaBig were no longer
recognized in the consolidated statement of operations.

In November 2001, we received an independent third party valuation of
ChinaBigs current business plan, capital needs and outlook for profitability
and cash flow. The valuation was conducted in connection with a proposed equity
financing. The results of the valuation provided a range of possible estimated
fair values for ChinaBig, all of which implied that the fair value of this
investment was substantially lower than the carrying value of $13.4 million.
Accordingly, an impairment charge of $11.4 million was recorded in 2001 to
write this investment down to an amount that we believed was the best estimate
of the current fair value of the investment at that time. After reviewing
ChinaBigs 2002 operating results, we determined that sufficient evidence did
not exist to support the carrying value of this investment and that the
probability of realizing any value from this investment in the foreseeable
future was remote. Accordingly, an additional impairment charge of $2.0
million was recorded to write off the remaining book value of the investment in
2002.

Restructuring and Special Charge

In 2001, a restructuring and special charge of $18.6 million was recorded in
connection with executive management employment transition arrangements and the
expiration of a pre-press publishing contract, which was expected to result in
the elimination of approximately 100 positions during 2002. The charge
included:



| |  |  | $9.9 million associated with executive management transition
arrangements, including severance, accrued pension benefits and other
related costs;     
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | $3.3 million for other employee severance and related costs;                                                                                          
|
| |  |  | $4.4 million for idle leased space in the Raleigh publishing
facility and planned relocation of the corporate headquarters due to
excess capacity; and
|
| |  |  | $1.0 million for professional fees and the write-off of assets no
longer considered useable.                                                          

As a result of the SPA acquisition, we determined that certain costs originally
anticipated in the restructuring charge would not be incurred. Specifically,
idle leased space in the Raleigh publishing facility will now be utilized,
planned severance and other related costs will be significantly less and the
corporate headquarters is no longer expected to be relocated. Accordingly,
income of $6.4 million was recognized in 2002 from the reversal of $6.7 million
of the original reserve, partially offset by a charge of $0.3 million for
additional costs paid in connection with the executive management transition.

32



---



##### Table of Contents



As Adjusted Results

Due to the disposition of businesses during 2000 and the one-time benefit from
the CenDon Restructuring, we have presented 2000 results on both a reported
basis and an as adjusted basis to facilitate comparisons with 2001 and 2002
reported results. The as adjusted information was derived by excluding from
the reported amounts the revenue, advertising sales, and expenses of the Bell
Atlantic, Cincinnati and GDS operations through the date of their disposition,
as well as the one-time items from the CenDon Restructuring. We believe the as
adjusted information is more indicative of our underlying financial and
operational performance and better reflected the results of our continuing
businesses at that time. The as adjusted information does not purport to
represent what our actual results would have been had the transactions occurred
as of the assumed dates or to project the results of operations or financial
condition for any future period.

We have historically presented both the reported results and as adjusted
information for 2000 as described above in our Managements Discussion and
Analysis of Financial Condition and Results of Operations. In addition, our
narrative discussion of the results and underlying reasons for variances from
one period to another focused on the as adjusted information because management
believed it was more indicative of underlying financial and operating
performance. However, in response to the Securities and Exchange Commissions
recent adoption of Regulation G and related rules, the discussion below
focuses on the underlying reasons and causes of variances in the reported
amounts from one period to the next. We have maintained the tabular
presentation of both the reported results and as adjusted information and
disclosure of reconciling items for comparative purposes.

Net Revenue

During the reporting periods, revenue was derived entirely from our DAS segment
(with the exception of $0.2 million of revenue from GDS in 2000). As a sales
agent for Sprint, we earned commission revenue based on the annual billing
value of advertisements sold for Sprint directories in the period (Sprint
calendar sales). Sales commission revenue was recorded net of an estimate for
potential claims allowances. We also earned revenue from providing pre-press
publishing services.

The amount of commission revenue recognized was directly correlated to Sprint
calendar sales recorded during the period. We managed the sale of advertising
on a directory-by-directory basis and organized each directory into a sales
campaign. A typical sales campaign lasts two to five months and ends
approximately two months before a directory is scheduled to be published.
Therefore, changes in the beginning and ending dates of a sales campaign and
the actual sales recorded at any point during the campaign can vary from one
period to the next. These variations could have caused sales commission
revenue in the period to be materially different from the prior comparative
period. Reported and as adjusted net revenue were as follows:

|                          |                     |       |      |      |      |      |      |      |      |          |       |          |       |               |      |               |      |   |      |      |      |    |       |       |       |   |       |       |       |   
|------------------------- | ------------------- | ----- | ---- | ---- | ---- | ---- | ---- | ---- | ---- | -------- | ----- | -------- | ----- | ------------- | ---- | ------------- | ---- | - | ---- | ---- | ---- | -- | ----- | ----- | ----- | - | ----- | ----- | ----- | --
|($ amounts in millions)   |                     |       |      |      |      |      |      |      |      |          |       |          |       | 2002 vs. 2001 |      | 2001 vs. 2000
|                          |                     |       |      |      |      |      |      |      |      |          |       |          |       |               |      |              
|                          |                     |       |      | 2002 |      | 2001 |      | 2000 |      | $ Change |       | % Change |       | $ Change      |      | % Change     
|                          |                     |       |      |      |      |      |      |      |      |          |       |          |       |               |      |              
|Reported                  |                     |       |      |      |      |      |      |      |      |          |       |          |       |               |      |               |      |   |      |      |      |    |       |       |       |   |       |      
|Commission revenue        |                     | $     | 43.1 |      |      | $    | 42.7 |      |      | $        | 115.7 |          |       | $             | 0.4  |               |      |   | 0.9  | %    |      | $  | (73.0 | )     |       |   | (63.1 | )%   
|Sales allowances          |                     |       | (0.4 | )    |      |      | 1.1  |      |      |          | (6.9  | )        |       |               | (1.5 | )             |      |   | n/m  |      |      |    | 8.0   |       |       |   | n/m   |      
|                          |                     |       |      |      |      |      |      |      |      |          |       |          |       |               |      |               |      |   |      |      |      |    |       |       |       |   |       |      
|Net commission revenue    |                     |       | 42.7 |      |      |      | 43.8 |      |      |          | 108.8 |          |       |               | (1.1 | )             |      |   | (2.5 | )    |      |    | (65.0 | )     |       |   | (59.7 | )    
|Pre-press publishing fees |                     |       | 31.1 |      |      |      | 32.9 |      |      |          | 32.3  |          |       |               | (1.8 | )             |      |   | (5.5 | )    |      |    | 0.6   |       |       |   | 1.9   |      
|                          |                     |       |      |      |      |      |      |      |      |          |       |          |       |               |      |               |      |   |      |      |      |    |       |       |       |   |       |      
|                          | Total revenue  DAS |       |      | 73.8 |      |      |      | 76.7 |      |          |       | 141.1    |       |               |      | (2.9          | )    |   |      | (3.8 | )    |    |       | (64.4 | )     |   |       | (45.6 | )    
|GDS                       |                     |       |     |      |      |      |     |      |      |          | 0.2   |          |       |               |     |               |      |   |     |      |      |    | (0.2  | )     |       |   | n/m   |      
|                          |                     |       |      |      |      |      |      |      |      |          |       |          |       |               |      |               |      |   |      |      |      |    |       |       |       |   |       |      
|                          |                     | Total |      | $    | 73.8 |      |      | $    | 76.7 |          |       | $        | 141.3 |               |      | $             | (2.9 | ) |      |      | (3.8 | )% |       | $     | (64.6 | ) |       |       | (45.7 | )%
|                          |                     |       |      |      |      |      |      |      |      |          |       |          |       |               |      |               |      |   |      |      |      |    |       |       |       |   |       |      
|As adjusted               |                     |       |      |      |      |      |      |      |      |          |       |          |       |               |      |               |      |   |      |      |      |    |       |       |       |   |       |      
|Commission revenue (a)    |                     | $     | 43.1 |      |      | $    | 42.7 |      |      | $        | 47.2  |          |       | $             | 0.4  |               |      |   | 0.9  | %    |      | $  | (4.5  | )     |       |   | (9.5  | )%   
|Sales allowances (a)      |                     |       | (0.4 | )    |      |      | 1.1  |      |      |          | (2.2  | )        |       |               | (1.5 | )             |      |   | n/m  |      |      |    | 3.3   |       |       |   | n/m   |      
|                          |                     |       |      |      |      |      |      |      |      |          |       |          |       |               |      |               |      |   |      |      |      |    |       |       |       |   |       |      
|Net commission revenue    |                     |       | 42.7 |      |      |      | 43.8 |      |      |          | 45.0  |          |       |               | (1.1 | )             |      |   | (2.5 | )    |      |    | (1.2  | )     |       |   | (2.7  | )    
|Pre-press publishing fees |                     |       | 31.1 |      |      |      | 32.9 |      |      |          | 32.3  |          |       |               | (1.8 | )             |      |   | (5.5 | )    |      |    | 0.6   |       |       |   | 1.9   |      
|                          |                     |       |      |      |      |      |      |      |      |          |       |          |       |               |      |               |      |   |      |      |      |    |       |       |       |   |       |      
|                          | Total revenue  DAS |       |      | 73.8 |      |      |      | 76.7 |      |          |       | 77.3     |       |               |      | (2.9          | )    |   |      | (3.8 | )    |    |       | (0.6  | )     |   |       | (0.8  | )    
|GDS (b)                   |                     |       |     |      |      |      |     |      |      |          |      |          |       |               |     |               |      |   |     |      |      |    |      |       |       |   | --    |      
|                          |                     | Total |      | $    | 73.8 |      |      | $    | 76.7 |          |       | $        | 77.3  |               |      | $             | (2.9 | ) |      |      | (3.8 | )% |       | $     | (0.6  | ) |       |       | (0.8  | )%
|                          |                     |       |      |      |      |      |      |      |      |          |       |          |       |               |      |               |      |   |      |      |      |    |       |       |       |   |       |      

33



---



##### Table of Contents





---

|(a) |  | Excludes Bell Atlantic commission revenue of $47.4 million and sales
allowances of $4.7 million and a revenue benefit of $21.0 million from the
CenDon Restructuring in 2000.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(b) |  | Excludes revenue for GDS in 2000.                                                                                                                                            

Net revenue was $73.8 million, $76.7 million and $141.3 million for 2002, 2001
and 2000, respectively. Net commission revenue decreased $1.1 million in 2002
compared to 2001 primarily due to the reversal of $1.4 million of sales claims
allowances in 2001. Fees from pre-press publishing services declined $1.8
million primarily due to a reduction in volumes resulting from the expiration
of a pre-press publishing contract in December 2002.

Net revenue in 2001 declined
$64.6 million, or 45.7% from 2000
primarily due to the loss of revenue in 2001 from the Bell Atlantic business
and a revenue benefit of $21.0 million in 2000 from the CenDon Restructuring.
Revenue from Bell Atlantic in 2000 was $42.8 million. On an as adjusted basis,
revenue in 2000 was $77.3 million, which was in-line with 2001 revenue.

Calendar Advertising Sales

Commission revenue, priority distribution income from Sprint, and revenue
participation income from SBC are directly correlated to the value of
advertising sales made during the period. The table below sets forth the value
of advertising that we sold on behalf of Sprint (and Bell Atlantic in 2000) and
that DonTech sold on behalf of SBC during the periods noted. DonTech manages
its selling process in a manner similar to how we manage our selling process.
Accordingly, the annual billing value of advertisements sold for SBC
directories in the period (DonTech calendar sales) can vary from one period
to the next due to changes in the beginning and ending dates of a sales
campaign and the actual sales recorded at any point during the campaign.

Reported and as adjusted calendar sales by segment were as follows:

|             |         |       |   |       |       |      |   |       |       |          |   |          |       |               |   |               |       |   |  |      |      |    |   |        |        |   |  |       |       |   
|------------ | ------- | ----- | - | ----- | ----- | ---- | - | ----- | ----- | -------- | - | -------- | ----- | ------------- | - | ------------- | ----- | - |  | ---- | ---- | -- | - | ------ | ------ | - |  | ----- | ----- | --
|($ amounts   |         |       |   |       |       |      |   |       |       |          |   |          |       |               |   |               |       |   |  |      |      |    |   |        |        |   |  |      
|in millions) |         |       |   |       |       |      |   |       |       |          |   |          |       | 2002 vs. 2001 |   | 2001 vs. 2000
|             |         |       |   |       |       |      |   |       |       |          |   |          |       |               |   |              
|             |         |       |   | 2002  |       | 2001 |   | 2000  |       | $ Change |   | % Change |       | $ Change      |   | % Change     
|             |         |       |   |       |       |      |   |       |       |          |   |          |       |               |   |              
|Reported     |         |       |   |       |       |      |   |       |       |          |   |          |       |               |   |               |       |   |  |      |      |    |   |        |        |   |  |      
|             | DonTech |       | $ | 402.9 |       |      | $ | 422.6 |       |          | $ | 428.2    |       |               | $ | (19.7         | )     |   |  | (4.7 | )%   |    | $ | (5.6   | )      |   |  | (1.3  | )%   
|             | DAS     |       |   | 186.8 |       |      |   | 185.3 |       |          |   | 469.5    |       |               |   | 1.5           |       |   |  | 0.8  |      |    |   | (284.2 | )      |   |  | (60.5 | )    
|             |         |       |   |       |       |      |   |       |       |          |   |          |       |               |   |               |       |   |  |      |      |    |   |        |        |   |  |       |      
|             |         | Total |   | $     | 589.7 |      |   | $     | 607.9 |          |   | $        | 897.7 |               |   | $             | (18.2 | ) |  |      | (3.0 | )% |   | $      | (289.8 | ) |  |       | (32.3 | )%
|             |         |       |   |       |       |      |   |       |       |          |   |          |       |               |   |               |       |   |  |      |      |    |   |        |        |   |  |       |      
|As adjusted  |         |       |   |       |       |      |   |       |       |          |   |          |       |               |   |               |       |   |  |      |      |    |   |        |        |   |  |      
|             | DonTech |       | $ | 402.9 |       |      | $ | 422.6 |       |          | $ | 428.2    |       |               | $ | (19.7         | )     |   |  | (4.7 | )%   |    | $ | (5.6   | )      |   |  | (1.3  | )%   
|             | DAS (a) |       |   | 186.8 |       |      |   | 185.3 |       |          |   | 191.7    |       |               |   | 1.5           |       |   |  | 0.8  |      |    |   | (6.4   | )      |   |  | (3.3  | )    
|             |         |       |   |       |       |      |   |       |       |          |   |          |       |               |   |               |       |   |  |      |      |    |   |        |        |   |  |       |      
|             |         | Total |   | $     | 589.7 |      |   | $     | 607.9 |          |   | $        | 619.9 |               |   | $             | (18.2 | ) |  |      | (3.0 | )% |   | $      | (12.0  | ) |  |       | (1.9  | )%
|             |         |       |   |       |       |      |   |       |       |          |   |          |       |               |   |               |       |   |  |      |      |    |   |        |        |   |  |       |      



---

|(a) |  | Excludes Bell Atlantic sales of $182.0 million and a sales benefit from
the CenDon Restructuring of $95.8 million in 2000.
|--- |  | --------------------------------------------------------------------------------------------------------------------------

Calendar sales were $589.7 million, $607.9 million and $897.7 million for 2002,
2001 and 2000, respectively. DonTech calendar sales declined 4.7% in 2002 and
1.3% in 2001. The decline in 2002 DonTech calendar sales reflects continued
advertiser uncertainty from weak economic conditions, competition and changes
in the servicing of sales campaigns to call on customers closer to the time
when directories publish. The decline in 2001 reflects the weakening economic
environment, which began affecting DonTech sales in the latter part of 2001,
increased competition in Chicago and low consumer confidence resulting in
advertisers not increasing their advertising spending and lower new business
sales.

DAS calendar sales increased slightly during 2002 compared to 2001 as we began
to see signs that these markets may be trending back towards historical growth
levels. DAS sales in 2001 decreased 60.5% compared to 2000 mainly due to the
loss of Bell Atlantic sales of $182.0 million and a one-time sales benefit of
$95.8 million from the CenDon Restructuring. Excluding these items, calendar
sales declined $6.4 million or 3.3% due to the weakening economy, tighter
credit standards in light of the weakening economy and increased uncertainty
among advertisers in certain Sprint markets. The effects of the weakening
economy and increased uncertainty were exacerbated in the

34



---



##### Table of Contents



tourist-based markets of Las Vegas and Orlando.

Publication Advertising Sales

Management also reviews and analyzes the value of advertising sales on behalf
of Sprint (and Bell Atlantic in 2000) and by DonTech on behalf of SBC in
directories that published during the period (publication sales). We compare
publication sales for the period against publication sales for the same
directories published in the prior year period (a same store sales type
metric). We believe that a comparison of publication sales from one period to
another gives an indication of underlying sales growth in directories as this
metric removes the timing factors associated with a sales campaign. However,
publication sales did not have a direct correlation to our reported revenue or
profitability in the indicated period because calendar sales drive revenue and
profitability and occur prior to publication dates.

Reported and as adjusted publication sales by segment were as follows:

|             |         |       |   |       |       |      |   |       |       |          |   |          |       |               |   |               |       |   |  |      |      |    |   |        |        |   |  |       |       |   
|------------ | ------- | ----- | - | ----- | ----- | ---- | - | ----- | ----- | -------- | - | -------- | ----- | ------------- | - | ------------- | ----- | - |  | ---- | ---- | -- | - | ------ | ------ | - |  | ----- | ----- | --
|($ amounts   |         |       |   |       |       |      |   |       |       |          |   |          |       |               |   |               |       |   |  |      |      |    |   |        |        |   |  |      
|in millions) |         |       |   |       |       |      |   |       |       |          |   |          |       | 2002 vs. 2001 |   | 2001 vs. 2000
|             |         |       |   |       |       |      |   |       |       |          |   |          |       |               |   |              
|             |         |       |   | 2002  |       | 2001 |   | 2000  |       | $ Change |   | % Change |       | $ Change      |   | % Change     
|             |         |       |   |       |       |      |   |       |       |          |   |          |       |               |   |              
|Reported     |         |       |   |       |       |      |   |       |       |          |   |          |       |               |   |               |       |   |  |      |      |    |   |        |        |   |  |      
|             | DonTech |       | $ | 418.2 |       |      | $ | 434.0 |       |          | $ | 430.5    |       |               | $ | (15.8         | )     |   |  | (3.6 | )%   |    | $ | 3.5    |        |   |  | 0.8   | %    
|             | DAS     |       |   | 184.7 |       |      |   | 193.5 |       |          |   | 431.4    |       |               |   | (8.8          | )     |   |  | (4.5 | )    |    |   | (237.9 | )      |   |  | (55.1 | )    
|             |         |       |   |       |       |      |   |       |       |          |   |          |       |               |   |               |       |   |  |      |      |    |   |        |        |   |  |       |      
|             |         | Total |   | $     | 602.9 |      |   | $     | 627.5 |          |   | $        | 861.9 |               |   | $             | (24.6 | ) |  |      | (3.9 | )% |   | $      | (234.4 | ) |  |       | (27.2 | )%
|             |         |       |   |       |       |      |   |       |       |          |   |          |       |               |   |               |       |   |  |      |      |    |   |        |        |   |  |       |      
|As adjusted  |         |       |   |       |       |      |   |       |       |          |   |          |       |               |   |               |       |   |  |      |      |    |   |        |        |   |  |      
|             | DonTech |       | $ | 418.2 |       |      | $ | 434.0 |       |          | $ | 430.5    |       |               | $ | (15.8         | )     |   |  | (3.6 | )%   |    | $ | 3.5    |        |   |  | 0.8   | %    
|             | DAS (a) |       |   | 184.7 |       |      |   | 193.5 |       |          |   | 193.3    |       |               |   | (8.8          | )     |   |  | (4.5 | )    |    |   | 0.2    |        |   |  | 0.1   |      
|             |         |       |   |       |       |      |   |       |       |          |   |          |       |               |   |               |       |   |  |      |      |    |   |        |        |   |  |       |      
|             |         | Total |   | $     | 602.9 |      |   | $     | 627.5 |          |   | $        | 623.8 |               |   | $             | (24.6 | ) |  |      | (3.9 | )% |   | $      | 3.7    |   |  |       | 0.6   | % 
|             |         |       |   |       |       |      |   |       |       |          |   |          |       |               |   |               |       |   |  |      |      |    |   |        |        |   |  |       |      



---

|(a) |  | Excludes Bell Atlantic sales of $238.1 million in 2000.
|--- |  | -------------------------------------------------------

Publication sales were $602.9 million, $627.5 million and $861.9 million for
2002, 2001 and 2000, respectively. For 2002, publication sales at DonTech
declined 3.6% and publication sales at DAS declined 4.5% compared to 2001.
These declines were due to difficult economic conditions, reduced spending by
advertisers and uncertainty and caution in the small business market following
the events of September 11, 2001. Two of our largest sales campaigns, Sprints
Las Vegas and SBCs Chicago Consumer directories, were in their peak selling
period immediately after September 11th. Both these directories published in
early 2002 with the advertising sales value of the 2002 publications being
substantially below the value of the 2001 publications. However, since our
revenue and profitability were driven by calendar sales, the shortfall in the
2002 Las Vegas and Chicago Consumer directories were reflected in our 2001
results and did not directly impact our revenue or profitability in 2002.

Publication sales at DonTech in 2001 were relatively flat compared to 2000 as
sales in 2001 were adversely affected by the weakening economy, uncertainty
among advertisers and increased competition. DAS publication sales declined
$237.9 million, or 55.1% mainly due to the loss of publication sales from the
Bell Atlantic business in 2001. Publication sales in 2000 from Bell Atlantic
were $238.1 million. Publication sales from Sprint in 2001 were flat compared
to 2000 due to the weakening economy, tighter credit standards in light of the
weakening economy and increased uncertainty among advertisers, especially in
the tourist based market of Orlando.

35



---



##### Table of Contents



Expenses

Reported and as adjusted expenses were as follows:

|                        |                                  |       |   |      |      |      |   |      |       |          |   |          |       |               |   |               |       |   |  |       |       |    |   |       |       |   |  |       |       |   
|----------------------- | -------------------------------- | ----- | - | ---- | ---- | ---- | - | ---- | ----- | -------- | - | -------- | ----- | ------------- | - | ------------- | ----- | - |  | ----- | ----- | -- | - | ----- | ----- | - |  | ----- | ----- | --
|($ amounts in millions) |                                  |       |   |      |      |      |   |      |       |          |   |          |       | 2002 vs. 2001 |   | 2001 vs. 2000
|                        |                                  |       |   |      |      |      |   |      |       |          |   |          |       |               |   |              
|                        |                                  |       |   | 2002 |      | 2001 |   | 2000 |       | $ Change |   | % Change |       | $ Change      |   | % Change     
|                        |                                  |       |   |      |      |      |   |      |       |          |   |          |       |               |   |              
|Reported                |                                  |       |   |      |      |      |   |      |       |          |   |          |       |               |   |               |       |   |  |       |       |    |   |       |       |   |  |      
|                        | Operating expenses               |       | $ | 46.4 |      |      | $ | 47.8 |       |          | $ | 101.0    |       |               | $ | (1.4          | )     |   |  | (2.9  | )%    |    | $ | (53.2 | )     |   |  | (52.7 | )%   
|                        | G&A expenses                     |       |   | 16.4 |      |      |   | 16.6 |       |          |   | 25.2     |       |               |   | (0.2          | )     |   |  | (1.2  | )     |    |   | (8.6  | )     |   |  | (34.1 | )    
|                        | Restructuring and special
charge |       |   | (6.4 | )    |      |   | 18.6 |       |          |   |         |       |               |   | (25.0         | )     |   |  | n/m   |       |    |   | 18.6  |       |   |  | N/m   |      
|                        | Investment impairment charge     |       |   | 2.0  |      |      |   | 11.4 |       |          |   |         |       |               |   | (9.4          | )     |   |  | n/m   |       |    |   | 11.4  |       |   |  | N/m   |      
|                        | D&A expense                      |       |   | 6.3  |      |      |   | 10.8 |       |          |   | 15.4     |       |               |   | (4.5          | )     |   |  | (41.7 | )     |    |   | (4.6  | )     |   |  | (29.9 | )    
|                        |                                  |       |   |      |      |      |   |      |       |          |   |          |       |               |   |               |       |   |  |       |       |    |   |       |       |   |  |      
|                        |                                  | Total |   | $    | 64.7 |      |   | $    | 105.2 |          |   | $        | 141.6 |               |   | $             | (40.5 | ) |  |       | (38.5 | )% |   | $     | (36.4 | ) |  |       | (25.7 | )%
|                        |                                  |       |   |      |      |      |   |      |       |          |   |          |       |               |   |               |       |   |  |       |       |    |   |       |       |   |  |       |      
|As adjusted             |                                  |       |   |      |      |      |   |      |       |          |   |          |       |               |   |               |       |   |  |       |       |    |   |       |       |   |  |      
|                        | Operating expenses (a)           |       | $ | 46.4 |      |      | $ | 47.8 |       |          | $ | 50.3     |       |               | $ | (1.4          | )     |   |  | (2.9  | )%    |    | $ | (2.5  | )     |   |  | (5.0  | )%   
|                        | G&A expenses (b)                 |       |   | 16.4 |      |      |   | 16.6 |       |          |   | 22.5     |       |               |   | (0.2          | )     |   |  | (1.2  | )     |    |   | (5.9  | )     |   |  | (26.2 | )    
|                        | Restructuring and special
charge |       |   | (6.4 | )    |      |   | 18.6 |       |          |   |         |       |               |   | (25.0         | )     |   |  | n/m   |       |    |   | 18.6  |       |   |  | N/m   |      
|                        | Investment impairment charge     |       |   | 2.0  |      |      |   | 11.4 |       |          |   |         |       |               |   | (9.4          | )     |   |  | n/m   |       |    |   | 11.4  |       |   |  | N/m   |      
|                        | D&A expense (c)                  |       |   | 6.3  |      |      |   | 10.8 |       |          |   | 12.7     |       |               |   | (4.5          | )     |   |  | (41.7 | )     |    |   | (1.9  | )     |   |  | (15.0 | )    
|                        |                                  |       |   |      |      |      |   |      |       |          |   |          |       |               |   |               |       |   |  |       |       |    |   |       |       |   |  |      
|                        |                                  | Total |   | $    | 64.7 |      |   | $    | 105.2 |          |   | $        | 85.5  |               |   | $             | (40.5 | ) |  |       | (38.5 | )% |   | $     | 19.7  |   |  |       | 23.0  | % 
|                        |                                  |       |   |      |      |      |   |      |       |          |   |          |       |               |   |               |       |   |  |       |       |    |   |       |       |   |  |       |      



---

|(a) |  | Excludes operating expenses for Bell Atlantic of $30.4 million,
Cincinnati of $0.7 million, GDS of $9.0 million and expenses in connection
with the CenDon Restructuring of $10.6 million in 2000.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(b) |  | Excludes general and administrative expenses for Bell Atlantic of $2.4
million and Cincinnati of $0.3 million in 2000.                                                                            
|   
|(c) |  | Excludes depreciation and amortization expense of $2.6 million for Bell
Atlantic and $0.1 million for Cincinnati in 2000.                                                                         

Operating expenses were $46.4 million, $47.8 million and $101.0 million for
2002, 2001 and 2000, respectively. The decrease in 2002 operating expenses
compared to 2001 was primarily due to a favorable settlement of $1.1 million
for CenDon Partnership advertiser receivables (the CenDon settlement) and
reduced headcount through attrition in our Raleigh facility. In 2002, we
settled CenDon Partnership accounts receivable issues for approximately $2.1
million less than the amount reserved in our financial statements to cover
potential losses. The remaining $1.0 million benefit was recognized as
partnership income. We established reserves for these receivable issues over
time as we became aware of relevant facts and circumstances. While we were a
party to the CenDon Partnership, the reserves established were offset against
partnership income. Subsequent to the CenDon Restructuring, the reserves
established were charged to expense. Accordingly, the reversal of the reserves
established was recorded to the same accounts to which the original reserve was
recorded.

Operating expenses in 2001 decreased $53.2 million, or 52.7% compared to the
prior year as 2000 includes $40.1 million of operating expenses from the Bell
Atlantic, Cincinnati and GDS businesses and one-time expenses of $10.6 million
from the CenDon Restructuring. The remaining decrease in operating expenses in
2001 was due to lower sales compensation related costs proportionate to the
decrease in sales, the full year effect of cost savings initiatives implemented
during 2000 and the absence of sales and production costs associated with our
cable television yellow pages product, which was discontinued at the end of
2000.

General and administrative (G&A) expenses were $16.4 million, $16.6 million and
$25.2 million for 2002, 2001 and 2000, respectively. G&A expense benefited in
2002 from lower salary and benefit costs due to the executive management
transition, but these savings were offset by $1.2 million of expenses incurred
in connection with the SPA acquisition. The majority of acquisition-related
expenses were capitalized as part of the transaction. G&A expenses in 2001
decreased $8.6 million compared to 2000 primarily due to a full year effect of
the cost savings initiatives implemented during 2000. Due to reduced
headcount, savings were realized from lower salary and benefit costs, lower
facilities costs due to the consolidation of staff and the elimination of
corporate planning and international development efforts. In addition, $2.7
million of G&A expenses from the Bell Atlantic and Cincinnati businesses
incurred in 2000 were not incurred in 2001.

36



---



##### Table of Contents



See Factors Affecting Comparability  Restructuring and Special Chargeand
ChinaBig Investment and Impairment Charge for a discussion of the amounts
reflected in the above table.

Depreciation and amortization expense was $6.3 million, $10.8 million and $15.4
million in 2002, 2001 and 2000, respectively. Depreciation and amortization
expense has been steadily declining as a result of reduced capital spending,
including software development, the write-off of assets from the disposition of
businesses and significant software development costs incurred in our Raleigh
pre-press publishing operation in 1995 and 1996 becoming fully amortized during
2000 and 2001.

Partnership and Joint Venture Income

Partnership and joint venture income (partnership income) includes our 50%
share of the net income of DonTech, revenue participation income from SBC and
the priority distribution on our membership interest in CenDon LLC. In 2000,
partnership income also included equity losses from our ChinaBig investment.
Effective June 16, 2000, we began to account for this investment under the cost
method. Partnership income was as follows:

|                        |       |   |       |       |      |   |       |       |          |               |          |               |          |   |          |      |   |  |      |      |    |   |      |      |   |  |       |      |   
|----------------------- | ----- | - | ----- | ----- | ---- | - | ----- | ----- | -------- | ------------- | -------- | ------------- | -------- | - | -------- | ---- | - |  | ---- | ---- | -- | - | ---- | ---- | - |  | ----- | ---- | --
|($ amounts in millions) |       |   |       |       |      |   |       |       |          | 2002 vs. 2001 |          | 2001 vs. 2000
|                        |       |   |       |       |      |   |       |       |          |               |          |              
|                        |       |   | 2002  |       | 2001 |   | 2000  |       | $ Change |               | % Change |               | $ Change |   | % Change
|                        |       |   |       |       |      |   |       |       |          |               |          |               |          |   |         
|DonTech                 |       | $ | 117.1 |       |      | $ | 122.4 |       |          | $             | 124.0    |               |          | $ | (5.3     | )    |   |  | (4.3 | )%   |    | $ | (1.6 | )    |   |  | (1.3  | )%  
|CenDon                  |       |   | 19.8  |       |      |   | 17.6  |       |          |               | 24.8     |               |          |   | 2.2      |      |   |  | 12.5 |      |    |   | (7.2 | )    |   |  | (29.0 | )   
|ChinaBig                |       |   |      |       |      |   |      |       |          |               | (1.1     | )             |          |   |         |      |   |  |     |      |    |   | 1.1  |      |   |  | n/m   |     
|                        |       |   |       |       |      |   |       |       |          |               |          |               |          |   |          |      |   |  |      |      |    |   |      |      |   |  |       |     
|                        | Total |   | $     | 136.9 |      |   | $     | 140.0 |          |               | $        | 147.7         |          |   | $        | (3.1 | ) |  |      | (2.2 | )% |   | $    | (7.7 | ) |  |       | (5.2 | )%
|                        |       |   |       |       |      |   |       |       |          |               |          |               |          |   |          |      |   |  |      |      |    |   |      |      |   |  |       |     

Partnership income was $136.9 million, $140.0 million and $147.7 million for
2002, 2001 and 2000, respectively. Partnership income from DonTech decreased
$5.3 million in 2002 and $1.6 million in 2001 primarily due to the decline in
DonTech calendar sales of 4.3% and 1.3% in 2002 and 2001, respectively. As
previously stated, DonTech calendar sales have declined due to a weakening
economy, low consumer confidence in certain markets and competition.

Partnership income from CenDon increased $2.2 million in 2002 partially due to
the increase in calendar sales coupled with an increase in the priority
distribution rate in 2002 from 12.9% to 13.2%. Partnership income for 2002
also included a $1.0 million benefit from the CenDon settlement. Partnership
income from CenDon in 2001 decreased $7.2 million compared to 2000. The
decrease is mainly due to a benefit of $5.4 million from the CenDon
Restructuring in 2000 and lower sales in 2001.

Operating Income

Operating income from DonTech includes our 50% share of the net profits of
DonTech and revenue participation income from SBC. Operating income from DAS
includes the results of, and those costs directly incurred by, each constituent
business unit, less an allocation of certain shared expenses based on estimated
business usage. General & Corporate represents overhead and administrative
costs that are not allocated to the DAS business units. Reported and as
adjusted operating income were as follows:

|                        |                                  |                          |       |       |       |       |      |       |       |       |          |       |          |               |          |               |          |      |  |      |      |      |   |       |      |       |   |       |      |       |   
|----------------------- | -------------------------------- | ------------------------ | ----- | ----- | ----- | ----- | ---- | ----- | ----- | ----- | -------- | ----- | -------- | ------------- | -------- | ------------- | -------- | ---- |  | ---- | ---- | ---- | - | ----- | ---- | ----- | - | ----- | ---- | ----- | --
|($ amounts in millions) |                                  |                          |       |       |       |       |      |       |       |       |          |       |          | 2002 vs. 2001 |          | 2001 vs. 2000
|                        |                                  |                          |       |       |       |       |      |       |       |       |          |       |          |               |          |              
|                        |                                  |                          |       |       | 2002  |       | 2001 |       | 2000  |       | $ Change |       | % Change |               | $ Change |               | % Change
|                        |                                  |                          |       |       |       |       |      |       |       |       |          |       |          |               |          |               |         
|Reported                |                                  |                          |       |       |       |       |      |       |       |       |          |       |          |               |          |               |          |      |  |      |      |      |   |       |      |       |   |      
|                        | DonTech                          |                          | $     | 117.1 |       |       | $    | 122.4 |       |       | $        | 124.0 |          |               | $        | (5.3          | )        |      |  | (4.3 | )%   |      | $ | (1.6  | )    |       |   | (1.3  | )%  
|                        | DAS                              |                          |       | 38.2  |       |       |      | 32.9  |       |       |          | 48.1  |          |               |          | 5.3           |          |      |  | 16.1 |      |      |   | (15.2 | )    |       |   | (31.6 | )   
|                        | General & Corporate              |                          |       | (13.7 | )     |       |      | (13.8 | )     |       |          | (15.8 | )        |               |          | 0.1           |          |      |  | 0.7  |      |      |   | 2.0   |      |       |   | 12.7  |     
|                        | GDS                              |                          |       |      |       |       |      |      |       |       |          | (8.9  | )        |               |          |              |          |      |  |     |      |      |   | 8.9   |      |       |   | n/m   |     
|                        |                                  |                          |       |       |       |       |      |       |       |       |          |       |          |               |          |               |          |      |  |      |      |      |   |       |      |       |   |      
|                        |                                  | Segment Operating Income |       |       | 141.6 |       |      |       | 141.5 |       |          |       | 147.4    |               |          |               | 0.1      |      |  |      | (0.0 | )    |   |       | (5.9 | )     |   |       | (4.0 | )    
|                        | Restructuring and special
charge |                          |       | 6.4   |       |       |      | (18.6 | )     |       |          |      |          |               |          | 25.0          |          |      |  | n/m  |      |      |   | (18.6 | )    |       |   | n/m   |     
|                        | Investment impairment charge     |                          |       | (2.0  | )     |       |      | (11.4 | )     |       |          |      |          |               |          | 9.4           |          |      |  | n/m  |      |      |   | (11.4 | )    |       |   | n/m   |     
|                        |                                  |                          |       |       |       |       |      |       |       |       |          |       |          |               |          |               |          |      |  |      |      |      |   |       |      |       |   |      
|                        |                                  |                          | Total |       | $     | 146.0 |      |       | $     | 111.5 |          |       | $        | 147.4         |          |               | $        | 34.5 |  |      |      | 30.9 | % |       | $    | (35.9 | ) |       |      | (24.4 | )%
|                        |                                  |                          |       |       |       |       |      |       |       |       |          |       |          |               |          |               |          |      |  |      |      |      |   |       |      |       |   |       |     

37



---



##### Table of Contents



|                        |                                  |                          |       |       |       |       |      |       |       |       |          |       |          |               |          |               |          |      |  |      |      |      |   |       |     |       |   |      |     |       |   
|----------------------- | -------------------------------- | ------------------------ | ----- | ----- | ----- | ----- | ---- | ----- | ----- | ----- | -------- | ----- | -------- | ------------- | -------- | ------------- | -------- | ---- |  | ---- | ---- | ---- | - | ----- | --- | ----- | - | ---- | --- | ----- | --
|($ amounts in millions) |                                  |                          |       |       |       |       |      |       |       |       |          |       |          | 2002 vs. 2001 |          | 2001 vs. 2000
|                        |                                  |                          |       |       |       |       |      |       |       |       |          |       |          |               |          |              
|                        |                                  |                          |       |       | 2002  |       | 2001 |       | 2000  |       | $ Change |       | % Change |               | $ Change |               | % Change
|                        |                                  |                          |       |       |       |       |      |       |       |       |          |       |          |               |          |               |         
|As adjusted             |                                  |                          |       |       |       |       |      |       |       |       |          |       |          |               |          |               |          |      |  |      |      |      |   |       |     |       |   |     
|                        | DonTech                          |                          | $     | 117.1 |       |       | $    | 122.4 |       |       | $        | 124.0 |          |               | $        | (5.3          | )        |      |  | (4.3 | )%   |      | $ | (1.6  | )   |       |   | (1.3 | )% 
|                        | DAS (a)                          |                          |       | 38.2  |       |       |      | 32.9  |       |       |          | 26.0  |          |               |          | 5.3           |          |      |  | 16.1 |      |      |   | 6.9   |     |       |   | 26.5 |    
|                        | General and Corporate            |                          |       | (13.7 | )     |       |      | (13.8 | )     |       |          | (15.8 | )        |               |          | 0.1           |          |      |  | 0.7  |      |      |   | 2.0   |     |       |   | 12.7 |    
|                        | GDS (b)                          |                          |       |      |       |       |      |      |       |       |          |      |          |               |          |              |          |      |  |     |      |      |   |      |     |       |   | --   |    
|                        |                                  |                          |       |       |       |       |      |       |       |       |          |       |          |               |          |               |          |      |  |      |      |      |   |       |     |       |   |     
|                        |                                  | Segment Operating Income |       |       | 141.6 |       |      |       | 141.5 |       |          |       | 134.2    |               |          |               | 0.1      |      |  |      | (0.0 | )    |   |       | 7.3 |       |   |      | 5.4 |      
|                        | Restructuring and special
charge |                          |       | 6.4   |       |       |      | (18.6 | )     |       |          |      |          |               |          | 25.0          |          |      |  | n/m  |      |      |   | (18.6 | )   |       |   | n/m  |    
|                        | Investment impairment charge     |                          |       | (2.0  | )     |       |      | (11.4 | )     |       |          |      |          |               |          | 9.4           |          |      |  | n/m  |      |      |   | (11.4 | )   |       |   | n/m  |    
|                        |                                  |                          |       |       |       |       |      |       |       |       |          |       |          |               |          |               |          |      |  |      |      |      |   |       |     |       |   |     
|                        |                                  |                          | Total |       | $     | 146.0 |      |       | $     | 111.5 |          |       | $        | 134.2         |          |               | $        | 34.5 |  |      |      | 30.9 | % |       | $   | (22.7 | ) |      |     | (16.9 | )%
|                        |                                  |                          |       |       |       |       |      |       |       |       |          |       |          |               |          |               |          |      |  |      |      |      |   |       |     |       |   |     



---

|(a) |  | Excludes an operating income benefit of $15.8 million from the CenDon
Restructuring, operating income for Bell Atlantic of $7.3 million and
operating loss for Cincinnati of $1.0 million in 2000.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(b) |  | Excludes the operating loss of $8.9 million for GDS in 2000.                                                                                                                                      

Operating income was $146.0 million, $111.5 million and $147.4 million in 2002,
2001 and 2000, respectively. Operating income from DonTech decreased $5.3
million in 2002 and $1.6 million in 2001. See Partnership and Joint Venture
Income above for further details of the decrease in DonTech operating income.

Operating income from DAS increased $5.3 million in 2002 compared to 2001 due
to higher sales at Sprint, the contractual increase in the priority
distribution rate and the benefit from the CenDon settlement. This increase
was partially offset by a reversal of $1.4 million of sales claims allowances
in 2001. DAS operating income also benefited from lower software amortization
expense as the significant amount of investment in software development made at
the Raleigh publishing facility in 1995 and 1996 was fully amortized during
2000 and 2001. DAS operating income in 2001 decreased $15.2 million compared
to 2000 as operating income for 2000 included a one-time benefit of $15.8
million from the CenDon Restructuring and operating income of $6.3 million from
Bell Atlantic and Cincinnati. The decrease in 2001 operating income caused by
these items was partially offset by lower information technology and publishing
costs due to the full-year benefit of cost cutting initiatives and strategic
actions taken in 2000 plus higher Sprint income from cost management and
controls and the reversal of prior period sales claims allowances.

General and Corporate costs were consistent with last year as lower salary and
benefit costs from the executive management transition in 2002 were offset by
$1.2 million of costs related to the acquisition of SPA. General and Corporate
costs decreased $2.0 million in 2001 compared to 2000 primarily due to cost
cutting initiatives and headcount reductions that resulted in lower salary and
benefit costs, lower rental costs, the elimination of corporate planning and
international development efforts and lower depreciation expense.

Interest and Taxes

Interest expense was $35.5 million, $27.4 million and $35.9 million in
2002, 2001 and 2000, respectively. Interest expense for 2002 includes $12.7
million of interest incurred on the $1,825 million of proceeds from Term Loan B
and the Notes that were held in escrow. Interest expense, excluding the
interest on the funds in escrow, was $22.8 million, $4.6 million lower than
2001 due to lower outstanding borrowings and lower interest rates. Interest
income in 2002 of $2.0 million includes $1.5 million of income on the funds
held in escrow. Interest expense in 2002 and 2001 benefited from prepayments
of $65 million of debt in 2001 and $90 million of debt in 2000.

The effective tax rate for 2002, 2001
and 2000 was 40.0%, 41.9% and 38.2%, respectively. The effective tax rate in 2002 and 2001 was impacted by
the ChinaBig investment impairment charges, which were not deductible against
income for tax purposes. These charges represent capital losses and can only
be offset against capital gains. These charges also gave rise to a deferred
tax asset of $6.1 million that can only be realized by offsetting future
capital gains. Given our current business portfolio and projections of future
results, we believe that the probability of generating future capital gains to
realize this asset is remote. Accordingly, a valuation allowance for the full
value of the asset was established.

38



---



##### Table of Contents



Other (expense) income

Other (expense) income in 2002 consisted of a $1.5 million charge related to
our interest rate swap and a $1.0 million reversal of remaining reserves
related to the disposition of businesses in 2000. Other (expense) income in
2000 consisted of the net gain on the disposition of businesses.

As a result of the then-pending repayment of existing variable rate debt in
connection with the SPA acquisition, our interest rate swap no longer qualified
for hedge accounting treatment at December 31, 2002. Accordingly, a charge of
$1.5 million, previously recognized in accumulated other comprehensive loss on
the balance sheet, was taken against earnings.

The calculation of the gain recorded in 2000 for the disposition of businesses
included certain reserves established in connection with the termination of the
Agency Agreements with Bell Atlantic. These reserves were based on the best
information available to us at the time of the transaction. At December 31,
2002, we believe that sufficient time has elapsed since the transaction and
that no additional costs will be incurred. Accordingly, remaining reserves of
$1.0 million were reversed into income.

Net income and net income available to common shareholders

Net income was $67.2 million, $49.8 million and $124.8 million in 2002, 2001
and 2000, respectively. The dividend on the Preferred Stock, whether paid in
cash or allowed to accrue, reduces net income and the residual is net income
available to common shareholders. For 2002, net income was reduced by a
Preferred Stock dividend of $24.7 million to derive net income available to
common shareholders of $42.5 million.

The amount of the Preferred Stock dividend includes the stated 8% dividend of
$0.5 million (pro rata for the period outstanding) and a deemed dividend for a
beneficial conversion feature (BCF) of $24.2 million. The BCF is a function
of the conversion price of the Preferred Stock ($24.05), the fair value of the
warrants ($5.3 million based on the Black Scholes model and an exercise price
of $26.28) and the fair market value of the underlying common stock on the date
of issuance ($29.92). The full amount of the BCF is treated as a deemed
dividend in 2002 as the Preferred Stock was convertible into common stock
immediately after issuance. An additional BCF of $38.2 million resulted from
the issuance of 130,000 additional shares of Preferred Stock to the GS Funds in
January 2003, which will be recorded as a deemed dividend in the first quarter
2003.

Earnings Per Share

Basic earnings per common share (EPS) are generally calculated by dividing
income available to common shareholders by the weighted average number of
common shares outstanding. However, because the Preferred Stock contains
certain participation rights, Topic D-95 requires that the dilutive effect of
those securities be included in the weighted average number of shares
outstanding. Furthermore, Topic D-95 requires that the dilutive effect
included in basic EPS may be calculated using either the if-converted method or
the two-class method. However, the dilutive effect of the Preferred Stock
cannot be less than that which would result from the application of the
two-class method.

Diluted EPS are calculated by dividing net income by the weighted average
common shares outstanding plus common share equivalents. Common share
equivalents include stock options and warrants, the dilutive effect of which is
calculated using the treasury stock method, and Preferred Stock, the potential
dilutive effect of which is calculated using the if-converted method.

For the years ended December 31, 2001 and 2000, basic earnings per share were
calculated by dividing net income by the weighted average common shares
outstanding during the year and diluted earnings per share were calculated by
dividing net income by the weighted average common shares outstanding plus
potentially dilutive common shares, primarily stock options, calculated using
the treasury stock method.

39



---



##### Table of Contents



EPS for the years ended December 31, 2002, 2001 and 2000 are presented below.

|                                                                                                                                                                                                                                                                                                                                   |                                                  |         |        |        |      |      |        |   |      |   |         |   |      | 
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------ | ------- | ------ | ------ | ---- | ---- | ------ | - | ---- | - | ------- | - | ---- | 
|( in thousands, except per share data)                                                                                                                                                                                                                                                                                             |                                                  | 2002    |        | 2001   |      | 2000
|                                                                                                                                                                                                                                                                                                                                   |                                                  |         |        |        |      |     
|Net income available to common                                                                                                                                                                                                                                                                                                     |                                                  | $       | 42,475 |        |      | $    | 49,815 |   |      | $ | 124,758 |  
|                                                                                                                                                                                                                                                                                                                                   |                                                  |         |        |        |      |      |        |   |      |   |         |  
|Weighted average common shares outstanding                                                                                                                                                                                                                                                                                         |                                                  |         | 29,643 |        |      |      | 30,207 |   |      |   | 31,947  |  
|Dilutive effect of stock options                                                                                                                                                                                                                                                                                                   |                                                  |         | 655    |        |      |      | 769    |   |      |   | 647     |  
|                                                                                                                                                                                                                                                                                                                                   |                                                  |         |        |        |      |      |        |   |      |   |         |  
|Weighted average common and common
equivalent shares outstanding                                                                                                                                                                                                                                                                   |                                                  |         | 30,298 |        |      |      | 30,976 |   |      |   | 32,594  |  
|                                                                                                                                                                                                                                                                                                                                   |                                                  |         |        |        |      |      |        |   |      |   |         |  
|Earnings per share                                                                                                                                                                                                                                                                                                                 |                                                  |         |        |        |      |      |        |   |      |   |         |  
|                                                                                                                                                                                                                                                                                                                                   |                                                  | Basic   |        | $      | 1.42 |      |        | $ | 1.65 |   |         | $ | 3.91 | 
|                                                                                                                                                                                                                                                                                                                                   |                                                  | Diluted |        | $      | 1.40 |      |        | $ | 1.61 |   |         | $ | 3.83 | 
|                                                                                                                                                                                                                                                                                                                                  
|The calculation of EPS for 2002 is as
follows:                                                                                                                                                                                                                                                                                     |                                                  |         |        |        |      |      |        |   |      |   |         |  
|                                                                                                                                                                                                                                                                                                                                  
|Basic EPS  If-Converted Method                                                                                                                                                                                                                                                                                                    |                                                  |         |        |        |      |      |        |   |      |   |         |  
|Income available to common                                                                                                                                                                                                                                                                                                         |                                                  | $       | 42,475 |        |      |      |        |   |      |   |         |  
|Preferred Stock dividend                                                                                                                                                                                                                                                                                                           |                                                  |         | 24,702 |        |      |      |        |   |      |   |         |  
|                                                                                                                                                                                                                                                                                                                                   |                                                  |         |        |        |      |      |        |   |      |   |         |  
|Net income                                                                                                                                                                                                                                                                                                                         |                                                  | $       | 67,177 |        |      |      |        |   |      |   |         |  
|                                                                                                                                                                                                                                                                                                                                   |                                                  |         |        |        |      |      |        |   |      |   |         |  
|Weighted average common shares outstanding                                                                                                                                                                                                                                                                                         |                                                  |         | 29,643 |        |      |      |        |   |      |   |         |  
|Weighted average common equivalent shares
assuming conversion of Preferred Stock                                                                                                                                                                                                                                                   |                                                  |         | 281    |        |      |      |        |   |      |   |         |  
|                                                                                                                                                                                                                                                                                                                                   |                                                  |         |        |        |      |      |        |   |      |   |         |  
|                                                                                                                                                                                                                                                                                                                                   |                                                  |         | 29,924 |        |      |      |        |   |      |   |         |  
|                                                                                                                                                                                                                                                                                                                                   |                                                  |         |        |        |      |      |        |   |      |   |         |  
|Basic earnings per share  if-converted method                                                                                                                                                                                                                                                                                     |                                                  | $       | 2.24   |        |      |      |        |   |      |   |         |  
|                                                                                                                                                                                                                                                                                                                                   |                                                  |         |        |        |      |      |        |   |      |   |         |  
|                                                                                                                                                                                                                                                                                                                                  
|At December 31, 2002, the Preferred Stock
was convertible into 2,933,888 shares
of common stock. However, since the
Preferred Stock was issued in November
2002, the number of common share
equivalents included in the EPS calculation
has been weighted for the actual time the
Preferred Stock was outstanding
during the year.
|                                                                                                                                                                                                                                                                                                                                  
|Basic EPS  Two-Class Method                                                                                                                                                                                                                                                                                                       |                                                  |         |        |        |      |      |        |   |      |   |         |  
|                                                                                                                                                                                                                                                                                                                                   | Income available to common and
common equivalent |         | $      | 42,475 |      |      |        |   |      |   |         |   |     
|                                                                                                                                                                                                                                                                                                                                   | Amount allocable to common shares (1)            |         |        | 99     | %    |      |        |   |      |   |         |   |     
|                                                                                                                                                                                                                                                                                                                                   |                                                  |         |        |        |      |      |        |   |      |   |         |  
|                                                                                                                                                                                                                                                                                                                                   | Rights to undistributed earnings                 |         | $      | 42,051 |      |      |        |   |      |   |         |   |     
|                                                                                                                                                                                                                                                                                                                                   | Weighted average common shares outstanding       |         |        | 29,643 |      |      |        |   |      |   |         |   |     
|                                                                                                                                                                                                                                                                                                                                   |                                                  |         |        |        |      |      |        |   |      |   |         |  
|Basic earnings per share  two-class method                                                                                                                                                                                                                                                                                        |                                                  | $       | 1.42   |        |      |      |        |   |      |   |         |  
|                                                                                                                                                                                                                                                                                                                                   |                                                  |         |        |        |      |      |        |   |      |   |         |  
|                                                                                                                                                                                                                                                                                                                                   |                                                  |         |        |        |      |      |        |   |      |   |         |  
|(1) 29,643 / (29,643 + 281)                                                                                                                                                                                                                                                                                                        |                                                  |         |        |        |      |      |        |   |      |   |         |  
|                                                                                                                                                                                                                                                                                                                                  
|Diluted EPS                                                                                                                                                                                                                                                                                                                        |                                                  |         |        |        |      |      |        |   |      |   |         |  
|Net income available to common                                                                                                                                                                                                                                                                                                     |                                                  | $       | 42,475 |        |      |      |        |   |      |   |         |  
|                                                                                                                                                                                                                                                                                                                                   |                                                  |         |        |        |      |      |        |   |      |   |         |  
|Weighted average common shares outstanding                                                                                                                                                                                                                                                                                         |                                                  |         | 29,643 |        |      |      |        |   |      |   |         |  
|Dilutive effect of stock options                                                                                                                                                                                                                                                                                                   |                                                  |         | 655    |        |      |      |        |   |      |   |         |  
|                                                                                                                                                                                                                                                                                                                                   |                                                  |         |        |        |      |      |        |   |      |   |         |  
|Weighted average common and common
equivalent shares
outstanding                                                                                                                                                                                                                                                                   |                                                  |         | 30,298 |        |      |      |        |   |      |   |         |  
|                                                                                                                                                                                                                                                                                                                                   |                                                  |         |        |        |      |      |        |   |      |   |         |  
|Diluted EPS                                                                                                                                                                                                                                                                                                                        |                                                  | $       | 1.40   |        |      |      |        |   |      |   |         |  
|                                                                                                                                                                                                                                                                                                                                   |                                                  |         |        |        |      |      |        |   |      |   |         |  

40



---



##### Table of Contents



The conversion of the Preferred Stock was not reflected in the calculation of
diluted EPS because the effect was anti-dilutive.

41



---



##### Table of Contents






LIQUIDITY AND CAPITAL RESOURCES

The SPA acquisition was financed through borrowings under our new $1,525
million Credit Facility, the issuance of $325 million 8 7/8% Notes and $600
million 10 7/8% Notes and the issuance of $200 million of Preferred Stock to
the GS Funds. To take advantage of favorable market conditions and to ensure
the timely consummation of the SPA acquisition, in December 2002, we incurred
debt under and received the gross proceeds of the Term Loan B and the Notes.
The total proceeds of $1,825 million were deposited and held in escrow pending
the closing of the SPA acquisition. Additionally, the GS Funds invested an
initial $70 million of their $200 million commitment through the purchase of
70,000 shares of Preferred Stock and warrants to purchase 577,500 shares of our
common stock in November 2002. We issued the Preferred Stock earlier than
anticipated in order to facilitate the cure of a technical default under the
indenture governing the Existing Notes. The technical default resulted from
our inadvertent failure to cause certain subsidiaries to be added as guarantors
to such indenture in 2000. The net proceeds of $69.3 million from the issuance
of Preferred Stock and warrants were used to offset certain restricted payments
that were made in 2000 and 2001. As a result, the technical default was cured.

At December 31, 2002, we had $1,936.5 million of cash and cash equivalents.
This amount included the proceeds of $1,825 million held in escrow, $69.3
million from the issuance of Preferred Stock and warrants and $34.4 million of
the $40.0 million drawn under our previous revolver. Accordingly, $1,928.7
million of the cash on hand at year-end was restricted and intended to be used
to finance the SPA acquisition, repay existing debt and pay transaction costs.

On January 3, 2003, we borrowed $510 million consisting of $500 million Term
Loan A proceeds and $10 million under the Revolver. We also received the
proceeds of $1,825 million held in escrow and the GS Funds purchased the
remaining $130 million of Preferred Stock and warrants to purchase 1,072,500
shares of our common stock. These proceeds were used to acquire the common
stock of SPA, repay existing debt and pay transaction costs.

42



---



##### Table of Contents



The sources and uses of funds in connection with the acquisition are summarized
as follows:

|                                                       |               |   |         |         | 
|------------------------------------------------------ | ------------- | - | ------- | ------- | 
|Sources:                                               |               |   |         |        
|Proceeds from the Credit Facility                      |               | $ | 1,410.0 |        
|Proceeds from the Notes                                |               |   | 925.0   |        
|Proceeds from the sale of Preferred Stock and warrants |               |   | 200.0   | (1)    
|Available cash                                         |               |   | 29.8    |        
|                                                       |               |   |         |        
|                                                       | Total sources |   | $       | 2,564.8 | 
|                                                       |               |   |         |        
|Uses:                                                  |               |   |         |        
|Purchase price                                         |               | $ | 2,213.5 |        
|Payment of CenDon obligations                          |               |   | 14.0    |        
|Repay existing debt, including accrued interest        |               |   | 244.2   |        
|Fees and expenses                                      |               |   | 93.1    |        
|                                                       |               |   |         |        
|                                                       | Total uses    |   | $       | 2,564.8 | 
|                                                       |               |   |         |        



---

|(1) |  | Calculated prior to the application of a 1% closing payment and
other fees.
|--- |  | ---------------------------------------------------------------------------

In connection with a tender offer and exit consent solicitation, $128.8 million
of the Existing Notes were repurchased on January 3, 2003. We borrowed an
initial $1,410 million under the Credit Facility contingent upon our repurchase
of the entire $150 million aggregate principal amount of the Existing Notes.
Any proceeds that were not used to repurchase the Existing Notes were required
to be repaid to the lenders under the Credit Facility. Accordingly, $21.2
million, representing the amount of Existing Notes that remain outstanding
following the tender offer and exit consent solicitation, was repaid to the
lenders under the Credit Facility shortly after the consummation of the
acquisition.

The Credit Facility bears interest, at our option, at either:



| |  |  | The highest of (i) a base rate as determined by Deutsche Bank
Securities Inc., Salomon Smith Barney Inc. or Bear, Sterns & Co. Inc.;
(ii) the three-month certificate of deposit rate plus 1/2 of 1%, and
(iii) the Federal Funds Effective Rate (as defined) plus 1/2 of 1%;
or
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | LIBOR rate plus an applicable margin. We may elect interest
periods of 1, 2, 3, 6 or 12 months for LIBOR borrowings.                                                                                                                                                            

The Credit Facility and the indentures governing the Notes contain usual and
customary negative covenants that, among other things, place limitations on our
ability to (i) incur additional indebtedness, including capital leases and
liens; (ii) pay dividends and repurchase our capital stock; (iii) enter into
mergers, consolidations, acquisitions, asset dispositions and sale-leaseback
transactions; (iv) make capital expenditures; and (v) issue capital stock of
our subsidiaries. The Credit Facility also contains financial covenants
relating to maximum leverage, minimum interest coverage, minimum fixed charge
coverage and maximum senior leverage. The Revolver and Term Loan A mature
December 2008 and the Term Loan B loan matures June 2010. Substantially all of
our assets, including the capital stock of our subsidiaries, are pledged to
secure our obligations under the Credit Facility.

The Preferred Stock is convertible at any time at a price of $24.05. The
cumulative dividend of 8% is compounded quarterly and may be paid in cash or
allowed to accrue, at our option. The Credit Facility significantly limits our
ability to pay the Preferred Stock dividends in cash through 2004. The
warrants issued in November 2002 have an exercise price of $26.28 and the
warrants issued in January 2003 have an exercise price of $28.62. These
warrants can be exercised at any time before they expire on January 3, 2008.
We intend to issue treasury stock to satisfy conversion of the Preferred Stock
and exercise of warrants.

As a result of the acquisition, we have a significant amount of debt and our
debt service requirements are significantly higher than in the past. Aggregate
outstanding debt as of January 3, 2003 was $2,356.2 million. The Term Loan A
and Term Loan B require quarterly principal payments beginning in the first
quarter of 2003. In

43



---



##### Table of Contents



addition to the $21.2 million repaid under the Credit Facility, we have prepaid
an additional $75 million of debt that was outstanding at January 3, 2003. As
of March 17, 2003, we have $125 million of borrowing capacity under the
Revolver. The following table sets forth our commitments for debt and lease
payments for the next five years and thereafter. The $58.7 million of required
principal payments in 2003 include only the scheduled principal payments under
the Credit Facility and do not include the repayment of existing debt on
January 3, 2003 or the $75 million prepayment of new debt.

|                  |       |   |      |      |      |   |      |      |      |   |      |      |            |   |       |      |  |   |      |      |  |   |         |         |  |   |         |         | 
|----------------- | ----- | - | ---- | ---- | ---- | - | ---- | ---- | ---- | - | ---- | ---- | ---------- | - | ----- | ---- |  | - | ---- | ---- |  | - | ------- | ------- |  | - | ------- | ------- | 
|                  |       |   | 2003 |      | 2004 |   | 2005 |      | 2006 |   | 2007 |      | Thereafter |   | Total
|                  |       |   |      |      |      |   |      |      |      |   |      |      |            |   |      
|Debt payments     |       | $ | 58.7 |      |      | $ | 75.2 |      |      | $ | 75.2 |      |            | $ | 75.2  |      |  | $ | 91.8 |      |  | $ | 1,883.9 |         |  | $ | 2,260.0 |        
|Lease commitments |       |   | 7.0  |      |      |   | 6.2  |      |      |   | 2.6  |      |            |   | 0.4   |      |  |   | 0.4  |      |  |   | 1.8     |         |  |   | 18.4    |        
|                  |       |   |      |      |      |   |      |      |      |   |      |      |            |   |       |      |  |   |      |      |  |   |         |         |  |   |         |        
|                  | Total |   | $    | 65.7 |      |   | $    | 81.4 |      |   | $    | 77.8 |            |   | $     | 75.6 |  |   | $    | 92.2 |  |   | $       | 1,885.7 |  |   | $       | 2,278.4 | 
|                  |       |   |      |      |      |   |      |      |      |   |      |      |            |   |       |      |  |   |      |      |  |   |         |         |  |   |         |        

Our primary source of liquidity will continue to be cash flows from operations
as well as available borrowing capacity under the Revolver. Cash flows from
operations will consist mainly of cash receipts from advertisers from the sale
of advertising in our yellow pages directories, revenue participation payments
received directly from SBC based on the value of advertising sales sold by
DonTech and cash distributions from DonTech. Our primary liquidity requirement
will be for principal and interest payments on our debt.

Our ability to meet our debt service requirements will depend on our ability to
generate cash flow in the future. Our primary sources of cash flow will
consist mainly of cash receipts from the sale of advertising in our yellow
pages directories and revenue participation payments and cash distributions
related to DonTech. These sources are directly dependent on the value of
yellow pages advertising sold and can be impacted by, among other factors,
general economic conditions, competition from other yellow pages directory
publishers and other alternative products, consumer confidence and the level of
demand for yellow pages advertising. We believe that the cash flow from
operations, along with borrowing capacity under the Revolver, will be adequate
to fund our operations and meet our debt service requirements for at least the
next 12 to 24 months. However, we make no assurances that our business will
generate sufficient cash flow from operations or that sufficient borrowing will
be available under the Revolver to enable us to fund our operations and meet
all debt service requirements.

Pre-Acquisition Liquidity

Cash flow from operations in 2002 was $50.0 million compared to $86.9 million
in 2001. The decrease of $36.9 million is mainly due to payments
of:



| |  |  | $13.5 million for the 2001 executive management transition;                       
| | - |  | ----------------------------------------------------------------------------------
|
| |  |  | $14.9 million relating to the SPA acquisition; and                                
|
| |  |  | $4.9 million of interest on the acquisition financing proceeds placed into escrow.

Cash flow from operations in 2001 increased $4.1 million compared to the $82.8
million in 2000. Payments of accounts payable and accrued liabilities
decreased $53.7 million as 2000 included significant payments for severance and
taxes related to the Bell Atlantic and Cincinnati transactions and cash
receipts from the DonTech Partnership and CenDon joint venture in excess of
income increased $9.6 million, primarily due to the timing of cash receipts
relative to the recognition of income. Income from DonTech and CenDon is
recognized when a sales contract is executed; however, cash is not received
until the publisher bills the advertiser. Therefore, timing differences exist
as to when income is recognized and cash is collected. Partially offsetting
these increases were lower collections of accounts receivable of $41.0 million
in 2001 as accounts receivable collections in 2000 included the collection of
all outstanding Bell Atlantic receivables at the time of the buyout of the
Agency Agreements.

Cash used in investing activities in 2002 was $1,932.4 million, of which
$1,928.7 million represents an increase in restricted cash intended to finance
the SPA acquisition. Capital expenditures were $3.7 million in 2002 and $4.6
million in 2001. In 2001, we also made our final required investment in
ChinaBig of $1.6 million. We currently have no material investment
commitments. Cash provided from investing activities was $109.4 million in
2000. This amount included $122.0 million from the buyout of the Bell Atlantic
Agency Agreements and sale of our

44



---



##### Table of Contents



Cincinnati operations. Capital expenditures in 2001 were $3.1 million lower
than 2000 due to lower capital requirements resulting from the reduction in
headcount and disposition of businesses.

Cash provided by financing activities
of $1,875.6 million in 2002 consisted primarily of:



| |  |  | $1,825 million of proceeds from Term Loan B and the Notes;                                                                                                  
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | $40.0 million borrowed under our previous revolving credit
facility, $34.4 million of which was used to fund interest and
underwriting fees into escrow; and
|
| |  |  | $69.3 million received from the issuance of Preferred Stock and warrants to the GS Funds; net of                                                            
|
| |  |  | $62.5 million used to repay debt.                                                                                                                           

There were no treasury stock repurchases in 2002 as we suspended our share
repurchase programs in the first quarter of 2002 while we analyzed various
acquisition and growth opportunities.

Cash used by financing activities in 2001 was $121.5 million and consisted of
debt prepayments of $65.0 million, treasury stock repurchases of $64.0 million
and proceeds from option exercises of $7.5 million. Cash used by financing
activities in 2000 was $139.1 million and consisted of debt prepayments of
$90.0 million and a scheduled principal repayment of $3.0 million, treasury
stock repurchases of $53.6 million and proceeds from option exercises of $7.5
million.




ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Pre-Acquisition Interest Rate Risk and Risk Management

We were exposed to interest rate risk through our prior credit facility, under
which we borrowed at prevailing short-term rates. We have an outstanding
interest rate swap agreement with a notional principal amount of $75 million,
whereby we pay a fixed rate of 5.9% and receive floating rate payments based on
3-month LIBOR rates. For 2002, the weighted average rate received was 1.1%.
This swap agreement expires in June 2003. Due to the pending repayment of
variable rate debt under our prior credit agreement in conjunction with the SPA
acquisition, at December 31, 2002, the interest rate swap no longer qualified
for hedge accounting treatment. We recognized a charge of $1.5 million in 2002
to record the swap at its fair market value. We expect that changes in the
fair value of the swap in 2003 will result in a gain of approximately $1.5
million as the swap approaches maturity and the fair value declines to zero.
We intend to hold this interest rate swap through its expiration date.

The outstanding interest rate swap exposes us to credit risk in the event that
we are in a net gain position and the counter party to the agreement does not,
or cannot meet its obligation. The notional amount is used to measure interest
to be paid or received and does not represent the amount of exposure to credit
loss. The loss would be limited to the amount that would have been received,
if any, over the remaining life of the swap agreement. At December 31, 2002,
we were in a net loss position of $1.5 million (see Market Risk Sensitive
Instruments below), and therefore, were not exposed to credit risk. The
counterparty to the swap is a major financial institution and, were we in a net
gain position, we would expect this counterparty to be able to perform its
obligations under the swap. We use derivative financial instruments for
hedging purposes only and not for trading or speculative purposes. A
discussion of our accounting policies and further disclosure relating to these
financial instruments is included in Note 1 to the Consolidated Financial
Statements included in Item 8.

Market Risk Sensitive Instruments

The provisions of SFAS 133, Accounting for Derivative Instruments and Hedging
Activities, as amended by SFAS 137 and FAS 138 (SFAS 133), require that
derivative instruments be recorded at fair value. At December 31, 2002, our
interest rate swap did not meet the requirements for hedge accounting treatment
and in accordance with SFAS 133, the unrealized fair value of the swap, which
is the difference between what we would have to pay to terminate the swap, and
the book value of the swap, was a loss of $1.5 million. This amount was
recognized as a non-operating expense in 2002. The fair value of the swap was
based on quoted market prices.

45



---



##### Table of Contents



Post-Acquisition Interest Rate Risk and Risk Management

The Credit Facility and Revolver bear interest at variable rates. Accordingly,
our earnings and cash flow are affected by changes in interest rates. On the
closing date, the weighted average interest rate of borrowings under the
Credit Facility and Revolver was 7.1%. Assuming a 1/8% increase in the average
interest rate of these borrowings, annual interest expense would increase
approximately $1.7 million. Under the terms of the Credit Facility, we are
required to implement interest rate management strategies that would allow us
to effectively fix the interest rate on at least 50% of our total outstanding
debt no later than March 31, 2003. We are reviewing various strategies and
anticipate entering into agreements that would enable us to fix the interest
rate of approximately $250 million of variable rate debt.




ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA




INDEX TO FINANCIAL STATEMENTS

|                                                                                                       |  |      |    | 
|------------------------------------------------------------------------------------------------------ |  | ---- | -- | 
|                                                                                                       |  | Page
|                                                                                                       |  |     
|R.H. DONNELLEY CORPORATION                                                                             |  |      |    | 
|Report of Independent Accountants                                                                      |  |      | 47 | 
|Consolidated Balance Sheets at December 31, 2002 and 2001                                              |  |      | 48 | 
|Consolidated Statements of Operations for the three years ended December 31, 2002                      |  |      | 49 | 
|Consolidated Statements of Cash Flows for the three years ended December 31, 2002                      |  |      | 50 | 
|Consolidated Statement of Changes in Shareholders Deficit for the three years ended December 31, 2002 |  |      | 51 | 
|Notes to Consolidated Financial Statements                                                             |  |      | 52 | 
|DONTECH                                                                                                |  |      |    | 
|Report of Independent Accountants                                                                      |  |      | 79 | 
|Combined Balance Sheets at December 31, 2002 and 2001                                                  |  |      | 80 | 
|Combined Statements of Operations for the three years ended December 31, 2002                          |  |      | 81 | 
|Combined Statements of Cash Flows for the three years ended December 31, 2002                          |  |      | 82 | 
|Combined Statements of Partners Capital for the three years ended December 31, 2002                   |  |      | 83 | 
|Notes to Combined Financial Statements                                                                 |  |      | 84 | 

46



---



##### Table of Contents






REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders
of R.H. Donnelley Corporation:

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, shareholders deficit and cash flows
present fairly, in all material respects, the financial position of R.H.
Donnelley Corporation and its subsidiaries (the Company) at December 31, 2002
and 2001, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 2002, in conformity with
accounting principles generally accepted in the United States of America.
These financial statements are the responsibility of the Companys management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of America, which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion.

/s/ PRICEWATERHOUSECOOPERS LLP

New York, New York
February 21, 2003

47



---



##### Table of Contents






R.H. DONNELLEY CORPORATION

CONSOLIDATED BALANCE SHEETS

|                                                |                                                                                                                                   |                                                                               |                                                                                     |           |        |              |         |          |        |          |   | 
|----------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------- | ----------------------------------------------------------------------------------- | --------- | ------ | ------------ | ------- | -------- | ------ | -------- | - | 
|                                                |                                                                                                                                   |                                                                               |                                                                                     |           |        | December 31,
|                                                |                                                                                                                                   |                                                                               |                                                                                     |           |        |             
|(in thousands, except share and per share data) |                                                                                                                                   | 2002                                                                          |                                                                                     | 2001     
|                                                |                                                                                                                                   |                                                                               |                                                                                     |          
|                                                |                                                                                                                                   |                                                                               |                                                                                     | Assets    |        |              |         |          |        |          |   | 
|Current Assets                                  |                                                                                                                                   |                                                                               |                                                                                     |           |        |              |         |         
|                                                | Cash and cash equivalents                                                                                                         |                                                                               | $                                                                                   | 7,787     |        |              | $       | 14,721   |       
|                                                | Restricted cash                                                                                                                   |                                                                               |                                                                                     | 1,928,700 |        |              |         |         |       
|                                                |                                                                                                                                   |                                                                               |                                                                                     |           |        |              |         |          |       
|                                                |                                                                                                                                   |                                                                               | Total cash, cash equivalents and restricted cash                                    |           |        | 1,936,487    |         |          |        | 14,721   |  
|                                                | Accounts receivable                                                                                                               |                                                                               |                                                                                     |           |        |              |         |          |       
|                                                |                                                                                                                                   | Trade                                                                         |                                                                                     |           | 31,978 |              |         |          | 29,240 |         
|                                                |                                                                                                                                   | Other                                                                         |                                                                                     |           | 1,582  |              |         |          | 4,121  |         
|                                                |                                                                                                                                   | Allowance for doubtful accounts                                               |                                                                                     |           | (4,772 | )            |         |          | (6,339 | )       
|                                                |                                                                                                                                   |                                                                               |                                                                                     |           |        |              |         |          |       
|                                                |                                                                                                                                   |                                                                               | Total accounts receivable                                                           |           |        | 28,788       |         |          |        | 27,022   |  
|                                                | Other current assets                                                                                                              |                                                                               |                                                                                     | 3,399     |        |              |         | 2,275    |       
|                                                |                                                                                                                                   |                                                                               |                                                                                     |           |        |              |         |          |       
|                                                |                                                                                                                                   |                                                                               | Total current assets                                                                |           |        | 1,968,674    |         |          |        | 44,018   |  
|Fixed assets and computer software  net        |                                                                                                                                   |                                                                               | 12,008                                                                              |           |        |              | 14,514  |         
|Partnership and joint venture investments       |                                                                                                                                   |                                                                               | 202,236                                                                             |           |        |              | 208,989 |         
|Prepaid pension                                 |                                                                                                                                   |                                                                               | 22,748                                                                              |           |        |              | 20,956  |         
|Other non-current assets                        |                                                                                                                                   |                                                                               | 17,709                                                                              |           |        |              | 7,504   |         
|                                                |                                                                                                                                   |                                                                               |                                                                                     |           |        |              |         |          |       
|                                                |                                                                                                                                   |                                                                               | Total Assets                                                                        |           | $      | 2,223,375    |         |          | $      | 295,981  |  
|                                                |                                                                                                                                   |                                                                               |                                                                                     |           |        |              |         |          |       
|                                                |                                                                                                                                   | Liabilities, Redeemable Convertible Preferred Stock and Shareholders Deficit |                                                                                     |           |        |              |         |          |        |         
|Current Liabilities                             |                                                                                                                                   |                                                                               |                                                                                     |           |        |              |         |         
|                                                | Accounts payable and accrued liabilities                                                                                          |                                                                               | $                                                                                   | 18,586    |        |              | $       | 25,381   |       
|                                                | Restructuring and other related liabilities                                                                                       |                                                                               |                                                                                     | 1,675     |        |              |         | 16,357   |       
|                                                | Current portion of long-term debt                                                                                                 |                                                                               |                                                                                     | 13,780    |        |              |         | 2,846    |       
|                                                |                                                                                                                                   |                                                                               |                                                                                     |           |        |              |         |          |       
|                                                |                                                                                                                                   |                                                                               | Total current liabilities                                                           |           |        | 34,041       |         |          |        | 44,584   |  
|Long-term debt                                  |                                                                                                                                   |                                                                               | 2,075,470                                                                           |           |        |              | 283,904 |         
|Long-term restructuring liability               |                                                                                                                                   |                                                                               |                                                                                    |           |        |              | 4,934   |         
|Deferred income taxes  net                     |                                                                                                                                   |                                                                               | 60,783                                                                              |           |        |              | 52,632  |         
|Pension and postretirement benefits             |                                                                                                                                   |                                                                               | 7,264                                                                               |           |        |              | 7,431   |         
|Other non-current liabilities                   |                                                                                                                                   |                                                                               | 12,958                                                                              |           |        |              | 13,809  |         
|                                                |                                                                                                                                   |                                                                               |                                                                                     |           |        |              |         |          |       
|                                                |                                                                                                                                   |                                                                               | Total liabilities                                                                   |           |        | 2,190,516    |         |          |        | 407,294  |  
|Commitments and contingencies                   |                                                                                                                                   |                                                                               |                                                                                     |           |        |              |         |         
|Redeemable convertible preferred stock          |                                                                                                                                   |                                                                               | 63,459                                                                              |           |        |              |        |         
|Shareholders Deficit                           |                                                                                                                                   |                                                                               |                                                                                     |           |        |              |         |         
|                                                | Common stock, par value $1 per share, authorized 
400,000,000 shares; issued  51,621,894 shares for 2002 and 2001, respectively |                                                                               |                                                                                     | 51,622    |        |              |         | 51,622   |       
|                                                | Additional paid-in capital                                                                                                        |                                                                               |                                                                                     | 63,913    |        |              |         | 32,043   |       
|                                                | Warrants outstanding                                                                                                              |                                                                               |                                                                                     | 5,330     |        |              |         |         |       
|                                                | Unamortized restricted stock                                                                                                      |                                                                               |                                                                                     | (327      | )      |              |         | (336     | )     
|                                                | Retained earnings (deficit)                                                                                                       |                                                                               |                                                                                     | 13,605    |        |              |         | (28,870  | )     
|                                                | Treasury stock, at cost, 21,900,818 shares for 2002 and 22,231,910 shares for 2001                                                |                                                                               |                                                                                     | (164,743  | )      |              |         | (163,442 | )     
|                                                | Accumulated other comprehensive loss                                                                                              |                                                                               |                                                                                     |          |        |              |         | (2,330   | )     
|                                                |                                                                                                                                   |                                                                               |                                                                                     |           |        |              |         |          |       
|                                                |                                                                                                                                   |                                                                               | Total shareholders deficit                                                         |           |        | (30,600      | )       |          |        | (111,313 | )
|                                                |                                                                                                                                   |                                                                               |                                                                                     |           |        |              |         |          |       
|                                                |                                                                                                                                   |                                                                               | Total Liabilities, Redeemable Convertible Preferred Stock
and Shareholders Deficit |           | $      | 2,223,375    |         |          | $      | 295,981  |  
|                                                |                                                                                                                                   |                                                                               |                                                                                     |           |        |              |         |          |       

The accompanying notes are an integral part of the consolidated financial statements.

48



---



##### Table of Contents






R.H. DONNELLEY CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

|                                            |                                            |                                                            |         |                          |         |      |         |        |         |   |         |         |         | 
|------------------------------------------- | ------------------------------------------ | ---------------------------------------------------------- | ------- | ------------------------ | ------- | ---- | ------- | ------ | ------- | - | ------- | ------- | ------- | 
|                                            |                                            |                                                            |         | Years Ended December 31,
|                                            |                                            |                                                            |         |                         
|                                            |                                            |                                                            |         | 2002                     |         | 2001 |         | 2000  
|                                            |                                            |                                                            |         |                          |         |      |         |       
|(in thousands, except per share data)       |                                            |                                                            |         |                          |         |      |         |        |         |   |         |        
|Gross revenue                               |                                            | $                                                          | 74,209  |                          |         | $    | 75,713  |        |         | $ | 148,109 |        
|Sales allowances                            |                                            |                                                            | (403    | )                        |         |      | 1,026   |        |         |   | (6,822  | )      
|                                            |                                            |                                                            |         |                          |         |      |         |        |         |   |         |        
|                                            | Net revenue                                |                                                            |         | 73,806                   |         |      |         | 76,739 |         |   |         | 141,287 |        
|Expenses                                    |                                            |                                                            |         |                          |         |      |         |        |         |   |         |        
|                                            | Operating expenses                         |                                                            |         | 46,421                   |         |      |         | 47,833 |         |   |         | 101,029 |        
|                                            | General and administrative expenses        |                                                            |         | 16,432                   |         |      |         | 16,643 |         |   |         | 25,143  |        
|                                            | Restructuring and special (benefit) charge |                                                            |         | (6,405                   | )       |      |         | 18,556 |         |   |         |        |        
|                                            | Investment impairment charge               |                                                            |         | 2,000                    |         |      |         | 11,432 |         |   |         |        |        
|                                            | Depreciation and amortization              |                                                            |         | 6,249                    |         |      |         | 10,767 |         |   |         | 15,433  |        
|                                            |                                            |                                                            |         |                          |         |      |         |        |         |   |         |        
|                                            |                                            | Total expenses                                             |         |                          | 64,697  |      |         |        | 105,231 |   |         |         | 141,605 | 
|Partnership and joint venture income        |                                            |                                                            | 136,873 |                          |         |      | 139,964 |        |         |   | 147,693 |        
|                                            |                                            |                                                            |         |                          |         |      |         |        |         |   |         |        
|                                            |                                            | Operating income                                           |         |                          | 145,982 |      |         |        | 111,472 |   |         |         | 147,375 | 
|Interest expense                            |                                            |                                                            | (35,499 | )                        |         |      | (27,411 | )      |         |   | (35,908 | )      
|Interest income                             |                                            |                                                            | 1,951   |                          |         |      | 1,763   |        |         |   | 3,912   |        
|Other (expense) income                      |                                            |                                                            | (451    | )                        |         |      |        |        |         |   | 86,495  |        
|                                            |                                            |                                                            |         |                          |         |      |         |        |         |   |         |        
|                                            |                                            | Income before income taxes                                 |         |                          | 111,983 |      |         |        | 85,824  |   |         |         | 201,874 | 
|Provision for income taxes                  |                                            |                                                            | 44,806  |                          |         |      | 36,009  |        |         |   | 77,116  |        
|                                            |                                            |                                                            |         |                          |         |      |         |        |         |   |         |        
|                                            |                                            | Net income                                                 |         |                          | 67,177  |      |         |        | 49,815  |   |         |         | 124,758 | 
|8% cumulative dividend on Preferred Stock   |                                            |                                                            | 544     |                          |         |      |        |        |         |   |        |        
|Deemed dividend on Preferred Stock          |                                            |                                                            | 24,158  |                          |         |      |        |        |         |   |        |        
|                                            |                                            |                                                            |         |                          |         |      |         |        |         |   |         |        
|                                            |                                            | Net income available to common shareholders                |         | $                        | 42,475  |      |         | $      | 49,815  |   |         | $       | 124,758 | 
|                                            |                                            |                                                            |         |                          |         |      |         |        |         |   |         |        
|Earnings per share                          |                                            |                                                            |         |                          |         |      |         |        |         |   |         |        
|                                            |                                            | Basic                                                      |         | $                        | 1.42    |      |         | $      | 1.65    |   |         | $       | 3.91    | 
|                                            |                                            |                                                            |         |                          |         |      |         |        |         |   |         |        
|                                            |                                            | Diluted                                                    |         | $                        | 1.40    |      |         | $      | 1.61    |   |         | $       | 3.83    | 
|                                            |                                            |                                                            |         |                          |         |      |         |        |         |   |         |        
|Shares used in computing earnings per share |                                            |                                                            |         |                          |         |      |         |        |         |   |         |        
|                                            |                                            | Basic                                                      |         |                          | 29,643  |      |         |        | 30,207  |   |         |         | 31,947  | 
|                                            |                                            |                                                            |         |                          |         |      |         |        |         |   |         |        
|                                            |                                            | Diluted                                                    |         |                          | 30,298  |      |         |        | 30,976  |   |         |         | 32,594  | 
|                                            |                                            |                                                            |         |                          |         |      |         |        |         |   |         |        
|Comprehensive Income:                       |                                            |                                                            |         |                          |         |      |         |        |         |   |         |        
|                                            |                                            | Net income available to common shareholders                |         | $                        | 42,475  |      |         | $      | 49,815  |   |         | $       | 124,758 | 
|                                            |                                            | Unrealized loss on interest rate swaps, net of tax benefit |         |                          |        |      |         |        | (2,330  | ) |         |         |        | 
|                                            |                                            |                                                            |         |                          |         |      |         |        |         |   |         |        
|                                            |                                            | Comprehensive income                                       |         | $                        | 42,475  |      |         | $      | 47,485  |   |         | $       | 124,758 | 
|                                            |                                            |                                                            |         |                          |         |      |         |        |         |   |         |        

The accompanying notes are an integral part of the consolidated financial statements.

49



---



##### Table of Contents






R.H. DONNELLEY CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                                           |                                                        |                                                     |            |                          |            |      |         |         |          |   |         |         |          |  
|-------------------------------------------------------------------------- | ------------------------------------------------------ | --------------------------------------------------- | ---------- | ------------------------ | ---------- | ---- | ------- | ------- | -------- | - | ------- | ------- | -------- | -
|                                                                           |                                                        |                                                     |            | Years Ended December 31,
|                                                                           |                                                        |                                                     |            |                         
|                                                                           |                                                        |                                                     |            | 2002                     |            | 2001 |         | 2000   
|                                                                           |                                                        |                                                     |            |                          |            |      |         |        
|(in thousands)                                                             |                                                        |                                                     |            |                          |            |      |         |         |          |   |         |        
|Cash Flows from Operating Activities                                       |                                                        |                                                     |            |                          |            |      |         |         |          |   |         |        
|Net income                                                                 |                                                        | $                                                   | 67,177     |                          |            | $    | 49,815  |         |          | $ | 124,758 |        
|Reconciliation of net income to net cash provided by
operating activities: |                                                        |                                                     |            |                          |            |      |         |         |          |   |         |        
|                                                                           | Depreciation and amortization                          |                                                     |            | 6,249                    |            |      |         | 10,767  |          |   |         | 15,433  |         
|                                                                           | Deferred income tax                                    |                                                     |            | 8,151                    |            |      |         | (8,281  | )        |   |         | (2,111  | )       
|                                                                           | Provision for bad debts                                |                                                     |            | 2,897                    |            |      |         | 2,978   |          |   |         | 4,306   |         
|                                                                           | Other noncash charges                                  |                                                     |            | 1,746                    |            |      |         | 2,481   |          |   |         | 3,302   |         
|                                                                           | Restructuring and special (benefit) charge             |                                                     |            | (6,694                   | )          |      |         | 18,556  |          |   |         |        |         
|                                                                           | Investment impairment charge                           |                                                     |            | 2,000                    |            |      |         | 11,432  |          |   |         |        |         
|                                                                           | Gain on disposition of businesses, net of tax          |                                                     |            | (659                     | )          |      |         |        |          |   |         | (53,454 | )       
|                                                                           | Loss on hedging activities                             |                                                     |            | 1,523                    |            |      |         |        |          |   |         |        |         
|                                                                           | Cash in excess of partnership and joint venture income |                                                     |            | 6,754                    |            |      |         | 11,893  |          |   |         | 2,252   |         
|                                                                           | (Increase) decrease in accounts receivable             |                                                     |            | (2,513                   | )          |      |         | 292     |          |   |         | 41,304  |         
|                                                                           | (Increase) decrease in other assets                    |                                                     |            | (16,394                  | )          |      |         | 263     |          |   |         | 6,226   |         
|                                                                           | Decrease in accounts payable and accrued liabilities   |                                                     |            | (19,014                  | )          |      |         | (14,982 | )        |   |         | (61,097 | )       
|                                                                           | (Decrease) increase in other non-current liabilities   |                                                     |            | (1,268                   | )          |      |         | 1,640   |          |   |         | 1,847   |         
|                                                                           |                                                        |                                                     |            |                          |            |      |         |         |          |   |         |        
|                                                                           |                                                        | Net cash provided by operating activities           |            |                          | 49,955     |      |         |         | 86,854   |   |         |         | 82,766   |  
|Cash Flows from Investing Activities                                       |                                                        |                                                     |            |                          |            |      |         |         |          |   |         |        
|Additions to fixed assets and computer software                            |                                                        |                                                     | (3,743     | )                        |            |      | (4,550  | )       |          |   | (7,717  | )      
|Increase in restricted cash                                                |                                                        |                                                     | (1,928,700 | )                        |            |      |        |         |          |   |        |        
|Investment in ChinaBig.com Limited                                         |                                                        |                                                     |           |                          |            |      | (1,550  | )       |          |   | (4,938  | )      
|Proceeds from disposition of businesses                                    |                                                        |                                                     |           |                          |            |      |        |         |          |   | 122,009 |        
|                                                                           |                                                        |                                                     |            |                          |            |      |         |         |          |   |         |        
|                                                                           |                                                        | Net cash (used in) provided by investing activities |            |                          | (1,932,443 | )    |         |         | (6,100   | ) |         |         | 109,354  |  
|Cash Flows from Financing Activities                                       |                                                        |                                                     |            |                          |            |      |         |         |          |   |         |        
|Repayment of debt under Existing Credit Facility                           |                                                        |                                                     | (62,500    | )                        |            |      | (65,000 | )       |          |   | (93,000 | )      
|Proceeds from the issuance of Preferred Stock                              |                                                        |                                                     | 69,300     |                          |            |      |        |         |          |   |        |        
|Proceeds from the issuance of long-term debt                               |                                                        |                                                     | 1,865,000  |                          |            |      |        |         |          |   |        |        
|Purchase of treasury stock                                                 |                                                        |                                                     |           |                          |            |      | (63,981 | )       |          |   | (53,627 | )      
|Proceeds from employee stock option exercises                              |                                                        |                                                     | 3,754      |                          |            |      | 7,511   |         |          |   | 7,554   |        
|                                                                           |                                                        |                                                     |            |                          |            |      |         |         |          |   |         |        
|                                                                           |                                                        | Net cash provided by (used in) financing activities |            |                          | 1,875,554  |      |         |         | (121,470 | ) |         |         | (139,073 | )
|                                                                           |                                                        |                                                     |            |                          |            |      |         |         |          |   |         |        
|(Decrease) increase in cash and cash equivalents                           |                                                        |                                                     | (6,934     | )                        |            |      | (40,716 | )       |          |   | 53,047  |        
|Cash and cash equivalents, beginning of year                               |                                                        |                                                     | 14,721     |                          |            |      | 55,437  |         |          |   | 2,390   |        
|                                                                           |                                                        |                                                     |            |                          |            |      |         |         |          |   |         |        
|Cash and cash equivalents, end of year                                     |                                                        | $                                                   | 7,787      |                          |            | $    | 14,721  |         |          | $ | 55,437  |        
|                                                                           |                                                        |                                                     |            |                          |            |      |         |         |          |   |         |        
|Supplemental Information                                                   |                                                        |                                                     |            |                          |            |      |         |         |          |   |         |        
|Cash interest paid                                                         |                                                        | $                                                   | 27,627     |                          |            | $    | 24,552  |         |          | $ | 36,750  |        
|                                                                           |                                                        |                                                     |            |                          |            |      |         |         |          |   |         |        
|Income taxes paid                                                          |                                                        | $                                                   | 38,940     |                          |            | $    | 39,608  |         |          | $ | 82,698  |        
|                                                                           |                                                        |                                                     |            |                          |            |      |         |         |          |   |         |        

The accompanying notes are an integral part of the consolidated financial statements.

50



---



##### Table of Contents






R.H. DONNELLEY CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS DEFICIT

|                                                               |                            |   |                  |     |          |   |       |  |             |   |          |   |          |   |               |   |                     |   |          |   |  |   |        |   |  |   |          |     | 
|-------------------------------------------------------------- | -------------------------- | - | ---------------- | --- | -------- | - | ----- |  | ----------- | - | -------- | - | -------- | - | ------------- | - | ------------------- | - | -------- | - |  | - | ------ | - |  | - | -------- | --- | 
|                                                               |                            |   | Common Stock and |     |          |   |       |  | Unamortized |   | Retained |   |          |   |               |   | Other               |   |          |   | 
|                                                               |                            |   | Additional       |     |          |   |       |  | Restricted  |   | Earnings |   | Treasury |   | Comprehensive |   | Total Shareholders'
|                                                               |                            |   | Paid-in Capital  |     | Warrants |   | Stock |  | (Deficit)   |   | Stock    |   | Loss     |   | Deficit      
|                                                               |                            |   |                  |     |          |   |       |  |             |   |          |   |          |   |              
|(in thousand)                                                  |                            |   |                  |     |          |   |       |  |             |   |          |   |          |   |               |   |                     |   |          |   |  |   |        |   |  |   |          |    
|Balance, December 31, 1999                                     |                            | $ | 56,860           |     |          |   |       |  |             | $ | (152     | ) |          | $ | (203,443      | ) |                     | $ | (46,076  | ) |  |   |        |   |  | $ | (192,811 | )  
|Net income                                                     |                            |   |                  |     |          |   |       |  |             |   |          |   |          |   | 124,758       |   |                     |   |          |   |  |   |        |   |  |   | 124,758  |    
|Employee stock option exercises,
including tax benefit         |                            |   | 11,096           |     |          |   |       |  |             |   |          |   |          |   |               |   |                     |   | 636      |   |  |   |        |   |  |   | 11,732   |    
|Restricted stock issued                                        |                            |   | 204              |     |          |   |       |  |             |   | (204     | ) |          |   |               |   |                     |   |          |   |  |   |        |   |  |   |         |    
|Stock issued for employee bonus plans                          |                            |   | 1,901            |     |          |   |       |  |             |   |          |   |          |   |               |   |                     |   | 120      |   |  |   |        |   |  |   | 2,021    |    
|Compensatory stock options                                     |                            |   | 176              |     |          |   |       |  |             |   |          |   |          |   |               |   |                     |   |          |   |  |   |        |   |  |   | 176      |    
|Restricted stock amortization                                  |                            |   |                  |     |          |   |       |  |             |   | 124      |   |          |   |               |   |                     |   |          |   |  |   |        |   |  |   | 124      |    
|Stock acquired for treasury                                    |                            |   |                  |     |          |   |       |  |             |   |          |   |          |   |               |   |                     |   | (54,510  | ) |  |   |        |   |  |   | (54,510  | )  
|                                                               |                            |   |                  |     |          |   |       |  |             |   |          |   |          |   |               |   |                     |   |          |   |  |   |        |   |  |   |          |    
|Balance, December 31, 2000                                     |                            |   | 70,237           |     |          |   |       |  |             |   | (232     | ) |          |   | (78,685       | ) |                     |   | (99,830  | ) |  |   |        |   |  |   | (108,510 | )  
|Net income                                                     |                            |   |                  |     |          |   |       |  |             |   |          |   |          |   | 49,815        |   |                     |   |          |   |  |   |        |   |  |   | 49,815   |    
|Employee stock option exercises,
including tax benefit         |                            |   | 11,101           |     |          |   |       |  |             |   |          |   |          |   |               |   |                     |   | 585      |   |  |   |        |   |  |   | 11,686   |    
|Restricted stock issued                                        |                            |   | 292              |     |          |   |       |  |             |   | (297     | ) |          |   |               |   |                     |   | 5        |   |  |   |        |   |  |   |         |    
|Stock issued for employee bonus plans                          |                            |   | 1,408            |     |          |   |       |  |             |   |          |   |          |   |               |   |                     |   | 90       |   |  |   |        |   |  |   | 1,498    |    
|                                                               | Compensatory stock options |   |                  | 627 |          |   |       |  |             |   |          |   |          |   |               |   |                     |   |          |   |  |   |        |   |  |   |          | 627 | 
|Restricted stock amortization                                  |                            |   |                  |     |          |   |       |  |             |   | 193      |   |          |   |               |   |                     |   |          |   |  |   |        |   |  |   | 193      |    
|Stock acquired for treasury                                    |                            |   |                  |     |          |   |       |  |             |   |          |   |          |   |               |   |                     |   | (64,292  | ) |  |   |        |   |  |   | (64,292  | )  
|Unrealized loss on interest rate swaps,
including tax benefit  |                            |   |                  |     |          |   |       |  |             |   |          |   |          |   |               |   |                     |   |          |   |  | $ | (2,330 | ) |  |   | (2,330   | )  
|                                                               |                            |   |                  |     |          |   |       |  |             |   |          |   |          |   |               |   |                     |   |          |   |  |   |        |   |  |   |          |    
|Balance, December 31, 2001                                     |                            |   | 83,665           |     |          |   |       |  |             |   | (336     | ) |          |   | (28,870       | ) |                     |   | (163,442 | ) |  |   | (2,330 | ) |  |   | (111,313 | )  
|Net income                                                     |                            |   |                  |     |          |   |       |  |             |   |          |   |          |   | 67,177        |   |                     |   |          |   |  |   |        |   |  |   | 67,177   |    
|Preferred dividend                                             |                            |   |                  |     |          |   |       |  |             |   |          |   |          |   | (24,702       | ) |                     |   |          |   |  |   |        |   |  |   | (24,702  | )  
|Employee stock option exercises,
including tax benefit         |                            |   | 4,925            |     |          |   |       |  |             |   |          |   |          |   |               |   |                     |   | 260      |   |  |   |        |   |  |   | 5,185    |    
|Restricted stock issued                                        |                            |   | 216              |     |          |   |       |  |             |   | (221     | ) |          |   |               |   |                     |   | 5        |   |  |   |        |   |  |   |         |    
|Stock issued for employee bonus plans                          |                            |   | 2,328            |     |          |   |       |  |             |   |          |   |          |   |               |   |                     |   | 106      |   |  |   |        |   |  |   | 2,434    |    
|Compensatory stock options                                     |                            |   | 243              |     |          |   |       |  |             |   |          |   |          |   |               |   |                     |   |          |   |  |   |        |   |  |   | 243      |    
|Stock acquired for treasury                                    |                            |   |                  |     |          |   |       |  |             |   |          |   |          |   |               |   |                     |   | (1,672   | ) |  |   |        |   |  |   | (1,672   | )  
|Restricted stock amortization                                  |                            |   |                  |     |          |   |       |  |             |   | 230      |   |          |   |               |   |                     |   |          |   |  |   |        |   |  |   | 230      |    
|Beneficial conversion feature from issuance
of Preferred Stock |                            |   | 24,158           |     |          |   |       |  |             |   |          |   |          |   |               |   |                     |   |          |   |  |   |        |   |  |   | 24,158   |    
|Issuance of warrants                                           |                            |   |                  |     |          | $ | 5,330 |  |             |   |          |   |          |   |               |   |                     |   |          |   |  |   |        |   |  |   | 5,330    |    
|Unrealized loss on interest rate swaps,
including tax benefit  |                            |   |                  |     |          |   |       |  |             |   |          |   |          |   |               |   |                     |   |          |   |  |   | 2,330  |   |  |   | 2,330    |    
|                                                               |                            |   |                  |     |          |   |       |  |             |   |          |   |          |   |               |   |                     |   |          |   |  |   |        |   |  |   |          |    
|Balance, December 31, 2002                                     |                            | $ | 115,535          |     |          | $ | 5,330 |  |             | $ | (327     | ) |          | $ | 13,605        |   |                     | $ | (164,743 | ) |  | $ |       |   |  | $ | (30,600  | )  
|                                                               |                            |   |                  |     |          |   |       |  |             |   |          |   |          |   |               |   |                     |   |          |   |  |   |        |   |  |   |          |    

The accompanying notes are an integral part of the consolidated financial statements.

51



---



##### Table of Contents






R.H. DONNELLEY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(in thousands, except share and per share data, unless otherwise noted)




|1. |  | Summary of Significant Accounting Policies
|-- |  | ------------------------------------------

Principles of Consolidation.The consolidated financial statements include
the accounts of R.H. Donnelley Corporation and its direct and indirect wholly
owned subsidiaries (the Company, we, us and our). All intercompany
transactions and balances have been eliminated. The DonTech Partnership is
accounted for under the equity method as we do not have control, but do have
the ability to exercise significant influence over DonTechs operating and
financial policies. Accordingly, DonTechs results are not consolidated in our
financial statements, but our share of its net profits is reported as
partnership and joint venture income in the Consolidated Statements of
Operations.

On January 3, 2003, we acquired all the common stock of Sprint Publishing &
Advertising. This business will be included in our consolidated results from
and after the acquisition date. Accordingly, the operating results of SPA are
not included in our consolidated financial statements at or for the year ended
December 31, 2002. (See Note 17, Subsequent Events).

Revenue Recognition.We earn revenue in the form of commissions from the sale
of advertising and fees from our pre-press publishing services. Sales
commission revenue is recognized net of potential claims allowances at the time
an advertising contract is executed with a customer. Revenue from pre-press
publishing operations was recognized as services are performed.

Partnership and Joint Venture Income and Investments.Partnership and joint
venture income includes our 50% share of the net profits of DonTech, revenue
participation income from an affiliate of SBC and the priority distribution
income on our membership interest in CenDon. Revenue participation income and
the priority distribution income are earned and recognized when a sales
contract is executed with a customer. Prior to the restructuring of the CenDon
relationship, which was effective July 1, 2000, the CenDon Partnership was
accounted for under the equity method and we recognized our 50% share of the
net profits of CenDon. The carrying value of the DonTech investment, the
revenue participation receivable from SBC and the priority distribution
receivable from Sprint is included as partnership and joint venture
investments. The priority distribution receivable at December 31, 2002 was
$16,266. As a result of the acquisition, this receivable became an
intercompany item and was included as part of the purchase price.

Cash and Cash Equivalents.Cash equivalents include liquid investments with a
maturity of less than three months at their time of acquisition. At December
31, 2002, cash of $1,928,700 was restricted and intended to be used to finance
the SPA acquisition.

Trade Receivables.Trade receivables represent sales commissions earned from
the sale of advertising and fees for pre-press publishing services. We
establish an allowance for doubtful accounts based on the expected
collectibility of receivables from advertisers based upon historical experience
and contractual provisions. Receivables for sales commissions are billed to
the publisher upon directory publication and collected in accordance with
contractual provisions, typically in the same month of publication, but no
later than nine months after publication. Receivables for pre-press publishing
services are billed and collected in accordance with the terms of the
applicable agreement.

Trade receivables at December 31, 2002 include $27,206 due from SPA for
commissions and pre-press publishing services. As a result of the acquisition,
these receivables became intercompany items and were included as part of the
purchase price.

Fixed Assets and Computer Software.Fixed assets and computer software are
recorded at cost. Depreciation and amortization is provided over the estimated
useful lives of the assets using the straight-line method. Estimated useful
lives are five years for machinery and equipment, ten years for furniture and
fixtures, three to five years for computer
equipment and five years for computer software. Leasehold improvements are
amortized on a straight-line basis over

52



---



##### Table of Contents



the shorter of the term of the lease or
the estimated useful life of the improvement. Fixed assets and computer
software at December 31, 2002 and 2001, consisted of the following:

|                                               |                                        |   |          |         |      |   |         |         | 
|---------------------------------------------- | -------------------------------------- | - | -------- | ------- | ---- | - | ------- | ------- | 
|                                               |                                        |   | 2002     |         | 2001
|                                               |                                        |   |          |         |     
|Computer software                              |                                        | $ | 65,349   |         |      | $ | 62,428  |        
|Computer equipment                             |                                        |   | 39,958   |         |      |   | 39,150  |        
|Machinery and equipment                        |                                        |   | 3,863    |         |      |   | 3,863   |        
|Furniture and fixtures                         |                                        |   | 4,967    |         |      |   | 4,953   |        
|Leasehold improvements                         |                                        |   | 3,824    |         |      |   | 3,824   |        
|                                               |                                        |   |          |         |      |   |         |        
|                                               | Total cost                             |   |          | 117,961 |      |   |         | 114,218 | 
|Less accumulated depreciation and amortization |                                        |   | (105,953 | )       |      |   | (99,704 | )      
|                                               |                                        |   |          |         |      |   |         |        
|                                               | Net fixed assets and computer software |   | $        | 12,008  |      |   | $       | 14,514  | 
|                                               |                                        |   |          |         |      |   |         |        

Depreciation and amortization expense for the years ended December 31, 2002,
2001 and 2000 was as follows:

|                                    |  |      |       |      |  |      |        |  |  |   |        | 
|----------------------------------- |  | ---- | ----- | ---- |  | ---- | ------ |  |  | - | ------ | 
|                                    |  | 2002 |       | 2001 |  | 2000
|                                    |  |      |       |      |  |     
|Depreciation of fixed assets        |  | $    | 2,823 |      |  | $    | 3,803  |  |  | $ | 5,532  | 
|Amortization of computer software   |  |      | 3,426 |      |  |      | 6,964  |  |  |   | 9,901  | 
|                                    |  |      |       |      |  |      |        |  |  |   |        | 
|Total depreciation and amortization |  | $    | 6,249 |      |  | $    | 10,767 |  |  | $ | 15,433 | 
|                                    |  |      |       |      |  |      |        |  |  |   |        | 

Concentration of Credit Risk.We maintain significant receivable balances
from SBC and Sprint for sales commissions, pre-press services, revenue
participation and priority distribution. The revenue participation receivable
from SBC is subject to adjustment, based on collections by SBC from individual
advertisers; however, the adjustment is limited based on contractual
provisions. Receivables are recorded at net realizable value. We do not
foresee a material credit risk associated with collection, although we can give
no assurance that full payment will continue to be received on a timely basis.
As a result of the SPA acquisition, receivables from Sprint became intercompany
items and were included as part of the purchase price.

Pension and Other Postretirement BenefitsPension and other postretirement
benefits represent estimated amounts to be paid to employees in the future.
The accounting for benefits reflects the recognition of these benefit costs
over the employees approximate service period based on the terms of the plan
and the investment and funding decisions made. The determination of the
benefit obligations and the net periodic pension and other postretirement
benefit costs requires management to make assumptions regarding the discount
rate, return on retirement plan assets, increase in future compensation and
health care cost trends. Changes in these assumptions can have a significant
impact on the projected benefit obligation, funding requirement and net
periodic benefit cost. The assumed discount rate is the rate at which the
pension benefits could be settled. We use the rates on Aa corporate bonds as a
basis for determining our discount rate assumption. The expected long-term
rate of return on plan assets is based on the mix of assets held by the plan
and the expected long-term rates of return within each asset class. The
anticipated trend of future health care costs is based on historical experience
and external factors. See Note 9 for further information regarding our benefit
plans.

Effective January 1, 2003, we reduced our rate of return on plan assets from
9.75% to 8.25%. As a result of low investment returns over the last few years,
as well as our outlook for the long-term, particularly for equity securities,
we determined that the assumed rate of return of 9.75% no longer reflected our
best estimate of future long-term returns. Based on the current investment
environment and the pension plans asset allocation, we determined that a
long-term rate of return of 8.25% better reflected our expectations for future
long-term returns.

Derivative Financial Instruments.Our derivative financial instruments are
limited to interest rate swap agreements used to manage exposure to
fluctuations in interest rates on variable rate debt. At December 31, 2002, we
had an interest rate swap agreement with a notional value of $75,000 and at
December 31, 2001, we had interest rate swaps with a combined notional value of
$125,000. We make fixed-rate payments of 5.9% and receive variable-rate
payments based on 3-month LIBOR rates. The weighted average rate received was
1.1% in 2002 and 3.0% in 2001.

53



---



##### Table of Contents



These periodic payments and receipts are
recorded as part of interest expense. The swap agreement at December 31, 2002
will expire in June 2003. We do not use derivative financial instruments for
trading or speculative purposes.

As a result of the SPA acquisition and repayment of existing variable rate
debt, the $75,000 notional value interest rate swap did not qualify for hedge
accounting treatment at December 31, 2002. Because the interest rate swap did
not qualify for hedge accounting treatment at December 31, 2002, the
unrecognized fair market value of the swap, previously recognized in other
accumulated comprehensive loss on the balance sheet, was charged to earnings.
Accordingly, a charge of $1,523 was included in other expense, net for the year
ended December 31, 2002.

Income Taxes.We account for income taxes under the liability method in
accordance with SFAS 109, Accounting for Income Taxes. See Note 8 for more
information regarding our income tax provision.

Earnings per Share.Basic earnings per common share (EPS) are generally
calculated by dividing income available to common shareholders by the weighted
average number of common shares outstanding. However, because the outstanding
Preferred Stock contains certain participation rights, EITF Topic D-95, Effect
of Participating Securities on the Computation of Basic Earnings Per Share,
requires that the dilutive effect of those securities be included in the
weighted average number of shares outstanding. Furthermore, Topic D-95
requires that the dilutive effect to be included in basic EPS may be calculated
using either the if-converted method or the two-class method. However, the
dilutive effect of the Preferred Stock cannot be less that that which would
result from the application of the two-class method. We have elected to use
the if-converted method in calculating basic EPS.

Diluted EPS are calculated by dividing net income by the weighted average
common shares outstanding plus common share equivalents. Common stock
equivalents include stock options and warrants, the dilutive effect of which is
calculated using the treasury stock method, and Preferred Stock, the dilutive
effect of which is calculated using the if-converted method. The calculation
of basic and diluted EPS for 2002 is presented below.

|                                               |                                                                                  |   |        |        | 
|---------------------------------------------- | -------------------------------------------------------------------------------- | - | ------ | ------ | 
|Basic EPS  If-Converted Method                |                                                                                  |   |        |       
|                                               | Income available to common                                                       |   | $      | 42,475 | 
|                                               | Preferred Stock dividend                                                         |   |        | 24,702 | 
|                                               |                                                                                  |   |        |        | 
|                                               | Net income                                                                       |   | $      | 67,177 | 
|                                               |                                                                                  |   |        |        | 
|                                               | Weighted average common shares outstanding                                       |   |        | 29,643 | 
|                                               | Weighted average common equivalent shares assuming
conversion of Preferred Stock |   |        | 281    | 
|                                               |                                                                                  |   |        |        | 
|                                               |                                                                                  |   | 29,942 |       
|                                               |                                                                                  |   |        |        | 
|Basic earnings per share  if-converted method |                                                                                  | $ | 2.24   |       
|                                               |                                                                                  |   |        |        | 

At December 31, 2002, the Preferred Stock was convertible into 2,933,888 shares
of common stock. However, since the Preferred Stock was issued in November
2002, the number of common share equivalents included in the EPS calculation
has been weighted for the actual time the Preferred Stock was outstanding for
the year.

|                             |                                                  |  |   |        |  
|---------------------------- | ------------------------------------------------ |  | - | ------ | -
|Basic EPS  Two-Class Method |                                                  |  |   |       
|                             | Income available to common and common equivalent |  | $ | 42,475 |  
|                             | Amount allocable to common shares (1)            |  |   | 99     | %
|                             |                                                  |  |   |        |  
|                             | Rights to undistributed earnings                 |  | $ | 42,051 |  
|                             | Weighted average common shares outstanding       |  |   | 29,643 |  
|                             |                                                  |  |   |        |  
|                             | Basic earnings per share  two-class method      |  | $ | 1.42   |  
|                             |                                                  |  |   |        |  



|(1) |  | 29,643 / (29,643 + 281)
|--- |  | -----------------------

54



---



##### Table of Contents



|                                                                 |  |   |        | 
|---------------------------------------------------------------- |  | - | ------ | 
|Diluted EPS                                                      |  |   |        | 
|Net income available to common                                   |  | $ | 42,475 | 
|                                                                 |  |   |        | 
|Weighted average common shares outstanding                       |  |   | 29,643 | 
|Dilutive effect of stock options                                 |  |   | 655    | 
|                                                                 |  |   |        | 
|Weighted average common and common equivalent shares outstanding |  |   | 30,298 | 
|                                                                 |  |   |        | 
|Diluted EPS                                                      |  | $ | 1.40   | 
|                                                                 |  |   |        | 

The conversion of the Preferred Stock was not reflected in the calculation of
diluted EPS because the effect was anti-dilutive.

For the years ended December 31, 2001 and 2000, basic earnings per share are
calculated by dividing net income by the weighted average common shares
outstanding during the year and diluted earnings per share are calculated by
dividing net income by the weighted average common shares outstanding plus
potentially dilutive common shares, primarily stock options, calculated using
the treasury stock method. The calculation of basic and diluted EPS for the
years ended December 31, 2001 and 2000 and a comparison to the 2002 EPS is
presented below.

|                                                    |         |                                  |        |      |        |      |        |      |        |   |         |      |        | 
|--------------------------------------------------- | ------- | -------------------------------- | ------ | ---- | ------ | ---- | ------ | ---- | ------ | - | ------- | ---- | ------ | 
|                                                    |         |                                  |        | 2002 |        | 2001 |        | 2000
|                                                    |         |                                  |        |      |        |      |        |     
|Net income available to common                      |         | $                                | 42,465 |      |        | $    | 49,815 |      |        | $ | 124,758 |     
|                                                    |         |                                  |        |      |        |      |        |      |        |   |         |     
|Weighted average shares of common stock outstanding |         |                                  |        |      |        |      |        |      |        |   |         |     
|                                                    |         | Basic shares                     |        |      | 29,643 |      |        |      | 30,207 |   |         |      | 31,947 | 
|                                                    |         | Dilutive effect of stock options |        |      | 655    |      |        |      | 769    |   |         |      | 647    | 
|                                                    |         |                                  |        |      |        |      |        |      |        |   |         |     
|                                                    |         | Diluted shares                   |        |      | 30,298 |      |        |      | 30,976 |   |         |      | 32,594 | 
|                                                    |         |                                  |        |      |        |      |        |      |        |   |         |     
|Earnings per share                                  |         |                                  |        |      |        |      |        |      |        |   |         |     
|                                                    | Basic   |                                  | $      | 1.42 |        |      | $      | 1.65 |        |   | $       | 3.91 |       
|                                                    | Diluted |                                  | $      | 1.40 |        |      | $      | 1.61 |        |   | $       | 3.83 |       

Employee Stock Options.We follow Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees and related interpretations in
accounting for our stock option plan, and, accordingly, no compensation expense
related to the issuance of stock options to employees or non-employee directors
has been recognized in the three year period ended December 31, 2002. We also
grant stock options to certain key employees of DonTech, which are considered
compensatory under current accounting rules. Compensation expense of $234,
$627 and $176 was recognized in 2002, 2001 and 2000, respectively. The
following table reflects the pro forma net income and earnings per share
assuming we applied the fair value method of SFAS No. 123 Accounting for
Stock-Based Compensation. The pro forma disclosures shown are not necessarily
representative of the effects on income and earnings per share in future years.

|                               |             |  |      |        |      |  |      |        |  |  |   |         | 
|------------------------------ | ----------- |  | ---- | ------ | ---- |  | ---- | ------ |  |  | - | ------- | 
|                               |             |  | 2002 |        | 2001 |  | 2000
|                               |             |  |      |        |      |  |     
|Net income                     |             |  |      |        |      |  |      |        |  |  |   |        
|                               | As reported |  | $    | 67,177 |      |  | $    | 49,815 |  |  | $ | 124,758 | 
|                               | Pro forma   |  | $    | 64,633 |      |  | $    | 47,621 |  |  | $ | 123,045 | 
|Net income available to common |             |  |      |        |      |  |      |        |  |  |   |        
|                               | As reported |  | $    | 42,475 |      |  | $    | 49,815 |  |  | $ | 124,758 | 
|                               | Pro forma   |  | $    | 39,931 |      |  | $    | 47,621 |  |  | $ | 123,045 | 
|Basic earnings per share       |             |  |      |        |      |  |      |        |  |  |   |        
|                               | As reported |  | $    | 1.42   |      |  | $    | 1.65   |  |  | $ | 3.91    | 
|                               | Pro forma   |  | $    | 1.33   |      |  | $    | 1.58   |  |  | $ | 3.85    | 
|Diluted earnings per share     |             |  |      |        |      |  |      |        |  |  |   |        
|                               | As reported |  | $    | 1.40   |      |  | $    | 1.61   |  |  | $ | 3.83    | 
|                               | Pro forma   |  | $    | 1.32   |      |  | $    | 1.54   |  |  | $ | 3.78    | 

55



---



##### Table of Contents



The fair value of stock options ($8.29
in 2002, $8.81 in 2001 and $6.15 in 2000) was
estimated on the grant date using the Black-Scholes option-pricing model with
the following assumptions:

|                        |  |         |     |         |  |         |     |   |  |  |     |  
|----------------------- |  | ------- | --- | ------- |  | ------- | --- | - |  |  | --- | -
|                        |  | 2002    |     | 2001    |  | 2000   
|                        |  |         |     |         |  |        
|Dividend yield          |  |         | 0   | %       |  |         | 0   | % |  |  | 0   | %
|Expected volatility     |  |         | 35  | %       |  |         | 35  | % |  |  | 35  | %
|Risk-free interest rate |  |         | 3.1 | %       |  |         | 4.8 | % |  |  | 6.6 | %
|Expected holding period |  | 4 years |     | 4 years |  | 4 years

Estimates.The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities,
revenue and expenses and the disclosure of contingent assets and liabilities.
Actual results could differ materially from those estimates and assumptions.
Estimates and assumptions are used in the determination of sales allowances,
allowances for bad debts, depreciation and amortization, employee benefit plans
and restructuring reserve, among others.

Reclassifications.Certain prior year amounts have been reclassified to
conform to the current years presentation. These reclassifications had no
impact on previously reported results of operations or shareholders deficit.

New Accounting Pronouncements.In April 2002, the Financial Accounting
Standards Board (FASB) issued FAS 145, Rescission of FASB Statements No. 4,
44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections.
This statement, among other things, changes the way gains and losses from the
extinguishment of debt are reported. Previously, all gains and losses from the
extinguishment of debt were required to be reported as an extraordinary item,
net of related tax effect. Under FAS 145, gains and losses from the
extinguishment of debt should be reported as part of on-going operations,
unless the extinguishment of debt is both an unusual and infrequent event for
the entity. Previously reported extraordinary gains and losses from the
extinguishment of debt that are not unusual or infrequent should be
reclassified. This statement is effective for calendar year 2003; however, we
have adopted this statement at the end of 2002. Previously reported
extraordinary losses from the extinguishment of debt have been reclassified.
Accordingly, interest expense includes the write-off of deferred financing
costs associated with the prepayment of debt of $482, $704 and $1,144 in 2002,
2001 and 2000, respectively. The adoption of this statement did not impact
previously reported net income.

In June 2002, the FASB issued FAS 146, Accounting for Costs Associated with
Exit or Disposal Activities. FAS 146 addresses the accounting and reporting
for costs associated with exit or disposal activities and nullifies Emerging
Issues Task Force Issue 94-3, Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring). This statement is effective for
transactions initiated after December 31, 2002 and is to be applied
prospectively.

In December 2002, the FASB issued FAS 148, Accounting for Stock-Based
Compensation  Transition and Disclosure  an amendment to FAS 123. This
statement provides alternative methods of transition for a voluntary change to
the fair value method of accounting for stock based employee compensation. In
addition, the statement amends the disclosure requirements of FAS 123 to
require prominent disclosures in both annual and interim financial statements
about the method of accounting for stock based employee compensation and the
effect of the method on reported results. The statement is effective for
calendar year 2003; however, at this time, we do not intend to voluntarily
adopt the provisions of FAS 123.

In November 2002, the FASB issued FASB Interpretation No. 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others. This Interpretation elaborates on the
disclosures to be made by a guarantor in financial statements about its
obligations under certain guarantees that it has issued. It also clarifies
that a guarantor is required to recognize, at the inception of the guarantee, a
liability for the fair value of the obligation undertaken in issuing the
guarantee. This recognition and
measurement provisions of this Interpretation are applicable on a prospective
basis to guarantees issued or modified after December 31, 2002. The disclosure
requirements are effective for financial statements for periods ending after
December 15, 2002. We do not guarantee any obligations of third parties
(including DonTech); however we and its indirect subsidiaries jointly and
severally, fully and unconditionally guarantee the debt obligations of R.H.
Donnelley Inc. See Note 13, Guarantees.

56



---



##### Table of Contents





|2. |  | Restructuring and Special Charge
|-- |  | --------------------------------

In 2001, we recognized a restructuring and special charge of $18,556 consisting
of a special charge of $9,937 in connection with a transition in executive
management and a restructuring charge of $8,619 in connection with the
expiration of a pre-press publishing contract in December 2002. As a result of
the SPA acquisition, management has determined that certain costs originally
anticipated in the restructuring charge will not be incurred. Specifically,
the idle leased space in the Raleigh publishing facility will now be utilized,
planned severance and other related costs will be significantly less and the
corporate headquarters will not be relocated. Accordingly, $6,694 of the
original charge was reversed. The table below shows the payments and all
adjustments applied against the reserve during 2002.

|                                 |  |            |         |           |  |            |        |           |  |       |        |              |  |   |      |   |  |   |         |  
|-------------------------------- |  | ---------- | ------- | --------- |  | ---------- | ------ | --------- |  | ----- | ------ | ------------ |  | - | ---- | - |  | - | ------- | -
|                                 |  | Executive  |         |           |  |            |        |           |  |       |        | Professional |  |   |      |  
|                                 |  | Management |         | Other     |  | Facilities |        | Fees      |  |       |        |             
|                                 |  | Transition |         | Severance |  | Related    |        | and Other |  | Total
|                                 |  |            |         |           |  |            |        |           |  |      
|Restructuring and special charge |  | $          | 9,937   |           |  | $          | 3,252  |           |  | $     | 4,380  |              |  | $ | 987  |   |  | $ | 18,556  |  
|Reclass of related liabilities   |  |            | 2,735   |           |  |            |       |           |  |       |       |              |  |   |     |   |  |   | 2,735   |  
|                                 |  |            |         |           |  |            |        |           |  |       |        |              |  |   |      |   |  |   |         |  
|Balance at January 1, 2002       |  |            | 12,672  |           |  |            | 3,252  |           |  |       | 4,380  |              |  |   | 987  |   |  |   | 21,291  |  
|2002 activity                    |  |            |         |           |  |            |        |           |  |       |        |              |  |   |      |   |  |   |         |  
|Payments applied against reserve |  |            | (12,961 | )         |  |            | (161   | )         |  |       |       |              |  |   | (89  | ) |  |   | (13,211 | )
|Payments charged to expense      |  |            | 289     |           |  |            |       |           |  |       |       |              |  |   |     |   |  |   | 289     |  
|Adjustments                      |  |            |        |           |  |            | (1,418 | )         |  |       | (4,380 | )            |  |   | (898 | ) |  |   | (6,694  | )
|                                 |  |            |         |           |  |            |        |           |  |       |        |              |  |   |      |   |  |   |         |  
|Balance at December 31, 2002     |  | $          |        |           |  | $          | 1,673  |           |  | $     |       |              |  | $ |     |   |  | $ | 1,675   |  
|                                 |  |            |         |           |  |            |        |           |  |       |        |              |  |   |      |   |  |   |         |  



|3. |  | Investment Impairment Charges
|-- |  | -----------------------------

We have a nominal 18% interest in ChinaBig, which publishes yellow pages directories
and offers Internet directory services in the Peoples Republic of China. In
2001, an independent third party valuation of ChinaBigs current business plan,
capital needs and outlook for profitability and cash flow, prepared in
connection with a proposed equity financing by ChinaBig, indicated that the
carrying value of our investment was permanently impaired. As a result of this
valuation, we recorded an impairment charge of $11,432 in 2001. Further, in
2002, ChinaBig did not achieve its sales objective or generate sufficient
operating cash flows to fund operations and meet its obligations and needed to
obtain shareholder loans to make up the cash shortfall. Accordingly, we
recorded an additional impairment charge of $2,000 to write-off the remaining
book value of this investment since we believe that sufficient doubt exists as
to ChinaBigs ability to raise sufficient cash either through operations or
additional investments by existing or new investors and we believe that this
investment will not provide any value in the foreseeable future.



|4. |  | Long-term Debt and Credit Facilities
|-- |  | ------------------------------------

Long-term debt at December 31, 2002 and 2001, consisted of the following:

|                                                   |                |   |         |           |      |   |         |         | 
|-------------------------------------------------- | -------------- | - | ------- | --------- | ---- | - | ------- | ------- | 
|                                                   |                |   | 2002    |           | 2001
|                                                   |                |   |         |           |     
|Existing 9 1/8% Senior Subordinated Notes due 2008 |                | $ | 150,000 |           |      | $ | 150,000 |        
|Existing Senior Secured Term Facilities            |                |   | 114,250 |           |      |   | 136,750 |        
|New Senior Secured Credit Facility                 |                |   | 900,000 |           |      |   |        |        
|New 8 7/8% Senior Notes due 2010                   |                |   | 325,000 |           |      |   |        |        
|New 10 7/8% Senior Subordinated Notes due 2012     |                |   | 600,000 |           |      |   |        |        
|                                                   |                |   |         |           |      |   |         |        
|                                                   | Total          |   |         | 2,089,250 |      |   |         | 286,750 | 
|Less current portion                               |                |   | 13,780  |           |      |   | 2,846   |        
|                                                   |                |   |         |           |      |   |         |        
|                                                   | Long-term debt |   | $       | 2,075,470 |      |   | $       | 283,904 | 
|                                                   |                |   |         |           |      |   |         |        

The Existing Notes paid interest semi-annually and matured in June 2008. The
Existing Notes were callable at our option at any time on or after June 1, 2003
at 104.6% of par. This percentage declined 1.5% after each 12-month

57



---



##### Table of Contents



period
until June 1, 2006, when the Existing Notes were callable at 100% of par. The
carrying value of the Existing Notes was $150,000 at December 31, 2002 and 2001
and the fair value of the Existing Notes, determined based on the quoted market
price, was $150,900 and $154,425, respectively. See Note 17  Subsequent
Events for additional information relating to the Existing Notes.

The Indenture governing the Existing Notes contained covenants that, among
other things, restricted our ability to incur certain additional debt and liens
and engage in mergers, consolidations and asset sales. In 2002, we were in
technical default under the Existing Senior Secured Term Facilities (Existing
Term Facilities) and the Indenture governing the Existing Notes resulting
from our inadvertent failure to cause certain subsidiaries to be added as
guarantors in 2000. In November 2002, we received net proceeds of $69,300 from
the issuance of Preferred Stock. These proceeds were used to offset certain
restricted payments that were made in 2000 and 2001. As a result, the
technical default was cured. At the SPA acquisition closing, we retired
$128,755 of Existing Notes. As a result, all covenants under the Existing
Notes became void.

The Existing Term Facilities consisted of $74,250 outstanding under committed
bank facilities and $40,000 outstanding under our Existing $100,000 Senior
evolving Credit Facility (the Existing Revolver and together with the
Existing Term Facilities, the Existing Credit Agreement). Obligations under
the Existing Credit Agreement were secured by security interests granted to the
lenders in substantially all of our assets, including capital stock of our
existing and newly formed subsidiaries. The Existing Credit Agreement
contained covenants that, among other things, restricted our ability to engage
in mergers, consolidations and asset sales, incur additional indebtedness, pay
dividends or create liens and required that we maintain certain financial
ratios. The Existing Credit Agreement borrowings bore interest at floating
rates based on a spread over the London interbank offered rate (LIBOR) or the
greater of either the Prime rate or the Fed Funds rate plus 50 basis points, at
our election. The weighted average interest rate of outstanding debt under the
Existing Credit Agreement at December 31, 2002 and 2001 was 6.7% and 7.4%,
respectively. See Note 17  Subsequent Events for additional information
relating to the Existing Credit Agreement.

In connection with the SPA acquisition, we entered into a new $1,525,000 Credit
Facility, consisting of a $500,000 Term Loan A, a $900,000 Term Loan B and a
$125,000 Revolver and issued $325,000 8-year 8 7/8% and $600,000 10-year 10
7/8% Notes. At December 31, 2002, gross proceeds of $1,825,000 from Term Loan
B and the Notes were held in escrow pending the SPA acquisition closing. See
Note 17  Subsequent Events for additional information relating to this debt.

The Indentures governing the Notes contain covenants that, among other things,
restrict our ability and the ability of our subsidiaries to incur certain
additional debt and liens; pay dividends on our equity interests or repurchase
equity interests; make certain investments; enter into certain types of
transactions with affiliates; receive dividends or other payments from our
restricted subsidiaries; use assets as security in other transactions; and sell
certain assets or merge with or into other companies.

The New Credit Facility and Revolver bear interest, at our option, at either
(a) the highest of (i) a base rate as determined by Deutsche Bank Securities
Inc., Salomon Smith Barney Inc. or Bear, Stearns & Co. Inc.; (ii) the
three-month certificate of deposit rate plus 1/2 of 1%, and (iii) the Federal
Funds Effective Rate (as defined) plus 1/2 of 1%, plus in each case an
applicable margin or (b) LIBOR plus an applicable margin. We may elect
interest periods of 1, 2, 3, 6 or 12 months for LIBOR borrowings.

The Credit Facility contains usual and customary negative covenants that will,
among other things, place limitations on our ability to (i) incur additional
indebtedness, including capital leases and liens; (ii) pay dividends and
repurchase our capital stock; (iii) enter into mergers, consolidations,
acquisitions, asset dispositions and sale-leaseback transactions; (iv) make
capital expenditures; and (v) issue capital stock of our subsidiaries. The
Credit Facility also contains financial covenants relating to maximum leverage,
minimum interest coverage, minimum fixed charge coverage and maximum senior
secured leverage. The Term Loan B loan matures in June 2010.

58



---



##### Table of Contents



Aggregate maturities of long-term debt at December 31, 2002 were:

|           |       |   |           |           | 
|---------- | ----- | - | --------- | --------- | 
|2003       |       | $ | 13,780    |          
|2004       |       |   | 19,872    |          
|2005       |       |   | 39,215    |          
|2006       |       |   | 77,383    |          
|2007       |       |   | 9,000     |          
|Thereafter |       |   | 1,930,000 |          
|           |       |   |           |          
|           | Total |   | $         | 2,089,250 | 
|           |       |   |           |          



|5. |  | Partnership and Joint Venture Investments
|-- |  | -----------------------------------------

DonTech.DonTech acts as the exclusive sales agent for yellow pages
directories published by SBC in Illinois and northwest Indiana. Income from
DonTech consists of 50% of the net profits of DonTech and revenue participation
income received directly from SBC, which is based on the value of advertising
sales. Income from DonTech consisted of the following:

|                                 |  |                          |         |      |  |      |         |  |  |   |         | 
|-------------------------------- |  | ------------------------ | ------- | ---- |  | ---- | ------- |  |  | - | ------- | 
|                                 |  | Years Ended December 31,
|                                 |  |                         
|                                 |  | 2002                     |         | 2001 |  | 2000
|                                 |  |                          |         |      |  |     
|50% share of DonTech net profits |  | $                        | 18,480  |      |  | $    | 19,313  |  |  | $ | 20,671  | 
|Revenue participation income     |  |                          | 98,666  |      |  |      | 103,106 |  |  |   | 103,354 | 
|                                 |  |                          |         |      |  |      |         |  |  |   |         | 
|Total DonTech income             |  | $                        | 117,146 |      |  | $    | 122,419 |  |  | $ | 124,025 | 
|                                 |  |                          |         |      |  |      |         |  |  |   |         | 

Our investment in DonTech, including the revenue participation receivable from
SBC, was $185,969 and $193,810 at December 31, 2002 and 2001, respectively.

CenDon.Through 2002, we were the exclusive sales agent in Nevada, Florida,
Virginia and North Carolina for CenDon LLC, a joint venture with Centel
Directory Company (Centel), a subsidiary of Sprint. Income from CenDon LLC
consisted of a priority distribution based on a percentage of CenDon
advertising sales. Income from CenDon for the six months ended June 30, 2000
consisted of our 50% interest in the net profit of the CenDon Partnership, a
partnership between the Company and Centel. This partnership was restructured
to a limited liability company effective July 1, 2000. Income from CenDon LLC
and the CenDon Partnership was $19,727, $17,545 and $24,747 in 2002, 2001 and
2000, respectively.



|6. |  | Redeemable Preferred Stock and Warrants
|-- |  | ---------------------------------------

We have 10 million shares of preferred stock authorized and at December 31,
2002, 70,000 shares of Preferred Stock were outstanding.

In November 2002, we issued through a private placement 70,000 shares of
Preferred Stock and warrants to purchase 577,500 shares of our common stock,
for aggregate gross consideration of $70,000. The Preferred Stock is
convertible into common stock at any time after issuance at a price of $24.05
and earns a cumulative dividend of 8% compounded quarterly, which we may pay in
cash or allow to accrue, at our option.

59



---



##### Table of Contents



The fair value of the Preferred Stock was based on an independent valuation of
the security. The value of the warrants ($12.18) was determined based on the
Black-Scholes model, with the following assumptions:

|                        |  |         |     |  
|----------------------- |  | ------- | --- | -
|Dividend yield          |  |         | 0   | %
|Expected volatility     |  |         | 35  | %
|Risk-free interest rate |  |         | 3.1 | %
|Expected holding period |  | 5 years

The net proceeds received were allocated to the Preferred Stock and warrants
based on their relative fair values. Because the fair market value of the
underlying common stock on the date of issuance ($29.92) was greater that the
conversion price, a beneficial conversion feature (BCF) of $24,158 existed.
The BCF is a function of the conversion price of the Preferred Stock, the fair
value of the warrants and the fair market value of the underlying common stock
on the date of issuance. The BCF was treated as a deemed dividend in 2002. See
Note 17  Subsequent Events.



|7. |  | Stock Option Plans
|-- |  | ------------------

We maintain a shareholder approved stock option plan whereby certain employees
and non-employee directors are eligible to receive stock options, stock
appreciation rights, limited stock appreciation rights in tandem with stock
options and deferred stock. Options are typically granted at the fair market
value of our common stock at the date of the grant. We follow Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees and
related interpretations in accounting for our stock option plan, and,
accordingly, we typically do not recognize compensation expense related to the
issuance of stock options. The options expire not more than ten years from the
grant date and the Board determines vesting provisions at the date of the
grant. We have yet to grant any stock appreciation rights or limited stock
appreciation rights.

Non-employee directors receive options to purchase 1,500 shares and an award of
1,500 deferred shares upon election to the Board. Non-employee directors also
receive on an annual basis, options to purchase 1,500 shares and an award of
1,500 deferred shares. Non-employee directors may also elect to receive
additional options in lieu of their annual cash retainer fee.

Changes in our stock option plan for the last three years were as follows:

|                                                 |                     |  |           |           |           |   |                  |       | 
|------------------------------------------------ | ------------------- |  | --------- | --------- | --------- | - | ---------------- | ----- | 
|                                                 |                     |  |           |           |           |   | Weighted Average
|                                                 |                     |  |           |           |           |   | Exercise Price  
|                                                 |                     |  | Shares    |           | Per Share
|                                                 |                     |  |           |           |          
|Options outstanding, December 31, 1999           |                     |  | 3,570,429 |           |           | $ | 13.82            |      
|                                                 | Granted             |  |           | 685,858   |           |   |                  | 16.65 | 
|                                                 | Exercised           |  |           | (631,727  | )         |   |                  | 12.58 | 
|                                                 | Canceled or expired |  |           | (725,975  | )         |   |                  | 15.40 | 
|                                                 |                     |  |           |           |           |   |                  |      
|Options outstanding, December 31, 2000           |                     |  | 2,898,585 |           |           |   | 14.35            |      
|                                                 | Granted             |  |           | 539,084   |           |   |                  | 25.23 | 
|                                                 | Exercised           |  |           | (585,913  | )         |   |                  | 12.82 | 
|                                                 | Canceled or expired |  |           | (222,402  | )         |   |                  | 17.22 | 
|                                                 |                     |  |           |           |           |   |                  |      
|Options outstanding, December 31, 2001           |                     |  | 2,629,354 |           |           |   | 16.70            |      
|                                                 | Granted             |  |           | 1,925,995 |           |   |                  | 26.01 | 
|                                                 | Exercised           |  |           | (255,386  | )         |   |                  | 14.70 | 
|                                                 | Canceled or expired |  |           | (17,342   | )         |   |                  | 24.82 | 
|                                                 |                     |  |           |           |           |   |                  |      
|Options outstanding, December 31, 2002           |                     |  | 4,282,621 |           |           | $ | 20.97            |      
|                                                 |                     |  |           |           |           |   |                  |      
|Available for future grants at December 31, 2002 |                     |  | 2,139,270 |           |           |   |                  |      
|                                                 |                     |  |           |           |           |   |                  |      

The following table summarizes information about stock options outstanding and
exercisable at December 31, 2002:

60



---



##### Table of Contents



|                         |  |                           |           |                           |  |                  |  |                    |       |       |  |  |           |                    |  |   |       |  |  | 
|------------------------ |  | ------------------------- | --------- | ------------------------- |  | ---------------- |  | ------------------ | ----- | ----- |  |  | --------- | ------------------ |  | - | ----- |  |  | 
|                         |  | Stock Options Outstanding |           | Stock Options Exercisable
|                         |  |                           |           |                          
|                         |  |                           |           |                           |  | Weighted Average |  | Weighted Average   |       |       |  |  |           | Weighted Average  
|                         |  |                           |           |                           |  | Remaining        |  | Exercise Price Per |       |       |  |  |           | Exercise Price Per
|Range of Exercise Prices |  | Shares                    |           | Contractual Life          |  | Share            |  | Shares             |       | Share
|                         |  |                           |           |                           |  |                  |  |                    |       |      
|$9.99-$15.78             |  |                           | 1,526,502 |                           |  | 5.0 years        |  | $                  | 14.26 |       |  |  | 1,280,978 |                    |  | $ | 14.06 | 
|$16.09-$29.12            |  |                           | 2,756,119 |                           |  | 9.1 years        |  | $                  | 24.69 |       |  |  | 283,679   |                    |  | $ | 20.26 | 
|                         |  |                           |           |                           |  |                  |  |                    |       |       |  |  |           |                    |  |   |       | 
|                         |  |                           | 4,282,621 |                           |  | 7.6 years        |  | $                  | 20.97 |       |  |  | 1,564,657 |                    |  | $ | 15.18 | 
|                         |  |                           |           |                           |  |                  |  |                    |       |       |  |  |           |                    |  |   |       | 

At December 31, 2001, there were 2,629,354 options outstanding at a weighted
average exercise price per share of $16.70 and 1,350,153 options exercisable at
a weighted average exercise price per share of $14.02. At December 31, 2000,
there were 2,898,585 options outstanding at a weighted average exercise price
per share of $14.35 and 1,357,603 options exercisable at a weighted average
exercise price per share of $12.84.

The options granted in 2002 include a grant of 1,486,000 options (Founders
Grant) to certain employees contingent on the consummation of the SPA
acquisition. As a result of the sale of Preferred Stock in connection with the
SPA acquisition, a change in control of the Company occurred so that all
options granted through the end of 2002, with the exception of the Founders
Grant options and options held by senior management (with respect to which the
change in control was waived), became fully vested. Accordingly, at January 3,
2003, 2,080,071 options were exercisable at a weighted average exercise price
of $17.12.



|8. |  | Income Taxes
|-- |  | ------------

Provision for income taxes consisted of:

|                                   |                 |   |        |        |      |   |        |        |   |   |        |        |  
|---------------------------------- | --------------- | - | ------ | ------ | ---- | - | ------ | ------ | - | - | ------ | ------ | -
|                                   |                 |   | 2002   |        | 2001 |   | 2000  
|                                   |                 |   |        |        |      |   |       
|Current provision                  |                 |   |        |        |      |   |        |        |   |   |        |       
|                                   | U.S. Federal    |   | $      | 31,545 |      |   | $      | 39,977 |   |   | $      | 67,475 |  
|                                   | State and local |   |        | 5,110  |      |   |        | 4,313  |   |   |        | 11,752 |  
|                                   |                 |   |        |        |      |   |        |        |   |   |        |        |  
|Total current provision            |                 |   | 36,655 |        |      |   | 44,290 |        |   |   | 79,227 |       
|Deferred
provision (benefit)       |                 |   |        |        |      |   |        |        |   |   |        |       
|                                   | U.S. Federal    |   |        | 6,915  |      |   |        | (7,233 | ) |   |        | (1,795 | )
|                                   | State and local |   |        | 1,236  |      |   |        | (1,048 | ) |   |        | (316   | )
|                                   |                 |   |        |        |      |   |        |        |   |   |        |        |  
|Total deferred (benefit) provision |                 |   | 8,151  |        |      |   | (8,281 | )      |   |   | (2,111 | )     
|                                   |                 |   |        |        |      |   |        |        |   |   |        |        |  
|Provision for income taxes         |                 | $ | 44,806 |        |      | $ | 36,009 |        |   | $ | 77,116 |       
|                                   |                 |   |        |        |      |   |        |        |   |   |        |        |  

The following table summarizes the significant differences between the U.S.
Federal statutory tax rate and our effective tax rate.

|                                                       |  |      |      |      |  |      |      |   |  |  |      |  
|------------------------------------------------------ |  | ---- | ---- | ---- |  | ---- | ---- | - |  |  | ---- | -
|                                                       |  | 2002 |      | 2001 |  | 2000
|                                                       |  |      |      |      |  |     
|Statutory Federal tax rate                             |  |      | 35.0 | %    |  |      | 35.0 | % |  |  | 35.0 | %
|State and local taxes, net of U.S. Federal tax benefit |  |      | 3.6  |      |  |      | 2.5  |   |  |  | 2.5  |  
|Non-deductible expense                                 |  |      | 1.4  |      |  |      | 4.4  |   |  |  | 0.7  |  
|                                                       |  |      |      |      |  |      |      |   |  |  |      |  
|Effective tax rate                                     |  |      | 40.0 | %    |  |      | 41.9 | % |  |  | 38.2 | %
|                                                       |  |      |      |      |  |      |      |   |  |  |      |  

61



---



##### Table of Contents



Deferred tax assets and liabilities consisted of the following at December 31,
2002 and 2001:

|                           |                                            |   |        |        |      |   |        |        |  
|-------------------------- | ------------------------------------------ | - | ------ | ------ | ---- | - | ------ | ------ | -
|                           |                                            |   | 2002   |        | 2001
|                           |                                            |   |        |        |     
|Deferred tax assets        |                                            |   |        |        |      |   |        |       
|                           | Reorganization and restructuring costs     |   | $      | 774    |      |   | $      | 7,821  |  
|                           | Bad debts                                  |   |        | 1,837  |      |   |        | 2,302  |  
|                           | Postretirement benefits                    |   |        | 2,246  |      |   |        | 2,109  |  
|                           | Capital loss carryforward                  |   |        | 6,094  |      |   |        | 4,287  |  
|                           | Other                                      |   |        | 1,450  |      |   |        | 780    |  
|                           |                                            |   |        |        |      |   |        |        |  
|                           |                                            |   | 12,401 |        |      |   | 17,299 |       
|                           | Valuation allowance                        |   |        | (6,094 | )    |   |        | (4,287 | )
|                           |                                            |   |        |        |      |   |        |        |  
|                           | Total deferred tax assets                  |   | $      | 6,307  |      |   | $      | 13,012 |  
|                           |                                            |   |        |        |      |   |        |        |  
|Deferred tax liabilities   |                                            |   |        |        |      |   |        |       
|                           | Equity investment                          |   | $      | 56,216 |      |   | $      | 53,262 |  
|                           | Pension                                    |   |        | 8,556  |      |   |        | 6,655  |  
|                           | Capitalized project costs and fixed assets |   |        | 2,318  |      |   |        | 5,727  |  
|                           |                                            |   |        |        |      |   |        |        |  
|                           | Total deferred tax liabilities             |   |        | 67,090 |      |   |        | 65,644 |  
|                           |                                            |   |        |        |      |   |        |        |  
|Net deferred tax liability |                                            | $ | 60,783 |        |      | $ | 52,632 |       
|                           |                                            |   |        |        |      |   |        |        |  

The investment impairment charge of $2,000 and $11,432 in 2002 and 2001 to
write-down the ChinaBig investment contributed to a deferred tax asset of
$6,094. The write-down of this investment is treated as a capital loss for
income tax purposes and can only be utilized to offset future capital gains.
We do not believe that future capital gains will be generated to offset against
this capital loss. Accordingly, a valuation allowance was established for the
full amount of this asset. However, we believe that we will obtain the full
benefit of other deferred tax assets based on an assessment of the Companys
anticipated profitability during the years the deferred tax assets are expected
to become tax deductions.



|9. |  | Benefit Plans
|-- |  | -------------

Retirement Plans.We have a defined benefit pension plan covering
substantially all employees with at least one year of service. The benefits to
be paid to employees are based on years of service and a percentage of total
annual compensation. The percentage of compensation allocated to a retirement
account ranges from 3.0% to 12.5% depending on age and years of service (cash
balance benefit). Benefits for certain employees who were participants in the
predecessor D&B defined benefit pension plan are also determined based on the
participants average compensation and years of service (final average pay
benefit) and benefits to be paid will equal the greater of the final average
pay benefit or the cash balance benefit. Pension costs are determined using
the projected unit credit actuarial cost method. Our funding policy is to
contribute an amount at least equal to the minimum legal funding requirement.
No contributions were required to be made in 2002, 2001 or 2000. The
underlying pension plan assets are invested in diversified portfolios
consisting primarily of equity and debt securities.

We also have an unfunded non-qualified defined benefit pension plan, the
Pension Benefit Equalization Plan (PBEP), which covers senior executives and
certain key employees. Benefits are based on years of service and compensation
(including compensation not permitted to be taken into account under the
previously mentioned defined benefit pension plan). We also had an additional
unfunded non-qualified defined benefit plan, the Supplemental Executive Benefit
Plan (SEBP), which was discontinued at the end of 2001.

We offer a defined contribution savings plan to substantially all employees and
contribute 50 cents for each dollar contributed by a participating employee, up
to a maximum of 6% of each participating employees salary (including bonus and
commissions). Contributions under this plan were $724, $776 and $1,287 for the
year ended December 31, 2002, 2001 and 2000, respectively.

Other Postretirement Benefits.We have an unfunded postretirement benefit
plan that provides certain health care and life insurance benefits to those
full-time employees who reach retirement age while working for the Company.

62



---



##### Table of Contents



A summary of the funded status of the benefit plans at December 31, 2002 and
2001, was as follows:

|                                               |  |                  |        |                     |  |      |        |      |  |   |        |   |  |   |        |  
|---------------------------------------------- |  | ---------------- | ------ | ------------------- |  | ---- | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                               |  | Retirement Plans |        | Postretirement Plan
|                                               |  |                  |        |                    
|                                               |  | 2002             |        | 2001                |  | 2002 |        | 2001
|                                               |  |                  |        |                     |  |      |        |     
|Change in benefit obligation                   |  |                  |        |                     |  |      |        |      |  |   |        |   |  |   |        |  
|Benefit obligation, beginning of period        |  | $                | 50,660 |                     |  | $    | 48,668 |      |  | $ | 5,270  |   |  | $ | 4,960  |  
|Service cost                                   |  |                  | 1,414  |                     |  |      | 1,876  |      |  |   | 140    |   |  |   | 120    |  
|Interest cost                                  |  |                  | 3,726  |                     |  |      | 3,777  |      |  |   | 370    |   |  |   | 360    |  
|Plan participant contributions                 |  |                  |       |                     |  |      |       |      |  |   | 70     |   |  |   | 60     |  
|Amendments                                     |  |                  | 9      |                     |  |      | 1,227  |      |  |   |       |   |  |   | (440   | )
|Actuarial loss                                 |  |                  | 4,960  |                     |  |      | 1,689  |      |  |   | 280    |   |  |   | 250    |  
|Benefits paid                                  |  |                  | (2,907 | )                   |  |      | (3,037 | )    |  |   | (290   | ) |  |   | (40    | )
|Special benefits                               |  |                  |       |                     |  |      | 3,452  |      |  |   |       |   |  |   |       |  
|Curtailment loss                               |  |                  |       |                     |  |      | 567    |      |  |   |       |   |  |   |       |  
|Settlement                                     |  |                  |       |                     |  |      | (7,559 | )    |  |   |       |   |  |   |       |  
|                                               |  |                  |        |                     |  |      |        |      |  |   |        |   |  |   |        |  
|Benefit obligation, end of period              |  | $                | 57,862 |                     |  | $    | 50,660 |      |  | $ | 5,840  |   |  | $ | 5,270  |  
|                                               |  |                  |        |                     |  |      |        |      |  |   |        |   |  |   |        |  
|Change in plan assets                          |  |                  |        |                     |  |      |        |      |  |   |        |   |  |   |        |  
|Fair value of plan assets, beginning of period |  | $                | 63,762 |                     |  | $    | 68,463 |      |  | $ |       |   |  | $ |       |  
|Return on plan assets                          |  |                  | (4,818 | )                   |  |      | (1,751 | )    |  |   |       |   |  |   |       |  
|Employer contributions                         |  |                  | 71     |                     |  |      | 87     |      |  |   | 220    |   |  |   | (20    | )
|Plan participant contributions                 |  |                  |       |                     |  |      |       |      |  |   | 70     |   |  |   | 60     |  
|Benefits paid                                  |  |                  | (2,907 | )                   |  |      | (3,037 | )    |  |   | (290   | ) |  |   | (40    | )
|                                               |  |                  |        |                     |  |      |        |      |  |   |        |   |  |   |        |  
|Fair value of plan assets, end of period       |  | $                | 56,108 |                     |  | $    | 63,762 |      |  | $ |       |   |  | $ |       |  
|                                               |  |                  |        |                     |  |      |        |      |  |   |        |   |  |   |        |  
|Funded status of plans                         |  | $                | (1,754 | )                   |  | $    | 13,102 |      |  | $ | (5,840 | ) |  | $ | (5,270 | )
|Unrecognized net loss                          |  |                  | 22,789 |                     |  |      | 6,084  |      |  |   | 320    |   |  |   | 40     |  
|Unrecognized prior service costs               |  |                  | 1,191  |                     |  |      | 1,300  |      |  |   | (300   | ) |  |   | (370   | )
|                                               |  |                  |        |                     |  |      |        |      |  |   |        |   |  |   |        |  
|Net amount recognized                          |  | $                | 22,226 |                     |  | $    | 20,486 |      |  | $ | (5,820 | ) |  | $ | (5,600 | )
|                                               |  |                  |        |                     |  |      |        |      |  |   |        |   |  |   |        |  

Net amounts recognized in the consolidated balance sheets at December 31, 2002
and 2001 were as follows:

|                              |  |                  |        |                     |  |      |        |      |  |   |        |   |  |   |        |  
|----------------------------- |  | ---------------- | ------ | ------------------- |  | ---- | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                              |  | Retirement Plans |        | Postretirement Plan
|                              |  |                  |        |                    
|                              |  | 2002             |        | 2001                |  | 2002 |        | 2001
|                              |  |                  |        |                     |  |      |        |     
|Prepaid pension               |  | $                | 22,748 |                     |  | $    | 20,956 |      |  | $ |       |   |  | $ |       |  
|Other non-current liabilities |  |                  | (522   | )                   |  |      | (470   | )    |  |   | (5,820 | ) |  |   | (5,600 | )
|                              |  |                  |        |                     |  |      |        |      |  |   |        |   |  |   |        |  
|Net amount recognized         |  | $                | 22,226 |                     |  | $    | 20,486 |      |  | $ | (5,820 | ) |  | $ | (5,600 | )
|                              |  |                  |        |                     |  |      |        |      |  |   |        |   |  |   |        |  

The projected benefit obligation and accumulated benefit obligation for the
unfunded PBEP at December 31, 2002 and 2001 was as follows:

|                               |  |      |     |      |  |   |     | 
|------------------------------ |  | ---- | --- | ---- |  | - | --- | 
|                               |  | 2002 |     | 2001
|                               |  |      |     |     
|Projected benefit obligation   |  | $    | 800 |      |  | $ | 319 | 
|Accumulated benefit obligation |  |      | 247 |      |  |   | 39  | 

The net periodic benefit income of the retirement plan for the years ended
December 31, 2002, 2001 and 2000 was as follows:

|                              |  |      |        |      |  |      |        |   |  |   |        |  
|----------------------------- |  | ---- | ------ | ---- |  | ---- | ------ | - |  | - | ------ | -
|                              |  | 2002 |        | 2001 |  | 2000
|                              |  |      |        |      |  |     
|Service cost                  |  | $    | 1,414  |      |  | $    | 1,876  |   |  | $ | 2,336  |  
|Interest cost                 |  |      | 3,726  |      |  |      | 3,777  |   |  |   | 3,790  |  
|Return on plan assets         |  |      | (6,952 | )    |  |      | (6,690 | ) |  |   | (6,397 | )
|Net amortization and deferral |  |      | 145    |      |  |      | 210    |   |  |   | (259   | )
|                              |  |      |        |      |  |      |        |   |  |   |        |  
|Net periodic benefit income   |  | $    | (1,667 | )    |  | $    | (827   | ) |  | $ | (530   | )
|                              |  |      |        |      |  |      |        |   |  |   |        |  

63



---



##### Table of Contents



Additionally, a charge of $4,823 was recognized in 2001 for special benefits,
the settlement of a portion of the liability under the PBEP and the curtailment
of the SEBP in connection with the executive management transition
arrangements. These costs were included as part of the restructuring and
special charge.

The following assumptions were used in determining the benefit obligation and
net periodic benefit income for the retirement plan:

|                                        |  |      |      |      |  |      |      |   |  |  |      |  
|--------------------------------------- |  | ---- | ---- | ---- |  | ---- | ---- | - |  |  | ---- | -
|                                        |  | 2002 |      | 2001 |  | 2000
|                                        |  |      |      |      |  |     
|Weighted average discount rate          |  |      | 6.50 | %    |  |      | 7.25 | % |  |  | 7.50 | %
|Rate of increase in future compensation |  |      | 3.70 | %    |  |      | 4.41 | % |  |  | 4.66 | %
|Expected return on plan assets          |  |      | 9.75 | %    |  |      | 9.75 | % |  |  | 9.75 | %

Effective January 1, 2003, we will reduce our expected return on plan assets
assumption to 8.25%.
The net periodic benefit expense of the post-retirement plan for the years
ended December 31, 2002, 2001 and 2000 was as follows:

|                              |  |      |     |      |  |      |     |   |  |   |     | 
|----------------------------- |  | ---- | --- | ---- |  | ---- | --- | - |  | - | --- | 
|                              |  | 2002 |     | 2001 |  | 2000
|                              |  |      |     |      |  |     
|Service cost                  |  | $    | 140 |      |  | $    | 120 |   |  | $ | 330 | 
|Interest cost                 |  |      | 370 |      |  |      | 360 |   |  |   | 430 | 
|Net amortization and deferral |  |      | (70 | )    |  |      | (70 | ) |  |   |    | 
|                              |  |      |     |      |  |      |     |   |  |   |     | 
|Net periodic benefit expense  |  | $    | 440 |      |  | $    | 410 |   |  | $ | 760 | 
|                              |  |      |     |      |  |      |     |   |  |   |     | 

The discount rate used to determine benefit obligation and net periodic benefit
expense for the post-retirement plan was 6.50%, 7.25% and 7.50% for the 2002,
2001 and 2000, respectively.

For measurement purposes, a 10% annual rate of increase in the per capita cost
of covered health care benefits was assumed for 2003. The rate was assumed to
decrease gradually to 5% through 2011 and remain at that level thereafter. A
one-percentage-point increase or decrease would not have a material effect on
the net periodic postretirement expense. A one-percentage point increase would
have increased the benefit obligation at end of period by $310 and a
one-percentage point decrease would have decreased the benefit obligation at
end of period by $280.



|10. |  | Commitments
|--- |  | -----------

We lease office facilities and equipment under operating leases with
non-cancelable lease terms expiring at various dates through 2006. The lease
of our corporate headquarters extends through 2011; however, we have the option
of canceling this lease in 2006 for a minimal fee. Rent and lease expense for
2002, 2001 and 2000 was $3,090, $3,534 and $7,065, respectively. The
non-cancelable minimum rental payments applicable to operating leases at
December 31, 2002, were:

|      |  |   |       | 
|----- |  | - | ----- | 
|2003  |  | $ | 2,717 | 
|2004  |  |   | 2,682 | 
|2005  |  |   | 1,364 | 
|2006  |  |   | 582   | 
|Total |  | $ | 7,345 | 
|      |  |   |       | 



|11. |  | Litigation
|--- |  | ----------

We are involved in various legal proceedings arising in the ordinary course of
our business, as well as certain extraordinary litigation and tax matters
described below. We periodically assess our liabilities and contingencies in
connection with these matters based upon the latest information available to
us. For those matters where it is probable that we have incurred a loss and
the loss or range of loss can be reasonably estimated, we record reserves in
our consolidated financial statements. In other instances, we are unable to
make a reasonable estimate of any liability because of the uncertainties
related to both the probable outcome and amount or range of loss. As
additional information becomes available, we adjust our assessment and
estimates of such liabilities accordingly.

64



---



##### Table of Contents



Based on our review of the latest information available, we believe our
ultimate liability in connection with pending legal proceedings, including the
extraordinary litigation and tax matters described below, will not have a
material adverse effect on our results of operations, cash flows or financial
position, as described further below.

In order to understand our potential exposure under the extraordinary
litigation and tax matters described below under the captions Information
Resources, Inc. and Tax Matters, you need to understand the relationship
between us and The Dun & Bradstreet Corporation, and certain of its
predecessors and affiliates that, through various corporate reorganizations and
contractual commitments, have assumed varying degrees of responsibility with
respect to such matters.

In November 1996, the company then known as The Dun & Bradstreet Corporation
(D&B1) separated (the 1996 Distribution) through a spin-off into three
separate public companies: D&B1, ACNielsen Corporation (ACNielsen) and
Cognizant Corporation (Cognizant). In June 1998, D&B1 separated (the 1998
Distribution) through a spin-off into two separate public companies: D&B1,
which changed its name to R.H. Donnelley Corporation (Donnelley), and a new
company named The Dun & Bradstreet Corporation (D&B2). Later in 1998,
Cognizant separated (the Cognizant Distribution) through a spin-off into two
separate public companies: IMS Health Incorporated (IMS) and Nielsen Media
Research, Inc. (NMR). In September 2000, D&B2 separated (the 2000
Distribution) through a spin-off into two separate public companies: D&B2,
which changed its name to Moodys Corporation (Moodys), and a new company
named The Dun & Bradstreet Corporation (D&B3, and together with D&B1 and
D&B2, also referred to elsewhere in this Form 10-K as D&B). As a result of
the form of our separation from D&B, we are the corporate successor of, and
technically the defendant and taxpayer referred to below as D&B.

Rockland Yellow Pages.In 1999, Sandy Goldberg, Dellwood Publishing, Inc. and
Rockland Yellow Pages initiated a lawsuit against the Company and Bell Atlantic
Corporation in the United States District Court for the Southern District of
New York. The Rockland Yellow Pages is a proprietary directory that competes
against a Bell Atlantic directory in the same region, for which we served as
Bell Atlantics advertising sales agent through June 30, 2000. The complaint
alleged that the defendants disseminated false information concerning the
Rockland Yellow Pages, which resulted in damages to the Rockland Yellow Pages.
In May 2001, the District Court dismissed substantially all of plaintiffs
claims, and in August 2001, the remaining claims were either withdrawn by the
plaintiffs or dismissed by the District Court. The plaintiffs then filed a
complaint against the same defendants in New York State Supreme Court, in
Rockland County, alleging virtually the same state law tort claim previously
dismissed by the District Court and seeking unspecified damages. In October
2001, defendants filed a motion to dismiss this complaint. In May 2002, the
Court granted defendants motion to dismiss the complaint. Plaintiffs have
filed an appeal of this dismissal. Nonetheless, we presently do not believe
that the final outcome of this matter will have a material adverse effect on
our results of operations or financial condition.

65



---



##### Table of Contents



Information Resources, Inc.In 1996, Information Resources, Inc. (IRI),
filed a complaint in the United States District Court for the Southern District
of New York, naming as defendants the Company, as successor of D&B, ACNielsen
Company and IMS International Inc., at the time of the filing, all wholly owned
subsidiaries of D&B. IRI alleges, among other things, various violations of
the antitrust laws, including alleged violations of Sections 1 and 2 of the
Sherman Act. The complaint also alleges a claim of tortious interference with
a contract and a claim of tortious interference with a prospective business
relationship. These claims relate to the acquisition by defendants of Survey
Research Group Limited (SRG). IRI alleges SRG violated an alleged agreement
with IRI when it agreed to be acquired by the defendants and that the
defendants induced SRG to breach that agreement. IRI is seeking damages in
excess of $350,000, which amount IRI seeks to treble under antitrust laws.
IRI is also seeking punitive damages of an unspecified amount. No trial date
has been set, and discovery is ongoing. Under the agreements relating to the
1996 Distribution, Cognizant, AC Nielsen and D&B agreed to conduct a joint
defense and allocated liabilities amongst themselves. Under the agreements
relating to the 1998 Distribution, D&B assumed the defense and agreed to
indemnify us against any payments that we may be required to make, including
related legal fees. As required by those agreements, Moodys Corporation,
which subsequently separated from D&B in the 2000 Distribution, has agreed to
be jointly and severally liable with D&B for the indemnity obligation to us.
At this stage in the proceedings, we are unable to predict the outcome of this
matter. While we cannot assure you as to any outcome, management presently
believes that D&B and Moodys have sufficient financial resources, borrowing
capacity and indemnity rights against IMS and NMR (who succeeded to Cognizants
indemnity obligations under the Cognizant Distribution) to reimburse us for any
payments we may be required to make and related costs we may incur in
connection with this matter.

Tax Matters.D&B entered into global tax planning initiatives in the normal
course of its business, principally through tax-free restructurings of both
their foreign and domestic operations. The status of Internal Revenue Service
(IRS) reviews of these initiatives is summarized below.

Pursuant to a series of agreements relating to the 1996, 1998, Cognizant and
2000 Distributions, IMS and NMR are jointly and severally liable for, and must
pay one-half, and D&B and Moodys are jointly and severally liable for, and
must pay the other half, of any payments over $137,000 for taxes, accrued
interest and other amounts resulting from unfavorable IRS rulings on the tax
matters summarized below (other than the matter summarized below as
Amortization Expense Deductions  1997-2002, for which D&B and Moodys
(jointly and severally) are solely responsible). D&B, on our behalf, was
contractually obligated to pay, and did pay, the first $137,000 of tax
liability in connection with the matter summarized below as Utilization of
Capital Losses  1989-1990. Under the agreements relating to the 1998
Distribution, D&B agreed to assume the defense and to indemnify us for any tax
liability that may be assessed against us and any related costs and expenses
that we may incur in connection with any of these tax matters. Also, as
required by those agreements, Moodys Corporation has agreed to be jointly and
severally liable with D&B for the indemnity obligation to us. Under the
agreements relating to the 2000 Distribution, D&B and Moodys have, between
each other, agreed to each be financially responsible for 50% of any potential
liabilities that may arise to the extent such potential liabilities are not
directly attributable to each partys respective business operations.

While we cannot assure you as to any outcome in these matters, management
presently believes that D&B and Moodys have sufficient financial resources,
borrowing capacity and indemnity rights against IMS and NMR (who succeeded to
Cognizants indemnity obligations under the Cognizant Distribution) to
reimburse us for any payments we may be required to make and related costs we
may incur in connection with these tax matters.

Utilization of Capital Losses  1989-1990
In 2000, D&B filed an amended tax return with respect to the utilization of
capital losses in 1989 and 1990 in response to a formal IRS assessment. The
amended tax return reflected an additional $561,600 of tax and interest due.
In 2000, D&B paid the IRS $349,300 while IMS (on behalf of itself and NMR) paid
approximately $212,300 to the IRS. We understand that this payment was made
under dispute in order to stop additional interest from accruing, that D&B is
contesting the IRSs formal assessment and would also contest the assessment of
amounts, if any, in excess of the amounts paid, and that D&B has filed a
petition for a refund in the United States District Court. This case is
expected to go to trial in 2004.

Subsequent to making its payment to the IRS in 2000, IMS sought to obtain
partial reimbursement from NMR under the terms of the agreements relating to
the Cognizant Distribution. NMR paid IMS less than IMS sought. Accordingly, in
2001, IMS filed an arbitration proceeding against NMR claiming that NMR
underpaid to IMS its

66



---



##### Table of Contents



proper allocation of the above tax payments as provided by the agreements
relating to the Cognizant Distribution. Neither D&B nor we were party to the
Cognizant Distribution. IMS nonetheless sought to include us in this
arbitration, arguing that if NMR should prevail in its interpretation against
IMS, then IMS could seek to enforce the same interpretation against us (as
successor to D&B) under the agreements relating to the 1996 Distribution. The
arbitration panel ruled that we are a proper party to this arbitration
proceeding. A decision from the arbitration panel on the merits is expected
during 2003. If NMR should prevail in the arbitration against IMS and, in
turn, IMS should prevail against us, then we believe that our additional
liability would be approximately $15,000, net of tax benefits. While we
believe that the original interpretation of the tax allocation computation is
correct and that the claims of IMS are without merit, if NMR prevails against
IMS and in turn IMS prevails against us in this arbitration proceeding, as
noted above, D&B and Moodys would be jointly and severally obligated to
indemnify us against any such liability and related costs.

We believe the fact that D&B and IMS have already paid the IRS a substantial
amount of additional taxes with respect to the contested tax planning
strategies significantly mitigates our risk. While no assurances can be given,
we currently believe that D&B and Moodys have sufficient financial resources,
borrowing capacity and indemnity rights against IMS and NMR to reimburse us for
any payments we may be required to make and related costs we may incur with
respect to this matter.

Royalty Expense Deductions  1994-1996
During the second quarter of 2002, D&B (on our behalf) received a Notice of
Proposed Adjustment from the IRS with respect to a transaction entered into in
1993. In this Notice, the IRS proposed to disallow certain royalty expense
deductions claimed by D&B on its 1994, 1995 and 1996 tax returns. The IRS
previously concluded an audit of this transaction for taxable years 1993 and
1994 and did not disallow any similarly claimed deductions. We understand that
D&B disagrees with the position taken by the IRS in its Notice and has filed a
responsive brief to this effect with the IRS. If the IRS were to issue a
formal assessment consistent with the Notice, then a payment of the disputed
amounts would be required, if D&B opted to challenge the assessment in U.S.
District Court rather than in U.S. Tax Court. In the event of such challenge
by D&B, the required payment by D&B to the IRS would be up to $42,000 ($48,000
offset by a $6,000 tax benefit). In verbal communications between D&B and the
IRS during 2002, we understand that the IRS has expressed some willingness to
withdraw its proposed disallowance of certain royalty expense deductions of
$7,500 for 1994. However, we also understand that the IRS has expressed its
intent to seek penalties of $7,500 for 1995 and 1996 based on its
interpretation of applicable law. We have been advised that D&B would
challenge the IRSs interpretation. Again, under the agreements relating to
the 1998 and 2000 Distributions, D&B and Moodys have agreed to jointly and
severally defend and indemnify us against any such liability and related costs.

Notwithstanding the verbal communications with the IRS in 2002 noted above
regarding royalty expense deductions of $7,500 for 1994, in a February 2003
letter to D&B (on our behalf) the IRS asserted that it intends to take a
position regarding prior tax years that would have the effect of disallowing a
portion of the 1994 royalty expense deduction, our share of which would be
$5,000 if the IRS prevailed. We understand that D&B disagrees with the IRSs
position. Also, in February 2003, D&B (on our behalf) received a Preliminary
Partnership Summary Report from the IRS that challenges the tax treatment of
certain royalty payments received by a partnership in which D&B was a partner.
As stated in its Report, the IRS would reallocate certain partnership income to
D&B, which if the IRS prevailed would require an additional payment from us of
$20,000 (which includes tax, interest and penalty, net of associated tax
benefits).

Again, under the agreements relating to the 1998 and 2000 Distributions, D&B
and Moodys have agreed to jointly and severally defend and indemnify us
against any such liability and related costs.

Amortization Expense Deductions  1997-2002
We understand that the IRS has sought certain documentation from D&B with
respect to a transaction entered into in 1997 that produces amortization
expense deductions for D&B. While we understand that D&B believes the
deductions are appropriate, the IRS could ultimately challenge them and issue
an assessment. If the IRS were to prevail or the assessment were to be
challenged by us in U.S. District Court, we understand that D&B estimates that
its cash payment to the IRS with respect to deductions claimed to date and
including any potential assessment of penalties of $6,500, could be up to
$46,400, or $43,000 net of associated tax benefits. This transaction is
scheduled to expire in 2012 and, unless earlier terminated by D&B, the cash
exposure, based on current interest rates and tax

67



---



##### Table of Contents



rates, would increase at a rate of approximately $2,300 per quarter (including
potential penalties) as future amortization expenses are deducted. Again,
under the agreements relating to the 1998 and 2000 Distributions, D&B and
Moodys are required to jointly and severally indemnify us against any such
liability and related costs.

As a result of our assessment of our exposure in these tax matters, especially
in light of our indemnity arrangements with D&B and Moodys, and their
financial resources, borrowing capacity and indemnity rights against IMS and
NMR, no material amounts have been accrued in our consolidated financial
statements for any of these D&B related litigation and tax matters.

Coastal Termite and Pest ControlIn 2001, Marnan Group, Inc., doing business
as Coastal Termite and Pest Control (Coastal), filed a complaint in the
United States District Court for the Middle District of Florida against SPA.
The complaint, as amended, alleged that SPA breached certain directory
advertising contracts between 1996 and 1999, fraudulently induced Coastal to
enter into another directory advertising contract and tortiously interfered
with Coastals business relationships with its customers. Coastal is seeking
damages for lost contract benefits, lost profits and diminution of business
value in an unspecified amount, including pre-judgment interest. In January
2002, SPA filed a motion to dismiss certain of Coastals claims. In September
2002, the court denied SPAs motion to dismiss. Nonetheless, we do not believe
that the final outcome of this matter will have a material adverse effect on
our results of operations or financial condition. SPA had
approximately $500 reserved in its consolidated financial statements for this matter,
which amount was transferred to our consolidated financial statements as a
result of the acquisition.

Other matters.We are also involved in other legal proceedings, claims and
litigation arising in the ordinary conduct of our business. Although we cannot
assure you of any outcome, management presently believes that the outcome of
such legal proceedings will not have a material adverse effect on our results
of operations or financial condition.

12. Business Segments

Our operating segments at December 31, 2002 and 2001 are DonTech and Directory
Advertising Services. Get Digital Smart, our Internet business, was an
operating segment during 2000 until we ceased operations of this business in
December 2000.

The DonTech segment includes our 50% interest in the net profits of DonTech and
revenue participation income received from SBC. Although DonTech provides
advertising sales of yellow pages and other directory products similar to DAS,
the partnership is considered a separate operating segment since, among other
things, it has its own Board of Directors and the employees of DonTech,
including officers and managers, are not employees of the Company.

The DAS segment includes our yellow pages advertising sales services for
affiliated entities of Sprint and pre-press publishing services for yellow
pages directories. The DAS segment also includes all information technology
costs. Operating income for DAS includes an allocation of certain shared
expenses based on estimated business usage. DAS results for 2000 include the
operating results of the Bell Atlantic and Cincinnati businesses, which were
disposed of in 2000 and certain one-time items from the restructuring of the
CenDon relationship (see Note 15  2000 Transactions  Disposition of
Businesses and Partnership Restructuring).

General & Corporate includes those expenses not allocated to the DAS segment.
Interest expense, interest income, income tax expense and other non-operating
items are not allocated to the operating segments.

Segment information for the years ended December 31, 2002, 2001 and 2000 is
presented below:

|                              |  |         |         |     |  |             |        |          |  |                     |           |   |  |  |       |  |  |   |           | 
|----------------------------- |  | ------- | ------- | --- |  | ----------- | ------ | -------- |  | ------------------- | --------- | - |  |  | ----- |  |  | - | --------- | 
|                              |  |         |         |     |  |             |        |          |  | General             |           |   |  |  |       |  |  |  
|2002                          |  | DonTech |         | DAS |  | & Corporate |        | Other(1) |  | Consolidated Totals
|                              |  |         |         |     |  |             |        |          |  |                    
|Net revenue                   |  |         |        |     |  | $           | 73,806 |          |  |                     |          |   |  |  |      |  |  | $ | 73,806    | 
|Operating income (loss)       |  | $       | 117,146 |     |  |             | 38,214 |          |  | $                   | (13,783   | ) |  |  | 4,405 |  |  |   | 145,982   | 
|Depreciation and amortization |  |         |        |     |  |             | 5,973  |          |  |                     | 276       |   |  |  |      |  |  |   | 6,249     | 
|Total assets                  |  |         | 185,969 |     |  |             | 38,993 |          |  |                     | 1,998,413 |   |  |  |      |  |  |   | 2,223,375 | 

68



---



##### Table of Contents



|                              |  |         |         |     |  |             |        |          |  |                     |         |   |  |   |         |   |  |   |         | 
|----------------------------- |  | ------- | ------- | --- |  | ----------- | ------ | -------- |  | ------------------- | ------- | - |  | - | ------- | - |  | - | ------- | 
|                              |  |         |         |     |  |             |        |          |  | General             |         |   |  |   |         |   |  |  
|2001                          |  | DonTech |         | DAS |  | & Corporate |        | Other(1) |  | Consolidated Totals
|                              |  |         |         |     |  |             |        |          |  |                    
|Net revenue                   |  |         |        |     |  | $           | 76,739 |          |  |                     |        |   |  |   |        |   |  | $ | 76,739  | 
|Operating income (loss)       |  | $       | 122,419 |     |  |             | 32,885 |          |  | $                   | (13,844 | ) |  | $ | (29,988 | ) |  |   | 111,472 | 
|Depreciation and amortization |  |         |        |     |  |             | 10,149 |          |  |                     | 618     |   |  |   |        |   |  |   | 10,767  | 
|Total assets                  |  |         | 193,810 |     |  |             | 38,644 |          |  |                     | 63,527  |   |  |   |        |   |  |   | 295,981 | 

|                              |  |         |         |        |  |     |         |             |  |                     |        |   |  |         |         |   |  |   |         | 
|----------------------------- |  | ------- | ------- | ------ |  | --- | ------- | ----------- |  | ------------------- | ------ | - |  | ------- | ------- | - |  | - | ------- | 
|                              |  |         |         |        |  |     |         |             |  |                     |        |   |  | General |         |   |  |  
|2000                          |  | DonTech |         | DAS(3) |  | GDS |         | & Corporate |  | Consolidated Totals
|                              |  |         |         |        |  |     |         |             |  |                    
|Net revenue                   |  |         |        |        |  | $   | 141,124 |             |  | $                   | 163    |   |  |         |        |   |  | $ | 141,287 | 
|Operating income (loss)       |  | $       | 124,025 |        |  |     | 48,092  |             |  |                     | (8,914 | ) |  | $       | (15,828 | ) |  |   | 147,375 | 
|Depreciation and amortization |  |         |        |        |  |     | 13,841  |             |  |                     | 57     |   |  |         | 1,535   |   |  |   | 15,433  | 
|Total assets                  |  |         | 197,822 |        |  |     | 47,270  |             |  |                     |       |   |  |         | 120,192 |   |  |   | 365,284 | 



|(1) |  | Other in 2002 includes income of $6,405 due to adjustments made to a
restructuring reserve and a $2,000 investment impairment charge. Other in
2001 includes a restructuring and special charge of $18,556 and an
investment impairment charge of $11,432. These items were not allocated
to an operating segment.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | The DAS segment includes the following data relating to the Bell Atlantic
and Cincinnati businesses that were disposed of in 2000 and certain
special items related to the CenDon Restructuring.                                                                                                                  

|                              |  |      |        | 
|----------------------------- |  | ---- | ------ | 
|                              |  | 2000
|                              |  |     
|Net revenue                   |  |      | 63,831 | 
|Operating income              |  |      | 22,105 | 
|Depreciation and amortization |  |      | 2,703  | 
|Total assets                  |  |      |       | 

We also evaluate DonTech and DAS based on advertising sales because, while
these sales do not appear on our financial statements or the financial
statements of DonTech, they are a critical measure of performance reviewed by
management and play an important role in managements decision in allocating
financial resources. For a discussion of advertising sales, see Managements
Discussion and Analysis of Financial Condition and Results of Operations 
Results of Operations.

13. Guarantees

R.H. Donnelley Inc. is a direct wholly owned subsidiary of the Company and the
issuer of the Existing Notes. The Company and the direct and indirect wholly
owned subsidiaries of R.H. Donnelley Inc. jointly and severally, fully and
unconditionally guarantee the Existing Notes. At
December 31, 2002, R.H. Donnelley Inc.s direct wholly
owned subsidiaries were R.H. Donnelley APIL, Inc., R.H. Donnelley CD, Inc., R.H.
Donnelley Acquisitions II, Inc. and Get Digital Smart.com Inc. R.H. Donnelley
Acquisitions, Inc. is a wholly owned subsidiary of R.H. Donnelley APIL, Inc.
R.H. Donnelley Finance Corporation I and II, subsidiary borrowers
established in connection with the financing of the SPA acquisition, were non-guarantor subsidiaries at
December 31, 2002. Subject to the technical default that was
subsequently cured (see Note (4)), there were no non-guarantor
subsidiaries for the years ended
December 31, 2001 and 2000. The following consolidating condensed financial
statements should be read in conjunction with the consolidated financial
statements of the Company.

R.H. Donnelley Corporation
Consolidating Condensed Balance Sheet
December 31, 2002

|                                                             |  |           |         |           |  |              |         |              |  |              |         |             |  |           |           |      |  |              |          |   |  |   |           |  
|------------------------------------------------------------ |  | --------- | ------- | --------- |  | ------------ | ------- | ------------ |  | ------------ | ------- | ----------- |  | --------- | --------- | ---- |  | ------------ | -------- | - |  | - | --------- | -
|                                                             |  | R.H.      |         | R.H.      |  |              |         |              |  |              |         |             |  |           |           |      |  | Consolidated
|                                                             |  | Donnelley |         | Donnelley |  |              |         |              |  | Non-         |         |             |  |           |           | R.H.
|                                                             |  | Inc.      |         | Corp.     |  | Guarantor    |         | guarantor    |  |              |         |             |  | Donnelley
|                                                             |  | (Issuer)  |         | (Parent)  |  | subsidiaries |         | subsidiaries |  | Eliminations |         | Corporation
|                                                             |  |           |         |           |  |              |         |              |  |              |         |            
|Assets                                                       |  |           |         |           |  |              |         |              |  |              |         |             |  |           |           |      |  |              |          |   |  |   |           |  
|Cash and cash equivalents                                    |  | $         | 7,745   |           |  |              |         |              |  | $            | 42      |             |  |           |           |      |  |              |          |   |  | $ | 7,787     |  
|Restricted cash                                              |  |           | 103,700 |           |  |              |         |              |  |              |         |             |  | $         | 1,825,000 |      |  |              |          |   |  |   | 1,928,700 |  
|Other current assets                                         |  |           | 29,563  |           |  |              |         |              |  |              | 1,038   |             |  |           | 1,586     |      |  |              |          |   |  |   | 32,187    |  
|Investment in subsidiaries                                   |  |           | 305,509 |           |  | $            | 32,859  |              |  |              | 124,047 |             |  |           |           |      |  | $            | (260,179 | ) |  |   | 202,236   |  
|Fixed assets, net                                            |  |           | 12,008  |           |  |              |         |              |  |              | 3       |             |  |           |           |      |  |              | (3       | ) |  |   | 12,008    |  
|Other assets                                                 |  |           | 40,457  |           |  |              |         |              |  |              | 99,990  |             |  |           |           |      |  |              | (99,990  | ) |  |   | 40,457    |  
|                                                             |  |           |         |           |  |              |         |              |  |              |         |             |  |           |           |      |  |              |          |   |  |   |           |  
|Total assets                                                 |  | $         | 498,982 |           |  | $            | 32,859  |              |  | $            | 225,120 |             |  | $         | 1,826,586 |      |  | $            | (360,172 | ) |  | $ | 2,223,375 |  
|                                                             |  |           |         |           |  |              |         |              |  |              |         |             |  |           |           |      |  |              |          |   |  |   |           |  
|Liabilities, Preferred
Stock and Shareholders
Deficit       |  |           |         |           |  |              |         |              |  |              |         |             |  |           |           |      |  |              |          |   |  |   |           |  
|Current liabilities                                          |  | $         | 124,874 |           |  |              |         |              |  | $            | 2,943   |             |  | $         | 6,214     |      |  | $            | (99,990  | ) |  | $ | 34,041    |  
|Long-term debt                                               |  |           | 250,470 |           |  |              |         |              |  |              |         |             |  |           | 1,825,000 |      |  |              |          |   |  |   | 2,075,470 |  
|Other long-term liabilities                                  |  |           | 81,005  |           |  |              |         |              |  |              |         |             |  |           |           |      |  |              |          |   |  |   | 81,005    |  
|Redeemable convertible
preferred stock                       |  |           |         |           |  | $            | 63,459  |              |  |              |         |             |  |           |           |      |  |              |          |   |  |   | 63,459    |  
|Shareholders equity
(deficit)                               |  |           | 42,633  |           |  |              | (30,600 | )            |  |              | 222,177 |             |  |           | (4,628    | )    |  |              | (260,182 | ) |  |   | (30,600   | )
|                                                             |  |           |         |           |  |              |         |              |  |              |         |             |  |           |           |      |  |              |          |   |  |   |           |  
|Total liabilities,
preferred stock and
shareholders deficit |  | $         | 498,982 |           |  | $            | 32,859  |              |  | $            | 225,120 |             |  | $         | 1,826,586 |      |  | $            | (360,172 | ) |  | $ | 2,223,375 |  
|                                                             |  |           |         |           |  |              |         |              |  |              |         |             |  |           |           |      |  |              |          |   |  |   |           |  

69



---



##### Table of Contents



R.H. Donnelley Corporation
Consolidating Condensed Balance Sheet
December 31, 2001

|                                            |  |           |          |           |  |              |          |              |  |             |         |           |  |              |          |   |  |   |          |  
|------------------------------------------- |  | --------- | -------- | --------- |  | ------------ | -------- | ------------ |  | ----------- | ------- | --------- |  | ------------ | -------- | - |  | - | -------- | -
|                                            |  | R.H.      |          | R.H.      |  |              |          |              |  |             |         |           |  | Consolidated
|                                            |  | Donnelley |          | Donnelley |  |              |          |              |  |             |         |           |  | R.H.        
|                                            |  | Inc.      |          | Corp.     |  | Guarantor    |          |              |  |             |         | Donnelley
|                                            |  | (Issuer)  |          | (Parent)  |  | subsidiaries |          | Eliminations |  | Corporation
|                                            |  |           |          |           |  |              |          |              |  |            
|Assets                                      |  |           |          |           |  |              |          |              |  |             |         |           |  |              |          |   |  |   |          |  
|Cash and cash equivalents                   |  | $         | 14,667   |           |  |              |          |              |  | $           | 54      |           |  |              |          |   |  | $ | 14,721   |  
|Other current assets                        |  |           | 28,158   |           |  |              |          |              |  |             | 1,139   |           |  |              |          |   |  |   | 29,297   |  
|Investment in subsidiaries                  |  |           | 271,532  |           |  | $            | (111,313 | )            |  |             | 124,379 |           |  | $            | (75,609  | ) |  |   | 208,989  |  
|Fixed assets, net                           |  |           | 14,514   |           |  |              |          |              |  |             | 3       |           |  |              | (3       | ) |  |   | 14,514   |  
|Other assets                                |  |           | 28,460   |           |  |              |          |              |  |             | 99,990  |           |  |              | (99,990  | ) |  |   | 28,460   |  
|                                            |  |           |          |           |  |              |          |              |  |             |         |           |  |              |          |   |  |   |          |  
|Total assets                                |  | $         | 357,331  |           |  | $            | (111,313 | )            |  | $           | 225,565 |           |  | $            | (175,602 | ) |  | $ | 295,981  |  
|                                            |  |           |          |           |  |              |          |              |  |             |         |           |  |              |          |   |  |   |          |  
|Liabilities and Shareholders
Deficit       |  |           |          |           |  |              |          |              |  |             |         |           |  |              |          |   |  |   |          |  
|Current liabilities                         |  | $         | 144,556  |           |  |              |          |              |  | $           | 44,138  |           |  | $            | (144,110 | ) |  | $ | 44,584   |  
|Long-term debt                              |  |           | 283,904  |           |  |              |          |              |  |             |         |           |  |              |          |   |  |   | 283,904  |  
|Other long-term liabilities                 |  |           | 78,806   |           |  |              |          |              |  |             |         |           |  |              |          |   |  |   | 78,806   |  
|Shareholders (deficit)
equity              |  |           | (149,935 | )         |  | $            | (111,313 | )            |  |             | 181,427 |           |  |              | (31,492  | ) |  |   | (111,313 | )
|                                            |  |           |          |           |  |              |          |              |  |             |         |           |  |              |          |   |  |   |          |  
|Total liabilities and
shareholders deficit |  | $         | 357,331  |           |  | $            | (111,313 | )            |  | $           | 225,565 |           |  | $            | (175,602 | ) |  | $ | 295,981  |  
|                                            |  |           |          |           |  |              |          |              |  |             |         |           |  |              |          |   |  |   |          |  

R.H. Donnelley Corporation
Consolidating Condensed Statement of Operations
For the Year Ended December 31, 2002

|                                            |  |           |         |           |  |              |        |              |  |              |         |             |  |           |         |      |  |              |          |   |  |   |         |  
|------------------------------------------- |  | --------- | ------- | --------- |  | ------------ | ------ | ------------ |  | ------------ | ------- | ----------- |  | --------- | ------- | ---- |  | ------------ | -------- | - |  | - | ------- | -
|                                            |  | R.H.      |         | R.H.      |  |              |        |              |  |              |         |             |  |           |         |      |  | Consolidated
|                                            |  | Donnelley |         | Donnelley |  |              |        |              |  | Non-         |         |             |  |           |         | R.H.
|                                            |  | Inc.      |         | Corp.     |  | Guarantor    |        | guarantor    |  |              |         |             |  | Donnelley
|                                            |  | (Issuer)  |         | (Parent)  |  | subsidiaries |        | subsidiaries |  | Eliminations |         | Corporation
|                                            |  |           |         |           |  |              |        |              |  |              |         |            
|Net revenue                                 |  | $         | 73,806  |           |  |              |        |              |  |              |         |             |  |           |         |      |  |              |          |   |  | $ | 73,806  |  
|Expenses                                    |  |           | 64,390  |           |  |              |        |              |  | $            | 307     |             |  |           |         |      |  |              |          |   |  |   | 64,697  |  
|Partnership and equity
income               |  |           | 85,378  |           |  | $            | 67,177 |              |  |              | 121,669 |             |  |           |         |      |  | $            | (137,351 | ) |  |   | 136,873 |  
|                                            |  |           |         |           |  |              |        |              |  |              |         |             |  |           |         |      |  |              |          |   |  |   |         |  
|Operating income                            |  |           | 94,794  |           |  |              | 67,177 |              |  |              | 121,362 |             |  |           |         |      |  |              | (137,351 | ) |  |   | 145,982 |  
|Interest (expense) income                   |  |           | (29,521 | )         |  |              |        |              |  |              | 7,129   |             |  | $         | (11,156 | )    |  |              |          |   |  |   | (33,548 | )
|Other expense                               |  |           | (451    | )         |  |              |        |              |  |              |         |             |  |           |         |      |  |              |          |   |  |   | (451    | )
|                                            |  |           |         |           |  |              |        |              |  |              |         |             |  |           |         |      |  |              |          |   |  |   |         |  
|Pre-tax income                              |  |           | 64,822  |           |  |              | 67,177 |              |  |              | 128,491 |             |  |           | (11,156 | )    |  |              | (137,351 | ) |  |   | 111,983 |  
|Income tax benefit
(expense)                |  |           | 2,355   |           |  |              |        |              |  |              | (47,161 | )           |  |           |         |      |  |              |          |   |  |   | (44,806 | )
|                                            |  |           |         |           |  |              |        |              |  |              |         |             |  |           |         |      |  |              |          |   |  |   |         |  
|Net income                                  |  |           | 67,177  |           |  |              | 67,177 |              |  |              | 81,330  |             |  |           | (11,156 | )    |  |              | (137,351 | ) |  |   | 67,177  |  
|Dividend on Preferred Stock                 |  |           |         |           |  |              | 24,702 |              |  |              |         |             |  |           |         |      |  |              |          |   |  |   | 24,702  |  
|                                            |  |           |         |           |  |              |        |              |  |              |         |             |  |           |         |      |  |              |          |   |  |   |         |  
|Net income available to
common shareholders |  | $         | 67,177  |           |  | $            | 42,475 |              |  | $            | 81,330  |             |  | $         | (11,156 | )    |  | $            | (137,351 | ) |  | $ | 42,475  |  
|                                            |  |           |         |           |  |              |        |              |  |              |         |             |  |           |         |      |  |              |          |   |  |   |         |  

70



---



##### Table of Contents



R.H. Donnelley Corporation
Consolidating Condensed Statement of Operations
For the Year Ended December 31, 2001

|                              |  |           |         |           |  |              |       |              |  |             |         |           |  |              |         |   |  |   |         |  
|----------------------------- |  | --------- | ------- | --------- |  | ------------ | ----- | ------------ |  | ----------- | ------- | --------- |  | ------------ | ------- | - |  | - | ------- | -
|                              |  | R.H.      |         | R.H.      |  |              |       |              |  |             |         |           |  | Consolidated
|                              |  | Donnelley |         | Donnelley |  |              |       |              |  |             |         |           |  | R.H.        
|                              |  | Inc.      |         | Corp.     |  | Guarantor    |       |              |  |             |         | Donnelley
|                              |  | (Issuer)  |         | (Parent)  |  | subsidiaries |       | Eliminations |  | Corporation
|                              |  |           |         |           |  |              |       |              |  |            
|Net revenue                   |  | $         | 76,739  |           |  |              |       |              |  |             |         |           |  |              |         |   |  | $ | 76,739  |  
|Expenses                      |  |           | 105,102 |           |  |              |       |              |  | $           | 129     |           |  |              |         |   |  |   | 105,231 |  
|Partnership and equity income |  |           | 99,055  |           |  | $            | 4,579 |              |  |             | 120,944 |           |  | $            | (84,614 | ) |  |   | 139,964 |  
|                              |  |           |         |           |  |              |       |              |  |             |         |           |  |              |         |   |  |   |         |  
|Operating income              |  |           | 70,692  |           |  |              | 4,579 |              |  |             | 120,815 |           |  |              | (84,614 | ) |  |   | 111,472 |  
|Interest (expense) income     |  |           | (32,777 | )         |  |              |       |              |  |             | 7,129   |           |  |              |         |   |  |   | (25,648 | )
|                              |  |           |         |           |  |              |       |              |  |             |         |           |  |              |         |   |  |   |         |  
|Pre-tax income                |  |           | 37,915  |           |  |              | 4,579 |              |  |             | 127,944 |           |  |              | (84,614 | ) |  |   | 85,824  |  
|Income tax (expense) benefit  |  |           | (33,336 | )         |  |              |       |              |  |             | (46,792 | )         |  |              | 44,119  |   |  |   | (36,009 | )
|                              |  |           |         |           |  |              |       |              |  |             |         |           |  |              |         |   |  |   |         |  
|Net income                    |  | $         | 4,579   |           |  | $            | 4,579 |              |  | $           | 81,152  |           |  | $            | (40,495 | ) |  | $ | 49,815  |  
|                              |  |           |         |           |  |              |       |              |  |             |         |           |  |              |         |   |  |   |         |  

R.H. Donnelley Corporation
Consolidating Condensed Statement of Operations
For the Year Ended December 31, 2000

|                              |  |           |         |           |  |              |         |              |  |             |         |           |  |              |          |   |  |   |         |  
|----------------------------- |  | --------- | ------- | --------- |  | ------------ | ------- | ------------ |  | ----------- | ------- | --------- |  | ------------ | -------- | - |  | - | ------- | -
|                              |  | R.H.      |         | R.H.      |  |              |         |              |  |             |         |           |  | Consolidated
|                              |  | Donnelley |         | Donnelley |  |              |         |              |  |             |         |           |  | R.H.        
|                              |  | Inc.      |         | Corp.     |  | Guarantor    |         |              |  |             |         | Donnelley
|                              |  | (Issuer)  |         | (Parent)  |  | subsidiaries |         | Eliminations |  | Corporation
|                              |  |           |         |           |  |              |         |              |  |            
|Net revenue                   |  | $         | 141,124 |           |  |              |         |              |  | $           | 163     |           |  |              |          |   |  | $ | 141,287 |  
|Expenses                      |  |           | 132,453 |           |  |              |         |              |  |             | 9,152   |           |  |              |          |   |  |   | 141,605 |  
|Partnership and equity income |  |           | 149,827 |           |  | $            | 133,690 |              |  |             | 104,501 |           |  | $            | (240,325 | ) |  |   | 147,693 |  
|                              |  |           |         |           |  |              |         |              |  |             |         |           |  |              |          |   |  |   |         |  
|Operating income              |  |           | 158,498 |           |  |              | 133,690 |              |  |             | 95,512  |           |  |              | (240,325 | ) |  |   | 147,375 |  
|Interest (expense) income     |  |           | (35,560 | )         |  |              |         |              |  |             | 3,564   |           |  |              |          |   |  |   | (31,996 | )
|Other income                  |  |           | 86,495  |           |  |              |         |              |  |             |         |           |  |              |          |   |  |   | 86,495  |  
|                              |  |           |         |           |  |              |         |              |  |             |         |           |  |              |          |   |  |   |         |  
|Pre-tax income                |  |           | 209,433 |           |  |              | 133,690 |              |  |             | 99,076  |           |  |              | (240,325 | ) |  |   | 201,874 |  
|Income tax expense            |  |           | (75,743 | )         |  |              |         |              |  |             | (1,373  | )         |  |              |          |   |  |   | (77,116 | )
|                              |  |           |         |           |  |              |         |              |  |             |         |           |  |              |          |   |  |   |         |  
|Net income                    |  | $         | 133,690 |           |  | $            | 133,690 |              |  | $           | 97,703  |           |  | $            | (240,325 | ) |  | $ | 124,758 |  
|                              |  |           |         |           |  |              |         |              |  |             |         |           |  |              |          |   |  |   |         |  

71



---



##### Table of Contents



R.H. Donnelley Corporation
Consolidating Condensed Statement of Cash Flows
For the Year Ended December 31, 2002

|                                    |  |           |          |           |  |              |         |              |  |              |         |             |  |           |            |      |  |              |         |   |  |   |            |  
|----------------------------------- |  | --------- | -------- | --------- |  | ------------ | ------- | ------------ |  | ------------ | ------- | ----------- |  | --------- | ---------- | ---- |  | ------------ | ------- | - |  | - | ---------- | -
|                                    |  | R.H.      |          | R.H.      |  |              |         |              |  |              |         |             |  |           |            |      |  | Consolidated
|                                    |  | Donnelley |          | Donnelley |  |              |         |              |  | Non-         |         |             |  |           |            | R.H.
|                                    |  | Inc.      |          | Corp.     |  | Guarantor    |         | Guarantor    |  |              |         |             |  | Donnelley
|                                    |  | (Issuer)  |          | (Parent)  |  | subsidiaries |         | subsidiaries |  | Eliminations |         | Corporation
|                                    |  |           |          |           |  |              |         |              |  |              |         |            
|Cash flow from operations           |  | $         | 14,342   |           |  |              |         |              |  | $            | 40,554  |             |  | $         | (4,941     | )    |  |              |         |   |  | $ | 49,955     |  
|Cash flow from investing
activities |  |           | (107,443 | )         |  | $            | (69,300 | )            |  |              |         |             |  |           | (1,825,000 | )    |  | $            | 69,300  |   |  |   | (1,932,443 | )
|Cash flow from financing
activities |  |           | 86,179   |           |  |              | 69,300  |              |  |              | (40,566 | )           |  |           | 1,829,941  |      |  |              | (69,300 | ) |  |   | 1,875,554  |  
|                                    |  |           |          |           |  |              |         |              |  |              |         |             |  |           |            |      |  |              |         |   |  |   |            |  
|Change in cash                      |  |           | (6,922   | )         |  |              |        |              |  |              | (12     | )           |  |           |           |      |  |              |        |   |  |   | (6,934     | )
|Cash at beginning of period         |  |           | 14,667   |           |  |              |         |              |  |              | 54      |             |  |           |            |      |  |              |         |   |  |   | 14,721     |  
|                                    |  |           |          |           |  |              |         |              |  |              |         |             |  |           |            |      |  |              |         |   |  |   |            |  
|Cash at end of period               |  | $         | 7,745    |           |  | $            |        |              |  | $            | 42      |             |  | $         |           |      |  | $            |        |   |  | $ | 7,787      |  
|                                    |  |           |          |           |  |              |         |              |  |              |         |             |  |           |            |      |  |              |         |   |  |   |            |  

R.H. Donnelley Corporation
Consolidating Condensed Statement of Cash Flows
For the Year Ended December 31, 2001

|                                    |  |          |         |              |  |             |          |   |  |              |          |  
|----------------------------------- |  | -------- | ------- | ------------ |  | ----------- | -------- | - |  | ------------ | -------- | -
|                                    |  |          |         |              |  |             |          |   |  | Consolidated
|                                    |  |          |         |              |  |             |          |   |  | R.H.        
|                                    |  | RHD Inc. |         | Guarantor    |  | Donnelley  
|                                    |  | (Issuer) |         | subsidiaries |  | Corporation
|                                    |  |          |         |              |  |            
|Cash flow from operations           |  | $        | (30,197 | )            |  | $           | 117,051  |   |  | $            | 86,854   |  
|Cash flow from investing activities |  |          | (6,100  | )            |  |             |          |   |  |              | (6,100   | )
|Cash flow from financing activities |  |          | (4,467  | )            |  |             | (117,003 | ) |  |              | (121,470 | )
|                                    |  |          |         |              |  |             |          |   |  |              |          |  
|Change in cash                      |  |          | (40,764 | )            |  |             | 48       |   |  |              | (40,716  | )
|Cash at beginning of period         |  |          | 55,431  |              |  |             | 6        |   |  |              | 55,437   |  
|                                    |  |          |         |              |  |             |          |   |  |              |          |  
|Cash at end of period               |  | $        | 14,667  |              |  | $           | 54       |   |  | $            | 14,721   |  
|                                    |  |          |         |              |  |             |          |   |  |              |          |  

R.H. Donnelley Corporation
Consolidating Condensed Statement of Cash Flows
For the Year Ended December 31, 2000

|                                    |  |          |         |              |  |             |         |   |  |              |          |  
|----------------------------------- |  | -------- | ------- | ------------ |  | ----------- | ------- | - |  | ------------ | -------- | -
|                                    |  |          |         |              |  |             |         |   |  | Consolidated
|                                    |  |          |         |              |  |             |         |   |  | R.H.        
|                                    |  | RHD Inc. |         | Guarantor    |  | Donnelley  
|                                    |  | (Issuer) |         | subsidiaries |  | Corporation
|                                    |  |          |         |              |  |            
|Cash flow from operations           |  | $        | 10,473  |              |  | $           | 72,293  |   |  | $            | 82,766   |  
|Cash flow from investing activities |  |          | 109,354 |              |  |             |         |   |  |              | 109,354  |  
|Cash flow from financing activities |  |          | (66,786 | )            |  |             | (72,287 | ) |  |              | (139,073 | )
|                                    |  |          |         |              |  |             |         |   |  |              |          |  
|Change in cash                      |  |          | 53,041  |              |  |             | 6       |   |  |              | 53,047   |  
|Cash at beginning of period         |  |          | 2,390   |              |  |             |         |   |  |              | 2,390    |  
|                                    |  |          |         |              |  |             |         |   |  |              |          |  
|Cash at end of period               |  | $        | 55,431  |              |  | $           | 6       |   |  | $            | 55,437   |  
|                                    |  |          |         |              |  |             |         |   |  |              |          |  

72



---



##### Table of Contents



14. Valuation and Qualifying Accounts

|                                |  |                     |  |                |  |                   |  |                   |  |  |  |  |  |  |  | 
|------------------------------- |  | ------------------- |  | -------------- |  | ----------------- |  | ----------------- |  |  |  |  |  |  |  | 
|                                |  |                     |  |                |  | Additions Charged |  |                   |  |  |  |  |  | 
|                                |  | Balance at          |  | To Revenue and |  | Write-offs and    |  | Balance at End of
|                                |  | Beginning of Period |  | Expense        |  | Other Deductions  |  | Period           
|                                |  |                     |  |                |  |                   |  |                  
|Allowance for Doubtful Accounts |  |                     |  |                |  |                   |  |                   |  |  |  |  |  |  |  | 

|                                       |  |   |       |  |  |  |        |  |  |  |        |  |  |   |       | 
|-------------------------------------- |  | - | ----- |  |  |  | ------ |  |  |  | ------ |  |  | - | ----- | 
|For the year ended December 31, 2002   |  | $ | 6,339 |  |  |  | 3,300  |  |  |  | 4,867  |  |  | $ | 4,772 | 
|For the year ended December 31, 2001   |  | $ | 7,355 |  |  |  | 3,372  |  |  |  | 4,388  |  |  | $ | 6,339 | 
|For the year ended December 31, 2000   |  | $ | 7,992 |  |  |  | 11,128 |  |  |  | 11,765 |  |  | $ | 7,355 | 
|Deferred Tax Asset Valuation Allowance |  |   |       |  |  |  |        |  |  |  |        |  |  |   |       | 
|For the year ended December 31, 2002   |  | $ | 4,287 |  |  |  | 1,807  |  |  |  |       |  |  | $ | 6,094 | 
|For the year ended December 31, 2001   |  | $ |      |  |  |  | 4,287  |  |  |  |       |  |  | $ | 4,287 | 

15. 2000 Transactions  Disposition of Businesses and Partnership Restructuring

Disposition of Businesses.During 2000, we sold our Cincinnati proprietary
directory business to Yellow Book USA, Inc., terminated early our directory
services agreements with Bell Atlantic, ceased operations of our Get Digital
Smart Internet business and implemented related cost-cutting measures,
including headcount reductions, at our Raleigh facility and corporate
headquarters. A pretax gain of $86,495 ($53,454 after taxes) was recognized in
connection with these actions. The calculation of the gain included certain
estimated reserves based on the best information available at the time of the
transactions. At December 31, 2002, we determined that sufficient time has
elapsed since the transaction, that no additional costs will be incurred and no
risks or uncertainties existed at the balance sheet date. Accordingly, the
remaining reserves of $1,072 were reversed into income.

CenDon Restructuring.Effective for directories that published after June 30,
2000, we entered into a series of agreements with Centel that effectively
restructured the CenDon Partnership as a limited liability company, CenDon LLC.
Under the restructured arrangement, we receive sales commissions on all
advertising sold, and in consideration for transferring control over the
publishing functions to Centel, we receive a priority distribution, which is
determined as a percentage of CenDon advertising sales. The priority
distribution allows us to maintain the same level of profitability that we
would have earned under the CenDon Partnership through the original expiration
date in 2004. We also provided pre-press publishing services to the CenDon
Partnership and continue to provide similar services to CenDon. The CenDon
sales agency relationship extends through December 2010.

Under the revised arrangement, revenue and related costs were recognized at the
time of sale. Under the previous CenDon Partnership, where we shared
responsibility for the publishing and delivery functions, revenue and related
costs were recognized at the time of directory publication. Accordingly, upon
the restructuring of the CenDon arrangement, a one-time operating income
benefit of $15,771 was recorded. This benefit related to advertising sales
made and costs incurred prior to the effective date of the agreement for
directories that published subsequent to the effective date of the agreement.

16. Quarterly Information (unaudited)

|                                      |  |                    |        |         |  |              |        |                |  |           |        |  |  |   |         |   |  |   |         | 
|------------------------------------- |  | ------------------ | ------ | ------- |  | ------------ | ------ | -------------- |  | --------- | ------ |  |  | - | ------- | - |  | - | ------- | 
|                                      |  | Three Months Ended |        |         |  |             
|                                      |  |                    |        |         |  |             
|                                      |  | March 31           |        | June 30 |  | September 30 |        | December 31(1) |  | Full Year
|                                      |  |                    |        |         |  |              |        |                |  |          
|2002                                  |  |                    |        |         |  |              |        |                |  |           |        |  |  |   |         |   |  |   |         | 
|Net revenue                           |  | $                  | 18,390 |         |  | $            | 19,456 |                |  | $         | 20,938 |  |  | $ | 15,022  |   |  | $ | 73,806  | 
|Operating income                      |  |                    | 27,657 |         |  |              | 40,393 |                |  |           | 45,992 |  |  |   | 31,940  |   |  |   | 145,982 | 
|Net income                            |  |                    | 13,182 |         |  |              | 21,169 |                |  |           | 25,059 |  |  |   | 7,767   |   |  |   | 67,177  | 
|Preferred dividend                    |  |                    |       |         |  |              |       |                |  |           |       |  |  |   | 24,702  |   |  |   | 24,702  | 
|Net income (loss) available
to common |  |                    | 13,182 |         |  |              | 21,169 |                |  |           | 25,059 |  |  |   | (19,935 | ) |  |   | 42,475  | 
|Basic earnings (loss) per share       |  | $                  | 0.45   |         |  | $            | 0.71   |                |  | $         | 0.84   |  |  | $ | (0.57   | ) |  | $ | 1.42    | 
|Diluted earnings (loss) per share     |  | $                  | 0.44   |         |  | $            | 0.70   |                |  | $         | 0.83   |  |  | $ | (0.57   | ) |  | $ | 1.40    | 

|            |  |                    |        |         |  |              |        |                |  |           |        |  |  |   |        |  |  |   |        | 
|----------- |  | ------------------ | ------ | ------- |  | ------------ | ------ | -------------- |  | --------- | ------ |  |  | - | ------ |  |  | - | ------ | 
|            |  | Three Months Ended |        |         |  |             
|            |  |                    |        |         |  |             
|            |  | March 31           |        | June 30 |  | September 30 |        | December 31(2) |  | Full Year
|            |  |                    |        |         |  |              |        |                |  |          
|2001        |  |                    |        |         |  |              |        |                |  |           |        |  |  |   |        |  |  |   |        | 
|Net revenue |  | $                  | 18,839 |         |  | $            | 20,034 |                |  | $         | 22,165 |  |  | $ | 15,701 |  |  | $ | 76,739 | 

73



---



##### Table of Contents



|                                  |  |   |        |  |  |   |        |  |  |   |        |  |  |   |        |   |  |   |         | 
|--------------------------------- |  | - | ------ |  |  | - | ------ |  |  | - | ------ |  |  | - | ------ | - |  | - | ------- | 
|Operating income (loss)           |  |   | 27,661 |  |  |   | 39,208 |  |  |   | 47,316 |  |  |   | (2,713 | ) |  |   | 111,472 | 
|Net income (loss)                 |  |   | 12,861 |  |  |   | 20,612 |  |  |   | 25,688 |  |  |   | (9,346 | ) |  |   | 49,815  | 
|Basic earnings (loss) per share   |  | $ | 0.42   |  |  | $ | 0.68   |  |  | $ | 0.86   |  |  | $ | (0.32  | ) |  | $ | 1.65    | 
|Diluted earnings (loss) per share |  | $ | 0.41   |  |  | $ | 0.66   |  |  | $ | 0.83   |  |  | $ | (0.32  | ) |  | $ | 1.61    | 

The full year earnings per share amount may not equal the sum of the quarters
due to weighting of shares.



|(1) |  | The fourth quarter of 2002 includes a benefit of $6,694 from the reversal
of a restructuring reserve, an investment impairment charge of $2,000, a
loss on hedging activities of $1,523 and a benefit of $1,072 from the
reversal of reserves established in connection with the disposition of the
Bell Atlantic business.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | The fourth quarter of 2001 includes a restructuring and special charge of
$18,556 and an investment impairment charge of $11,432.                                                                                                                                                                                          

17. Subsequent Events

On January 3, 2003, we completed the acquisition of Sprint Corporations
directory publishing business, Sprint Publishing & Advertising, for $2,213,475,
after a preliminary working capital adjustment, repaid existing debt and
accrued interest of $244,166 and paid transaction costs of $15,101. The
ultimate purchase price is subject to a final working capital adjustment. SPA
is a publisher of 260 revenue-generating yellow pages directories in 18 states.
Prior to the acquisition, we provided sales agency and pre-press publishing
services for 44 of these directories in four states. The acquisition
transforms the Company from a sales agent and pre-press vendor into a leading
publisher of yellow pages directories.

At the closing of the acquisition, we borrowed $510,000 consisting of $500,000
Term Loan A proceeds and $10,000 under the Revolver. We also received the
proceeds of $1,825,000 held in escrow (see Note 4) and issued 130,000 shares of
Preferred Stock and warrants to purchase 1,072,500 shares of our common stock
to investment partnerships affiliated with The Goldman Sachs Group, Inc.
(collectively, the GS Funds) for gross proceeds of $130,000. This investment
by the GS Funds represented the remaining investment amount of their $200,000
commitment. On January 3, 2003, the 70,000 shares of Series B-1 Preferred
Stock purchased by the GS Funds in November 2002 automatically converted into
70,604 shares of Preferred Stock. These proceeds, along with the $69,300 of net proceeds from the issuance
of Preferred Stock to the GS Funds in November and $40,000 borrowed under the
Existing Revolver in December, were used to purchase all the outstanding common
stock of SPA, repay existing debt, including accrued interest and pay
transaction fees and expenses. The Revolver and Term Loan A mature December
2008. The Preferred Stock is redeemable at our option at any time on or after
January 3, 2013. The Preferred Stock may be redeemed at our option on or after
January 3, 2006 and before January 3, 2013 if the market price (as defined) of
our common stock exceeds 200% of the conversion price for 30 trading days. The
Preferred Stock is redeemable at the option of the holder in the event of a
change in control (as defined).

The sources and uses of funds in connection with the acquisition are summarized
as follows:

|                                          |                           |               |           |         |           | 
|----------------------------------------- | ------------------------- | ------------- | --------- | ------- | --------- | 
|Sources:                                  |                           |               |           |        
|Borrowings under the Credit Facility:     |                           |               |           |        
|                                          | Revolving credit facility |               | $         | 10,000  |          
|                                          | Term loan A               |               |           | 500,000 |          
|                                          | Term loan B               |               |           | 900,000 |          
|8 7/8% Notes                              |                           |               | 325,000   |        
|10 7/8% Notes                             |                           |               | 600,000   |        
|Proceeds from issuance of Preferred Stock |                           |               | 200,000   |        
|Available cash                            |                           |               | 29,701    |        
|                                          |                           |               |           |         |          
|                                          |                           | Total sources |           | $       | 2,564,701 | 
|                                          |                           |               |           |         |          
|Uses:                                     |                           |               |           |        
|Acquisition price of SPA                  |                           | $             | 2,213,475 |        
|CenDon obligations                        |                           |               | 14,000    |        
|Repay existing long-term debt:            |                           |               |           |        
|                                          | Existing Credit Agreement |               |           | 114,250 |          

74



---



##### Table of Contents



|                  |                                             |            |        |         |           | 
|----------------- | ------------------------------------------- | ---------- | ------ | ------- | --------- | 
|                  | Existing Notes                              |            |        | 128,755 |          
|                  | Accrued interest on existing long-term debt |            |        | 1,161   |          
|Fees and expenses |                                             |            | 93,060 |        
|                  |                                             |            |        |         |          
|                  |                                             | Total uses |        | $       | 2,564,701 | 
|                  |                                             |            |        |         |          

On January 3, 2003, borrowings under the Existing Term Facilities were repaid
and, in connection with a tender offer and exit consent solicitation, $128,755
of the Existing Notes were repurchased. We borrowed an initial $1,410,000
under the Credit Facility contingent upon our repurchase of the entire $150,000
aggregate principal amount of the Existing Notes. Any proceeds that were not
used to repurchase the Existing Notes were required to be repaid to the lenders
under the Credit Facility. Accordingly, $21,245, representing the amount of
Existing Notes that remain outstanding following the tender offer and exit
consent solicitation, was repaid to the lenders under the Credit Facility
shortly after the consummation of the acquisition. In connection with the
tender offer and exit consent solicitation, the holders of the Existing Notes
agreed to terminate all covenants set forth in the Indenture governing the
Existing Notes. Accordingly, the restrictions of this Indenture discussed in
Note 4 above are no longer effective. In addition, the repayment of the
Existing Term Facilities terminated the Existing Credit Agreement.

The acquisition was accounted for as a purchase business combination in
accordance with SFAS 141 Business Combinations. The purchase price was
allocated to the tangible and identifiable intangible assets acquired and
liabilities assumed based on their respective estimated fair values on the
acquisition date. The fair value of certain long-term intangible assets and
their respective useful lives were valued by an independent third party with
expert knowledge in the area of valuing acquired businesses and in our
industry. Identifiable intangible assets acquired included commercial
agreements entered into between Sprint and us, customer relationships and
acquired trade names.

Commercial agreements between Sprint and us include a directory services
license agreement, a trademark license agreement and a non-competition
agreement (collectively Directory Services Agreements). The directory
services license agreement gives us the exclusive right to produce, publish and
distribute directories for Sprint in the markets where Sprint currently
provides local telephone service. The trademark license agreement gives us the
exclusive right to use certain specified Sprint trademarks, including the
Sprint diamond logo, in those markets and the non-competition agreement
prohibits Sprint from producing, publishing and distributing print directories
or selling local advertising in those markets, with certain limited exceptions.
These agreements are all interrelated and each has an initial term of 50
years, subject to earlier termination under specified circumstances. The fair
value assigned to these agreements of $1,625,000 was based on the present value of
estimated future cash flows. We also acquired the established local and
national customer relationships of SPA. The value of these relationships was
determined based on the present value of estimated future cash flows and an
analysis of historical attrition rates. A value of $200,000 was assigned to
the local customer relationships and a value of $60,000 was assigned to the
national customer relationships. Finally, we also acquired certain trade names
historically used in the SPA directory business. A value of $30,000 was
assigned to the trade names based on the relief from royalty method, which
values the trade names based on the estimated amount that a company would have
to pay in an arms length transaction to use these trade names. The excess of
the purchase price over the fair value of the assets acquired and liabilities
assumed was recognized as goodwill.

In accordance with SFAS 142 Goodwill and Other Intangible Assets, the fair
value of the identifiable intangible assets will be amortized over their
estimated useful lives in a manner that best reflects the economic benefits
derived from such assets. Goodwill is not amortized but is subject to
impairment testing on an annual basis. We estimated that amortization expense
for identified intangible assets will be approximately $50,000 per year.

Under purchase accounting rules, we did not assume the deferred revenue balance
of SPA at January 3, 2003 of $292,775. This amount represented revenue that
would have been recognized in 2003 under our deferral and amortization
recognition method (described below) had the acquisition not occurred.
Accordingly, we will never record revenue associated with directories that
published prior to the acquisition. Although the deferred revenue balance was
eliminated, we retained all the rights associated with the collection of
amounts due under and obligations under the advertising contracts executed
prior to the SPA acquisition. As a result, SPAs billed and

75



---



##### Table of Contents



unbilled accounts receivable balances remain assets of Donnelley. Also under
purchase accounting rules, we did not assume deferred directory costs at
January 3, 2003 related to those directories that were published prior to the
acquisition. These costs represented operating expenses that would have been
recognized in 2003 under the deferral and amortization method had the
acquisition not occurred. Our policy of deferring direct costs attributable to
a directory post-acquisition will be different than the policy followed by SPA
prior to the acquisition, as certain costs previously deferred and amortized by
SPA will be treated as period expenses.

76



---



##### Table of Contents



The allocation of the purchase price to the fair value of assets acquired and
liabilities assumed is presented in the table below. The purchase price
allocation is based on the best information we have to date and could change as
additional information arises.

|                                                  |                                              |                                                                                        |   |           |         |  
|------------------------------------------------- | -------------------------------------------- | -------------------------------------------------------------------------------------- | - | --------- | ------- | -
|Calculation of allocable purchase price:          |                                              |                                                                                        |   |          
|                                                  | Cash                                         |                                                                                        | $ | 2,213,475 |        
|                                                  | Allocable transaction costs                  |                                                                                        |   | 15,101    |        
|                                                  |                                              |                                                                                        |   |           |        
|                                                  | Total allocable purchase price               |                                                                                        | $ | 2,228,576 |        
|                                                  |                                              |                                                                                        |   |           |        
|Estimated allocation of allocable purchase price: |                                              |                                                                                        |   |          
|                                                  | SPA net assets acquired                      |                                                                                        | $ | 85,602    |        
|                                                  | Directory Services Agreements                |                                                                                        |   | 1,625,000 |        
|                                                  | Customer relationships                       |                                                                                        |   | 260,000   |        
|                                                  | Acquired trade names                         |                                                                                        |   | 30,000    |        
|                                                  | Estimated profit on acquired sales contracts |                                                                                        |   | 8,300     |        
|                                                  | Fair market value adjustments                |                                                                                        |   |           |        
|                                                  |                                              | Reverse pre-acquisition deferred revenue                                               |   |           | 292,775 |  
|                                                  |                                              | Reverse deferred directory costs associated with
directories published pre-acquisition |   |           | (89,503 | )
|                                                  |                                              | Eliminate SPA historical deferred tax and goodwill                                     |   |           | (43,540 | )
|                                                  |                                              | Other                                                                                  |   |           | (14,518 | )
|                                                  |                                              |                                                                                        |   |           |        
|                                                  | Fair value of net assets acquired            |                                                                                        |   | 2,154,116 |        
|                                                  | Goodwill                                     |                                                                                        |   | 74,460    |        
|                                                  |                                              |                                                                                        |   |           |        
|                                                  | Total allocable purchase price               |                                                                                        | $ | 2,228,576 |        
|                                                  |                                              |                                                                                        |   |           |        

As the publisher of yellow pages directories, we will recognize revenue from
directory advertising sales and direct costs incurred in generating those sales
under the deferral and amortization method. Under this method, the advertising
sales value of the directory and related direct costs are initially deferred
and recognized ratably over the life of a directory, which is typically twelve
months.

After the acquisition, a significant portion of our revenue is derived from
selling advertising to local small- and medium-sized businesses. Most
advertisers, including all new advertisers, are subject to a credit review, and
if the advertiser qualifies, we will extend credit to them for their
advertising purchase. Small- and medium-sized businesses tend to have fewer
financial resources and higher financial failure rates than large businesses.
In addition, full collection of delinquent accounts can take an extended period
of time and involve increased costs. While we do not believe that extending
credit to our local advertisers will have a material adverse affect on our
results of operations or financial condition, no assurances can be given. We
do not require collateral from our advertisers, although we do charge interest
to advertisers who do not pay within specified due dates. National advertising
is typically paid in full within 30 days of the directory publication.

77



---



##### Table of Contents






REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and
Partners of DonTech

In our opinion, the accompanying combined balance sheets and the related
combined statements of partners capital, operations and cash flows present
fairly, in all material respects, the combined financial position of AM-DON
(DonTech I) and the DonTech II Partnership (DonTech II), together referred
to as DonTech at December 31, 2002 and 2001, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2002 in conformity with accounting principles generally accepted
in the United States of America. These financial statements are the
responsibility of DonTechs management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with auditing standards generally
accepted in the United States of America, which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

/s/ PRICEWATERHOUSECOOPERS LLP

January 17, 2003

78



---



##### Table of Contents






DONTECH

COMBINED BALANCE SHEETS

|                                                               |                                          |                                         |         |         |         |              |         |         |         |  |  | 
|-------------------------------------------------------------- | ---------------------------------------- | --------------------------------------- | ------- | ------- | ------- | ------------ | ------- | ------- | ------- |  |  | 
|                                                               |                                          |                                         |         |         |         | December 31,
|                                                               |                                          |                                         |         |         |         |             
|                                                               |                                          |                                         |         |         |         | 2002         |         | 2001   
|                                                               |                                          |                                         |         |         |         |              |         |        
|(in thousands, except share and per share data)                |                                          |                                         |         |         |         |              |         |        
|Assets                                                         |                                          |                                         |         |         |         |              |         |        
|Current Assets                                                 |                                          |                                         |         |         |         |              |         |        
|                                                               | Cash and cash equivalents                |                                         | $       | 9,016   |         |              | $       | 3,946   |        
|                                                               | Commission receivable from related party |                                         |         | 102,358 |         |              |         | 108,475 |        
|                                                               | Prepaid expenses                         |                                         |         | 843     |         |              |         | 212     |        
|                                                               |                                          |                                         |         |         |         |              |         |         |        
|                                                               |                                          | Total current assets                    |         |         | 112,217 |              |         |         | 112,633 | 
|Fixed assets, net of accumulated depreciation and amortization |                                          |                                         | 6,036   |         |         |              | 7,086   |        
|Pension asset                                                  |                                          |                                         | 8,819   |         |         |              | 9,759   |        
|Other                                                          |                                          |                                         | 1,842   |         |         |              | 1,662   |        
|                                                               |                                          |                                         |         |         |         |              |         |         |        
|                                                               |                                          | Total Assets                            |         | $       | 128,914 |              |         | $       | 131,140 | 
|                                                               |                                          |                                         |         |         |         |              |         |         |        
|Liabilities and Partners Capital                              |                                          |                                         |         |         |         |              |         |        
|Current Liabilities                                            |                                          |                                         |         |         |         |              |         |        
|                                                               | Accounts payable                         |                                         | $       | 1,602   |         |              | $       | 1,573   |        
|                                                               | Accrued liabilities                      |                                         |         | 9,640   |         |              |         | 9,154   |        
|                                                               | Distribution payable to partners         |                                         |         | 3,600   |         |              |         |        |        
|                                                               |                                          |                                         |         |         |         |              |         |         |        
|                                                               |                                          | Total current liabilities               |         |         | 14,842  |              |         |         | 10,727  | 
|                                                               | Deferred rent credits                    |                                         |         | 1,550   |         |              |         |        |        
|                                                               |                                          |                                         |         |         |         |              |         |         |        
|                                                               |                                          | Total Liabilities                       |         |         | 16,392  |              |         |         | 10,727  | 
|Commitments and contingencies (Note 6)                         |                                          |                                         |         |         |         |              |         |        
|Partners capital                                              |                                          |                                         | 112,522 |         |         |              | 120,413 |        
|                                                               |                                          |                                         |         |         |         |              |         |         |        
|                                                               |                                          | Total Liabilities and Partners Capital |         | $       | 128,914 |              |         | $       | 131,140 | 
|                                                               |                                          |                                         |         |         |         |              |         |         |        

The accompanying notes are an
integral part of the combined financial statements.

79



---



##### Table of Contents






DONTECH

COMBINED STATEMENTS OF OPERATIONS

|                                       |                            |                          |         |                          |        |      |         |        |        |   |         |       |        | 
|-------------------------------------- | -------------------------- | ------------------------ | ------- | ------------------------ | ------ | ---- | ------- | ------ | ------ | - | ------- | ----- | ------ | 
|                                       |                            |                          |         | Years Ended December 31,
|                                       |                            |                          |         |                         
|                                       |                            |                          |         | 2002                     |        | 2001 |         | 2000  
|                                       |                            |                          |         |                          |        |      |         |       
|(in thousands)                         |                            |                          |         |                          |        |      |         |        |        |   |         |      
|Sales commissions, net  related party |                            | $                        | 101,792 |                          |        | $    | 106,849 |        |        | $ | 108,316 |      
|Expenses
Selling                       |                            |                          | 48,016  |                          |        |      | 48,810  |        |        |   | 49,327  |      
|                                       | Administrative             |                          |         | 10,273                   |        |      |         | 10,356 |        |   |         | 8,493 |       
|                                       | Occupancy and depreciation |                          |         | 7,388                    |        |      |         | 9,058  |        |   |         | 8,174 |       
|                                       | Other                      |                          |         | 855                      |        |      |         | 1,190  |        |   |         | 1,640 |       
|                                       |                            |                          |         |                          |        |      |         |        |        |   |         |      
|                                       |                            | Total operating expenses |         |                          | 66,562 |      |         |        | 69,414 |   |         |       | 67,634 | 
|                                       |                            |                          |         |                          |        |      |         |        |        |   |         |      
|                                       |                            | Income from operations   |         |                          | 33,230 |      |         |        | 37,435 |   |         |       | 40,682 | 
|Other income                           |                            |                          | 1,729   |                          |        |      | 1,191   |        |        |   | 736     |      
|                                       |                            |                          |         |                          |        |      |         |        |        |   |         |      
|                                       |                            | Net income               |         | $                        | 36,959 |      |         | $      | 38,626 |   |         | $     | 41,418 | 
|                                       |                            |                          |         |                          |        |      |         |        |        |   |         |      

The accompanying notes are an integral part of the combined financial
statements.

80



---



##### Table of Contents






DONTECH

COMBINED STATEMENTS OF CASH FLOWS

|                                                                           |                                    |                                             |                                                  |                                           |       |                          |         |       |       |        |         |       |       |         |        | 
|-------------------------------------------------------------------------- | ---------------------------------- | ------------------------------------------- | ------------------------------------------------ | ----------------------------------------- | ----- | ------------------------ | ------- | ----- | ----- | ------ | ------- | ----- | ----- | ------- | ------ | 
|                                                                           |                                    |                                             |                                                  |                                           |       | Years Ended December 31,
|                                                                           |                                    |                                             |                                                  |                                           |       |                         
|                                                                           |                                    |                                             |                                                  |                                           |       | 2002                     |         | 2001  |       | 2000  
|                                                                           |                                    |                                             |                                                  |                                           |       |                          |         |       |       |       
|(in thousands)                                                             |                                    |                                             |                                                  |                                           |       |                          |         |       |       |        |         |      
|Cash Flows from Operating Activities                                       |                                    |                                             |                                                  |                                           |       |                          |         |       |       |        |         |      
|Net income                                                                 |                                    | $                                           | 36,959                                           |                                           |       | $                        | 38,626  |       |       | $      | 41,418  |      
|Reconciliation of net income to net cash provided by
operating activities: |                                    |                                             |                                                  |                                           |       |                          |         |       |       |        |         |      
|                                                                           | Depreciation and amortization      |                                             |                                                  | 1,702                                     |       |                          |         | 2,360 |       |        |         | 2,135 |      
|                                                                           | Loss on disposal of fixed assets   |                                             |                                                  | 26                                        |       |                          |         |      |       |        |         | 44    |      
|                                                                           | Changes in assets and liabilities: |                                             |                                                  |                                           |       |                          |         |       |       |        |         |       |      
|                                                                           |                                    | Decrease in commission receivable           |                                                  |                                           | 6,177 |                          |         |       | 2,450 |        |         |       | 2,815 |        
|                                                                           |                                    | Increase in prepaid rent expense            |                                                  |                                           | (743  | )                        |         |       |      |        |         |       |      |        
|                                                                           |                                    | Increase in receivable from landlord        |                                                  |                                           | (450  | )                        |         |       |      |        |         |       |      |        
|                                                                           |                                    | Decrease (increase) in other current assets |                                                  |                                           | 1,322 |                          |         |       | (115  | )      |         |       | (486  | )      
|                                                                           |                                    | Increase (decrease) in accounts payable     |                                                  |                                           | 29    |                          |         |       | (548  | )      |         |       | (325  | )      
|                                                                           |                                    | Increase in accrued liabilities             |                                                  |                                           | 457   |                          |         |       | 533   |        |         |       | 1,090 |        
|                                                                           |                                    | Increase in deferred rent credits           |                                                  |                                           | 1,579 |                          |         |       |      |        |         |       |      |        
|                                                                           |                                    |                                             |                                                  |                                           |       |                          |         |       |       |        |         |      
|                                                                           |                                    |                                             |                                                  | Net cash provided by operating activities |       |                          | 46,998  |       |       |        | 43,306  |       |       |         | 46,691 | 
|Cash Flows from Investing Activities                                       |                                    |                                             |                                                  |                                           |       |                          |         |       |       |        |         |      
|Purchases of equipment                                                     |                                    |                                             | (678                                             | )                                         |       |                          | (1,331  | )     |       |        | (3,153  | )    
|Cash Flows from Financing Activities                                       |                                    |                                             |                                                  |                                           |       |                          |         |       |       |        |         |      
|Distributions to partners                                                  |                                    |                                             | (44,850                                          | )                                         |       |                          | (43,400 | )     |       |        | (57,575 | )    
|Increase in distribution payable                                           |                                    |                                             | 3,600                                            |                                           |       |                          |        |       |       |        |        |      
|                                                                           |                                    |                                             |                                                  |                                           |       |                          |         |       |       |        |         |      
|Net cash used in financing activities                                      |                                    |                                             | (41,250                                          | )                                         |       |                          | (43,400 | )     |       |        | (57,575 | )    
|                                                                           |                                    |                                             | Increase (decrease) in cash and cash equivalents |                                           |       | 5,070                    |         |       |       | (1,425 | )       |       |       | (14,037 | )     
|Cash and cash equivalents, beginning of year                               |                                    |                                             | 3,946                                            |                                           |       |                          | 5,371   |       |       |        | 19,408  |      
|                                                                           |                                    |                                             |                                                  |                                           |       |                          |         |       |       |        |         |      
|Cash and cash equivalents, end of year                                     |                                    | $                                           | 9,016                                            |                                           |       | $                        | 3,946   |       |       | $      | 5,371   |      
|                                                                           |                                    |                                             |                                                  |                                           |       |                          |         |       |       |        |         |       |       |        
|Noncash financing activities                                               |                                    |                                             |                                                  |                                           |       |                          |         |       |       |        |         |      
|Forgiveness of receivable due from API/IL                                  |                                    | $                                           |                                                 |                                           |       | $                        |        |       |       | $      | 16,567  |      
|                                                                           |                                    |                                             |                                                  |                                           |       |                          |         |       |       |        |         |      

The accompanying notes are an integral part of the combined financial
statements.

81



---



##### Table of Contents






DONTECH

COMBINED STATEMENTS OF PARTNERS CAPITAL

|                           |  |                            |         |                                        |  |       |         |   |  |   |         |  
|-------------------------- |  | -------------------------- | ------- | -------------------------------------- |  | ----- | ------- | - |  | - | ------- | -
|(in thousands)             |  | R.H.
Donnelley
Corporation |         | Ameritech
Publishing of
Illinois, Inc. |  | Total
|                           |  |                            |         |                                        |  |      
|Balance, December 31, 1999 |  | $                          | 93,202  |                                        |  | $     | 64,709  |   |  | $ | 157,911 |  
|Net income                 |  |                            | 20,671  |                                        |  |       | 20,747  |   |  |   | 41,418  |  
|Distributions to partners  |  |                            | (21,381 | )                                      |  |       | (52,761 | ) |  |   | (74,142 | )
|                           |  |                            |         |                                        |  |       |         |   |  |   |         |  
|Balance, December 31, 2000 |  | $                          | 92,492  |                                        |  | $     | 32,695  |   |  | $ | 125,187 |  
|Net income                 |  |                            | 19,313  |                                        |  |       | 19,313  |   |  |   | 38,626  |  
|Distributions to partners  |  |                            | (21,700 | )                                      |  |       | (21,700 | ) |  |   | (43,400 | )
|                           |  |                            |         |                                        |  |       |         |   |  |   |         |  
|Balance, December 31, 2001 |  | $                          | 90,105  |                                        |  | $     | 30,308  |   |  | $ | 120,413 |  
|Net income                 |  |                            | 18,479  |                                        |  |       | 18,480  |   |  |   | 36,959  |  
|Distributions to partners  |  |                            | (22,425 | )                                      |  |       | (22,425 | ) |  |   | (44,850 | )
|                           |  |                            |         |                                        |  |       |         |   |  |   |         |  
|Balance, December 31, 2002 |  | $                          | 86,159  |                                        |  | $     | 26,363  |   |  | $ | 112,522 |  
|                           |  |                            |         |                                        |  |       |         |   |  |   |         |  

The accompanying notes are an integral part of the combined financial
statements.

82



---



##### Table of Contents






DONTECH

NOTES TO COMBINED FINANCIAL STATEMENTS

(in thousands)


1. Form of Organization and Nature of Business

The DonTech II Partnership (DonTech II) is a general partnership between
Reuben H. Donnelley, Inc. (formerly known as The Reuben H. Donnelley
Corporation) (R.H. Donnelley), a Delaware corporation, and Ameritech
Publishing of Illinois, Inc. (API/IL), a unit of SBC Communications (SBC).
The partnership was established in August 1997 and was preceded by AM-DON
(DonTech I), a general partnership between the same parties, which, as of
December 31, 2000, ceased business operations and distributed its remaining
assets to its partners. The accompanying financial statements of DonTech I and
DonTech II (hereafter referred to as DonTech) are shown on a combined basis.
All significant affiliated accounts and transactions incurred prior to December
31, 2000 have been eliminated in preparation of the combined financial
statements.

DonTech II is the exclusive sales agent in perpetuity for yellow page, white
page and street address directories published by SBC in Illinois and northwest
Indiana. The partnership receives a 27% commission on sales net of provisions
(capped at 6.1% subject to certain exclusions). DonTech IIs cost structure
includes principally sales, sales operations, office services, finance,
facilities and related overhead. DonTech II profits are shared equally between
the partners. During the term of the partnership agreement, neither partner
may compete directly against the business of DonTech II without the consent of
the Board of Directors.

A Board of Directors (the Board) was appointed to administer the activities
of the partnership. From time to time during the term of the partnership, the
Board may call for additional capital contributions in equal amounts from each
of the partners if, in the opinion of the Board, additional capital is required
for the operation of the partnership.

On January 28, 2000, the partners agreed to amend the DonTech I partnership
agreement to provide for the payment of $29,898 from DonTech I to API/IL as a
preferential distribution. The preferential distribution was comprised of cash
totaling $13,331 and the forgiveness and cancellation of a receivable due from
API/IL to the partnership in the amount of $16,567.

Additionally, the partners also agreed to amend the DonTech II partnership
agreement to provide for the payment of $29,898 by API/IL to DonTech II upon
the dissolution of the DonTech II partnership and for the subsequent payment of
a $29,898 preferential distribution to R.H. Donnelley.

2. Significant Accounting Policies

Cash and Cash Equivalents.Cash and cash equivalents include all highly
liquid investments with an initial maturity date of three months or less. The
carrying value of cash equivalents approximates fair value due to their
short-term nature.

Revenue Recognition.Revenue is comprised of sales commissions reflected net of
provisions (capped at 6.1% per annum subject to certain exclusions) and is
recognized upon execution of contracts for the sale of advertising. Greater
than 99% of DonTechs revenue is generated from DonTechs sales agency
agreement with API/IL.

Fixed Assets.Fixed assets are recorded at cost and are depreciated on a
straight-line basis over the estimated useful lives of the assets. Upon asset
retirement or other disposition, the cost and the related accumulated
depreciation are removed from the accounts, and any resulting gain or loss is
included in the statement of operations. Amounts incurred for repairs and
maintenance are charged to operations.

Post-Retirement Benefits Other Than Pensions.DonTech provides
post-retirement benefits consisting mainly of life and health insurance to
substantially all employees and their dependents. The accrual method of
accounting is utilized for post-retirement health care and life insurance
benefits.

83



---



##### Table of Contents



Income Taxes.No provision for income taxes is made, as the proportional
share of partnership income is the responsibility of the individual partners.

Concentration of Credit Risk.Financial instruments that potentially subject
DonTech to a concentration of credit risk consist principally of commission
receivable. DonTechs commission receivable is due from one of its partners
(SBC). Collateral is not required.

Use of Estimates.The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expense during the
reporting period. Actual results could differ from those estimates.

Recent Pronouncements.In April 2002, the Financial Accounting Standards
Board (FASB) issued Statement of Financial Accounting Standard (SFAS)
No. 145, Rescission of FASB Statements No. 4, 44 and 64, Amendment of
FASB Statement No. 13 and Technical Corrections (SFAS 145), which is
effective for fiscal years beginning after May 15, 2002. SFAS 145
updates, clarifies and simplifies existing accounting pronouncements. The
adoption of the standard will not have a significant impact on DonTechs
financial position, results of operations or cash flows.

In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities (SFAS 146) which supercedes Emerging Issues
Task Force Issue No. 94-3, Liability for Certain Employee Termination Benefits
and Other Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring). SFAS 146 requires companies to recognize costs associated
with exit or disposal activities when they are incurred rather than at the date
of the commitment to an exit or disposal plan. This statement is effective for
exit or disposal activities that are initiated after December 31, 2002 and the
adoption will have no impact on DonTechs historical combined financial
position or results of operations.

In October 2002, the FASB issued SFAS No. 147, Acquisition of Certain
Financial Institutions, which is not applicable to DonTech.

In November 2002, the FASB issued FASB Interpretation No. 45 Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others. This interpretation clarifies the
requirements for a guarantors accounting for and disclosure of certain
guarantees issued and outstanding. The initial recognition and measurement
provisions of this interpretation are applicable on a prospective basis to
guarantees issued or modified after December 31, 2002. The disclosure
requirements are effective for financial statements ending after December 15,
2002. The adoption will not have a significant impact on DonTechs financial
position, results of operations or cash flows.

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation  Transition and Disclosures an amendment of FASB Statement No.
123, which is not applicable to DonTech.

In January 2003, the FASB issued FASB Interpretation No. 46, Consolidation of
Variable Interest Entities  an interpretation of ARB No. 51, which is not
applicable to DonTech.

84



---



##### Table of Contents



3. Fixed Assets

Fixed assets consist of the following at December 31:

|                                               |  |      |        |      |  |   |        | 
|---------------------------------------------- |  | ---- | ------ | ---- |  | - | ------ | 
|                                               |  | 2002 |        | 2001
|                                               |  |      |        |     
|Equipment                                      |  | $    | 16,656 |      |  | $ | 15,990 | 
|Furniture and fixtures                         |  |      | 7,030  |      |  |   | 7,261  | 
|Leasehold improvements                         |  |      | 1,969  |      |  |   | 1,970  | 
|Other                                          |  |      |       |      |  |   | 366    | 
|                                               |  |      |        |      |  |   |        | 
|                                               |  |      | 25,655 |      |  |   | 25,587 | 
|Less accumulated depreciation and amortization |  |      | 19,619 |      |  |   | 18,501 | 
|                                               |  |      |        |      |  |   |        | 
|                                               |  | $    | 6,036  |      |  | $ | 7,086  | 
|                                               |  |      |        |      |  |   |        | 

Depreciation expense for the three years ended December 31, 2002, 2001 and 2000
was $1,702, $2,360 and $2,135, respectively.

4. Accrued Liabilities

Accrued liabilities consist of the following at December 31:

|                                                         |  |      |       |      |  |   |       | 
|-------------------------------------------------------- |  | ---- | ----- | ---- |  | - | ----- | 
|                                                         |  | 2002 |       | 2001
|                                                         |  |      |       |     
|Accrued bonuses, commissions and other employee expenses |  | $    | 4,657 |      |  | $ | 4,184 | 
|Accrued post-retirement benefits other than pensions     |  |      | 3,599 |      |  |   | 3,230 | 
|Deferred compensation                                    |  |      | 1,350 |      |  |   | 1,662 | 
|Other accrued liabilities                                |  |      | 34    |      |  |   | 78    | 
|                                                         |  |      |       |      |  |   |       | 
|                                                         |  | $    | 9,640 |      |  | $ | 9,154 | 
|                                                         |  |      |       |      |  |   |       | 

5. Related Party Transactions

DonTech purchases insurance services and through August 2000 purchased
automobile plan administration services from R.H. Donnelley, and general ledger
and purchasing services from SBC. DonTech also provides facility space for
certain employees of SBC under an agreement entered into in 1998 (see Note 6).

6. Contingencies and Commitments

DonTech leases certain office facilities under noncancelable lease
arrangements. Rent expense under these operating leases was approximately
$2,254, $2,223 and $2,119 for 2002, 2001 and 2000, respectively. During 2000,
DonTech entered into a sublease agreement with SBC whereby DonTech received
$56, $54 and $30 of sublease rental income from SBC during 2002, 2001 and 2000,
respectively.

The future minimum lease payments required under noncancelable operating leases
that have initial or remaining lease terms in excess of one year as of December
31, 2002 are as follows:

|                    |  |   |        | 
|------------------- |  | - | ------ | 
|2003                |  | $ | 4,098  | 
|2004                |  |   | 3,922  | 
|2005                |  |   | 3,918  | 
|2006                |  |   | 3,896  | 
|2007 and thereafter |  |   | 13,291 | 
|                    |  |   |       
|                    |  | $ | 29,125 | 
|                    |  |   |        | 

During 2002, DonTech renegotiated the lease for its headquarters facilities,
which was originally scheduled to terminate on January 31, 2010. The
renegotiated lease extends the terms of the agreement two additional years
(through January 31, 2012) in exchange for certain cash concessions totaling
$1,579.Cash concessions received in

85



---



##### Table of Contents



connection with the amended lease have been
recorded as deferred rent credits in the combined balance sheet and are being
recognized on a straight-line basis as a reduction to rent expense over the
lease term. At December 31, 2002, the long-term deferred credit related to
these concessions was $1,524. In connection with the renegotiation of the
lease, DonTech incurred brokers fees of $779 which have been reflected in the
combined balance sheet as a non-current other asset as of December 31, 2002.
These fees are being amortized to rent expense over the lease term.

In September 1998, DonTech entered into a maintenance service agreement with
Ameritech Advertising Services to provide certain maintenance services,
including parts, to DonTech. The length of the agreement is five years.
According to the terms of the agreement, DonTechs remaining obligation as of
December 31, 2002 is $79.

7. Employee Retirement and Profit Participation Plans

DonTech sponsors a defined benefit pension plan covering substantially all of
its employees (the Principal Plan). The Principal Plans assets are invested
in equity funds, fixed income funds and real estate. Total expense (benefit)
for the Principal Plan was $986, $29 and $(342) for 2002, 2001 and 2000,
respectively.

The following provides a reconciliation of benefit obligations, plan assets,
and the funded status of the Principal Plan.

|                                                                |  |      |        |      |  |   |        |  
|--------------------------------------------------------------- |  | ---- | ------ | ---- |  | - | ------ | -
|                                                                |  | 2002 |        | 2001
|                                                                |  |      |        |     
|Change in benefit obligation                                    |  |      |        |      |  |   |        |  
|Projected benefit obligation, beginning of year                 |  | $    | 26,280 |      |  | $ | 24,477 |  
|Service cost                                                    |  |      | 1,262  |      |  |   | 1,116  |  
|Interest cost                                                   |  |      | 1,903  |      |  |   | 1,765  |  
|Benefits paid                                                   |  |      | (975   | )    |  |   | (934   | )
|Actuarial (gain) loss                                           |  |      | 278    |      |  |   | (575   | )
|Effect of plan amendments, assumption changes and other charges |  |      | 638    |      |  |   | 431    |  
|Plan curtailment                                                |  |      | (156   | )    |  |   |       |  
|                                                                |  |      |        |      |  |   |        |  
|Projected benefit obligation, end of year                       |  | $    | 29,230 |      |  | $ | 26,280 |  
|                                                                |  |      |        |      |  |   |        |  
|Change in plan assets                                           |  |      |        |      |  |   |        |  
|Market value of assets, at January 1                            |  | $    | 30,026 |      |  | $ | 31,618 |  
|Benefits paid                                                   |  |      | (975   | )    |  |   | (934   | )
|Contributions                                                   |  |      | 64     |      |  |   | 60     |  
|Actual return on assets                                         |  |      | (2,216 | )    |  |   | (718   | )
|                                                                |  |      |        |      |  |   |        |  
|Market value of assets, at December 31                          |  | $    | 26,899 |      |  | $ | 30,026 |  
|                                                                |  |      |        |      |  |   |        |  
|Funded status of the plan                                       |  | $    | (2,330 | )    |  | $ | 3,746  |  
|Unrecognized net loss                                           |  |      | 9,750  |      |  |   | 4,250  |  
|Unrecognized prior service costs                                |  |      | 781    |      |  |   | 1,127  |  
|                                                                |  |      |        |      |  |   |        |  
|Prepaid cost                                                    |  | $    | 8,201  |      |  | $ | 9,123  |  
|                                                                |  |      |        |      |  |   |        |  
|Prepaid benefit cost                                            |  | $    | 8,819  |      |  | $ | 9,759  |  
|Accrued liability                                               |  |      | (618   | )    |  |   | (636   | )
|                                                                |  |      |        |      |  |   |        |  
|Net amount recognized                                           |  | $    | 8,201  |      |  | $ | 9,123  |  
|                                                                |  |      |        |      |  |   |        |  

86



---



##### Table of Contents



Net periodic pension cost (benefit) for the Plan in 2002, 2001 and 2000 include
the following components:

|                                                |  |      |        |      |  |      |        |   |  |   |        |  
|----------------------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ | - |  | - | ------ | -
|                                                |  | 2002 |        | 2001 |  | 2000
|                                                |  |      |        |      |  |     
|Service cost                                    |  | $    | 1,262  |      |  | $    | 1,116  |   |  | $ | 1,093  |  
|Interest cost                                   |  |      | 1,903  |      |  |      | 1,765  |   |  |   | 1,683  |  
|Expected return on assets                       |  |      | (2,791 | )    |  |      | (3,282 | ) |  |   | (3,430 | )
|Amortization of net loss (gain)                 |  |      | 263    |      |  |      | 4      |   |  |   | (114   | )
|Amortization of unrecognized prior service cost |  |      | 291    |      |  |      | 426    |   |  |   | 426    |  
|Curtailment loss                                |  |      | 58     |      |  |      |       |   |  |   |       |  
|                                                |  |      |        |      |  |      |        |   |  |   |        |  
|Total pension cost (benefit)                    |  | $    | 986    |      |  | $    | 29     |   |  | $ | (342   | )
|                                                |  |      |        |      |  |      |        |   |  |   |        |  
|Assumptions used are as follows:                |  |      |        |      |  |      |        |   |  |   |        |  

|                                       |  |      |      |      |  |      |       |   |  |  |       |  
|-------------------------------------- |  | ---- | ---- | ---- |  | ---- | ----- | - |  |  | ----- | -
|                                       |  | 2002 |      | 2001 |  | 2000
|                                       |  |      |      |      |  |     
|Discount rate                          |  |      | 6.50 | %    |  |      | 7.25  | % |  |  | 7.50  | %
|Expected long-term rate of return      |  |      | 9.75 | %    |  |      | 10.50 | % |  |  | 10.50 | %
|Weighted average compensation increase |  |      | 3.91 | %    |  |      | 3.91  | % |  |  | 4.16  | %

In the fourth quarter of 2000, the Partnership changed the method of accounting
used to determine the value of plan assets for purposes of calculating annual
pension expense. The method was changed from a market-related value whereby
gains and losses are recognized on a straight-line basis over five years to
market value whereby gains and losses are reflected immediately. The effect of
this change on the 2000 results of operations, including the cumulative effect
of prior years, was not material.

Additionally, DonTech offers a defined contribution savings plan (the Profit
Plan) to substantially all employees and contributes fifty cents for each
dollar contributed by a participating employee, up to a maximum of 6% of the
participants compensation including salary, commission and short-term bonus.
DonTech also makes contributions to the Profit Plan contingent upon the
attainment of financial goals set in advance as defined in the Profit Plan
agreement. The matching contributions made to the plan were $876, $944 and
$854 in 2002, 2001 and 2000, respectively.

8. Postretirement Benefits Other Than Pensions

DonTech II provides post-retirement health care and life insurance benefits to
certain retired employees and their dependents. The following provides a
reconciliation of benefit obligations, plan assets and the funded status of the
health and life insurance plans.

|                                        |  |      |       |      |  |   |       |  
|--------------------------------------- |  | ---- | ----- | ---- |  | - | ----- | -
|                                        |  | 2002 |       | 2001
|                                        |  |      |       |     
|Change in benefit obligation            |  |      |       |      |  |   |       |  
|Benefit obligation, beginning of year   |  | $    | 4,052 |      |  | $ | 3,326 |  
|Service cost                            |  |      | 157   |      |  |   | 126   |  
|Interest cost                           |  |      | 286   |      |  |   | 261   |  
|Plan participants contributions        |  |      | 47    |      |  |   | 36    |  
|Actuarial loss                          |  |      | 390   |      |  |   | 536   |  
|Benefits paid                           |  |      | (242  | )    |  |   | (233  | )
|                                        |  |      |       |      |  |   |       |  
|Benefit obligation, end of year         |  | $    | 4,690 |      |  | $ | 4,052 |  
|                                        |  |      |       |      |  |   |       |  
|Change in plan assets                   |  |      |       |      |  |   |       |  
|Market value of assets, at January 1    |  | $    |      |      |  | $ |      |  
|Employer contributions                  |  |      | 195   |      |  |   | 197   |  
|Plan participants contributions        |  |      | 47    |      |  |   | 36    |  
|Benefits paid                           |  |      | (242  | )    |  |   | (233  | )
|                                        |  |      |       |      |  |   |       |  
|Market value of assets, at December 31, |  | $    |      |      |  | $ |      |  
|                                        |  |      |       |      |  |   |       |  

87



---



##### Table of Contents



|                                   |  |   |        |   |  |   |       |  
|---------------------------------- |  | - | ------ | - |  | - | ----- | -
|Funded status of plan              |  | $ | 4,690  |   |  | $ | 4,052 |  
|Unrecognized actuarial gain        |  |   | (1,022 | ) |  |   | (656  | )
|Unrecognized prior service benefit |  |   | (69    | ) |  |   | (166  | )
|                                   |  |   |        |   |  |   |       |  
|Accrued cost                       |  | $ | 3,599  |   |  | $ | 3,230 |  
|                                   |  |   |        |   |  |   |       |  

Net periodic postretirement benefit cost for 2002, 2001 and 2000 include the
following components:

|                                   |  |      |     |      |  |      |     |  |  |   |     | 
|---------------------------------- |  | ---- | --- | ---- |  | ---- | --- |  |  | - | --- | 
|                                   |  | 2002 |     | 2001 |  | 2000
|                                   |  |      |     |      |  |     
|Service cost                       |  | $    | 157 |      |  | $    | 126 |  |  | $ | 154 | 
|Interest cost                      |  |      | 286 |      |  |      | 261 |  |  |   | 231 | 
|                                   |  |      |     |      |  |      |     |  |  |   |     | 
|Amortization of prior service cost |  |      | 97  |      |  |      | 97  |  |  |   | 97  | 
|                                   |  |      |     |      |  |      |     |  |  |   |     | 
|Amortization of unrecognized loss  |  |      | 23  |      |  |      | 1   |  |  |   |    | 
|                                   |  |      |     |      |  |      |     |  |  |   |     | 
|Net periodic benefit cost          |  | $    | 563 |      |  | $    | 485 |  |  | $ | 482 | 
|                                   |  |      |     |      |  |      |     |  |  |   |     | 

The discount rate used in determining the benefit obligation as of December 31,
2002 and 2001 was 6.50% and 7.25%, respectively. The assumed health care cost
trend rate used in measuring the benefit obligation as of December 31, 2002 and
2001 was 10.0% and 9.5%, respectively. The rates are assumed to decrease
gradually to 5.0% for 2011 and remain at that level thereafter.

Increasing or decreasing the health care cost trend rates by one percentage
point would not have had a material effect on the net periodic post-retirement
expense for the year ended December 31, 2002. A one-percentage point increase
would have increased the benefit obligation at December 31, 2002 by $315. A
one-percentage point decrease would have decreased the benefit obligation at
December 31, 2002 by $285.

88



---



##### Table of Contents






ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES

There have been no changes in, or disagreements with the Companys independent
auditors, or the independent auditors of DonTech for the three-year period
ended December 31, 2002.




PART III




ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information in response to this Item is incorporated herein by reference to the
sections entitled Board of Directors and Section 16(a) Beneficial Ownership
Reporting Compliance in the Companys Proxy Statement to be
filed with the Securities and Exchange Commission on or about March 25, 2003,
except that Executive Officers of the Registrant on page
10 of this Report
responds to Item 401(b), (d) and (e) of Regulation S-K with respect to
executive officers.




ITEM 11. EXECUTIVE COMPENSATION

Information in response to this Item is incorporated herein by reference to the
section entitled Director and Executive Compensation in the Companys Proxy
Statement to be filed on or about March 25, 2003 with the Securities and
Exchange Commission.






ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED SHAREHOLDER MATTERS


Information in response to this Item is incorporated herein by reference to the
section entitled Security Ownership of Certain Beneficial Owners and
Management in the Companys Proxy Statement to be filed on or about March 25,
2003 with the Securities and Exchange Commission, except that Equity
Compensation Plan Information on page 17 of this Report responds to Item
201(d) of Regulation S-K.




ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information in response to this Item is incorporated herein by reference to the
section entitled Compensation Committee Interlocks and Insider Participation;
Certain Relationships and Related Party Transactions in the Companys Proxy
Statement to be filed on or about March 25, 2003 with the Securities and
Exchange Commission.




ITEM 14. CONTROLS AND PROCEDURES

|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Evaluation of Disclosure Controls and Procedures. Based on their
evaluation, as of a date within 90 days of the filing date of this Annual
Report on Form 10-K, of the effectiveness of the Companys disclosure
controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) under
the Securities Exchange Act of 1934, as amended), the principal executive
officer and principal financial officer of the Company have each concluded
that such disclosure controls and procedures are effective and sufficient
to ensure that information required to be disclosed by the Company in
reports that it files or submits under the Securities Exchange Act of 1934
is recorded, processed, summarized and reported within the time periods
specified in Securities and Exchange Commissions rules and forms.

89



---



##### Table of Contents





| | (b) |  | Changes in internal controls.Subsequent to their evaluation, there have
not been any significant changes in the Companys internal controls or in
other factors that could significantly affect these controls, including
any corrective action with regard to significant deficiencies and material
weaknesses.
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




PART IV




ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(A)(1) and (2)  List of financial statements and financial statement
schedules

The following consolidated financial statements of the Company are included
under Item 8:

Consolidated Balance Sheets at December 31, 2002 and 2001

Consolidated Statements of Operations for the three years ended December
31, 2002

Consolidated Statements of Cash Flows for the three years ended December
31, 2002

Consolidated Statements of Changes in Shareholders Deficit for the three
years ended December 31, 2002

Notes to Consolidated Financial Statements

The following combined financial statements for DonTech are included under Item
8:

Combined Balance Sheets at December 31, 2002 and 2001

Combined Statements of Operations for the three years ended December 31,
2002

Combined Statements of Cash Flows for the three years ended December 31,
2002

Combined Statements of Partners Capital for the three years ended
December 31, 2002

Notes to Combined Financial Statements

The following financial statement schedule for the Company is included under
Item 8:

Schedule II  Valuation and Qualifying Accounts (included as Footnote 14
 Valuation and Qualifying Accounts, in the Notes to Consolidated
Financial Statements)

(B)  Reports on Form 8-K:

On March 3, 2003, the Company filed a Current Report on Form 8-K, disclosing
under Item 9 that on March 3, 2003, certain members of senior management of the
Company were scheduled to make a presentation at a media industry conference
sponsored by Bear Stearns & Co. During its presentation at that conference,
management intended to present a slide presentation. The Company attached a
copy of the slide presentation as Exhibit 99.1.

On January 17, 2003, the Company filed a Current Report on Form 8-K, disclosing
under Item 2 that the Company completed the acquisition of SPA from Sprint. In
addition, under Item 5, the Company disclosed that the GS Funds invested an
additional $130 million in the Company through the purchase 130,000 shares of
Preferred Stock and warrants to purchase 1,072,500 shares of common stock of
the Company and that the Company replaced its existing senior credit facility
with a new senior secured credit facility.

On January 8, 2003, the Company filed a Current Report on Form 8-K, disclosing
under Item 9 that on January 8, 2003, certain members of senior management of
the Company were scheduled to make a presentation at an investor conference
sponsored by CJS Securities, a research firm that covers the Company. During
its presentation at that conference, management intended to present a slide
presentation. The Company attached a copy of the slide presentation as Exhibit
99.1.

On January 6, 2003, the Company filed a Current Report on Form 8-K, disclosing
under Item 5 that the Company and R.H. Donnelley Inc., entered into a Third
Supplemental Indenture, dated as of December 20, 2002 (and operative on January
3, 2002), by and among the Company, R.H. Donnelley Inc., R.H. Donnelley
Acquisitions, Inc., R.H. Donnelley APIL, Inc., R.H. Donnelley CD, Inc., Get
Digital Smart.com, Inc., R.H. Donnelley Acquisitions II, Inc. and The Bank of
New York, as trustee.

On December 20, 2002, the Company filed a Current Report on Form 8-K,
disclosing under Item 5 that the Company and R.H. Donnelley Inc. entered into a
Second Supplemental Indenture, dated December 20, 2002, by and

90



---



##### Table of Contents



among the
Company, R.H. Donnelley Inc., R.H. Donnelley Acquisitions, Inc., R.H. Donnelley
APIL, Inc., R.H. Donnelley CD, Inc., Get Digital Smart.com, Inc., R.H.
Donnelley Acquisitions II, Inc. and The Bank of New York, as trustee.

On December 3, 2002, the Company filed a Current Report on Form 8-K, disclosing
under Item 5 that pursuant to a letter agreement, dated as of November 25,
2002, among the Company, R.H. Donnelley Inc. and the GS Funds. The GS Funds
invested $70 million in the Company though the purchase of 70,000 shares of
Preferred Stock and warrants to purchase 577,500 shares of common stock. In
connection with the sale of the Preferred Stock and warrants to the GS Funds,
the Company and the GS Funds entered into a Registration Rights Agreement,
dated November 25, 2002.

On December 3, 2002, the Company filed a Current Report on Form 8-K, disclosing
under Item 9 the unaudited pro forma combined financial statements that give
effect to the acquisition by the Company of SPA and related financings on the
historical financial position and results of operations of the Company and SPA.

On November 25, 2002, the Company filed a Current Report on Form 8-K,
disclosing under Item 5 that on November 25, 2002, R.H. Donnelley Inc.
announced that it intended to offer, through one of its subsidiaries, $325
million of senior notes and $600 million of senior subordinated notes to
certain institutional investors in an offering exempt from the registration
requirements of the Securities Act of 1933. Pursuant to Rule 135c of the
Securities Act, the Company filed the related press release, issued on November
25, 2002, as Exhibit 99.1.

On November 25, 2002, the Company filed a Current Report on Form 8-K,
disclosing under Item 5 that the Company and R.H. Donnelley Inc. entered into a
First Supplemental Indenture, dated as of November 25, 2002, by and among the
Company, R.H. Donnelley Inc., R.H. Donnelley Acquisitions, Inc., R.H. Donnelley
APIL, Inc., R.H. Donnelley CD, Inc., Get Digital Smart.com, Inc., and The Bank
of New York, as trustee.

On November 14, 2002, the Company filed a Current Report on Form 8-K,
disclosing under Item 9 the unaudited pro forma combined financial statements
that give effect to the acquisition by the Company of SPA and related
financings on the historical financial position and results of operations of
the Company and SPA.

On November 8, 2002, the Company filed a Current Report on Form 8-K, disclosing
under Item 9 that at a conference held on November 7, 2002, a representative of
the Company stated that the Company does not intend to repay the outstanding
9-1/8% senior subordinated notes due 2008 of R.H. Donnelley Inc. in connection
with the financing of the Companys acquisition of the publishing business of
Sprint Corporation.

On November 7, 2002, the Company filed a Current Report on Form 8-K, disclosing
under Item 5 that R.H. Donnelley Inc. intends to offer, through a subsidiary,
$300 million of senior notes and $450 million of senior subordinated notes to
certain institutional investors in an offering exempt from the registration
requirements of the Securities Act of 1933. Pursuant to Rule 135c of the
Securities Act, the Company filed the press release issued on November 6, 2002
as Exhibit 99.1.

On October 1, 2002, the Company filed a Current Report on Form 8-K, disclosing
under Item 5 that pursuant to a Stock Purchase Agreement, dated as of September
21, 2002, by and among R.H. Donnelley Corporation, Sprint Corporation and
Centel Directories LLC, the Company agreed to purchase Sprints directory
publishing business (SPA) for $2.23 billion in cash. The Company also
disclosed that the GS Funds have entered into a definitive agreement to invest
$200 million in the Company through the purchase of the Companys newly issued
Preferred Stock. The GS Funds will also receive warrants to acquire 1.65
million shares of the Companys common stock with an exercise price equal to
the 30-day average of the common stock at the closing.

On September 23, 2002, the Company filed a Current Report on Form 8-K,
disclosing under Item 9 that the Company had posted a slide presentation on its
website titled Creating the Leading Public Stand-Alone U.S. Directory Company
in connection with the Companys public announcement and related conference
call that it had entered into a definitive agreement to purchase Sprint
Corporations directory publishing business.

91



---



##### Table of Contents



(C)  Exhibits:

|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Document                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|2.1         |  | Stock Purchase Agreement, dated as of September 21, 2002, by and among the
Company, Sprint Corporation and Centel Directories LLC (incorporated by
reference to Exhibit 2.1 to the Current Report on Form 8-K, filed with the
Securities and Exchange Commission on October 1, 2002, Commission File No.
001-07155). The Company agrees to furnish supplementally a copy of any
omitted schedules to the Securities and Exchange Commission upon request.  
|2.2         |  | Supplemental Agreement to Stock Purchase Agreement, dated as of December 31,
2002, by and among the Company, Sprint Corporation and Centel Directories LLC
(incorporated by reference to Exhibit 2.2 to the Current Report on Form 8-K,
filed with the Securities and Exchange Commission on January 17, 2003,
Commission File No. 001-07155). The Company agrees to furnish supplementally
a copy of any omitted schedules to the Commission upon request.
|2.3         |  | Preferred Stock and Warrant Purchase Agreement, dated as of September 21,
2002, among R.H. Donnelley Corporation and investment partnerships affiliated
with The Goldman Sachs Group, Inc. (incorporated by reference to Exhibit 2.2
to the Current Report on Form 8-K, filed with the Securities and Exchange
Commission on October 1, 2002, Commission File No. 001-07155)                                                                               
|3.1         |  | Certificate of Incorporation of the Company (incorporated by reference to
Exhibit 3.1 to the Quarterly Report on Form 10-Q for the three months ended
March 31, 1999, filed with the Securities and Exchange Commission on May 14,
1999 Commission File No. 001-07155)                                                                                                                                                                                     
|3.2         |  | By-laws of the Company (incorporated by reference to Exhibit 3.2 to the
Quarterly Report on Form 10-Q for the three months ended March 31, 1999,
filed with the Securities and Exchange Commission on May 14, 1999 Commission
File No. 001-07155)                                                                                                                                                                                                          
|3.3         |  | Certificate of Incorporation of R.H. Donnelley Inc. (incorporated by
reference to Exhibit 3.3 to Amendment No. 1 to the Registration Statement on
Form S-4, filed with the Securities and Exchange Commission on August 7,
1998, Registration No. 333-59287)                                                                                                                                                                                               
|3.4         |  | By-laws of R.H. Donnelley Inc. (incorporated by reference to Exhibit 3.4 to
the Registration Statement on Form S-4, filed with the Securities and
Exchange Commission on July 17, 1998, Registration No. 333-59287)                                                                                                                                                                                                                                        
|3.5         |  | Certificate of Designations of Convertible Cumulative Preferred Stock of R.H.
Donnelley Corporation (incorporated by reference to Exhibit 3.2 to the
Current Report on Form 8-K, filed with the Securities and Exchange Commission
on January 17, 2003, Commission File No. 001-07155)                                                                                                                                                                     
|3.6         |  | Certificate of Designations of Series B-1 Convertible Cumulative Preferred
Stock of R.H. Donnelley Corporation (incorporated by reference to Exhibit 3.1
to the Current Report Form 8-K, filed with the Securities and Exchange
Commission on December 3, 2002, Commission File No. 001-07155)                                                                                                                                                             
|4.1         |  | Indenture, dated as of June 5, 1998, among R.H. Donnelley Inc., as Issuer,
the Company, as Guarantor, and the Bank of New York, as Trustee, with respect
to the 9 1/8% Senior Subordinated Notes due 2008 (incorporated by reference to
Exhibit 4.1 to the Registration Statement on Form S-4, filed with the
Securities and Exchange Commission on July 17,                                                                                               

92



---



##### Table of Contents



|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Document                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|            |  | 1998, Registration No. 333-59287)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|4.2         |  | Form of the 9 1/8% Senior Subordinated Notes due 2008 (included in Exhibit 4.1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|4.3         |  | Company Guarantee (included in Exhibit 4.1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|4.4         |  | First Supplemental Indenture, dated as of November 25, 2002, among R.H.
Donnelley Inc., as Issuer, and the Company, R.H. Donnelley Acquisitions,
Inc., R.H. Donnelley APIL, Inc., R.H. Donnelley CD, Inc. and Get Digital
Smart.com, Inc., as Guarantors, and The Bank of New York, as Trustee, with
respect to the 9 1/8% Senior Subordinated Notes due 2008 (incorporated by
reference to Exhibit 4.1 to the Current Report on Form 8-K, filed with the
Securities and Exchange Commission on November 25, 2002, Commission File No.
001-07155)                                                                      
|4.5         |  | Second Supplemental Indenture, dated as of December 20, 2002, among R.H.
Donnelley Inc., as Issuer, and the Company, R.H. Donnelley Acquisitions,
Inc., R.H. Donnelley Acquisitions II, Inc., R.H. Donnelley APIL, Inc., R.H.
Donnelley CD, Inc. and Get Digital Smart.com, Inc., as Guarantors, and The
Bank of New York, as Trustee, with respect to the 9 1/8% Senior Subordinated
Notes due 2008 (incorporated by reference to Exhibit 4.1 to the Current
Report on Form 8-K, filed with the Securities and Exchange Commission on
December 20, 2002, Commission File No. 001-07155)                               
|4.6         |  | Third Supplemental Indenture, dated as of December 20, 2002 (operative as of
January 3, 2003), among R.H. Donnelley Inc., as Issuer, and the Company, R.H.
Donnelley Acquisitions, Inc., R.H. Donnelley Acquisitions II, Inc., R.H.
Donnelley APIL, Inc., R.H. Donnelley CD, Inc. and Get Digital Smart.com,
Inc., as Guarantors, and The Bank of New York, as Trustee, with respect to
the 9 1/8% Senior Subordinated Notes due 2008 (incorporated by reference to
Exhibit 4.1 to the Current Report on Form 8-K, filed with the Securities and
Exchange Commission on January 6, 2003, Commission File No. 001-07155)
|4.7         |  | Rights Agreement, dated as of October 27, 1998, between R.H. Donnelley
Corporation and First Chicago Trust Company (incorporated by reference to
Exhibit 4 to the Registration Statement on Form 8-A, filed with the
Securities and Exchange Commission on November 5, 1998, Commission File No.
001-07155)                                                                                                                                                                                                                                                                                                            
|4.8         |  | Amendment No. 1 to Rights Agreement, dated as of February 26, 2001, by and
among R.H. Donnelley Corporation, First Chicago Trust Company of New York (as
initial Rights Agent) and The Bank of New York (as successor Rights Agent)
(incorporated by reference to Exhibit 4.5 to the Annual Report on Form 10-K
for the year ended December 31, 2000, filed with the Securities and Exchange
Commission on March 28, 2001, Commission File No. 001-07155)                                                                                                                                                              
|4.9         |  | Amendment No. 2 to Rights Agreement, dated as of September 21, 2002, between
the Company and The Bank of New York, as successor Rights Agent (incorporated
by reference to Exhibit 4.1 to the Current Report on Form 8-K, filed with the
Securities and Exchange Commission on October 1, 2002, Commission File No.
001-07155)                                                                                                                                                                                                                                                                                         
|4.10        |  | Form of Warrant Agreement, dated as of November 25, 2002, between the Company and investment partnerships
affiliated with The Goldman Sachs Group, Inc.
(incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K,
filed with the Securities and Exchange Commission on January 17, 2003,
Commission File No. 001-07155)                                                                                                                                                                                                                                                                             
|4.11        |  | Form of Warrant Agreement, dated as of January 3, 2003, between the Company and investment partnerships
affiliated                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

93



---



##### Table of Contents



|            |  |                                                                                                                                                                                                                                                                                                                                                                                   
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Document                                                                                                                                                                                                                                                                                                                                                                          
|            |  |                                                                                                                                                                                                                                                                                                                                                                                   
|            |  | with The Goldman Sachs Group, Inc.
(incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K,
filed with the Securities and Exchange Commission on January 17, 2003,
Commission File No. 001-07155)                                                                                                                                                             
|4.12        |  | Registration Rights Agreement, dated as of November 25, 2002, among the
Company and investment partnerships affiliated with The Goldman Sachs Group,
Inc. (incorporated by reference to Exhibit 10.2 to the Current Report on Form
8-K, filed with the Securities and Exchange Commission on December 3, 2002,
Commission File No. 001-07155)                                     
|4.13*       |  | Indenture dated as of December 3 2002 between R.H. Donnelley Inc. (as
successor to R.H. Donnelley Finance Corporation I), as Issuer, and The Bank
of New York, as Trustee, with respect to the 8 7/8% Senior Notes due 2010                                                                                                                                                       
|4.14*       |  | Supplemental Indenture dated as of January 3, 2003 among R.H. Donnelley Inc.,
as Issuer, the Company and the other guarantors signatory thereto, as
Guarantors, and The Bank of New York, as Trustee, with respect to the
8 7/8%
Senior Notes due 2010                                                                                                                            
|4.15        |  | Form of 8 7/8% Senior Notes due 2010 (included in Exhibit 4.13)                                                                                                                                                                                                                                                                                                                   
|4.16*       |  | Guarantees relating to the 8 7/8% Senior Notes due 2010                                                                                                                                                                                                                                                                                                                           
|4.17*       |  | Indenture dated as of December 3 2002 between R.H. Donnelley Inc. (as
successor to R.H. Donnelley Finance Corporation I), as Issuer, and The Bank
of New York, as Trustee, with respect to the 10 7/8% Senior Subordinated Notes
due 2012                                                                                                                                         
|4.18*       |  | Supplemental Indenture dated as of January 3, 2003 among R.H. Donnelley Inc.,
as Issuer, the Company and the other guarantors signatory thereto, as
Guarantors, and The Bank of New York, as Trustee, with respect to the
10 7/8%
Senior Subordinated Notes due 2012                                                                                                              
|4.19        |  | Form of 10 7/8% Senior Subordinated Notes due 2012 (included in Exhibit 4.17)                                                                                                                                                                                                                                                                                                     
|4.20*       |  | Guarantees relating to the 10 7/8% Senior Subordinated Notes due 2012                                                                                                                                                                                                                                                                                                             
|10.1        |  | Form of Distribution Agreement between the Company (f/k/a The Dun &
Bradstreet Corporation) and The New Dun & Bradstreet Corporation
(incorporated by reference to Exhibit 99.2 to the Current Report on Form 8-K
of the Company (f/k/a The Dun & Bradstreet Corporation), filed with the
Securities and Exchange Commission on June 30, 1998, Commission File No.
001-07155)     
|10.2        |  | Form of Tax Allocation Agreement between the Company (f/k/a The Dun &
Bradstreet Corporation) and The New Dun & Bradstreet Corporation
(incorporated by reference to Exhibit 99.3 to the Current Report on Form 8-K
of the Company (f/k/a The Dun & Bradstreet Corporation), filed with the
Securities and Exchange Commission on June 30, 1998, Commission File No.
001-07155)   
|10.3        |  | Form of Employee Benefits Agreement between the Company (f/k/a The Dun &
Bradstreet Corporation) and The New Dun & Bradstreet Corporation
(incorporated by reference to Exhibit 99.4 to the Current Report on Form 8-K
of the Company (f/k/a The Dun & Bradstreet Corporation), filed with the
Securities and Exchange Commission on June 30, 1998, Commission File No.
001-07155)
|10.4        |  | Form of Intellectual Property Agreement between the Company (f/k/a The Dun &
Bradstreet Corporation) and The New Dun & Bradstreet Corporation
(incorporated by                                                                                                                                                                                                                    

94



---



##### Table of Contents



|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |  | reference to Exhibit
99.5 to the Current Report on Form 8-K of the Company (f/k/a
The Dun & Bradstreet Corporation), filed with the Securities
and Exchange Commission on June 30, 1998, Commission File No.
001-07155)                                                                                                                                                                                                                                                                                                                                                                                   
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.5  |  | Form of Amended and Restated Transition Services Agreement
among the Company (f/k/a The Dun & Bradstreet Corporation),
The New Dun & Bradstreet Corporation, Cognizant Corporation,
IMS Health Incorporated, ACNielsen Corporation and Gartner
Group, Inc. (incorporated by reference to Exhibit 99.9 to the
Current Report on Form 8-K of the Company (f/k/a The Dun &
Bradstreet Corporation), filed with the Securities and
Exchange Commission on June 30, 1998, Commission File No.
001-07155)                                                                                                       
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.6  |  | DonTech II Partnership Agreement, effective August 19, 1997,
by and between R.H. Donnelley Inc. (f/k/a The Reuben H.
Donnelley Corporation) and Ameritech Publishing of Illinois,
Inc. (incorporated by reference to Exhibit 10.10 to Amendment
No. 1 to the Registration Statement on Form S-4, filed with
the Securities and Exchange Commission on August 7, 1998,
Registration No. 333-59287)                                                                                                                                                                                                         
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.7  |  | Revenue Participation Agreement, dated as of August 19, 1997,
by and between APIL Partners Partnership and R.H. Donnelley
Inc. (f/k/a The Reuben H. Donnelley Corporation) (incorporated
by reference to Exhibit 10.11 to Amendment No. 1 to the
Registration Statement on Form S-4, filed with the Securities
and Exchange Commission on August 7, 1998, Registration No.
333-59287)                                                                                                                                                                                                                     
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.8  |  | Master Agreement, executed August 19, 1997, by and among R.H.
Donnelley Inc. (f/k/a The Reuben H. Donnelley Corporation),
the Company (f/k/a The Dun & Bradstreet Corporation), The
Am-Don Partnership a/k/a DonTech, DonTech II, Ameritech
Publishing, Inc., Ameritech Publishing of Illinois, Inc.,
Ameritech Corporation, DonTech I Publishing Company LLC and
the APIL Partners Partnership (incorporated by reference to
Exhibit 10.12 to Amendment No. 1 to the Registration Statement
on Form S-4, filed with the Securities and Exchange Commission
on August 7, 1998, Registration No. 333-59287)
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.9  |  | Exclusive Sales Agency Agreement, effective August 19, 1997,
between APIL Partners Partnership and DonTech II (incorporated
by reference to Exhibit 10.13 to Amendment No. 1 to the
Registration Statement on Form S-4, filed with the Securities
and Exchange Commission on August 7, 1998, Registration No.
333-59287)                                                                                                                                                                                                                                                                                  
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.10 |  | Agreement for Publishing Services, dated as of January 1, 2002
between Ameritech Publishing Inc. and R.H. Donnelley Inc.
(certain portions of this exhibit have been omitted and filed
separately with the Securities and Exchange Commission
pursuant to an Application for an Order Granting Confidential
Treatment) (incorporated by reference to Exhibit 10.13 to the
Companys Quarterly Report on Form 10-Q for the three months
ended March 31, 2002, filed with the Securities and Exchange
Commission on May 10, 2002, Commission File No. 001-07155)                                            
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.11 |  | Second Amended and Restated Partnership Agreement, effective
as of August 19, 1997, by and between R.H. Donnelley Inc.
(f/k/a The Reuben H. Donnelley Corporation) and Ameritech
Publishing of Illinois (incorporated by reference to Exhibit
10.14 to Amendment No. 1 to the Registration Statement on Form
S-4, filed with the Securities and Exchange Commission on
August 7, 1998, Registration No. 333-59287)                                                                                                                                                                                        
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.12 |  | Limited Liability Company Agreement of CenDon, L.L.C. dated
April 27, 2000 between R.H. Donnelley Inc. and Centel
Directory Company (certain portions of this exhibit have been
omitted and filed separately with the Securities and Exchange
Commission pursuant to an Application for an Order Granting
Confidential Treatment) (incorporated by reference to                                                                                                                                                                                                                                           

95



---



##### Table of Contents



|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |  | Exhibit
10.14 to the Companys Quarterly Report on Form 10-Q for the
three months ended June 30, 2002, filed with the Securities
and Exchange Commission on August 14, 2002, Commission File
No. 001-07155)                                                                                                                                                                                                                                                                                                                                   
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|10.13  |  | Sales Agency Agreement dated as of April 27, 2000 among R.H.
Donnelley Inc., Centel Directory Company and CenDon, L.L.C.
(incorporated by reference to Exhibit 10.15 to the Companys
Quarterly Report on Form 10-Q for the three months ended June
30, 2002, filed with the Securities and Exchange Commission on
August 14, 2002, Commission File No. 001-07155)                                                                                                                                                                            
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|10.14  |  | Agreement for Publishing Services dated as of April 27, 2000
between R.H. Donnelley and CenDon, L.L.C. (certain portions of
this exhibit have been omitted and filed separately with the
Securities and Exchange Commission pursuant to an Application
for an Order Granting Confidential Treatment) (incorporated by
reference to Exhibit 10.16 to the Companys Quarterly Report
on Form 10-Q for the three months ended June 30, 2002, filed
with the Securities and Exchange Commission on August 14,
2002, Commission File No. 001-07155)
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|10.15^ |  | Key Employees Performance Unit Plan, as amended and restated
(incorporated by reference to Exhibit 10.15 to Amendment No. 3
to the Registration Statement on Form S-4, filed with the
Securities and Exchange Commission on September 28, 1998,
Registration No. 333-59287)                                                                                                                                                                                                                                                                  
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|10.16^ |  | 1991 Key Employees Stock Option Plan, as amended and restated
through April 25, 2000 (incorporated by reference to Exhibit
10.17 to the Companys Quarterly Report on Form 10-Q for the
three months ended September 30, 2000, filed with the
Securities and Exchange Commission on November 13, 2000,
Commission File No. 001-07155)                                                                                                                                                                                                        
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|10.17^ |  | Amended and Restated 1998 Directors Stock Plan (incorporated
by reference to Exhibit 10.18 to the Companys Annual Report
on Form 10-K for the year ended December 31, 1999, filed with
the Securities and Exchange Commission on March 27, 2000,
Commission File No. 001-07155)                                                                                                                                                                                                                                                             
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|10.18^ |  | Pension Benefit Equalization Plan (incorporated by reference
to Exhibit 10.16 to the Companys Annual Report on Form 10-K
for the year ended December 31, 2001, filed with the
Securities and Exchange Commission on March 27, 2002,
Commission File No. 001-07155)                                                                                                                                                                                                                                                                           
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|10.19^ |  | 2001 Stock Award and Incentive Plan (incorporated by reference
to Exhibit 10.17 to the Companys Annual Report on Form 10-K
for the year ended December 31, 2001, filed with the
Securities and Exchange Commission on March 27, 2002,
Commission File No. 001-07155)                                                                                                                                                                                                                                                                         
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|10.20^ |  | 2001 Partner Share Plan (incorporated by reference to Exhibit
99.1 to the Registration Statement on Form S-8, filed with the
Securities and Exchange Commission on April 30, 2001,
Registration No. 333-59790)                                                                                                                                                                                                                                                                                                                                
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|10.21^ |  | Form of Non-Qualified Stock Option Agreement (incorporated by
reference to Exhibit 99.02 to Registration Statement on Form
S-8, filed with the Securities and Exchange Commission on
July 25, 2001, Registration No. 333-65822)                                                                                                                                                                                                                                                                                                               
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|10.22^ |  | Form of Annual Incentive Program Award (incorporated by
reference to Exhibit 99.03 to the Registration Statement on
Form S-8, filed with the Securities and Exchange Commission on
July 25, 2001, Registration No. 333-65822)                                                                                                                                                                                                                                                                                                                 

96



---



##### Table of Contents



|       |  |                                                                                                                                                                                                                                                                                                                                                    
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |  |                                                                                                                                                                                                                                                                                                                                                    
|10.23^ |  | Form of Performance Unit Program Award (incorporated by
reference to Exhibit 99.04 to the Registration Statement on
Form S-8, filed with the Securities and Exchange Commission on
July 25, 2001, Registration No. 333-65822)                                                                                                                      
|       |  |                                                                                                                                                                                                                                                                                                                                                    
|10.24^ |  | Deferred Compensation Plan (incorporated by reference to
Exhibit 4.01 to the Companys Registration Statement on Form
S-8, filed with the Securities and Exchange Commission on
November 24, 1999, Registration No. 333-91613)                                                                                                                     
|       |  |                                                                                                                                                                                                                                                                                                                                                    
|10.25^ |  | Amended and Restated Employment Agreement dated as of December
27, 2001 between the Company and Frank R. Noonan (incorporated
by reference to Exhibit 10.23 to the Companys Annual Report
on Form 10-K for the year ended December 31, 2001, filed with
the Securities and Exchange Commission on March 27, 2002,
Commission File No. 001-07155)  
|       |  |                                                                                                                                                                                                                                                                                                                                                    
|10.26^ |  | Amended and Restated Employment Agreement dated as of December
27, 2001 between the Company and Philip C. Danford
(incorporated by reference to Exhibit 10.24 to the Companys
Annual Report on Form 10-K for the year ended December 31,
2001, filed with the Securities and Exchange Commission on
March 27, 2002, Commission File No. 001-07155)
|       |  |                                                                                                                                                                                                                                                                                                                                                    
|10.27^ |  | Employment Agreement effective as of May 1, 2002 between the
Company and David C. Swanson (incorporated by reference to
Exhibit 10.29 to the Companys Quarterly Report on Form 10-Q
for the three months ended June 30, 2002, filed with the
Securities and Exchange Commission on August 14, 2002,
Commission File No. 001-07155)                
|       |  |                                                                                                                                                                                                                                                                                                                                                    
|10.28^ |  | Employment Agreement effective September 21, 2002 between the
Company and Peter J. McDonald (incorporated by reference to
Exhibit 10.30 to the Quarterly Report on Form 10-Q for the
nine months ended September 30, 2002, filed with the
Securities and Exchange Commission on November 12, 2002,
Commission File No. 001-07155)                  
|       |  |                                                                                                                                                                                                                                                                                                                                                    
|10.29^ |  | Employment Agreement effective March 1, 2002 between the
Company and Steven M. Blondy (incorporated by reference to
Exhibit 10.30 to the Companys Quarterly Report on Form 10-Q
for the three months ended June 30, 2002, filed with the
Securities and Exchange Commission on August 14, 2002,
Commission File No. 001-07155)                    
|       |  |                                                                                                                                                                                                                                                                                                                                                    
|10.30^ |  | Employment Agreement dated as of September 28, 1998 between
the Company and Frank M. Colarusso (incorporated by reference
to Exhibit 10.32 to the Companys Annual Report on Form 10-K
for the year ended December 31, 2000, filed with the
Securities and Exchange Commission on March 28, 2001,
Commission File No. 001-07155)                   
|       |  |                                                                                                                                                                                                                                                                                                                                                    
|10.31^ |  | Amendment No. 1 to Employment Agreement dated as of July 27,
2000 between the Company and Frank M. Colarusso (incorporated
by reference to Exhibit 10.33 to the Companys Annual Report
on Form 10-K for the year ended December 31, 2000, filed with
the Securities and Exchange Commission on March 28, 2001,
Commission File No. 001-07155)     
|       |  |                                                                                                                                                                                                                                                                                                                                                    
|10.32^ |  | Amendment No. 2 to Employment Agreement dated as of February
27, 2001 between the Company and Frank M. Colarusso
(incorporated by reference to Exhibit 10.34 to the Companys
Annual Report on Form 10-K for the year ended December 31,
2000, filed with the Securities and Exchange Commission on
March 28, 2001, Commission File No. 001-07155) 
|       |  |                                                                                                                                                                                                                                                                                                                                                    
|10.33^ |  | Employment Agreement dated as of September 26, 2000 between
the Company and                                                                                                                                                                                                                                                                        

97



---



##### Table of Contents



|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |  | William C. Drexler (incorporated by reference
to Exhibit 10.35 to the Companys Annual Report on Form 10-K
for the year ended December 31, 2000, filed with the
Securities and Exchange Commission on March 28, 2001,
Commission File No. 001-07155)                                                                                                                                                                                                                                                                                                           
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|10.34^ |  | Amendment No. 1 to Employment Agreement dated as of February
27, 2001 between the Company and William C. Drexler
(incorporated by reference to Exhibit 10.36 to the Companys
Annual Report on Form 10-K for the year ended December 31,
2000, filed with the Securities and Exchange Commission on
March 28, 2001, Commission File No. 001-07155)                                                                                                                                                                                                             
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|10.35^ |  | Employment Agreement dated as of January 1, 2001 between the
Company and Robert J. Bush (incorporated by reference to
Exhibit 10.37 to the Companys Annual Report on Form 10-K for
the year ended December 31, 2000, filed with the Securities
and Exchange Commission on March 28, 2001, Commission File No.
001-07155)                                                                                                                                                                                                                                      
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|10.36^ |  | Amendment No. 1 to Employment Agreement dated as of February
27, 2001 between the Company and Robert J. Bush (incorporated
by reference to Exhibit 10.38 to the Companys Annual Report
on Form 10-K for the year ended December 31, 2000, filed with
the Securities and Exchange Commission on March 28, 2001,
Commission File No. 001-07155)                                                                                                                                                                                                                 
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|10.37^ |  | Separation Agreement and Release dated as of March 15, 2001
between the Company and Judith A. Norton (incorporated by
reference to Exhibit 10.29 to the Companys Annual Report on
Form 10-K for the year ended December 31, 2000, filed with the
Securities and Exchange Commission on March 28, 2001,
Commission File No. 001-07155)                                                                                                                                                                                                                         
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|10.38  |  | Letter Agreement, dated as of November 25, 2002, among the
Company, R.H. Donnelley Inc. and investment partnerships
affiliated with The Goldman Sachs Group, Inc (incorporated by
reference to Exhibit 10.1 to the Current Report on Form 8-K,
filed with the Securities and Exchange Commission on December
3, 2002, Commission File No. 001-07155)                                                                                                                                                                                                           
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|10.39  |  | Letter Agreement dated as of January 3, 2003 among the
Company, R.H. Donnelley Inc. and investment partnerships
affiliated with The Goldman Sachs Group, Inc (incorporated by
reference to Exhibit 10.8 to the Current Report on Form 8-K,
filed with the Securities and Exchange Commission on January
17, 2003, Commission File No. 001-07155)                                                                                                                                                                                                               
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|10.40  |  | Directory Services License Agreement, dated as of January 3,
2003, by and among R.H. Donnelley Publishing & Advertising,
Inc. (f/k/a Sprint Publishing & Advertising, Inc.), CenDon
L.L.C., R.H. Donnelley Directory Company (f/k/a Centel
Directory Company), Sprint Corporation, Sprint Directory
Trademark Company, LLC and the Sprint Local Telecommunications
Division (incorporated by reference to Exhibit 10.1 to the
Current Report on Form 8-K, filed with the Securities and
Exchange Commission on January 17, 2003, Commission File No.
001-07155)
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|10.41  |  | Trademark License Agreement, dated as of January 3, 2003, by
and among Sprint Directory Trademark Company, LLC, R.H.
Donnelley Publishing & Advertising, Inc. (f/k/a Sprint
Publishing & Advertising, Inc.), CenDon L.L.C. and R.H.
Donnelley Directory Company (f/k/a Centel Directory Company)
(incorporated by reference to Exhibit 10.2 to the Current
Report on Form 8-K, filed with the Securities and Exchange                                                                                                                                          

98



---



##### Table of Contents



|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |  | Commission on January 17, 2003, Commission File No. 001-07155)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|10.42 |  | Publisher Trademark License Agreement, dated as of January 3,
2003, by and among R.H. Donnelley Publishing & Advertising,
Inc. (f/k/a Sprint Publishing & Advertising, Inc.), R.H.
Donnelley Directory Company (f/k/a Centel Directory Company)
and Sprint Corporation (incorporated by reference to Exhibit
10.3 to the Current Report on Form 8-K, filed with the
Securities and Exchange Commission on January 17, 2003,
Commission File No. 001-07155)                                                                                                                                                                                                                                                                                                                                                     
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|10.43 |  | Non-Competition Agreement, dated as of January 3, 2003, by and
among the Company, R.H. Donnelley Publishing & Advertising,
Inc. (f/k/a Sprint Publishing & Advertising, Inc.), CenDon
L.L.C., R.H. Donnelley Directory Company (f/k/a Centel
Directory Company), Sprint Corporation and the Sprint Local
Telecommunications Division (incorporated by reference to
Exhibit 10.4 to the Current Report on Form 8-K, filed with the
Securities and Exchange Commission on January 17, 2003,
Commission File No. 001-07155)                                                                                                                                                                                                                                                                                       
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|10.44 |  | Subscriber Listings Agreement, dated as of January 3, 2003, by
and among R.H. Donnelley Publishing & Advertising, Inc. (f/k/a
Sprint Publishing & Advertising, Inc.), CenDon L.L.C., R.H.
Donnelley Directory Company (f/k/a Centel Directory Company),
Sprint Corporation and the Sprint Local Telecommunications
Division (incorporated by reference to Exhibit 10.5 to the
Current Report on Form 8-K, filed with the Securities and
Exchange Commission on January 17, 2003, Commission File No.
001-07155)                                                                                                                                                                                                                                                                                                
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|10.45 |  | Credit Agreement, dated as of December 6, 2002, among the
Company, R.H. Donnelley Inc., R.H. Donnelley Finance
Corporation II (subsequently merged with and into R.H.
Donnelley Inc.), the several lenders from time to time party
thereto, Bear Stearns Corporate Lending Inc. and Citicorp
North America, Inc., as joint syndication agents, BNP Paribas
and Fleet National Bank, as joint documentation agents,
Deutsche Bank Trust Company Americas, as administrative agent,
and Deutsche Bank Securities Inc., Salomon Smith Barney Inc.
and Bear, Stearns & Co. Inc., as joint lead arrangers and
joint bookrunners (incorporated by reference to Exhibit 10.10
to the Current Report on Form 8-K, filed with the Securities
and Exchange Commission on January 17, 2003, Commission File
No. 001-07155)
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|21*   |  | Subsidiaries of the Company                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|23*   |  | Consent of Independent Accountants                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|99.1* |  | Certification of Annual Report on Form 10-K for the year ended
December 31, 2002 by David C. Swanson, Chief Executive Officer                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|99.2* |  | Certification of Annual Report on Form 10-K for the year ended
December 31, 2002 by Steven M. Blondy, Senior Vice President
and Chief Financial Officer                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|99.3* |  | Certification of Annual Report on Form 10-K for the year ended
December 31, 2002 by David C. Swanson, Chief Executive Officer
for R.H. Donnelley Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|99.4* |  | Certification of Annual Report on Form 10-K for the year ended
December 31, 2002 by Steven M. Blondy, Senior Vice President and
Chief Financial Officer for R.H. Donnelley Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                



---

|* |  | Filed herewith
|- |  | --------------

|^ |  | Management contract or compensatory plan
|- |  | ----------------------------------------

99



---



##### Table of Contents






SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this Annual Report on Form 10-K to
be signed on its behalf by the undersigned, thereunto duly authorized, on the
19th day of March 2003.

| |                                                                                 
| | --------------------------------------------------------------------------------
| | R.H. Donnelley Corporation                                                      
|
| | By:   /s/ David C. SwansonDavid C. Swanson,
Chairman and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been duly signed by the following persons in the
capacities and on the date indicated.

|                                                   |  |                                |  |               
|-------------------------------------------------- |  | ------------------------------ |  | --------------
|/s/ David C. Swanson                               |  | Chairman and Chief Executive   |  | March 19, 2003
|                                                   |  | Officer and Director           |  |               
|(David C. Swanson)                                 |  | (Principal Executive Officer)  |  |               
|                                                   |  |                                |  |               
|/s/ Steven M. Blondy                               |  | Senior Vice President and      |  | March 19, 2003
|                                                   |  | Chief Financial Officer        |  |               
|(Steven M. Blondy)                                 |  | (Principal Financial Officer)  |  |               
|                                                   |  |                                |  |               
|/s/ William C. Drexler                             |  | Vice President and Controller  |  | March 19, 2003
|(William C. Drexler)                               |  | (Principal Accounting Officer) |  |               
|                                                   |  |                                |  |               
|/s/ Kenneth G. Campbell

(Kenneth G. Campbell)     |  | Director                       |  | March 19, 2003
|                                                   |  |                                |  |               
|/s/ Nancy E. Cooper

(Nancy E. Cooper)             |  | Director                       |  | March 19, 2003
|                                                   |  |                                |  |               
|/s/ Robert R. Gheewalla

(Robert R. Gheewalla)     |  | Director                       |  | March 19, 2003
|                                                   |  |                                |  |               
|/s/ Robert Kamerschen

(Robert Kamerschen)         |  | Director                       |  | March 19, 2003
|                                                   |  |                                |  |               
|(Terence M. OToole)                               |  | Director                       |  | March 19, 2003
|                                                   |  |                                |  |               
|/s/ Carol J. Parry

(Carol J. Parry)               |  | Director                       |  | March 19, 2003
|                                                   |  |                                |  |               
|/s/ David M. Veit

(David M. Veit)                 |  | Director                       |  | March 19, 2003
|                                                   |  |                                |  |               
|/s/ Barry Lawson Williams

(Barry Lawson Williams) |  | Director                       |  | March 19, 2003

100



---



##### Table of Contents






SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this Annual Report on Form 10-K to
be signed on its behalf by the undersigned, thereunto duly authorized, on the
19th day of March, 2003.

| |  |                                                                  
| |  | -----------------------------------------------------------------
| |  | R.H. Donnelley Inc.                                              
|
| |  |                                                                  
|
| |  | By: /s/ David C. SwansonDavid C. Swanson,
Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been duly signed by the following persons in the
capacities and on the date indicated.

|                                             |  |                                                                                           |  |               
|-------------------------------------------- |  | ----------------------------------------------------------------------------------------- |  | --------------
|/s/ David C. Swanson

(David C. Swanson)     |  | Director and
Chief Executive Officer
(Principal Executive Officer)                        |  | March 19, 2003
|                                             |  |                                                                                           |  |               
|/s/ Steven M. Blondy

(Steven M. Blondy)     |  | Director, Senior Vice President
and Chief Financial Officer
(Principal Financial Officer) |  | March 19, 2003
|                                             |  |                                                                                           |  |               
|/s/ William C. Drexler

(William C. Drexler) |  | Vice President and Controller
(Principal Accounting Officer)                              |  | March 19, 2003
|                                             |  |                                                                                           |  |               

101



---



##### Table of Contents






CERTIFICATIONS

I, David C. Swanson, certify that:



| | 1. |  | I have reviewed this annual report on Form 10-K of R.H.
Donnelley Corporation;                                                                                                                                                                                                                                          
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 2. |  | Based on my knowledge, this annual report does not contain
any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this annual report;
|
| | 3. |  | Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly present
in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the
periods presented in this annual report;                   
|
| | 4. |  | The registrants other certifying officer and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for
the registrant and we have:                                                                                                

| |    |  |                                                                                                                                                                                                                                                                                             
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) |  | Designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this annual report is being prepared;
| |    |  |                                                                                                                                                                                                                                                                                             
| | b) |  | Evaluated the effectiveness of the registrants
disclosure controls and procedures as of a date within 90 days
prior to the filing date of this annual report (the Evaluation
Date); and                                                                                                  
| |    |  |                                                                                                                                                                                                                                                                                             
| | c) |  | Presented in this annual report our conclusions about
the effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;                                                                                                                        



| | 5. |  | The registrants other certifying officers and I have
disclosed, based on our most recent evaluation, to the registrants
auditors and the audit committee of the registrants board of
directors (or persons performing equivalent functions):
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |    |  |                                                                                                                                                                                                                                                                                               
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) |  | All significant deficiencies in the design or operation
of internal controls which could adversely affect the
registrants ability to record, process, summarize and report
financial data and have identified for the registrants auditors
any material weaknesses in internal controls; and
| |    |  |                                                                                                                                                                                                                                                                                               
| | b) |  | Any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal controls; and                                                                                                                                        



| | 6. |  | The registrants other certifying officer and I have
indicated in this annual report whether or not there were
significant changes in internal controls or in other factors that
could significantly affect internal controls subsequent to the date
of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                     |  |     |  |                                                                           
|-------------------- |  | --- |  | --------------------------------------------------------------------------
|Date: March 19, 2003 |  | By: |  | /s/ David C. SwansonDavid C. Swanson
President and Chief Executive Officer

102



---



##### Table of Contents






CERTIFICATIONS

I, Steven M. Blondy, certify that:



| | 1. |  | I have reviewed this annual report on Form 10-K of R.H.
Donnelley Corporation;                                                                                                                                                                                                                                          
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 2. |  | Based on my knowledge, this annual report does not contain
any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this annual report;
|
| | 3. |  | Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly present
in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the
periods presented in this annual report;                   
|
| | 4. |  | The registrants other certifying officer and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for
the registrant and we have:                                                                                                

| |    |  |                                                                                                                                                                                                                                                                                             
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) |  | Designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this annual report is being prepared;
| |    |  |                                                                                                                                                                                                                                                                                             
| | b) |  | Evaluated the effectiveness of the registrants
disclosure controls and procedures as of a date within 90 days
prior to the filing date of this annual report (the Evaluation
Date); and                                                                                                  
| |    |  |                                                                                                                                                                                                                                                                                             
| | c) |  | Presented in this annual report our conclusions about
the effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;                                                                                                                        



| | 5. |  | The registrants other certifying officer and I have
disclosed, based on our most recent evaluation, to the registrants
auditors and the audit committee of the registrants board of
directors (or persons performing equivalent functions):
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |    |  |                                                                                                                                                                                                                                                                                               
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) |  | All significant deficiencies in the design or operation
of internal controls which could adversely affect the
registrants ability to record, process, summarize and report
financial data and have identified for the registrants auditors
any material weaknesses in internal controls; and
| |    |  |                                                                                                                                                                                                                                                                                               
| | b) |  | Any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal controls; and                                                                                                                                        



| | 6. |  | The registrants other certifying officer and I have
indicated in this annual report whether or not there were
significant changes in internal controls or in other factors that
could significantly affect internal controls subsequent to the date
of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                     |  |     |  |                                                                                       
|-------------------- |  | --- |  | --------------------------------------------------------------------------------------
|Date: March 19, 2003 |  | By: |  | /s/ Steven M. BlondySteven M. Blondy
Senior Vice President and Chief Financial Officer

103



---



##### Table of Contents






CERTIFICATIONS

I, David C. Swanson, certify that:



| | 1. |  | I have reviewed this annual report on Form 10-K of R.H.
Donnelley Inc.;                                                                                                                                                                                                                                                 
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 2. |  | Based on my knowledge, this annual report does not contain
any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this annual report;
|
| | 3. |  | Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly present
in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the
periods presented in this annual report;                   
|
| | 4. |  | The registrants other certifying officer and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for
the registrant and we have:                                                                                                

| |    |  |                                                                                                                                                                                                                                                                                             
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) |  | Designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this annual report is being prepared;
| |    |  |                                                                                                                                                                                                                                                                                             
| | b) |  | Evaluated the effectiveness of the registrants
disclosure controls and procedures as of a date within 90 days
prior to the filing date of this annual report (the Evaluation
Date); and                                                                                                  
| |    |  |                                                                                                                                                                                                                                                                                             
| | c) |  | Presented in this annual report our conclusions about
the effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;                                                                                                                        



| | 5. |  | The registrants other certifying officers and I have
disclosed, based on our most recent evaluation, to the registrants
auditors and the audit committee of the registrants board of
directors (or persons performing equivalent functions):
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |    |  |                                                                                                                                                                                                                                                                                               
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) |  | All significant deficiencies in the design or operation
of internal controls which could adversely affect the
registrants ability to record, process, summarize and report
financial data and have identified for the registrants auditors
any material weaknesses in internal controls; and
| |    |  |                                                                                                                                                                                                                                                                                               
| | b) |  | Any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal controls; and                                                                                                                                        



| | 6. |  | The registrants other certifying officer and I have
indicated in this annual report whether or not there were
significant changes in internal controls or in other factors that
could significantly affect internal controls subsequent to the date
of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                     |  |     |  |                                                                           
|-------------------- |  | --- |  | --------------------------------------------------------------------------
|Date: March 19, 2003 |  | By: |  | /s/ David C. SwansonDavid C. Swanson
President and Chief Executive Officer

104



---



##### Table of Contents






CERTIFICATIONS

I, Steven M. Blondy, certify that:



| | 1. |  | I have reviewed this annual report on Form 10-K of R.H.
Donnelley Inc.;                                                                                                                                                                                                                                                 
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 2. |  | Based on my knowledge, this annual report does not contain
any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this annual report;
|
| | 3. |  | Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly present
in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the
periods presented in this annual report;                   
|
| | 4. |  | The registrants other certifying officer and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for
the registrant and we have:                                                                                                

| |    |  |                                                                                                                                                                                                                                                                                             
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) |  | Designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this annual report is being prepared;
| |    |  |                                                                                                                                                                                                                                                                                             
| | b) |  | Evaluated the effectiveness of the registrants
disclosure controls and procedures as of a date within 90 days
prior to the filing date of this annual report (the Evaluation
Date); and                                                                                                  
| |    |  |                                                                                                                                                                                                                                                                                             
| | c) |  | Presented in this annual report our conclusions about
the effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;                                                                                                                        



| | 5. |  | The registrants other certifying officer and I have
disclosed, based on our most recent evaluation, to the registrants
auditors and the audit committee of the registrants board of
directors (or persons performing equivalent functions):
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |    |  |                                                                                                                                                                                                                                                                                               
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) |  | All significant deficiencies in the design or operation
of internal controls which could adversely affect the
registrants ability to record, process, summarize and report
financial data and have identified for the registrants auditors
any material weaknesses in internal controls; and
| |    |  |                                                                                                                                                                                                                                                                                               
| | b) |  | Any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal controls; and                                                                                                                                        



| | 6. |  | The registrants other certifying officer and I have
indicated in this annual report whether or not there were
significant changes in internal controls or in other factors that
could significantly affect internal controls subsequent to the date
of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                     |  |     |  |                                                                                       
|-------------------- |  | --- |  | --------------------------------------------------------------------------------------
|Date: March 19, 2003 |  | By: |  | /s/ Steven M. BlondySteven M. Blondy
Senior Vice President and Chief Financial Officer

105



---



##### Table of Contents






EXHIBIT INDEX

|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Document                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|2.1         |  | Stock Purchase Agreement, dated as of September 21, 2002, by and among the
Company, Sprint Corporation and Centel Directories LLC (incorporated by
reference to Exhibit 2.1 to the Current Report on Form 8-K, filed with the
Securities and Exchange Commission on October 1, 2002, Commission File No.
001-07155). The Company agrees to furnish supplementally a copy of any
omitted schedules to the Securities and Exchange Commission upon request.  
|2.2         |  | Supplemental Agreement to Stock Purchase Agreement, dated as of December 31,
2002, by and among the Company, Sprint Corporation and Centel Directories LLC
(incorporated by reference to Exhibit 2.2 to the Current Report on Form 8-K,
filed with the Securities and Exchange Commission on January 17, 2003,
Commission File No. 001-07155). The Company agrees to furnish supplementally
a copy of any omitted schedules to the Commission upon request.
|2.3         |  | Preferred Stock and Warrant Purchase Agreement, dated as of September 21,
2002, among R.H. Donnelley Corporation and investment partnerships affiliated
with The Goldman Sachs Group, Inc. (incorporated by reference to Exhibit 2.2
to the Current Report on Form 8-K, filed with the Securities and Exchange
Commission on October 1, 2002, Commission File No. 001-07155)                                                                               
|3.1         |  | Certificate of Incorporation of the Company (incorporated by reference to
Exhibit 3.1 to the Quarterly Report on Form 10-Q for the three months ended
March 31, 1999, filed with the Securities and Exchange Commission on May 14,
1999 Commission File No. 001-07155)                                                                                                                                                                                     
|3.2         |  | By-laws of the Company (incorporated by reference to Exhibit 3.2 to the
Quarterly Report on Form 10-Q for the three months ended March 31, 1999,
filed with the Securities and Exchange Commission on May 14, 1999 Commission
File No. 001-07155)                                                                                                                                                                                                          
|3.3         |  | Certificate of Incorporation of R.H. Donnelley Inc. (incorporated by
reference to Exhibit 3.3 to Amendment No. 1 to the Registration Statement on
Form S-4, filed with the Securities and Exchange Commission on August 7,
1998, Registration No. 333-59287)                                                                                                                                                                                               
|3.4         |  | By-laws of R.H. Donnelley Inc. (incorporated by reference to Exhibit 3.4 to
the Registration Statement on Form S-4, filed with the Securities and
Exchange Commission on July 17, 1998, Registration No. 333-59287)                                                                                                                                                                                                                                        
|3.5         |  | Certificate of Designations of Convertible Cumulative Preferred Stock of R.H.
Donnelley Corporation (incorporated by reference to Exhibit 3.2 to the
Current Report on Form 8-K, filed with the Securities and Exchange Commission
on January 17, 2003, Commission File No. 001-07155)                                                                                                                                                                     
|3.6         |  | Certificate of Designations of Series B-1 Convertible Cumulative Preferred
Stock of R.H. Donnelley Corporation (incorporated by reference to Exhibit 3.1
to the Current Report Form 8-K, filed with the Securities and Exchange
Commission on December 3, 2002, Commission File No. 001-07155)                                                                                                                                                             
|4.1         |  | Indenture, dated as of June 5, 1998, among R.H. Donnelley Inc., as Issuer,
the Company, as Guarantor, and the Bank of New York, as Trustee, with respect
to the 9 1/8% Senior Subordinated Notes due 2008 (incorporated by reference to
Exhibit 4.1 to the Registration Statement on Form S-4, filed with the
Securities and Exchange Commission on July 17,                                                                                               

106



---



##### Table of Contents



|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Document                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|            |  | 1998, Registration No. 333-59287)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|4.2         |  | Form of the 9 1/8% Senior Subordinated Notes due 2008 (included in Exhibit 4.1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|4.3         |  | Company Guarantee (included in Exhibit 4.1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|4.4         |  | First Supplemental Indenture, dated as of November 25, 2002, among R.H.
Donnelley Inc., as Issuer, and the Company, R.H. Donnelley Acquisitions,
Inc., R.H. Donnelley APIL, Inc., R.H. Donnelley CD, Inc. and Get Digital
Smart.com, Inc., as Guarantors, and The Bank of New York, as Trustee, with
respect to the 9 1/8% Senior Subordinated Notes due 2008 (incorporated by
reference to Exhibit 4.1 to the Current Report on Form 8-K, filed with the
Securities and Exchange Commission on November 25, 2002, Commission File No.
001-07155)                                                                      
|4.5         |  | Second Supplemental Indenture, dated as of December 20, 2002, among R.H.
Donnelley Inc., as Issuer, and the Company, R.H. Donnelley Acquisitions,
Inc., R.H. Donnelley Acquisitions II, Inc., R.H. Donnelley APIL, Inc., R.H.
Donnelley CD, Inc. and Get Digital Smart.com, Inc., as Guarantors, and The
Bank of New York, as Trustee, with respect to the 9 1/8% Senior Subordinated
Notes due 2008 (incorporated by reference to Exhibit 4.1 to the Current
Report on Form 8-K, filed with the Securities and Exchange Commission on
December 20, 2002, Commission File No. 001-07155)                               
|4.6         |  | Third Supplemental Indenture, dated as of December 20, 2002 (operative as of
January 3, 2003), among R.H. Donnelley Inc., as Issuer, and the Company, R.H.
Donnelley Acquisitions, Inc., R.H. Donnelley Acquisitions II, Inc., R.H.
Donnelley APIL, Inc., R.H. Donnelley CD, Inc. and Get Digital Smart.com,
Inc., as Guarantors, and The Bank of New York, as Trustee, with respect to
the 9 1/8% Senior Subordinated Notes due 2008 (incorporated by reference to
Exhibit 4.1 to the Current Report on Form 8-K, filed with the Securities and
Exchange Commission on January 6, 2003, Commission File No. 001-07155)
|4.7         |  | Rights Agreement, dated as of October 27, 1998, between R.H. Donnelley
Corporation and First Chicago Trust Company (incorporated by reference to
Exhibit 4 to the Registration Statement on Form 8-A, filed with the
Securities and Exchange Commission on November 5, 1998, Commission File No.
001-07155)                                                                                                                                                                                                                                                                                                            
|4.8         |  | Amendment No. 1 to Rights Agreement, dated as of February 26, 2001, by and
among R.H. Donnelley Corporation, First Chicago Trust Company of New York (as
initial Rights Agent) and The Bank of New York (as successor Rights Agent)
(incorporated by reference to Exhibit 4.5 to the Annual Report on Form 10-K
for the year ended December 31, 2000, filed with the Securities and Exchange
Commission on March 28, 2001, Commission File No. 001-07155)                                                                                                                                                              
|4.9         |  | Amendment No. 2 to Rights Agreement, dated as of September 21, 2002, between
the Company and The Bank of New York, as successor Rights Agent (incorporated
by reference to Exhibit 4.1 to the Current Report on Form 8-K, filed with the
Securities and Exchange Commission on October 1, 2002, Commission File No.
001-07155)                                                                                                                                                                                                                                                                                         
|4.10        |  | Form of Warrant Agreement, dated as of November 25, 2002, between the Company and investment partnerships
affiliated with The Goldman Sachs Group, Inc.
(incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K,
filed with the Securities and Exchange Commission on January 17, 2003,
Commission File No. 001-07155)                                                                                                                                                                                                                                                                             
|4.11        |  | Form of Warrant Agreement, dated as of January 3, 2003, between the Company and investment partnerships
affiliated                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

107



---



##### Table of Contents



|            |  |                                                                                                                                                                                                                                                                                                                                                                                   
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Document                                                                                                                                                                                                                                                                                                                                                                          
|            |  |                                                                                                                                                                                                                                                                                                                                                                                   
|            |  | with The Goldman Sachs Group, Inc.
(incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K,
filed with the Securities and Exchange Commission on January 17, 2003,
Commission File No. 001-07155)                                                                                                                                                             
|4.12        |  | Registration Rights Agreement, dated as of November 25, 2002, among the
Company and investment partnerships affiliated with The Goldman Sachs Group,
Inc. (incorporated by reference to Exhibit 10.2 to the Current Report on Form
8-K, filed with the Securities and Exchange Commission on December 3, 2002,
Commission File No. 001-07155)                                     
|4.13*       |  | Indenture dated as of December 3 2002 between R.H. Donnelley Inc. (as
successor to R.H. Donnelley Finance Corporation I), as Issuer, and The Bank
of New York, as Trustee, with respect to the 8 7/8% Senior Notes due 2010                                                                                                                                                       
|4.14*       |  | Supplemental Indenture dated as of January 3, 2003 among R.H. Donnelley Inc.,
as Issuer, the Company and the other guarantors signatory thereto, as
Guarantors, and The Bank of New York, as Trustee, with respect to the
8 7/8%
Senior Notes due 2010                                                                                                                            
|4.15        |  | Form of 8 7/8% Senior Notes due 2010 (included in Exhibit 4.13)                                                                                                                                                                                                                                                                                                                   
|4.16*       |  | Guarantees relating to the 8 7/8% Senior Notes due 2010                                                                                                                                                                                                                                                                                                                           
|4.17*       |  | Indenture dated as of December 3 2002 between R.H. Donnelley Inc. (as
successor to R.H. Donnelley Finance Corporation I), as Issuer, and The Bank
of New York, as Trustee, with respect to the 10 7/8% Senior Subordinated Notes
due 2012                                                                                                                                         
|4.18*       |  | Supplemental Indenture dated as of January 3, 2003 among R.H. Donnelley Inc.,
as Issuer, the Company and the other guarantors signatory thereto, as
Guarantors, and The Bank of New York, as Trustee, with respect to the
10 7/8%
Senior Subordinated Notes due 2012                                                                                                              
|4.19        |  | Form of 10 7/8% Senior Subordinated Notes due 2012 (included in Exhibit 4.17)                                                                                                                                                                                                                                                                                                     
|4.20*       |  | Guarantees relating to the 10 7/8% Senior Subordinated Notes due 2012                                                                                                                                                                                                                                                                                                             
|10.1        |  | Form of Distribution Agreement between the Company (f/k/a The Dun &
Bradstreet Corporation) and The New Dun & Bradstreet Corporation
(incorporated by reference to Exhibit 99.2 to the Current Report on Form 8-K
of the Company (f/k/a The Dun & Bradstreet Corporation), filed with the
Securities and Exchange Commission on June 30, 1998, Commission File No.
001-07155)     
|10.2        |  | Form of Tax Allocation Agreement between the Company (f/k/a The Dun &
Bradstreet Corporation) and The New Dun & Bradstreet Corporation
(incorporated by reference to Exhibit 99.3 to the Current Report on Form 8-K
of the Company (f/k/a The Dun & Bradstreet Corporation), filed with the
Securities and Exchange Commission on June 30, 1998, Commission File No.
001-07155)   
|10.3        |  | Form of Employee Benefits Agreement between the Company (f/k/a The Dun &
Bradstreet Corporation) and The New Dun & Bradstreet Corporation
(incorporated by reference to Exhibit 99.4 to the Current Report on Form 8-K
of the Company (f/k/a The Dun & Bradstreet Corporation), filed with the
Securities and Exchange Commission on June 30, 1998, Commission File No.
001-07155)
|10.4        |  | Form of Intellectual Property Agreement between the Company (f/k/a The Dun &
Bradstreet Corporation) and The New Dun & Bradstreet Corporation
(incorporated by                                                                                                                                                                                                                    

108



---



##### Table of Contents



|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |  | reference to Exhibit
99.5 to the Current Report on Form 8-K of the Company (f/k/a
The Dun & Bradstreet Corporation), filed with the Securities
and Exchange Commission on June 30, 1998, Commission File No.
001-07155)                                                                                                                                                                                                                                                                                                                                                                                   
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.5  |  | Form of Amended and Restated Transition Services Agreement
among the Company (f/k/a The Dun & Bradstreet Corporation),
The New Dun & Bradstreet Corporation, Cognizant Corporation,
IMS Health Incorporated, ACNielsen Corporation and Gartner
Group, Inc. (incorporated by reference to Exhibit 99.9 to the
Current Report on Form 8-K of the Company (f/k/a The Dun &
Bradstreet Corporation), filed with the Securities and
Exchange Commission on June 30, 1998, Commission File No.
001-07155)                                                                                                       
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.6  |  | DonTech II Partnership Agreement, effective August 19, 1997,
by and between R.H. Donnelley Inc. (f/k/a The Reuben H.
Donnelley Corporation) and Ameritech Publishing of Illinois,
Inc. (incorporated by reference to Exhibit 10.10 to Amendment
No. 1 to the Registration Statement on Form S-4, filed with
the Securities and Exchange Commission on August 7, 1998,
Registration No. 333-59287)                                                                                                                                                                                                         
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.7  |  | Revenue Participation Agreement, dated as of August 19, 1997,
by and between APIL Partners Partnership and R.H. Donnelley
Inc. (f/k/a The Reuben H. Donnelley Corporation) (incorporated
by reference to Exhibit 10.11 to Amendment No. 1 to the
Registration Statement on Form S-4, filed with the Securities
and Exchange Commission on August 7, 1998, Registration No.
333-59287)                                                                                                                                                                                                                     
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.8  |  | Master Agreement, executed August 19, 1997, by and among R.H.
Donnelley Inc. (f/k/a The Reuben H. Donnelley Corporation),
the Company (f/k/a The Dun & Bradstreet Corporation), The
Am-Don Partnership a/k/a DonTech, DonTech II, Ameritech
Publishing, Inc., Ameritech Publishing of Illinois, Inc.,
Ameritech Corporation, DonTech I Publishing Company LLC and
the APIL Partners Partnership (incorporated by reference to
Exhibit 10.12 to Amendment No. 1 to the Registration Statement
on Form S-4, filed with the Securities and Exchange Commission
on August 7, 1998, Registration No. 333-59287)
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.9  |  | Exclusive Sales Agency Agreement, effective August 19, 1997,
between APIL Partners Partnership and DonTech II (incorporated
by reference to Exhibit 10.13 to Amendment No. 1 to the
Registration Statement on Form S-4, filed with the Securities
and Exchange Commission on August 7, 1998, Registration No.
333-59287)                                                                                                                                                                                                                                                                                  
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.10 |  | Agreement for Publishing Services, dated as of January 1, 2002
between Ameritech Publishing Inc. and R.H. Donnelley Inc.
(certain portions of this exhibit have been omitted and filed
separately with the Securities and Exchange Commission
pursuant to an Application for an Order Granting Confidential
Treatment) (incorporated by reference to Exhibit 10.13 to the
Companys Quarterly Report on Form 10-Q for the three months
ended March 31, 2002, filed with the Securities and Exchange
Commission on May 10, 2002, Commission File No. 001-07155)                                            
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.11 |  | Second Amended and Restated Partnership Agreement, effective
as of August 19, 1997, by and between R.H. Donnelley Inc.
(f/k/a The Reuben H. Donnelley Corporation) and Ameritech
Publishing of Illinois (incorporated by reference to Exhibit
10.14 to Amendment No. 1 to the Registration Statement on Form
S-4, filed with the Securities and Exchange Commission on
August 7, 1998, Registration No. 333-59287)                                                                                                                                                                                        
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.12 |  | Limited Liability Company Agreement of CenDon, L.L.C. dated
April 27, 2000 between R.H. Donnelley Inc. and Centel
Directory Company (certain portions of this exhibit have been
omitted and filed separately with the Securities and Exchange
Commission pursuant to an Application for an Order Granting
Confidential Treatment) (incorporated by reference to                                                                                                                                                                                                                                           

109



---



##### Table of Contents



|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |  | Exhibit
10.14 to the Companys Quarterly Report on Form 10-Q for the
three months ended June 30, 2002, filed with the Securities
and Exchange Commission on August 14, 2002, Commission File
No. 001-07155)                                                                                                                                                                                                                                                                                                                                   
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|10.13  |  | Sales Agency Agreement dated as of April 27, 2000 among R.H.
Donnelley Inc., Centel Directory Company and CenDon, L.L.C.
(incorporated by reference to Exhibit 10.15 to the Companys
Quarterly Report on Form 10-Q for the three months ended June
30, 2002, filed with the Securities and Exchange Commission on
August 14, 2002, Commission File No. 001-07155)                                                                                                                                                                            
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|10.14  |  | Agreement for Publishing Services dated as of April 27, 2000
between R.H. Donnelley and CenDon, L.L.C. (certain portions of
this exhibit have been omitted and filed separately with the
Securities and Exchange Commission pursuant to an Application
for an Order Granting Confidential Treatment) (incorporated by
reference to Exhibit 10.16 to the Companys Quarterly Report
on Form 10-Q for the three months ended June 30, 2002, filed
with the Securities and Exchange Commission on August 14,
2002, Commission File No. 001-07155)
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|10.15^ |  | Key Employees Performance Unit Plan, as amended and restated
(incorporated by reference to Exhibit 10.15 to Amendment No. 3
to the Registration Statement on Form S-4, filed with the
Securities and Exchange Commission on September 28, 1998,
Registration No. 333-59287)                                                                                                                                                                                                                                                                  
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|10.16^ |  | 1991 Key Employees Stock Option Plan, as amended and restated
through April 25, 2000 (incorporated by reference to Exhibit
10.17 to the Companys Quarterly Report on Form 10-Q for the
three months ended September 30, 2000, filed with the
Securities and Exchange Commission on November 13, 2000,
Commission File No. 001-07155)                                                                                                                                                                                                        
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|10.17^ |  | Amended and Restated 1998 Directors Stock Plan (incorporated
by reference to Exhibit 10.18 to the Companys Annual Report
on Form 10-K for the year ended December 31, 1999, filed with
the Securities and Exchange Commission on March 27, 2000,
Commission File No. 001-07155)                                                                                                                                                                                                                                                             
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|10.18^ |  | Pension Benefit Equalization Plan (incorporated by reference
to Exhibit 10.16 to the Companys Annual Report on Form 10-K
for the year ended December 31, 2001, filed with the
Securities and Exchange Commission on March 27, 2002,
Commission File No. 001-07155)                                                                                                                                                                                                                                                                           
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|10.19^ |  | 2001 Stock Award and Incentive Plan (incorporated by reference
to Exhibit 10.17 to the Companys Annual Report on Form 10-K
for the year ended December 31, 2001, filed with the
Securities and Exchange Commission on March 27, 2002,
Commission File No. 001-07155)                                                                                                                                                                                                                                                                         
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|10.20^ |  | 2001 Partner Share Plan (incorporated by reference to Exhibit
99.1 to the Registration Statement on Form S-8, filed with the
Securities and Exchange Commission on April 30, 2001,
Registration No. 333-59790)                                                                                                                                                                                                                                                                                                                                
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|10.21^ |  | Form of Non-Qualified Stock Option Agreement (incorporated by
reference to Exhibit 99.02 to Registration Statement on Form
S-8, filed with the Securities and Exchange Commission on
July 25, 2001, Registration No. 333-65822)                                                                                                                                                                                                                                                                                                               
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|10.22^ |  | Form of Annual Incentive Program Award (incorporated by
reference to Exhibit 99.03 to the Registration Statement on
Form S-8, filed with the Securities and Exchange Commission on
July 25, 2001, Registration No. 333-65822)                                                                                                                                                                                                                                                                                                                 

110



---



##### Table of Contents



|       |  |                                                                                                                                                                                                                                                                                                                                                    
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |  |                                                                                                                                                                                                                                                                                                                                                    
|10.23^ |  | Form of Performance Unit Program Award (incorporated by
reference to Exhibit 99.04 to the Registration Statement on
Form S-8, filed with the Securities and Exchange Commission on
July 25, 2001, Registration No. 333-65822)                                                                                                                      
|       |  |                                                                                                                                                                                                                                                                                                                                                    
|10.24^ |  | Deferred Compensation Plan (incorporated by reference to
Exhibit 4.01 to the Companys Registration Statement on Form
S-8, filed with the Securities and Exchange Commission on
November 24, 1999, Registration No. 333-91613)                                                                                                                     
|       |  |                                                                                                                                                                                                                                                                                                                                                    
|10.25^ |  | Amended and Restated Employment Agreement dated as of December
27, 2001 between the Company and Frank R. Noonan (incorporated
by reference to Exhibit 10.23 to the Companys Annual Report
on Form 10-K for the year ended December 31, 2001, filed with
the Securities and Exchange Commission on March 27, 2002,
Commission File No. 001-07155)  
|       |  |                                                                                                                                                                                                                                                                                                                                                    
|10.26^ |  | Amended and Restated Employment Agreement dated as of December
27, 2001 between the Company and Philip C. Danford
(incorporated by reference to Exhibit 10.24 to the Companys
Annual Report on Form 10-K for the year ended December 31,
2001, filed with the Securities and Exchange Commission on
March 27, 2002, Commission File No. 001-07155)
|       |  |                                                                                                                                                                                                                                                                                                                                                    
|10.27^ |  | Employment Agreement effective as of May 1, 2002 between the
Company and David C. Swanson (incorporated by reference to
Exhibit 10.29 to the Companys Quarterly Report on Form 10-Q
for the three months ended June 30, 2002, filed with the
Securities and Exchange Commission on August 14, 2002,
Commission File No. 001-07155)                
|       |  |                                                                                                                                                                                                                                                                                                                                                    
|10.28^ |  | Employment Agreement effective September 21, 2002 between the
Company and Peter J. McDonald (incorporated by reference to
Exhibit 10.30 to the Quarterly Report on Form 10-Q for the
nine months ended September 30, 2002, filed with the
Securities and Exchange Commission on November 12, 2002,
Commission File No. 001-07155)                  
|       |  |                                                                                                                                                                                                                                                                                                                                                    
|10.29^ |  | Employment Agreement effective March 1, 2002 between the
Company and Steven M. Blondy (incorporated by reference to
Exhibit 10.30 to the Companys Quarterly Report on Form 10-Q
for the three months ended June 30, 2002, filed with the
Securities and Exchange Commission on August 14, 2002,
Commission File No. 001-07155)                    
|       |  |                                                                                                                                                                                                                                                                                                                                                    
|10.30^ |  | Employment Agreement dated as of September 28, 1998 between
the Company and Frank M. Colarusso (incorporated by reference
to Exhibit 10.32 to the Companys Annual Report on Form 10-K
for the year ended December 31, 2000, filed with the
Securities and Exchange Commission on March 28, 2001,
Commission File No. 001-07155)                   
|       |  |                                                                                                                                                                                                                                                                                                                                                    
|10.31^ |  | Amendment No. 1 to Employment Agreement dated as of July 27,
2000 between the Company and Frank M. Colarusso (incorporated
by reference to Exhibit 10.33 to the Companys Annual Report
on Form 10-K for the year ended December 31, 2000, filed with
the Securities and Exchange Commission on March 28, 2001,
Commission File No. 001-07155)     
|       |  |                                                                                                                                                                                                                                                                                                                                                    
|10.32^ |  | Amendment No. 2 to Employment Agreement dated as of February
27, 2001 between the Company and Frank M. Colarusso
(incorporated by reference to Exhibit 10.34 to the Companys
Annual Report on Form 10-K for the year ended December 31,
2000, filed with the Securities and Exchange Commission on
March 28, 2001, Commission File No. 001-07155) 
|       |  |                                                                                                                                                                                                                                                                                                                                                    
|10.33^ |  | Employment Agreement dated as of September 26, 2000 between
the Company and                                                                                                                                                                                                                                                                        

111



---



##### Table of Contents



|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |  | William C. Drexler (incorporated by reference
to Exhibit 10.35 to the Companys Annual Report on Form 10-K
for the year ended December 31, 2000, filed with the
Securities and Exchange Commission on March 28, 2001,
Commission File No. 001-07155)                                                                                                                                                                                                                                                                                                           
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|10.34^ |  | Amendment No. 1 to Employment Agreement dated as of February
27, 2001 between the Company and William C. Drexler
(incorporated by reference to Exhibit 10.36 to the Companys
Annual Report on Form 10-K for the year ended December 31,
2000, filed with the Securities and Exchange Commission on
March 28, 2001, Commission File No. 001-07155)                                                                                                                                                                                                             
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|10.35^ |  | Employment Agreement dated as of January 1, 2001 between the
Company and Robert J. Bush (incorporated by reference to
Exhibit 10.37 to the Companys Annual Report on Form 10-K for
the year ended December 31, 2000, filed with the Securities
and Exchange Commission on March 28, 2001, Commission File No.
001-07155)                                                                                                                                                                                                                                      
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|10.36^ |  | Amendment No. 1 to Employment Agreement dated as of February
27, 2001 between the Company and Robert J. Bush (incorporated
by reference to Exhibit 10.38 to the Companys Annual Report
on Form 10-K for the year ended December 31, 2000, filed with
the Securities and Exchange Commission on March 28, 2001,
Commission File No. 001-07155)                                                                                                                                                                                                                 
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|10.37^ |  | Separation Agreement and Release dated as of March 15, 2001
between the Company and Judith A. Norton (incorporated by
reference to Exhibit 10.29 to the Companys Annual Report on
Form 10-K for the year ended December 31, 2000, filed with the
Securities and Exchange Commission on March 28, 2001,
Commission File No. 001-07155)                                                                                                                                                                                                                         
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|10.38  |  | Letter Agreement, dated as of November 25, 2002, among the
Company, R.H. Donnelley Inc. and investment partnerships
affiliated with The Goldman Sachs Group, Inc (incorporated by
reference to Exhibit 10.1 to the Current Report on Form 8-K,
filed with the Securities and Exchange Commission on December
3, 2002, Commission File No. 001-07155)                                                                                                                                                                                                           
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|10.39  |  | Letter Agreement dated as of January 3, 2003 among the
Company, R.H. Donnelley Inc. and investment partnerships
affiliated with The Goldman Sachs Group, Inc (incorporated by
reference to Exhibit 10.8 to the Current Report on Form 8-K,
filed with the Securities and Exchange Commission on January
17, 2003, Commission File No. 001-07155)                                                                                                                                                                                                               
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|10.40  |  | Directory Services License Agreement, dated as of January 3,
2003, by and among R.H. Donnelley Publishing & Advertising,
Inc. (f/k/a Sprint Publishing & Advertising, Inc.), CenDon
L.L.C., R.H. Donnelley Directory Company (f/k/a Centel
Directory Company), Sprint Corporation, Sprint Directory
Trademark Company, LLC and the Sprint Local Telecommunications
Division (incorporated by reference to Exhibit 10.1 to the
Current Report on Form 8-K, filed with the Securities and
Exchange Commission on January 17, 2003, Commission File No.
001-07155)
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|10.41  |  | Trademark License Agreement, dated as of January 3, 2003, by
and among Sprint Directory Trademark Company, LLC, R.H.
Donnelley Publishing & Advertising, Inc. (f/k/a Sprint
Publishing & Advertising, Inc.), CenDon L.L.C. and R.H.
Donnelley Directory Company (f/k/a Centel Directory Company)
(incorporated by reference to Exhibit 10.2 to the Current
Report on Form 8-K, filed with the Securities and Exchange                                                                                                                                          

112



---



##### Table of Contents



|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |  | Commission on January 17, 2003, Commission File No. 001-07155)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|10.42 |  | Publisher Trademark License Agreement, dated as of January 3,
2003, by and among R.H. Donnelley Publishing & Advertising,
Inc. (f/k/a Sprint Publishing & Advertising, Inc.), R.H.
Donnelley Directory Company (f/k/a Centel Directory Company)
and Sprint Corporation (incorporated by reference to Exhibit
10.3 to the Current Report on Form 8-K, filed with the
Securities and Exchange Commission on January 17, 2003,
Commission File No. 001-07155)                                                                                                                                                                                                                                                                                                                                                     
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|10.43 |  | Non-Competition Agreement, dated as of January 3, 2003, by and
among the Company, R.H. Donnelley Publishing & Advertising,
Inc. (f/k/a Sprint Publishing & Advertising, Inc.), CenDon
L.L.C., R.H. Donnelley Directory Company (f/k/a Centel
Directory Company), Sprint Corporation and the Sprint Local
Telecommunications Division (incorporated by reference to
Exhibit 10.4 to the Current Report on Form 8-K, filed with the
Securities and Exchange Commission on January 17, 2003,
Commission File No. 001-07155)                                                                                                                                                                                                                                                                                       
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|10.44 |  | Subscriber Listings Agreement, dated as of January 3, 2003, by
and among R.H. Donnelley Publishing & Advertising, Inc. (f/k/a
Sprint Publishing & Advertising, Inc.), CenDon L.L.C., R.H.
Donnelley Directory Company (f/k/a Centel Directory Company),
Sprint Corporation and the Sprint Local Telecommunications
Division (incorporated by reference to Exhibit 10.5 to the
Current Report on Form 8-K, filed with the Securities and
Exchange Commission on January 17, 2003, Commission File No.
001-07155)                                                                                                                                                                                                                                                                                                
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|10.45 |  | Credit Agreement, dated as of December 6, 2002, among the
Company, R.H. Donnelley Inc., R.H. Donnelley Finance
Corporation II (subsequently merged with and into R.H.
Donnelley Inc.), the several lenders from time to time party
thereto, Bear Stearns Corporate Lending Inc. and Citicorp
North America, Inc., as joint syndication agents, BNP Paribas
and Fleet National Bank, as joint documentation agents,
Deutsche Bank Trust Company Americas, as administrative agent,
and Deutsche Bank Securities Inc., Salomon Smith Barney Inc.
and Bear, Stearns & Co. Inc., as joint lead arrangers and
joint bookrunners (incorporated by reference to Exhibit 10.10
to the Current Report on Form 8-K, filed with the Securities
and Exchange Commission on January 17, 2003, Commission File
No. 001-07155)
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|21*   |  | Subsidiaries of the Company                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|23*   |  | Consent of Independent Accountants                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|99.1* |  | Certification of Annual Report on Form 10-K for the year ended
December 31, 2002 by David C. Swanson, Chief Executive Officer                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|99.2* |  | Certification of Annual Report on Form 10-K for the year ended
December 31, 2002 by Steven M. Blondy, Senior Vice President
and Chief Financial Officer                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|99.3* |  | Certification of Annual Report on Form 10-K for the year ended
December 31, 2002 by David C. Swanson, Chief Executive Officer
for R.H. Donnelley Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|99.4* |  | Certification of Annual Report on Form 10-K for the year ended
December 31, 2002 by Steven M. Blondy, Senior Vice President and
Chief Financial Officer for R.H. Donnelley Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                



---

|* |  | Filed herewith
|- |  | --------------

|^ |  | Management contract or compensatory plan
|- |  | ----------------------------------------

113