<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 10, 1998.
REGISTRATION NO. 333-[ ]
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
CENTRAL NEWSPAPERS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
<TABLE>
<S> <C> <C>
INDIANA 2711 35-0220660
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) NO.)
</TABLE>
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200 EAST VAN BUREN STREET, PHOENIX, ARIZONA 85004
602-444-1122
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
ERIC S. TOOKER, ESQ.
VICE PRESIDENT, GENERAL COUNSEL
AND CORPORATE SECRETARY
CENTRAL NEWSPAPERS, INC.
200 EAST VAN BUREN STREET
PHOENIX, ARIZONA 85004
602-444-1100
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
COPIES OF ALL COMMUNICATIONS TO:
<TABLE>
<S> <C>
O. WAYNE DAVIS, ESQ. WINTHROP B. CONRAD, JR., ESQ.
HENDERSON, DAILY, WITHROW & DEVOE DAVIS POLK & WARDWELL
2600 ONE INDIANA SQUARE 450 LEXINGTON AVENUE
INDIANAPOLIS, INDIANA 46204 NEW YORK, NEW YORK 10017
TELEPHONE: 317-639-4121 TELEPHONE: 212-450-4590
</TABLE>
-------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF SECURITIES TO BE OFFERING PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE REGISTRATION FEE
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<S> <C> <C> <C> <C>
Class A Common Stock (without par value)........... 1,336,850 shares $68.25 $91,240,013 $25,365
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</TABLE>
(1) Includes shares subject to the underwriters' over allotment option.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c). Based on the average of the high and low prices
reported on the New York Stock Exchange Composite Tape on November 6, 1998.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THE REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY
DETERMINE.
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<PAGE> 2
THE INFORMATION IN THE PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT
SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL
THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN
ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
Subject to Completion. Dated November [ ], 1998.
1,162,478 Shares
[LOGO]
CENTRAL NEWSPAPERS, INC.
Class A Common Stock
-------------------------
All of the shares of Common Stock in the offering are being sold by the
Selling Shareholder identified in this prospectus. Central Newspapers, Inc. will
not receive any of the proceeds from the sale of the shares being sold by the
Selling Shareholder.
The Class A Common Stock is listed on the New York Stock Exchange under the
symbol "ECP." The last reported sale price of the Class A Common Stock was
$ per share.
See "Risk Factors" on page 9 to read about certain factors you should
consider before buying shares of the Class A Common Stock.
-------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
-------------------------
<TABLE>
<CAPTION>
Per
Share Total
--------- --------
<S> <C> <C>
Public offering price....................................... $ $
Underwriting discount....................................... $ $
Proceeds, before expenses, to the Selling Shareholder....... $ $
</TABLE>
The underwriters may, under certain circumstances, purchase up to an
additional 174,372 shares from the Selling Shareholder at the public offering
price less the underwriting discount.
The underwriters are severally underwriting the shares being offered. The
underwriters expect to deliver the shares against payment in New York, New York
on , 1998.
GOLDMAN, SACHS & CO. DONALDSON, LUFKIN & JENRETTE
-------------------------
Prospectus dated , 1998.
<PAGE> 3
COMPANIES AND PUBLICATIONS OF CENTRAL NEWSPAPERS, INC.
ALEXANDRIA NEWSPAPERS, INC.
Alexandria Daily Town Talk
McCormick Graphics and PressWorks
Internet address: http://www.thetowntalk.com
CAREER SERVICES, INC.
Westech ExpoCorp.
JobsAmerica
High Technology Careers Magazine
Internet address:
http://www.vjf.com
CENTRAL NEWSPAPERS, INC.
Internet address: http://www.centralnews.com
HOMEBUYER'S FAIR, INC.
Internet address: http://www.homefair.com and http://www.theschoolreport.com
MUNCIE NEWSPAPERS, INC.
The Muncie Star Press
The Advertiser Group
Internet address: http//www.thestarpress.com
PHOENIX NEWSPAPERS, INC.
The Arizona Republic
The Arizona Business Gazette
Internet address: http://www.azcentral.com
TOPICS NEWSPAPERS, INC.
The Daily Ledger
15 Community Weeklies
VINCENNES NEWSPAPERS, INC.
The Vincennes Sun-Commercial
INDIANAPOLIS NEWSPAPERS, INC.
The Indianapolis Star
The Indianapolis News
Internet address: http//www.starnews.com
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<PAGE> 4
AVAILABLE INFORMATION
We file annual, quarterly, and special reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission").
These reports, proxy statements and other information can be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
following Regional Offices of the Commission: New York Regional Office, 7 World
Trade Center, Suite 1300, New York, New York 10048 and Chicago Regional Office,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material may be obtained at prescribed rates from the Public Reference Section
of the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549. In addition, the Commission maintains a Website on the Internet
(http://www.sec.gov) that contains these reports, proxy statements and other
information. These reports, proxy statements and other information are also
available for inspection and copying at the offices of the New York Stock
Exchange, Inc., 20 Broad Street, New York, New York 10005, on which the Class A
Common Stock is listed.
We have filed with the Commission a Registration Statement on Form S-3 (of
which this Prospectus is a part) under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the shares of Class A Common Stock
offered hereby. This Prospectus does not contain all the information set forth
in the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission. Statements contained in this
Prospectus as to the contents of any contract or any other document are not
necessarily complete, and in each instance reference is made to the copy of such
contract or other document filed as an exhibit or schedule to the Registration
Statement, each such statement being qualified in all respects by such reference
and the exhibits and schedules thereto. For further information with respect to
Central Newspapers, Inc. and the Class A Common Stock, you should read the
Registration Statement, including the exhibits filed as a part thereof. The
Registration Statement and the exhibits thereto may be inspected without charge
at the office of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549
and copies thereof may be obtained from the Commission at prescribed rates.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents which we have previously filed (File No. 1-10333)
with the Commission pursuant to the Securities Exchange Act of 1934, as amended
(the "Exchange Act") are incorporated herein by reference and made a part
hereof:
1. Our Annual Report on Form 10-K for the fiscal year ended December 28,
1997, which incorporates by reference certain portions of (a) our 1997
Annual Report to Shareholders and (b) our proxy statement for the 1998
Annual Meeting of Shareholders;
2. Our Quarterly Report on Form 10-Q dated May 1, 1998;
3. Our Quarterly Report on Form 10-Q dated August 4,1998;
4. Our Quarterly Report on Form 10-Q dated November 5, 1998; and
5. The Description of Capital Stock contained in our Registration Statement
on Form 10 filed September 13, 1989.
All documents we file with the Commission pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date of this Prospectus and prior to
the termination of the offering of the shares will be deemed to be incorporated
by reference herein and to be part hereof from the date of filing of such
documents. In the case of a conflict, statements in documents most recently
filed with the Commission should be relied upon.
We will provide to you, without charge, a copy of the documents which have
been or may be incorporated herein by reference (other than exhibits to such
documents unless such exhibits are specifically incorporated by reference into
such documents). Oral or written requests for such copies should be directed to
Central Newspapers, Inc., 200 East Van Buren Street, Phoenix, Arizona 85004,
Attention: Chief Financial Officer (telephone 602-444-1100).
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements appearing elsewhere, or
incorporated by reference, in this prospectus. In this prospectus, the
"Company," "we," "us" and "our" refer to Central Newspapers, Inc. and its
consolidated subsidiaries.
THE COMPANY
We publish the only major daily newspapers in the greater Phoenix
metropolitan area and central Indiana. Our flagship newspapers are The Arizona
Republic in Phoenix and The Indianapolis Star in Indianapolis. These newspapers
have been published for over a century. The average daily circulation levels
were 460,406 for The Arizona Republic and 228,421 for The Indianapolis Star for
the fiscal year ended December 28, 1997. According to circulation statistics
compiled by the Newspaper Association of America, The Arizona Republic has been
one of the fastest growing major daily morning newspapers in the country over
the last three years. Circulation penetration at December 31, 1997 for The
Arizona Republic was approximately 41% daily and 52% Sunday and for the
Indianapolis newspapers was approximately 42% daily and 60% Sunday, according to
the Audit Bureau of Circulation ("ABC"), ranking them among the highest in the
industry. Our control of the only major daily newspapers in each of our key
markets is of critical importance in attracting and maintaining advertising,
which is our principal source of revenue. Moreover, we generate in excess of 80%
of our circulation from subscriptions, thereby adding relative stability to our
revenue base.
We have benefited from the continuing economic growth and development of
our key markets. With 2.9 million residents in the greater Phoenix metropolitan
area, Phoenix is the nation's seventh largest city. In the greater Phoenix
metropolitan area, growth across several diverse economic sectors, from
manufacturing and construction to trade and services, has outpaced the national
average over the past three years. Phoenix led the nation in job growth for
1997, and its 1997 average annual unemployment rate of 2.9% was below the
national unemployment rate of 4.9%. Its manufacturing base, a substantial
portion of which comes from high technology, is projected by the Greater Phoenix
Economic Council to grow faster than the national rate. The greater Indianapolis
metropolitan area, with 1.5 million residents, has also experienced solid
economic and population growth, and its 1997 average annual unemployment rate of
2.8% was well below the national average. Its economy is anchored by a large and
diverse industrial base, including such major corporations as Eli Lilly and
Company, Conseco, Inc., and Dow AgroSciences. Large downtown development
projects such as the Convention Center, the RCA Dome and Circle Centre, a large
retail shopping center, have also bolstered the regional economy.
We also own and operate several smaller newspapers in central Indiana and
central Louisiana. These include The Indianapolis News, a daily afternoon
newspaper (with an average daily circulation of 41,165), the Alexandria Daily
Town Talk, serving Rapides Parish, Louisiana and its outlying areas (average
circulation of 38,155 daily and 43,823 Sunday), The Star Press (mornings and
Sundays) in Muncie, Indiana (average circulation of 36,558 daily and 40,690
Sunday), The Vincennes Sun-Commercial, a daily newspaper in Vincennes, Indiana
(average circulation of 13,281 daily and 15,617 Sunday), as well as The Daily
Ledger, a daily newspaper (with an average daily circulation of 11,273) and
fourteen controlled circulation (home-delivered and free to readers)
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newspapers (with an average weekly circulation of 110,485) serving the northern
suburbs of Indianapolis, the fastest growing area of metropolitan Indianapolis.
We own an 80% interest in the Santa Clara, California-based Westech
companies, which consist of Westech ExpoCorp., an organizer of job fairs for the
high tech industry; High Technology Careers, publisher of High Technology
Careers Magazine and Virtual Job Fair (http://www.vjf.com), an internet-based
resume posting and research service; and JobsAmerica, an organizer of job fairs
for service industry positions. We also own an 89% interest in Homebuyer's Fair,
Inc., which provides internet services and information for people who are moving
and corporations that are relocating their employees, a commercial printer and a
minority interest in a newsprint mill in the State of Washington.
We have consistently grown our revenues, EBITDA (as defined in "Selected
Consolidated Financial Data") and net income over the last five years. For the
five fiscal years ended December 28, 1997, we recorded compound annual growth in
revenues and EBITDA of 10.6% and 20.2%. For the fiscal year ended December 28,
1997, we generated revenues of $716.1 million, EBITDA of $193.1 million and net
income of $81.5 million. In 1997, we derived 76% of our revenue from
advertising, 20% from circulation, and 4% from other sources. Our EBITDA as a
percentage of revenues ("EBITDA margin") was 27% for this period, representing
the fifth year of improving EBITDA margin out of the last six years. Key drivers
of our financial success include the expansion of advertising and circulation
revenue in our existing markets, the implementation of certain cost-cutting
measures, the repurchase of our common stock, and the development of product
line extensions to meet the information needs of the markets we serve.
We seek to maintain our position as both the primary source of news and
information for our readers, as well as the most effective way for advertisers
to reach their target markets. To this end, we manage our newspapers with a
commitment to the highest standards of product quality and journalistic
excellence. For example, The Arizona Republic was the first major daily
newspaper in the country to have its pages fully composed by computer
generation, enabling us to deliver higher quality products. Since 1990, our
newspapers have won Pulitzer prizes for investigative reporting and political
cartooning, as well as numerous other awards from industry organizations such as
the American Association of Sunday and Feature Editors, the Society for
Newspaper Design and the National Press Photographers' Association, among
others.
Our financial objective is to continue to build value for our shareholders
by focusing on the strengths inherent in our current markets while selectively
pursuing acquisitions. The principal elements of our strategy are as follows:
- ENHANCE ADVERTISING AND CIRCULATION REVENUE BASE. Controlling the only
major daily newspapers in our key markets affords us a competitive
advantage in attracting and maintaining advertising, especially compared
to other advertising vehicles such as radio and television broadcasting
stations, each of which individually reach a significantly smaller
audience. We continue to expand our advertising revenue base by
developing long-term relationships with key advertising accounts and
promoting cross-selling opportunities. We also recently reorganized the
sales and marketing departments at both The Arizona Republic and The
Indianapolis Star, incorporating more sales-based incentives into the
compensation structure, which we believe will produce greater advertising
revenue.
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<PAGE> 8
Our daily home-delivered subscription base represents more than 85% of
total circulation, exceeding the industry average of approximately 74%.
This large subscription base adds to the stability of our revenues, and
we continue to emphasize and improve the quality of daily home delivery.
- CONTINUE TO ACHIEVE COST EFFICIENCIES. We have recently identified
several areas for more efficient cost management and have begun to pursue
these opportunities. Recent initiatives include the January 1997 closing
of The Phoenix Gazette, the afternoon newspaper in Phoenix, the
consolidation of The Muncie Star and the Muncie Evening Press into The
Star Press in May 1996, the implementation of client server computer
systems in Phoenix and Indianapolis and the consolidation of the
editorial function in Indianapolis. We continue to pursue opportunities
like these, with a particular focus on increasing production automation,
improving distribution and enhancing workforce productivity.
- SELECTIVELY PURSUE BRAND-ENHANCING ACQUISITIONS AND NEW PRODUCT
DEVELOPMENTS. We pursue acquisitions where we believe we can add or
derive significant value from our operating expertise or line extension
opportunities. Recent acquisitions include the purchase of the Alexandria
Daily Town Talk newspaper in March 1996, the purchase of Westech in
February 1997, and the purchase of Homebuyer's Fair in October 1997.
Additional product developments include the development of web sites for
our major newspapers.
Our corporate headquarters' address is 200 East Van Buren Street, Phoenix,
Arizona 85004 and our telephone number is (602) 444-1100.
SELLING SHAREHOLDER
The Nina Mason-Pulliam Charitable Trust indirectly acquired 5,073,600
shares of Class A Common Stock and 3,732,500 shares of Class B Common Stock from
the estate of Nina Mason Pulliam, the widow of our founder. On October 23, 1998,
we purchased 2,500,000 shares of Class A Common Stock from the Charitable Trust
for $60 per share, and we have an agreement with the Trust which provides that:
- We have the right to purchase up to an additional 1,500,000 shares of
Class A Common Stock from the Charitable Trust for $67 per share until
the earlier of (i) September 21, 1999 or (ii) five business days after
the stock price averages $67 per share for five consecutive days.
- We will register up to 1,336,850 shares of Class A Common Stock for sale
by the Charitable Trust under the federal securities laws. The offering
made by this prospectus is pursuant to this provision.
- Whether or not we exercise our option, the Charitable Trust will not
otherwise sell any shares of Class A Common Stock before September 21,
1999.
See "Selling Shareholder."
7
<PAGE> 9
THE OFFERING
The following information assumes that the underwriters do not exercise the
option granted by the selling shareholder to purchase additional shares in the
offering. See "Underwriting."
<TABLE>
<S> <C>
Class A Common Stock offered by the
Selling Shareholder..................... 1,162,478
Class A Common Stock outstanding after the
offering................................ 18,707,924
Class B Common Stock outstanding after the
offering................................ 31,345,500
New York Stock Exchange symbol............ ECP
Use of proceeds........................... We will not receive any of the
proceeds from this offering.
</TABLE>
8
<PAGE> 10
RISK FACTORS
You should carefully consider the risks described below before making an
investment decision. The risks and uncertainties described below are not the
only ones facing our company. Additional risks and uncertainties not presently
known to us or that we currently deem immaterial may also impair our business
operations.
If any of the following risks actually occur, our business, financial
condition or results of operations could be materially affected. As a result,
the trading price of our Class A Common Stock could decline, and you may lose
all or part of your investment.
This prospectus also contains forward-looking statements that involve risks
and uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including the risks faced by us described below and elsewhere in this
prospectus.
NEWSPAPER INDUSTRY COMPETITION
Our principal line of business is newspaper publishing. We derive our
revenues primarily from advertising and newspaper sales in two principal
metropolitan markets -- Phoenix, Arizona and Indianapolis, Indiana. Generally,
the newspaper industry competition for advertising expenditures and paid
circulation comes from regional and national newspapers, television, radio,
direct mail, on-line services and other forms of communication and advertising
media. Competition for newspaper advertising expenditures is based largely upon
advertiser results, readership, advertising rates, demographics and circulation
levels. Competition for circulation and readership is based largely upon the
content of the newspaper, its price and the effectiveness of its distribution.
The extent and nature of both forms of competition are, in large part,
determined by the location and demographics of the market and the number of
media alternatives in those markets. Our control of the only major daily
newspapers in each of our key markets is of critical importance in attracting
and maintaining advertising. While most of our daily papers are either the only
dailies, or the leading dailies published in our respective markets, there can
be no assurance that our significant market position will continue. Thus, the
entry of a direct competitor in our daily newspaper markets could adversely
effect our revenues and operating costs.
DEPENDENCE ON LOCAL ECONOMIES
We publish the only major daily newspaper in each of our key markets of the
greater Phoenix metropolitan area and central Indiana. Our flagship newspapers
are The Arizona Republic in Phoenix and The Indianapolis Star, both of which
have been published for over a century. Presently, we benefit from the economic
growth and development of these key markets.
Our advertising revenues and, to a lesser extent, circulation revenues are
dependent on a variety of factors specific to the communities we serve. These
factors include, among others, the size and demographic characteristics of the
local population, the local economic conditions and local weather conditions. If
any of these factors were to be adversely affected, there could be no assurance
that our financial condition or results of operations would not be adversely
affected.
FLUCTUATIONS IN NEWSPRINT COSTS
Newsprint is the basic raw material used in our business. We consumed
approximately 179,400 metric tons of newsprint in fiscal year 1997 and our
consumption is estimated to be approximately 190,000 tons in 1998. This increase
is due primarily to linage and circulation gains in 1998. We currently obtain
our newsprint from a number of suppliers, both foreign and domestic, under
long-term contracts.
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<PAGE> 11
Newsprint costs are cyclical and vary widely from period to period. Price
changes are the major factor in these fluctuations. Likewise, our newsprint
costs are affected by our changing volume needs. Our recent volume increase of
3.4% for the first nine month period in 1998 over the comparable 1997 period was
related to increased advertising linage and circulation gains. We anticipate
that newsprint expense comparisons will continue to show slight increases during
the last quarter of 1998 due to higher prices and volume increases.
Given the fluctuations in newsprint costs, we cannot predict whether any
increase in costs of newsprint will occur or the amount or timing of any
increase. Significant increases in newsprint costs as well as insufficient
supply could have a material adverse effect on our financial condition or
results of operations.
FLUCTUATION OF QUARTERLY RESULTS
Generally, newspaper companies tend to follow a distinct and recurring
seasonal revenue pattern. The first quarter of the year (January-March) tends to
be the weakest quarter because advertising volume is then at its lowest level.
The fourth quarter (October-December) tends to be the strongest quarter, as it
includes heavy holiday season advertising. Our business reflects this
seasonality, with our peak revenues and profits generally occurring in the
second and fourth quarter of each year. We expect that seasonal fluctuations in
revenue will continue to affect our results of operations in future periods.
Therefore, results of operations in any period should not be considered
indicative of the results to be expected for any future periods.
RISKS IN GROWTH STRATEGY
Our strategy is to grow by strengthening our presence in our existing
markets through brand-enhancing acquisitions and new product developments. In
addition, we seek to improve cash flow and our newspaper profitability through
cost efficiencies. Our growth strategy presents risks inherent in assessing the
value, strengths and weaknesses of acquisition opportunities, in evaluating the
costs of new growth opportunities and in expanding into new products and
improving our operating efficiency. We are unable to predict the number or
timing of future acquisition opportunities, or whether any such opportunities
will meet our acquisition criteria. Moreover, if such acquisitions occur, we are
unable to predict whether they will be a success.
Likewise, our growth strategy also depends on our ability to achieve cost
efficiencies through increasing production automation, improving distribution
and enhancing work force productivity. There can be no assurances that we will
be able to successfully implement this strategy in the future.
DEPENDENCE ON SUBSCRIPTION BASE
We derive a major source of revenue from our sale of newspapers through
subscriptions. Our daily home-delivered subscription base represents more than
85% of our total circulation, which exceeds the newspaper industry average of
approximately 74%. In 1998, circulation revenues for the third quarter and
year-to-date period increased to $36.5 million and $112.4 million, respectively,
for increases of 2.5% and 5.5% when compared to 1997. The year-to-date increase
is primarily due to Phoenix circulation growth and a distribution system change
in Indianapolis that resulted in a revenue increase of $4.3 million for the nine
months ending September 27, 1998. While our large subscription base adds
relative stability to our revenue base and we continue to improve the quality of
daily home delivery, our circulation is still largely dependent on such factors
as our market position, preferences of readers, and the development of new forms
of information dissemination (e.g. Internet). Any decline in circulation due to
such factors could have a material
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adverse effect on our financial condition and results of operations.
CONTROL BY EUGENE C. PULLIAM TRUST AND
ANTI-TAKEOVER EFFECT
Although we have two classes of voting common stock, Class A Common Stock
and Class B Common Stock, holders of the Class A Common Stock have one-tenth of
one vote per share, while holders of the Class B Common Stock have one vote per
share on all matters that shareholders are entitled to vote. Presently, a
majority of our voting power is held by the Eugene C. Pulliam Trust, which owns
approximately 73% of our Class B Common Stock and approximately 69% of our
combined voting power. The concentration of voting control by this trust could
affect decisions made on behalf of the Company. This trust has the ability to
elect all of the members of the Board of Directors and thus control the policies
and operations of our businesses. Circumstances may occur in which the interest
of this trust may be in conflict with the interest of the holders of Class A
Common Stock. By its terms, the trust will terminate twenty-one years after the
death of the survivor of the class consisting of the descendants of Eugene C.
Pulliam living at the time of the most recent amendment to the trust in May
1973.
Under the terms of this trust, the trustees are directed not to sell,
exchange, pledge or otherwise dispose of the Class B Common Stock held by the
trust or approve any reorganization or recapitalization, including mergers and
consolidations if, as a result, the property held by the trust would consist of
a smaller proportion of our voting power or of any corporation into which we
were merged or consolidated, than its proportion of the voting power at the time
of the execution of the trust (54%). These provisions prohibit this trust from
selling, exchanging, pledging (or otherwise disposing of its stock), or
approving any reorganization or recapitalization (including mergers and
consolidations) that would dilute the trust's voting power and thus may make it
more difficult for a third party to acquire a majority of our outstanding
capital stock. Likewise, certain provisions of Indiana law applicable to us
could also delay, deter or prevent a merger, tender offer, or other takeover
attempts.
POTENTIAL LITIGATION EXPOSURE
We are from time to time named as a defendant in litigation in which the
plaintiffs claim significant damages. Our insurance may not be sufficient to
prevent an adverse judgment from having a material adverse effect on our
financial condition or results of operations.
DEPENDENCE ON KEY PERSONNEL
We rely, and will continue to rely, on skilled managers, editors,
publishers, journalists, and other key personnel, including our present
officers. Although we believe we are able to attract and retain talented
personnel, and replace key personnel should that need arise, the inability to
attract, retain, or replace such personnel could adversely effect our financial
condition and results of operation.
COLLECTIVE BARGAINING AGREEMENTS
Approximately 40% of our employees are covered by a total of 23 collective
bargaining agreements. Given the large number of collective bargaining
agreements, we are frequently involved in labor negotiations. As of November 5,
1998, we were involved in ongoing negotiations with respect to five different
bargaining agreements, involving approximately 350 employees engaged in various
trades at our facilities. No assurance can be given as to the outcome of these
negotiations or as to the impact of such negotiations or agreements in the
future.
INTEREST RATE EXPOSURE
On October 23, 1998, we repurchased 2,500,000 shares of Class A Common
Stock from the Nina Mason Pulliam Chari-
11
<PAGE> 13
table Trust for $150.8 million. Moreover, we have an exclusive option to
purchase up to an additional 1,500,000 shares of the Class A Common Stock from
the Charitable Trust should the stock reach an average trading price of $67 for
five consecutive days. The repurchase was financed with a short-term $150
million bridge loan that is expected to be refinanced with a $300 million
revolving credit facility. The credit facility, which may also be used to
finance the purchase of the 1,500,000 shares in the event the option is
exercised, is expected to close prior to November 15, 1998. This indebtedness
could make our earnings more susceptible to interest rate fluctuations than
before.
RISK OF YEAR 2000 NONCOMPLIANCE
In 1997 we instituted a program to analyze and evaluate all internal
systems, equipment and operations to ensure their year 2000 compliance. We
completed phase one of this program, discovery and analysis, and expect to
complete phase two, remediation and testing, by the end of the first quarter of
1999. The third phase, compliance accountability, will be ongoing until the year
2000. In addition, we initiated a program to review year 2000 compliance by all
major suppliers in order to determine any exposure to year 2000 issues. While we
do not expect supplier noncompliance to have a material impact on our
businesses, it, and any failure by us or our suppliers to comply, could,
nonetheless, have a material adverse impact on our financial condition and
results of operation.
ENVIRONMENTAL MATTERS
Our operations are subject to federal, state and local environmental laws
and regulations pertaining to air and water quality, storage tanks and the
management and disposal of waste at our facilities. To the best of our
knowledge, our operations are in material compliance with applicable
environmental laws and regulations as currently interpreted. We cannot predict
with any certainty whether future events, such as changes unknown to us, may
give rise to additional costs that could be material. Furthermore, actions by
federal, state and local governments concerning environmental matters could
result in laws or regulations that could have a material adverse effect on our
financial condition or results of operations.
12
<PAGE> 14
PRICE RANGE OF CLASS A COMMON STOCK AND DIVIDEND POLICY
The Class A Common Stock is listed on the New York Stock Exchange under the
symbol "ECP." The Class B Common Stock is not publicly traded. The following
table sets forth the high and low reported sale prices for the Class A Common
Stock for the periods indicated as reported on the New York Stock Exchange
Composite Tape and the dividends declared and subsequently paid with respect to
the Class A Common Stock and the Class B Common Stock for such periods.
<TABLE>
<CAPTION>
CLASS A COMMON
STOCK PRICE DIVIDENDS PER SHARE
------------------ --------------------
HIGH LOW CLASS A CLASS B
---- --- -------- --------
<S> <C> <C> <C> <C>
1996
First quarter.................................. $37 7/8 $30 3/4 $0.17 $0.017
Second quarter................................. 38 3/8 34 1/8 0.17 0.017
Third quarter.................................. 39 3/8 33 3/8 0.19 0.019
Fourth quarter................................. 44 1/4 38 1/4 0.19 0.019
----- ------
$0.72 $ .072
1997
First quarter.................................. $50 3/4 $43 3/8 $0.19 $0.019
Second quarter................................. 71 5/8 47 7/8 0.19 0.019
Third quarter.................................. 76 1/4 65 7/8 0.21 0.021
Fourth quarter................................. 76 7/8 65 3/8 0.21 0.021
----- ------
$0.80 $0.080
1998
First quarter.................................. 74 1/4 62 1/16 $0.21 $0.021
Second quarter................................. 74 15/16 61 5/8 0.21 0.021
Third quarter.................................. 70 1/8 57 0.24 0.024
Fourth quarter (through November [ ], 1998)...
</TABLE>
On November [ ], 1998, the reported last sale price for the Class A Common
Stock was $[ ] per share on the New York Stock Exchange. On September 8,
1998, our Board of Directors declared a $0.24 dividend per share of Class A
Common Stock ($0.024 per share with respect to the Class B Common Stock) payable
on October 9, 1998, to holders of record on September 30, 1998.
While future dividends will be subject to the discretion of our Board of
Directors, the Board of Directors currently intends to continue the policy of
paying cash dividends on a quarterly basis. However, future dividends will
depend upon our results of operations, financial condition, capital expenditure
program and other factors, some of which are beyond our control. There can be no
assurance as to whether or when our Board of Directors will change the current
policy regarding dividends.
USE OF PROCEEDS
All of the shares of Class A Common Stock being offered hereby are being
sold by the Selling Shareholder. We will not receive any proceeds from the
offering.
13
<PAGE> 15
CAPITALIZATION
The following table sets forth our unaudited capitalization as of September
27, 1998, and as adjusted to reflect our repurchase of 2,500,000 shares of Class
A Common Stock from the Nina Mason Pulliam Charitable Trust. Funding for this
repurchase was from a $150 million bridge loan which is expected to be replaced
before November 15, 1998 by a $300 million revolving credit facility which will
be accounted for as long-term debt.
<TABLE>
<CAPTION>
SEPTEMBER 27, 1998
-----------------------------
ACTUAL AS ADJUSTED(1)(2)
-------- -----------------
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents................................ $ 32,049 $ 32,049
======== ========
Short-term borrowings.................................... $ 5,000 $ 5,000
======== ========
Long-term debt........................................... -- $150,000
-------- --------
Redeemable preferred stock issued by subsidiary.......... 18,920 18,920
-------- --------
Shareholders' equity:
Preferred Stock, issuable in series:
Authorized -- 25,000,000 shares
Issued -- none...................................... -- --
Class A Common Stock -- without par value:
Authorized -- 150,000,000 shares
Issued -- 21,314,058 and 18,814,058 shares.......... 36,543 33,143
Class B Common Stock -- without par value:
Authorized -- 130,000,000 shares
Issued -- 31,345,000 shares......................... 63 63
Retained earnings...................................... 343,707 197,107
Unamortized value of restricted stock.................. (1,419) (1,419)
Net unrealized gain on available-for-sale securities... 1,330 1,330
-------- --------
Total shareholders' equity..................... 380,224 230,224
-------- --------
Total capitalization..................................... $399,144 $399,144
======== ========
</TABLE>
- -------------------------
(1) Assumes no repurchase by us of Class A Common Stock pursuant to the trust
option granted to us to repurchase up to 1,500,000 shares of Class A Common
Stock from the Charitable Trust. If additional shares of Class A Common
Stock are repurchased by us, funding is expected to come from a combination
of cash and borrowings under the revolving credit facility.
(2) The adjusted retained earnings figure reflects the stock repurchase from the
Charitable Trust.
14
<PAGE> 16
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data in the following table (other than
the financial data for the thirty-nine weeks ended September 28, 1997 and
September 27, 1998) for each of the five fiscal years in the period ended
December 28, 1997 have been derived from our consolidated financial statements
which, for the fiscal year ended December 28, 1997, have been audited by
PricewaterhouseCoopers LLP and, with respect to the other fiscal years, have
been audited by Olive LLP (formerly Geo. S. Olive & Co. LLC), independent
auditors. See "Experts." The selected consolidated financial data should be read
in conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the consolidated financial statements and notes
thereto as incorporated by reference herein and the other documents incorporated
herein by reference. The selected consolidated financial data for the
thirty-nine weeks ended September 28, 1997 and September 27, 1998 have been
derived from our unaudited financial statements and include, in the opinion of
the management, all adjustments (consisting only of normal recurring accruals)
necessary to present fairly the financial position and results of operations for
such periods. The results of operations for the thirty-nine weeks ended
September 27, 1998 are not necessarily indicative of the results expected for
the full fiscal year 1998.
15
<PAGE> 17
<TABLE>
<CAPTION>
FISCAL YEAR ENDED 39 WEEKS ENDED
------------------------------------------------------------------------ -----------------------------
DECEMBER 26, DECEMBER 25, DECEMBER 31, DECEMBER 29, DECEMBER 28, SEPTEMBER 28, SEPTEMBER 27,
1993 1994 1995(1) 1996 1997 1997 1998
------------ ------------ ------------ ------------ ------------ ------------- -------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Operating revenues:
Advertising......... $346,566 $395,450 $446,693 $479,474 $541,311 $395,790 $411,885
Circulation......... 118,032 121,823 129,537 134,133 143,153 106,545 112,376
Other............... 1,969 2,429 3,671 6,708 31,673 22,293 30,787
-------- -------- -------- -------- -------- -------- --------
466,567 519,702 579,901 620,315 716,137 524,628 555,048
-------- -------- -------- -------- -------- -------- --------
Operating expenses:
Compensation........ 199,266 217,078 222,748 228,316 239,783 177,434 181,787
Newsprint and ink... 68,336 76,247 110,085 113,171 105,467 76,846 84,100
Other operating
costs............. 106,042 116,944 129,362 137,875 177,829 128,422 145,622
Depreciation and
amortization...... 25,810 26,639 28,487 35,528 42,022 32,179 34,613
Asset impairment
cost.............. 4,226
Work force reduction
cost.............. 1,491 7,064 3,328 1,340 9,999 9,355 77
-------- -------- -------- -------- -------- -------- --------
400,945 443,972 494,010 520,456 575,100 424,236 446,199
-------- -------- -------- -------- -------- -------- --------
Operating income...... 65,622 75,730 85,891 99,859 141,037 100,392 108,849
Other income-net.... 2,417 4,965 8,154 4,009 2,152 1,751 2,808
-------- -------- -------- -------- -------- -------- --------
Income before income
taxes............. 68,039 80,695 94,045 103,868 143,189 102,143 111,657
Provision for income
taxes............. 27,948 32,847 38,048 42,431 58,797 42,304 46,231
-------- -------- -------- -------- -------- -------- --------
Income before
minority interest
and equity in
Affiliate......... 40,091 47,848 55,997 61,437 84,392 59,839 65,426
Minority interest in
subsidiaries...... (3,683) (2,977) (1,409) (1,629) (2,566) (1,975) (1,937)
Equity in Affiliate,
net of tax........ (4,280) (3,550) (590) 1,726 (331) (255) 803
Net income.......... $ 32,128 $ 41,321 $ 53,998 $ 61,534 $ 81,495 $ 57,609 64,292
======== ======== ======== ======== ======== ======== ========
Net income per
common share:
Basic............. $ 1.21 $ 1.55 $ 2.03 $ 2.31 $ 3.17 $ 2.22 $ 2.57
Diluted........... $ $ $ 2.01 $ 2.28 $ 3.08 $ 2.16 $ 2.49
======== ======== ======== ======== ======== ======== ========
Average common
shares
outstanding:
Basic............. 26,571 26,621 26,651 26,619 25,732 25,918 25,061
Diluted........... 28,869 27,038 26,473 26,635 25,771
</TABLE>
16
<PAGE> 18
<TABLE>
<CAPTION>
FISCAL YEAR ENDED 39 WEEKS ENDED
------------------------------------------------------------------------ -----------------------------
DECEMBER 26, DECEMBER 25, DECEMBER 31, DECEMBER 29, DECEMBER 28, SEPTEMBER 28, SEPTEMBER 27,
1993 1994 1995(1) 1996 1997 1997 1998
------------ ------------ ------------ ------------ ------------ ------------- -------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF CASH FLOWS
DATA:
Net cash provided by
operating
activities.......... $ 73,732 $ 41,897 $ 62,283 $122,015 $153,823 $112,168 $113,389
Net cash used by
investing
activities.......... (55,547) (27,530) (42,463) (73,037) (70,706) (45,981) (41,142)
Net cash used by
financing
activities.......... (13,263) (14,405) (15,783) (38,971) (82,342) (46,585) (77,122)
OTHER DATA:
EBITDA(2)............. $ 92,923 $109,433 $117,706 $140,953 $193,058 $141,926 $143,539
EBITDA margin......... 19.9% 21.1% 20.3% 22.7% 27.0% 27.1% 25.9%
Capital
expenditures........ $ 16,049 $ 23,256 $ 58,676 $ 46,530 $ 25,135 $ 18,144 $ 30,916
Net cash provided by
operating
activities,
excluding the
effect of trading
securities.......... 73,732 87,579 79,913 81,344 142,192 110,008 114,967
BALANCE SHEET DATA:
Cash and cash
equivalents......... $ 22,143 $ 22,105 $ 26,142 $ 36,149 $ 36,924 $ 55,751 $ 32,049
Total Assets.......... 464,688 500,444 547,204 586,972 614,311 620,920 618,695
Working Capital....... 127,999 132,907 137,818 92,323 64,739 60,185 57,304
Long-term debt........ 2,678 2,678 2,678 2,678 2,678
Shareholders'
equity.............. 290,693 319,762 358,741 387,550 382,279 368,813 380,224
</TABLE>
- -------------------------
(1) 53-week year.
(2) Earnings before non-operating income and interest expense (other
income-net), taxes, depreciation, amortization and costs associated with
asset impairments and workforce reductions. We believe that EBITDA is a
valuable indicator of pre-tax profitability and also is used commonly by the
financial and investment community to analyze communications and media
companies. However, EBITDA is not derived pursuant to generally accepted
accounting principles ("GAAP") and therefore should not be construed as an
alternative to operating income or as a measure of liquidity. EBITDA as
defined herein may not be comparable to other similar measurements, as
entities define these non-GAAP measurements in different ways.
17
<PAGE> 19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
Our principal line of business is newspaper publishing. Revenues are
derived primarily from advertising and newspaper sales in the Phoenix, Arizona
and Indianapolis, Indiana metropolitan areas. We also have an 80% interest in
the Westech group of companies, which is predominantly in the jobs fair business
and a 13.5% interest in Ponderay, a partnership formed to own a newsprint mill
in the State of Washington. The following analysis should be read in conjunction
with the fiscal 1997 consolidated financial statements and the accompanying
notes to the consolidated financial statements.
Our business tends to be seasonal, with peak revenues and profits generally
occurring in the second and fourth quarters of each year. The results for 1995,
1996 and 1997 reflect these seasonal patterns. In addition, the 1996 and 1997
fiscal years each included 52 weeks and fiscal year 1995 included 53 weeks.
RECENT EVENTS
On October 23, 1998, pursuant to a September 21, 1998 agreement, we
purchased 2,500,000 shares of Class A Common Stock from the Nina Mason Pulliam
Charitable Trust at $60 per share (plus interest from September 16, 1998) for
total consideration of $150.8 million. Moreover, we have an exclusive one year
option to purchase up to an additional 1,500,000 shares of the Class A Common
Stock from the Charitable Trust should the stock reach an average trading price
of $67 for five consecutive days. The 2,500,000 share repurchase was financed
with a short-term $150 million bridge loan from First Chicago Capital Market,
Inc. (a subsidiary of Bank One Corporation) ("First Chicago"). This bridge loan
is expected to be refinanced with a $300 million revolving credit facility,
arranged by First Chicago and syndicated to a group of banks, which will also
allow us to exercise the option should that opportunity arise. This credit
facility is expected to close prior to November 15, 1998.
At our annual meeting of shareholders on May 15, 1998, our shareholders
approved an increase in the number of authorized shares of Class A Common Stock
from 75,000,000 to 150,000,000 shares and Class B Common Stock from 50,000,000
to 130,000,000 shares.
In December 1997, the Board of Directors authorized additional repurchases
of up to $100.0 million of our Class A Common Stock. The shares may be purchased
within the subsequent three years on the open market or in privately negotiated
transactions. We have repurchased a total of 897,730 shares under this
authorization through September 27, 1998 at a total cost of approximately $58.1
million. This authorization replaces the March 19, 1996, repurchase program
under which we repurchased 745,000 shares of Class A Common Stock at a cost of
approximately $33.2 million.
In October 1997, we acquired an 80% interest in Homebuyer's Fair, Inc.
which provides internet-based services and information for people who are moving
and corporations that are relocating employees. In September 1998, we increased
our ownership to 89%. We have an option to purchase the remaining 11%, which is
exerciseable on or after December 31, 2000.
In May 1997, we repurchased an aggregate of 1,177,367 shares of Class A
Common Stock from three non-profit organizations at a total cost of $58.6
million.
In February 1997, we acquired 80% of Westech for $34.8 million. Westech
consists of Westech ExpoCorp., which organizes job fairs for the high-tech
industry; High Tech-
18
<PAGE> 20
nology Careers, which publishes High Technology Careers Magazine and Virtual Job
Fair (http://www.vjf.com), an internet-based resume posting and research
service; and JobsAmerica, which organizes job fairs for service industry
positions. Westech had $32.2 million in revenues in 1997. In June 1997, Westech
acquired the assets of Target Career Fairs, a Boston-based company that
organizes job fairs for the high-technology industry in the eastern portion of
the U.S., including the cities of Boston, Raleigh, Orlando, Philadelphia and St.
Louis. Target had 1996 revenues of approximately $3.0 million.
Effective January 18, 1997, we ceased publication of the afternoon
newspaper, The Phoenix Gazette, and realigned the news gathering structure of
our morning newspaper, The Arizona Republic. These changes caused us to record a
one-time pre-tax charge to earnings of approximately $4.3 million in 1997, and
resulted in a reduction in operating expenses of approximately $5.0 million in
1997 and ongoing annual operating expense savings in future years of
approximately $6.4 million. A substantial portion of the savings are derived
from the approximately 85 positions eliminated as a result of these actions.
On January 3, 1997, we acquired the remaining 9.8% of Indianapolis
Newspapers, Inc. ("INI") common stock that we did not already own. This
transaction, which was recorded using purchase accounting, was accomplished by
issuing the minority shareholders an aggregate of 1,892 shares of newly created,
non-voting, INI preferred stock with an aggregate stated value of approximately
$18.9 million in exchange for the shares of INI common stock owned by them. The
preferred stock provides for aggregate annual dividends of approximately $1.3
million on a cumulative basis, is callable in five years by INI, and is
redeemable at any time by the shareholders of INI at the stated value plus
accrued but unpaid dividends. This transaction did not have a material effect on
earnings.
On March 12, 1996, we purchased Alexandria Newspapers, Inc. ("ANI") which
owns the Alexandria Daily Town Talk newspaper of Alexandria, Louisiana and
McCormick Graphics, Inc., a commercial printing subsidiary. The purchase price
was approximately $62.0 million in cash. The acquisition has contributed
positively to both net income and EBITDA.
NINE MONTH PERIOD ENDED SEPTEMBER 27, 1998 COMPARED WITH THE COMPARABLE
1997 PERIOD
RESULTS OF OPERATIONS
Year-to-date diluted earnings per share for 1998 was $2.49, an increase of
15.3% over the corresponding 1997 period. The effects of work force reduction
costs (special charges) negatively impacted earnings in the first nine months of
1997 and, to a lesser extent, the second quarter of 1998. Excluding special
charges, diluted earnings per share would have been $2.50 for the 1998 nine
month period, which represented an increase of 5.5% over comparable 1997
amounts.
Operating income for the first nine months of 1998 was $108.8 million,
which represented an increase of 8.4% over the comparable 1997 period. Excluding
special charges, operating income decreased 0.7% for the nine month period over
the comparable 1997 period.
Net income for the first nine months of 1998 was $64.3 million, up 11.6%
over the prior comparable period. Had we not incurred the work force reduction
costs, net income for the nine months would have been $64.3 million versus $63.1
million for the nine month period in 1997. EBITDA (operating earnings before
depreciation, amortization and special charges) for the comparable periods was
$143.5 million year-to-date, representing an increase of 1.1%, versus comparable
1997 periods.
19
<PAGE> 21
OPERATING REVENUES
Our nine month revenues rose to $555.0 million for an increase of 5.8%,
when compared with the same 1997 period.
Total advertising revenues for the nine month period ended September 27,
1998 were $411.9 million for an increase of 4.1%, over the comparable 1997
period. The increase in advertising revenues for the nine months of 1998 was
primarily due to gains in the classified recruitment category in both major
markets.
Circulation revenues for the year-to-date period increased to $112.4
million, for an increase of 5.5% when compared to 1997. The increase is
primarily due to Phoenix circulation growth, a distribution system change in
Indianapolis which resulted in a revenue increase of $4.3 million, and a home
delivered price increase in Phoenix.
Other revenues for the nine months increased $30.8 million over the first
nine months of 1997 due primarily to an increase in Westech job fair business,
online, direct marketing, and specialty publications.
The following is a summary of major market linage and circulation
statistics for the nine month periods:
<TABLE>
<CAPTION>
39 WEEKS ENDED
------------------------------
SEPTEMBER 28, SEPTEMBER 27, %
(IN THOUSANDS, EXCEPT CIRCULATION) 1997 1998 CHANGE
---------------------------------- ------------- ------------- ------
<S> <C> <C> <C>
Full run linage in six column inches:(1)
Retail....................................... 1,875.20 1,950.50 4.0
National..................................... 333.80 333.40 (0.1)
Classified................................... 2,365.00 2,378.20 0.6
--------- --------- ----
Total........................................ 4,574.00 4,662.10 1.9
========= ========= ====
Full run linage by major markets:
Phoenix(1)................................... 2,075.70 2,133.20 2.8
Indianapolis................................. 2,498.30 2,528.90 1.2
--------- --------- ----
Total........................................ 4,574.00 4,662.10 1.9
========= ========= ====
Net advertising revenue........................ $ 395,790 $ 411,885 4.1
Combined average daily circulation:
Phoenix...................................... 456,183 466,793 2.3
Indianapolis................................. 268,421 270,221 0.7
Sunday circulation:
Phoenix...................................... 579,331 582,596 0.6
Indianapolis................................. 392,955 390,911 (0.5)
</TABLE>
- -------------------------
(1) For comparability, linage statistics for the 39 weeks ended September 28,
1997 exclude linage of The Phoenix Gazette, which ceased publication in
January 1997.
20
<PAGE> 22
OPERATING EXPENSES
Compensation costs, which include fringe benefits, increased 2.5% to $181.8
million for the nine month period. The year-over-year headcount decreased 2.7%
due primarily to the closure of The Phoenix Gazette and the impact of a
conversion from a carrier-based distribution arrangement to an agency-based
distribution work force in Indianapolis. These benefits were offset by increased
employee benefits, commissions and merit increases.
Newsprint and ink expense for 1998 increased 9.4% to $84.1 million for the
nine month period. The increases in newsprint expense were primarily due to
higher newsprint prices during 1998 and a volume increase of 3.4% for the nine
month period over comparable 1997 periods. These volume increases were related
to increased advertising linage and circulation gains. We anticipate that
newsprint expense comparisons may show modest increases during the fourth
quarter of 1998.
Other operating costs rose 13.4% to $145.6 million for the nine month
period. Significant items contributing to these increases in 1998 versus the
same 1997 period included the circulation delivery system changes in
Indianapolis (which increased year-to-date expense by $6.3 million), costs
associated with outside printing of inserts and special publications, new
Phoenix and Indianapolis promotional/marketing programs, increased Arizona
Republic delivery costs, and expenses related to the jobs fair business.
Depreciation and amortization expense for the nine month period was $34.6
million, compared with $32.2 million in 1997. The expense increases were
primarily a result of information technology projects in Phoenix as well as
pagination and remodeling projects in Indianapolis.
We recorded work force reduction costs of approximately $9.4 million for
the nine months ended September 28, 1997. Of this amount, approximately $4.2
million resulted from closure of The Phoenix Gazette where approximately 85
positions were eliminated. The balance of the charges relates to a composing
room work force reduction of 30 individuals in the third quarter and the
conversion of distribution systems in Indianapolis.
NON-OPERATING ITEMS AND EQUITY IN AFFILIATE
Other non-operating income (primarily investment income) increased 6.5% in
the first nine months of 1998 primarily due to an increase in investable cash.
Other non-operating expenses decreased year-to-date due to a reduction in
interest expense from 1997. Equity in Affiliate recorded gains in the nine month
period due to an increase in newsprint selling prices being realized by Ponderay
Newsprint Company.
FISCAL YEARS 1995, 1996 AND 1997
RESULTS OF OPERATIONS
Fiscal 1997 was the fourth consecutive year of record revenues and profits
for us. Basic earnings per share for 1997 were $3.17, up $0.86 from the $2.31
reported in 1996. Basic earnings per share for 1996 increased $0.28 from the
$2.03 earned in 1995. All three years included work force reduction and/or asset
impairment costs ("special charges") that negatively impacted earnings. Basic
earnings per share, adjusted to exclude these costs, would have been $3.40 in
1997, $2.43 in 1996 and $2.11 in 1995. Diluted earnings per share for 1997, 1996
and 1995 were $3.08, $2.28 and $2.01, and excluding the special charges would
have been $3.31, $2.39 and $2.09, respectively. The results for 1995 include an
additional week when compared with the 1997 and 1996 periods.
Operating income for 1995, 1996 and 1997 was $85.9 million, $99.9 million
and $141.0 million, respectively, rising 16.3% in 1996 and by 41.2% in 1997. The
1997 results include the effects of the Westech and McCormick acquisitions,
while 1996
21
<PAGE> 23
includes the acquisition of McCormick for
10 months. All three years include the effects of the special charges. EBITDA
for the three year period (excluding asset impairment and work force reduction
costs) increased each year to $117.7 million, $141.0 million and $193.1 million
for 1995, 1996 and 1997, respectively.
Operating results, exclusive of special charges, acquisitions and the
fifty-third week of 1995, were as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-------------------------- 1995-1996 1996-1997
(IN MILLIONS) 1995 1996 1997 % CHANGE % CHANGE
------------- ------ ------ ------ --------- ---------
<S> <C> <C> <C> <C> <C>
Advertising revenues.............. $439.3 $471.4 $521.0 7.3 10.5
Circulation revenues.............. 127.2 131.0 139.2 3.0 6.3
Other revenues.................... 3.7 3.0 4.5 (18.9) 50.0
------ ------ ------ ----- ----
TOTAL REVENUES.................. 570.2 605.4 664.7 6.2 9.8
Compensation...................... 219.2 223.8 226.8 2.1 1.3
Newsprint and ink................. 107.9 110.1 101.2 2.0 (8.1)
Other operating costs............. 128.0 134.5 162.4 5.1 20.7
Depreciation and amortization..... 28.5 33.4 36.9 17.2 10.5
------ ------ ------ ----- ----
TOTAL EXPENSES.................. 483.6 501.8 527.3 3.8 5.1
------ ------ ------ ----- ----
OPERATING INCOME................ $ 86.6 $103.6 $137.4 19.6 32.6
</TABLE>
Net income was $54.0 million, $61.5 million, and $81.5 million in 1995,
1996, and 1997, respectively, for increases of 14.0% in 1996 and 32.4% in 1997.
If we had not incurred the special charges, net income would have been $56.2
million, $64.7 million and $87.5 million in 1995, 1996 and 1997, respectively.
OPERATING REVENUES
Our operating revenues rose 7.0% in 1996 and 15.4% in 1997. These
comparisons include the effects of the acquisitions and the fifty-third week of
1995. Excluding these items, operating revenues would have increased 6.2% and
9.8%, respectively.
Total advertising revenues were $446.7 million in 1995, $479.5 million in
1996 and $541.3 million in 1997. The gains in 1996 and 1997 of 7.3% and 12.9%,
respectively, were both affected by the acquisitions and the 1995 to 1996
comparison was also impacted by the fifty-third week of 1995. Excluding these
items, comparable increases would have been 7.3% and 10.5%, respectively. The
balance of the advertising revenue changes resulted primarily from increases in
advertising linage and higher advertising rates. Major market linage volumes for
the periods were:
<TABLE>
<CAPTION>
FULL RUN LINAGE IN SIX COLUMN INCHES(1)
----------------------------------------- 1995-1996 1996-1997
(IN THOUSANDS) 1995 1996 1997 % CHANGE % CHANGE
-------------- ----------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
BY ADVERTISING CATEGORY:
Retail....................... 2,708.5 2,507.2 2,679.8 (7.4) 6.9
National..................... 218.2 325.4 460.2 49.1 41.4
Classified................... 2,666.8 2,817.6 3,110.8 5.7 10.4
-------- -------- -------- ---- ----
TOTAL...................... 5,593.5 5,650.2 6,250.8 1.0 10.6
-------- -------- -------- ---- ----
</TABLE>
22
<PAGE> 24
<TABLE>
<CAPTION>
FULL RUN LINAGE IN SIX COLUMN INCHES(1)
----------------------------------------- 1995-1996 1996-1997
(IN THOUSANDS) 1995 1996 1997 % CHANGE % CHANGE
-------------- ----------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
BY MAJOR MARKET:
Phoenix...................... 2,657.0 2,668.6 2,828.9 0.4 6.0
Indianapolis................. 2,936.5 2,981.6 3,421.9 1.5 14.8
-------- -------- -------- ---- ----
TOTAL...................... 5,593.5 5,650.2 6,250.8 1.0 10.6
-------- -------- -------- ---- ----
Net advertising revenues..... $446,693 $479,474 $541,311 7.3 12.9
</TABLE>
- -------------------------
(1) For comparability, linage statistics for 1995, 1996 and 1997 exclude linage
of The Phoenix Gazette which ceased publication in January 1997.
Advertising revenues in 1997 increased primarily due to linage gains. Areas
of particular strength in 1997 included recruitment and national advertising in
both major markets. Advertising rates are adjusted at varying times throughout
the year and in varying amounts based on local market conditions for each type
of advertising category.
Circulation revenues for 1995, 1996 and 1997 were $129.5 million, $134.1
million and $143.2 million, respectively, for increases of 3.6% for the 1996
period and 6.7% for the 1997 period. The increase in 1997 was primarily a result
of a circulation distribution system change in Indianapolis (resulting in a
revenue increase of $10.7 million in 1997) and a September 1996 increase in the
single copy price (from $1.50 to $1.75) and home delivered price (from $1.50 to
$1.80) of the Sunday newspaper, both in Indianapolis. The closure of The Phoenix
Gazette in January 1997 did not have a significant impact on revenues since The
Arizona Republic gains in daily circulation in 1997 were greater than Gazette
losses. The combined average daily and Sunday circulation for Phoenix and
Indianapolis were:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
--------------------------- 1995-1996 1996-1997
(IN MILLIONS) 1995 1996 1997 % CHANGE % CHANGE
------------- ------- ------- ------- --------- ---------
<S> <C> <C> <C> <C> <C>
COMBINED AVERAGE DAILY CIRCULATION:
Phoenix............................ 459,109 455,131 460,184 (0.9) 1.1
Indianapolis....................... 300,990 285,355 271,712 (5.2) (4.8)
SUNDAY AVERAGE CIRCULATION:
Phoenix............................ 581,337 583,162 583,288 0.3 --
Indianapolis....................... 399,539 402,884 391,727 0.8 (2.8)
</TABLE>
Other revenues increased $25.0 million in 1997 versus 1996 due primarily to
Westech's jobs fair business which was acquired in 1997.
OPERATING EXPENSES
Compensation costs, which include payroll and fringe benefits, increased
2.5% to $228.3 million in 1996 and 5.0% to $239.8 million in 1997. Excluding the
acquisitions and the fifty-third week of 1995, compensation costs would have
increased 2.1% in 1996 and 1.3% in 1997. Headcount decreased 2.8% in 1996 but
compensation costs increased due to the change in the discount rates used in the
post retirement and pension calculations and one-time labor costs associated
with the move of personnel in Phoenix to a new office
23
<PAGE> 25
building. Headcount for 1997 compared with 1996 decreased approximately 3.7%,
due primarily to the Indianapolis circulation distribution system change and the
closure of The Phoenix Gazette, offset by increased headcount in the
advertising, marketing and information technology areas.
Newsprint and ink expense increased 2.8% to $113.2 million in 1996 and
decreased 6.8% to $105.5 million in 1997. Excluding the acquisitions and the
fifty-third week in 1995, newsprint expense would have increased 2.0% in 1996
and decreased 8.1% for 1997. The major factor in newsprint expense fluctuations
was decreasing prices throughout 1996 which leveled out in early 1997 and
subsequent newsprint price increases over the last three quarters of 1997.
Newsprint consumption for 1997, when compared with 1996, increased 6.8% due to
higher advertising linage in both major markets and to a new product initiative
targeting the southeast region of the Phoenix metropolitan area.
Other operating costs for 1995, 1996 and 1997 were $129.4 million, $137.9
million and $177.8 million, respectively, representing a 1996 increase of 6.6%
and a 1997 increase of 29.0%. Excluding the effects of the acquisitions, and the
fifty third week of 1995, other operating costs would have increased 5.1% and
20.7%. Items contributing to the 1996 versus 1995 increase included operating
duplicate office facilities, implementation of a new client server computer
system, additional circulation costs and the opening of new distribution centers
in Phoenix. Significant items contributing to the 1997 increase included the
change in the circulation delivery system in Indianapolis (which increased 1997
expense by $11.0 million), costs associated with a new Phoenix
promotional/marketing program, higher Arizona Republic delivery costs due to
increased circulation, and computer system design enhancements.
Depreciation and amortization expense was $28.5 million, $35.5 million and
$42.0 million for 1995, 1996 and 1997, respectively. Excluding the acquisitions,
1996 and 1997 depreciation and amortization expense would have been $33.4
million and $36.9 million, for increases of 17.2% and 10.5%. The 1997 increase
was primarily due to a new office building and client server computer system in
Phoenix and new distribution centers and inserting equipment at both locations
and the amortization of goodwill associated with the acquisitions.
During 1996, we recognized asset impairment costs of $2.5 million net of
tax for a Phoenix office building held for sale and a charge for the premature
retirement of a Phoenix conveyor system. These losses were recorded using the
provisions of SFAS No. 121, "Accounting for the lmpairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed of," which we adopted during 1996.
We recorded work force reduction costs in 1997 of $10.0 million.
Approximately $4.2 million resulted from the closure of The Phoenix Gazette,
where approximately 85 positions were eliminated. The balance of the charges
relates to composing room and transportation work force reductions of 40
individuals and the conversion from the carrier-based work force to an
agent-based circulation arrangement, both in Indianapolis.
NON-OPERATING ITEMS
Other non-operating income (primarily investment income), was $9.5 million,
$5.5 million and $4.3 million for 1995, 1996 and 1997, respectively. The
decreases from year to year reflect the reduction in investable cash resulting
from the acquisitions and the repurchases of common stock. Other non-operating
expenses increased due to interest expense on short-term borrowings used for the
repurchase of common stock.
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<PAGE> 26
Income tax expense for 1995, 1996 and 1997 was $38.0 million, $42.4 million
and $58.8 million, respectively, reflecting effective tax rates of 40.5%, 40.8%
and 41.1%, respectively. The increase in the effective tax rates was the result
of non-tax deductible goodwill associated with the acquisitions offset, in part,
by tax benefits received from filing a consolidated state income tax return in
Arizona.
EQUITY IN AFFILIATE
Our investment in Ponderay is accounted for using the equity method, which
reflects our share of Ponderay's net income or loss and related income tax
expense or benefit. Ponderay's operating results include interest expense on its
long-term debt. Equity income (loss) from Affiliate, net of tax, was $(0.6)
million, $1.7 million and $(0.3) million in 1995, 1996 and 1997, respectively.
These changes were mostly attributable to fluctuations in newsprint prices
realized by Ponderay over the respective periods. Based upon current and
anticipated 1998 newsprint pricing, Ponderay is expected to report income in
1998. We do not anticipate making additional cash investments in Ponderay during
1998.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities is our primary source of
liquidity. Net cash provided by operating activities of $62.3 million, $122.0
million and $153.8 million in 1995, 1996 and 1997, and $112.2 million and $113.3
million for the first nine months of 1997 and 1998, respectively. Net cash
provided by operating activities, excluding the effects of net proceeds from (or
purchases of) trading securities for 1995, 1996 and 1997 were $79.9 million,
$81.3 million and $142.2 million, respectively, and $110.0 million and $115.0
million for the nine months ended September 28, 1997 and September 27, 1998,
respectively. Changes between all periods were primarily attributable to
increases in earnings and/or changes in working capital. The principal uses of
cash in the first nine months of 1998 were the repurchase of Class A Common
Stock, capital expenditures, the payment of dividends, and repayment of a $10.0
million short-term bank line of credit. The principal uses of cash in 1997 were
the repurchases of Class A Common Stock, acquisitions, capital expenditures and
the payment of dividends. As of September 27, 1998, our available cash and
investments totaled $44.9 million, a decrease of $3.6 million from the balance
at the end of 1997. Working capital (exclusive of cash) as of September 27, 1998
was $30.3 million, down $7.5 million from $37.8 million at December 28, 1997.
Total capital expenditures for 1996 were $46.5 million compared with $25.1
million for the comparable 1997 period. Capital expenditures for the first nine
months of 1998 were $30.9 million compared to $18.1 million for the comparable
1997 period. We plan approximately $34.0 million of capital expenditures in
1998. As of November 5, 1998, there were no significant formal commitments
related to future capital expenditures.
As of September 27, 1998, we had two unsecured, uncommitted credit
facilities which can provide up to $80 million in short-term financing for
general corporate purposes. At September 27, 1998, we had $5.0 million
outstanding under such facilities.
On October 23, 1998, pursuant to a September 21, 1998 agreement, we
purchased 2,500,000 shares of Class A Common Stock from the Nina Mason-Pulliam
Charitable Trust at $60 per share (plus interest from September 16, 1998) for a
total consideration of $150.8 million. Moreover, we have an exclusive one year
option to purchase up to an additional 1,500,000 shares of Class A Common Stock
from the Charitable Trust should the stock reach an average trading price of $67
for five consecutive days. The 2,500,000 share repurchase was financed with a
25
<PAGE> 27
short-term $150 million bridge loan from First Chicago Capital Markets, Inc. (a
subsidiary of Bank One Corporation) ("First Chicago"). This bridge loan is
expected to be refinanced with a $300 million revolving credit facility,
arranged by First Chicago and syndicated to a group of banks, which will also
allow us to exercise the option. This credit facility is expected to close prior
to November 15, 1998.
In December 1997, the Board of Directors authorized additional repurchases
of up to $100.0 million of the Class A Common Stock. The shares may be purchased
within the subsequent three years on the open market or in privately negotiated
transactions. This authorization replaces the March 19, 1996, repurchase program
under which 745,000 shares of Class A Common Stock had been repurchased in 1997
and 1996 at a total cost of $33.2 million. During the nine months ended
September 27, 1998 we repurchased 897,730 shares at a total cost of $58.1
million.
In May 1997, we repurchased 1,177,367 shares of Class A Common Stock (not
related to the March 1996 authorized repurchase) from three nonprofit
beneficiaries of the estate of Enid Goodrich. The aggregate $58.6 million
transaction utilized existing cash and investments for part of the repurchase
with $39.4 million being obtained from a $60 million uncommitted, unsecured
short-term bank line of credit that was obtained May 8, 1997. As of December 28,
1997, $10.0 million remained outstanding under this short-term bank line of
credit which was repaid in the first quarter of 1998.
In February 1997, we acquired Westech for approximately $34.8 million.
We guarantee debt related to Ponderay which is discussed in Note 11 to the
Consolidated Financial Statements which are incorporated by reference in this
Prospectus.
Dividends of $0.80 per share on the Class A Common Stock and $0.08 on the
Class B Common Stock were declared during 1997. Total Class A and B dividend
payments of $15.7 million, $18.6 million and $20.1 million were made in 1995,
1996 and 1997. Dividends of $0.19, $0.21, and $0.24 per share on the Class A
Common Stock and $0.019, $0.021, and $0.024 per share on the Class B Common
Stock were declared during the first, second and third quarters of 1998. The
first quarter dividends were paid in April 1998, second quarter dividends in
July 1998, and third quarter dividends in October 1998.
We have demonstrated a consistent ability to generate net cash flow from
operations. Management believes that existing cash and investments, net cash
flows from operations and currently available bank credit resources are
sufficient to enable us to maintain our current level of operations. Financing
for future investing opportunities is expected to come from a combination of
existing cash, new debt facilities and/or the use of equity.
INFLATION AND CHANGING PRICES
Over the past several years, the impact of inflation on our operations has
become less significant because of lower overall inflation rates. However, we
and the newspaper industry as a whole have experienced wide fluctuations in
newsprint pricing. Variations in newsprint pricing can have a significant impact
on earnings for any given year. We have attempted to offset newsprint price
increases through the conservation of newsprint and by increasing advertising
and circulation rates.
NEW ACCOUNTING STANDARDS
In 1996, we adopted SFAS No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed of." The application of
this standard resulted in a 1996 charge to earnings of $2.5 million, net of tax.
26
<PAGE> 28
We adopted SFAS No.123, "Accounting for Stock Based Compensation" in 1996.
The statement prescribes accounting and reporting standards for all stock-based
compensation plans. SFAS No. 123 allows companies to continue to use existing
methods for recognizing the expense of these plans and provide pro forma
earnings per share and other disclosures in the financial statements using the
fair value method prescribed in the statement. We have elected the pro forma
disclosure provisions of this statement.
In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings Per Share," which established new standards in reporting earnings
per share. This standard is effective for reporting periods ending after
December 15, 1997, including interim periods, and therefore has been adopted by
us. Earnings per share amounts for all prior periods have been restated.
YEAR 2000 COMPLIANCE
STATE OF READINESS
Our Year 2000 project is on schedule to meet its objectives. We have
developed a comprehensive program to identify, evaluate, test, upgrade or
replace each of our computer and non-computer based systems in connection with
Year 2000 readiness. We have devoted significant resources to the program
including the development of a Year 2000 project team which reports to senior
management on a regular basis and the construction of a test environment
dedicated to the Year 2000 testing process. The Chief Information Officer
reports progress at every regularly scheduled Board of Directors meeting.
We have been actively implementing new systems and technology since 1995
for reasons unrelated to Year 2000, and these actions have resulted in a number
of our major information technology systems becoming Year 2000 compliant.
The discovery phase of our program has been completed and we have performed
several review audits to ensure that all susceptible systems have been
identified, including client server, desktop and all systems with embedded
computer chips. All desktop systems, application software and servers have been
updated to a compliant level and all database modules are in the process of
being upgraded. The embedded computer chip systems are in the remediation and
testing phase with a projected completion date of year-end 1998. The testing
phase of the project is also proceeding and we anticipate that testing will have
been completed or initiated for all significant systems by the end of 1998.
Letters of compliance have been requested from each of our vendors and,
wherever possible, we work with our vendors in determining an appropriate
testing and compliance process. This process is scheduled for completion by
year-end 1998. During early 1999, we anticipate using a third party auditor to
review the project. In addition, certain employees have attended a number of
Year 2000 training programs and outside consultants have been hired where
necessary.
COSTS
Total costs associated with our Year 2000 project are estimated to be
approximately $8.5 million, of which approximately $6.5 million will be incurred
through fiscal 1998 with the remainder incurred during 1999.
RISKS
Despite the efforts described above, we could potentially experience a
disruption in our operations as a result of potential non-compliance of certain
vendors, financial institutions, governmental agencies or other third-parties or
external systems. This disruption could potentially affect various aspects of
our business operations including the timeliness and content of
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<PAGE> 29
certain newspapers or online products. At this time, we are unable to determine
whether the consequences of Year 2000 failures would have a material impact on
our results of operations, liquidity or financial condition.
CONTINGENCY PLANS
In an effort to minimize any disruption, we are in the process of creating
a comprehensive contingency plan to address potential Year 2000 scenarios. Such
plans include maintaining an inventory of critical supplies such as newsprint,
ink and other consumables for at least a 30-45 day production cycle as well as
creating a smaller newspaper product designed to maximize advertising content.
FORWARD-LOOKING STATEMENTS
This document contains material that is forward-looking in nature. From
time to time, we may provide forward-looking statements relating to such matters
as anticipated financial performance, business prospects and similar matters.
These forward-looking statements may be identified by the use of words such as
"anticipate," "believe," or "expect" or derivations thereof. All forward-looking
statements are based upon information available to us at the time they are made
and we assume no obligation to update any forward-looking statements. We note
that a variety of factors could cause our actual results to differ materially
from the expectations expressed in the forward-looking statements. The risks and
uncertainties that may affect the operations, performance and results of our
business include, but are not limited to the factors set forth under "Risk
Factors."
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<PAGE> 30
BUSINESS
THE COMPANY
We publish the only major daily newspapers in the greater Phoenix
metropolitan area and central Indiana. Our flagship newspapers are The Arizona
Republic in Phoenix and The Indianapolis Star in Indianapolis. These newspapers
have been published for over a century. The average daily circulation levels
were 460,406 for The Arizona Republic and 228,421 for The Indianapolis Star for
the fiscal year ended December 28, 1997. According to circulation statistics
compiled by the Newspaper Association of America, The Arizona Republic has been
one of the fastest growing major daily morning newspapers in the country over
the last three years. Circulation penetration at December 31, 1997 for The
Arizona Republic was approximately 41% daily and 52% Sunday and for the
Indianapolis newspapers was approximately 42% daily and 60% Sunday, according to
the Audit Bureau of Circulation ("ABC"), ranking them among the highest in the
industry. Our control of the only major daily newspapers in each of our key
markets is of critical importance in attracting and maintaining advertising,
which is our principal source of revenue. Moreover, we generate in excess of 80%
of our circulation from subscriptions, thereby adding relative stability to our
revenue base.
We have benefited from the continuing economic growth and development of
our key markets. With 2.9 million residents in the greater Phoenix metropolitan
area, Phoenix is the nation's seventh largest city. In the greater Phoenix
metropolitan area, growth across several diverse economic sectors, from
manufacturing and construction to trade and services, has outpaced the national
average over the past three years. Phoenix led the nation in job growth for
1997, and its 1997 average annual unemployment rate of 2.9% was below the
national unemployment rate of 4.9%. Its manufacturing base, a substantial
portion of which comes from high technology, is projected by the Greater Phoenix
Economic Council to grow faster than the national rate. The greater Indianapolis
metropolitan area, with 1.5 million residents, has also experienced solid
economic and population growth, and its 1997 average annual unemployment rate of
2.8% was well below the national average. Its economy is anchored by a large and
diverse industrial base, including such major corporations as Eli Lilly and
Company, Conseco, Inc., and Dow AgroSciences. Large downtown development
projects such as the Convention Center, the RCA Dome and Circle Centre, a large
retail shopping center, have also bolstered the regional economy.
We also own and operate several smaller newspapers in central Indiana and
central Louisiana. These include The Indianapolis News, a daily afternoon
newspaper (with an average daily circulation of 41,165), the Alexandria Daily
Town Talk, serving Rapides Parish, Louisiana and its outlying areas (average
circulation of 38,155 daily and 43,823 Sunday), The Star Press (mornings and
Sundays) in Muncie, Indiana (average circulation of 36,558 daily and 40,690
Sunday), The Vincennes Sun-Commercial, a daily newspaper in Vincennes, Indiana
(average circulation of 13,281 daily and 15,617 Sunday), as well as The Daily
Ledger, a daily newspaper (with an average daily circulation of 11,273) and
fourteen controlled circulation (home-delivered and free to readers) newspapers
(with an average weekly circulation of 110,485) serving the northern suburbs of
Indianapolis, the fastest growing area of metropolitan Indianapolis.
We own an 80% interest in the Santa Clara, California-based Westech
companies which consist of Westech ExpoCorp., an organizer of job fairs for the
high tech industry; High Technology Careers, publisher of High Technology
Careers Magazine and Virtual Job Fair
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<PAGE> 31
(http://www.vjf.com), an internet-based resume posting and research service; and
JobsAmerica, an organizer of job fairs for service industry positions. We also
own an 89% interest in Homebuyer's Fair, Inc., which provides internet services
and information for people who are moving and corporations that are relocating
their employees, a commercial printer and a minority interest in a newsprint
mill in the State of Washington.
We have consistently grown our revenues, EBITDA (as defined in "Selected
Consolidated Financial Data") and net income over the last five years. For the
five fiscal years ended December 28, 1997, we recorded compound annual growth in
revenues and EBITDA of 10.6% and 20.2%. For the fiscal year ended December 28,
1997, we generated revenues of $716.1 million, EBITDA of $193.1 million and net
income of $81.5 million. In 1997, we derived 76% of our revenue from
advertising, 20% from circulation, and 4% from other sources. Our EBITDA as a
percentage of revenues ("EBITDA margin") was 27% for this period, representing
the fifth year of improving EBITDA margin out of the last six years. Key drivers
of our financial success include the expansion of advertising and circulation
revenue in our existing markets, the implementation of certain cost-cutting
measures, the repurchase of our common stock, and the development of product
line extensions to meet the information needs of the markets we serve.
We seek to maintain our position as both the primary source of news and
information for our readers as well as the most effective way for advertisers to
reach their target markets. To this end, we manage our newspapers with a
commitment to the highest standards of product quality and journalistic
excellence. For example, The Arizona Republic was the first major daily
newspaper in the country to have its pages fully composed by computer
generation, enabling us to deliver higher quality products. Since 1990, our
newspapers have won Pulitzer prizes for investigative reporting and political
cartooning, as well as numerous other awards from industry organizations such as
the American Association of Sunday and Feature Editors, the Society for
Newspaper Design and the National Press Photographers' Association, among
others.
Our financial objective is to continue to build value for our shareholders
by focusing on the strengths inherent in our current markets while selectively
pursuing acquisitions. The principal elements of our strategy are as follows:
- ENHANCE ADVERTISING AND CIRCULATION REVENUE BASE. Controlling the only
major daily newspapers in our key markets affords us a competitive
advantage in attracting and maintaining advertising, especially compared
to other advertising vehicles such as radio and television broadcasting
stations, each of which individually reach a significantly smaller
audience. We continue to expand our advertising revenue base by
developing long-term relationships with key advertising accounts and
promoting cross-selling opportunities. We also recently reorganized the
sales and marketing departments at both The Arizona Republic and The
Indianapolis Star, incorporating more sales-based incentives into the
compensation structure, which we believe will produce greater advertising
revenue.
Our daily home-delivered subscription base represents more than 85% of
total circulation, exceeding the industry average of approximately 74%.
This large subscription base adds to the stability of our revenues, and
we continue to emphasize and improve the quality of daily home delivery.
- CONTINUE TO ACHIEVE COST EFFICIENCIES. We have recently identified
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<PAGE> 32
several areas for more efficient cost management and have begun to pursue these
opportunities. Recent initiatives include the January 1997 closing of The
Phoenix Gazette, the afternoon newspaper in Phoenix, the consolidation of The
Muncie Star and the Muncie Evening Press into The Star Press in May
1996, the implementation of client server computer systems in Phoenix
and the consolidation of the editorial function in Indianapolis. We
continue to pursue opportunities like these, with a particular focus on
increasing production automation, improving distribution and enhancing
workforce productivity.
- SELECTIVELY PURSUE BRAND-ENHANCING ACQUISITIONS AND NEW PRODUCT
DEVELOPMENTS. We pursue acquisitions where we believe we can add or
derive significant value from our operating expertise or line extension
opportunities. Recent acquisitions include the purchase of the Alexandria
Daily Town Talk newspaper in March 1996, the purchase of Westech in
February 1997, and the purchase of Homebuyer's Fair in October 1997.
Additional product developments include the development of web sites for
our major newspapers.
THE ARIZONA REPUBLIC
In Phoenix, we currently publish The Arizona Republic, one of the fastest
growing major daily morning newspapers in the United States, together with the
Arizona Business Gazette, a weekly newspaper. We, together with a group of other
investors, originally acquired a 30% interest in The Arizona Republic and The
Phoenix Gazette in 1946. We have owned 100% of these newspapers since 1977. On
January 18, 1997, we stopped publishing The Phoenix Gazette. We were able to
convert approximately 85% of the subscribers of The Phoenix Gazette to The
Arizona Republic.
CIRCULATION
Approximately 87% of the daily and 72% of the Sunday circulation of The
Arizona Republic was home delivered as of December 28, 1997, with the remainder
being single copy sales. The circulation level of The Arizona Republic is
seasonal due to the large number of part-year residents in the Phoenix area.
Typically, circulation for The Arizona Republic achieves its highest levels in
February and March and decreases during the late spring and summer months.
During 1997, the seasonal variation was approximately 66,300 daily and 87,500
Sunday. The following table shows the average paid daily circulation for The
Arizona Republic and The Phoenix Gazette for the periods shown. The figures for
fiscal years ended 1995, 1996 and 1997 are based upon reports issued by the ABC,
an independent agency which audits the circulation of daily and Sunday
newspapers, and include circulation outside the Phoenix metropolitan statistical
area ("MSA"). The figures for the 39 weeks ended September 28 and September 27,
1997 and 1998 are based upon our records. Net circulation revenue for the
periods shown is based upon our records.
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<PAGE> 33
<TABLE>
<CAPTION>
FISCAL YEAR ENDED 39 WEEKS ENDED
------------------------------------------ ---------------------
DECEMBER 31, DECEMBER 29, DECEMBER 28, SEPT. 28, SEPT. 27,
1995(1)(2) 1996(1) 1997(3) 1997(3) 1998
------------ ------------ ------------ --------- ---------
<S> <C> <C> <C> <C> <C>
The Arizona Republic
(Sunday)................... 581,337 583,162 583,068 579,331 582,596
The Arizona Republic
(Daily).................... 387,986 406,725 460,406 456,183 466,793
The Phoenix Gazette
(Daily).................... 71,123 48,406 -- -- --
Net circulation revenue (in
thousands)................. $84,212 $87,790 $86,800 $65,112 $67,209
</TABLE>
- -------------------------
(1) In 1995, The Arizona Republic and The Phoenix Gazette consolidated their
newsroom staffs. Due to this combination, the morning and afternoon content
of the newspapers was similar, which caused many duplicate readers to cancel
their subscription to The Phoenix Gazette.
(2) 53-week year.
(3) Combined daily circulation includes The Arizona Republic and The Phoenix
Gazette, and net circulation revenue includes The Phoenix Gazette, through
January 18, 1997, the last day of its publication.
The Arizona Business Gazette contains business news and legal notices
relating to the Phoenix metropolitan area. The average paid circulation of the
Arizona Business Gazette was 10,351, 10,491 and 10,561 for 1995, 1996 and 1997,
respectively.
The home-delivered pricing structure for seven day subscriptions is based
on length of subscription. The home-delivered price for The Arizona
Republic(seven days) in the Phoenix MSA, ranges from $3.25 per week for a
fifty-two week subscription to $3.80 per week for an eight-week subscription.
There is also a four-week direct bank debit option of $3.25 per week. The home-
delivered price for The Arizona Republic (six days) is $2.50 per week for all
subscription terms. A weekend package comprising the Sunday paper and the Friday
and Saturday edition is offered at $3.00 per week. The single copy price of the
morning paper is $0.50 and $2.00 for the Sunday paper.
ADVERTISING
The newspapers generate revenue from two primary types of advertisements,
"run-of-paper," which are printed in the body of the newspaper, and
"preprinted," which are furnished by the advertiser and inserted into the
newspaper. We derive the majority of our advertising revenue for our Arizona
newspapers from run-of-paper advertisements. However, like other major
newspapers, The Arizona Republic has experienced an increase in advertisers' use
of preprinted advertisements in recent years. Because preprinted advertisements
are furnished by the advertisers and can be distributed by alternate means,
revenues and profits from preprinted advertisements are generally lower than
those from run-of-paper advertisements. To encourage use of run-of-paper
advertisements, we structure our advertising rates to provide more favorable
rates to high volume and frequent run-of-paper advertisers.
We also structure our advertising format to accommodate the numerous
communities that comprise the Phoenix
32
<PAGE> 34
metropolitan area. The Arizona Republic
publishes "Community" sections that are inserted in up to twelve zoned editions
on certain days of the week. Zoned editions, which include news stories and
advertisements targeted to specific communities or geographic areas, provide an
important means of competing with news coverage of local newspapers and thereby
promote circulation. Other part-run sections are also provided to accommodate
the needs of advertisers for more targeted distribution.
The combined run-of-paper advertising linage for our Arizona newspapers for
the periods shown and the combined advertising revenues of the newspapers for
such periods are set forth in the following table:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED 39 WEEKS ENDED
------------------------------------------ ---------------------
DECEMBER 31, DECEMBER 29, DECEMBER 28, SEPT. 28, SEPT. 27,
1995(1) 1996 1997 1997 1998
------------ ------------ ------------ --------- ---------
<S> <C> <C> <C> <C> <C>
Advertising linage --
run-of-paper (in
thousands of six column
inches):
Full-run................. 2,657 2,669 2,829 2,076 2,133
Part-run................. 1,150 1,091 1,182 821 953
Weekly................... 245 243 242 193 147
Net advertising revenue.... $248,468 $302,294 $333,583 $243,854 $257,145
</TABLE>
- -------------------------
(1) 53-week year
DISTRIBUTION
We distribute The Arizona Republic primarily by home delivery through a
network of independent contractors. We have implemented a centralized billing
system that removes the responsibility for billing and collection from the
independent contractors. Newspapers are distributed to the independent
contractor network by an outside company which has been under contract for over
forty years.
PRODUCTION
The Arizona Republic's editing and composing functions are performed
primarily at its facility in downtown Phoenix. The Arizona Republic was the
first major daily newspaper in the country to have its pages fully composed by
computer generation, enabling us to produce a higher quality product. Electronic
pagination allows entire pages of the newspaper to be formatted at a computer
terminal. Composed pages are electronically transmitted from the newspaper's
downtown facility to its two satellite production facilities.
The Arizona Republic's two satellite production facilities are located in
Deer Valley, which is north of downtown Phoenix, and in Mesa, Arizona. The Deer
Valley facility includes four offset presses and related production equipment,
as well as circulation, advertising and editorial-offices. This facility began
production during the first quarter of 1992 with full operation commencing in
the third quarter of 1992. The Mesa facility began operation in 1982 and has
been subsequently expanded and upgraded. It has three offset presses and related
production equipment. We own an additional undeveloped site in western Maricopa
County for a possible satellite production facility to meet future growth.
INDIANAPOLIS NEWSPAPERS, INC.
In Indianapolis, our primary newspapers are The Indianapolis Star (mornings
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<PAGE> 35
and Sunday) and The Indianapolis News (evenings). We formed Indianapolis
Newspapers, Inc. ("INI") in 1948, through which we currently publish The
Indianapolis Star and The Indianapolis News. At the end of 1996, we owned 90.2%
of the voting equity of INI and had the right to elect INI's Board of Directors.
On January 3, 1997, we acquired the remaining voting equity of INI through the
issuance of nonvoting preferred stock of INI with an aggregate liquidation value
of $18,920,000, entitling the holders to aggregate annual dividends of
$1,324,000. The preferred stock is callable in five years by INI and is
redeemable at any time by the holders at the stated value plus any accrued but
unpaid dividends.
CIRCULATION
Approximately 81% of the daily and 80% of the Sunday circulation of The
Indianapolis Star and 80% of the daily circulation of The Indianapolis News was
home-delivered as of December 28, 1997, with the remainder being single copy
sales.
The following table shows the average paid daily circulation for The
Indianapolis Star and The Indianapolis News for the last three fiscal years. The
figures for 1995 are based upon reports issued by the ABC and include
circulation outside the Indianapolis metropolitan statistical area. Net
circulation revenue is based upon our records.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED 39 WEEKS ENDED
------------------------------------------ ---------------------
DECEMBER 31, DECEMBER 29, DECEMBER 28, SEPT. 28, SEPT. 27,
1995(1) 1996 1997 1997 1998
------------ ------------ ------------ --------- ---------
<S> <C> <C> <C> <C> <C>
The Indianapolis Star
(Sunday)................... 399,539 402,884 391,820 392,955 390,911
The Indianapolis Star
(Daily).................... 227,849 230,932 228,421 226,289 233,882
The Indianapolis News
(Daily).................... 73,141 54,423 41,165 42,132 36,339
Net circulation revenue (In
thousands)................. $39,507 $37,205 $46,444 $34,018 $37,499
</TABLE>
- -------------------------
(1) 53-week year
The home-delivered price for The Indianapolis Star (seven days) in the
Indianapolis metropolitan statistical area is $3.60 per week. The home-delivered
price for The Indianapolis News (six days) is $1.80 per week. The single copy
price is $0.50 for each daily paper. The home-delivered price of the Sunday
newspaper is $1.80, and the single copy price is $1.75.
ADVERTISING
As is the case for the Arizona newspapers, our Indianapolis newspapers
derive the majority of their advertising revenues from run-of-paper
advertisements. The Indianapolis Star and The Indianapolis News have also
experienced an increase in advertisers' use of preprinted advertisements in
recent years. To encourage use of run-of-paper advertisements, we structure our
advertising rates to provide more favorable rates to high volume and frequent
run-of-paper advertisers. The combined run-of-paper advertising linage for The
Indianapolis Star and The Indianapolis News for the past three fiscal years and
the combined advertising revenue of the news-
34
<PAGE> 36
papers for such periods are set forth in the following table:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED 39 WEEKS ENDED
------------------------------------------ ---------------------
DECEMBER 31, DECEMBER 29, DECEMBER 28, SEPT. 28, SEPT. 27,
1995(1) 1996 1997 1997 1998
------------ ------------ ------------ --------- ---------
<S> <C> <C> <C> <C> <C>
Advertising linage -- run-
of-paper
(in thousands of
six column inches):
Full-run................... 2,937 2,982 3,422 2,498 2,529
Net advertising revenue.... $145,267 $149,658 $167,212 $122,221 $125,459
</TABLE>
- -------------------------
(1) 53-week year
DISTRIBUTION
Through 1996, we distributed The Indianapolis Star and The Indianapolis
News primarily by home delivery through a network of approximately 3,200
carriers. Carriers are independent contractors who purchase newspapers from us
and resell them at a markup to their customers.
In 1997, our Indianapolis newspapers converted from a carrier-based
delivery system to an agency-based distribution system for the Indianapolis
metropolitan area and its eight surrounding counties. We replaced approximately
1,350 carriers with 79 independent delivery agents, who are paid on a commission
basis. We believe the conversion has allowed for uniform pricing, resulted in
higher levels of customer satisfaction, and has helped facilitate the creation
of customer data bases.
PRODUCTION
The Indianapolis Star and The Indianapolis News merged their editorial news
staffs in 1995 and share production and distribution facilities. All editorial
and production functions are handled from our facility in downtown Indianapolis,
which is equipped with six offset presses and related production and
distribution equipment.
The Indianapolis Star and The Indianapolis News have recently implemented
several formatting changes to promote greater standardization and customization.
The weather, editorial and obituary sections are now anchored daily on the same
pages, and there are weekday stand-alone classified and automotive sections, as
well as a four-page daily "Metro" section with local coverage for each of the
major metropolitan distribution areas.
SMALLER NEWSPAPERS
In March 1996, we purchased 100% of the outstanding common stock of
McCormick & Company, Inc., now Alexandria Newspapers, Inc., the parent company
of the Alexandria Daily Town Talk newspaper and McCormick Graphics, Inc., a
commercial printing subsidiary. The Alexandria Daily Town Talk serves Rapides
Parish in Central Louisiana and the outlying areas within a 50 mile radius, with
a population base of approximately 282,000. For the fiscal year ended December
28, 1997, the average paid circulation of the Alexandria Daily Town Talk was
38,155 daily and 43,823 Sunday.
We also publish The Star Press (mornings and Sundays) in Muncie, Indiana --
we formerly published two newspapers in the Muncie market, The Muncie Star and
the Muncie Evening Press, but merged the two newspapers into The Star Press in
May 1996 in order to improve product quality and cost efficiency. The Star Press
35
<PAGE> 37
serves Muncie and east central Indiana, which has a population base of just over
370,000. For the fiscal year ended December 28, 1997, the average paid
circulation of The Star Press was 36,558 daily and 40,690 Sunday.
We publish The Daily Ledger (which for 1997 had an average daily
circulation of 11,273) and fourteen controlled circulation newspapers (which for
1997 had an average weekly circulation of 110,485) that serve the northern
suburbs of Indianapolis, the fastest growing area of metropolitan Indianapolis.
We publish the Vincennes Sun-Commercial, a daily newspaper that serves the
city of Vincennes, Indiana, with a population of approximately 24,700. For the
fiscal year ended December 28, 1997, the average paid circulation of the
Vincennes Sun-Commercial was 13,281 (five days) and 15,617 Sunday.
The revenues earned by these smaller publications represented approximately
4%, 7% and 6% in 1995, 1996 and 1997, respectively, of our total revenues.
WESTECH
In February 1997, we acquired an 80% interest in the Santa Clara,
California-based Westech companies. Westech consists of Westech ExpoCorp, which
organizes job fairs for the high tech industry; High Technology Careers, which
publishes High Technology Careers Magazine and Virtual Job Fair
(http://www.vjf.com), an internet-based resume posting and research service; and
JobsAmerica, which organizes job fairs for service industry positions.
Westech has enjoyed rapid growth in recent years and had approximately
$32.2 million of revenue in 1997. Operating margins in this business have
historically been higher than those associated with the newspaper publishing
industry.
We believe that the acquisition of Westech is a strategic extension of our
business of matching employers and employees. A substantial portion of our
revenues are derived from recruitment advertising and, historically, recruitment
advertising has been the most important means for employers to find qualified
employees and for job seekers to find employment. We believe that recruitment
classified advertising will continue to be an important avenue for job placement
in the future, that an increasing number of placements will be made using the
internet and job fairs and that the acquisition of Westech should ensure that we
are well positioned to provide career services information to employers and
employees through a variety of cost-effective channels.
Westech operates predominantly in the western half of the United States.
RAW MATERIALS -- PONDERAY NEWSPRINT COMPANY
We consumed approximately 179,400 metric tons of newsprint in fiscal year
1997 and expect that consumption will increase in 1998 due primarily to linage
gains. We currently obtain newsprint from a number of suppliers, both foreign
and domestic, under long-term contracts, standard in the industry, which offer
dependable sources of newsprint at current market rates.
To provide us with an additional source of newsprint for a portion of our
needs, we joined with four other newspaper publishing companies and a major
newsprint manufacturer in forming a general partnership, Ponderay Newsprint
Company ("Ponderay"), to own and operate a newsprint mill in Usk, Washington.
The mill began operations in December 1989. We are required to purchase on an
annual basis the lesser of 13.5% of Ponderay's newsprint production or 28,400
metric tons on a "take if tendered" basis until the related debt recorded by
Ponderay is repaid.
36
<PAGE> 38
COMPETITION
We face competition for advertising revenue from television, radio the
internet and direct mail programs, as well as competition for advertising and
circulation from suburban neighborhood and national newspapers and other
publications. Competition for advertising is based upon circulation levels,
readership demographics, advertising rates and advertiser results. Competition
for circulation is generally based upon the content, journalistic quality and
price of the newspaper.
In Phoenix, several suburban newspapers owned by major media corporations
operate in cities that are part of the Phoenix metropolitan area and compete
with The Arizona Republic for advertising and circulation. The most significant
of these competitors is Thomson Corporation, which owns five daily newspapers in
the East Valley region. These newspapers had a combined paid daily circulation
of 93,407, compared to 186,003 for The Arizona Republic in this region in 1997,
the period for which the latest ABC audit figures are available. The Arizona
Republic recently introduced four new "Community" sections in order to maintain
its position as the leading source of news and information in this region. In
Indianapolis, our newspapers do not experience significant direct competition
from suburban newspapers.
EMPLOYEES -- LABOR
As of September 27, 1998, we had approximately 5,185 employees (including
1,452 part-time employees), 40% of whom were covered by a total of 23 collective
bargaining agreements. Given the large number of collective bargaining
agreements, we are frequently involved in labor negotiations. As of November 5,
1998, we were involved in ongoing negotiations with respect to five different
bargaining agreements, involving approximately 350 employees engaged in various
trades at our facilities. No assurance can be given as to the outcome of these
negotiations or as to their impact on us. We have never had a significant strike
or work stoppage at our operations and we consider our labor relationships with
our employees to be satisfactory.
LEGAL PROCEEDINGS
We become involved from time to time in various claims and lawsuits in the
ordinary course of our business, including libel and invasion of privacy
actions, and we are involved from time to time in various governmental and
administrative proceedings. Our management believes that the outcome of any
pending claims or proceedings will not have a significant adverse effect on us.
37
<PAGE> 39
MANAGEMENT
Our executive officers and directors are:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY
---- --- ---------------------
<S> <C> <C>
Frank E. Russell........................ 78 Chairman of the Board and Assistant
Secretary
Louis A. Weil, III...................... 58 President and Chief Executive Officer;
Chairman of the Board of Phoenix
Newspapers, Inc.; Director
Thomas K. MacGillivray.................. 38 Vice President and Chief Financial
Officer
Eric S. Tooker.......................... 37 Vice President, General Counsel and
Secretary
Eugene S. Pulliam....................... 85 Publisher of The Indianapolis Star and
The Indianapolis News; Director
Dale A. Duncan.......................... 44 President and General Manager of
Indianapolis Newspapers, Inc.
John F. Oppedahl........................ 54 Publisher and Chief Executive Officer of
Phoenix Newspapers, Inc.
William A. Franke....................... 62 Director
L. Ben Lytle............................ 52 Director
Dan Quayle.............................. 52 Director
Richard Snell........................... 68 Director
</TABLE>
FRANK E. RUSSELL has been Chairman of the Company's Board of Directors and
Assistant Secretary of the Company since January 1996. Mr. Russell served as
President and Chief Executive Officer of the Company from 1979 through 1995. He
has been a Director of the Company since 1974. Mr. Russell is one of three
trustees of the Selling Shareholder. See "Selling Shareholder."
LOUIS A. WEIL, III has been President and Chief Executive Officer since
January 1996. He served as Publisher and Chief Executive Officer of The Arizona
Republic and The Phoenix Gazette and Executive Vice President of Phoenix
Newspapers, Inc. between July 1991 and January 1996. Mr. Weil served as
Publisher of Time from May 1989 to July 1991 and President and Publisher of The
Detroit News from May 1987 to May 1989. Mr. Weil serves as an independent
director of Prudential's Domestic Equity, Domestic Fixed Income, Global Fixed
Income and Municipal Bond mutual funds. He has been a Director of the Company
since 1991.
THOMAS K. MACGILLIVRAY has been Vice President since April 1997 and Chief
Financial Officer since January 1996. Previously, he was Director of Investments
from April 1993 to December 1995. He was Vice President and Equity Portfolio
Manager for Sovran Capital Management from January 1989 to March 1993.
ERIC S. TOOKER has been Vice President since April 1997 and General Counsel
and Secretary since June 1996. From November 1989 through May 1996, he was
Associate General Counsel at Conseco, Inc.
EUGENE S. PULLIAM has been the Publisher of The Indianapolis Star and The
Indianapolis News since 1975 and a Director of the Company since 1954. Mr.
Pulliam is the uncle of Dan Quayle, who is a Director of the Company.
38
<PAGE> 40
DALE A. DUNCAN has been President and General Manager of Indianapolis
Newspapers, Inc. since January 1998. From 1995 until assuming his current
position, Mr. Duncan was Vice President, ABC Publishing Group, where he directed
the operations of the Oakland Press, Pontiac, MI; The Belleville News-Democrat,
Illinois; and the Times Leader, Wilkes-Barre, PA. Mr. Duncan also served as
President and Publisher of the Oakland Press from 1995 to 1997 and was the
President and Publisher of the Times Leader from 1986 to 1994.
JOHN F. OPPEDAHL has been Publisher and Chief Executive Officer of Phoenix
Newspapers, Inc. since January 1996. Previously, he was Executive Editor of
Phoenix Newspapers, Inc. since 1993 and Managing Editor of The Arizona Republic
from 1989 to 1993.
WILLIAM A. FRANKE has been the Chairman and Chief Executive Officer of
America West Holdings Corporation, an aviation and travel service company, since
February 1997 and the Chairman of the Board of its principal subsidiary, America
West Airlines, Inc., an airline carrier. Mr. Franke was the subsidiary's Chief
Executive Officer from December 1993 until February 1997, and its President from
May 1996 until February 1997. He is a director of America West Holdings
Corporation, America West Airlines, Inc., Phelps Dodge Corporation, Beringer
Wine Estates, Mtel Latin America, Inc. and AirTransport Association of America.
He is a director and Chairman of the Board of Airplanes Limited and a
controlling trustee and Chairman of Airplanes U.S. Trust, entities involved in
aircraft financing and leasing. He has been a director of the Company since
1990.
L. BEN LYTLE has been President and Chief Executive Officer of Anthem
Insurance Companies, Inc., an insurance holding company, since 1989 and
presently serves as Chairman of the Board of Directors of its major
subsidiaries. He is a director of Acordia, Inc., IPALCO, Inc., Duke REIT, and
Bank One, Indianapolis, N.A. He has been a Director of the Company since April
1997.
DAN QUAYLE has been Chairman of Campaign America, a political action
committee, since 1995 and Chairman of BTC, Inc., a private company through which
he operates certain of his personal business interests, since 1993. He served as
Chairman of Circle Investors, Inc., a private financial services and insurance
holding company from 1993 until February 1997, and served on the Board of
Directors of Amtran, Inc. in 1996. He was Vice President of the United States
from January 1989 to January 1993 and a United States Senator from January 1981
to January 1989. Mr. Quayle is a director of American Standard, Inc., U.S.
Filter Corporation and Circle Investors, Inc. He has been a Director of the
Company since 1993. Mr. Quayle is the nephew of Eugene S. Pulliam.
RICHARD SNELL has been Chairman of the Board and Chief Executive Officer of
Pinnacle West Capital Corporation, a utility holding company and Chairman of the
Board of Arizona Public Service Company since 1990. He is also a director of
Aztar Corporation and Bank One Arizona Corporation. He has been a Director of
the Company since September 1996.
39
<PAGE> 41
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 150,000,000 shares of Class A
Common Stock, without par value (the "Class A Common Stock"), 130,000,000 shares
of Class B Common Stock, without par value (the "Class B Common Stock"), and
25,000,000 shares of Preferred Stock (the "Preferred Stock"). As of November 2,
1998, 18,707,924 shares of Class A Common Stock were issued and outstanding,
31,345,500 shares of Class B Common Stock (convertible into 3,134,550 shares of
Class A Common Stock) were issued and outstanding, and no shares of Preferred
Stock have been issued. As of November 2, 1998, the Class A Common Stock was
held by 325 shareholders of record and the Class B Common Stock was held by 23
shareholders of record. All outstanding shares are legally issued, fully paid
and nonassessable.
CLASS A COMMON STOCK AND
CLASS B COMMON STOCK
Voting Rights
Our Articles of Incorporation provide that each share of Class A Common
Stock entitles the holder thereof to one-tenth of a vote per share on all
matters on which shareholders are entitled to vote. Each share of Class B Common
Stock entitles the holder thereof to one vote per share on all matters on which
shareholders are entitled to vote.
In general, matters submitted to the vote of the shareholders, such as the
election of directors, are voted on by holders of the Class A Common Stock and
the Class B Common Stock voting together as a single class. Holders of Class A
Common Stock and Class B Common Stock are not entitled to vote cumulatively for
the election of directors. The holders of the Class B Common Stock hold
approximately 94% of the combined voting power of the outstanding Class A Common
Stock and Class B Common Stock. Under the Indiana Business Corporation Law,
however, holders of Class A Common Stock are also entitled to vote as a separate
class to approve amendments to our Articles of Incorporation that modify rights,
preferences and powers that affect the rights of the holders adversely, or to
increase the number of authorized shares of Class A Common Stock.
Dividend and Liquidation Rights
Each share of Class A Common Stock and Class B Common Stock is entitled to
receive dividends if and when declared by our Board of Directors. Our Articles
of Incorporation provide that dividends must be paid on both the Class A Common
Stock and the Class B Common Stock at any time that dividends are paid on
either. It is further provided that each share of Class B Common Stock is
entitled to receive only 10% of any dividend or other distribution in cash,
stock (other than Class A Common Stock or Class B Common Stock) or other
property (including any liquidating distribution) made with respect to each
share of Class A Common Stock. To the extent that a stock dividend is involved,
holders of Class A Common Stock are entitled to receive only Class A Common
Stock in respect of those shares and holders of Class B Common Stock are
entitled to receive only Class B Common Stock in respect of those shares.
Furthermore, the Articles of Incorporation provide that stock dividends on a
class of common stock may not be paid without a concomitant stock dividend for
the other class of common stock.
Transferability and Convertibility
The Class A Common stock is freely transferable, subject to applicable
securities laws. The Class B Common Stock is also freely transferable, subject
to applicable securities laws; however, the Class B Common Stock has not been
registered
40
<PAGE> 42
under the Securities Act of 1933, as amended, and we do not plan at any time in
the future to register such stock. No trading market currently exists for the
Class B Common Stock and it is not anticipated that such a market will develop.
To allow holders of shares of Class B Common Sock to have access to
trading, our Articles of Incorporation provide that each share of Class B Common
Stock is convertible at any time at the option of the holder into one-tenth of a
share of Class A Common Stock. A shareholder desiring to sell an equity interest
represented by Class B Common Stock could thereby convert and sell, consistent
with applicable securities laws, shares of Class A Common Stock.
PREFERRED STOCK
No shares of preferred stock have been issued. The Board of Directors,
without further shareholder action, is authorized to issue up to 25,000,000
shares of preferred stock and establish the designations, dividend rights,
dividend rate, conversion rights, voting rights, terms of redemption,
liquidation preference and all other preferences and rights of any series of
preferred stock; provided, however, that shares of the preferred stock may not
be given voting rights without the prior approval of holders of a majority of
the outstanding shares of Class B Common Stock.
CERTAIN PROVISIONS OF INDIANA
CORPORATE LAW AND THE
EUGENE C. PULLIAM TRUST
Certain provisions of Indiana law applicable to us could delay, deter or
prevent a merger, tender offer or other takeover attempt of us. Such provisions
include those pertaining to "control shares" (generally shares having 20%,
33 1/3% and 50% of voting power) that only have voting rights to the extent
approved by disinterested shareholders and limitations upon business
combinations involving us and any "interested shareholder" (generally defined to
include any holder of 10% or more of the corporation's voting securities). The
foregoing provisions may have limited effect on us in light of the provisions of
the Eugene C. Pulliam Trust, which has voting control of us. Under the terms of
this trust, the trustees are directed not to sell, exchange, pledge or otherwise
dispose of the Class B Common Stock held by the trust or approve any
reorganization or recapitalization of us, including mergers and consolidations
if, as a result, the property held by the trust would consist of a smaller
proportion of the voting power of us or any corporation into which we were
merged or consolidated, than its proportion of the voting power of us at the
time of the execution of the trust. At the time this trust was established it
had 54% of all outstanding voting common stock of us. The trust specifies that
this limitation shall last for the duration of the trust, except that this
limitation shall become void if the trustees (i) unanimously determine that a
substantially complete loss of the value of the property held in the trust is
seriously threatened and (ii) obtain the written consent of two-thirds of the
beneficiaries of the trust (which consist of descendants of Eugene C. Pulliam).
By its terms, the trust will terminate twenty-one years after the death of the
survivor of the class consisting of the descendants of Eugene C. Pulliam living
at the time of the most recent amendment to the trust in May 1973. As of
November 2, 1998, the trust owned 22,907,500 shares of Class B Common Stock
representing approximately 73% of the outstanding Class B Common Stock and
approximately 69% of the combined voting power of us.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Class A Common Stock and Class B
Common Stock is Norwest Bank Minnesota, NA.
41
<PAGE> 43
SELLING SHAREHOLDER
The table below sets forth the beneficial ownership of our Class A Common
Stock by the Selling Shareholder as of September 27, 1998 and following the
resale of shares to us and the sale of shares offered hereby. The Selling
Shareholder is a charitable trust which, indirectly, received all of its shares
of Class A Common Stock in a bequest from the Estate of Nina-Mason Pulliam. See
"Prospectus Summary -- Selling Shareholder." Mr. Frank E. Russell, one of the
three trustees of the Charitable Trust, is the Chairman of the Board of
Directors of Central Newspapers, Inc.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
SHARES BENEFICIALLY OWNED
OWNED PRIOR TO SHARES TO AFTER THE TRUST
THE OFFERING AND SHARES BE SOLD IN THE REPURCHASE AND THE
SALE TO US(1) SOLD TO US OFFERING(1) OFFERING(2)(3)
------------------- ---------- -------------- -------------------
NAME NUMBER PERCENT NUMBER PERCENT
- ---- --------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Nina Mason-Pulliam
Charitable Trust....... 5,446,850 25% 2,500,000 1,162,478 1,784,372 8.2%
</TABLE>
- -------------------------
(1) Includes 373,250 shares of Class A Common Stock attributable to 3,732,500
shares of Class B Common Stock.
(2) Includes 10,000 shares of Class A Common Stock attributable to 100,000
shares of Class B Common Stock. On September 21, 1998 we entered into a
Standstill and Option Agreement with the Selling Shareholder pursuant to
which we received an option to purchase up to 1,500,000 shares of Class A
Common Stock for $67 per share. The option has a term of one year but can
only be exercised within five days following the average trading price of
the Class A Common Stock being at least $67 per share for five consecutive
trading days.
(3) Assumes that the option granted the underwriter to purchase additional
shares is not exercised.
LEGAL MATTERS
Certain legal matters in connection with the Offering will be passed upon
for us by Henderson, Daily, Withrow & DeVoe, Indianapolis, Indiana, for the
Selling Shareholder by Barnes & Thornburg, Indianapolis, Indiana, and for the
Underwriters by Davis Polk & Wardwell, New York, New York.
EXPERTS
The consolidated financial statements of Central Newspapers, Inc. as of
December 28, 1997 and for the fiscal year then ended, incorporated in this
Prospectus by reference to the Annual Report on Form 10-K of Central Newspaper,
Inc. for the year ended December 28, 1997, have been so incorporated in reliance
on the report of PricewaterhouseCoopers LLP, independent accountants, given on
the authority of said firm as experts in auditing and accounting.
The consolidated financial statements of Central Newspapers, Inc. as of
December 29, 1996 and for each of the two fiscal years in the period ended
December 29, 1996, incorporated in the
42
<PAGE> 44
Prospectus by reference to the Annual Report on Form 10-K of Central Newspapers,
Inc. for the year ended December 28, 1997, have been so incorporated in reliance
on the report of Olive LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
With respect to the unaudited consolidated financial information of Central
Newspapers, Inc. as of September 27, 1998 and for the thirty-nine weeks then
ended incorporated by reference in this Prospectus, PricewaterhouseCoopers LLP
reported that they have applied limited procedures in accordance with
professional standards for a review of such information. However, their separate
report dated October 19, 1998 incorporated by reference herein, states that they
did not audit and they do not express in opinion on that unaudited consolidated
financial information. PricewaterhouseCoopers LLP has not carried out any
significant or additional audit tests beyond those which would have been
necessary if their report had not been included. Accordingly, the degree of
reliance on their report on such information should be restricted in light of
the limited nature of the review procedures applied. PricewaterhouseCoopers LLP
is not subject to the liability provisions of Section 11 of the Securities Act
for their report on the unaudited consolidated financial information because
that report is not a "report" or a "part" of the registration statement prepared
or certified by PricewaterhouseCoopers LLP within the meaning of Sections 7 and
11 of the Securities Act.
43
<PAGE> 45
UNDERWRITING
The Selling Shareholder and the underwriters for the offering (the
"Underwriters") named below have entered into an underwriting agreement with
respect to the Class A Common Stock being offered. Subject to certain
conditions, each Underwriter has severally agreed to purchase the number of
shares indicated in the following table. Goldman, Sachs & Co. is the
representative of the Underwriters.
<TABLE>
<CAPTION>
Underwriters Number of Shares
------------ ----------------
<S> <C>
Goldman, Sachs & Co.........................................
Donaldson, Lufkin & Jenrette Securities Corporation.........
----------------
Total.....................................................
================
</TABLE>
-------------------------
If the Underwriters sell more shares than the total number set forth in the
table above, the Underwriters have an option to buy up to an additional 174,372
shares from the Selling Shareholder to cover such sales. They may exercise that
option for 30 days. If any shares are purchased pursuant to this option, the
Underwriters will severally purchase shares in approximately the same proportion
as set forth in the table above.
The following table shows the per share and the total underwriting
discounts and commissions to be paid to the Underwriters by the Selling
Shareholder. Such amounts are shown assuming both no exercise and full exercise
of the Underwriters' option to purchase additional shares.
<TABLE>
<CAPTION>
Paid by the Selling Shareholder
-------------------------------
No Full
Exercise Exercise
-------- --------
<S> <C> <C>
Per share............ $ $
Total................ $ $
</TABLE>
Shares sold by the Underwriters to the public will initially be offered at
the public offering price set forth on the cover of this Prospectus. Any shares
sold by the Underwriters to securities dealers may be sold at a discount of up
to $ per share from the initial public offering price. Any such securities
dealers may resell any shares purchased from the Underwriters to certain other
brokers or dealers at a discount of up to $ per share from the initial
public offering price. If all the shares are not sold at the initial offering
price, the representatives may change the offering price and the other selling
terms.
The Company, the Selling Shareholder, each shareholder holding combined
voting power in excess of five percent (5%) of the Company's issued and
outstanding shares and the directors and other executive officers of the
Company, have agreed that, during the period beginning from the date of this
Prospectus and continuing and including the date 90 days after the date of the
Prospectus, they will not offer, sell, contract to sell or otherwise dispose of
any shares of Class A Common Stock or any security convertible into or
exchangeable for shares of Class A Common Stock without the prior written
consent of Goldman, Sachs & Co., except (i) pursuant to the Option Agreement and
(ii) as otherwise provided in the Underwriting Agreement.
In connection with the offering, the Underwriters may purchase and sell
shares of Class A Common Stock in the open market. These transactions may
include short sales, stabilizing transactions and purchases to cover positions
created by short sales. Short sales involve the sale by the Underwriters of a
greater number of shares than they are required to purchase in the offerings.
Stabilizing transactions consist of certain bids or purchases made
U-1
<PAGE> 46
for the purpose of preventing or retarding a
decline in the market price of the Class A Common Stock while the offering is in
progress.
The Underwriters also may impose a penalty bid. This occurs when a
particular Underwriter repays to the Underwriters a portion of the underwriting
discount received by it because the representatives have repurchased shares sold
by or for the account of such Underwriter in stabilizing or short covering
transactions.
These activities by the Underwriters may stabilize, maintain or otherwise
affect the market price of the Class A Common Stock. As a result, the price of
the Class A Common Stock may be higher than the price that otherwise might exist
in the open market. If these activities are commenced, they may be discontinued
by the Underwriters at any time. These transactions may be effected on the NYSE,
in the over-the-counter market or otherwise.
The Selling Shareholder estimates, that its share of the total expenses of
the offering, excluding underwriting discounts and commissions, will be
approximately $ .
The Company and the Selling Shareholder have agreed to indemnify several
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended.
U-2
<PAGE> 47
- ------------------------------------------------------------
- ------------------------------------------------------------
No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this prospectus. You must
not rely on any unauthorized information or representations. This prospectus is
an offer to sell only the shares offered hereby, but only under circumstances
and in jurisdictions where it is lawful to do so. The information contained in
this prospectus is current only as of its date.
-------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information..................... 3
Incorporation of Certain Documents by
Reference............................... 4
Prospectus Summary........................ 5
Risk Factors.............................. 9
Price Range of Common Stock and Dividend
Policy.................................. 12
Use of Proceeds........................... 13
Capitalization............................ 14
Selected Consolidated Financial Data...... 15
Management's Discussion and Analysis of
Results of Operations and Financial
Condition............................... 19
Business.................................. 30
Management................................ 39
Description of Capital Stock.............. 40
Selling Shareholder....................... 42
Legal Matters............................. 43
Experts................................... 43
Index to Consolidated Financial
Statements.............................. F-1
Underwriting.............................. U-1
</TABLE>
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------
1,162,478 Shares
CENTRAL NEWSPAPERS, INC.
CLASS A COMMON STOCK
-------------------------
[LOGO]
-------------------------
GOLDMAN, SACHS & CO.
DONALDSON, LUFKIN & JENRETTE
Representatives of the Underwriters
- ------------------------------------------------------------
- ------------------------------------------------------------
<PAGE> 48
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all fees and expenses payable in connection
with the issuance and distribution of the shares of Class A Common Stock, other
than underwriting discounts and commissions. All such fees and expenses will be
paid by the Selling Shareholder and the Company. All the amounts shown are
estimates, except for the Securities and Exchange Commission registration fee
and the NASD filing fee.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $
NASD filing fee.............................................
"Blue Sky" fees and expenses................................
Legal fees and expenses.....................................
Accounting fees and expenses................................
Printing expenses...........................................
Miscellaneous...............................................
--------
Total.............................................
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Sections 23-1-37-1 -- 23-1-37-15 of the Indiana Business Corporation Law
permit a corporation to indemnify directors and officers against liability
incurred in certain proceedings if the individual's conduct was in good faith
and the individual reasonably believed, in the case of conduct in the
individual's official capacity, that such conduct was in the best interests of
the corporation and, in all other cases, believed such conduct was at least not
opposed to the best interests of the corporation. If the proceeding is criminal,
the individual must either have had no reasonable cause to believe that such
conduct was unlawful or had reasonable cause to believe that such conduct was
lawful. The statute requires a corporation to indemnify an individual who is
wholly successful in the defense of any such proceeding against reasonable
expenses incurred by such individual, unless the Articles of Incorporation
provide otherwise. The corporation may pay for or reimburse the reasonable
expenses incurred by a director or officer who is a party to a proceeding in
advance of final disposition of the proceeding if certain conditions are
satisfied. Unless otherwise provided in the Articles of Incorporation, a
director or officer may apply for court ordered indemnification, which will
include reasonable expenses incurred to obtain the indemnification order if the
court determines that the director is entitled to mandatory indemnification or
that the director is fairly and reasonably entitled to indemnification in view
of all the relevant circumstances. Except in the case of mandatory
indemnification, a corporation may indemnify a director of officer only after it
is determined that the individual meets the standard of conduct described above.
In addition, a corporation may also indemnify and advance expenses to an
officer, whether or not a director, to the extent, consistent with public
policy, that may be provided by its Articles of Incorporation, by-laws, general
or specific action of its board of directors or contract. Section 23-1-37-14 of
the Indiana Business Corporation Law empowers an Indiana corporation to purchase
and maintain insurance on behalf of any director or officer against any
liability asserted against, or incurred by, such individual in any such capacity
or arising out of his or her status as such, whether or not the corporation
would have had the power to indemnify against such liability.
II-1
<PAGE> 49
The Amended and Restated Articles of Incorporation of the Registrant permit
the Registrant to indemnify any person who is or was a director or officer of
the Registrant to the fullest extent allowed by law.
The Registrant also carries liability insurance covering officers and
directors.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
1.1 Form of Underwriting Agreement.
4.1 Amended and Restated Articles of Incorporation of Central
Newspapers, Inc.
4.2 The Amended and Restated Code of By-Laws of Central
Newspapers, Inc..
5.1 Opinion of Henderson, Daily, Withrow & DeVoe as to
legality.*
10.1 Stock Purchase Agreement by and between the Nina Mason
Pulliam Charitable Trust and Central Newspapers, Inc., dated
as of September 21, 1998 incorporated by reference to Form
10-Q dated November 5, 1998.
10.2 Standstill and Option Agreement by and between the Nina
Mason Pulliam Charitable Trust and Central Newspapers, Inc.
dated as of September 21, 1998 incorporated by reference to
Form 10-Q dated November 5, 1998.
15.1 Awareness Letter of PricewaterhouseCoopers LLP.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of Olive LLP (formerly Geo. S. Olive & Co. LLC).
23.3 Consent of Henderson, Daily, Withrow & DeVoe (contained in
the opinion filed as Exhibit 5.1 to this Registration
Statement).*
24.1 Powers of Attorney (included on the signature pages hereof)
</TABLE>
- ---------------
* To be filed by Amendment
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, each filing of the registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at the time shall be deemed to be the
initial bona fide offering thereof.
(2) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(3) For the purposes of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the
II-2
<PAGE> 50
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described under Item 15 above or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted against the registrant by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
II-3
<PAGE> 51
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3, and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Phoenix, Arizona on the 10th day of November, 1998.
CENTRAL NEWSPAPERS, INC.
By: /s/ LOUIS A. WEIL, III
---------------------------------
President & Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Thomas K. MacGillivray and Eric S. Tooker his or
her true and lawful attorneys-in-fact and agents, each acting alone, with full
powers of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all amendments
to this Registration Statement, including post-effective amendments, as well as
any related registration statement (or amendment thereto) filed pursuant to Rule
462 promulgated under the Securities Act of 1933, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in
person, and hereby ratifies and confirms all his or her said attorneys-in-fact
and agents or any of them or his or her substitute or substitutes may lawfully
do or cause to be done by virtue thereof.
This Power of Attorney may be executed in multiple counterparts, each of
which shall be deemed an original, but which taken together shall constitute one
instrument.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ LOUIS A. WEIL, III President, Chief Executive November 10, 1998
- --------------------------------------------------- Officer and Director
Louis A. Weil, III (Principal Executive
Officer)
/s/ THOMAS K. MACGILLIVRAY Vice President and Chief November 10, 1998
- --------------------------------------------------- Financial Officer
Thomas K. MacGillivray (Principal Financial and
Accounting Officer)
/s/ WILLIAM A. FRANKE Director November 10, 1998
- ---------------------------------------------------
William A. Franke
</TABLE>
II-4
<PAGE> 52
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ L. BEN LYTLE Director November 10, 1998
- ---------------------------------------------------
L. Ben Lytle
/s/ EUGENE S. PULLIAM Director November 10,1998
- ---------------------------------------------------
Eugene S. Pulliam
/s/ DAN QUAYLE Director November 10, 1998
- ---------------------------------------------------
Dan Quayle
/s/ FRANK E. RUSSELL Director November 10, 1998
- ---------------------------------------------------
Frank E. Russell
/s/ RICHARD SNELL Director November 10, 1998
- ---------------------------------------------------
Richard Snell
</TABLE>
II-5
<PAGE> 53
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- ----------- ------------
<C> <S> <C>
1.1 Form of Underwriting Agreement. ............................
4.1 Amended and Restated Articles of Incorporation of Central
Newspapers, Inc. ...........................................
4.2 The Amended and Restated Code of By-Laws of Central
Newspapers, Inc. ...........................................
5.1 Opinion of Henderson, Daily, Withrow & DeVoe as to
legality.*..................................................
10.1 Stock Purchase Agreement by and between the Nina
Mason-Pulliam Charitable Trust and Central Newspapers, Inc.,
dated as of September 21, 1998.**...........................
10.2 Standstill and Option Agreement by and between the Nina
Mason-Pulliam Charitable Trust and Central Newspapers, Inc.
dated as of September 21, 1998.**...........................
15.1 Awareness Letter of PricewaterhouseCoopers LLP. ............
23.1 Consent of PricewaterhouseCoopers LLP. .....................
23.2 Consent of Olive LLP (formerly Geo. S. Olive & Co. LLC). ...
23.3 Consent of Henderson, Daily, Withrow & DeVoe (contained in
the opinion filed as Exhibit 5.1 to this Registration
Statement).*................................................
24.1 Powers of Attorney (included on the signature pages
hereof).....................................................
</TABLE>
- ---------------
* To be filed by Amendment
** previously filed
<PAGE> 1
Exhibit 1.1
Central Newspapers, Inc.
Class A Common Stock, Without Par Value
---------------
Underwriting Agreement
November , 1998
Goldman, Sachs & Co.,
Donaldson, Lufkin & Jenrette Securities Corporation,
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004
Ladies and Gentlemen:
A certain shareholder named in Schedule II hereto (the "Selling
Stockholder") of Central Newspapers, Inc., an Indiana corporation (the
"Company"), proposes, subject to the terms and conditions stated herein, to sell
to the Underwriters named in Schedule I hereto (the "Underwriters") an aggregate
of 1,162,478 shares (the "Firm Shares") and, at the election of the
Underwriters, up to 174,372 additional shares (the "Optional Shares") of Class A
Common Stock, without par value (the "Stock") of the Company (the Firm Shares
and the Optional Shares which the Underwriters elect to purchase pursuant to
Section 2 hereof are herein collectively called the "Shares").
1. (a) The Company represents and warrants to, and agrees with, each
of the Underwriters that:
(i) A registration statement on Form S-3 (File No. 33- ) (the
"Initial Registration Statement") in respect of the Shares has been
filed with the Securities and Exchange Commission (the "Commission");
the Initial Registration Statement and any post-effective amendment
thereto, each in the form heretofore delivered to you, and, excluding
exhibits thereto but including all documents incorporated by reference
in the prospectus contained therein, to you for each of the other
Underwriters, have been declared effective by the Commission in such
form; other than a registration statement, if any, increasing the size
of the offering (a "Rule 462(b) Registration Statement"), filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended
(the "Act"), which became effective upon filing, no
<PAGE> 2
other document with respect to the Initial Registration Statement or document
incorporated by reference therein has heretofore been filed with the Commission;
and no stop order suspending the effectiveness of the Initial Registration
Statement, any post-effective amendment thereto or the Rule 462(b) Registration
Statement, if any, has been issued and no proceeding for that purpose has been
initiated or threatened by the Commission (any preliminary prospectus included
in the Initial Registration Statement or filed with the Commission pursuant to
Rule 424(a) of the rules and regulations of the Commission under the Act is
hereinafter called a "Preliminary Prospectus"; the various parts of the Initial
Registration Statement and the Rule 462(b) Registration Statement, if any,
including all exhibits thereto and including (i) the information contained in
the form of final prospectus filed with the Commission pursuant to Rule 424(b)
under the Act in accordance with Section 5(a) hereof and deemed by virtue of
Rule 430A under the Act to be part of the Initial Registration Statement at the
time it was declared effective and (ii) the documents incorporated by reference
in the prospectus contained in the Initial Registration Statement at the time
such part of the Initial Registration Statement became effective, each as
amended at the time such part of the Initial Registration Statement became
effective or such part of the Rule 462(b) Registration Statement, if any, became
or hereafter becomes effective, are hereinafter collectively called the
"Registration Statement"; and such final prospectus, in the form first filed
pursuant to Rule 424(b) under the Act, is hereinafter called the "Prospectus";
any reference herein to any Preliminary Prospectus or the Prospectus shall be
deemed to refer to and include the documents incorporated by reference therein
pursuant to Item 12 of Form S-3 under the Act, as of the date of such
Preliminary Prospectus or Prospectus, as the case may be; any reference to any
amendment or supplement to any Preliminary Prospectus or the Prospectus shall be
deemed to refer to and include any documents filed after the date of such
Preliminary Prospectus or Prospectus, as the case may be, under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and incorporated by
reference in such Preliminary Prospectus or Prospectus, as the case may be; and
any reference to any amendment to the Registration Statement shall be deemed to
refer to and include any annual report of the Company filed pursuant to Section
13(a) or 15(d) of the Exchange Act after the effective date of the Initial
Registration Statement that is incorporated by reference in the Registration
Statement;
(ii) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and each Preliminary Prospectus,
at the time of filing thereof, conformed in all material respects to the
requirements of the Act and the rules and regulations of the Commission
thereunder, and did not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that this representation and warranty
shall not apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by an
Underwriter through Goldman, Sachs & Co. expressly for
2
<PAGE> 3
use therein or by the Selling Stockholder expressly for use in the preparation
of the answers therein to Item 7 of Form S-3;
(iii) The documents incorporated by reference in the Prospectus, when they
became effective or were filed with the Commission, as the case may be,
conformed in all material respects to the requirements of the Act or the
Exchange Act, as applicable, and the rules and regulations of the Commission
thereunder, and none of such documents contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading; and any further
documents so filed and incorporated by reference in the Prospectus or any
further amendment or supplement thereto, when such documents become effective or
are filed with the Commission, as the case may be, will conform in all material
respects to the requirements of the Act or the Exchange Act, as applicable, and
the rules and regulations of the Commission thereunder and will not contain an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading;
provided, however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with information
furnished in writing to the Company by an Underwriter through Goldman, Sachs &
Co. expressly for use therein;
(iv) The Registration Statement conforms, and the Prospectus and any
further amendments or supplements to the Registration Statement or the
Prospectus will conform, in all material respects to the requirements of the Act
and the rules and regulations of the Commission thereunder and do not and will
not, as of the applicable effective date as to the Registration Statement and
any amendment thereto and as of the applicable filing date as to the Prospectus
and any amendment or supplement thereto, contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided, however, that
this representation and warranty shall not apply to any statements or omissions
made in reliance upon and in conformity with information furnished in writing to
the Company by an Underwriter through Goldman, Sachs & Co. expressly for use
therein or by the Selling Stockholder expressly for use in the preparation of
the answers therein to Item 7 of Form S-3;
(v) Neither the Company nor any of its subsidiaries has sustained since the
date of the latest audited financial statements included or incorporated by
reference in the Prospectus any material loss or interference with its business
from fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action, order or
decree, otherwise than as set forth or contemplated in the Prospectus; and,
since the respective dates as of which information is given in the Registration
Statement and the Prospectus, there has not been any change in the capital stock
or long-term debt of the Company or any of its subsidiaries or any material
adverse change, or any development involving a prospective material adverse
change, in or affecting the
3
<PAGE> 4
general affairs, management, financial position, shareholders' equity or results
of operations of the Company and its subsidiaries, otherwise than as set forth
or contemplated in the Prospectus;
(vi) The Company and its subsidiaries have good and marketable title in fee
simple to all real property and good and marketable title to all personal
property owned by them, in each case free and clear of all liens, encumbrances
and defects except such as are described in the Prospectus or such as do not
materially affect the value of such property and do not interfere with the use
made and proposed to be made of such property by the Company and its
subsidiaries; and any real property and buildings held under lease by the
Company and its subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company and its subsidiaries;
(vii) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of Indiana, with power and authority
(corporate and other) to own its properties and conduct its business as
described in the Prospectus, and has been duly qualified as a foreign
corporation for the transaction of business and is in good standing under the
laws of each other jurisdiction in which it owns or leases properties or
conducts any business so as to require such qualification, or is subject to no
material liability or disability by reason of the failure to be so qualified in
any such jurisdiction; and each subsidiary of the Company has been duly
incorporated and is validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation;
(viii) The Company has an authorized capitalization as set forth in the
Prospectus, and all of the issued shares of capital stock of the Company have
been duly and validly authorized and issued, are fully paid and non-assessable
and conform to the description of the Stock contained in the Prospectus; and all
of the issued shares of capital stock of each subsidiary of the Company have
been duly and validly authorized and issued, are fully paid and non-assessable
and (except for directors' qualifying shares and except as set forth in the
Prospectus) are owned directly or indirectly by the Company, free and clear of
all liens, encumbrances, equities or claims;
(ix) The compliance by the Company with all of the provisions of this
Agreement and the consummation of the transactions herein contemplated will not
conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which the Company or
any of its subsidiaries is a party or by which the Company or any of its
subsidiaries is bound or to which any of the property or assets of the Company
or any of its subsidiaries is subject, nor will such action result in any
violation of the provisions of the certificate of incorporation or by-laws of
the Company or any statute or any order, rule or
4
<PAGE> 5
regulation of any court or governmental agency or body having jurisdiction over
the Company or any of its subsidiaries or any of their properties; and no
consent, approval, authorization, order, registration or qualification of or
with any such court or governmental agency or body is required for sale of the
Shares or the consummation by the Company of the transactions contemplated by
this Agreement, except the registration under the Act of the Shares and such
consents, approvals, authorizations, registrations or qualification as may be
required under state securities or Blue Sky laws in connection with the purchase
and distribution of the Shares by the Underwriters;
(x) Neither the Company nor any of its subsidiaries is in violation of its
certificate of incorporation or by-laws or in default in the performance or
observance of any material obligation, agreement, covenant or condition
contained in any indenture, mortgage, deed of trust, loan agreement, lease or
other agreement or instrument to which it is a party or by which it or any of
its properties may be bound;
(xi) The statements set forth in the Prospectus under the caption
"Description of Capital Stock", insofar as they purport to constitute a summary
of the terms of the Stock, under the caption "Taxation", and under the caption
"Underwriting", insofar as they purport to describe the provisions of the laws
and documents referred to therein, are accurate, complete and fair;
(xii) Other than as set forth in the Prospectus (including information
incorporated therein), there are no legal or governmental proceedings pending to
which the Company or any of its subsidiaries is a party or of which any property
of the Company or any of its subsidiaries is the subject which, if determined
adversely to the Company or any of its subsidiaries, would individually or in
the aggregate have a material adverse effect on the current or future
consolidated financial position, shareholders' equity or results of operations
of the Company and its subsidiaries; and, to the best of the Company's
knowledge, no such proceedings are threatened or contemplated by governmental
authorities or threatened by others;
(xiii) The Company is not and, after giving effect to the offering and sale
of the Shares, will not be an "investment company", as such term is defined in
the Investment Company Act of 1940, as amended (the "Investment Company Act");
(xiv) PricewaterhouseCoopers LLP and Olive LLP (formerly Geo. S. Olive &
Co., LLC), who have certified certain financial statements of the Company and
its subsidiaries, are independent public accountants as required by the Act and
the rules and regulations of the Commission thereunder; and
(xv) The Company has reviewed its operations and that of its subsidiaries
and any
5
<PAGE> 6
third parties with which the Company or any of its subsidiaries has a
material relationship to evaluate the extent to which the business or
operations of the Company or any of its subsidiaries will be affected by
the Year 2000 Problem. As a result of such review, the Company has no
reason to believe, and does not believe, that the Year 2000 Problem will
have a material adverse effect on the general affairs, management, the
current or future consolidated financial position, business prospects,
shareholders' equity or results of operations of the Company and its
subsidiaries or result in any material loss or interference with the
Company's business or operations. The "Year 2000 Problem" as used herein
means any significant risk that computer hardware or software used in the
receipt, transmission, processing, manipulation, storage, retrieval,
retransmission or other utilization of data or in the operation of
mechanical or electrical systems of any kind will not, in the case of
dates or time periods occurring after December 31, 1999, function at least
as effectively as in the case of dates or time periods occurring prior to
January 1, 2000.
(b) The Selling Stockholder represents and warrants to, and agrees with,
each of the Underwriters and the Company that:
(i) All consents, approvals, authorizations and orders necessary for
the execution and delivery by the Selling Stockholder of this Agreement and
the Custody Agreement hereinafter referred to, and for the sale and
delivery of the Shares to be sold by the Selling Stockholder hereunder,
have been obtained; and the Selling Stockholder has full right, power and
authority to enter into this Agreement and the Custody Agreement and to
sell, assign, transfer and deliver the Shares to be sold by the Selling
Stockholder hereunder;
(ii) The sale of the Shares to be sold by the Selling Stockholder
hereunder and the compliance by the Selling Stockholder with all of the
provisions of this Agreement and the Custody Agreement and the consummation
of the transactions herein and therein contemplated will not conflict with
or result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any statute, indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which the Selling
Stockholder is a party or by which the Selling Stockholder is bound or to
which any of the property or assets of the Selling Stockholder is subject,
nor will such action result in any violation of the provisions of the
Nina Mason Pulliam Revocable Trust dated August 24, 1990, or any statute or
any order, rule or regulation of any court or governmental agency or body
having jurisdiction over the Selling Stockholder or the property of the
Selling Stockholder;
(iii) The Selling Stockholder has, and immediately prior to each Time
of Delivery (as defined in Section 4 hereof) the Selling Stockholder will
have, good and valid title to the Shares to be sold by the Selling
Stockholder hereunder, free and clear of all liens, encumbrances, equities
or claims; and, upon delivery of such Shares and payment therefor pursuant
hereto, good and valid title to such Shares, free and clear of all liens,
encumbrances,
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equities or claims, will pass to the several Underwriters;
(iv) During the period beginning from the date hereof and continuing
to and including the date 90 days after the date of the Prospectus, not to
offer, sell contract to sell or otherwise dispose of, except as provided
hereunder, any securities of the Company that are substantially similar to
the Shares, including but not limited to any securities that are
convertible into or exchangeable for, or that represent the right to
receive, Stock or any such substantially similar securities (other than
pursuant to employee stock option plans existing on, or upon the conversion
or exchange of convertible or exchangeable securities outstanding as of,
the date of this Agreement), without your prior written consent;
(v) The Selling Stockholder has not taken and will not take, directly
or indirectly, any action which is designed to or which has constituted or
which might reasonably be expected to cause or result in stabilization or
manipulation of the price of any security of the Company to facilitate the
sale or resale of the Shares;
(vi) To the extent that any statements or omissions made in the
Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto are made in reliance upon and in conformity
with written information furnished to the Company by the Selling
Stockholder expressly for use therein, such Preliminary Prospectus and the
Registration Statement did, and the Prospectus and any further amendments
or supplements to the Registration Statement and the Prospectus, when they
become effective or are filed with the Commission, as the case may be, will
conform in all material respects to the requirements of the Act and the
rules and regulations of the Commission thereunder and will not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading;
(vii) In order to document the Underwriters' compliance with the
reporting and withholding provisions of the Tax Equity and Fiscal
Responsibility Act of 1982 with respect to the transactions herein
contemplated, the Selling Stockholder will deliver to you prior to or at
the First Time of Delivery (as hereinafter defined) a properly completed
and executed United States Treasury Department Form W-9 (or other
applicable form or statement specified by Treasury Department regulations
in lieu thereof);
(viii) Certificates in negotiable form representing all of the Shares
to be sold by the Selling Stockholder hereunder have been placed in custody
under a Custody Agreement, in the form heretofore furnished to you (the
"Custody Agreement"), duly executed and delivered by the Selling
Stockholder to Norwest Bank Minnesota, N.A., as custodian (the
"Custodian"), and the undersigned trustee on behalf of the Selling
Shareholder has the authority to execute and deliver this Agreement, to
determine the purchase price to be paid
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<PAGE> 8
by the Underwriters to the Selling Stockholder as provided in Section 2
hereof, to authorize the delivery of the Shares to be sold by the Selling
Stockholder hereunder and otherwise to act on behalf of the Selling
Stockholder in connection with the transactions contemplated by this
Agreement and the Custody Agreement; and
(ix) The Shares represented by the certificates held in custody for
the Selling stockholder under the Custody Agreement are subject to the
interests of the Underwriters hereunder and the arrangements made by the
Selling Stockholder for such custody is irrevocable; the obligations of the
Selling Stockholder hereunder shall not be terminated by operation of law,
by the death or incapacity of any trustee or the termination of such trust,
or by the occurrence of any other event; if any trustee should die or
become incapacitated, or if any such trust should be terminated or if any
other such event should occur, before the delivery of the Shares hereunder,
certificates representing the Shares shall be delivered by or on behalf of
the Selling Stockholder in accordance with the terms and conditions of this
Agreement and of the Custody Agreement; regardless of whether or not the
Custodian, or any person, shall have received notice of such death,
incapacity, termination, or other event.
2. Subject to the terms and conditions herein set forth, (a) the Selling
Stockholder agrees to sell to each of the Underwriters, and each of the
Underwriters agrees, severally and not jointly, to purchase from the Selling
Stockholder, at a purchase price per share of $ , the Firm Shares, and (b) in
the event and to the extent that the Underwriters shall exercise the election to
purchase Optional Shares as provided below, the Selling Stockholder agrees to
sell to each of the Underwriters, and each of the Underwriters agrees, severally
and not jointly, to purchase from the Selling Stockholder, at the purchase price
per share set forth in clause (a) of this Section 2, that portion of the number
of Optional Shares as to which such election shall have been exercised.
The Selling Stockholder hereby grants to the Underwriters the right to
purchase at their election up to 174,372 Optional Shares, at the purchase price
per share set forth in the paragraph above, for the sole purpose of covering
overallotments in the sale of the Firm Shares. Any such election to purchase
Optional Shares may be exercised only by written notice from you to the Selling
Shareholder, given within a period of 30 calendar days after the date of this
Agreement and setting forth the aggregate number of Optional Shares to be
purchased and the date on which such Optional Shares are to be delivered, as
determined by you but in no event earlier than the First Time of Delivery (as
defined in Section 4 hereof) or, unless you and the Selling Shareholder
otherwise agree in writing, earlier than two or later than ten business days
after the date of such notice.
3. Upon the authorization by you of the release of the Firm Shares, the
several Underwriters propose to offer the Firm Shares for sale upon the terms
and conditions set forth in the Prospectus.
4. (a) The Shares to be purchased by each Underwriter hereunder, in
definitive form, and
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<PAGE> 9
in such authorized denominations and registered in such names as Goldman, Sachs
& Co. may request upon at least forty-eight hours' prior notice to the Selling
Stockholder shall be delivered by or on behalf of the Selling Stockholder to
Goldman, Sachs & Co., through the facilities of the Depository Trust Company
("DTC"), for the account of such Underwriter, against payment by or on behalf of
such Underwriter of the purchase price therefor by wire transfer of Federal
(same-day) funds to the account specified by the Custodian, to Goldman, Sachs &
Co. at least forty-eight hours in advance. The Company will cause the
certificates representing the Shares to be made available for checking and
packaging at least twenty-four hours prior to the Time of Delivery (as defined
below) with respect thereto at the office of DTC or its designated custodian
(the "Designated Office"). The time and date of such delivery and payment shall
be, with respect to the Firm Shares, 9:30 a.m., New York time, on
- -------------, 19-- or such other time and date as Goldman, Sachs & Co. and the
Selling Stockholder may agree upon in writing, and, with respect to the Optional
Shares, 9:30 a.m., New York time, on the date specified by Goldman, Sachs & Co.
in the written notice given by Goldman, Sachs & Co. of the Underwriters'
election to purchase such Optional Shares, or such other time and date as
Goldman, Sachs & Co. and the Selling Stockholder may agree upon in writing. Such
time and date for delivery of the Firm Shares is herein called the "First Time
of Delivery", such time and date for delivery of the Optional Shares, if not the
First Time of Delivery, is herein called the "Second Time of Delivery", and each
such time and date for delivery is herein called a "Time of Delivery".
(b) The documents to be delivered at each Time of Delivery by or on behalf
of the parties hereto pursuant to Section 7 hereof, including the cross receipt
for the Shares and any additional documents requested by the Underwriters
pursuant to Section 7(k) hereof, will be delivered at the offices of Davis Polk
& Wardwell, 450 Lexington Avenue, New York, NY 10017 (the "Closing Location"),
and the Shares will be delivered at the Designated Office, all at such Time of
Delivery. A meeting will be held at the Closing Location at ----- p.m., New York
City time, on the New York Business Day next preceding such Time of Delivery, at
which meeting the final drafts of the documents to be delivered pursuant to the
preceding sentence will be available for review by the parties hereto. For the
purposes of this Section 4, "New York Business Day" shall mean each Monday,
Tuesday, Wednesday, Thursday and Friday which is not a day on which banking
institutions in New York are generally authorized or obligated by law or
executive order to close.
5. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you and to file such
Prospectus pursuant to Rule 424(b) under the Act not later than the Commission's
close of business on the second business day following the execution and
delivery of this Agreement, or, if applicable, such earlier time as may be
required by Rule 430A(a)(3) under the Act; to make no further amendment or any
supplement to the Registration Statement or Prospectus prior to the last Time of
Delivery which shall be disapproved by you promptly after reasonable notice
thereof; to advise you, promptly after it receives notice thereof, of the time
when any amendment to the Registration Statement has
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<PAGE> 10
been filed or becomes effective or any supplement to the Prospectus or any
amended Prospectus has been filed and to furnish you with copies thereof; to
file promptly all reports and any definitive proxy or information statements
required to be filed by the Company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of the
Prospectus and for so long as the delivery of a prospectus is required in
connection with the offering or sale of the Shares; to advise you, promptly
after it receives notice thereof, of the issuance by the Commission or any stop
order or of any order preventing or suspending the use of any Preliminary
Prospectus or prospectus, of the suspension of the qualification of the Shares
for offering or sale in any jurisdiction, of the initiation or threatening of
any proceeding for any such purpose, or of any request by the Commission for the
amending or supplementing of the Registration Statement or Prospectus or for
additional information; and, in the event of the issuance of any stop order or
of any order preventing or suspending the use of any Preliminary Prospectus or
prospectus or suspending any such qualification, promptly to use its best
efforts to obtain the withdrawal of such order;
(b) Promptly from time to time to take such action as you may reasonably
request to qualify the Shares for offering and sale under the securities laws of
such jurisdictions as you may request and to comply with such laws so as to
permit the continuance of sales and dealings therein in such jurisdictions for
as long as may be necessary to complete the distribution of the Shares, provided
that in connection therewith the Company shall not be required to qualify as a
foreign corporation or to file a general consent to service of process in any
jurisdiction;
(c) Prior to 10:00 A.M., New York City time, on the New York Business Day
next succeeding the date of this Agreement and from time to time, to furnish the
Underwriters with copies of the Prospectus in New York City in such quantities
as you may reasonably request, and, if the delivery of a prospectus is required
at any time prior to the expiration of nine months after the time of issue of
the Prospectus in connection with the offering or sale of the Shares and if at
such time any events shall have occurred as a result of which the Prospectus as
then amended or supplemented would include an untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were made
when such Prospectus is delivered, not misleading, or, if for any other reason
it shall be necessary during such period to amend or supplement the Prospectus
or to file under the Exchange Act any document incorporated by reference in the
Prospectus in order to comply with the Act or the Exchange Act, to notify you
and upon your request to file such document and to prepare and furnish without
charge to each Underwriter and to any dealer in securities as many copies as you
may from time to time reasonably request of an amended Prospectus or a
supplement to the Prospectus which will correct such statement or omission or
effect such compliance, and in case any Underwriter is required to deliver a
prospectus in connection with sales of any of the Shares at any time nine months
or more after the time of issue of the Prospectus, upon your request but at the
expense of such Underwriter, to prepare and deliver to such Underwriter as many
copies as you may request of an amended or supplemented Prospectus complying
with Section 10(a)(3) of the Act;
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(d) To make generally available to its securityholders as soon as
practicable, but in any event not later than eighteen months after the effective
date of the Registration Statement (as defined in Rule 158(c) under the Act), an
earnings statement of the Company and its subsidiaries (which need not be
audited) complying with Section 11(a) of the Act and the rules and regulations
of the Commission thereunder (including, at the option of the Company, Rule
158);
(e) During the period beginning from the date hereof and continuing to and
including the date 90 days after the date of the Prospectus, not to offer, sell,
contract to sell or otherwise dispose of, except as provided hereunder, any
securities of the Company that are substantially similar to the Shares,
including but not limited to any securities that are convertible into or
exchangeable for, or that represent the right to receive, Stock or any such
substantially similar securities (other than pursuant to employee stock option
plans existing on, or upon the conversion or exchange of convertible or
exchangeable securities outstanding as of, the date of this Agreement), without
your prior written consent;
(f) To furnish to its shareholders as soon as practicable after the end of
each fiscal year an annual report (including a balance sheet and statements of
income, shareholders' equity and cash flows of the Company and its consolidated
subsidiaries certified by independent public accountants) and, as soon as
practicable after the end of each of the first three quarters of each fiscal
year (beginning with the fiscal quarter ending after the effective date of the
Registration Statement), to make available to its shareholders consolidated
summary financial information of the Company and its subsidiaries for such
quarter in reasonable detail;
(g) During a period of five years from the effective date of the
Registration Statement, to furnish to you copies of all reports or other
communications (financial or other) furnished to shareholders, and to deliver
to you (i) as soon as they are available, copies of any reports and financial
statements furnished to or filed with the Commission or any national securities
exchange on which any class of securities of the Company is listed; and (ii)
such additional information concerning the business and financial condition of
the Company as you may from time to time reasonably request (such financial
statements to be on a consolidated basis to the extent the accounts of the
Company and its subsidiaries are consolidated in reports furnished to its
shareholders generally or to the Commission);
(h) To use the net proceeds received by it from the sale of the Shares
pursuant to this Agreement in the manner specified in the Prospectus under the
caption "Use of Proceeds"; and
(i) If the Company elects to rely upon Rule 462(b), the Company shall file
a Rule 462(b) Registration Statement with the Commission in compliance with Rule
462(b) by 10:00 P.M., Washington, D.C. time, on the date of this Agreement, and
the Company shall at the time of filing either pay to the Commission the filing
fee for the Rule 462(b) Registration Statement or give irrevocable instructions
for the payment of such fee pursuant to Rule 111(b) under the Act.
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<PAGE> 12
[6. The Company and the Selling Stockholder covenant and agree with one
another and with the several Underwriters that (a) the Selling Stockholder will
pay or cause to be paid the following: (i) the fees and expenses of its counsel
and accountants; (ii) the underwriters' discount; (iii) all expenses in
connection with the qualification of the Shares for offering and sale under
state securities laws as provided in Section 5(b) hereof, including the fees and
disbursements of counsel for the Underwriters in connection with such
qualification and in connection with the Blue Sky survey; (iv) all filing fees
with the Commission; (v) the filing fees incident to, and the fees and
disbursements of counsel for the Underwriters in connection with, securing any
required review by the National Association of Securities Dealers, Inc. of the
terms of the sale of the Shares; and (vi) all other costs and expenses incident
to the performance of the Selling Shareholder's obligations hereunder which are
not otherwise specifically provided in this Section, including those expenses
that the Selling Shareholder agreed to pay in the Stock Purchase Agreement dated
September 21, 1998 between the Company and the Selling Shareholder; and (b) the
Company will pay or cause to be paid: (i) the fees, disbursements and expenses
of the Company's counsel and accountants in connection with the registration of
the Shares under the Act and all other expenses in connection with the
preparation, printing and filing of the Registration Statement, any Preliminary
Prospectus and the Prospectus and amendments and supplements thereto and the
mailing and delivering of copies thereof to the Underwriters and dealers; (ii)
the cost of printing or producing any Agreement among Underwriters, this
Agreement, the Blue Sky Memorandum, closing documents (including any
compilations thereof) and any other documents in connection with the offering,
purchase, sale and delivery of the Shares; (iii) the cost of preparing stock
certificates; (iv) the cost and charges of any transfer agent or registrar and
[the Custodian]; and (v) all other costs and expenses incident to the
performance of its obligations hereunder which are not otherwise specifically
provided for in this Section; and (c)[the Selling Stockholder] will pay or cause
to be paid all expenses and taxes incident to the sale and delivery of the
Shares to be sold by the Selling Stockholder to the Underwriters hereunder. In
connection with clause (b)(iii) of the preceding sentence, Goldman, Sachs & Co.
agrees to pay New York State stock transfer tax, and [the Selling Stockholder]
agrees to reimburse Goldman, Sachs & Co. for associated carrying costs if such
tax payment is not rebated on the day of payment and for any portion of such tax
payment not rebated. It is understood, however, that the Company shall bear, and
the Selling Stockholder shall not be required to pay or to reimburse the Company
for, the cost of any other matters not directly relating to the sale and
purchase of the Shares pursuant to this Agreement, and that, except as provided
in this Section, and Sections 8 and 11 hereof, the Underwriters will pay all of
their own costs and expenses, including the fees of their counsel, stock
transfer taxes on resale of any of the Shares by them, and any advertising
expenses connected with any offers they may make.]
7. The obligations of the Underwriters hereunder, as to the Shares to be
delivered at each Time of Delivery, shall be subject, in their discretion, to
the condition that all representations and warranties and other statements of
the Company and of the Selling Stockholder herein are, at and as of such Time of
Delivery, true and correct, the condition that the Company and the Selling
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<PAGE> 13
Stockholder shall have performed all of its and their obligations
hereunder theretofore to be performed, and the following additional
conditions:
(a) The Prospectus shall have been filed with the Commission pursuant
to Rule 424(b) within the applicable time period prescribed for such filing
by the rules and regulations under the Act and in accordance with Section
5(a) hereof; if the Company has elected to rely upon Rule 462(b), the Rule
462(b) Registration Statement shall have become effective by 10:00 P.M.,
Washington, D.C. time, on the date of this Agreement; no stop order
suspending the effectiveness of the Registration Statement or any part
thereof shall have been issued and no proceeding for that purpose shall
have been initiated or threatened by the Commission; and all requests for
additional information on the part of the Commission shall have been
complied with to your reasonable satisfaction;
(b) Davis Polk & Wardwell, counsel for the Underwriters, shall have
furnished to you such written opinion or opinions (a draft of each such
opinion is attached as Annex II(a) hereto), dated such Time of Delivery,
with respect to the matters covered in paragraphs (vii), (xi) (as to
"Underwriting"), and (xiv) of subsection (c) below as well as such other
related matters as you may reasonably request, and such counsel shall have
received such papers and information as they may reasonably request to
enable them to pass upon such matters;
(c) Henderson, Daily, Withrow & DeVoe, counsel for the Company shall
have furnished to you their written opinion (a draft of such opinion is
attached as Annex II(b) hereto), dated such Time of Delivery, in form and
substance satisfactory to you, to the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of Indiana,
with power and authority (corporate and other) to own its properties
and conduct its business as described in the Prospectus;
(ii) The Company has an authorized capitalization as set forth
in the Prospectus, and all of the issued shares of capital stock of
the Company (including the Shares being delivered at such Time of
Delivery) have been duly and validly authorized and issued and are
fully paid and non-assessable; and the Shares conform to the
description of the Stock contained in the Prospectus;
(iii) The Company has been duly qualified as a foreign
corporation for the transaction of business and is in good standing
under the laws of each other jurisdiction in which it owns or leases
properties or conducts any business so as to require such
qualification, or is subject to no material liability or disability by
reason of failure to be so qualified in any such jurisdiction (such
counsel being entitled to
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<PAGE> 14
rely in respect of the opinion in this clause upon opinions of local counsel and
in respect of matters of fact upon certificates of officers of the Company,
provided that such counsel shall state that they believe that both you and they
are justified in relying upon such opinions and certificates);
(iv) Each subsidiary of the Company has been duly incorporated and is
validly existing as a corporation in good standing under the laws of its
jurisdiction of incorporation; and all of the issued shares of capital stock of
each subsidiary have been duly and validly authorized and issued, are fully paid
and non-assessable, and (except for directors' qualifying shares and except as
otherwise set forth in the Prospectus) are owned directly or indirectly by the
Company, free and clear of all liens, encumbrances, equities or claims (such
counsel being entitled to rely in respect of the opinion in this clause upon
opinions of local counsel and in respect of matters of fact upon certificates of
officers of the Company or its subsidiaries, provided that such counsel shall
state that they believe that both you and they are justified in relying upon
such opinions and certificates);
(v) The Company and its subsidiaries have good and marketable title in fee
simple to all real property owned by them, in each case free and clear of all
liens, encumbrances and defects except such as are described in the Prospectus
or such as do not materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by the
Company and its subsidiaries; and any real property and buildings held under
lease by the Company and its subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as are not material and
do not interfere with the use made and proposed to be made of such property and
buildings by the Company and its subsidiaries (in giving the opinion in this
clause, such counsel may state that no examination of record titles for the
purpose of such opinion has been made, and that they are relying upon a general
review of the titles of the Company and its subsidiaries, upon opinions of local
counsel and abstracts, reports and policies of title companies rendered or
issued at or subsequent to the time of acquisition of such property by the
Company or its subsidiaries, upon opinions of counsel to the lessors of such
property and, in respect of matters of fact, upon certificates of officers of
the Company or its subsidiaries, provided that such counsel shall state that
they believe that both you and they are justified in relying upon such opinions,
abstracts, reports, policies and certificates);
(vi) To the best of such counsel's knowledge and other than as set forth in
the Prospectus, there are no legal or governmental proceedings pending to which
the Company or any of its subsidiaries is a party or of which any property of
the Company or any of its subsidiaries is the subject which, if determined
adversely to
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<PAGE> 15
the Company or any of its subsidiaries, would individually or in the aggregate
have a material adverse effect on the current or future consolidated financial
position shareholders' equity or results of operations of the Company and its
subsidiaries; and, to the best of such counsel's knowledge, no such proceedings
are threatened or contemplated by governmental authorities or threatened by
others;
(vii) This Agreement has been duly authorized, executed and delivered by
the Company;
(viii) The issue and sale of the Shares being delivered at such Time of
Delivery and the compliance by the Company with all of the provisions of this
Agreement and the consummation of the transactions herein contemplated will not
conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument known to such counsel to
which the Company or any of its subsidiaries is a party or by which the Company
or any of its subsidiaries is bound or to which any of the property or assets of
the Company or any of its subsidiaries is subject, nor will such action result
in any violation of the provisions of the Certificate of Incorporation or
By-laws of the Company or any statute or any order, rule or regulation known to
such counsel of any court or governmental agency or body having jurisdiction
over the Company or any of its subsidiaries or any of their properties;
(ix) No consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body is
required for the sale of the Shares or the consummation by the Company of the
transactions contemplated by this Agreement, except the registration under the
Act of the Shares, and such consents, approvals, authorizations, registrations
or qualifications as may be required under state securities or Blue Sky laws in
connection with the purchase and distribution of the Shares by the Underwriters;
(x) Neither the Company nor any of its subsidiaries is in violation of its
Certificate of Incorporation or By-laws or in default in the performance or
observance of any material obligation, agreement, covenant or condition
contained in any indenture, mortgage, deed of trust, loan agreement, or lease or
agreement or other instrument to which it is a party or by which it or any of
its properties may be bound;
(xi) The statements set forth in the Prospectus under the caption
"Description of Capital Stock", insofar as they purport to constitute a summary
of the terms of the Stock, and under the caption "Underwriting", insofar as they
purport to
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describe the provisions of the laws and documents referred to therein, are
accurate, complete and fair;
(xii) The Company is not an "investment company", as such term is defined
in the Investment Company Act; and
(xiii) The documents incorporated by reference in the Prospectus or any
further amendment or supplement thereto made by the Company prior to such Time
of Delivery (other than the financial statements and related schedules therein,
as to which such counsel need express no opinion), when they become effective or
were filed with the Commission, as the case may be, complied as to form in all
material respects with the requirements of the Act or the Exchange Act, as
applicable and the rules and regulations of the Commission thereunder; and they
have no reason to believe that any of such documents, when such documents became
effective or were so filed, as the case may be, contained, in the case of a
registration statement which became effective under the Act, an untrue statement
of a material fact, or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, or, in the
case of other documents which were filed under the Exchange Act with the
Commission, an untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made when such documents were so filed,
not misleading; and
(xiv) The Registration Statement and the Prospectus and any further
amendments and supplements thereto made by the Company prior to such Time of
Delivery (other than the financial statements and related schedules therein, as
to which such counsel need express no opinion) comply as to form in all material
respects with the requirements of the Act and the rules and regulations
thereunder; although they do not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the Registration
Statement or the Prospectus, except for those referred to in the opinion in
subsection (xi) of this Section 7(c), they have no reason to believe that, as of
its effective date, the Registration Statement or any further amendment thereto
made by the Company prior to such Time of Delivery (other than the financial
statements and related schedules therein, as to which such counsel need express
no opinion) contained an untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading or that, as of its date, the Prospectus or any
further amendment or supplement thereto made by the Company prior to such Time
of Delivery (other than the financial statements and related schedules therein,
as to which such counsel need express no opinion) contained an untrue statement
of a material fact or omitted to state a material fact necessary to make the
statements
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therein, in the light of the circumstances under which they were made, not
misleading or that, as of such Time of Delivery, either the Registration
Statement or the Prospectus or any further amendment or supplement thereto
made by the Company prior to such Time of Delivery (other than the
financial statements and related schedules therein, as to which such
counsel need express no opinion) contains an untrue statement of a material
fact or omits to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; and they do not know of any amendment to the Registration
Statement required to be filed or of any contracts or other documents of a
character required to be filed as an exhibit to the Registration Statement
or required to be incorporated by reference into the Prospectus or required
to be described in the Registration Statement or the Prospectus which are
not filed or incorporated by reference or described or required;
(d) Barnes & Thornburg, counsel for the Selling Stockholder shall have
furnished to you their written opinion (a draft of each such opinion is
attached as Annex II(c) hereto), dated such Time of Delivery, in form and
substance satisfactory to you, to the effect that:
(i) A Custody Agreement has been duly executed and delivered by the
Selling Stockholder and constitutes valid and binding agreement of the
Selling Stockholder in accordance with its terms;
(ii) This Agreement has been duly executed and delivered by or on
behalf of the Selling Stockholder; and the sale of the Shares hereunder and
the compliance by the Selling Stockholder with all of the provisions of
this Agreement and the Custody Agreement and the consummation of the
transactions herein and therein contemplated will not conflict with or
result in a breach or violation of any terms of provisions of, or
constitute a default under, any statute, indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument known to such
counsel to which the Selling Stockholder is a party or by which the Selling
Stockholder is bound or to which any of the property or assets of the
Selling Stockholder is subject, nor will such action result in any
violation of the provisions of the Nina Mason Pulliam Revocable Trust
dated August 24, 1990 of the Selling Stockholder or any order, rule or
regulation known to such counsel of any court or governmental agency or
body having jurisdiction over the Selling Stockholder or the property of
the Selling Stockholder;
(iii) No consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation of the
transactions contemplated by this Agreement in connection with the Shares
to be sold by such Selling Stockholder hereunder, except such as have been
obtained under the Act and such as may be required under state securities
or Blue Sky laws in connection with
17
<PAGE> 18
the purchase and distribution of such Shares by the Underwriters;
(iv) Immediately prior to such Time of Delivery, the Selling
Stockholder had good and valid title to the Shares to be sold at such
Time of Delivery under this Agreement, free and clear of all liens,
encumbrances, equities or claims, and full right, power and authority
to sell, assign, transfer and deliver the Shares to be sold hereunder;
and
(v) Good and valid title to such Shares, free and clear of all liens,
encumbrances, equities or claims, has been transferred to each of the
several Underwriters who have purchased such Shares in good faith and
without notice of any such lien, encumbrance, equity or claim or any
other adverse claim or any other adverse claim within the meaning of
the Uniform Commercial Code.
In rendering the opinion in paragraph (iv), such counsel may rely upon a
certificate of such Selling Stockholder in respect of matters of fact as to
ownership of, and liens, encumbrances, equities or claims on, the Shares sold by
the Selling Stockholder, provided that such counsel shall state that they
believe that both you and they are justified in relying upon such certificate;
(e) On the date of the Prospectus at a time prior to the execution of
this Agreement, at 9:30 a.m., New York City time, on the effective date of
any post-effective amendment to the Registration Statement filed subsequent
to the date of this Agreement and also at each Time of Delivery,
PricewaterhouseCoopers LLP and Olive & Co. LLP (formerly, Geo. S. Olive &
Co., LLC) shall have furnished to you a letter or letters, dated the
respective dates of delivery thereof, in form and substance satisfactory to
you, to the effect set forth in Annex I hereto [(the executed copy of the
letter delivered prior to the execution of this Agreement is attached as
Annex I(a) hereto and a draft of the form of letter to be delivered on the
effective date of any post-effective amendment to the Registration
Statement and as of each Time of Delivery is attached as Annex I(b)
hereto)];
(f) (i) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements
included or incorporated by reference in the Prospectus any loss or
interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree, otherwise than as set forth
or contemplated in the Prospectus, and (ii) since the respective dates as
of which information is given in the Prospectus there shall not have been
any change in the capital stock or long-term debt of the Company or any of
its subsidiaries or any change, or any development involving a prospective
change, in or affecting the general affairs, management, financial
position, shareholders' equity or results of operations of the Company and
its subsidiaries, otherwise than as set forth or contemplated in the
Prospectus, the effect of which, in any such case
18
<PAGE> 19
described in Clause (i) or (ii), is in the judgment of the
Representatives so material and adverse as to make it impracticable or
inadvisable to proceed with the public offering or the delivery of the
Shares being delivered at such Time of Delivery on the terms and in
the manner contemplated in the Prospectus;
(g) On or after the date hereof (i) no downgrading shall have
occurred in the rating accorded the Company's debt securities by any
"nationally recognized statistical rating organization", as that term
is defined by the Commission for purposes of Rule 436(g)(2) under the
Act, and (ii) no such organization shall have publicly announced that
it has under surveillance or review, with possible negative
implications, its rating of any of the Company's debt securities;
(h) On or after the date hereof that shall not have occurred any of
the following: (i) a suspension or material limitation in trading in
securities generally on the New York Stock Exchange (the "Exchange");
(ii) a suspension or material limitation in trading in the Company's
securities on the Exchange; (iii) a general moratorium on commercial
banking activities declared by either Federal or New York State
authorities; or (iv) the outbreak or escalation of hostilities
involving the United States or the declaration by the United States of
a national emergency or war, if the effect of any such event specified
in this Clause (iv) in the judgment of the Representatives makes it
impracticable or inadvisable to proceed with the public offering or
the delivery of the Shares being delivered at such Time of Delivery on
the terms and in the manner contemplated in the Prospectus;
(i) The Shares at such Time of Delivery shall have been duly listed,
subject to notice of issuance, on the Exchange; and
(j) The Company has obtained and delivered to the Underwriters
executed copies of the lock-up agreements from each of the officers,
directors and 5% or more shareholders of the Company, substantially to
the effect set forth in Subsection 1(b)(iv) hereof in form and
substance satisfactory to you;
(k) The Company shall have complied with the provisions of Section
5(c) hereof with respect to the furnishing of prospectuses on the New
York Business Day next succeeding the date of this Agreement; and
(l) The Company and the Selling Stockholder shall have furnished or
caused to be furnished to you at such Time of Delivery certificates of
officers of the Company and of the Selling Stockholder, respectively,
satisfactory to you as to the accuracy of the representations and
warranties of the Company and the Selling Stockholder, respectively,
herein at and as of such Time of Delivery, as to the performance by
the Company and the Selling Stockholder of all of their respective
obligations hereunder to be performed at or prior to such Time of
19
<PAGE> 20
Delivery, and as to such matters as you may reasonably request, and the
Company shall have furnished or caused to be furnished certificates as to
the matters set forth in the subsections (a) and (f) of this Section.
8. (a) The Company will indemnify and hold harmless each Underwriter
against any losses, claims, damages or liabilities, joint or several, to which
such Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each Underwriter for any legal or
other expenses reasonably incurred by such Underwriter in connection with
investigating or defending any such action or claim as such expenses are
incurred; provided, however, that the Company shall not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in any Preliminary Prospectus, the Registration Statement
or the Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by any Underwriter
through Goldman, Sachs & Co. expressly for use therein.
(b) The Selling Stockholder will indemnify and hold harmless each
Underwriter against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in any Preliminary Prospectus, the Registration
Statement or the Prospectus or any such amendment or supplement in reliance upon
and in conformity with written information furnished to the Company by the
Selling Stockholder expressly for use therein; and will reimburse each
Underwriter for any legal or other expenses reasonably incurred by such
Underwriter in connection with investigating or defending any such action or
claim as such expenses are incurred; provided, however, that the Selling
Stockholder shall not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
any Preliminary Prospectus, the Registration Statement or the Prospectus or any
such amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by any Underwriting through Goldman, Sachs
& Co. expressly for use therein.
20
<PAGE> 21
(c) Each Underwriter will indemnify and hold harmless the Company and the
Selling Stockholder against any losses, claims, damages or liabilities to which
the Company or such Selling Stockholder may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in any Preliminary Prospectus, the Registration
Statement or the Prospectus or any such amendment or supplement in reliance upon
and in conformity with written information, furnished to the Company by such
Underwriting through Goldman, Sachs & Co. expressly for use therein; and will
reimburse the Company and the Selling Stockholder for any legal or other
expenses reasonably incurred by the Company or the Selling Stockholder in
connection with investigating or defending any such action or claim as such
expenses are incurred.
(d) Promptly after receipt by an indemnified party under subsection (a),
(b) or (c) above of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under such subsection. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party, be counsel to the indemnifying
party), and, after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party shall
not be liable to such indemnified party under such subsection for any legal
expenses of other counsel or any other expenses, in each case subsequently
incurred by such indemnified party, in connection with the defense thereof other
than reasonable costs of investigation. No indemnifying party shall, without the
written consent of the indemnified party, effect the settlement or compromise
of, or consent to the entry of any judgment with respect to, any pending or
threatened action or claim in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified party is an actual or
potential party to such action or claim) unless such settlement, compromise or
judgment (i) includes an unconditional release of the indemnified party from all
liability arising out of such action or claim and (ii) does not include a
statement as to or an admission of fault, culpability or a failure to act, by or
on behalf of any indemnified party.
(c) If the indemnification provided for in this Section 8 is unavailable to
or insufficient to hold harmless an indemnified party under subsection (a), (b)
or (c) above in respect of any losses,
21
<PAGE> 22
claims, damages or liabilities (or actions in respect there of) referred to
therein, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is appropriate
to reflect the relative benefits received by the Company and the Selling
Stockholder on the one hand and the Underwriters on the other from the offering
of the Shares. If, however, the allocation provided by the immediately preceding
sentence is not permitted by applicable law or if the indemnified party failed
to give the notice required under subsection (d) above, then each indemnifying
party shall contribute to such amount paid or payable by such indemnified party
in such proportion as is appropriate to reflect not only such relative benefits
but also the relative fault of the Company and the Selling Stockholder on the
one hand and the Underwriters on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company and the Selling
Stockholder on the one hand and the Underwriters on the other shall be deemed to
be in the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company and the Selling Stockholder bear to
the total underwriting discounts and commissions received by the Underwriters,
in each case as set forth in the table on the cover page of the Prospectus. The
relative fault shall be determined by reference to, among others things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company or the Selling Stockholder on the one hand or the Underwriters on the
other and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company, the
Selling Stockholder and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this subsection (e) were determined by
pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to above in this subsection (e). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to above
in this subsection (e) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subsection (e), no Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Shares underwritten
by it and distributed to the public were offered to the public exceeds the
amount of any damages which such Underwriter has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution form any person
who was not guilty of such fraudulent misrepresentation. The Underwriters'
obligations in this subsection (e) to contribute are several in proportion to
their respective underwriting obligations and not joint.
(f) The obligations of the Company and the Selling Stockholder under this
Section 8 shall be in addition to any liability which the Company and the
Selling Stockholder may otherwise have and shall extend, upon the same terms and
conditions, to each person, if any, who controls any
22
<PAGE> 23
Underwriter within the meaning of the Act; and the obligations of the
Underwriters under this Section 8 shall be in addition to any liability which
the respective Underwriters may otherwise have and shall extend, upon the same
terms and conditions, to each officer and director of the Company (including any
person who, with his or her consent, is named in the Registration Statement as
about to become a director of the Company) and to each person, if any, who
controls the Company or the Selling Stockholder within the meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to purchase the
Shares which it has agreed to purchase hereunder at a Time of Delivery, you may
in your discretion arrange for you or another party or other parties to purchase
such Shares on the terms contained herein. If within thirty-six hours after such
default by any Underwriter you do not arrange for the purchase of such Shares,
then the Selling Stockholder shall be entitled to a further period of thirty-six
hours within which to procure another party or other parties satisfactory to you
to purchase such Shares on such terms. In the event that, within the respective
prescribed periods, you notify the Selling Stockholder that you have so arranged
for the purchase of such Shares, or the Selling Stockholder notify you that it
has so arranged for the purchase of such Shares, you or the Selling Stockholder
shall have the right to postpone (a) Time of Delivery for a period of not more
than seven days, in order to effect whatever changes may thereby be made
necessary in the Registration Statement or the Prospectus, or in any other
documents or arrangements, and the Company agrees to file promptly any
amendments to the Registration Statement or the Prospectus which in your opinion
may thereby be made necessary. The term "Underwriter" as used in this Agreement
shall include any person substituted under this Section with like effect as if
such person had originally been a party to this Agreement with respect to such
Shares.
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Selling
Stockholder as provided in subsection (a) above, the aggregate number of such
Shares which remains unpurchased does not exceed one-eleventh of the aggregate
number of all the Shares to be purchased at such Time of Delivery, then the
Selling Stockholder shall have the right to require each non-defaulting
Underwriter to purchase the number of Shares which such Underwriter agreed to
purchase hereunder at such Time of Delivery and, in addition, to require each
non-defaulting Underwriter to purchase its pro rata share (based on the number
of Shares which such Underwriter agreed to purchase hereunder) of the Shares of
such defaulting Underwriter or Underwriters for which such arrangements have not
been made; but nothing herein shall relieve a defaulting Underwriter from
liability for its default.
(c) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Selling
Stockholder as provided in subsection (a) above, the aggregate number of such
Shares which remains unpurchased exceeds one-eleventh of the aggregate number of
all of the Shares to be purchased at such Time of Delivery, or if the Selling
Stockholder shall not exercise the right described in subsection (b) above to
require non-defaulting Underwriters to purchase Shares of a defaulting
Underwriter or Underwriters, then this Agreement
23
<PAGE> 24
(or, with respect to the Second Time of Delivery, the obligations of the
Underwriters to purchase and of the Selling Stockholder to sell the Optional
Shares) shall thereupon terminate, without liability on the part of any
non-defaulting Underwriter or the Company or the Selling Stockholder, except for
the expenses to be borne by the Company and the Selling Stockholder and the
Underwriters as provided in Section 6 hereof and the indemnity and contribution
agreements in Section 8 hereof; but nothing herein shall relieve a defaulting
Underwriter from liability for its default.
10. The respective indemnities, agreements, representations, warranties and
other statements of the Company, the Selling Stockholder and the several
Underwriters, as set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement, shall remain in full force and effect,
regardless of any investigation (or any statement as to the results thereof)
made by or on behalf of any Underwriter or any controlling person of any
Underwriter, or the Company, or the Selling Stockholder, or any officer or
director or controlling person of the Company, or any controlling person of the
Selling Stockholder, and shall survive delivery of and payment for the Shares.
11. If this Agreement shall be terminated pursuant to Section 9 hereof,
neither the Company nor the Selling Stockholder shall then be under any
liability to any Underwriter except as provided in Sections 6 and 8 hereof; but,
if for any other reason any Shares are not delivered by or on behalf of the
Selling Stockholder as provided herein, the Selling Stockholder pro rata (based
on the number of Shares to be sold by such Selling Stockholder hereunder), will
reimburse the Underwriters through you for all out-of-pocket expenses approved
in writing by you, including fees and disbursements of counsel, reasonably
incurred by the Underwriters in making preparations for the purchase, sale and
delivery of the Shares not so delivered, but the Company and the Selling
Stockholder shall then be under no further liability to any Underwriter in
respect of the Shares not so delivered except as provided in Sections 6 and 8
hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you [jointly or by Goldman, Sachs & Co. on behalf of you as the
representatives]; and in all dealings with the Selling Stockholder hereunder,
you and the Company shall be entitled to act and rely upon any statement,
request, notice or agreement on behalf of such Selling Stockholder made or given
by any or all of the authorized trustees for such Selling Stockholder.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives in care of Goldman, Sachs &
Co., 32 Old Slip, 9th Floor, New York, New York 10005, Attention: Registration
Department; if to the Selling Stockholder shall be delivered or sent by mail,
telex or facsimile transmission to counsel for such Selling Stockholder at its
address set forth in Schedule II hereto; and if to the Company shall be
delivered or sent by mail, telex or
24
<PAGE> 25
facsimile transmission to the address of the Company set forth in the
Registration Statement, Attention: Secretary; provided, however, that any notice
to an Underwriter pursuant to Section 8(d) hereof shall be delivered or sent by
mail, telex or facsimile transmission to such Underwriter at its address set
forth in its Underwriters' Questionnaire or telex constituting such
Questionnaire, which address will be supplied to the Company or the Selling
Stockholder by you on request. Any such statements, requests, notices or
agreements shall take effect upon receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the benefit
of, the Underwriters, the Company and the Selling Stockholder and, to the extent
provided in Sections 8 and 10 hereof, the officers and directors of the Company
and each person who controls the Company, the Selling Stockholder or any
Underwriter, and their respective heirs, executors, administrators, successors
and assigns, and no other person shall acquire or have any right under or by
virtue of this Agreement. No purchaser of any of the Shares from any Underwriter
shall be deemed a successor or assign by reason merely of such purchase.
14. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
15. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
16. This Agreement may be executed by any one or more of the parties hereto
in any number of counterparts, each of which shall be deemed to be an original,
but all such counterparts shall together constitute one and the same instrument.
If the foregoing is in accordance with your understanding, please sign and
return to us one for the Company and each of the Representatives plus one for
each counsel and the Custodian, if any counterparts hereof, and upon the
acceptance hereof by you, on behalf of each of the Underwriters, this letter and
such acceptance hereof shall constitute a binding agreement among each of the
Underwriters, the Company and the Selling Stockholder. It is understood that
your acceptance of this letter on behalf of each of the Underwriters is pursuant
to the authority set forth in a form of Agreement among Underwriters, the form
of which shall be submitted to the Company and the Selling Stockholder for
examination, upon request, but without warranty on your part as to the authority
of the signers thereof.
25
<PAGE> 26
Any person executing and delivering this Agreement on behalf of the Selling
Stockholder represents by so doing that he has been duly authorized by the
Selling Stockholder.
Very truly yours,
Central Newspapers, Inc.
By:____________________________________
Name:
Title:
Nina Mason-Pulliam Charitable Trust
By:____________________________________
Name: Frank E. Russell
Title: Authorized Trustee
On behalf of the Selling Stockholder
named in Schedule II to this
Agreement.
Accepted as of the date hereof in
New York, New York
Goldman, Sachs & Co.
Donaldson, Lufkin & Jenrette Securities Corporation
By:________________________________________________
(Goldman, Sachs & Co.)
On behalf of each of the Underwriters
26
<PAGE> 27
SCHEDULE I
<TABLE>
<CAPTION> Number of Optional
Total Number of Shares to be Purchased
Firm Shares to be if Maximum Option
Underwriters Purchased Exercised
------------ ----------------- ----------------------
<S> <C> <C>
Goldman, Sachs & Co...............
Donaldson, Lufkin & Jenrette
Securities Corporation..........
[Names of other Underwriters].....
----------------- ----------------------
Total............................. 1,162,478 174,372
</TABLE>
27
<PAGE> 28
SCHEDULE II
<TABLE>
<CAPTION> Number of Optional
Total Number of Shares to be Sold if
Firm Shares to Maximum Option
The Selling Stockholder be Purchased Exercised
----------------------- ----------------- --------------------
<S> <C> <C>
Nina Mason-Pulliam Charitable Trust.... 1,162,478 174,372
</TABLE>
28
<PAGE> 29
ANNEX I
Pursuant to Section 7(d) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with respect to the
Company and its subsidiaries within the meaning of the Act and the applicable
published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any supplemental
financial information and schedules (and, if applicable, financial forecasts
and/or pro forma financial information) examined by them and included or
incorporated by reference in the Registration Statement or the Prospectus comply
as to form in all material respects with the applicable accounting requirements
of the Act or the Exchange Act, as applicable, and the related published rules
and regulations thereunder; and, if applicable, they have made a review in
accordance with standards established by the American Institute of Certified
Public Accountants of the consolidated interim financial statements, selected
financial data, pro forma financial information, financial forecasts and/or
condensed financial statements derived from audited financial statements of the
Company for the periods specified in such letter, as indicated in their reports
thereon, copies of which have been separately furnished to the representatives
of the Underwriters (the "Representatives") and are attached hereto;
(iii) They have made a review in accordance with standards established by
the American Institute of Certified Public Accountants of the unaudited
condensed consolidated statements of income, consolidated balance sheets and
consolidated statements of cash flows included in the Prospectus and/or included
in the Company's quarterly report of Form 10-Q incorporated by reference into
the Prospectus as indicated in their reports thereon copies of which have been
separately furnished to the Representatives are attached hereto; and on the
basis of specified procedures including inquiries of officials of the Company
who have responsibility for financial and accounting matters regarding whether
the unaudited condensed consolidated financial statements referred to in
paragraph (vi)(A)(i) below comply as to form in all material respects with the
applicable accounting requirements of the Act and the Exchange Act and the
related published rules and regulations, nothing came to their attention that
caused them to believe that the unaudited condensed consolidated financial
statements do not comply as to form in all material respects with the applicable
accounting requirements of the Act and the Exchange Act and the related
published rules and regulations;
(iv) The unaudited selected financial information with respect to the
consolidated results of operations and financial position of the Company for the
five most recent fiscal
<PAGE> 30
years included in the Prospectus and included or incorporated by reference in
Item 6 of the Company's Annual Report on Form 10-K for the most recent fiscal
year agrees with the corresponding amounts (after restatement where applicable)
in the audited consolidated financial statements for such five fiscal years
which were included or incorporated by reference in the Company's Annual Reports
of Form 10-K for such fiscal years;
(v) They have compared the information in the Prospectus under selected
captions with the disclosure requirements of Regulation S-K and on the basis of
limited procedures specified in such letter nothing came to their attention as a
result of the foregoing procedures that caused them to believe that this
information does not conform in all material respects with the disclosure
requirements of Items 301, 302, 402 and 503(d), respectively, of Regulation S-K;
(vi) On the basis of limited procedures, not constituting an examination in
accordance with generally accepted auditing standards, consisting of a reading
of the unaudited financial statements and other information referred to below, a
reading of the latest available interim financial statements of the Company and
its subsidiaries, inspection of the minute books of the Company and its
subsidiaries since the date of the latest audited financial statements included
or incorporated by reference in the Prospectus, inquiries of officials of the
Company and its subsidiaries responsible for financial and accounting matters
and such other inquiries and procedures as may be specified in such letter,
nothing came to their attention that caused them to believe that:
(A)(i) the unaudited condensed consolidated statements of income,
consolidated balance sheets and consolidated statements of cash flows
included in the Prospectus and/or included or incorporated by reference in
the Company's Quarterly Reports on Form 10-Q incorporated by reference in
the Prospectus do not comply as to form in all material respects with the
applicable accounting requirements of the Exchange Act as it applies to
Form 10-Q and the related published rules and regulations, or (ii) any
material modifications should be made to the unaudited condensed
consolidated statements of income, consolidated balance sheets and
consolidated statements of cash flows included in the Prospectus or
included in the Company's Quarterly Reports of Form 10-Q incorporated by
reference in the Prospectus, for them to be in conformity with generally
accepted accounting principles;
(B) any other unaudited income statement data and balance sheet items
included in the Prospectus so not agree with the corresponding items in the
unaudited consolidated financial statements from which such data and items
were derived, and any such unaudited data and items were not determined on
a basis substantially consistent with the basis for the corresponding
amount in the audited consolidated
2
<PAGE> 31
financial statements included or incorporated by reference in the Company's
Annual Report on Form 10-K for the most recent fiscal year;
(C) the unaudited financial statements which were not included in the
Prospectus but from which were derived the unaudited condensed financial
statements referred to in Clause (A) and any unaudited income statement data and
balance sheet items included in the Prospectus and referred to in Clause (B)
were not determined on a basis substantially consistent with the basis for the
audited financial statements included or incorporated by reference in the
Company's Annual Report on Form 10-K for the most recent fiscal year;
(D) any unaudited pro forma consolidated condensed financial statements
included or incorporated by reference in the Prospectus do not comply as to form
in all material respects with the applicable accounting requirements of the Act
and the published rules and regulations thereunder or the pro forma adjustments
have not been properly applied to the historical amounts in the compilation of
those statements;
(E) as of a specified date not more than five days prior to the date of
such letter, there have been any changes in the consolidated capital stock
(other than issuances of capital stock upon exercise of options and stock
appreciation rights, upon earn-outs of performance shares and upon conversions
of convertible securities, in each case which were outstanding on the date of
the latest balance sheet included or incorporated by reference in the
Prospectus) or any increase in the consolidated long-term debt of the Company
and its subsidiaries, or any decreases in consolidated net current assets or
stockholders' equity or any other items specified by the Representatives, or any
increases in any items specified by the Representatives, in each case as
compared with amounts shown in the latest balance sheet included or incorporated
by reference in the Prospectus, except in each case for changes, increases or
decreases which the Prospectus discloses have occurred or may occur or which are
described in such letter; and
(F) for the period from the date of the latest financial statements
included or incorporated by reference in the Prospectus to the specified date
referred to in Clause (E) there were any decreases in consolidated net revenues
or operating profit or the total or per share amounts of consolidated net
income or other items specified by the Representatives, or any increases in any
items specified by the Representatives, in each case as compared with the
comparable period of the preceding year and with any other period of
corresponding length specified by the Representatives, except in each case for
increases or decreases which the Prospectus discloses have occurred or may occur
or which are described in such letter; and
3
<PAGE> 32
(vii) In addition to the examination referred to in their report(s)
included or incorporated by reference in the Prospectus and the limited
procedures, inspection of minute books, inquiries and other procedures
referred to in paragraphs (iii) and (vi) above, they have carried out
certain specified procedures, not constituting an examination in accordance
with generally accepted auditing standards, with respect to certain
amounts, percentages and financial information specified by the
Representatives which are derived from the general accounting records of
the Company and its subsidiaries, which appear in the Prospectus (excluding
documents incorporated by reference) or in Part II of, or in exhibits and
schedules to, the Registration Statement specified by the Representatives
or in documents incorporated by reference in the Prospectus specified by
the Representatives, and have compared certain of such amounts, percentages
and financial information with the accounting records of the Company and
its subsidiaries and have found them to be in agreement.
4
<PAGE> 33
ANNEX II(a)
[Insert form of Underwriters' Counsel Opinion]
<PAGE> 34
ANNEX II(b)
[Insert form of Company Counsel Opinion]
<PAGE> 35
ANNEX II(c)
[Insert form of Selling Shareholder's Counsel Opinion]
<PAGE> 1
Exhibit 4.1
ARTICLES OF AMENDMENT TO
ARTICLES OF INCORPORATION OF
CENTRAL NEWSPAPERS, INC.
The undersigned officer of Central Newspapers, Inc., an Indiana corporation
(the "Corporation"), pursuant to the provisions of the Indiana Business
Corporation Law (as amended from time to time, the "Act"), desiring to give
notice of corporate action effectuating amendment of its Articles of
Incorporation by the adoption of the Articles of Amendment set forth below,
certifies the following facts:
ARTICLE 1
AMENDMENT
SECTION 1. The date of incorporation of the Corporation is March 30, 1934.
SECTION 2. The name of the Corporation following this amendment to the
Articles of Incorporation is Central Newspapers, Inc.
SECTION 3. The following sections of the Corporation's Articles of
Incorporation are amended as follows.
AMENDMENT 1
The exact text of Article 4, Section 4.01, of the Corporation's Articles
of Incorporation is hereby amended to read as follows:
ARTICLE 4
TERMS OF SHARES
SECTION 4.01. AMOUNT. The total number of shares which the Corporation
shall have authority to issue is two hundred and eighty million
(280,000,000) shares ("Shares"). One hundred and fifty million
(150,000,000) Shares shall constitute a separate and single class of Shares
known as "Class A Common Stock," which shall be without par value and shall
not be issued in series. One hundred and thirty million (130,000,000)
Shares shall constitute a separate and single class of Shares known as
"Class B Common Stock," which shall be without par value and shall not be
issued in series. All Shares of Class A Common Stock and Class B Common
Stock shall have the same relative rights, preferences, and limitations,
except as otherwise provided in these Articles of Incorporation, as the
same may, from time to time, be otherwise amended (these "Articles").
<PAGE> 2
AMENDMENT 2
The exact text of Article 6 of the Corporation's Articles of Incorporation
is hereby amended to read as follows:
ARTICLE 6
Code of By-Laws; Amendments of Articles
Section 6.01. Code of By-Laws. The Board of Directors of the
Corporation shall have power, without the assent or vote of the
Shareholders, to make, alter, amend or repeal the By-Laws of the
Corporation, but the affirmative vote of a number of Directors equal to a
majority of the number who would constitute a full board of Directors at
the time of such action shall be necessary to take any action for the
making, alteration, amendment or repeal of the By-Laws.
Section 6.02. Amendment of Articles. The Corporation reserves the
right to amend, alter, change or repeal any provision contained in these
Articles, or in any amendment hereto, or to add any provision to these
Articles or to any amendment hereto, in any manner now or hereafter
prescribed or permitted by the provisions of the Act or any amendment
thereto, or by the provisions of any other applicable statute of the State
of Indiana; and all rights conferred upon Shareholders in these Articles or
any amendment hereto are granted subject to this reservation.
ARTICLE II
Manner of Adoption and Vote
AMENDMENT 1
Action by Directors. The Board of Directors of the Corporation duly adopted
a resolution proposing to amend the terms of Article 4 of the Articles of
Incorporation to increase the number of authorized Shares ("Amendment 1"). The
resolution was adopted by the Board of Directors at a meeting held on March 2,
1998.
Action by Shareholders. The Shareholders of the Corporation entitled to
vote in respect of the Articles of Amendment adopted Amendment 1. The number of
outstanding shares, number of votes entitled to be cast and number of votes
represented at the annual meeting held on May 15, 1998, pursuant to which the
Articles of Amendment were approved by the Shareholders of the Corporation, are
as follows:
- 2 -
<PAGE> 3
===============================================================================
Class A Class B
Shareholders: Common Stock Common Stock
- -------------------------------------------------------------------------------
Number of Outstanding 22,091,159 31,345,159
Shares:
- -------------------------------------------------------------------------------
Number of Votes 2,209,116 31,345,159
Entitled to be Cast:
- -------------------------------------------------------------------------------
Number of Votes 1,994,601 31,202,500
Represented at
the Meeting:
- -------------------------------------------------------------------------------
Shares Voted in Favor: 1,612,407 30,928,750
- -------------------------------------------------------------------------------
Shares Voted Against: 373,527 273,750
- -------------------------------------------------------------------------------
Total 1,985,934 31,202,500
===============================================================================
AMENDMENT 2
ACTION BY DIRECTORS. The Board of Directors of the Corporation duly adopted
a resolution proposing to amend the terms of Article 6 of the Articles of
Incorporation to remove the provisions regarding the indemnification of the
Corporation's directors and officers ("Amendment 2"). The resolution was adopted
by the Board of Directors at a meeting held on March 2, 1998.
ACTION BY SHAREHOLDERS. The Shareholders of the Corporation entitled to
vote in respect of the Articles of Amendment adopted Amendment 2. The number of
outstanding shares, number of votes entitled to be cast and number of votes
represented at the annual meeting held on May 15, 1998, pursuant to which the
Articles of Amendment were approved by the Shareholders of the Corporation, are
as follows:
-3-
<PAGE> 4
=================================================
Class A Common Stock
Shareholders: and Class B Common
Stock Voting Together
as a Single Class
- -------------------------------------------------
Number of Outstanding 53,436,659
Shares:
- -------------------------------------------------
Number of Votes 33,554,616
Entitled to be Cast:
- -------------------------------------------------
Number of Votes 33,197,101
Represented at
the Meeting:
- -------------------------------------------------
Shares Voted in Favor: 33,127,305
- -------------------------------------------------
Shares Voted Against: 56,416
- -------------------------------------------------
Total: 33,183,721
=================================================
-4-
<PAGE> 5
ARTICLE III
Compliance With Legal Requirements
The manner of adoption of the Articles of Amendment and the vote by which
they were adopted constitute full legal compliance with the provisions of the
Act, the Articles of Incorporation and the By-Laws of the Corporation.
I hereby verify, subject to the penalties of perjury, that the statements
contained herein are true, this 15th day of May, 1998.
CENTRAL NEWSPAPERS, INC.
By: Eric S. Tooker
------------------------------
Eric S. Tooker, Vice President
and General Counsel
-5-
<PAGE> 6
ARTICLES OF RESTATEMENT
OF
CENTRAL NEWSPAPERS, INC.
The undersigned officer of Central Newspapers, Inc. (hereinafter referred
to as the "Corporation"), a corporation existing pursuant to the provisions of
the Indiana Business Corporation Law, as amended (hereinafter referred to as
the "Act"), desiring to give notice of corporate action effectuating amendment
by the adoption of Amended and Restated Articles of Incorporation to supersede
and take the place of its heretofore existing Amended and Restated Articles of
Incorporation, hereby certifies the following facts:
ARTICLE I
Text of the Amendment
The exact text of the entire Articles of Incorporation of the Corporation,
as amended (hereinafter referred to as the "Amended Articles"), is set forth in
"Exhibit A," attached hereto and made a part hereof.
ARTICLE II
Manner of Adoption and Vote
Section 1. Action by Directors. The Board of Directors of the
Corporation, at a meeting thereof, duly called, constituted and held on July
14, 1989, adopted resolutions (a) approving the Amended Articles, (b) directing
the submission of the Amended Articles to a vote of the Shareholders and (c)
recommending the adoption of the Amended Articles.
Section 2. Action by Shareholders. The Amended Articles contain
amendments requiring the approval of the Shareholders of the Corporation. The
Shareholders of the Corporation entitled to vote in respect of the Amended
Articles, at a meeting thereof (the "Meeting") duly called, constituted and
held on July 28, 1989, at which a quorum of such Shareholders was present in
person or by proxy, adopted and approved the Amended Articles.
Pursuant to Indiana Code Section 23-1-38-4, the holders of shares of the
outstanding Class A Common Stock of the Corporation, without par value ("Class
A Stock"), and the holders of outstanding shares of the Class B Common Stock of
the Corporation, without par value ("Class B Stock"), were the only voting
groups entitled to vote in respect of the Amended Articles. The number of
outstanding shares of Class A Stock and Class B Stock, the number of votes
entitled to be cast by
<PAGE> 7
the holders of shares of Class A Stock and Class B Stock, the number of votes
represented at the Meeting and the number of votes cast in favor and against
approval of the Amended Articles are set forth below:
<TABLE>
<CAPTION>
Class A Class B
Stock Stock
-------- -------
<S> <C> <C>
Number of Shares Outstanding 115,835 13,309
Number of Votes Entitled to be Cast 115,835 13,309
Number of Votes Represented at Meeting 70,057 12,661
Votes in Favor 70,057 12,661
Votes Against -0- -0-
</TABLE>
Section 3. Compliance with Legal Requirements. The manner of adoption
of the Amended Articles, and the vote by which they were adopted, constitute
full legal compliance with the provisions of the Act, the Articles of
Incorporation, and the By-Laws of the Corporation.
Section 4. Effective Date. The Amended Articles shall become effective
when filed with the Indiana Secretary of State.
EXECUTED in Indianapolis, Indiana this 28th day of July, 1989.
CENTRAL NEWSPAPERS, INC.
By: /s/ David B. Wright
------------------------------
David B. Wright,
Secretary
-2-
<PAGE> 8
EXHIBIT A
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
CENTRAL NEWSPAPERS, INC.
ARTICLE 1
Identification
Section 1.01. Name. The name of the Corporation is CENTRAL
NEWSPAPERS, INC.
ARTICLE 2
Purpose and Powers
Section 2.01. Purpose. The purpose for which the Corporation is formed is
the transaction of any or all lawful business for which corporations may be
incorporated under the Indiana Business Corporation Law (such law, and any
successor thereto, as amended from time to time, is hereinafter referred to as
the "Act").
Section 2.02. Powers. The Corporation shall have the same powers as an
individual to do all things necessary or convenient to carry out its business
and affairs, subject to any limitations or restrictions imposed by applicable
law or these Articles.
ARTICLE 3
Registered Office and Registered Agent
Section 3.01. Registered Office and Agent. The name of the registered
agent and the street address of the registered office of the Corporation are as
follows:
David B. Wright
307 North Pennsylvania Street
Indianapolis, Indiana
ARTICLE 4
Terms of Shares
Section 4.01. Amount. The total number of shares which the Corporation
shall have authority to issue is one hundred fifty million shares (150,000,000)
("Shares"). Seventy-five million (75,000,000) Shares shall constitute a
separate and single class of Shares known as "Class A Common Stock," which
shall be without par value and shall not be issued in series. Fifty million
(50,000,000) Shares shall constitute a separate and single class of Shares
known as "Class B Common Stock," which shall be without par value and shall not
be issued in series. All Shares of Class A Common Stock and Class B Common
Stock shall have the same relative rights, preferences, and limitations, except
as otherwise provided in these Articles of Incorporation, as the same may, from
time to time, be otherwise amended (these "Articles").
<PAGE> 9
Section 4.02. Preferred Stock. All the remaining Shares shall constitute a
separate and single class of Shares known as "Preferred Stock," which may be
issued in one or more series. The Board of Directors of the Corporation (the
"Board") has authority to determine and state the relative rights (including
voting rights, if any), preferences and limitations of each such series by the
adoption and filing in accordance with the Act, prior to the issuance of such
series, of an amendment or amendments to these Articles determining the terms
of such series (a "Preferred Stock Amendment"); provided, however, that Shares
of the Preferred Stock shall not have voting rights without the prior approval
of the holders of a majority of he Shares of Class B Common Stock. All Shares
of Preferred Stock of the same series shall have the same relative rights,
preferences and limitations.
Section 4.03. Equitable Interests in Shares. The Corporation shall be
entitled to treat the person in whose name any Share is registered on the books
of the Corporation as the owner thereof for all purposes, and shall not be
bound to recognize any equitable or other claim to, or interest in, such Share
on the part of any other person, whether or not the Corporation shall have
notice thereof.
Section 4.04. Voting Rights of Class A Common Stock. Except as may
otherwise by required by the Act, the holders of Shares of Class A Common Stock
shall vote together with the holders of Shares of Class B Common Stock as a
single voting group; provided that, the holders of Shares of Class A Common
Stock shall have one-tenth (1/10) of a vote for each Share.
Section 4.05. Voting Rights of Class B Common Stock. Except as may
otherwise be required by the Act, the holders of Shares of Class B Common Stock
shall have one (1) vote per Share on all matters that may be submitted to a
vote of the Shareholders.
Section 4.06. Voting Rights of Preferred Shares. The holders of the Shares
of a series of Preferred Stock shall have only such voting rights, if any, for
Shares of such series as may be provided in the Preferred Stock Amendment for
such series, except as otherwise required in the Act.
Section 4.07. Stock Combinations and Subdivisions. Shares of Class A
Common Stock shall not be combined or subdivided unless at the same time Shares
of Class B Common Stock are combined or subdivided in the same proportion as
the Shares of the Class A Common Stock. If Shares of Class B Common Stock are
combined or subdivided, a proportionate combination or subdivision of Shares of
Class A Common Stock shall be made at the same time.
Section 4.08. Conversion. The Shares of Class B Common Stock shall be
convertible at any time at the option of the record holder thereof, in the
manner hereinafter provided, into fully paid and nonassessable Shares of Class
A Common Stock of the Corporation at the rate of one tenth (.1) of a Share of
Class A Common Stock for each Share of Class B Common Stock (the "Share
Conversion Rate"). No payment or adjustment shall be made for dividends on any
Shares of Class A Common Stock that shall be issuable upon such conversion, but
all dividends unpaid on such Shares of Class B Common Stock up to the dividend
payment date immediately preceding the date of conversion shall be payable to
the converting Shareholder.
-2-
<PAGE> 10
Clause (a). Recapitalization, Merger, Sale. In case of any recapitalization
or change of outstanding Shares of Class A Common Stock, or in case of any
merger of the Corporation with or into another corporation, or in case of any
exchange of Shares of the Corporation for shares of another corporation or for
other consideration, or in case of any sale or conveyance to another corporation
of all or substantially all of the property of the Corporation, the Share
Conversion Rate shall be converted so that the holder of each outstanding Share
of Class B Common Stock, or its equivalent after such transaction, shall have
the right thereafter, so long as such holder's conversion right hereunder shall
exist, to convert such Share into the kind and amount of shares of stock and
other securities and property receivable upon such recapitalization, change,
share exchange, merger, sale or conveyance by a holder of the number of Shares
of Class A Common Stock of the Corporation into which such Shares of Class B
Common Stock might have been converted immediately prior to such
reclassification, change, share exchange, merger, sale or conveyance. Any
subdivision or combination of Shares shall not be deemed to be a
recapitalization of the Class A Common Stock of the Corporation for the purposes
of this clause (a).
Clause (b). Conversion of Shares. To convert Shares of Class B Common Stock
into Shares of Class A Common Stock, the holder thereof shall surrender the
certificate or certificates for Shares of Class B Common Stock, duly endorsed to
the Corporation or in blank, at the office of any Transfer Agent for the Shares
of Class B Common Stock (or such other place as may be designated by the
Corporation), and shall give written notice to the corporation at said office
that such holder elects to convert the same and shall state in writing therein
the name or names in which the holder wishes the certificate or certificates for
Shares of Class A Common Stock to be issued. The Corporation shall, as soon as
practicable thereafter, deliver at said office to such holder of Shares of Class
B Common Stock or to such holder's nominee or nominees, a certificate or
certificates for the number of full Shares of Class A Common Stock to which such
shall be entitled as aforesaid and shall make appropriate payment in cash for
any fractional Shares. Shares of Class B Common Stock shall be deemed to have
been converted as of the date of the surrender of such Shares for conversion as
provided above, and the person or persons entitled to receive the Shares of
Class A Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder or holders of such Shares of Class A Common Stock
on such date.
Clause (c). Fractional Shares. No fractions of Shares of Class A Common
Stock shall be issued upon conversion, but in lieu thereof the Corporation shall
adjust such fractional interest by payment to the holders of an amount in cash
equal (computed to the nearest cent) to the same fraction of the closing bid
price on the business day immediately preceding such conversion as recorded on
the principal stock exchange, market or system on which trades in the Class A
Common Stock are recorded.
Clause (d). Reserved Shares. A number of authorized Shares of Class A
Common Stock sufficient to provide for the conversion of the Shares of Class
B Common Stock outstanding upon the basis here provided shall at all times be
reserved for such conversion.
Section 4.09. Distributions Upon Shares. Subject to the limitations imposed
by the Act, the Board has authority to authorize and direct the payment of
dividends and the making of other distributions by the Corporation in respect of
Shares of the
-3-
<PAGE> 11
issued and outstanding Class A Common Stock and Class B Common Stock, in the
form of cash, property or Shares, at such time, in such amount, from such
sources and upon such terms and conditions as it may, from time to time,
determine, subject to the following restrictions, limitations, conditions and
requirements.
Clause (a). Class B Share Dividend. Notwithstanding any other section or
clause of these Articles, the Board of Directors of the Corporation may
authorize and declare a one-time share dividend (the "Class B Share Dividend")
of eleven and one half (11.5) Shares of Class B Common Stock with respect to
each Share of Class B Common Stock issued and outstanding as of the effective
date of these Articles (the "Effective Date"), which share dividend shall
become effective as of the Effective Date, without making a simultaneous share
dividend in the same proportion on the Class A Common Stock.
Clause (b). Simultaneous Distributions. Except for the Class B Share
Dividend, at any time that a distribution is made with respect to Shares of
either the Class A Common Stock or the Class B Common Stock, a distribution
must be made with respect to Shares of both the Class A Common Stock and the
Class B Common Stock.
Clause (c). Distribution Conversion Rate. Any distribution, including, but
not limited to, a distribution in the event of liquidation, dissolution or
winding up of the Corporation, declared and payable in cash, Shares (other than
Class A Common Stock and Class B Common Stock) or other property with respect
to Shares of Class A Common Stock (a "Class A Distribution") shall be paid with
respect to the Shares of Class B Common Stock as well, except that each
distribution made with respect to the Class B Common Stock shall be one-tenth
(1/10) of the amount of the Class A Distribution made at the same time.
Clause (d). Share Dividends. Share dividends payable in Shares of Class B
Common Stock may be paid only on Shares of Class B Common Stock, and share
dividends payable in Shares of Class A Common Stock may be paid only on Shares
of Class A Common Stock. If a share dividend payable in Class A Common Stock is
made on the Class A Common Stock, the Corporation must also make a simultaneous
share dividend in the same proportion on the Class B Common Stock. Except for
the Class B Share Dividend, if a share dividend payable in Class B Common Stock
is made on the Class B Common Stock, the Corporation must also make a
simultaneous share dividend in the same proportion on the Class A Common Stock.
Clause (e). Fractional Interests. If, pursuant to Clause (d) of this
Section 4.09, the holders of Shares of Class A Common Stock or Class B Common
Stock become entitled to receive share dividends consisting of fractions of
Shares, the Board shall, in its discretion, (1) distribute the fractional
Shares or (2) distribute in lieu thereof an amount in cash equal to the value
of such fractional Shares as determined by the Board of Directors.
ARTICLE 5
Directors
Section 5.01. Number and Qualification. The number of Directors of the
Corporation shall be specified, from time to time, by the Code of By-Laws (the
"By-Laws"), which number may be increased or decreased from time to time by
-4-
<PAGE> 12
amendment of the By-Laws. Directors need not be Shareholders of the Corporation.
ARTICLE 6
Code of By-Laws; Indemnification;
Amendments of Articles
Section 6.01. Code of By-Laws. The Board of Directors of the Corporation
shall have power, without the assent or vote of the Shareholders, to make,
alter, amend or repeal the By-Laws of the Corporation, but the affirmative vote
of a number of Directors equal to a majority of the number who would constitute
a full Board of Directors at the time of such action shall be necessary to take
any action for the making, alteration, amendment or repeal of the By-Laws.
Section 6.02. Indemnification. The Corporation shall indemnify a
Director or Officer of the Corporation who was wholly successful, on the merits
or otherwise, in the defense of any proceeding to which the Director or Officer
was a party because the Director or Officer is or was a Director or Officer of
the Corporation against reasonable expenses incurred by the Director or Officer
in connection with the proceeding. The Corporation shall indemnify an
individual made a party to a proceeding because the individual is or was a
Director or Officer of the Corporation against liability if the Director or
Officer has met the standard of conduct set forth in Indiana Code Section
23-1-37-8. The Corporation also may pay for or reimburse the reasonable
expenses incurred by a Director or Officer of the Corporation who is a party to
a proceeding in advance of final disposition of the proceeding upon compliance
with the provisions of Indiana Code Section 23-1-37-10. The indemnification and
advancement of expenses for Directors and Officers of the Corporation shall
apply when such persons are serving at the Corporation's request while a
Director or Officer of the Corporation as a Director, Officer, partner,
trustee, employee or agent of another foreign or domestic corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise,
whether or not for profit, as well as in their official capacity with the
Corporation. The Corporation also may purchase and maintain insurance on behalf
of an individual specified in Indiana Code Section 23-1-37-14 against liability
asserted against or incurred by such individual in any of the capacities
specified in such Section or arising from the individual's status as a
Director, Officer, employee or agent of the Corporation, whether or not the
Corporation would have power to indemnify the individual against the same
liability under the Act. All references in this paragraph to Indiana Code
Section 23-1-37 shall be deemed to include any amendment or successor thereto.
When a word or phrase used in this paragraph is defined in Indiana Code Section
23-1-37, such word or phrase shall have the same meaning in this Section that
it has in Indiana Code Section 23-1-37 unless the context otherwise requires.
Nothing contained in this paragraph shall limit or preclude the exercise of any
right relating to indemnification or advance of expenses to any person who is or
was a Director, Officer, employee or agent of the Corporation or the ability of
the Corporation otherwise to indemnify or advance expenses to any such person
by contract or in any other manner. If any word, clause or sentence of the
foregoing provisions regarding indemnification or advancement of expenses shall
be held invalid as contrary to law or public policy, it shall be severable and
the provisions remaining shall not be otherwise affected. All references in this
Section to
-5-
<PAGE> 13
"Director," "Officer," "employee" and "agent" shall include the heirs, estate,
executors, administrators and personal representatives of such persons.
Section 6.03. Amendment of Articles. The Corporation reserves the right to
amend, alter, change or repeal any provision contained in these Articles, or in
any amendment hereto, or to add any provision to these Articles or to any
amendment hereto, in any manner now or hereafter prescribed or permitted by the
provisions of the Act or any amendment thereto, or by the provisions of any
other applicable statute of the State of Indiana; and all rights conferred upon
Shareholders in these Articles or any amendment hereto are granted subject to
this reservation.
-6-
<PAGE> 1
Exhibit 4.2
AMENDED AND RESTATED
CODE OF BY-LAWS
OF
CENTRAL NEWSPAPERS, INC.
ARTICLE 1
Identification, Records, Seal and Fiscal Year
Section 1.01. Name. The name of the Corporation is Central Newspapers,
Inc. (the "Corporation").
Section 1.02. Place of Keeping Corporate Books and Records. The
Corporation shall keep at its principal office a copy of (a) its Articles of
Incorporation and all amendments thereto currently in effect (the "Articles");
(b) its Code of By-Laws and all amendments thereto currently in effect (the
"By-Laws"); (c) resolutions adopted by the Board of Directors (the "Board")
with respect to one or more classes or series of shares and fixing their
relative rights, preferences, and limitations, if shares issued pursuant to
these resolutions are outstanding; (d) minutes of all meetings of the
shareholders of the Corporation (each a "Shareholder" and, collectively, the
"Shareholders") and records of all actions taken by the Shareholders without a
meeting (collectively, "Shareholders Minutes") for the prior three years;
(e) all written communications by the Corporation to the Shareholders including
the financial statements furnished by the Corporation to the Shareholders for
the prior three years; (f) a list of the names and business addresses of the
current directors of the Corporation (the "Directors") and the current officers
of the Corporation (the "Officers"); and (g) the most recent Annual Report of
the Corporation as filed with the Secretary of State of Indiana. The Corporation
shall also keep and maintain at its principal office, or at such other place or
places within or without the State of Indiana as may be provided, from time to
time, in these By-Laws, (a) minutes of all meetings of the Board and of each
committee, and records of all actions taken by the Board and by each committee
without a meeting; (b) Shareholders Minutes; (c) appropriate accounting records
of the Corporation; and (d) a record of the Shareholders in a form that permits
preparation of a list of the names and addresses of all the Shareholders, in
alphabetical order by class of shares, stating the number and class of shares
held by each Shareholder. All of the records of the Corporation described in
this Section shall be maintained in written form or in another form capable of
conversion into written form within a reasonable time.
Section 1.03. Seal. The corporate seal of the Corporation shall be in
circular form and mounted upon a metal die, suitable for impressing upon paper,
and about the upper periphery of the seal shall appear the words "Central
Newspapers, Inc." and about the lower periphery thereof shall appear the word
"Indiana" and in the center thereof shall appear the word "Seal" and the year
"1934". The corporate seal shall be used for ceremonial or traditional purposes
in such circumstances as the Secretary or Assistant Secretary shall deem
appropriate. The Corporation shall not be required to use the corporate seal
for any purpose whatsoever, and the absence of the impression of the corporate
seal from any document shall not affect in any way the validity or effect of
such document.
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Section 1.04. Fiscal Year. Each fiscal year of the Corporation shall end
on the last Sunday of each calendar year, and the next fiscal year shall begin
on the Monday following the last Sunday in each calendar year.
ARTICLE 2
Shares
Section 2.01. Certificates for Shares. Each holder of the shares of the
Corporation shall be entitled to a certificate evidencing the shares owned by
such Shareholder in such form as the Board may prescribe from time to time.
However, unless the Articles provide otherwise, the Board may authorize the
issue of some or all of the shares of any or all of the Corporation's classes
or series without certificates. Within a reasonable time after the issue or
transfer of shares without certificates, the Corporation or any of its transfer
agents or registrars shall send the Shareholder a written statement of the
information required on certificates by the Indiana Business Corporation Law, as
amended from time to time (the "Act"), and the information required by the
Indiana Uniform Commercial Code, as in effect from time to time. A holder of
such shares may request that a certificate be provided to him by giving notice
to the Secretary of the Corporation. The certificate shall be provided in the
form prescribed by the Board.
Section 2.02. Transfer of Shares. The shares of the Corporation shall be
transferable only on the books of the Corporation upon delivery to the
Corporation or any of its transfer agents of the certificate(s) representing
the same or, in the case of shares without certificates, an instrument of
assignment in respect of the shares being transferred, in form and substance
satisfactory to the Corporation and any of its transfer agents, properly
endorsed by the registered holder or by his duly authorized attorney, such
endorsement to be guaranteed by a bank or registered securities broker or
dealer. The requirement for such guarantee may be waived in writing upon the
form of endorsement by the President of the Corporation.
Section 2.03. Lost, Stolen or Destroyed Certificates. Each holder of the
shares of the Corporation shall immediately notify the Corporation or one of
its agents of any loss, theft or destruction of any certificate evidencing
ownership of shares of the Corporation. The Corporation may issue a new
certificate for shares in the place of any certificate theretofore issued and
alleged to have been lost, stolen or destroyed, but the Board may require the
owner of such lost, stolen or destroyed certificate, or his legal
representative, to furnish affidavit as to such loss, theft or destruction and
to give a bond in such form and substance, and with such surety or sureties,
with fixed or open penalty, as it may direct to indemnify the Corporation
against any claim that may be made on account of the alleged loss, theft or
destruction of such certificate. A new certificate may be issued without
requiring any bond when, in the judgment of the Board, it is not imprudent to
do so.
Section 2.04. Issue and Consideration for Shares. The Board may authorize
shares to be issued for consideration consisting of any tangible or intangible
property or benefit to the
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Corporation, including cash, promissory notes, services performed, contracts for
services to be performed, or other securities of the Corporation. If shares are
issued for promissory notes or for promises to render services in the future,
the Corporation shall report in writing to the Shareholders the number of shares
authorized to be so issued with or before the notice of the next Shareholders'
meeting. However, if the Corporation is subject to the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), these reporting requirements are
satisfied by complying with the proxy disclosure provisions of the Exchange Act.
The adequacy of the consideration is to be determined by the Board, and that
determination is conclusive insofar as the adequacy of the shares relates to
whether the shares are validly issued, fully paid, and nonassessable. Once the
Corporation receives the consideration for which the Board authorized the
issuance of the shares, the shares are fully paid and nonassessable.
Section 2.05. Transfer Agent and Registrars. The Board may appoint one or
more transfer agents, one or more registrars, and one or more agents to act in
the dual capacity of transfer agent and registrar with respect to the shares of
the Corporation.
ARTICLE 3
Meetings of Shareholders
Section 3.01. Place of Meetings. All meetings of Shareholders shall be held
at the principal office of the Corporation or at such other place, within or
without the State of Indiana, as may be specified in the respective notices or
waivers of notice thereof.
Section 3.02. Annual Meeting. Unless otherwise determined by the Board, the
annual meeting of the Shareholders for the election of Directors, and for the
transaction of such other business as may properly come before the meeting,
shall be held at 10:00 in the forenoon of the second Wednesday in May of each
year, if such day is not a legal holiday, and if a holiday then on the first
following day that is not a legal holiday. Failure to hold the Annual Meeting at
the designated time does not affect the validity of any corporate action.
Section 3.03. Special Meetings. Special meetings, for any purpose or
purposes (unless otherwise prescribed by law), may be called by the Board or the
President, and shall be called by the President or any Officer designated by the
President at (a) the request in writing of a majority of the Board, or (b) at
the written demand, delivered to the Secretary, of Shareholders holding of
record not less than 25% of the voting power of all the shares of the
Corporation issued and outstanding and entitled by the Articles to vote on the
business proposed to be transacted thereat. All requests or demands for special
meetings shall state the purpose or purposes thereof, and the business
transacted at such meeting shall be confined to the purposes stated in the call
and matters germane thereto.
Section 3.04. Record Date. The Board may fix a record date, not exceeding
seventy (70) days prior to the date of any meeting of the Shareholders, for the
purpose of determining the Shareholders entitled to notice of and to vote at
such meeting. In the absence of action by the Board
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fixing a record date as herein provided, the record date shall be the thirtieth
(30th) day prior to the date of the meeting. A new record date must be fixed if
a meeting of Shareholders is adjourned to a date more than 120 days after the
date fixed for the original meeting.
Section 3.05. Notice of Meetings. A written or printed notice, stating the
place, day and hour of the meeting, and, in the case of a special meeting or
when otherwise required by any provision of the Act, the Articles or these
By-Laws, the purpose or purposes for which the meeting is called, shall be
delivered or mailed by the Secretary or by the persons calling the meeting to
each Shareholder at the time entitled to vote, at such address as appears on the
records of the Corporation, at least ten (10) and not more than sixty (60) days
before the date of the meeting. Notice of any special meeting called at the
written demand of Shareholders shall be delivered or mailed within sixty (60)
days of the Secretary's receipt of such demand. Each Shareholder who has in the
manner provided in Section 3.06 of these By-Laws waived notice of a
Shareholders' meeting, or who personally attends a Shareholders' meeting, or is
represented thereat by a proxy duly authorized to appear by an instrument of
proxy complying with the requirements hereinafter set forth, shall be
conclusively presumed to have been given due notice of such meeting.
Section 3.06. Waiver of Notice. Notice of any annual or special meeting may
be waived in writing by any Shareholder, before or after the date and time of
the meeting specified in the notice thereof, by a written waiver delivered to
the Corporation for inclusion in the minutes or filing with the corporate
records. A Shareholder's attendance at any meeting in person or by proxy shall
constitute a waiver of any objection to (a) notice of such meeting, unless the
Shareholder at the beginning of the meeting objects to the holding of or the
transaction of business at the meeting, and (b) consideration at such meeting of
any business that is not within the purpose or purposes described in the meeting
notice, unless the Shareholder objects to considering the matter when it is
presented.
Section 3.07. Proxies. A Shareholder entitled to vote at any meeting may
vote either in person or by proxy executed in writing by the Shareholder or a
duly authorized attorney-in-fact of such Shareholder. For purposes of this
Section, a proxy granted by telegram, telex, telecopy or other document
transmitted electronically for or by a Shareholder shall be deemed "executed in
writing by the Shareholder." The general proxy of a fiduciary shall be given the
same effect as the general proxy of any other Shareholder. No proxy shall be
valid after eleven months from the date of its execution unless a longer or
shorter time is expressly provided therein. An appointment of a proxy is
revocable by a Shareholder unless the appointment form conspicuously states that
it is irrevocable and the appointment is coupled with an interest.
Section 3.08. Quorum. At any meeting of Shareholders, the holders of
outstanding shares representing a majority of the votes entitled to be cast with
respect to the business to be transacted at such meeting, represented thereat in
person or by proxy, shall constitute a quorum, and a majority vote of such
quorum shall be necessary for the transaction of any business by the meeting,
unless a greater number is required by law, the Articles or these By-Laws. In
case a quorum shall not be present at any meeting, the holders of record
representing a majority of the votes so present in person
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or by proxy may adjourn the meeting from time to time, without notice, other
than announcement at the meeting, unless the date of the adjourned meeting
requires that the Board fix a new record date therefore, in which case notice
of the adjourned meeting shall be given. At any such adjourned meeting at which
a quorum shall be present or represented, any business may be transacted which
might have been transacted at the meeting as originally scheduled.
Section 3.09. Shareholder List. The Secretary shall cause to be prepared
before each meeting of Shareholders a complete list of the Shareholders
entitled to notice of such meeting, arranged in alphabetical order by class of
shares (and each series within a class), and showing the address of, and the
number of shares entitled to vote held by, each Shareholder (the "Shareholder
List"). Beginning five business days before the meeting and continuing
throughout the meeting, the Shareholder List shall be on file at the principal
office or at a place identified in the meeting notice as the city where the
meeting will be held, and shall be available for inspection by any Shareholder
entitled to vote at the meeting. On written demand, made in good faith and for
a proper purpose and describing with reasonable particularity the Shareholder's
purpose, and if the Shareholder List is directly connected with the
Shareholder's purpose, a Shareholder (or such Shareholder's agent or attorney
authorized in writing) shall be entitled to inspect and to copy the Shareholder
List, during regular business hours and at the Shareholder's expense, during the
period the Shareholder List is available for inspection. The original stock
register or transfer book, or a duplicate thereof kept in the State of Indiana,
shall be the only evidence as to who are the Shareholders entitled to examine
the Shareholder List, or to notice of or to vote at any meeting.
Section 3.10. Action Without Meeting. Any action required or permitted to
be taken at any meeting of the Shareholders may be taken without a meeting if
the action is taken by all the Shareholders entitled to vote on the action. The
action must be evidenced by one (1) or more written consents describing the
action taken, signed by all the Shareholders entitled to vote on the action,
and delivered to the Corporation for inclusion in the minutes or filing with
the corporate records. Action taken under this Section is effective when the
last Shareholder signs a written consent, unless the consent specifies a
different prior or subsequent effective date.
Section 3.11. Voting Rights of Shareholders. The Shareholders of the
Corporation shall have the voting rights set forth in the Articles.
Section 3.12. Order of Business. The order of business at the annual
meetings, and so far as practicable at all other meetings, of Shareholders
shall be as determined by the chairman of the meeting. The Chairman of the
Board shall preside at each meeting of shareholders. In the absence of the
Chairman, the meeting shall be chaired by an officer of the Corporation in
accordance with the following order: Chief Executive Officer, President and
Vice President. In the absence of all such officers, the meeting shall be
chaired by a person chosen by the vote of a majority in interest of the
Shareholders present in person or represented by proxy and entitled to vote
thereat. Secretary or in his or her absence an Assistant Secretary or in the
absence of the Secretary and all Assistant Secretaries a person whom the
chairman of the meeting shall appoint shall act as secretary of the meeting
and keep a record of the proceedings thereof.
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The Board of Directors of the Corporation shall be entitled to make such
rules or regulations for the conduct of meetings of shareholders as it shall
deem necessary, appropriate or convenient. Subject to such rules and regulations
of the Board of Directors, if any, the chairman of the meeting shall have the
right and authority to prescribe such rules, regulations and procedures and to
do all such acts as, in the judgment of such chairman, are necessary,
appropriate or convenient for the proper conduct of the meeting, including,
without limitation, establishing an agenda or order of business for the meeting,
rules and procedures for maintaining order at the meeting and the safety of
those present, limitations on participation in such meeting to shareholders of
record of the Corporation and their duly authorized and constituted proxies, and
such other persons as the chairman shall permit, restrictions on entry to the
meeting after the time fixed for the commencement thereof, limitations on the
time allotted to questions or comment by participants and regulation of the
opening and closing of the polls for balloting on matters which are to be voted
on by ballot, unless, and to the extent, determined by the Board of Directors or
the chairman of the meeting, meetings of shareholders shall not be required to
be held in accordance with rules of parliamentary procedure.
Section 3.13. Notice of Shareholder Business. At an annual meeting of the
Shareholders, only such business or proposals ("Business") may be conducted as
shall have been properly brought before the meeting, and as shall have been
determined to be lawful and appropriate for consideration by Shareholders at the
meeting. To be properly brought before an annual meeting, Business must be (a)
specified in the notice of meeting (or supplement thereto) given in accordance
with Section 3.05 of these By-Laws, (b) brought before the meeting by or at the
direction of the Board or the President, or (c) brought before the meeting by a
Shareholder after giving timely notice thereof in writing to the Secretary of
the Corporation. To be timely, a Shareholder's notice must be delivered to or
mailed and received at the principal office of the Corporation, not less than
thirty (30) days prior to the annual meeting; provided, however, that in the
event that less than forty (40) days notice or prior public disclosure of the
date of the annual meeting is given or made to Shareholders, notice by the
Shareholder to be timely must be so received not later than the close of
business on the tenth (10th) day following the day on which such notice of the
meeting was mailed or such public disclosure made. A Shareholder's notice to the
Secretary shall set forth as to each matter the Shareholder proposes to bring
before the annual meeting (a) a brief description of the Business desired to be
brought before the meeting, (b) the name and address, as they appear on the
Corporation's Shareholder List, of the Shareholder proposing such Business, (c)
the class and number of shares of the Corporation which are beneficially owned
by the Shareholder, and (d) any interest of the Shareholder in such Business.
The person presiding at the annual meeting shall, if the facts warrant,
determine and declare to the meeting that Business was not properly brought
before the meeting in accordance with the By-Laws, or that Business was not
lawful or appropriate for consideration by Shareholders at the meeting, and if
he should so determine, he shall so declare to the meeting, and any such
Business shall not be transacted. At any special meeting of the Shareholders,
only such Business shall be conducted as shall have been brought before the
meeting by or at the direction of the Board of Directors.
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Section 3.14. Notice of Shareholder Nominees. Nominations of persons
for election to the Board may be made at any meeting of Shareholders by or at
the direction of the Board or by any Shareholder of the Corporation entitled to
vote for the election of Directors at the meeting. Shareholder nominations shall
be made pursuant to timely notice given in writing to the Secretary of the
Corporation in accordance with Section 3.13 of these By-Laws. Such Shareholder's
notice shall set forth as to each person whom the Shareholder proposes to
nominate for election or re-election as a Director, (a) the name, age, business
address and residence address of such person, (b) the principal occupation or
employment of such person, (c) the class and number of shares of the Corporation
which are beneficially owned by such person, (d) any other information relating
to such person that is required to be disclosed in solicitation of proxies for
election of Directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (including
without limitation such person's written consent to being named in the proxy
statement as a nominee and to serving as a Director if elected), and (e) the
qualifications of the nominee to serve as a Director of the Corporation. The
Corporation may require any proposed nominee to furnish such other information
as may reasonably be required by the Corporation to determine the eligibility of
such proposed nominee to serve as a Director of the Corporation. No Shareholder
nomination shall be effective unless made in accordance with the procedures set
forth in this Section 3.14. The person presiding at the meeting shall, if the
facts warrant, determine and declare to the meeting that a Shareholder
nomination was not made in accordance with the By-Laws, and if he should so
determine, he shall so declare to the meeting and the defective nomination shall
be disregarded.
ARTICLE 4
Board of Directors
Section 4.01. Duties and Number. The business and affairs of the
Corporation shall be managed under the direction of a Board of seven (7)
Directors, which number may be either increased or decreased from time to time
by resolution adopted by not less than a majority of the directors then in
office; provided, however, that no decrease in the number of Directors shall
have the effect of shortening the term of any incumbent Director.
Section 4.02. Election, Term of Office and Qualification. Directors
shall be elected at each annual meeting by the Shareholders entitled by the
Articles to elect Directors. Directors shall be elected for a term of one year
and shall hold office until their respective successors are elected and
qualified. Directors need not be residents of the State of Indiana or
Shareholders of the Corporation. No decrease in the number of Directors at any
time provided for these By-Laws shall have the effect of shortening the term of
any incumbent Director.
Section 4.03. Powers of Directors. The Board shall exercise all the
powers of the Corporation, subject to the restrictions imposed by law, the
Articles, or these By-Laws.
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Section 4.04. Annual Meeting. Unless otherwise determined by the President
or the Board, the Board shall meet each year immediately after the annual
meeting of the Shareholders, at the place where such meeting of the Shareholders
has been held, for the purpose of organization, election of Officers, and
consideration of any other business that may properly be brought before the
meeting.
Section 4.05. Regular Board Meetings. Regular meetings of the Board may be
held at stated times or from time to time, and at such place, either within or
without the State of Indiana, as the Board may determine, without call and
without notice.
Section 4.06. Special Board Meetings. Special meetings of the Board may be
called at any time or from time to time, and shall be called on the written
request of at least two Directors or the President, by causing the Secretary or
any Assistant Secretary to give to each Director, either personally or by mail,
telephone, telegraph, teletype or other form of wire or wireless communication
at least two days' notice of the date, time and place of such meeting. Special
meetings shall be held at the principal office or at such other place, within or
without the State of Indiana, as shall be specified in the respective notices or
waivers of notice thereof. A Director may waive notice of any special meeting of
the Board before or after the date and time stated in the notice by a written
waiver signed by the Director and filed with the minutes or corporate records. A
Director's attendance at or participation in a special meeting waives any
required notice to the Director of the meeting unless the Director at the
beginning of the meeting (or promptly upon the Director's arrival) objects to
holding the meeting or transacting business at the meeting and does not
thereafter vote for or assent to action taken at the meeting.
Section 4.07. Meeting by Telephone, etc. Any or all of the members of the
Board or of any committee designated by the Board may participate in a meeting
of the Board or the committee, or conduct a meeting through the use of, any
means of communication by which all persons participating may simultaneously
hear each other during the meeting, and participation in a meeting using these
means constitutes presence in person at the meeting.
Section 4.08. Quorum. At all meetings of the Board, a majority of the
number of Directors designated for the full Board shall be necessary to
constitute a quorum for the transaction of any business, except (a) that for
the purpose of filling of vacancies of the Board a majority of Directors then in
office shall constitute a quorum, and (b) that a lesser number may adjourn the
meeting from time to time until a quorum is present. The affirmative vote of a
majority of the Directors present at a meeting at which a quorum is present
shall be the act of the Board, unless the act of a greater number is required
by law, the Articles or these By-Laws.
Section 4.09. Action Without Meeting. Any action required or permitted to
be taken at any meeting of the Board or of any committee thereof may be taken
without a meeting if the action is taken by all members of the Board or of such
committee. The action must be evidenced by one (1) or more written consents
describing the action taken, signed by each member of the Board or of the
committee, and included in the minutes or filed with the corporate records
reflecting the action taken.
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Action taken under this Section is effective when the last member of the Board
or of the committee signs a written consent, unless the consent specifies a
different prior or subsequent effective date.
Section 4.10. Resignations. Any Director may resign at any time by
delivering written notice to the Board, its Chairman, the President, or the
Secretary. Such resignation shall take effect when the notice is delivered
unless the notice specifies a later effective date. If the resignation
specifies a later effective date, the Board may fill the pending vacancy before
the effective date, but the new Director may not take office until the vacancy
occurs.
Section 4.11. Removal. Any Director may be removed, with or without
cause, at any meeting of the Shareholders by the vote specified in the
Articles, if notice of the intention to act upon such matter shall have been
given in the notice calling such meeting.
Section 4.12. Vacancies. Any vacancy occurring in the Board, including a
vacancy resulting from an increase in the number of Directors, may be filled by
the Board, or if the Directors remaining in office constitute fewer than a
quorum of the Board, they may fill the vacancy by the affirmative vote of a
majority of all the Directors remaining in office. Each Director so chosen
shall hold office until the expiration of the term of the Director, if any,
whom he has been chosen to succeed, or, if none, until the expiration of the
term designated by the Board for the directorship to which he has been elected,
or until his earlier removal, resignation, death, or other incapacity.
Section 4.13. Compensation of Directors. The Board is empowered and
authorized to fix and determine the compensation of Directors for attendance at
meetings of the Board and additional compensation for such additional services
any of such Directors may perform for the Corporation.
Section 4.14. Interest of Directors in Contracts. Any contract or other
transaction between the Corporation and (a) any Director, or (b) any
corporation, unincorporated association, business trust, estate, partnership,
trust, joint venture, individual or other legal entity ("Legal Entity") (1) in
which any Director has a material financial interest or is a general partner,
or (2) of which any Director is a director, officer or trustee (collectively, a
"Conflict Transaction"), shall be valid for all purposes, if the material facts
of the Conflict Transaction and the Director's interest were disclosed or known
to the Board, a committee with authority to act thereon, or the Shareholders
entitled to vote thereon, and the Board, such committee, or such Shareholders
authorized, approved, or ratified the Conflict Transaction. A Conflict
Transaction is authorized, approved or ratified:
(a) By the Board or such committee, if it receives the affirmative
vote of a majority of the Directors who have no interest in the Conflict
Transaction, notwithstanding the fact that such majority may not constitute
a quorum or a majority of the Board or such committee or a majority of the
Directors present at the meeting, and notwithstanding the presence or vote
of any Director who does have such an interest; provided, however, that no
Conflict Transaction may be authorized, approved or ratified by a single
Director; or
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(b) By such Shareholders, if it receives the vote of a majority of
the shares entitled to be counted, in which vote shares owned or voted
under the control of any Director who, or of any Legal Entity that, has an
interest in the Conflict Transaction may be counted.
This Section shall not be construed to require authorization, ratification or
approval by the Shareholders of any Conflict Transaction, or to invalidate
any Conflict Transaction that would otherwise be valid under the common and
statutory law applicable thereto.
ARTICLE 5
Executive Committee And Other Committees
Section 5.01. Designation of Committees. The Board may, by resolution
adopted by a majority of the actual number of Directors elected and qualified,
from time to time, designate (i) any two (2) or more of its members to
constitute an Executive Committee, and (ii) any one (1) or more of its members
to constitute any other Committee. The Board shall have the power at any time
to increase or decrease the number of members of the Executive Committee or any
other Committee, to fill vacancies thereon, to change any member thereof and
to change the functions or terminate the existence thereof.
Section 5.02. Powers of Committees. During the intervals between meetings
of the Board, and subject to such limitations as may be required by law or by
resolution of the Board, the Executive Committee shall have and may exercise
all of the authority of the Board, and any other Committee shall have and may
exercise such authority of the Board as may be provided in the resolution
designating such Committee; provided, however, that neither the Executive
Committee nor any other Committee shall have authority to do any of the
following:
(a) authorize dividends or other distributions, except that the
Executive Committee (or an Officer designated by the Board) may authorize
or approve a reacquisition of Shares if done according to a formula or
method prescribed by the Board;
(b) approve or propose to the Shareholders action required by the law
to be submitted to the Shareholders for approval;
(c) fill vacancies on the Board or any Committee;
(d) amend the Articles, except to the extent authorized in subsection
(g);
(e) adopt, amend or repeal these By-Laws;
(f) approve a plan of merger not requiring Shareholder approval; or
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(g) authorize or approve the issuance or sale of Shares, or determine
the designation and relative rights, preferences and limitations of a class
or series of Shares, except that the Executive Committee (or an Officer
designated by the Board) may take the actions described in this subsection
within limits prescribed by the Board.
The members of any Committee shall act only as a Committee, and the individual
members shall have no power as such. All minutes of Committee Meetings shall be
submitted to the next succeeding Board Meeting; but failure to submit the same
shall not invalidate any completed or incomplete action taken by the
Corporation upon proper authorization by such Committee prior to the time when
the same should have been or were submitted as above provided.
Section 5.03. Meetings; Procedure; Quorum. Section 4.05 through 4.09 of
these By-Laws dealing with meetings, action without a meeting, notice and
waiver of notice, and quorum and voting requirements of the Board apply to the
committees and their members as well.
ARTICLE 6
Officers
Section 6.01. Number. The Officers of the Corporation shall consist of the
President, the Chairman of the Board, the Chief Executive Officer, the
Executive Vice President, one (1) or more Vice-Presidents, the Secretary, the
Treasurer, the Chief Financial Officer, the General Counsel and such other
officers as may be chosen by the board at such time and in such manner and for
such terms as the Board may prescribe. Any two (2) or more offices may be held
by the same person.
Section 6.02. Election and Term of Office. The Officers shall be chosen by
the Board or by an Officer duly elected or appointed and duly authorized by the
Board. Each Officer shall hold office until his successor is chosen and
qualified, until his death, until he shall have resigned, or until he shall
have been removed pursuant to Section 6.04 of these By-Laws.
Section 6.03. Resignations. Any Officer may resign at any time by
delivering written notice to the Board, its Chairman, the President, or the
Secretary. Such resignation shall take effect when the notice is delivered
unless the notice specifies a later effective date. If a resignation is made
effective at a later date and the Corporation accepts the future effective date,
the Board may fill the pending vacancy before the effective date if the Board
provides that the successor does not take office until the effective date.
Section 6.04. Removal. Any Officer may be removed either with or without
cause, at any time, by the vote of a majority of the actual number of Directors
elected and qualified from time to time, or by the Officer who appointed that
Officer.
Section 6.05. Vacancies. Whenever any vacancy shall occur in any office,
the same shall be filled by the Board, the President, or by an Officer duly
appointed by the Board, and the Officer
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so chosen shall hold office during the remainder of the term for which his
predecessor was chosen or as otherwise provided herein.
Section 6.06. Chairman of the Board. The Chairman of the Board shall be
elected from the Directors of the Corporation and shall have the usual duties of
a Chairman of the Board.
Section 6.07. Chief Executive Officer. If the Officers of the
Corporation include both a Chairman of the Board and a President, the Board
shall designate one of such Officers to be the Chief Executive Officer of the
Corporation. If the office of Chairman of the Board is vacant, the President
shall be the Chief Executive Officer of the Corporation. The Chief Executive
Officer, subject to the general control of the Board, shall manage and
supervise all the affairs and personnel of the Corporation and shall discharge
all the usual functions of the chief executive officer of a corporation. He
shall preside at meetings of the Shareholders and Directors, discharge all the
duties which devolve upon a presiding officer, and shall exercise and perform
such other powers and duties as these By-laws or the Board may prescribe. The
Chief Executive Officer shall have full authority to execute proxies on behalf
of the Corporation, and to execute, with the Secretary, powers of attorney
appointing other corporations, partnerships, or individuals the agent of the
Corporation, all subject to the provisions of the Act, the Articles and these
By-Laws.
Section 6.08. President. The President shall have such powers and
duties as may be determined by the Board. In the absence of the Chairman of the
Board, or if such office be vacant, the President shall have all the powers of
the Chairman of the Board.
Section 6.09. The Executive Vice-President and Vice-Presidents. The
Executive Vice-President shall perform all duties incumbent upon the President
during the absence or disability of the President, and perform such other
duties as the By-Laws may require or the Board of Directors or President may
prescribe. The Vice-Presidents shall perform all duties incumbent upon the
Executive Vice-President during the absence or disability of the Executive
Vice-President, and perform such other duties as these By-Laws may require or
the Board of Directors or President may prescribe.
Section 6.10. Secretary. The Secretary shall attend all meetings of
the Shareholders and of the Board, and shall keep or cause to be kept in a book
provided for the purpose a true and complete record of the proceedings of such
meetings, and shall perform a like duty, when required, for all committees
created by the Board. He shall authenticate the records of the Corporation when
necessary and shall exercise and perform such other powers and duties as these
By-Laws, the Board, or the President may prescribe. He shall give all notices
of the Corporation and, in case of his absence, negligence, or refusal so to
do, any notice may be given by a person so directed by the President or by the
requisite number of Directors or Shareholders upon whose request the meeting is
called as provided by these By-Laws.
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Section 6.11. Treasurer. The Treasurer shall have charge of the funds,
securities, receipts and disbursements of the Corporation; cause the moneys and
other valuable effects of the Corporation to be deposited in the name and to
the credit of the Corporation in such banks or trust companies or with such
bankers or other depositories as shall be selected in accordance with
resolutions adopted by the Board; cause the funds of the Corporation to be
disbursed from the authorized depositories of the Corporation, and cause to be
taken and preserved proper records of all moneys disbursed; and, in general,
perform all duties incident to the office of Treasurer and such other duties as
are given to the Treasurer by these By-Laws or as may be assigned to him or her
by the Chairman of the Board, the President, the Chief Financial Officer, or
the Board. The Treasurer may be required to furnish bond in such amount as
shall be determined by the Board.
Section 6.12. Chief Financial Officer. The Chief Financial Officer shall
have supervision over and be responsible for the funds, securities, receipts
and disbursements of the Corporation; cause to be kept at the principal
business office of the Corporation and preserved for review, as required by law
or regulation, records of financial transactions and correct books of account
using appropriate accounting principles; be responsible for the establishment
of adequate internal control over the transactions and books of account of the
Corporation; be responsible for rendering to the proper Officers and the Board,
upon request, and to shareholders and other parties, as required by law or
regulation, financial statements of the Corporation; and, in general, perform
all duties incident to the office and such other duties as are given by these
By-Laws or as may be assigned by the Chairman of the Board, the President or
the Board.
Section 6.13. General Counsel. The General Counsel shall have general
control of all matters of legal import concerning the Corporation.
Section 6.14. Assistant Officers. The Board or an Officer duly appointed
by the Board may from time to time designate assistant Officers who shall
exercise and perform such powers and duties as the Officers whom they are
elected to assist shall specify and delegate to them, and such other powers and
duties as these By-Laws, the Board, or the President may prescribe. An Assistant
Secretary may, in the absence or disability of the Secretary, attest the
execution of all documents by the Corporation.
Section 6.15. Delegation of Authority. In case of the absence of any
Officer of the Corporation, or for any other reason that the Board may deem
sufficient, the Board may delegate the powers or duties of such Officer to any
other Officer or to any Director, for the time being.
ARTICLE 7
Negotiable Instruments, Deeds, Contracts
Stock and Limitation OF LIABILITY
Section 7.01. Execution of Negotiable Instruments. All checks, drafts,
bills of exchange and orders for the payment of money by the Corporation shall,
unless otherwise directed by the Board,
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or unless otherwise required by law, be signed by such Officer or Officers or
such agent or agents of the Corporation and in such manner as the Chief
Executive Officer from time to time may determine.
Section 7.02. Execution of Deeds, Contracts, Etc. All deeds, notes, bonds
and mortgages made by the Corporation and all other written contracts and
agreements, other than those executed in the ordinary course of corporate
business, to which the Corporation shall be a party may be executed in its name
by the President, the Chairman of the Board, the Executive Vice-President, a
Vice-President or by any other person or persons so authorized by the Board
whether or not such person or persons be Officers of the Corporation. Such
person or persons may delegate, from time to time, by instrument in writing, all
or any part of such authority to any other person or persons if authorized to do
so by the Board.
Section 7.03. Ordinary Contracts and Agreements. All written contracts and
agreements into which the Corporation enters in the ordinary course of business
operations shall be executed by any Officer or by any other employee of the
Corporation designated by the President to execute such contracts and
agreements.
Section 7.04. Endorsement of Certificates for Shares. Unless otherwise
directed by the Board, any share or shares issued by any corporation and owned
by the Corporation (including reacquired shares of the Corporation) may, for
sale or transfer, be endorsed in the name of the Corporation by the President,
the Executive Vice-President or a Vice-President, and the Secretary, when
necessary or required, shall attest such endorsement.
Section 7.05. Voting of Shares Owned by Corporation. Unless otherwise
directed by the Board, any share of shares issued by any other corporation and
owned or controlled by the Corporation may be voted at any shareholders' meeting
of such other corporation by the President of the Corporation or any Officer
designated by the President or authorized by the Board. Whenever, in the
judgment of the President or the Board, it is desirable for the Corporation to
execute a proxy or give a shareholder's consent in respect to any share or
shares issued by any other corporation and owned by the Corporation, such proxy
or consent shall be executed in the name of the Corporation by the President or
any Officer designated by the President or authorized by the Board. Any person
or persons designated in the manner above stated as the proxy or proxies of the
Corporation shall have full right, power and authority to vote the share or
shares issued by such other corporation and owned by the Corporation in the same
manner as such share or shares might be voted by the Corporation.
ARTICLE 8
Liability
No person or his personal representatives shall be liable to the
Corporation for any loss or damage suffered by it on account of any action taken
or omitted to be taken by such person in good
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faith as an officer or employee of the Corporation, or as a director, officer,
partner, trustee, employee, or agent of another foreign or domestic Corporation,
partnership, joint venture, trust employee benefit-plan, or other enterprise,
whether for profit or not, which he serves or served at the request of the
Corporation, if such person (a) exercised and used the same degree of care and
skill as a prudent man would have exercised and used under like circumstances,
charged with a like duty, or (b) took or omitted to take such action in reliance
upon advice of counsel for the Corporation or such enterprise or upon statements
made or information furnished by persons employed or retained by the Corporation
or such enterprise upon which he had reasonable grounds to rely. The foregoing
shall not be exclusive of other rights and defenses to which such person or his
personal representatives may be entitled under law.
ARTICLE 9
Indemnification
Section 9.01. Actions by a Third Party. The Corporation shall indemnify any
person who is or was a party, or is threatened to be made a defendant or
respondent, to a proceeding, including any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than actions by or in the right of the Corporation), and
whether formal or informal, who is or was a Director, officer, or employee of
the Corporation or who, while a Director, officer, or employee of the
Corporation, is or was serving at the Corporation's request or direction as a
director, officer, partner, trustee, employee, or agent of another foreign or
domestic corporation, partnership, joint venture, trust, employee benefit plan,
or other enterprise, either for profit or not, against:
(a) any reasonable expenses (including attorneys' fees) incurred with
respect to a proceeding, if such person is wholly successful on the merits
or otherwise in the defense of such proceeding, or
(b) judgments, settlements, penalties, fines (including excise taxes
assessed with respect to employee benefit plans) and reasonable expenses
(including attorneys' fees) incurred with respect to a proceeding where
such person is not wholly successful on the merits or otherwise in the
defense of the proceeding if:
(i) the individual's conduct was in good faith; and
(ii) the individual reasonably believed:
(A) in the case of conduct in the individual's capacity as a
Director, officer or employee of the Corporation, that the
individual's conduct was in the Corporation's best interests; and
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(B) in all other cases, that the individual's conduct was at
least not opposed to the Corporation's best interests; and
(iii) in the case of any criminal proceeding, the individual either:
(A) had reasonable cause to believe the individual's conduct
was lawful; or
(B) had no reasonable cause to believe the individual's conduct
was unlawful.
The termination of a proceeding by a judgment, order, settlement, conviction,
or upon a plea of nolo contenders or its equivalent is not, of itself,
determinative that the Director, officer, or employee did not meet the standard
of conduct described in this Section.
Section 9.02. Actions by or in the Right of the Corporation. The
Corporation shall indemnify any person who is or was a party or is threatened
to be made a defendant or respondent, to a proceeding, including any
threatened, pending or completed action, suit or proceeding, by or in the right
of the Corporation to procure a judgment in its favor, by reason of the fact
that such person is or was a Director, officer, or employee of the Corporation
or is or was serving at the request or direction of the Corporation as a
director, officer, partner, trustee, employee, or agent of another foreign or
domestic corporation, partnership, joint venture, trust, employee benefit plan,
or other enterprise, whether for profit or not, against any reasonable expenses
(including attorneys' fees):
(a) if such person is wholly successful on the merits or otherwise in
the defense of such proceeding, or
(b) if not wholly successful:
(i) the individual's conduct was in good faith; and
(ii) the individual reasonably believed:
(A) in the case of conduct in the individual's capacity as a
director, officer, or employee of the Corporation, that the
individual's conduct was in the Corporation's best interests; and
(B) in all other cases, that the individual's conduct was at
least not opposed to the Corporation's best interests,
except that no indemnification shall be made in respect of any claim, issue, or
matter as to which such person shall have been adjudged to be liable to the
Corporation unless and only to the extent that the court in which such action
or suit was brought shall have determined upon application, that
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despite the adjudication of liability but in view of all circumstances of the
case, such person is fairly and reasonably entitled to indemnification for such
expenses which such court shall deem proper.
Section 9.03. Methods of Determining Whether Standards for
Indemnification Have Been Met. Any indemnification under Sections 1 or 2 of
this Article (unless ordered by a court) shall be made by the Corporation only
as authorized in the specific case upon a determination that indemnification of
the Director, officer, or employee is proper in the circumstances because he
has met the applicable standards of conduct set forth in Section 1 or 2. In the
case of Directors of the Corporation such determination shall be made by any
one of the following procedures:
(a) by the Board by a majority vote, of a quorum consisting of
Directors not at the time parties to the proceeding;
(b) if a quorum cannot be obtained under (a), by majority vote of a
committee duly designated by the Board (in which designation Directors who
are parties may participate), consisting solely of two or more Directors
not at the time parties to the proceeding;
(c) by special legal counsel:
(i) selected by the Board or a committee thereof in the manner
prescribed in (a) or (b); or
(ii) if a quorum of the Board cannot be obtained under (a) and a
committee cannot be designated under (b), selected by a majority vote of
the full Board (in which selection Directors who are parties may
participate).
In the case of persons who are not Directors of the Corporation, such
determination will be made (a) by the Chief Executive Officer of the
Corporation or (b) if the Chief Executive Officer so directs or in his
absence, in the manner such determination would be made if the person were a
director of the Corporation.
Section 9.04. Advancement of Defense Expenses. The Corporation may pay
for or reimburse the reasonable expenses incurred by a Director, officer, or
employee who is a part to a proceeding described in Section 1 or 2 of this
Article in advance of the final disposition of said proceeding if:
(a) the Director, officer, or employee furnishes the Corporation a
written affirmation of his good faith belief that he has met the standard
of conduct described in Section 1 or 2; and
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(b) the Director, officer, or employee furnishes the Corporation a
written undertaking, executed personally or on his behalf, to repay the advance
if it is ultimately determined that the Director, officer or employee did not
meet the standard of conduct; and
(c) a determination is made that the facts then known to those
making the determination would not preclude indemnification under Section 1
or 2.
The undertaking required by this Section must be an unlimited general obligation
of the Director, officer, or employee but need not be secured and may be
accepted by the Corporation without reference to the financial ability of such
person to make repayment.
Section 9.05. Non-Exclusiveness of Indemnification. The
indemnification and advancement of expenses provided for or authorized by this
Article does not exclude any other rights to indemnification or advancement of
expenses that a person may have under:
(a) the Corporation's articles of incorporation or bylaws;
(b) any resolution of the Board or the Shareholders of the
Corporation;
(c) any other authorization adopted by the Shareholders; or
(d) otherwise as provided by law, both as to such person's actions
in his capacity as a Director, officer, or employee of the Corporation and
as to actions in another capacity while holding such office.
All such indemnification, including the indemnification authorized by this
Article, shall continue as to a person who has ceased to be a Director,
officer, or employee, and shall inure to the benefit of the heirs and personal
representatives of such person.
ARTICLE 10
Amendments
Section 10.01. Amendment of By-Laws. The power to make, alter, amend
or repeal these By-Laws is vested in the Board, but the affirmative vote of a
number of Directors equal to a majority of the number who would constitute a
full Board of Directors at the time of such action shall be necessary to take
any action for the making, alteration, amendment or repeal of these By-Laws.
<PAGE> 1
EXHIBIT 15.1
AWARENESS LETTER OF PRICEWATERHOUSECOOPERS LLP
November 6, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Ladies and Gentlemen:
We are aware that Central Newspapers, Inc. has included our reports dated
April 27, 1998, August 3, 1998 and October 19, 1998 (issued pursuant to the
provisions of Statement on Auditing Standards No. 71) in the Prospectus
constituting part of its Registration Statement on Form S-3 to be filed on or
about November 6, 1998. We are also aware of our responsibilities under the
Securities Act of 1933.
Yours very truly,
/s/ PricewaterhouseCoopers LLP
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PricewaterhouseCoopers LLP
Phoenix, Arizona
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on form S-3 of our report
dated February 2, 1998, which appears on page 23 of the 1997 Annual Report to
Shareholders of Central Newspapers, Inc. ("the Company") which is incorporated
by reference in the Company's Annual Report on Form 10-K for the year ended
December 28, 1997. We also consent to the incorporation by reference of our
report on the Financial Statement Schedule, which appears on page 17 of such
Annual Report on Form 10-K. We also consent to the references to us under the
headings "Experts" and "Selected Consolidated Financial Data" in such
Prospectus. However, it should be noted that PricewaterhouseCoopers LLP has not
prepared or certified such "Selected Consolidated Financial Data."
/s/ PricewaterhouseCoopers LLP
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PricewaterhouseCoopers LLP
Phoenix, Arizona
November 6, 1998
<PAGE> 1
Exhibit 23.2
Consent of Independent Auditors
We consent to the reference to our firm under the captions "Experts" and
"Selected Consolidated Financial Data" in this Registration Statement on Form
S-3 (File No. 333-________).
/s/ Olive LLP
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Olive LLP
Indianapolis, Indiana
November 9, 1998
