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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from __________ to ___________
Commission file number 1-6430
TRIBUNE/SWAB-FOX COMPANIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 73-0757116
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2407 EAST SKELLY DRIVE, TULSA, OKLAHOMA 74105
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (918) 747-2600
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
CLASS A COMMON STOCK, $0.10 PAR VALUE
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
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As of March 17, 1995, 26,845,864 shares of the registrant's voting Class A
Common Stock ("Common Stock") (net of Class A Common Stock held by a
subsidiary), were outstanding. The Company also has issued and outstanding as
of March 17, 1995, 3,703,704 shares of Class B Common Stock (the Class B Common
Stock and the Class A Common Stock are referenced together as "Company Common
Stock"), which is nonvoting stock. The aggregate market value of these voting
shares held by nonaffiliates of the registrant on March 17, 1995, was
$9,304,000. The Class A Common Stock was valued at $0.87 per share, based on
the average of its closing price on the over-the-counter market on March 17,
1995, as reported by NASDAQ. For purposes of this computation, only officers
and directors of the Company and the top manager of each of its subsidiaries,
and beneficial owners of more than 10 percent of the combined voting power of
all voting securities, and affiliates of such persons, were deemed to be
affiliates.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents are incorporated by reference to this Form 10-K:
1. Annual Report on Form 10-K filed by T/SF Communications Corporation for its
fiscal year ended December 31, 1994 (Part I, Items 1, 2 and 3; Part II,
Items 6 and 7; Part III, Items 10, 11, 12 and 13; Part IV, Item 14).
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PART I
ITEM 1. BUSINESS
GENERAL
The principal activities of the Company during 1994 were managing the
liquidation of its real estate and the few remaining investments from its
venture capital portfolio and the activities carried on through T/SF
Communications Corporation, its 78 percent owned subsidiary. In 1989,
Tribune/Swab-Fox Companies, Inc., a Delaware corporation (referred to herein,
together with its subsidiaries, as the "Company"), caused to be formed a then
new subsidiary, T/SF Communications Corporation, a Delaware corporation
("T/SF"). Soon thereafter, T/SF completed its initial public offering.
Other than its ownership of 78 percent of the outstanding shares of T/SF,
the only business activities in which the Company was engaged as of December 31,
1994, were real estate investment/management.
CREATION OF T/SF
On March 17, 1989, the Company caused T/SF to be formed. Also on March 17,
1989, the Company entered into an Agreement for Contribution of Assets,
Assumption of Liabilities and Merger ("Contribution Agreement") with T/SF and
Tulsa Tribune Company ("Tribune"), then a wholly owned subsidiary of the
Company. The Company formed T/SF to succeed to its publishing and information
businesses and the Contribution Agreement was entered into to accomplish this
purpose. Pursuant to the Contribution Agreement, among other matters, T/SF
became the owner of all of the businesses comprising Tribune, then the publisher
of a daily newspaper in Tulsa, Oklahoma, Transportation Information Services,
Inc., ("TISI"), an information services company, BMT Communications, Inc.
(formerly BMT Publications, Inc.), ("BMT"), the publisher of trade journals, and
Shopper's Guide, Inc., and its affiliates ("Shopper's Guide"), publishers of
weekly free distribution shopper-newspapers in southern New Jersey and suburban
Philadelphia, Pennsylvania ("New Jersey Shopper"), and a commercial printer.
T/SF also assumed certain indebtedness of the Company as part of this
transaction.
Effective June 15, 1989, T/SF completed its initial public offering and,
after the subsequent exercise by the underwriters of a portion of their over
allotment option, sold 2,190,000 shares of its common stock ("T/SF Common
Stock") to the public. Under the Contribution Agreement, the Company owned and,
after the public offering, retained the ownership of 3,600,000 shares of T/SF
Common Stock, or approximately 62 percent of the outstanding shares after
completion of the offering. In the offering, T/SF raised approximately
$26,280,000. After payment of expenses of approximately $2,280,000 for the
offering, including underwriting discounts, T/SF used a portion of the offering
proceeds to repay the Company $6,500,000 as part of the Contribution Agreement
for certain indebtedness which it had incurred. The remaining dollars were held
for working capital and to make additional acquisitions (Marks-Roiland
Communications, Inc., a Long Island shopper-newspaper/commercial printer (the
"New York Shopper") and Atwood Convention Publishing, Inc. ("Atwood"), a
specialty and convention
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publishing operation). See the Annual Report on Form 10-K for T/SF for its
fiscal year ended December 31, 1994, which is incorporated herein, for a
description of the use of the proceeds of the offering. As a result of
subsequent purchases of T/SF Common Stock by both the Company and T/SF, the
Company currently owns 3,777,500 shares of the 4,864,818 shares of T/SF Common
Stock outstanding.
RECENT DEVELOPMENTS
On January 25, 1995, the Company and T/SF entered into that certain
Agreement and Plan of Merger, as amended (the "Merger Agreement"), pursuant to
which the Company will be merged with and into T/SF and T/SF will be the
surviving corporation (the "Merger"). Under the terms of the Merger Agreement,
each Company stockholder will receive, for each share of Company Common Stock
held by such stockholder, 0.1255 of a share of T/SF Common Stock or, at the
election of the stockholder and subject to certain limitations described in the
Merger Agreement, $0.88 in cash (subject to appraisal rights for dissenting
Company stockholders). The Merger Agreement is subject to the approval of the
stockholders of both companies. A Registration Statement of T/SF on Form S-4
(File No. 33-57587) has been filed with the Securities and Exchange Commission
for use in securing stockholder approval and the Joint Proxy
Statement/Prospectus (which constitutes a part of such Registration Statement)
is anticipated to be mailed to stockholders in April, 1995, for a meeting of
stockholders to approve the Merger Agreement in May, 1995. The effect of the
Merger will be to end the separate existence of Tribune/Swab-Fox and those
stockholders of Tribune/Swab-Fox who do not accept the $0.88 per share cash
offer will become direct stockholders of T/SF.
DESCRIPTION OF BUSINESS
As noted above, other than the activities conducted through T/SF, the only
operating businesses owned by the Company during 1994 were its real estate
investment and management business and the liquidation of its remaining venture
capital investments.
Reference is made to the Annual Report on Form 10-K filed by T/SF with
respect to its fiscal year ended December 31, 1994, for a complete description
of the activities of the businesses of T/SF.
REAL ESTATE INVESTMENTS AND DEVELOPMENT
In connection with a restructuring of the Company as of December 31, 1986,
the Company determined to cease making new real estate investments and to
proceed as expeditiously as possible to liquidate its real estate assets.
Because of the depressed state of the real estate industry in Tulsa, Oklahoma,
where most of the Company's properties are located, it was understood that it
was likely to take the Company a number of years to effect this liquidation.
Recognizing the slow moving nature of the Company's real estate, and the
fact that the Company has lost money, from an operating standpoint, for a number
of years primarily because of the holding costs of the real estate, the Board of
Directors adopted a new approach to the
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liquidation of the real estate division in August, 1993. The Board of Directors
authorized management to effect significant discounts in the previous asking
prices for the Company's real estate in an effort to accelerate the liquidation
of the same to pay debt of the Company. It was determined that the value of
discounting the real estate to effect the debt repayment exceeded the potential
gain that might be achieved by continuing to hold the real estate for a number
of years until a "retail" buyer could be found. Also, as a result of this,
significant sales of real estate have occurred in 1994 and the first quarter of
1995. As a result of this decision, the Company's real estate portfolio was
written down $4,400,000, on a pre-tax basis, in the third quarter of 1993 and a
further $2,800,000, on a pre-tax basis, in the third quarter of 1994. Reference
is made to ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS for a more detailed discussion of this write down. A
more detailed discussion of the Company's real estate activities during 1994 and
the first quarter of 1995 is included under ITEM 2. PROPERTIES - REAL ESTATE.
VENTURE CAPITAL
As part of the Company's decision in 1988 to concentrate its investment
activities in its information and communication businesses (now conducted
through T/SF), the Company determined to effectively cease its venture capital
activities. As a result, no additional investment in venture capital activities
was made in 1994.
During 1994, essentially all of the Companys remaining venture assets, were
sold for $678,000, resulting in a pre-tax gain of $440,000.
EMPLOYEES
In 1994, the Company had only one direct employee, Robert J. Swab, Chairman
of the Executive Committee, who retired in December, 1994 (see, ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS for information on Mr. Swab's
Retirement Agreement). Reference is made to the Annual Report on Form 10-K for
T/SF for its year ended December 31, 1994, for information on employees of T/SF.
REGULATION
None of the businesses conducted directly by Tribune/Swab-Fox are subject
to material regulation. See the Annual Report on Form 10-K filed by T/SF for
its fiscal year ended December 31, 1994, regarding regulation of the businesses
conducted through T/SF.
ITEM 2. PROPERTIES
T/SF
Reference is made to the Annual Report on Form 10-K of T/SF for its year
ended December 31, 1994, for a description of the material properties of the
businesses conducted through T/SF.
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REAL ESTATE
As noted above, the Company has not made any material additional
investments in its real estate division for several years, other than acquiring
certain partners' interests in existing real estate investments when those
partners have been unable to meet their obligations. At March 17, 1995, the
book value of the Company's interest in the few small pieces of real estate
still owned was approximately $2,154,000. This compares to approximately
$12,000,000 at December 31, 1993. The difference reflects the write down in the
third quarter of 1994, and sales or exchange of real estate. Sales in 1994 and
through March 17, 1995, were as follows:
(i) January, 1994, sale of condominium in Snowmass, Colorado, for $265,000.
The Company recognized a gain of approximately $170,000 on this
transaction in 1994.
(ii) January, 1994, sale of 4.54 acres of land (a portion of the total
property), 100 percent owned, for $650,000. The Company did not
recognize a gain or loss on this transaction.
(iii) January and February, 1994, sale of five (5) duplexes, 100 percent
owned, in Owasso, Oklahoma, in two different transactions with a total
sales price of $277,000. The Company recognized a gain of approximately
$90,000 on these transactions in 1994.
(iv) February, 1994, sale of a leased restaurant facility, 100 percent owned,
for $400,000. A gain of approximately $230,000 was recognized by the
Company on this transaction in 1994.
(v) February, 1994, sale of a 40-unit multi-family complex, 100 percent
owned, in Owasso, Oklahoma, for $825,000. The Company recognized a loss
of approximately $20,000 on this transaction in 1994.
(vi) March, 1994, sale of the Company's interest in a 98 room motel located
in Paducah, Kentucky, for $450,000. The partnership through which the
Company owned this property was liquidated. The Company did not
recognize a gain or loss on this transaction in 1994.
(vii) June, 1994, sale of 50 acres, 100 percent owned, for $866,000. The
Company did not recognize a gain or loss on this transaction.
(viii) September, 1994, the sale of 110 acres, 100 percent owned, of
undeveloped land for $1,025,000. The Company recognized a $42,000 loss
on this transaction in 1994.
(ix) December, 1994, the sale of 100 percent of the Companys interest in
three parcels of undeveloped land for $1,386,000 to 1995 Land Company,
an Oklahoma limited liability company. 1995 Land Company is 49.9
percent owned by the Company. The
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Company had attempted to sell these properties, along with a fourth one,
on a bulk sale basis during 1994 and was unsuccessful. To exit these
properties, the Company entered into an agreement to create 1995 Land
Company with a recognized real estate owner/developer in Tulsa,
Oklahoma. The effect of this transaction is for the Company to be able
to realize on the profits of the ultimate sale/development of these
properties through its ownership in 1995 Land Company, after the other
partner has recovered his cost of acquisition/development. The Company
recognized no gain or loss on this transaction.
(x) Additional sales of smaller tracts of undeveloped property, a motel in
Tulsa, Oklahoma, not being operated, and a 40,000 square foot industrial
warehouse owned 20% by the Company, totaling $364,000, resulting in a
net gain of $57,000.
Real estate under contract at March 17, 1995:
Pursuant to that certain Acquisition Agreement, dated March 14, 1995 (the
"MECI Agreement"), by and between the Company and Midwest Energy Company, Inc.
("MECI"), the Company will be exchanging five parcels of undeveloped property
and certain related contracts to MECI in exchange for 7,422,773 shares of MECI
common stock, $0.001 par value (the "MECI Stock"). MECI is indirectly controlled
by Martin A. Vaughan, a director and significant stockholder of Tribune/Swab-
Fox. For a more detailed discussion of this transaction, see ITEM 13. CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS.
Real estate under option at March 17, 1995:
20 acres of raw land for $213,650 to 1995 Land Company (see (ix) above).
The Company will recognize no gain or loss on this transaction, if
completed.
28 acres of raw land for $588,000 which would result in a gain, if the
option is exercised.
The following table reflects all of the real estate owned by the Company as
of March 17, 1995, that is not under contract or option:
<TABLE>
<CAPTION>
COMPANY'S
TYPE OF DATE COMPANY'S SHARE OF
PROPERTY DESCRIPTION ACQUIRED INTEREST INDEBTEDNESS
--------------------------- -------------- -------- --------- ------------
<S> <C> <C> <C> <C>
Commercial office 4,905 sq. ft. 07/03/81 100% $ -0-
office
condominium
in Tulsa, OK
Industrial warehouse 32,600 sq. 10/08/80 50% 194,176
ft. warehouse
in Tulsa, OK
Undeveloped land 712 acres, 12/05/75 9.697% 5,368
Okmulgee Co.,
OK
</TABLE>
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VENTURE CAPITAL DIVISION
The Company sold the remaining assets of its venture capital division
during 1994.
ITEM 3. LEGAL PROCEEDINGS
Reference is made to the Annual Report on Form 10-K of T/SF for its year
ended December 31, 1994, for a discussion of the material litigation affecting
the businesses conducted through T/SF. Other than the legal proceedings
affecting the businesses conducted through T/SF, as of March 17, 1995, the
Company was not subject to any material pending legal proceeding as to which an
adverse decision would have a material adverse impact on the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders of the Company
during the fourth quarter of 1994.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
As of March 17, 1994, there were approximately 338 record owners of the
Company's Class A Common Stock and one holder of the Company's Class B Common
Stock (which is not traded or registered for trading on any exchange). Included
in the number of stockholders of record are shares that are held in "nominee" or
"street" names. The Company's Class A Common Stock is included on the NASDAQ
Small-Cap Market and the stock is not registered or traded on any exchange. No
dividends have been paid on either of the common stocks of the Company during
the last two years.
The following table sets forth the high and low sales price per share of
the Company's Class A Common Stock for the last two years, as reported by
NASDAQ/SCM (1):
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
---------------------- ---------------- ---------------- ------------------
1994 1993 1994 1993 1994 1993 1994 1993
---------------------- ---------------- ---------------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
High $7/16 $7/16 $ 1/2 $7/16 $13/16 $ 5/8 $11/16 $7/16
Low 5/16 3/8 7/16 3/16 7/16 3/16 5/8 5/16
</TABLE>
(1) The information with respect to NASDAQ/SCM quotations was attained from the
National Association of Securities Dealers, Inc. and reflects interdealer
prices, without retail markup, markdown or commissions and may not represent
actual transactions.
On January 18, 1995, the Board of Directors of the Company declared a
special dividend which is to be paid in connection with the Merger. The gross
amount of this dividend is approximately $1,090,000 or $0.0344 per share. This
dividend will be payable to holders of Company Common Stock on the record date
for the Special Meeting of Stockholders of the Company to vote on the approval
of the Merger Agreement and will be paid as of the date of such meeting, subject
to the Merger being approved.
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ITEM 6. SELECTED FINANCIAL DATA
The selected financial information shown below has been extracted from the
financial statements of the Company included elsewhere herein. This selected
financial information should be read in conjunction with such financial
statements and related notes.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, (1)
--------------------------------------------------
1994 1993 1992 1991 1990
-------- ----------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
(In thousands, except per share data)
OPERATING DATA: CONTINUING OPERATIONS
(2)
Revenues................................ $56,919 $ 68,175 $95,233 $94,443 $93,436
Operating costs........................ 46,931 74,243 85,954 87,958 88,417
Depreciation and amortization.......... 3,118 3,779 7,378 4,891 5,313
Restructuring costs.................... 2,441
Operating income (loss) before
interest, unusual gain, income taxes
and minority interest.................. 6,870 ( 9,818) 1,974 1,661 (2,948)
Interest................................ 736 1,921 2,692 3,221 2,972
Unusual gain............................ 24,412
Income (loss) from continuing
operations ............................ 2,564 ( 5,713) 9,142 (1,033) (3,227)
Net income (loss)...................... (252) (11,073) 8,352 (1,569) (3,385)
Earnings(loss) per share - primary:
Continuing operations.................. .08 ( .19) .27 ( .03) ( .10)
Extraordinary loss..................... ( .02)
Net income (loss)...................... ( .01) ( .37) .25 ( .06) ( .11)
Weighted average number of common and
common equivalent shares outstanding
29,742 30,286 33,531 30,960 31,542
BALANCE SHEET DATA (AT PERIOD END):
Total assets............................ 53,581 60,059 88,102 78,760 84,270
Total liabilities other than long-term
debt................................... 24,821 24,336 33,221 26,104 27,206
Long-term debt, net of current
installments........................... 4,905 9,273 16,593 22,421 24,921
Stockholders equity..................... 23,855 26,450 38,288 30,235 32,143
</TABLE>
____________________________
(1) The Company was a party to several events/transactions (most of which
were through its interest in T/SF) which affect the comparability of the
historical information presented above. On April 30, 1994, T/SF sold the
assets of the Shopper's Guide, Inc. shopper-newspaper (the "New Jersey
Shopper"). Effective March 1, 1994, T/SF acquired the stock of Galaxy
Registration, Inc. ("Galaxy"). During the third quarter of 1993, the T/SF
Board made the decision to offer for sale all of its shopper-newspaper
operations. On November 1, 1993, T/SF sold the operating assets of the
Marks-Roiland Communications, Inc. shopper-newspaper (the "New York
Shopper"). On September 30, 1992, T/SF ceased publishing The Tulsa
Tribune as a result of the termination of a joint operating agreement. In
August, 1990, T/SF acquired all of the outstanding stock of Atwood. The
above described actions by T/SF affected the Company's financial
statements because T/SF's activities and assets are consolidated with the
Company. See the Notes to Consolidated Financial Statements included in
T/SF's Annual Report on Form 10-K for additional information on these
transactions/events.
(2) Restated to reflect real estate as a discontinued operation as of
November 30, 1994.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
Reference is made to the Annual Report on Form 10-K of T/SF for its year
ended December 31, 1994, and, specifically, Item 7 therein, for management's
discussion of those businesses conducted through T/SF.
As noted elsewhere in this report, when the businesses conducted through
T/SF are ignored, the only operating businesses of the Company at December 31,
1994, are its real estate activities.
The Company's real estate investments are concentrated in the Tulsa,
Oklahoma area. The market value of these investments deteriorated beginning in
the 1980's because of the declining economy in Oklahoma relating to the effects
of the significant downturn in the oil and gas industry. In 1986, management
determined to cease all real estate activities other than management of
properties currently owned and to use its best efforts to liquidate its real
estate assets. As a result of this decision, various write-downs of real estate
assets have occurred based on changes in perceived market values. As noted
elsewhere, a decision was made in August, 1993, to effect discounts in the
asking price of the Company's real estate to effect faster sale thereof, with
the result that the Company took a pre-tax write down of its real estate assets
of $4,400,000 in the third quarter of 1993 and $2,800,000 in the third quarter
of 1994. At December 31, 1994, the real estate segment has been recognized as
discontinued operations and the financials restated to reflect the discontinued
operations.
Pursuant to the Contribution Agreement in 1989, all employees of the
Company became employees of T/SF, other than Robert J. Swab. To provide
management services for its businesses separate from T/SF, the Company entered
into a Management Agreement with T/SF. Pursuant to this agreement, the Company
paid T/SF $70,000 per month in 1989. In accordance with the terms of the
Management Agreement, the same was renegotiated for 1990, 1991, 1992, 1993 and
1994. For 1994, the Company paid $23,333 per month under the Management
Agreement. The Management Agreement has been extended for 1995 at a flat rate
of $45,000 pending completion of the Merger of the two companies. If the Merger
does not occur, this fee will be renegotiated. Reference is made to ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTION in the Annual Report on Form 10-K
for T/SF for its fiscal year ended December 31, 1994, for a discussion of the
provisions of the Management Agreement.
INFLATION
Other than with respect to the businesses conducted through T/SF (as to
which reference is made to the Annual Report on Form 10-K of T/SF for the year
ended December 31, 1994, for a discussion of the effects of inflation thereon),
the Company does not anticipate that inflation will have a material impact on
its business activities in 1995.
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LIQUIDITY AND CAPITAL RESOURCES
Prior to the formation of T/SF, the Company was the recipient of the cash
generated by the businesses now owned by T/SF. The Company owns 78 percent of
T/SF and, therefore, unless a dividend is declared by T/SF payable pro rata to
all stockholders (which is unlikely), the Company no longer has access to the
cash flow of the businesses of T/SF.
However, in the formation of T/SF, the Company was repaid certain
indebtedness representing advances made by the Company in the acquisition of the
assets of BMT. This amount, being $6,500,000, served to provide the Company
with significant liquidity to meet its obligations for several years. The
Company plans no significant cash expenditures in 1995, other than debt
repayment. The assets owned by the Company separate from T/SF, being primarily
notes receivable and shares of MECI Stock produce only small amounts of
revenues. Thus, if the Merger were not completed, unless certain of such assets
are sold during 1995, the Company will operate at a negative cash flow.
To meet its needs, it was necessary for the Company to renegotiate its real
estate debt obligations and lending arrangements in 1993. In July 1993, the
Company entered into three separate loan agreements with BancFirst, an Oklahoma
banking institution ("BancFirst"), to effect such refinancing. In addition, as
a part of this transaction, the Company used available cash to repay other
indebtedness. At December 31, 1993, the Company had borrowed $3,250,000 from
BancFirst secured by real estate owned by the Company. Such loans were fully
repaid at the end of 1994. At the time the loan arrangements were entered into,
several of the material loans were with partnerships of which the Company was a
general partner. Subsequent to entering into these loan arrangements, the
Company acquired the interest of the other general partner in these partnerships
thus becoming responsible for 100 percent of this indebtedness. As a practical
matter, because the partner had been unable to make payments for a number of
years, the Company was fully responsible for this debt. Therefore, the Company
made the decision to acquire the interest of the partner for the payment by the
partner of $50,000 in cash to the Company and the formal assumption by the
Company of this indebtedness, as well as the forgiveness by the Company of
approximately $3,400,000 in accrued advances by the Company to such partner.
While the value of the land thus acquired was possibly less than the rights of
the Company given up, the Company believed that the ability to control this
property in connection with its decision to discount real estate to effect
earlier sales and the fact that the partner had no other available assets, made
this transaction acceptable and appropriate.
To meet its obligation under the Merger Agreement, the Company has
essentially liquidated or otherwise sold all of its real estate and paid much of
its debt. It was necessary for the Company to borrow cash (in the form of a
line-of-credit of $2,500,000) from T/SF to pay some of its debts and redeem its
outstanding preferred stock. The debt to T/SF is secured by 625,000 shares of
T/SF Common Stock. As the Company no longer has any significant cash flow, if
the Merger does not occur, the Company will have to renegotiate the terms of
this loan and seek new revenue sources or risk default on its debt to T/SF and
other note holders. Possible sources of revenue and cash include sale of its
notes receivable at a discount, sale of a portion of
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the shares of its investment in T/SF, or a dividend from T/SF payable to all
T/SF stockholders. No determination has been made as to which course of action
would be taken if the Merger is not completed.
RESULTS OF OPERATIONS
Reference is made to the Annual Report on Form 10-K of T/SF for its year
ended December 31, 1994, for a discussion of results of operations of the
businesses owned through T/SF. While such discussion in T/SF's Annual Report on
Form 10-K provides a complete discussion of the results of operations of such
businesses, because T/SF is consolidated with the Company for financial
statement purposes, the following discussion relates to the Company from a
financial statement standpoint and not just to the businesses operated
separately from T/SF by the Company, i.e., the material changes during the
respective years discussed relate to all businesses in which the Company has an
interest, whether or not now managed through T/SF. Segment operating data is
set forth in Note 12 to the Financial Statements included herewith.
Effective September 30, 1992, Tribune ceased operations. Tribune's 1992
operating results are included through September 30, 1992. In the third quarter
of 1993, T/SF made the decision to offer for sale all of T/SF's shopper-
newspapers. Effective September 30, 1993, these operations were written-down to
net realizable value and a pre-tax loss of $9,224,000 recognized. No operations
of the shopper-newspapers are included for the periods subsequent to September
30, 1993. On November 1, 1993, the assets, except cash, of the New York Shopper
were sold for $4,675,000 cash and assumption of approximately $1,560,000 of
liabilities. On May 1, 1994, the assets, other than cash, of the New Jersey
Shopper were sold for $3,600,000 cash (including post closing adjustments),
assumption of approximately $930,000 in liabilities and the right to receive up
to $3,450,000 in the future based on the income derived by the buyer from the
business so sold. Effective November 30, 1994, the Companys Board of Directors
approved a plan to liquidate the remaining real estate and recognize real estate
as a discontinued operation. Accordingly, the Company's operations have been
restated to recognize the real estate segment as a discontinued operation.
13
<PAGE>
YEAR ENDED DECEMBER 31, 1994, VERSUS YEAR ENDED DECEMBER 31, 1993
Operations for the year ended December 31, 1994, have four major variations
from the same period ended December 31, 1993. First, the 1994 period did not
include any shopper-newspaper operations because these operations were sold
during the past year. Second, Galaxy, which is a provider of registration and
information services to the exposition industry, was acquired effective March 1,
1994, and its operations are included for the ten months ended December 31,
1994, in exposition services along with the operations of Atwood. Third,
indebtedness has been reduced by over $16,000,000 during the past eighteen
months. Fourth, during the third quarter of 1993, a $9,224,000 loss on assets
held for sale was recognized related to the intended disposition of the shopper-
newspapers. In addition, the real estate segment is a discontinued operation as
of December 31, 1994, and the financials have been restated to recognize this
discontinued operation.
Revenues of $56,919,000 for 1994 were $11,256,000 lower than for 1993. The
revenue decrease consisted of $26,212,000 which related to the shopper-
newspapers. Partially offsetting this decrease is the revenue increase in 1994
of $2,571,000 in the convention publishing component of the exposition services
(which is Atwood's activities) plus Galaxy's revenues of $8,003,000 from March
1, 1994. Convention publishing revenue increased as a result of additional
conventions, including specialty publications, and higher revenues from a trade
journal which published more issues in 1994. Convention publishing revenues for
1993 and 1992 were reclassified from publishing to exposition services.
Publishing revenues for 1994, disregarding the shopper-newspapers, were
$2,148,000 higher than the prior year. An increase in advertising pages in
Gaming and Wagering Business and Convenience Store News in 1994 represents the
major increases. The information services revenue increase of $592,000 for 1994
consists mainly of an increase in employment histories revenue, resulting from
both higher volume and an increase in the price of employment histories, a new
product introduced in 1993 (criminal records), and an increase in motor vehicle
report revenues, offset by a $2,613,000 decrease in 1994 in long distance
telephone resale revenue, resulting from the Companys termination of this
business during the first quarter of 1994 due to competitive and regulatory
considerations. In terminating this business, the Company maintained an
override interest and the ability to continue marketing services of the
purchaser.
Other revenue for 1994 and 1993, is substantially all related to the World
Gaming Congress trade show sponsored by Communications' Gaming and Wagering
Business trade publication. Also included in other income is interest income
related to the contract receivable from the World Publishing Company, income
from a co-sponsored trade show and covenant-not-to-compete income related to the
New York Shopper sale in November 1993. Gains of approximately $440,000
relating to the sale of the remaining venture investments are included in 1994
other revenue.
Publishing costs and expenses were $19,579,000 lower for 1994, as compared
with 1993. The decrease in costs related to the shopper-newspapers was
$21,600,000 for 1994. The increase in 1994 related to the growth of the World
Gaming Congress conference and trade show, as
14
<PAGE>
noted in other revenue above, partially offsets the shopper-newspapers decrease.
Trade journal costs increased in 1994 related to the increase in pages as
compared with 1993.
Exposition services costs and expenses consist of Atwood for 1994 and 1993
and Galaxy for ten months in 1994. The increase of $5,506,000 for 1994,
includes increases of $1,557,000 related to the convention publishing business
as noted above and Galaxy's 1994 operating costs for the ten months of
$3,949,000.
Information services costs and expenses were $516,000 lower for 1994, as
compared with 1993. The increase in costs related to the criminal records
product introduced in 1993 and higher volumes, including additional personnel
and related costs, was more than offset by the decrease of $2,394,000 in 1994,
related to long distance telephone resale costs because of the termination of
this business in early 1994.
Other operating expenses in 1993 related to the venture capital operations,
which remaining venture investments were sold in 1994.
General and administrative expenses were $3,138,000 lower 1994, as compared
with 1993. The decrease in 1994 related to the shopper-newspapers was
$5,422,000. Galaxy's general and administrative expenses of $2,700,000 in 1994
and increases in each of the other divisions related to continued growth, mainly
personnel costs, partially offset the decrease from the shopper-newspapers. In
addition, retirement and deferred compensation expense of approximately
$1,800,000 was included in 1993, attributable to the retirement of the then
chief executive officer of the Company.
Interest expense decreased $1,185,000 for 1994, as compared with 1993,
which is related to the payoff of the 10.32% Senior Notes in November 1993, and
other principal payments on debt and reductions in deferred contract liabilities
during the past year. The interest rate increase on current outstanding debt
reduced the amount interest expense declined in 1994 from debt reductions.
Depreciation and amortization decreased $661,000 in 1994, as compared with
1993, substantially all related to disposition of the depreciable and
amortizable assets of the shopper-newspapers. Galaxy's depreciation and
amortization of $823,000 is included for ten months in 1994 and partially offset
the decrease from the shopper-newspapers.
The loss on assets held for sale in 1993 represented the reduction from
book value to estimated net value of the shopper-newspaper assets which were
being held for sale and were subsequently sold in November, 1993, and May, 1994,
with no additional loss. No loss was recognized on the assets of the three
trade journals held for sale at December 31, 1994, as the Company believes that
the net value of the trade journals are greater than the net book value.
Provision for income taxes as a percent of income before income taxes is
higher than the statutory federal income tax rate because goodwill amortization
related to acquisitions is not deductible for income tax purposes.
15
<PAGE>
YEAR ENDED DECEMBER 31, 1993, COMPARED TO YEAR ENDED DECEMBER 31, 1992.
Revenues for 1993 decreased $27,058,000 from 1992. Revenues of T/SF for
1993 decreased $26,854,000 from revenues for 1992. Aside from the T/SF
decrease, the decrease in revenues is mainly attributable to lower interest
income on short-term investments, related to both the continued decline in
short-term interest rates and decrease in amounts invested.
With respect to the T/SF decrease, $19,900,000 of the decrease was
newspaper publishing revenues for 1992 through September 30, 1992, when The
Tulsa Tribune ceased publication after the agreement with World Publishing
Company which terminated their joint operating arrangement. Revenues from the
shopper-newspapers were $11,500,000 lower in 1993 as compared with 1992.
Revenues for the fourth quarter of 1992 from shopper-newspapers were $9,500,000,
whereas no fourth quarter revenue was recognized from shopper-newspapers in 1993
due to the operations being held for sale. The New Jersey Shopper revenues were
$2,000,000 lower during 1993 as compared with 1992 mainly because of the effect
on operations of moving to a new location in early 1993 which resulted in the
commercial printing operations being shut-down for approximately one month. The
other major reason for lower revenue from the New Jersey Shopper in 1993 was
lower volume and prices in the preprint insert business caused by the
competitive environment.
Revenues from exposition services convention/trade show publishing
increased approximately $1,500,000, most of which was attributable to continued
growth of this operation, including a $300,000 increase from a small trade
publication acquired in mid-1992.
Information services revenues increased $1,800,000 in 1993 as compared with
1992, consisting mainly of revenue from a new product, criminal records reports,
of $640,000; higher revenue from employment history information of $700,000, a
result of both higher volume and an increase in price; and an increase in
revenue from motor vehicle reports of approximately $300,000, as a result of
higher volume, and a new service, "MVR Express," which provides a motor vehicle
report faster for a premium price.
Other revenue and interest increased $640,000 which consisted of a $730,000
increase in interest income attributable to the contract receivable from World
Publishing Company that was a part of the termination of a Joint Operating
Agreement and an $800,000 increase in revenue from conferences sponsored by
T/SF's trade journal group, as a result of an increase in existing conference
exhibitors and attendees and a new conference. Included in 1992 other income
was a $950,000 lawsuit settlement from MCI.
Costs and expenses other than interest and depreciation and amortization
were $11,711,000 lower in 1993 as compared with 1992. Newspaper publishing
costs were $15,000,000 lower in 1993 (the costs incurred in the nine months of
the operation of The Tulsa Tribune in 1992), and shopper-newspaper costs were
$10,500,000 lower in 1993, a result of only nine months' costs being included in
1993. As a result of the decision to sell the shopper-newspapers, T/SF
recognized a loss of $9,224,000 to reduce the assets of these operations to net
16
<PAGE>
realizable value which partially offset the above decreases. Exposition services
convention/trade show publishing costs and expenses increased $1,300,000 in 1993
as a result of continued growth of this operation. Information services costs
and expenses increased $1,250,000 consisting of the direct cost of criminal
record reports, which is a new product, and an increase in personnel costs due
to an increase in the number of employees for new products and growth in
existing products.
General and administrative expenses in 1993 include approximately
$1,800,000 for retirement expenses related to the resignation of the former
chairman and chief executive officer of T/SF and the Company.
Interest expense decreased $771,000 in 1993, essentially all attributable
to a reduction in T/SFs debt of $11,750,000 as a result of scheduled debt
payments and the early payoff of the 10.32% Senior Notes in November 1993. This
payoff was required by the holder of the 10.32% Senior Notes in connection with
the sale of the assets of the New York Shopper. The early termination penalty
("yield maintenance premium") required by the 10.32% Senior Notes was reduced
through negotiations with the holder of the 10.32% Senior Notes. This premium
is accounted for as an extraordinary loss in the financial statements. Interest
on debt other than T/SF increased slightly related to renegotiation of certain
debt.
Depreciation and amortization decreased $3,599,000 in 1993 attributable to
T/SF's operations including sale of the newspaper publishing assets at September
30, 1992, the reduction in shopper-newspaper assets to net realizable value at
September 30, 1993, and higher depreciation and amortization of approximately
$2,400,000 in 1992 related to a change in estimated lives used to depreciate and
amortize certain assets.
Adoption of the change in accounting for income taxes as required by
Financial Accounting Standards Statement No. 109 did not have a material effect
on the Companys financial position or results of operations.
YEAR ENDED DECEMBER 31, 1992, COMPARED TO YEAR ENDED DECEMBER 31, 1991.
The Company's revenues for 1992 increased by $790,000 over revenues for
1991. Revenues for T/SF increased $1,248,000 for 1992 over 1991, which revenues
are consolidated in the Company's financial information. Aside from T/SF's
increase, the changes in revenues from other businesses of the Company, separate
from T/SF, are mainly lower interest income on short-term investments,
attributable to both the decline in interest rates and decrease in amount
invested in 1992, and that 1991 included approximately $400,000 from gains on
the sale of two venture capital investments.
With respect to T/SF's increase, information services increased $3,121,000
whereas overall publishing revenues decreased $1,915,000. Newspaper publishing
revenues declined $6,050,000 in 1992 related to only nine months operations
which was substantially offset by increases in trade journal revenues of
$1,500,000, attributable to increased advertising pages, shopper-newspapers of
$750,000 and convention/trade show publishing of $2,000,000, because of growth
of both operation and new services.
17
<PAGE>
The early termination of the Joint Operating Agreement between T/SFs
newspaper publishing division and World, the publisher of the morning newspaper
in Tulsa, resulted in an "Unusual Gain" before income taxes of $24,412,000 in
1992.
Costs and expenses, other than interest, depreciation and amortization,
decreased $2,004,000 for 1992 as compared with 1991. T/SF's costs decreased
$2,150,000 in 1992, composed of a decrease in newspaper publishing costs of
$6,500,000 and a decrease in shopper-newspaper costs of $380,000, related to
only nine months newspaper publishing operations in 1992 and lower newsprint
costs, offset by an increase in trade journals of $930,000, an increase in
convention/trade show publishing of $2,000,000 and an increase in information
services of $1,800,000, mainly attributable to growth in volume.
Other costs and expenses for the Company, separate from T/SF, were higher
in 1992 primarily related to an increase in valuation reserves for venture
capital investments. Lower general and administrative costs are mainly
attributable to the newspaper publishing operation.
Interest expense decreased $529,000 in 1992 of which $500,000 was a
decrease in T/SF's interest. These decreases in 1992 are a result of significant
debt reduction by T/SF, scheduled debt payments on the Company's debt, and lower
interest rates. Depreciation and amortization increased $2,487,000 in 1992,
substantially all related to the effect of a change in the estimated lives used
to depreciate or amortize certain machinery, equipment and advertising lists by
T/SF.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The Company has not changed accountants during the previous five years nor
had any reported disagreement on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure during
the previous five years.
18
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth information with respect to each Director
and executive officer, as well as with respect to certain other key employees of
the Company or its significant subsidiaries. All Directors of the Company hold
office until the next Annual Meeting of Stockholders and until the election and
qualification of their successors. Except as noted, each officer was elected at
the last Annual Meeting of the Board of Directors to serve for one year or, if
earlier or later, until the next Annual Meeting of the Board of Directors.
<TABLE>
<CAPTION>
DIRECTOR OR
OFFICER OR
EMPLOYEE
NAME AGE SINCE POSITION WITH THE COMPANY
---- --- ----- -------------------------
<S> <C> <C> <C>
Jenkin Lloyd Jones 83 1984 Chairman of the Board of
Directors
Martin A. Vaughan 68 1984 Vice Chairman of the Board
of Directors
Robert J. Swab 57 1969 Director
Jenkin Lloyd Jones Jr. 58 1984 Vice President and Director
Florence Lloyd Jones 81 1984 Director
Barnett
Howard G. Barnett, Jr. 44 1984 President, Chief Executive
Officer and Director of
the Company and Chairman
of the Board, President,
Chief Executive Officer
and Director of T/SF
Robert E. Craine, Jr. 47 1985 Senior Vice President of
the Company, Executive
Vice President and
Director of T/SF
J. Gary Mourton 48 1980 Senior Vice
President-Finance, Chief
Financial Officer and
Treasurer of both the
Company and T/SF and
Director of T/SF
Donna J. Peters 65 1984 Secretary of both the
Company and T/SF
Richard A. Wimbish 51 1987 President of TISI
Stuart P. Honeybone 53 1986 Vice President of both the
Company and T/SF and
President of BMT
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
DIRECTOR OR
OFFICER OR
EMPLOYEE
NAME AGE SINCE POSITION WITH THE COMPANY
---- --- ----- -------------------------
<S> <C> <C> <C>
Jimmy C. Strong 60 1990 Vice President-Human
Resources for T/SF
Wayne Atwood 43 1990 President of Atwood
John R. Laughlin 51 1994 President of Galaxy
</TABLE>
______________________
JENKIN LLOYD JONES - served since 1963 as Editor and Publisher of the Tulsa
Tribune, published until September 30, 1992, by a subsidiary of the Company.
Mr. Jones became Chairman in August, 1993. Mr. Jones is the brother of Florence
Lloyd Jones Barnett, the uncle of Howard G. Barnett, Jr., and the father of
Jenkin Lloyd Jones Jr.
MARTIN A. VAUGHAN - is currently the Chairman of the Board, President, Chief
Executive Officer, Director and a major owner of Midwest Energy Corporation, a
privately-held oil and gas exploration company, and of Midwest Energy Companies,
Inc., a public international oil and gas exploration company. Mr. Vaughan has
been with the predecessors of such companies since 1982. Mr. Vaughan became
Vice Chairman of the Board in August, 1993.
ROBERT J. SWAB - has been associated with the Company and has served as a
Director since May, 1969. He was Executive Vice President, Secretary and
Treasurer of the Company from 1969 through January, 1979, President of the
Company from January, 1979, until April, 1980, Chairman of the Board from April,
1980, to October, 1984, and Chairman of the Executive Committee from October 1,
1984 until December, 1994, when he retired.
JENKIN LLOYD JONES JR. - was Vice President of Tulsa Tribune Company, a
subsidiary of the Company ("Tribune"), from 1967, and became Executive Editor of
the Tulsa Tribune in 1975. Mr. Jones was made Editor in 1988 and in November,
1991, he was made Publisher. Mr. Jones is the son of Jenkin Lloyd Jones, the
nephew of Florence Lloyd Jones Barnett and the cousin of Howard G. Barnett, Jr.
FLORENCE LLOYD JONES BARNETT - served as President of Tribune from 1982 to
1988. Mrs. Barnett was a Vice President of Tribune between 1941 and 1974, and
from 1974 until 1982 she served as Secretary of such Company. Mrs. Barnett is
the sister of Jenkin Lloyd Jones, the mother of Howard G. Barnett, Jr., and the
aunt of Jenkin Lloyd Jones Jr.
HOWARD G. BARNETT, JR. - became executive Vice President of the Company and
of Tribune on January 1, 1985, and was elected President in March, 1991. for
approximately ten years prior to joining the Company, Mr. Barnett was a member
of the law firm of Sneed, Lang, Adams & Barnett, Tulsa, Oklahoma. Mr. Barnett
became President and Chief Operating Officer of T/SF upon its formation in 1989
and was elected as Chairman and Chief Executive Officer in
20
<PAGE>
August, 1993. Mr. Barnett is the cousin of Jenkin Lloyd Jones Jr., the son of
Florence Lloyd Jones Barnett, and the nephew of Jenkin Lloyd Jones.
ROBERT E. CRAINE, JR. - joined the Company in November, 1985, as President
of Swab-Fox Services, Inc. (now TSF Capital Corp.), the Company's venture
capital subsidiary. For the 11 years preceding his joining the Company, Mr.
Craine was a member of the law firm of Gable & Gotwals, Inc., Tulsa, Oklahoma.
Mr. Craine was General Counsel of the Company from 1980 until he joined the
Company in 1985, and served as a Director of the Company from 1981 to 1984. in
March, 1994, Mr. Craine became a Director and Executive Vice President of T/SF.
J. GARY MOURTON - joined the Company as Chief Financial Officer in 1980 and
became Vice President and Treasurer in 1984. Mr. Mourton became Senior Vice
President-Finance, Chief Financial Officer and Treasurer of T/SF upon its
formation in 1989. Prior to that time and for the previous 11 years, Mr.
Mourton was with the accounting firm of Arthur Andersen & Co. Mr. Mourton is a
certified public accountant.
DONNA J. PETERS - was an employee of Tribune from 1974 to December 31,
1992, and is now employed by the Company.
RICHARD A. WIMBISH - joined TISI, a wholly-owned subsidiary of T/SF, as
Controller in 1987 and became Executive Vice President in 1990. Mr. Wimbish was
made President of TISI in 1991. Prior to joining TISI, Mr. Wimbish was
Controller and Chief Financial Officer of Carlson Reserve Corporation from 1981
through 1986.
STUART P. HONEYBONE - joined the Company in June, 1986, as Vice President of
TXF Capital Corp., and became Vice President of the Company in 1988. Mr.
Honeybone became President of BMT in December, 1994. From September, 1985,
until joining the Company, Mr. Honeybone was the owner and Chief Executive
Officer of HB Management, a consulting firm specializing in problem or troubled
businesses. For the six years preceding this, Mr. Honeybone was with
Hinderliter Industries, Inc. and was Group Vice President, Energy Group, at the
time of his leaving the employ of such Company.
JIMMY C. STRONG - became Vice President-Human Resources of T/SF in 1990.
for the year before joining T/SF, Mr. Strong was with Hinderliter Heat Treating,
Inc., as Vice President of Human Resources, and was with Hinderliter Industries,
Inc., a diversified manufacturing company, for the preceding 16 years.
WAYNE ATWOOD - founded Atwood, now a subsidiary of T/SF, with his wife,
Linette Atwood, and Tom Bodine, in 1983 and he has been continuously employed by
such Company since such time.
JOHN R. LAUGHLIN - founded Galaxy, which was acquired by T/SF as of March 1,
1994, in 1982, and has been continuously employed by such Company since such
time.
21
<PAGE>
FORMS 3 AND 4 AND FORM 5 FILINGS. To the Company's knowledge, all persons
required to file Forms 3 and 4 during 1994 timely made all required filings and
no Form 5 filings were required for 1994.
ITEM 11. EXECUTIVE COMPENSATION
COMPENSATION.
Set forth below is certain information with respect to the compensation of
the Company's Chief Executive Officer and each of the Company's and its
subsidiaries' four other most highly compensated executive officers, based on
salary and bonus earned during 1994, for services in all capacities to the
Company and its subsidiaries during each of the Company's last three fiscal
years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------------------------
AWARDS PAYOUTS
--------------------------- ---------
ANNUAL COMPENSATION (1)
---------------------------------
OTHER SECURITIES ALL
ANNUAL RESTRICTED UNDERLYING OTHER
NAME AND COMPEN- STOCK OPTIONS/ LTIP COMPENSA-
PRINCIPAL POSITION YEAR SALARY($) BONUS($)(2) SATION($) AWARD(S)($)(3) SARS(#)(4) PAYOUT($) TION ($)(5)
--------------------------- ---- --------- ----------- --------- -------------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Howard G. Barnett, Jr.(6) 1994 214,454 77,889 --- 77,889 75,000 --- 5,544
Chairman, President and 1993 214,454 -0- --- --- --- --- 4,261
Chief Executive Office 1992 214,104 46,657 --- --- --- --- 5,589
of T/SF
Wayne Atwood 1994 128,670 15,938 --- 31,875 10,000 --- 3,292
President, Atwood 1993 138,915 91,668 --- --- --- --- 2,656
1992 132,300 126,662 --- --- --- --- 2,646
J. Gary Mourton 1994 151,410 34,067 --- 34,067 37,500 --- 4,620
Senior Vice President and 1993 151,410 -0- --- --- --- --- 3,475
Chief Financial Officer 1992 151,410 30,973 --- --- --- --- 3,465
of T/SF
Robert E. Craine, Jr. 1994 133,900 30,127 --- 30,127 37,500 --- 4,107
Executive Vice President 1993 133,900 7,500 --- --- --- --- 2,884
of T/SF 1992 133,900 27,386 --- --- --- --- 3,412
Richard A. Wimbish 1994 125,000 36,192 --- --- 22,500 --- 3,960
President, TISI 1993 100,000 26,500 --- --- --- --- 2,593
1992 90,900 18,000 --- --- --- --- 2,138
Hedy Halpert(7) 1994 248,218 154,827 --- --- --- --- 5,544
formerly President and 1993 227,570 72,809 --- --- --- --- 4,497
Chief Operating 1992 205,000 75,851 --- --- --- --- 4,364
Officer of BMT
___________________
</TABLE>
(1) No cash compensation other than the annual amounts described was paid to any
of the named executives during the period shown. Certain executives are
also entitled to car allowances or are provided cars, and club dues are paid
for certain executives. The value of such perquisites is not required to be
disclosed because the aggregate amount of such compensation does not exceed
the lesser of $50,000 or 10 percent of the total amount of annual salary and
bonus for any named executive.
22
<PAGE>
(2) Includes bonuses earned for the year, even if paid in another year.
(3) Under the T/SF Communications Corporation 1994 Incentive Stock Plan (the
"Incentive Stock Plan"), approved by the stockholders of T/SF at the 1994
Annual Meeting of Stockholders, one-half of the bonus paid to Howard G.
Barnett, Jr., J. Gary Mourton and Robert E. Craine, Jr., was to be paid in
the form of restricted stock grants. The amount shown represents the dollar
amount of such stock grants, which were granted at a rate of $6.25 per
share, being the closing price on the American Stock Exchange for T/SF
common stock on December 30, 1994 (the last trading day of 1994). Each such
stock grant vests 100 percent after three years, assuming the employee is
then employed by T/SF (subject to earlier vesting in the case of death or
disability of employee). Dividends are payable on the restricted stock to
the same extent as would be paid on T/SF common stock. Two-thirds of Wayne
Atwood's 1994 bonus, or $31,875, is to be paid by such a restricted stock
grant from T/SF with the price of the stock to be determined based on the
average of the 20 trading days preceding April 30, 1995.
(4) Consists solely of options to acquire shares of T/SF common stock.
(5) These amounts represent the total value of the Company's contributions made
or accrued to the Company's 401(k) plan and, as to Mr. Barnett only, by NPC
under its 401(k) plan for 1992 when Mr. Barnett was also employed by this
agency of a wholly-owned subsidiary of the Company. All such persons are
100 percent vested in their accounts under the Company's plan, and Mr.
Barnett was 100 percent vested in his accrued benefits under the NPC plan.
Mr. Barnett's vested interest in the NPC plan was distributed to him in 1992
as he terminated his employment with NPC as part of the termination of the
JOA with World.
(6) The cash compensation shown for Howard G. Barnett, Jr., in the table
includes amounts paid to him as a director of the Company. The remainder of
the amounts shown as paid to Mr. Barnett were paid by T/SF.
(7) Hedy Halpert, formerly President and Chief Operating Officer of BMT, and two
other officers of BMT (together, the "BMT Senior Executives"), were removed
as officers of BMT in December, 1994. The payments in the table above to Ms.
Halpert were pursuant to an Employment Agreement with her which expired
December 31, 1994. The formal severance of full-time employment with BMT by
the BMT Senior Executives occurred pursuant to agreements entered into in
January, 1995 (the "Employment/Severance Agreements"). Pursuant to the
Employment/Severance Agreements, the BMT Senior Executives are required to
provide varying amounts of services during 1995 and will be compensated
therefor as provided in such agreements. In particular, each agreement with
the BMT Senior Executives provides for a significant bonus to be paid upon
the sale of Convenience Store News, The Journal of Petroleum Marketing and
United States
23
<PAGE>
Distribution Journal, if accomplished in 1995 (reference is
made to T/SF's Annual Report on Form 10-K for its fiscal year ended December
31, 1994, for a discussion of the intended sale of the three trade
journals). If such sale is not accomplished, bonuses will be paid based on
an agreed-to amount. Thus, the primary function of the BMT Senior
Executives in 1995 will be to assist in the sale of the three journals being
held for sale.
OPTIONS.
Other than Director's fees paid to Howard G. Barnett, Jr., the other
officers and key employees described above receive their compensation from T/SF
and its directly owned subsidiaries. Although the Company has an Incentive
Stock Option Plan, there are no outstanding options under such plan and no
options were exercised under such plan during 1994. T/SF has established an
Incentive Stock Option Plan as well as its Incentive Stock Plan described in the
footnotes in the preceding table. The information described in this section
relates to options and rights granted by T/SF under such plans.
The following table sets forth certain information with respect to options
for T/SF Common Stock exercised by the named executive officers of the Company
and its subsidiaries during 1994, and the number and value of unexercised
options held by such persons at the end of the year. Neither the Company nor
T/SF has granted any stock appreciation rights.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
-------------------------------------
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
NUMBER OF IN-THE-MONEY
SECURITIES UNDER- OPTIONS/SARS
LYING UNEXERCISED AT FISCAL
OPTIONS/SARS AT YEAR-END ($)
FISCAL YEAR-END (1)(2)
VALUE
SHARES ACQUIRED REALIZED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) ($)(1) UNEXERCISABLE UNEXERCISABLE
--------------------------- --------------- -------- ----------------- ---------------
<S> <C> <C> <C> <C>
Howard G. Barnett, Jr. -0- -0- 0/75,000 0/150,000
Wayne Atwood -0- -0- 5,336/12,664 0/20,000
J. Gary Mourton (3) -0- -0- 20,833/37,500 0/75,000
Robert E. Craine, Jr. (3) -0- -0- 12,500/37,500 0/75,000
Richard Wimbish (3) -0- -0- 1,166/22,500 0/45,000
Hedy Halpert -0- -0- 0/0 0/0
_______________________
</TABLE>
(1) Market value of the underlying securities at exercise date or fiscal year-
end, as the case may be, minus the option exercise price.
(2) The closing price for T/SF's Common Stock on the American Stock Exchange on
December 30, 1994, the last trading day of the fiscal year, was $6.25.
24
<PAGE>
(3) In March, 1995, Messers, Mourton, Craine and Wimbish allowed options to
acquire 20,833, 12,500 and 1,166 shares of T/SF Common Stock, respectively,
at $12.00 per share, to lapse.
The following table sets forth certain information with respect to options
to acquire T/SF Common Stock granted to the named executive officers of the
Company and its subsidiaries during 1994 by T/SF. Neither the Company nor T/SF
has granted any stock appreciation rights.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
----------------------------------------------------------------------
INDIVIDUAL GRANTS
----------------------------------------------------------------------
NUMBER OF % OF TOTAL AT ASSUMED ANNUAL RATES
SECURITIES OPTIONS/SARS OF STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM (2)
OPTIONS/SARS EMPLOYEES IN OR BASE EXPIRATION ---------------------------
NAME GRANTED(#)(1) FISCAL YEAR PRICE($/SH) DATE 5%($) 10%($)
---- ------------- ------------ ----------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Howard G. Barnett, Jr. 75,000 37.0 4.25 1/25/04 200,460 508,005
Wayne Atwood 10,000 4.0 4.25 1/25/04 26,728 67,734
J. Gary Mourton 37,500 18.5 4.25 1/25/04 100,230 254,003
Robert E. Craine, Jr. 37,500 18.5 4.25 1/25/04 100,230 254,003
Richard Wimbish 22,500 11.1 4.25 1/25/04 60,138 152,402
Hedy Halpert -0- -- -- -- -- --
__________________
</TABLE>
(1) Consists solely of options to acquire shares of T/SF Common Stock. The
options were granted for a term of ten years, subject to earlier termination
in certain events related to the termination of employment. The exercise
price of the options is equal to the fair market value of T/SF Common Stock
on the date of grant. The options become exercisable in full on January 25,
1997. The option exercise price may be paid in cash, by delivery of
already-owned shares, by offset of the underlying shares, or by a
combination of such methods. Tax withholding obligations related to
exercise may be paid by offset of the underlying shares, subject to certain
conditions.
(2) Potential realizable value illustrates the value that might be realized upon
exercise of the options immediately prior to the expiration of their term
(ten years from the date of grant), assuming that T/SF Common Stock
appreciates in value from the date of grant to the end of the option term at
rates of 5 percent and 10 percent, respectively, compounded annually.
COMPENSATION OF DIRECTORS. Directors are paid a fee of $5,000 per year,
plus an attendance fee of $350 per meeting. Directors receive an additional fee
of $1,000 per year for each committee of the Board of Directors on which they
serve, plus an attendance fee of $350 per committee meeting. All Directors are
reimbursed by the Company for out-of-pocket expenses incurred by them in
connection with their service on the Board of Directors and any committee
thereof.
EMPLOYMENT AGREEMENTS. Reference is made to T/SF'S Annual Report on Form
10-K for a description of Employment Agreements with the following persons:
Jenkin Lloyd Jones David Lloyd Jones Wayne Atwood
Linette Atwood John R. Laughlin Hedy Halpert
25
<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on
Company Common Stock for the period from December 31, 1989, through December 31,
1994, with the cumulative total return of two indices during such period.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL
RETURN AMONG TRIBUNE/SWAB-FOX COMPANIES, INC.,
NASDAQ STOCK MARKET TOTAL RETURN INDEX AND
S&P PUBLISHING GROUP INDEX*
[GRAPH OF COMPARISON OF FIVE YEAR CUMULATIVE TOTAL APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Company 100 41 51 83 67 119
Industry 100 82 98 111 137 124
Nasdaq 100 85 136 159 181 177
</TABLE>
* The total return set forth above assumes $100 was invested in Company Common
Stock and each of the indices set forth above on December 31, 1989, and that
all dividends were reinvested. The S&P Publishing Group Index is compiled by
Standard & Poor's Corporation and is composed of Dun & Bradstreet
Corporation, McGraw Hill Publishing Company and Meredith Corporation. The
Nasdaq Stock Market Total Return Index was developed by the Center for
Research and Securities Prices at the University of Chicago and the index
comprises all domestic common shares traded on the Nasdaq National Market and
the Nasdaq Small Cap Market.
REPORT OF COMPENSATION COMMITTEE OF THE COMPANY
All of the officers and highly compensated employees described in the
compensation table above are direct employees of T/SF. As such, their salaries
are determined exclusively by the Board of Directors of T/SF and its
Compensation Committee. The Company only indirectly compensates those parties
by reason of its payment under the Management Agreement. However, the purpose
of the Management Agreement is to allocate overhead and, thus, the payments by
the Company thereunder are not necessarily related directly to the salaries of
specific individuals.
26
<PAGE>
Accordingly, the Compensation Committee of the Board of Directors of the
Company does not have control over the compensation of its officers or the above
listed highly compensated employees. To provide information regarding the
methodology by which the Compensation Committee of T/SF determined such
salaries, reference is made to the Report of the Compensation Committee of T/SF
included in ITEM 11 OF T/SF'S ANNUAL REPORT ON FORM 10-K FOR ITS FISCAL YEAR
ENDED DECEMBER 31, 1994.
ITEM 12. SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
At the close of business on March 17, 1995, there were issued and
outstanding 26,845,864 shares of the Company's Class A Common Stock and
3,703,704 shares of the Company's Class B Common Stock. In December, 1994, and
January, 1995, the Company redeemed or called for redemption all of its classes
of preferred stock. As a result of such action, all of the preferred stock of
the Company was either converted into the Company's Class A Common Stock or
redeemed and, on March 17, 1995, the Company no longer has outstanding any
shares of preferred stock.
Information is provided below for each person whom the Company has been
advised owned beneficially, as of March 17, 1995, more than 5 percent of any
class of voting securities of the Company, for each Director of the Company, for
each of the executive officers of the Company or its subsidiaries named in the
Summary Compensation table and for all executive officers and Directors as a
group.
<TABLE>
<CAPTION>
AMOUNT OF
BENEFICIAL APPROXIMATE
NAME AND ADDRESS OF OWNERSHIP, PERCENT OF
TITLE OF CLASS BENEFICIAL OWNER IN SHARES CLASS
--------------------------- ------------------------ --------- -----------
<S> <C> <C> <C>
Class A Common Stock Jenkin Lloyd Jones(2) 3,650,431 13.6%
Stock(1) 6683 South
Jamestown Place
Tulsa, Oklahoma 74136
Florence Lloyd Jones 6,901,377 25.7%
Barnett(3)
2619 East 37th Street
Tulsa, Oklahoma 74105
Howard G. Barnett, 8,573,865 31.9%
Barnett, Jr.(4)
6742 S. Evanston
Tulsa, Oklahoma 74136
Georgia Lloyd Jones 2,160,296 8.0%
Snoke(5)
and Kenneth Palmer Snoke
4502 East 85th Street
Tulsa, Oklahoma 74137
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
AMOUNT OF
BENEFICIAL APPROXIMATE
NAME AND ADDRESS OF OWNERSHIP, PERCENT OF
TITLE OF CLASS BENEFICIAL OWNER IN SHARES CLASS
--------------------------- ------------------------ --------- -----------
<S> <C> <C> <C>
Jenkin Lloyd Jones Jr. 1,514,479 5.6%
and Carol B. Jones,
as Co-Trustees
of the Revocable
Inter Vivos
Trust of Jenkin
Lloyd Jones Jr.,
and of the Revocable
Inter Vivos Trust
of Carol B. Jones
6447 South Louisville
Tulsa, Oklahoma 74136
Tulsa Tribune 1,593,490 5.9%
Foundation(6)
2407 E. Skelly Drive
Tulsa, Oklahoma 74105
Robert J. Swab 1,423,576 5.3%
3301 S. Trenton
Tulsa, Oklahoma 74105
Martin A.Vaughan(7) 423,250 1.6%
2405 E. Skelly Drive
Tulsa, Oklahoma 74105
Hayden Ann Barnett 1,613,409 6.0%
Kiser
1615 East 31st Place
Tulsa, Oklahoma 74105
The Prudential 3,703,704 12.1%
Insurance(9)
Company of America
c/o Prudential Capital
1201 Elm Street,
Suite 4900
Dallas, Texas 75270
Robert E. Craine, Jr. 170,000 0.6%
J. Gary Mourton 288,081 1.1%
Hedy Halpert 937 ---
Wayne Atwood --- ---
Richard A. Wimbish 10,660 ---
All executive officers and Company Common Stock 14,484,236 53.9%
Directors as a group, 14
persons (10)
</TABLE>
__________________
28
<PAGE>
(1) Each of the beneficial owners has sole voting and investment power with
respect to the securities specified, except as noted otherwise. The Class B
Common Stock is convertible, at the option of the holder, into Class A
Common Stock.
(2) The shares of Common Stock beneficially owned by Jenkin Lloyd Jones include
2,056,941 shares held by Jenkin Lloyd Jones, as Trustee of the Revocable
Inter Vivos Trust of Jenkin Lloyd Jones, and 1,593,490 shares held by Tulsa
Tribune Foundation (which shares are also included in the share ownership of
Florence Lloyd Jones Barnett, and Howard G. Barnett, Jr.). See footnote (6)
below.
(3) The shares of Common Stock beneficially owned by Florence Lloyd Jones
Barnett include 5,307,887 shares owned by Florence Lloyd Jones Barnett and
Howard G. Barnett, Jr., as co-trustees of the Revocable Inter Vivos Trust of
Florence Lloyd Jones Barnett (which are also included in the ownership of
Howard G. Barnett, Jr.), and 1,593,490 shares owned by Tulsa Tribune
Foundation (which shares are also included in the ownership of Jenkin Lloyd
Jones and Howard G. Barnett, Jr.). Not included are 20,000 shares of Common
Stock beneficially owned by her husband, Howard G. Barnett (which are
included in the ownership of Howard G. Barnett, Jr.). Mrs. Barnett
disclaims beneficial ownership of the shares held by her husband. See
footnotes (4) and (6) below.
(4) The shares of Common Stock shown as owned by Mr. Barnett include 1,265,389
shares of Common Stock which are owned directly and beneficially by Mr.
Barnett for his own account, 1,593,490 shares of Common Stock owned by Tulsa
Tribune Foundation (which shares are also included in the stock ownership
for Jenkin Lloyd Jones and Florence Lloyd Jones Barnett) and 387,099 shares
of Common Stock owned by Howard G. Barnett, Jr., as Trustee of the Katherine
Ann Kiser 1980 Trust; 20,000 shares of Common Stock owned by Howard G.
Barnett and Howard G. Barnett, Jr., as Co-Trustees of the Revocable Inter
Vivos Trust of Howard G. Barnett and 5,307,887 shares of Common Stock owned
by Florence Lloyd Jones Barnett and Howard G. Barnett, Jr., as Co-Trustees
of the Revocable Inter Vivos Trust of Florence Lloyd Jones Barnett. The
shares owned by the Revocable Inter Vivos Trust of Florence Lloyd Jones
Barnett are also included in the stock ownership in the table for Florence
Lloyd Jones Barnett. The stock ownership of Mr. Barnett in the table does
not include shares held as follows: Billie T. Barnett (211,971 shares of
Common Stock); Billie T. Barnett, as Trustee under the Howard G. Barnett,
Jr., Trust for Adrienne Lee Barnett (387,099 shares of Common Stock); and
Billie T. Barnett, as Trustee under the Howard G. Barnett, Jr., Trust for
Allison Michelle Barnett (387,099 shares of Common Stock). Billie T.
Barnett is the wife of Howard G. Barnett, Jr., and Adrienne Lee Barnett and
Allison Michelle Barnett are their children. Mr. Barnett disclaims
beneficial ownership of the shares held by his wife, individually, and as
trustee under such trusts for his children. Katherine Ann Kiser is the
daughter of Hayden Ann Barnett Kiser.
(5) Excluded from the shares shown as owned by Georgia Lloyd Jones Snoke and
Kenneth Palmer Snoke are 272,220 shares of Common Stock held by Bank IV of
Oklahoma, N.A., of Tulsa, as trustee under certain present interest trusts
for each of their children, and
29
<PAGE>
12,500 shares of Common Stock owned by David Lloyd Jones as trustee of
certain separate trusts for their children. Mr. and Mrs. Snoke disclaim
beneficial ownership of any such shares.
(6) The Trustees of Tulsa Tribune Foundation (which Trustees have sole control
over the actions of Tulsa Tribune Foundation and, thus, voting control of
the shares owned by it) are Florence Lloyd Jones Barnett, Jenkin Lloyd
Jones, Howard G. Barnett, Jr., and William A. Bowen. The shares owned by
Tulsa Tribune Foundation are also included in the beneficial ownership of
Florence Lloyd Jones Barnett, Jenkin Lloyd Jones and Howard G. Barnett, Jr.
The Tulsa Tribune Foundation also owns $831,000 of 11 percent debentures of
the Company, due 1998, which are convertible into shares of Common Stock at
a conversion rate of $2.39 per share. Because such conversion price is so
much above the current market price and such foundation has indicated a
present intention to require cash repayment of the debentures when due, the
shares of Common Stock which could be acquired by conversion of such
debentures are not included in the ownership for Tulsa Tribune Foundation.
(7) The shares shown as owned by Mr. Vaughan excludes 337,437 shares of Common
Stock held by his wife, Nancy Swab Vaughan, directly, and 310,105 shares of
Common Stock held by his wife as Co-Trustee of the Revocable Inter Vivos
Trust of John T. Swab. Mr. Vaughan disclaims beneficial ownership of any
such shares. Mr. Vaughan's stock holdings in the table include 238,450
shares of Common Stock held by Midwest Resources, Inc., a private company of
which Mr. Vaughan is president, and 29,000 shares of Common Stock held by
Maverick Exploration, Inc., of which Mr. Vaughan owns 100 percent. The
Trustees of the Revocable Inter Vivos Trust of John T. Swab are Nancy Swab
Vaughan, wife of Martin A. Vaughan, and John Stephen Swab.
(8) The stock ownership shown for Hayden Ann Barnett Kiser excludes 387,099
shares of Common Stock owned by Howard G. Barnett, Jr., as Trustee of the
Katherine Ann Kiser 1980 Trust. Katherine Ann Kiser is the daughter of
Hayden Ann Barnett Kiser. The shares owned by such Trust are included in
the beneficial ownership of Howard G. Barnett, Jr. Hayden Ann Barnett Kiser
disclaims beneficial ownership of any of the shares held by the Katherine
Ann Kiser 1980 Trust.
(9) Assumes conversion of the Class B Common Stock into Class A Common Stock.
This stockholder owns 100 percent of the outstanding shares of the Company's
Class B Common Stock.
(10) Included in the totals are the 1,593,490 shares of Common Stock owned by
Tulsa Tribune Foundation, of which Directors Jenkin Lloyd Jones, Florence
Lloyd Jones Barnett and Howard G. Barnett, Jr., are trustees.
30
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Reference is made to the Annual Report on Form 10-K of T/SF for its fiscal
year ended December 31, 1994, and, specifically, Item 13 therein.
The Company is a party to a loan agreement with Howard G. Barnett, Jr.,
President and Chief Executive Officer, that arose in connection with the merger
with Tulsa Tribune Company on October 1, 1984. During 1994, the maximum amount
of Mr. Barnetts loan was $250,000 and that amount represents the amount
outstanding under such loan as of December 31, 1994. The balance of such loan
at December 31, 1993, was $235,000. Mr. Barnett's loan, which has been a line-
of-credit, was amended in 1992 to provide for a maximum future borrowings rights
of up to $250,000 and a loan interest rate of 7.5 percent. The loan may remain
outstanding on a line-of-credit basis through April 30, 1995, at which time Mr.
Barnett must commence amortizing the principal amount in semi-annual
installments (plus accrued interest at 8.5 percent) equal to 1/15th of the
outstanding principal balance with the first installment due October 31, 1995,
and with all remaining principal and interest being due on October 31, 1999.
Mr. Barnett has pledged 695,455 shares of Company Common Stock to secure this
loan.
On May 29, 1990, the Company entered into a loan agreement with Robert J.
Swab, pursuant to which the Company agreed to loan to Mr. Swab, on a line-of-
credit basis for three years, up to $250,000. On June 22, 1993, this line-of-
credit was increased to $350,000. This loan was renewed in June, 1994. At
December 31, 1993, the loan balance was $348,546. The maximum outstanding during
the year was $348,546 and such amount represents the principal amount
outstanding, plus accrued interest, at December 31, 1994, the date of the
Retirement Agreement with Mr. Swab described below. Until the Retirement
Agreement was entered into, the loan bore interest at 9 percent per annum. The
loan was secured by 6,435 shares of 6 1/2 percent Cumulative Convertible
Preferred Stock of the Company (which has since been converted into 289,575
shares of Common Stock) and 110,000 shares of Company Common Stock.
Effective on December 31, 1994, the Company and Mr. Swab entered into a
Retirement Agreement. Pursuant to Mr. Swabs Retirement Agreement, the following
matters, among other things, were agreed to:
(i) Effective December 31, 1994, Mr. Swab retired and resigned from all
offices with and as an employee of the Company.
(ii) Beginning January, 1995, and for 72 consecutive months thereafter,
Mr. Swab will be paid the amount of $5,130 per month.
(iii) Mr. Swab entered into a Covenant-Not-to-Compete (with 30 percent of the
payments described in (ii) above being allocated for such Covenant-Not-
to-Compete).
(iv) Mr. Swab was transferred title to the automobile owned by the Company
and used by Mr. Swab.
31
<PAGE>
(v) The Company purchased 200,000 shares of the Companys Class A Common
Stock owned by Mr. Swab at a price of $0.80 per share. With the proceeds
of this sale, Mr. Swab paid all accrued interest under his note and
reduced the principal balance to $324,317.
(vi) In the event the Merger is not consummated, Mr. Swab agreed to sell an
additional 500,000 shares of Company's Class A Common Stock to the
Company at $0.80 per share.
(vii) Upon completion of the Merger, Mr. Swab will reduce his note to a
$300,000 balance and a new note will be issued, bearing interest at a 9
percent rate, payable $25,000 of principal plus accrued interest each
year with the full balance of the note due December 31, 1997.
(viii) While the note will continue to be secured by 399,575 shares of Company
Common Stock (or the converted amount of T/SF Common Stock in the
Merger), Mr. Swab has the right to "put" 399,575 shares to the Company
at a price of $0.75 per share (or $5.976 per share equivalent of T/SF
Common Stock) for three years. The Company has a "call" on such shares
for the three years at $1.10 per share. All proceeds of any put or call
will be used to pay principal on the loan, if exercised.
(ix) Mr. Swab has an additional "put", at $0.75 per share, on an additional
300,000 shares of common stock of the Company, exercisable 100,000
shares a year for 1995, 1996 and 1997. The Company has a "call" on such
shares, on the same annual basis, at $1.10 per share (or $8.765 per
share equivalent of T/SF Common Stock).
Effective March 14, 1995, the Company entered into the MECI Agreement with
Director Martin A. Vaughan. Pursuant to the MECI Agreement, the Company will
transfer title to MECI of its interest in certain parcels of undeveloped land in
Tulsa, Oklahoma. In exchange, the Company will receive 7,422,773 shares of MECI
stock (some of which are held in escrow pending certain post closing items). The
exchange ratio was determined based on the book value of the real estate
transferred by the Company and the price at which MECI has conducted exchanges
for other assets during the last year. MECI is a very small public company, and
there is little trading in its stock. The real estate to be transferred by the
Company has been owned by the Company for between 10 and 15 years and there had
been only modest activity with respect to such parcels during that time. The
Board of Directors of the Company determined that such assets were of
speculative value at best and that the elimination of the management
responsibility with respect to such assets plus the potential upside afforded by
an investment in MECI justified the exchange and the exchange ratio. The
exchange is part of the Company's plan to dispose of the real estate
discontinued assets, and it was determined by the Company that this transaction
or a similar one was the only reasonable way in which the Company could hope to
realize on these very long term assets in the short term.
32
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)1. Financial Statements
The Financial Statements listed in the accompanying Index to
Financial Statements and Financial Statement Schedules are filed as a
part of this Annual Report on Form 10-K.
2. Financial Statement Schedules
The Financial Statement Schedules are not submitted as the required
information is immaterial, inapplicable or is included in the
financial statements or notes thereto filed as a part of this Annual
Report on Form 10-K.
3. Exhibits
The following exhibits are included as a part of or incorporated into
this Annual Report on Form 10-K:
EXHIBIT NUMBER
2.1 Agreement and Plan of Merger, dated January 25, 1995, between the
Company and T/SF and Amendment No. 1 to Agreement and Plan of
Merger, dated March 3, 1995, between the Company and T/SF
(incorporated by reference to Appendix A to the Joint Proxy
Statement and Prospectus forming a part of T/SFs Registration
Statement on Form S-4, No. 33-57587).
3.1 Certificate of Incorporation of the Company (incorporated by
reference to the Company's Information Statement for its Annual
Meeting of Stockholders, held October 1, 1984, for base Certificate
of Incorporation and to the Company's Proxy Statement for the 1988
Annual Meeting of Stockholders for certain amendments to the
Certificate of Incorporation).
3.2 Bylaws of the Company (incorporated by reference to the Company's
Information Statement for its Annual Meeting of Stockholders, held
October 1, 1984).
10.1 Management Agreement with T/SF, effective January 1, 1989
(incorporated by reference to Exhibit 10.11 to T/SF's Registration
Statement on Form S-1, No. 33-27811, effective June 8, 1989, under
the Securities Act of 1933 (the "S-1 Registration Statement").
33
<PAGE>
10.2 Three separate Loan Agreements, by the Company, as
Facilitator/Guarantor, and BancFirst, dated July 14, 1993
(incorporated by reference to Exhibit 10 to the Company's Quarterly
Report on Form 10-Q for its second quarter ended June 30, 1993).
10.3 Retirement Agreement, by and among the Company, T/SF and G. Douglas
Fox, effective August 1, 1993 (incorporated by reference to Exhibit
10 to the Company's Quarterly Report on Form 10-Q for its quarter
ended June 30, 1993).
10.4 Agreement for Purchase and Sale of Stock, dated March 17, 1994,
between T/SF, T/SF Investment Co., John R. Laughlin and Galaxy
Registration, Inc. Employee Stock Ownership Plan and Trust
(incorporated by reference to Exhibit 2 to T/SF's Report on Form 8-
K, dated March 17, 1994).
10.5 Asset Purchase Agreement, dated November 1, 1993, by and among T/SF,
Marks-Roiland Communications, Inc., and Dickson Media, Inc.,
together with the material closing documents executed and delivered
therewith (incorporated by reference to Exhibit 10.1 to T/SF's
Report on Form 8-K, dated November 1, 1993).
10.6 Asset Purchase Agreement, dated May 2, 1994, by and among T/SF,
Shopper's Guide, Inc., and Dickson Media, Inc. (incorporated by
reference to Exhibit 10.1 to T/SF's Report on Form 8-K, dated May 2,
1994).
10.7 Amendment and Termination Agreement, dated July 31, 1992, and
exhibits, by and among Tulsa Tribune Company, World Publishing
Company and Newspaper Printing Corporation (incorporated by
reference to Exhibit 1 to T/SF's Report on Form 8-K, dated September
30, 1992).
10.8 Covenant for Continued Payments, dated September 30, 1992, by World
Publishing Company in favor of Tulsa Tribune Company (incorporated
by reference to Exhibit 2(vi) to T/SF's Report on Form 8-K, dated
September 30,1992).
10.9 Registration Rights Agreement, by and between the Company and The
Prudential Insurance Company of America, dated August 15, 1988
(incorporated by reference to Exhibit 2A to the Company's Report on
Form 8-K, dated August 29, 1988).
10.10 Revolving Credit Loan Agreement, dated as of July 14, 1993, between
BMT Publications, Inc., and BancFirst, together with exhibits,
including forms of various closing documents executed in connection
therewith (incorporated by reference to Exhibit 10.24 of T/SF's
Report on Form 10-Q for the quarter ended September 30, 1993).
34
<PAGE>
10.11 Revolving Credit Loan Agreement, dated as of July 14, 1993, between
Transportation Information Services, Inc., and BancFirst, together
with exhibits, including forms of various closing documents executed
in connection therewith (incorporated by reference to Exhibit 10.25
to T/SF's Report on Form 10-Q for the quarter ended September 30,
1993).
10.12 Second Amendment to Revolving Credit Loan Agreement, effective as
of June 30, 1994, between Transportation Information Services, Inc.
and BancFirst (incorporated by reference to Exhibit 10.2 to T/SF's
Report on Form 10-Q for the quarter ended September 30, 1994).
10.13 Revolving Credit Loan Agreement, dated as of July 14, 1993, between
T/SF and BancFirst, together with exhibits, including forms of
various closing documents executed in connection therewith
(incorporated by reference to Exhibit 10.26 to T/SF's Report on Form
10-Q for the quarter ended September 30, 1993).
10.14 Revolving Credit Loan Agreement, dated as of June 30, 1994, between
T/SF and BancFirst (incorporated by reference to Exhibit 10.1 to
T/SF's Report on Form 10-Q for the quarter ended September 30,
1994).
10.15 Revolving Credit Loan Agreement, dated November 30, 1993, between
Tulsa Tribune Company and BancFirst (incorporated by reference to
Exhibit 10(iii) to T/SF's Report on Form 10-K for the year ended
December 31, 1993).
10.16* T/SF Communications Corporation 1994 Incentive Stock Plan
(incorporated by reference to Exhibit A to T/SF's Proxy Statement
for its Annual Meeting of Stockholders, dated May 23, 1994).
10.17* T/SF Communications Corporation Employee Stock Purchase Plan
(incorporated by reference to Exhibit 10.1 to the S-1 Registration
Statement).
10.18* T/SF Communications Corporation Incentive Stock Option Plan
(incorporated by reference to Exhibit 10.2 to the S-1 Registration
Statement).
10.19 Retirement Agreement, dated December 14, 1994, with Robert J. Swab
(filed herewith).
10.20 Operating Agreement for 1995 Land Company, L.L.C., dated December
20, 1994, by and among John C. Bumgarner, Jr., and the Company
(filed herewith).
11 Computations of earnings per share for the years ended December 31,
1994, 1993, and 1992 (filed herewith).
35
<PAGE>
21 Subsidiaries of the Company (filed herewith).
27 Financial Data Schedule (filed herewith).
_______________
* Management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K.
During the quarter ended December 31, 1994, the Company did not file a
Current Report on Form 8-K.
36
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
TRIBUNE/SWAB-FOX COMPANIES, INC.
Dated: March 28, 1995 By: /s/ Howard G. Barnett, Jr.
------------------------------------
Howard G. Barnett, Jr., President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
By: /s/ Howard G. Barnett, Jr. President, Chief Executive March 28, 1995
-------------------------------- Officer and Director
Howard G. Barnett, Jr.
By: /s/ Jenkin Lloyd Jones Director March 30, 1995
--------------------------------
Jenkin Lloyd Jones
By: /s/ Jenkin Lloyd Jones Jr. Director March 27, 1995
--------------------------------
Jenkin Lloyd Jones Jr.
By: /s/ Robert J. Swab Director March 28, 1995
--------------------------------
Robert J. Swab
By: /s/ Florence Lloyd Jones Barnett Director March 28, 1995
--------------------------------
Florence Lloyd Jones Barnett
By: /s/ Martin A. Vaughan Director March 28, 1995
--------------------------------
Martin A. Vaughan
By: /s/ J. Gary Mourton Senior Vice President, March 28, 1995
-------------------------------- Chief Financial Officer
J. Gary Mourton and Chief Accounting
Officer
</TABLE>
37
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
Page
<S> <C>
Report of Independent Public Accountants ................................................ F-2
Consolidated Balance Sheets as of December 31, 1994 and 1993 ............................ F-3
Consolidated Statements of Operations for the years ended
December 31, 1994, 1993 and 1992 ....................................................... F-5
Consolidated Statements of Changes in Stockholders' Equity
for the years ended December 31, 1994, 1993 and 1992 ................................... F-6
Consolidated Statements of Cash Flows for the
years ended December 31, 1994, 1993 and 1992 ........................................... F-8
Notes to Consolidated Financial Statements .............................................. F-10
</TABLE>
The required schedules are not submitted as they are immaterial or
inapplicable or because the required information is included in the Consolidated
Financial Statements or notes thereto.
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Tribune/Swab-Fox Companies, Inc.:
We have audited the accompanying consolidated balance sheets of Tribune/Swab-
Fox Companies, Inc. (a Delaware corporation) and subsidiaries as of December 31,
1994 and 1993, and the related consolidated statements of operations, changes in
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1994. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Tribune/Swab-Fox Companies,
Inc. and subsidiaries as of December 31, 1994 and 1993, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1994, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Tulsa, Oklahoma
March 15, 1995
F-2
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
December 31,
1994 1993
------ -------
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents $4,585 $2,808
Short-term investments 2,000 --
Accounts receivable, less reserve for doubtful accounts
of $506 in 1994 and $465 in 1993 8,847 6,541
Inventories (Note 1) 596 188
Deferred tax assets (Notes 1 and 8) -- 1,444
Current contract receivable and other current assets 7,481 5,661
Refundable income taxes 167 404
Assets held for sale (Note 4) 8,529 4,350
------- -------
Total current assets 32,205 21,396
------- -------
Investments (Note 5) 233 366
------- -------
Contract and Notes Receivable (Note 2) 2,786 7,090
------- -------
Property, Plant and Equipment, at cost
(Notes 1, 6 and 7):
Exposition equipment 2,712 --
Rental property and other real estate 255 13,337
Other 4,452 4,279
------- -------
7,419 17,616
Less - accumulated depreciation 2,834 3,650
------- -------
4,585 13,966
------- -------
Deferred Tax Assets (Note 8) 732 --
------- -------
Intangibles and Other Assets, net (Notes 1 and 3) 13,040 17,241
------- -------
$53,581 $60,059
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
December 31,
1994 1993
------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities:
Accounts payable $ 5,905 $ 3,635
Accrued liabilities (Note 13) 7,163 6,867
Deferred tax liabilities (Notes 1 and 8) 823 --
Current portion of long-term debt (Note 7) 1,251 1,880
------- -------
Total current liabilities 15,142 12,382
------- -------
Long-Term Debt (Note 7) 4,905 9,273
------- -------
Deferred Contract Liabilities and Credits 2,456 2,424
------- -------
Deferred Tax Liabilities (Notes 1 and 8) -- 1,531
------- -------
Minority Interests in Consolidated Subsidiaries (Note 1) 6,698 7,999
------- -------
Commitments and Contingencies (Notes 3 and 10)
Common Stock Subject to Put (Note 11) 525 --
------- -------
Stockholders' Equity, per accompanying statement
(Notes 1, 7, 9, and 11):
Preferred stocks, $10 par value -- 459
Common stock, Class A, $.10 par value,
50,000 shares authorized 2,729 2,680
Common stock, Class B, $.10 par value,
10,000 shares authorized 370 370
Additional paid-in capital 17,417 19,211
Retained earnings 3,904 4,295
------- -------
24,420 27,015
Less stock of parent company held by subsidiary (Note 11) ( 565) ( 565)
------- -------
Total stockholders' equity 23,855 26,450
------- -------
$53,581 $60,059
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Revenues (Notes 1 and 3):
Publishing $ 14,946 $ 39,010 $ 69,849
Exposition services 21,057 10,483 9,168
Information services 15,091 14,499 12,673
Other operating income and interest 5,825 4,183 3,543
-------- -------- --------
56,919 68,175 95,233
-------- -------- --------
Costs and Expenses (Notes 1, 3, 4 and 6):
Publishing 11,988 31,567 48,621
Exposition services 14,137 8,631 7,449
Information services 8,944 9,460 8,214
Other operating expenses -- 361 329
General and administrative 11,862 15,000 21,341
Interest 736 1,921 2,692
Depreciation and amortization 3,118 3,779 7,378
Loss on assets held for sale -- 9,224 --
-------- -------- --------
50,785 79,943 96,024
-------- -------- --------
Income (loss) before unusual gain, equity
earnings and income taxes 6,134 ( 11,768) ( 791)
Unusual gain (Note 2) -- -- 24,412
Earnings of equity investments (Note 5) -- 29 73
Income tax (provision) benefit (Notes 1 and 8) ( 2,589) 4,097 ( 10,569)
Minority interest in consolidated subsidiaries (Note 1) ( 981) 1,929 ( 3,983)
-------- -------- --------
Income (loss) from continuing operations 2,564 ( 5,713) 9,142
Discontinued operations (Note 6) ( 2,816) ( 4,800) ( 790)
Extraordinary loss, net of tax of $340 (Note 7) -- ( 560) --
-------- -------- --------
Net income (loss) ( 252) ( 11,073) 8,352
Dividends on preferred shares (Note 9) ( 139) ( 139) ( 139)
-------- -------- --------
Income (loss) applicable to common shares $( 391) $( 11,212) $ 8,213
========= ========= ========
Earnings (loss) per common and
common equivalent share (Note 1):
Primary --
Continuing operations $ 0.08 $( 0.19) $ 0.27
Discontinued operations ( 0.09) ( 0.16) ( 0.02)
Extraordinary loss -- ( 0.02) --
--------- --------- --------
$( 0.01) $( 0.37) $ 0.25
========= ========= ========
Fully Diluted --
Continuing operations $ N/A $ N/A $ 0.26
Discontinued operations N/A N/A ( 0.02)
Extraordinary loss N/A N/A --
--------- --------- --------
$ N/A $ N/A $ 0.24
========= ========= ========
Cash dividends per common share $ -- $ -- $ --
========= ========= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Preferred Stock:
Beginning balance $ 459 $ 459 $ 459
Conversion and redemption of preferred stock (459) -- --
-------- -------- --------
Balance at end of year -- 459 459
-------- -------- --------
Common Stock, Class A:
Beginning balance 2,680 2,690 2,722
Conversion of preferred stock 139 -- --
Retirement of common stock (20) (10) (32)
Reclassification to common stock subject to put (70) -- --
-------- -------- --------
Balance at end of year 2,729 2,680 2,690
-------- -------- --------
Common Stock, Class B:
Balance at end of year 370 370 370
-------- -------- --------
Additional Paid-in Capital:
Beginning balance 19,211 19,262 19,390
Conversion and redemption of preferred stock (1,199) -- --
Retirement of common stock (140) (51) (128)
Reclassification to common stock subject to put (455) -- --
-------- -------- --------
Balance at end of year 17,417 19,211 19,262
-------- -------- --------
Retained Earnings:
Beginning balance 4,295 15,507 7,294
Net income (loss) (252) (11,073) 8,352
Cash dividends on preferred shares (139) (139) (139)
-------- -------- --------
Balance at end of year 3,904 4,295 15,507
-------- -------- --------
Less stock of parent company held by a subsidiary (565) (565) --
-------- -------- --------
$ 23,855 $ 26,450 $ 38,288
======== ======== ========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
F-6
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Continued
(In thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Preferred Shares:
Beginning balance 46 46 46
Conversion and redemption of preferred stock (46) -- --
------ ------ ------
Balance at end of year -- 46 46
====== ====== ======
Common Shares, Class A:
Beginning balance 26,802 26,903 27,223
Conversion of preferred stock 1,387 -- --
Retirement of common stock (200) (101) (320)
Reclassification to common stock subject to put (700) -- --
------ ------ ------
Balance at end of year 27,289 26,802 26,903
====== ====== ======
Common Shares, Class B:
Balance at end of year 3,704 3,704 3,704
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
------- -------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (252) $(11,073) $8,352
------- -------- ------
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 3,163 3,928 7,516
(Earnings) losses of equity investments 18 ( 3) ( 37)
Accretion of interest expense 47 228 270
Unusual gain -- -- (24,412)
Gain on sale of property,
plant and equipment, investments
and marketable securities ( 702) ( 41) ( 231)
Loss on assets held for sale -- 9,224 --
Reserves provided on venture capital
and real estate investments 2,812 4,815 691
Deferred compensation 7 1,856 37
Changes in assets and liabilities:
Accounts receivable and refundable
income taxes (1,907) ( 744) 3,189
Inventories ( 213) 184 535
Current contract receivable and
other current assets ( 399) ( 314) 53
Intangibles and other assets 77 ( 103) ( 33)
Accounts payable and accrued liabilities 2,136 ( 257) ( 797)
Deferred income taxes ( 343) ( 4,837) 4,809
Minority interests 981 ( 1,929) 3,983
------- ------- -------
Total adjustments 5,677 12,007 ( 4,427)
------- ------- -------
Net cash provided by operating activities 5,425 934 3,925
------- ------- -------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-8
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Continued
(In thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Cash flows from investing activities:
Net sales (purchases) of short-term investments (2,000) -- 905
Net receipt (advances) on notes receivable 319 (455) (558)
Investments, net of distributions (183) (164) (6)
Capital expenditures (3,254) (1,618) (1,402)
Net proceeds from early termination of Joint Operating Agreement -- -- 9,720
Proceeds from the sale of property, plant and equipment, investments
and marketable securities 8,983 4,616 1,921
Collections on contract receivable 4,714 4,354 1,039
Payments for acquisitions, net of cash acquired (1,114) -- --
Payments on deferred contract liabilities (502) (1,013) (1,304)
-------- -------- --------
Net cash provided by investing activities 6,963 5,720 10,315
-------- -------- --------
Cash flows from financing activities:
Payments of notes payable, net (151) (51) (140)
Principal payments of long-term debt (6,378) (13,319) (6,612)
Borrowings under bank lines-of-credit 3,300 -- 3,200
Payments under bank lines-of-credit (3,300) -- (5,075)
Issuance of common stock 347 -- --
Repurchase of common stock (2,770) (100) --
Redemption of preferred stock (1,520) -- --
Dividends paid (139) (139) (139)
-------- -------- --------
Net cash used in financing activities (10,611) (13,609) (8,766)
-------- -------- --------
Net increase (decrease) in cash and cash equivalents 1,777 (6,955) 5,474
Cash and cash equivalents at beginning of year 2,808 9,763 4,289
-------- -------- --------
Cash and cash equivalents at end of year $ 4,585 $ 2,808 $ 9,763
======== ======== ========
Supplemental disclosures of cash flow information:
Cash paid for:
Interest $ 1,039 $ 1,993 $ 2,765
Income taxes 2,783 1,485 5,344
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
F-9
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BUSINESS
Tribune/Swab-Fox Companies, Inc., and subsidiaries (collectively,
"Tribune/Swab-Fox", unless the context indicates otherwise) are engaged in
publishing several trade journals, newspapers and other publications for
conventions and trade shows, providing trade show registration services and
exhibitor information and marketing services, providing information services to
the insurance and trucking industries, real estate investments, publishing
shopper-newspapers (through October 31, 1993 - see Note 4) and, until October 1,
1992, publishing a daily newspaper.
T/SF Communications Corporation, a 78 percent-owned subsidiary
(Communications), conducts the publishing and information businesses of
Tribune/Swab-Fox.
On January 25, 1995, Communications entered into an Agreement and Plan of
Merger, as amended, with Tribune/Swab-Fox whereby, subject to approval of
Communications and Tribune/Swab-Fox stockholders, Tribune/Swab-Fox will be
merged with and into Communications. Tribune/Swab-Fox stockholders (other than
Communications) will receive 0.1255 of a share of Communications Common Stock
or, if elected, and subject to certain limitations, $0.88 in cash, for each
Tribune/Swab-Fox share.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Tribune/Swab-
Fox and its majority-owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated in consolidation. Minority interest
represents the minority stockholders' interest in certain majority-owned
subsidiaries.
INTEREST IN NEWSPAPER PRINTING CORPORATION (NPC)
Prior to an agreed-to dissolution and liquidation (see Note 2), NPC, a
joint operating agency, was owned 40 percent by Tulsa Tribune Company, a wholly-
owned subsidiary of Communications (Tribune), and 60 percent by Tulsa World
Company (World). Tribune, World and NPC entered into a Joint Operating
Agreement (JOA) in 1941 (amended in 1955 and 1981) which provided, among other
things, for the following:
(1) A common plan of operation under which NPC, as agent for Tribune and
World, sold advertising, printed, marketed and distributed the
newspapers published by Tribune and World, and collected revenues
attributable to such operations.
F-10
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
However, Tribune and World maintained control of their individual news
and editorial departments.
(2) Revenues and expenses of operating, selling and distributing the two
newspapers were shared 40 percent by Tribune and 60 percent by World,
without regard to whether generated by or attributable to Tribune or
World, except newsroom expenses as to which Tribune paid 100 percent of
such expenses incurred on its behalf in excess of 6/14ths of the total
newsroom costs of both newspapers.
Tribune and World reported their share of the revenues over expenses
generated through their joint operations managed by NPC in their respective tax
returns.
Prior to the termination of the JOA, Tribune/Swab-Fox used agency
accounting for its 40 percent ownership of NPC, whereby its share of NPC's
individual assets, liabilities, revenues and expenses are included in these
financial statements. Printing equipment utilized by NPC, as agent, was owned
directly by Tribune and World.
INVENTORIES
Inventories include newsprint and related printing supplies, computers and
computer-related equipment and exposition registration supplies. Inventories
are recorded at the lower of cost or market determined on first-in, first-out
and average cost methods. Inventories of newsprint and related printing
supplies were $404,000 and $128,000 and inventories of computers and computer-
related equipment were $81,000 and $60,000 at December 31, 1994, and 1993,
respectively, and inventories of exposition registration supplies were $111,000
at December 31, 1994.
DEPRECIATION
Depreciation of property, plant and equipment is provided using the
straight-line method based on estimated useful lives ranging from three to 25
years.
INTANGIBLES AND OTHER ASSETS
Intangibles and other assets include advertising lists, covenants-not-to-
compete and consulting agreements, goodwill related to acquisitions, and credits
granted for truck driver employment information files. These assets are being
amortized over periods of three to 30 years and consist of the following:
F-11
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
Amortization December 31,
Period 1994 1993
-------------- ---------- ------------
(In thousands)
<S> <C> <C> <C>
Advertising lists 3 1/2-11 years $ 70 $ 3,941
Covenants-not-to-compete and
consulting agreements 3-10 years 1,731 2,190
Goodwill 30 years 11,833 17,963
Other 4-9 years 3,757 1,754
-------- --------
17,391 25,848
Accumulated amortization ( 4,351) ( 8,607)
-------- --------
$ 13,040 $ 17,241
======== ========
</TABLE>
Goodwill impairment is assessed at each balance sheet date based upon a
review of the acquired entity's operations as to income, growth of income in
relation to the expected growth of income when acquired and, if the entity is
considered for sale, estimated realizable value. Valuation reserves are
provided if the carrying value of acquired goodwill is determined to be
permanently impaired.
CHANGE IN ACCOUNTING ESTIMATES
During the third quarter of 1992, Tribune/Swab-Fox revised the estimated
lives used to depreciate or amortize certain machinery and equipment,
advertising lists and covenants of Shopper's Guide, Inc. (Shopper's Guide),
Tribune/Swab-Fox's New Jersey free-distribution shopper-newspaper, and equipment
and advertising lists of Marks-Roiland Communications, Inc. (Marks-Roiland),
Tribune/Swab-Fox's Long Island free-distribution shopper-newspaper. Management
of Tribune/Swab-Fox made the change in estimates to reflect the effect of the
local economies of each operation on the useful lives of these assets. The
effect of this change in accounting estimates was to increase 1992 depreciation
and amortization by approximately $2,400,000 and to decrease 1992 net income by
approximately $1,540,000 or $0.05 per share.
REVENUE RECOGNITION
Revenues from information services are net of the cost of charges from
state motor vehicle record departments which are incurred by Tribune/Swab-Fox as
an agent for its customers. As provided in the agreements with customers,
Tribune/Swab-Fox charges a fee for its service and is also reimbursed for state
charges.
Exposition services revenues are recognized when the services are provided.
F-12
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
Advertising revenues from Tribune/Swab-Fox's publishing businesses are
recognized when each publication is published and distributed.
Commercial printing revenues are recognized when the material is printed
since the customer is generally obligated to accept printed matter when the
printing is complete. Commercial printing customers must exercise their right
of inspection, when such inspection right exists, while the printing is in
process.
INCOME TAXES
Effective January 1, 1993, Tribune/Swab-Fox adopted SFAS No. 109,
Accounting for Income Taxes, which requires an asset and liability approach to
financial accounting and reporting for income taxes. The difference between the
financial statement and tax bases of assets and liabilities is determined
annually. Deferred income tax assets and liabilities are computed for those
differences that have future tax consequences using the currently enacted tax
laws and rates that apply to the periods in which they are expected to affect
taxable income.
The effect of adopting SFAS No. 109 was not material to Tribune/Swab-Fox's
financial position or its results of operations.
POSTRETIREMENT BENEFITS
Tribune/Swab-Fox does not offer any postretirement medical or insurance
benefits for any employees.
STATEMENTS OF CASH FLOWS
For purposes of the statements of cash flows, Tribune/Swab-Fox considers
all highly liquid debt instruments purchased with a maturity of three months or
less to be cash equivalents.
EARNINGS (LOSS) PER COMMON SHARE
Earnings (loss) per common and common equivalent share are computed by
dividing net income (loss), adjusted for dividends on preferred stock and before
deduction of interest expense (net of tax) on certain subordinated convertible
debentures, by the weighted average number of common and common equivalent
shares, when dilutive, outstanding during the year. Outstanding incentive stock
options, warrants and common shares that would be issued assuming the 6 1/2
percent convertible preferred shares and the 11 percent subordinated convertible
debentures due in 1997 were converted into common stock are considered common
stock equivalents and, when dilutive, are included in the calculation of
earnings (loss) per common share.
F-13
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
The weighted average number of common and common equivalent shares
outstanding was 29,742,000 in 1994, 30,286,000 in 1993 and 33,531,000 in 1992.
Common shares that would be issued assuming conversion of the new senior
preferred shares and the 11 percent subordinated convertible debentures due in
1998 were not included in the calculations since the effect would have been
antidilutive.
2. TERMINATION OF JOINT OPERATING AGREEMENT:
On September 30, 1992, pursuant to the terms of an Amendment and
Termination Agreement, by and among Tribune, World and NPC, the following
occurred:
(1) The JOA among Tribune, World and NPC which otherwise would not have
terminated prior to March 31, 1996, was terminated.
(2) Tribune ceased publication of The Tulsa Tribune effective with the
September 30, 1992 edition.
(3) At closing, World paid Tribune $1,000,000 for certain newspaper related
assets of Tribune and paid an additional $10,500,000 in partial
consideration for the early termination of the JOA. World also
executed and delivered to Tribune a Covenant for Continued Payment
pursuant to which World agreed to pay to Tribune 41 consecutive monthly
payments of $450,000 commencing November 1, 1992 (total payments of
$18,450,000), in lieu of amounts that Tribune would have otherwise been
entitled to receive under the JOA contract. At December 31, 1994,
$5,996,000, representing the present value of remaining unpaid monthly
payments, is reflected in the accompanying balance sheets as a Contract
Receivable.
(4) The parties agreed to dissolve and liquidate NPC.
As part of this transaction, Tribune agreed to pay termination costs for
Tribune-related newsroom and editorial employees of NPC and certain executives
of Tribune, which approximated a present value of $2,200,000. The excess of
payments received at September 30, 1992, plus the present value of future
payments, over the book basis of assets sold and Tribune's cost of termination,
is reflected in the accompanying financial statements as Unusual Gain. The
provision for income taxes includes the income taxes related to the Unusual
Gain.
F-14
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
3. ACQUISITIONS:
ATWOOD CONVENTION PUBLISHING, INC. (ATWOOD)
In August, 1990, Communications acquired 100 percent of the outstanding
stock of Atwood. Atwood publishes daily newspapers and other publications for
conventions and trade shows and is part of the Exposition Services segment.
In addition to the original purchase price, Communications agreed to, and
has paid additional purchase price adjustments of $1,250,000, based upon
Atwood's operating income exceeding certain defined levels for each of the three
years in the period ended December 31, 1993. Also, incentive compensation
payments to the former owners of $750,000 were earned and expensed during the
same periods. The purchase price adjustments are included in the accompanying
financial statements as additional goodwill to be amortized over the remaining
goodwill life.
GALAXY REGISTRATION, INC. (GALAXY)
Effective March 1, 1994, Communications completed the acquisition of
Galaxy. Galaxy provides, on a national basis, registration, information and
marketing services to the convention/trade show industry and is included in the
Exposition Services segment. Communications acquired Galaxy with the payment of
$1,200,000 in cash plus a note payable for $900,000. If certain earnings
targets are achieved, the principal owner of Galaxy, who will be employed as
President and Chief Operating Officer of Galaxy, may receive additional payments
not to exceed $2,900,000 by 1997. The earnings target for 1994 was achieved.
Accordingly, Communications accrued $300,000 of purchase price adjustments
payable to the former owner. In addition, the former owner earned $100,000 of
incentive compensation in the period ended December 31, 1994, which
Communications expensed. In connection with this transaction, the former
principal owner of Galaxy purchased 75,000 shares of Communications' Common
Stock at $4.625 per share for a total purchase price of $346,875. In addition,
a covenant-not-to-compete and an employment agreement were entered into with the
former principal owner.
Unaudited pro forma results of operations, had the Galaxy acquisition
occurred on January 1, 1994, with respect to the 1994 information, and January
1, 1993, with respect to the 1993 information are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993
----------- -----------
<S> <C> <C>
(In thousands)
Revenues $58,469 $76,419
Income (loss) from continuing operations 2,726 (5,477)
Earnings (loss) per common from 0.09 (0.18)
continuing operations
</TABLE>
F-15
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
This unaudited pro forma information is presented in response to applicable
accounting rules. It is not necessarily indicative of the actual results that
would have been achieved had the Galaxy acquisition occurred on January 1, 1994,
with respect to the 1994 information, and January 1, 1993, with respect to the
1993 information.
4. ASSETS HELD FOR SALE:
On December 22, 1994, the Communications Board of Directors approved the
selling of three of Communications trade journals. Accordingly, the net assets
related to these trade journals are reflected as Assets held for sale in the
accompanying balance sheet at December 31, 1994. Managements opinion is that
the book value of the three trade journals is less than their estimated net
realizable value.
On April 30, 1994, Communications sold the assets of Shoppers Guide.
Communications received $1,750,000 in cash, $1,100,000 cash payment for post-
closing adjustments, and the buyer assumed certain liabilities totaling
$930,000. Communications also received the right to receive a maximum of
$3,450,000 out of future cash flow from the business conducted with the assets
sold, as defined, over the next five years and after the buyer receives a
certain sum. In addition, Communications entered into a five year covenant-not-
to-compete in exchange for $750,000 in cash. Communications recorded no gain or
loss on the sale or in connection with the covenant-not-to-compete. At December
31, 1994, the accompanying balance sheet includes $762,000 of net assets related
to the right to receive future cash flow payments. Communications will
recognize income for future cash flow payments in excess of such amount when
received.
During the third quarter of 1993, Communications' Board of Directors made
the decision to offer for sale all of Communications shopper-newspaper
operations. Accordingly, the book value of the shopper-newspapers was reduced
to estimated net realizable value and a pre-tax loss of $9,224,000 was
recognized. On November 1, 1993, Communications sold all of the operating
assets, except cash, of Marks-Roiland, one of the shopper-newspapers.
Communications received $4,675,000 in cash, and the buyer assumed certain
liabilities totaling approximately $1,560,000. In addition, Communications
entered into a three-year covenant-not-to-compete whereby Communications may not
compete with the buyer in the geographic area of the operations that were sold.
Communications received $1,425,000 in cash for the covenant which will be
recognized in income ratably over the term of the covenant.
F-16
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
5. INVESTMENTS:
Tribune/Swab-Fox is a general partner in several real estate partnerships
which own real estate assets. Tribune/Swab-Fox accounts for these investments
in real estate partnerships using the equity method (see Note 6).
In 1994, Tribune/Swab-Fox sold its venture capital investments in several
corporations which were in the form of common stocks, preferred stocks,
subordinated debentures and other debt instruments and as a partner in
businesses operating as partnerships. Management of Tribune/Swab-Fox was
represented on the Boards of Directors of certain of these investments. These
investments were accounted for at cost until Tribune/Swab-Fox's ownership
reached 20 percent or Tribune/Swab-Fox exercised significant influence, at which
time, Tribune/Swab-Fox accounted for the investment on the equity method. To
the extent such investments included goodwill, such goodwill was amortized over
periods up to 30 years. The carrying value of such investments was reduced by a
charge to income when, in the opinion of management, a permanent impairment in
value had occurred.
6. REAL ESTATE:
Effective November 30, 1994, Tribune/Swab-Foxs Board of Directors approved
a plan to dispose of the remaining real estate operations. As a result, the
real estate business has been reclassified as discontinued operations.
Tribune/Swab-Fox and Communications file separate income tax returns. Due to
Tribune/Swab-Foxs history of losses, no deferred tax asset is recognized related
to the net operating loss carryforward. Therefore, no income tax benefit is
recognized on the real estate business losses. The following summarizes the
components of the loss from discontinued operations.
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
(In thousands)
Revenues $ 589 $ 365 $ 406
Costs and expenses (3,405) (5,165) (1,196)
------- ------- -------
Loss from discontinued operations $(2,816) $(4,800) $( 790)
======= ======= =======
</TABLE>
On December 30, 1994, Tribune/Swab-Fox sold three significant parcels of
raw land to 1995 Land Company L.L.C. an Oklahoma limited liability company (1995
Land Company), for $1,386,650, including cash of $600,000 and a note receivable
of $786,350. The 1995 Land Company is owned 49.99 percent by Tribune/Swab-Fox,
but the funding for the purchase was provided through a loan from the owner of
the remaining 50.01 percent, who will oversee, manage and fund the development
and sale of these properties.
F-17
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
Subsequent to December 31, 1994, Tribune/Swab-Fox entered into an
Acquisition Agreement with Midwest Energy Companies, Inc. (MECI), which is
indirectly controlled by a Tribune/Swab-Fox director. The Acquisition Agreement
provides that Tribune/Swab-Fox will sell approximately 900 acres of raw land,
with a book value of $1,650,000 at December 31, 1994, for 7,422,773 shares of
MECI common stock.
During the third quarter of 1993, Tribune/Swab-Fox's Board of Directors
made the decision to accelerate the liquidation of real estate. The plan for
liquidation was implemented by offering the real estate assets for sale at
discounts from retail values that might otherwise be achieved if the assets were
held for sale in the normal course of business. As part of this plan,
Tribune/Swab-Fox acquired the interests of several partners in certain real
estate partnerships in exchange for notes receivable from such partners of
approximately $3,400,000, assumed partnership bank debt of approximately
$1,700,000 and made cash payments of $335,000. After these interests were
acquired, Tribune/Swab-Fox generally owned 100 percent of these partnerships and
properties. As a part of the liquidation plan, a review of the market value for
each property was made and a write-down of the real estate assets of
approximately $2,800,000 and $4,400,000 was recognized in 1994 and 1993,
respectively. These write-downs are reflected in "costs and expenses" in the
table above and included in discontinued operations.
F-18
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
7. LONG-TERM DEBT:
Long-term debt outstanding consists of the following:
<TABLE>
<CAPTION>
December 31,
1994 1993
------- -------
(In thousands)
<S> <C> <C>
Promissory notes secured by stock of a
subsidiary, payable $152,000
quarterly, plus interest, through
December, 2000, interest rate adjusts
semi-annually to the base rate of
Chase Manhattan Bank (8.5% at December
31, 1994). $ 3,640 $ 4,247
7.5% Promissory note, unsecured,
$100,000 payable annually, plus
interest, in August with final payment
in August, 1998. 365 465
11% convertible subordinated debenture
due August, 1998, interest payable
quarterly. 831 831
11% convertible subordinated debentures
paid in 1994. 1,265
Subordinated debenture, $200,000 annual
principal payment through 1997,
interest payable quarterly based upon
Chase Manhattan base rate plus 1%
(9.5% at December 31, 1994). 600 800
Real estate term notes paid in
December, 1994. -- 3,250
6% Promissory note, unsecured,
quarterly payments of $75,000, plus
interest, through March 31, 1997. 675 --
Other 45 295
-------- --------
6,156 11,153
Less portion due within one year ( 1,251) ( 1,880)
-------- --------
$ 4,905 $ 9,273
======== ========
</TABLE>
F-19
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
Installments due on long-term debt during each of the five years subsequent
to December 31, 1994, are as follows:
<TABLE>
<CAPTION>
(In thousands)
<S> <C>
1995 $1,251
1996 1,208
1997 982
1998 1,503
1999 607
Thereafter 605
------
$6,156
======
</TABLE>
The 11 percent convertible subordinated debenture due 1998 is convertible
into Common Stock of Tribune/Swab-Fox at any time, prior to maturity, at a rate
of $2.39 per share.
At December 31, 1994, assets with a net book value of approximately
$6,200,000 are pledged as collateral on long-term debt.
In connection with the sale of the Marks-Roiland assets (see Note 4),
Tribune/Swab-Fox agreed to a prepayment of the $8,889,000 remaining principal of
Senior Notes held by The Prudential Insurance Company of America (Prudential).
As provided by the Senior Notes agreement, a yield maintenance premium was
required to be paid as part of the prepayment. Through negotiations with
Prudential, Tribune/Swab-Fox obtained a reduction in the yield maintenance
premium to $802,000 which, along with the remaining unamortized loan fees
related to the Senior Notes, is reflected as an extraordinary loss in the
accompanying statements of operations.
At December 31, 1994, Tribune/Swab-Fox has two separate revolving credit
arrangements with a bank which together allow Tribune/Swab-Fox to borrow up to
$3,750,000. Interest on amounts borrowed is payable monthly at a rate of 1 1/2
percent above the Chase Manhattan base rate (10 percent at December 31, 1994).
Certain of the facilities are secured by accounts receivable. At December 31,
1994, no balance was outstanding under these arrangements, which require payment
of a 3/8 percent per annum fee on the unused portion of the credit facilities.
F-20
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
8. INCOME TAXES:
The provision for (benefit from) income taxes is comprised of the
following:
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Current:
Federal $2,600 $ 352 $ 4,948
State 332 48 1,003
------ ------- -------
$2,932 400 5,951
------ ------- -------
Deferred:
Federal ( 339) (4,137) 3,944
State ( 4) ( 700) 674
------ ------- -------
( 343) (4,837) 4,618
------ ------- -------
$2,589 $(4,437) $10,569
====== ======= =======
</TABLE>
The reconciliation of income tax computed at the federal statutory
rate (34%) to income tax expense (benefit) is as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
----------- ------------ --------------
<S> <C> <C> <C>
(In thousands)
Income tax provision (benefit) at $1,128 $ (5,956) $ 7,787
statutory rates
Amortization of acquired assets not
deductible for income tax purposes 224 302 1,092
Losses without tax benefit 1,061 2,042 594
Excess of tax basis of assets sold over
book basis which was not previously ( 36) ( 369) ---
tax effected
State income taxes 217 ( 444) 1,107
Other ( 5) ( 12) ( 11)
------ -------- -------
$2,589 ( 4,437) $10,569
====== ======== =======
</TABLE>
F-21
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
Significant components of deferred tax liabilities and assets are as
follows:
<TABLE>
<CAPTION>
December 31,
1994 1993
---------- ---------
<S> <C> <C>
(In thousands)
Deferred tax liabilities:
Fixed asset basis differences $( 330) $( 654)
Unusual gain recognized in different
accounting period for income tax (2,293) (4,136)
reporting purposes
Assigned acquisition basis -- ( 472)
Other, net -- ( 66)
------- -------
Deferred tax liabilities (2,623) (5,328)
------- -------
Deferred tax assets:
Income recognized in different
accounting period for income tax 1,045 508
purposes
Deferred severance benefits payable 938 993
Reserves on assets 260 5,338
Accrued expenses deductible when paid 319 553
Tax loss carryforwards 3,887 1,926
Other, net -- 188
------- -------
Total deferred tax assets 6,449 9,506
Valuation allowance for deferred (3,917) (4,265)
tax assets ------- -------
Net deferred tax assets 2,532 5,241
------- -------
Net deferred tax liabilities $( 91) $( 87)
======= =======
</TABLE>
F-22
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
Net deferred tax liabilities are reflected on the accompanying balance
sheets as follows:
<TABLE>
<CAPTION>
December 31,
1994 1993
---- ----
<S> <C> <C>
(In thousands)
Long-term - Deferred tax liabilities $ -- $(1,531)
Long-term - Deferred tax assets 732 --
Current liabilities - Deferred tax ( 823) --
liabilities
Current assets - Deferred tax assets -- 1,444
------ -------
$( 91) $( 87)
====== =======
</TABLE>
At December 31, 1994, Tribune/Swab-Fox has net operating loss carryforwards
of approximately $10,500,000 for income tax reporting purposes. If not offset
against future taxable income, the carryforwards will begin to expire in the
year 2006.
9. CAPITAL STOCK:
In December, 1994, the 6 1/2 percent Cumulative Convertible Preferred Stock
was converted and Tribune/Swab-Fox paid approximately $1,520,000 for the
redemption of the remaining outstanding preferred stock as follows:
The 30,815 shares of 6 1/2 percent Cumulative Convertible Preferred Stock,
were converted into 1,386,675 shares of Class A Common Stock.
The 1,400 shares of Class A Preferred Stock were redeemed by Tribune/Swab-
Fox at a price of $110 per share.
The 13,657 shares of New Senior Preferred Stock were redeemed by
Tribune/Swab-Fox at $100 per share.
In December 1994 and 1993 and in June, 1992, Tribune/Swab-Fox purchased and
retired 200,000 shares, 101,073 shares and 320,000 shares, respectively, of its
Class A Common Stock owned by certain officers and directors of Tribune/Swab-Fox
for a purchase price of $0.80, $0.60, and $0.50 per share in 1994, 1993 and
1992, respectively. As part of these transactions, Tribune/Swab-Fox received
payments on loans of $24,000 in 1994, $224,000 in 1993 and $450,000 in 1992.
The 1994 stock repurchase of 200,000 shares for $160,000 related to the
retirement of the former Chairman of the Executive Committee (Note 11).
F-23
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
Tribune/Swab-Fox has an incentive stock option plan whereby 747,500 shares
of Common Stock are reserved for issuance at December 31, 1994. Options may be
granted to key employees and are exercisable up to ten years from date of grant.
No options are outstanding under this plan and no options were exercised or
lapsed during 1994. Communications' incentive stock option plan authorizes an
aggregate of 150,000 shares of Communications' Common Stock which may be granted
to key employees. Communications options for 62,499 shares were outstanding and
exercisable at December 31, 1994, at option prices of $5.50, $8.00 and $12.00
per share. Communications options for 20,000 shares were granted during 1994
and no options were exercised during 1994. Communications options for 29,166
shares lapsed or were canceled in 1994. Options are granted at the discretion
of the Board of Directors Compensation Committee at a minimum exercise price of
100 percent of the market value of Communications' Common Stock at the date of
grant.
Communications has approved an Employee Stock Purchase Plan and 100,000
shares of Common Stock have been allocated for this plan. No shares have been
issued under this plan.
In January, 1994, Communications' Board of Directors approved the 1994
Incentive Stock Plan which permits Communications to grant stock options and
awards of restricted stock to executives and key employees. Tribune/Swab-Foxs
stockholders approved this plan at the 1994 Annual Meeting. Pursuant to various
bonus plans, Communications will award 22,733 shares of restricted stock at
$6.25 per share in April, 1995, plus additional shares equal to $31,874 based on
a per share price equal to the average of the closing price on the last 20
trading days in April, 1995, as part of 1994 incentives. These restricted
shares vest three years from the date of issuance. Communications granted
options for 202,500 shares in 1994 at an option price of $4.25 per share which
will expire in 2004 and vest 100 percent in 1997.
Class B Common Stock is nonvoting, holders are entitled to dividends on a
basis equal to that of Class A Common Stock and is convertible into Class A
Common Stock on a share-for-share basis at the option of the holder.
10. COMMITMENTS AND CONTINGENCIES:
Tribune/Swab-Fox, mainly through Communications, has operating lease
agreements, principally for office facilities and equipment, expiring at various
dates through 2000. Rent expense in 1994, 1993 and 1992 under operating leases
was approximately $924,000, $1,317,000, $1,995,000, respectively.
F-24
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
As of December 31, 1994, future minimum lease payments are as follows:
<TABLE>
<CAPTION>
Minimum Lease
Year Ending December 31 Payments
----------------------- --------------
(In thousands)
<S> <C>
1995 $ 887
1996 856
1997 780
1998 686
1999 511
Thereafter 189
------
$3,909
======
</TABLE>
Communications has employment agreements with three executives of
Communications and its subsidiaries. The agreements provide for individual
compensation ranging from $100,000 to $111,000 annually ($310,000 annually in
the aggregate) and expire at various dates through 1997.
Communications is a defendant in certain litigation arising out of
operations in the normal course of business. However, it is the opinion of
management that the ultimate liabilities relating thereto, if any, will not have
a material adverse effect on the financial position or results of operations of
Communications.
In February, 1993, Communications received notice of assessments of Federal
income tax for the years 1989 through 1991 of approximately $955,000, due
principally to the disallowance of certain deductions related to amortization of
intangible assets, specifically advertising lists and covenants-not-to-compete.
Communications settled the tax liability during 1994 with the Internal Revenue
Service, which did not materially affect Communications financial position or
results of operations. Currently, examination of Communications Federal income
tax returns for the years 1993 and 1992 are in progress. Management of
Communications believes that any tax liability which ultimately may result will
not have a material adverse effect on the financial position or results of
operations of Communications.
11. RELATED PARTY TRANSACTIONS:
Effective December 31, 1994, the Chairman of the Executive Committee of
Tribune/Swab-Fox retired. Tribune/Swab-Fox recorded deferred compensation
expense of approximately $277,000 in 1994 related to this retirement. In
addition, Tribune/Swab-Fox acquired 200,000 shares of Class A Common Stock for
$160,000 from the former employee. The former Chairman of the Executive
Committee has a promissory note payable to Tribune/Swab-
F-25
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
Fox of approximately $325,000 at an 8.5 percent interest rate at December 31,
1994. Upon completion of the merger with Communications, a new promissory note
at a 9 percent interest rate will be executed for the unpaid principal balance
plus accrued interest. A security interest in favor of Tribune/Swab-Fox covering
399,575 shares of Class A Common Stock secures this note. The former Chairman of
the Executive Committee has the right to put the 399,575 shares to Tribune/Swab-
Fox at $0.75 per share for three years. In addition, Tribune/Swab-Fox granted
the former Chairman of the Executive Committee the right to put 100,000
additional shares in each of 1995, 1996 and 1997 to Tribune/Swab-Fox at $0.75
per share. Tribune/Swab-Fox has the right to call all 699,575 shares at $1.10
per share. Accordingly, at December 31, 1994, the 699,575 shares are reflected
as Common Stock Subject to Put in the accompanying balance sheet.
Effective August 1, 1993, the Chairman and Chief Executive Officer of
Tribune/Swab-Fox and Communications resigned. Included in general and
administrative expenses for 1993 in the accompanying consolidated statements of
operations are retirement and deferred compensation expense of approximately
$1,800,000 related to this resignation. In addition, Communications acquired
748,734 shares of Tribune/Swab-Fox's Class A Common Stock and 111 shares of
Tribune/Swab-Fox's 6 1/2 percent Cumulative Convertible Preferred Stock for
$565,000, with a cash payment of $100,000 and the issuance of a promissory note
for the balance providing for payments over the period 1994 through 1998.
Communications also acquired an 11 percent Convertible Subordinated Debenture
due 1997 (which was called for early retirement in 1994) in the principal amount
of $141,000 held by the former Chairman and Chief Executive Officer. Subsequent
to December 31, 1994, upon exercise of an option, Communications acquired
389,000 shares of Tribune/Swab-Fox Class A Common Stock from the Profit Sharing
Plan and Trust of Tribune/Swab-Fox Companies, Inc., of which the former Chairman
and Chief Executive Officer is the trustee, for $291,750, with a cash payment of
$72,937 and a note payable for $218,813.
NPC paid approximately $170,000 to Green Country Distributors, Inc. (Green
Country), an affiliated company of Tribune, for transportation services in 1992.
NPC paid approximately $198,000 to a leasing company owned by certain
stockholders of Tribune/Swab-Fox, World and the General Manager of NPC for
vehicle leases in 1992. Green Country paid approximately $79,000 to this
leasing company for vehicle leases in 1992. In a separate but related
transaction, concurrent with the termination of the JOA, World acquired the
interests of such Tribune/Swab-Fox stockholders in this leasing company for
approximately $70,000.
Under the terms of a loan agreement, amended in June, 1992, a former
Tribune stockholder and current officer and director of Tribune/Swab-Fox has
borrowed approximately $235,000 from Tribune/Swab-Fox at an interest rate of 7.5
percent. The loan is secured by
F-26
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
695,000 shares of Class A Common Stock of Tribune/Swab-Fox. The borrower is
required to commence semi-annual payments in October, 1995 equal to one-
fifteenth of the outstanding loan principal with all of the remaining balance
due in October, 1999.
12. BUSINESS SEGMENT INFORMATION:
Tribune/Swab-Fox's operations are conducted primarily through three
business segments entirely within the continental United States. These segments
and the primary operations of each are as follows:
<TABLE>
<CAPTION>
Business Segment Operations
---------------- ----------
<S> <C>
Publishing Publication through September 30, 1992, of The
Tulsa Tribune, an evening newspaper published six
days per week in Tulsa, Oklahoma, publication of
weekly free-distribution shopper-newspapers by
Shopper's Guide and Marks-Roiland (through October
31, 1993) and publication of five trade journals
(four after August, 1994) by BMT Publications, Inc.
Exposition Publisher of various convention/trade show
Services publications and publisher of trade journal,
provider of registration services, exhibitor
marketing and information services, all to the
exposition industry. Prior to 1994, Atwood was
included in the Publishing segment. In connection
with the Galaxy acquisition, the Exposition
Services segment was added which also includes
Atwood. Atwood has been reclassified into the
Exposition Services segment for 1993 and 1992.
Information Provider of motor vehicle reports, truck driver
Services employment information, worker's compensation
information, credit reports, criminal record
reports and other pre-employment screening
information and services, and, until March , 1994,
reseller of long-distance telephone service to the
insurance and trucking industries.
Real Estate - Ownership and management of various rental
Discontinued properties, including commercial buildings,
Operations motels, residential units and warehouses and
investment in undeveloped real estate. This
segment was discontinued in 1994.
</TABLE>
F-27
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
Summarized financial information by industry segment is as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
-------- -------- -------
(In thousands)
<S> <C> <C> <C>
NET REVENUES FROM SALES TO UNAFFILIATED
CUSTOMERS:
Publishing $ 18,608 $ 41,652 $71,475
Exposition services 21,057 10,483 9,168
Information services 15,091 14,499 13,643
Corporate and other 2,163 1,541 947
-------- -------- -------
$ 56,919 $ 68,175 $95,233
======== ======== ========
OPERATING PROFIT (LOSS):
Publishing $ 2,891 $ (9,509) $ 944
Exposition services 1,453 297 363
Information services 2,992 2,505 2,708
------- -------- --------
Operating profit (loss) from segments 7,336 ( 6,707) 4,015
Corporate expenses, net ( 466) ( 3,111) (2,041)
Interest expense ( 736) ( 1,921) (2,692)
------- -------- --------
Income (loss) from continuing
operations before unusual gain,
income taxes and extraordinary loss $ 6,134 $(11,739) $( 718)
======= ======== ========
IDENTIFIABLE ASSETS:
Publishing $14,871 $ 24,422 $ 46,852
Exposition services 11,534 4,714 4,196
Information services 12,101 12,387 11,460
Corporate 12,808 6,105 12,117
Discontinued operations 2,267 12,431 13,477
------- -------- --------
$53,581 $ 60,059 $ 88,102
======= ======== ========
</TABLE>
F-28
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
(In thousands)
DEPRECIATION AND AMORTIZATION:
Publishing $ 866 $2,563 $5,967
Exposition services 1,167 291 248
Information services 1,035 898 1,100
Corporate 50 27 63
Discontinued operations 45 149 138
------ ------ ------
$3,163 $3,928 $7,516
====== ====== ======
CAPITAL EXPENDITURES:
Publishing $ 109 $ 578 $ 418
Exposition services 3,175 180 201
Information services 935 800 702
Corporate 163 12 2
Discontinued operations 3,994 79
------ ------ ------
$4,382 $5,564 $1,402
====== ====== ======
</TABLE>
Corporate revenues consist principally of revenues from dividends, interest
and miscellaneous nonoperating income. Operating profit (loss) is net revenues,
less applicable operating expenses. Corporate general and administrative
expenses are allocated to each of the industry segments and to general corporate
expenses based on management's estimate of time devoted to each segment and
general corporate matters. Included in 1993 corporate general and administrative
expenses is the retirement expense related to the former Chairman of
the Board.
Included in the information services division 1992 operating profits is the
settlement of a major lawsuit with MCI that had been in process since late 1989.
Costs and expenses related to the lawsuit were expensed as incurred.
Identifiable assets by segment are those assets that are used in the
operations of each segment. Corporate assets consist principally of cash and
cash equivalents, notes receivable, prepaid expenses, furniture, fixtures and
equipment and deferred finance charges. Capital expenditures include additions
to property, plant and equipment, investments in real estate partnerships and
joint ventures and additions to goodwill and advertising lists.
During 1994, 1993 and 1992, no customer represented ten percent or more of
Tribune/Swab-Fox's revenues.
F-29
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
13. ACCRUED LIABILITIES:
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
December 31,
1994 1993
---- ----
(In thousands)
<S> <C> <C>
Current portion of deferred contract
liabilities $ 533 $ 432
Accrued interest 117 204
Accrued vacation 249 413
Accrued payroll 1,528 767
Deferred revenue 2,750 2,607
Accrued other liabilities 1,986 2,444
------ ------
$7,163 $6,867
====== ======
</TABLE>
F-30
<PAGE>
Exhibit 10.19
RETIREMENT AGREEMENT
OF
ROBERT J. SWAB
<PAGE>
RETIREMENT AGREEMENT
This Retirement Agreement (this "Agreement") is made and entered into as of
the 14th day of December, 1994 (the "Effective Date"), by and among ROBERT J.
SWAB ("Swab"), T/SF COMMUNICATIONS CORPORATION, a Delaware corporation ("T/SF"),
and TRIBUNE/SWAB-FOX COMPANIES, INC., a Delaware corporation ("Tribune/Swab-
Fox").
R E C I T A L S
- - - - - - - -
A. Swab has served as an executive officer, employee and director, and
has been a major stockholder, of Tribune/Swab-Fox for the past twenty-
five years.
B. Tribune/Swab-Fox and T/SF (a 78% owned subsidiary of Tribune/Swab-Fox)
have announced their intention to enter into a merger transaction (the
"Merger") whereby Tribune/Swab-Fox would merge with and into T/SF,
with T/SF as the surviving entity. In connection with the Merger the
former Tribune/Swab-Fox stockholders will own shares in T/SF and be
offered the opportunity to sell a portion of their Tribune/Swab-Fox
common stock, $0.10 par value (the "Tribune/Swab-Fox Common Stock"),
for cash.
C. Swab has determined to retire and resign from his officer and employee
positions with Tribune/Swab-Fox, subject to the terms and provisions
of this Agreement.
In consideration of the mutual covenants herein set forth and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. Retirement/Resignation. Effective December 31, 1994, (a)
----------------------
Swab hereby retires and resigns from all offices with (including as Chairman of
the Executive Committee of Tribune/Swab-Fox), and as an employee of,
Tribune/Swab-Fox and T/SF, as a result of which Swab, except as provided herein,
shall no longer be entitled to receive any compensation or benefits provided to
employees of Tribune/Swab-Fox or T/SF; (b) except as hereafter specifically
noted, Swab hereby resigns from all offices with, and as an employee of, all
subsidiaries and affiliates of Tribune/Swab-Fox and T/SF. Should it hereafter
be determined that Swab holds any position with any other entity affiliated with
T/SF or Tribune/Swab-Fox, the parties will work together to arrange for the
resignation or withdrawal of Swab from such position in an orderly manner which
is mutually acceptable to all of the parties hereto and all other affected
parties.
2. Director Status. Swab may continue to serve as a director
---------------
of Tribune/Swab-Fox. If the contemplated Merger occurs as expected, Swab shall
be nominated to serve as a director of T/SF, the surviving entity, upon
consummation of the Merger. For a period of five years after the Effective
Date, management of Tribune/Swab-Fox, or T/SF if the Merger occurs, will
continue to nominate Swab to serve as a director. If Swab's ownership of
Tribune/Swab-Fox Common Stock drops below 400,000 shares (or, in the event the
<PAGE>
Merger occurs, 50,000 shares of T/SF), Tribune/Swab-Fox (or T/SF, as applicable)
may elect not to re-nominate Swab to serve as a director as of the next regular
date for election of directors. While serving as a director of Tribune/Swab-Fox
or T/SF, Swab shall receive the same directors' fees and benefits, if any are
paid, as the other non-employee directors.
3. Retirement Payments. All parties agree that any oral or
-------------------
written employment or other agreements pursuant to which Swab was employed by,
or received any benefits from, Tribune/Swab-Fox or T/SF are hereby terminated in
all respects, effective on the Effective Date, and neither T/SF nor
Tribune/Swab-Fox nor any affiliate of either company shall have any liability to
Swab except as expressly set forth herein. Subject to the provisions of this
Agreement, Tribune/Swab-Fox (as hereinafter used in this Agreement, and unless
otherwise specified, the term Tribune/Swab-Fox shall be deemed to mean T/SF if
the Merger of Tribune/Swab-Fox into T/SF has occurred) shall pay to or for the
benefit of Swab the following amounts:
(a) Tribune/Swab-Fox shall pay to Swab or, in the event of his
disability or death (neither of which shall affect the
obligations to make any of the payments to him under this
Agreement), that beneficiary specifically designated from time to
time (with the latest designation to be the effective one) by
Swab in writing addressed to Tribune/Swab-Fox (or to his estate,
in the case of death, or to him, in the event of disability, if
he should fail to designate such a beneficiary), on the first day
of each month, beginning January 1, 1995, and continuing for
seventy-two (72) consecutive months thereafter, the amount of
$5,130 per month (the "Monthly Payment"). Thirty (30) percent of
each Monthly Payment shall be allocated and payable to Swab in
consideration of his obligations and agreements under section
6(a) below.
(b)(i) If acceptable to the health insurance carrier utilized by
Tribune/Swab-Fox from time to time, Tribune/Swab-Fox shall
continue to provide health insurance coverage to Swab as a single
employee with no dependents for a period coincident with the
payments described in section 3(a) above. The coverage available
to Swab shall be the same as that available to any other single
employee of Tribune/Swab-Fox with no dependent coverage, and Swab
shall pay the same amount as then paid by regular employees of
Tribune/Swab-Fox for single employee/no dependent coverage;
provided, however, that no additional medical, health or dental
coverage or medical, health or dental reimbursement plan or "flex
plan" benefits shall be available to Swab, and Swab's eligibility
for benefits under the Tribune/Swab-Fox medical reimbursement
plan shall cease as of the Effective Date. The parties agree to
arrange Swab's continuing coverage such that his former spouse,
covered as a dependent under the present health insurance plan,
may continue, at her option, to be eligible for the COBRA
2
<PAGE>
benefits to which she may be entitled without regard to Swab's
retirement hereunder.
(ii) If and to the extent the health insurance carrier utilized by
Tribune/Swab-Fox does not allow Swab to continue his coverage as
a single employee of Tribune/Swab-Fox, Swab may, to the extent
allowed by the health insurance plan and applicable law, elect
COBRA coverage for himself. If Swab makes an election for COBRA
coverage, Tribune/Swab-Fox shall reimburse Swab for all payments
made by him under COBRA, for health insurance coverage, from the
Effective Date through the maximum time allowed by law. If
Swab's coverage under the Tribune/Swab-Fox health insurance plan,
or the COBRA benefits portion thereof ceases, through no fault or
election of Swab, Tribune/Swab-Fox, for a period coincident with
the remaining payments described in section 3(a) above, shall
reimburse Swab on a monthly basis for the cost of his individual
health insurance in an amount not exceeding $400.00 per month.
(c) Tribune/Swab-Fox maintains an individual long-term disability
insurance policy (the "LTD Policy") on Swab. On and as of the
Effective Date, Tribune/Swab-Fox agrees to transfer all rights
and full ownership of the LTD Policy to Swab, and from and after
the Effective Date Swab shall assume full responsibility for and
pay all sums due (at his option) under the LTD Policy.
4. 401(k) Plan. To the extent allowed by law and subject to
-----------
the provisions of this paragraph 4, Tribune/Swab-Fox and Swab shall cooperate to
effect a distribution from the T/SF 401(k) Plan to an individual retirement
account or other account of Swab ("Distribution Account"), as he shall direct,
of his vested account balance in the T/SF 401(k) Plan, in such a manner as to
qualify as a "lump sum distribution," available for "rollover" treatment under
applicable federal tax laws. It is agreed that such distribution will be
effected in such a manner as to avoid any withholding for federal income tax
purposes or any federal or state income tax liability if the same can be done
consistent with applicable law and regulations. Swab acknowledges that he has
previously received all amounts to which he was or is entitled under the
Tribune/Swab-Fox Companies, Inc. Profit Sharing Plan and Trust.
5. Automobile.
----------
(a) On the Effective Date hereof, or within ten days thereafter,
Tribune/Swab-Fox shall transfer and assign to Swab title to the
automobile owned by Tribune/Swab-Fox and currently being used by
Swab. From and after the date of transfer of said auto, Swab
shall assume full responsibility for all expenses and costs
relating thereto, including fuel, oil, repairs, maintenance,
insurance and applicable taxes and all operating costs. The
value of said automobile, for purposes of the transfer to Swab,
shall be the net book value of the car on the books and records
of Tribune/Swab-Fox as of the date of transfer. Said value
3
<PAGE>
shall be included in and reported as part of Swab's compensation
expense for 1994.
(b) As of January 1, 1995, Swab shall no longer receive, directly or
indirectly, any further automobile expense allowance from
Tribune/Swab-Fox, nor any payment or reimbursement for club dues
or any other miscellaneous benefits or payments. Expense
reimbursements, club dues and other payments to which Swab is
entitled relating to periods ending on or prior to the Effective
Date shall be paid in ordinary course.
6. Obligations of Swab.
-------------------
(a) Covenant-Not-To-Compete. From and after the Effective Date and
-----------------------
for a period of six (6) years thereafter, Swab shall not in any
way compete with, or provide any advice or assistance, financial
or otherwise, to any person or entity who competes with, any
business or activity in which T/SF or Tribune/Swab-Fox or any of
their subsidiaries (meaning any entity, corporate or otherwise,
in which T/SF or Tribune/Swab-Fox, directly or indirectly, has a
twenty percent (20%) or more beneficial interest) is then
engaged in any market (meaning geographic area or customer
base/target industry) in which such business or activity is
so engaged.
Permitted Activities. Notwithstanding any provisions of
---------------------
this subparagraph 6(a) to the contrary, it is agreed that
engaging in real estate activities shall not be deemed
competitive for purposes of this subparagraph.
Furthermore, no activity shall be deemed to be a violation
of this subparagraph 6(a) unless there is a meaningful
potential for such activity to have, or the person with or
for whom it is being performed thereby to have, a material
impact on the competitive position or business of T/SF,
Tribune/Swab-Fox or any affiliates of either of them in the
markets or industries in which they or any of them
are then participating or targeting.
(b) Confidentiality. From and after the Effective Date and for a
---------------
period of six (6) years thereafter, Swab covenants and agrees
that he shall not divulge, furnish, disclose or make accessible
to any person or entity, any knowledge or information,
technique, process, promotional idea, trade secret, customer
information, plan, device, or material with respect to any
secret, confidential or sensitive research or development work,
promotion, business plan, design, service, product or production
method of T/SF, Tribune/Swab-Fox or any of their subsidiaries,
or with respect to any other secret, confidential or sensitive
aspect of the business of T/SF, Tribune/Swab-Fox or any of
their subsidiaries, except as may be necessary in the
furtherance and conduct of Swab's consulting services for T/SF
as provided in subparagraph 6(c) below for the period he is so
retained.
4
<PAGE>
(c) Consulting. From and after the Effective Date and for a period
----------
of six (6) years thereafter, T/SF or Tribune/Swab-Fox may call on
Swab to provide and, if so requested, Swab shall provide,
consulting services for T/SF and/or Tribune/Swab-Fox and/or any
of their subsidiaries as requested by either, for up to twenty
percent (20%) of his time (based on a 40-hour work week). Any
call for his services shall be at the reasonable convenience of
Swab with as much advance notice as is reasonably possible under
the circumstances. Swab shall not be required to perform
consulting services for more than two (2) days in succession or
for more than five (5) days during any calendar month.
Furthermore, Swab shall be entitled to take up to thirty (30)
consecutive days off from the performance of any such services.
(d) Benefits. The benefits of this paragraph 6 shall flow to and be
--------
enforceable by T/SF, Tribune/Swab-Fox and their respective
successors, assigns and affiliates.
7. Swab Indebtedness to Tribune/Swab-Fox. As of December 1,
-------------------------------------
1994, Swab was indebted to Tribune/Swab-Fox in the principal amount of
$348,546.19, plus accrued and unpaid interest through said date of $49,634.72
(on and after December 1, 1994, interest shall accrue at the rate of 8-1/2% per
annum). Said principal amount plus the accrued and unpaid interest is owed to
Tribune/Swab Fox under, and evidenced by, Swab's promissory note dated June 22,
1993, in the maximum principal amount of $350,000 payable to Tribune/Swab-Fox
(referred to herein as the "Existing Debt"). Swab and Tribune/Swab-Fox agree
that the Existing Debt shall be paid as follows:
(a) Upon the closing of Swab's sale of stock to Tribune/Swab-Fox
pursuant to section 8(b) below, Swab shall immediately pay to
Tribune/Swab-Fox, or Tribune/Swab-Fox may at its option withhold
from the sale proceeds, sufficient funds to pay all accrued and
unpaid interest through the date of closing of the stock sale
and the amount necessary to bring the remaining principal
balance (and the initial principal balance of the New Note
referred to below) to $300,000.
(b) Immediately following the closing and payment referred to in
section 7(a) above, Swab shall execute a new promissory note
(the "New Note") as payment of the balance of the Existing Debt.
The New Note, in the original principal amount of $300,000,
shall bear interest at the rate of 9% per annum, and shall be
payable according to the terms, and be in the form, of the
promissory note attached hereto as Exhibit "A".
(c) The Existing Debt and the promissory note evidencing same were
secured pursuant to the terms of the Security Agreement, dated
June 22, 1993, whereby Swab granted Tribune/Swab-Fox a first and
prior security interest in 110,000 shares of the
Tribune/Swab-Fox Common Stock and 6,435 shares of
Tribune/Swab-Fox 6-1/2% Cumulative Convertible Preferred Stock
(the "Preferred Stock"); the Preferred Stock and the Common
Stock held as security for the Existing Debt and New Note shall
be referred to as the "Swab Securities". The New Note shall
5
<PAGE>
continue to be secured by the Swab Securities pursuant to the
terms of the Security Agreement in the form attached hereto as
Exhibit "B". It is recognized that the Preferred Stock has been
called for redemption by Tribune/Swab-Fox and that Swab has
elected to convert the Preferred Stock into 289,575 shares of
Tribune/Swab-Fox Common Stock. Thus, upon such conversion, the
Security Agreement shall relate to 399,575 shares of
Tribune/Swab-Fox Common Stock (the "Pledged Shares").
8. Sale of Stock. Swab is the owner (as an individual and not
-------------
through any other persons or accounts which may be deemed to have beneficial
ownership) of 1,494,575 shares (which shares include 694,575 shares attributable
to the conversion of the 6-1/2% Cumulative Convertible Preferred Stock) of
Tribune/Swab-Fox Common Stock and 15,435 shares of 6-1/2% Cumulative Convertible
Preferred Stock of Tribune/Swab-Fox, which is convertible into 694,575 shares of
Tribune/Swab-Fox Common Stock. Swab hereby represents and warrants that, except
with respect to the security interests in the shares described on Exhibit "C"
attached hereto, he owns full right, title and interest in and to all the Common
and Preferred shares of Tribune/Swab-Fox, free and clear of all liens, claims
and encumbrances, with full power to transfer the same without the consent of
any third party. With respect to these securities, the parties agree as
follows:
(a) On or before the Effective Date, Swab shall sell to
Tribune/Swab-Fox and Tribune/Swab-Fox shall buy from Swab,
200,000 shares of Tribune/Swab-Fox Common Stock at a price of
$.80 per share ($160,000 for 200,000 shares). The entire
purchase price shall be paid in cash on the date of transfer or,
at the option of Tribune/Swab-Fox, up to 40% of the purchase
price may be paid in cash and the balance in the form of
Tribune/Swab-Fox's promissory note, which note shall bear
interest at the rate of 9% per annum and all interest and
principal thereunder shall be due and payable on June 30, 1995,
or, if earlier, 10 days after the date upon which the Merger is
completed. Said promissory note, if issued, shall be unsecured
and in form acceptable to both parties. If the entire purchase
price is paid in cash, Swab shall pay to Tribune/Swab-Fox the
amount of $75,000 in payment of all accrued but unpaid interest
and the balance on principal on the Existing Debt.
(b) In connection with the Merger, it is anticipated that
Tribune/Swab-Fox stockholders will have an opportunity to
receive cash in exchange for up to 10,000,000 shares of
Tribune/Swab-Fox Common Stock at a price of $.80 per share.
Swab represents that, if such offer is actually made, he
presently intends to elect to exchange not less than 500,000
shares (in addition to the 200,000 shares referred to in Section
8(a) above) of Tribune/Swab-Fox Common Stock for cash if the
cash price is at least $.80 per share. In the event the Merger
is not consummated, Swab agrees to sell said 500,000 shares to
Tribune/Swab-Fox for the price of $.80 per share on terms that
include 100% cash at closing or, at the purchaser's option, up
to 50% in the form of the purchaser's promissory note providing
6
<PAGE>
for the principal balance to be paid in two equal annual
payments plus accrued interest at the rate of 9% per annum.
(c) With respect to 300,000 shares of Tribune/Swab-Fox Common Stock
owned by Swab and not pledged as collateral for Swab's
indebtedness to Tribune/Swab-Fox (the "Option Shares"):
(i) Swab hereby grants to Tribune/Swab-Fox the right to
purchase all or any portion of the Option Shares at a price
of $1.10 per share (the "Call Price") after the effective
date of the Merger and during the time periods specified
below; and
(ii) Tribune/Swab-Fox hereby grants to Swab the right to sell to
Tribune/Swab-Fox all or any portion of the Option Shares at
a price of $.75 per share (the "Put Price") after the
effective date of the Merger and during the time periods
specified below:
Time Period During Which
Purchase Rights May be Exercised
No. of Option Shares Subject to Exercise by Swab or Tribune/Swab-Fox
---------------------------------------- --------------------------------
100,000 effective date of Merger
through 3-31-98
100,000 4-1-96 - 3-31-98
100,000 4-1-97 - 3-31-98
Tribune/Swab-Fox may require Swab to sell, and Swab may require
Tribune/Swab-Fox to purchase, any number of the Option Shares,
up to a maximum of 100,000 during each of the three time periods
set forth above. Such rights, if unexercised in any period,
shall carry over from one time period to the next. To the
extent the rights are not exercised during the first two time
periods specified, such rights apply to all of the Option Shares
under this subsection (c) during the final twelve-month period.
As of and after April 1, 1998, this subsection (c) shall be void
and of no effect.
(d) With respect to the repayment of principal and interest under
the New Note, it is the intention of the parties that the
Pledged Shares be available for such payment on the terms and
conditions of this subparagraph (d). Should Swab desire to
utilize some of the Pledged Shares to repay any amount of
principal or interest due under the New Note, Swab is hereby
given the right to do so and, upon delivery of certificates
appropriately executed for transfer to Tribune/Swab-Fox, there
shall be credited against amounts then due under the New Note an
amount equal to the number of the Pledged Shares so transferred
times $.75 per share. This right shall be exercisable only upon
the satisfaction of Tribune/Swab-Fox that such shares are
transferred to it free and clear of all liens and encumbrances
7
<PAGE>
and that full legal and beneficial title thereto has been
transferred to Tribune/Swab-Fox. Conversely, Tribune/Swab-Fox
may choose to acquire a portion of the Pledged Shares by
crediting against amounts due under the New Note the herein
provided purchase price therefor. In such event, Tribune/Swab-
Fox shall credit against the amounts due under the New Note
(which shall be credited first to accrued interest and then to
the next due installment(s) of principal) based on the number of
shares of the Pledged Shares to be acquired times the Call
Price. In the event of the exercise of this right, Swab shall
transfer to Tribune/Swab-Fox all legal and beneficial title to
certificates representing the shares to be so acquired, free and
clear of all liens and encumbrances.
(e) If the Merger is consummated, each such "put" and "call" price
shall be appropriately adjusted and the shares of
Tribune/Swab-Fox Common Stock referred to in subsections (b),
(c) and (d) of this paragraph 8 shall be deemed to refer to and
cover the number of equivalent shares of T/SF Common Stock for
which the Tribune/Swab-Fox shares were converted or exchanged in
and as a result of the Merger transaction.
9. Other Obligations/Rights of Swab.
--------------------------------
(a) Office. Tribune/Swab-Fox and T/SF agree that Swab may continue
------
the use of his office at 2407 East Skelly Drive, Tulsa,
Oklahoma, through December 31, 1996, at no cost to Swab. During
such period, Swab shall be entitled to use the supplies and
facilities, including long distance telephone and fax service,
of T/SF, provided that the cost to T/SF thereof does not exceed
$300 per month.
(b) Tribune/Swab-Fox shall reimburse Swab for all normal business
expenses incurred by him on behalf of Tribune/Swab-Fox through
December 31, 1994, in accordance with past practices.
10. Miscellaneous.
-------------
(a) Governing Law. This Agreement is deemed made in and shall be
-------------
construed in accordance with the laws of the State of Oklahoma.
(b) Further Assurances. Each party agrees that, at any time and
------------------
from time to time after the Effective Date, such party will,
upon request of any other party, and without further
consideration, execute, acknowledge and deliver, or cause to be
executed, acknowledged and delivered, such additional documents,
instruments and agreements, and take such other action, as such
other party may reasonably request to complete the transactions
contemplated, and to otherwise fulfill the terms and actions, in
this Agreement.
(c) Headings. The headings of the paragraphs and sections of this
--------
Agreement are for convenience only and shall not be deemed to
constitute a part of this Agreement or affect the construction
hereof.
8
<PAGE>
(d) Binding Effect. The terms and conditions of this Agreement shall
--------------
inure to the benefit of and be binding upon the respective
heirs, legal representatives, successors and assigns of the
parties and, in the instances so specified, certain affiliates
of the parties. Except for the beneficiary designation provided
for in paragraph 2(a) above, this Agreement may not be assigned
by any party without the prior written consent of the others.
(e) Entire Agreement. This Agreement constitutes the entire
----------------
understanding and agreement of the parties, and supersedes any
prior agreement, understanding or negotiations among the
parties, with respect to the subject matter hereof. This
Agreement may only be amended or modified by an instrument in
writing executed by all of the parties.
(f) Notices. Any notice, request, instruction or other communication
-------
required or permitted to be given hereunder by any party to any
other party shall be in writing and delivered personally or by
registered or certified mail, return receipt requested, as
follows:
If to T/SF or Tribune/Swab-Fox:
Tribune/Swab-Fox Companies, Inc. or
T/SF Communications Corporation
2407 E. Skelly Drive
Tulsa, Oklahoma 74105
Attention: Howard G. Barnett, Jr.
If to Swab:
Robert J. Swab
3301 South Trenton
Tulsa, Oklahoma 74105
or to such other address as a party shall specify by like
notice. Any notice which is delivered personally shall be
deemed to have been duly given to the party to whom delivered
upon actual receipt thereof by the party. Any notice which is
addressed and mailed in the manner herein provided shall be
conclusively presumed to have been given to the party to whom it
is addressed at the close of business, local time of the
recipient, on the second day after the day it is so placed in
the U.S. mail.
(g) Waiver. No waiver of any term, provision or condition of this
------
Agreement shall be effective unless in writing signed by the
party granting the waiver, and no such waiver shall be deemed to
be or construed as a further or continuing waiver of any such
term, provision or condition or as a waiver of any other term,
provision or condition of this Agreement, unless specifically so
stated in such written waiver.
9
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement, or caused this Agreement to be executed and delivered by their duly
authorized representatives, as of the date first above written.
/s/ Robert J. Swab
____________________________________
ROBERT J. SWAB
TRIBUNE/SWAB-FOX COMPANIES, INC.
By: /s/ Howard G. Barnett, Jr.
____________________________________
Howard G. Barnett, Jr.
President
T/SF COMMUNICATIONS CORPORATION
By: /s/ Howard G. Barnett, Jr.
____________________________________
Howard G. Barnett, Jr.
President
10
<PAGE>
Exhibit "A"
to
Retirement Agreement
Form of Promissory Note
-----------------------
Tulsa, Oklahoma
$ , 1995
-------- ----------
FOR VALUE RECEIVED, Robert J. Swab, herein called the "Maker", promises to
pay to the order of Tribune/Swab-Fox Companies, Inc., a Delaware corporation,
herein called the "Payee", at its principal offices at 2407 East Skelly Drive,
Tulsa, Oklahoma, or at such other place or places as the Payee or holder hereof
shall from time to time in writing direct, in lawful money (except as otherwise
specifically provided herein) of the United States, the principal sum of
($ ), together with interest on the unpaid
------------------------------ -------
balance from time to time outstanding at a rate of nine percent (9%) per annum,
until said principal is paid.
Subject to the rights of the holder hereof upon the occurrence of an event
of default hereunder, the unpaid principal balance of this note plus accrued
interest shall be due and payable as follows: accrued interest due hereunder
shall be paid quarterly on the last day of each calendar quarter, beginning June
30, 1995; the principal amount due hereunder shall be paid as follows: $25,000
on the first anniversary of the date hereof and $25,000 on the second
anniversary of the date hereof; all remaining unpaid principal and accrued
interest shall be due and payable three (3) years from the date hereof.
The Maker shall have the right and option to prepay, at anytime, without
penalty, all or any part of the balance outstanding on this Note. Any such
prepayment received by the holder shall be applied first to the payment of
accrued and unpaid interest and then to the reduction of principal.
This Promissory Note is issued in substitution and payment of the principal
amount of that certain Promissory Note, dated June 22, 1993, by Maker in favor
of Payee in the principal amount of $350,000 (the "Prior Note"). This
Promissory Note is secured by a Security Agreement (the "Security Agreement") of
even date herewith executed by the Maker in favor of Payee, covering shares of
the Common Stock of Tribune/Swab-Fox Companies, Inc.
Upon the occurrence of a default in the performance of any covenant
contained in the Security Agreement or the failure to timely pay any principal
of or interest on this Note when due, the holder of this Note shall have the
option of declaring this Note to be immediately due and payable, and upon such
option being exercised this Note and all amounts due hereunder shall forthwith
mature and at once become due and payable and the lien evidenced by the
A-1
<PAGE>
Security Agreement shall be subject to foreclosure as provided in the Security
Agreement. In the event of the exercise of such option, the Maker agrees to pay
all costs of collection, including reasonable attorneys' fees. Failure of the
holder to exercise any right, power or option hereunder at any time shall not
constitute a waiver of its right to exercise the same at a subsequent time.
After the maturity of this Note, whether by passage of time, by
acceleration, or otherwise, or if any principal or interest payment due is not
made hereunder, the entire amount of unpaid principal and interest hereunder
shall bear interest at the rate of twelve percent (12%) per annum.
All notices required or desired to be given hereunder shall be in writing,
and it is agreed:
(a) Notices to the Payee or holder of this Note shall be deemed to have
been given when signed on behalf of the Maker and (i) mailed by
certified or registered mail, postage prepaid, addressed to
Tribune/Swab-Fox Companies, Inc., 2407 East Skelly Drive, Tulsa,
Oklahoma 74105, or (ii) delivered in person to a principal executive
officer of the Payee. The place to which any notices are to be sent
may be changed by notice to the Maker
(b) Notices to the Maker of this Note shall be deemed to have been given
when signed on behalf of the Payee or holder of this Note and (i)
mailed by certified or registered mail, postage prepaid, addressed to
Robert J. Swab, 3301 S. Trenton, Tulsa, Oklahoma 74105, or
(ii) delivered in person to Maker. The place to which any such
notices are to be sent may be changed by notice to the Payee or
holder of this Note given by the Maker.
The Maker hereof, and all assigns, or any other persons liable or
becoming liable for the payment of any sums due or to become due under the terms
of this Note or under the Security Agreement, waive demand, presentment for
payment, notice of dishonor, protest and notice of protest and agree that, in
the event a default occurs and this Note is placed in the hands of an attorney
for collection or a suit is filed thereon, or in the event it is collected
through bankruptcy or other legal proceedings, the Maker hereof will pay
reasonable attorneys' fees in addition to the principal and interest due hereon.
__________________________________
Robert J. Swab
A-2
<PAGE>
Exhibit "B"
to
Retirement Agreement
Form of Security Agreement
--------------------------
This Security Agreement (the "Security Agreement") is made and effective
this day of , 1995, by and between TRIBUNE/SWAB-FOX COMPANIES,
---- ----------
INC., a Delaware corporation ("Company"), and ROBERT J. SWAB ("Pledgor").
Preliminary Statements
----------------------
A. Prior to the date hereof Pledgor was indebted to the Company in the
principal amount of $350,000 pursuant to the terms of a promissory
note dated June 22, 1993 (the "Prior Note").
B. As part of Pledgor's indebtedness to the Company, Pledgor had executed
a security agreement (the "Second Amended Security Agreement") whereby
the Company was granted a first and prior security interest in shares
of the common and preferred stock of the Company, which shares are
described on Exhibit "A" hereto (the "Pledged Shares").
C. Pledgor and the Company have agreed to revise and extend the terms of
Pledgor's indebtedness to the Company and accordingly, have executed a
new promissory note in the principal amount of $ (the "Note")
---------
evidencing Pledgor's indebtedness to the Company. Pledgor and the
Company also desire for the Company to continue with a first and prior
security interest in the Pledged Shares in accordance with the terms
hereof.
In consideration of the mutual covenants and agreements herein
contained and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, and to secure the due and punctual performance
by Pledgor of all of Pledgor's obligations under the Note, Company and Pledgor
agree as follows:
1. Pledge. In consideration of sums loaned to Pledgor by
------
Company as evidenced by the Note, and the Company's agreement to extend the
terms of repayment of the Prior Note, Pledgor hereby continues the grant of a
first and prior security interest to Company in the Pledged Shares, the
certificate(s) representing the Pledged Shares having been duly endorsed in
blank or executed Assignments Separate from Certificate given and delivered to
Company, receipt of which are acknowledged. As to the Pledged Shares, this
pledge shall be deemed an amendment and restatement of the Second Amended
Security Agreement with respect to the same securities and shall be a
continuation of such pledge and the grant of security shall run from the date of
the Second Amended Security Agreement.
B-1
<PAGE>
2. Dividends. During the term of this Agreement, and so long
---------
as the Pledgor is not in default in the performance of any of the terms of this
Agreement or in the payment of the principal or interest of the Note, all
dividends and other amounts receivable with respect to the Pledged Shares shall
be paid to and owned by the Pledgor.
3. Voting Rights. During the term of this Agreement, and so
-------------
long as the Pledgor is not in default in the performance of any of the terms of
this Agreement or in the payment of the principal or interest of the Note,
Pledgor shall have the sole right to vote the Pledged Shares on all corporate
questions.
4. Representations. The Pledgor warrants and represents that
---------------
he owns full right and title to each of the Pledged Shares, that there are no
restrictions upon the transfer of any of the Pledged Shares, other than may
appear on the face of the certificate therefor, and that the Pledgor has the
right to transfer and pledge such shares free of any claims or encumbrances and
without obtaining the consent of any other party.
5. Adjustments. In the event that, during the term of this
-----------
Security Agreement, any share dividend, reclassification, or other change in the
structure of the corporation issuing the Pledged Shares, all new, substituted
and additional shares, or other securities, which are issued in connection with
or with respect to the Pledged Shares by reason of any such change shall be held
by Company under the terms of this Agreement in the same manner as the shares
originally pledged hereunder. In the event the Pledged Shares are converted
into, or exchanged for, other securities of the Company or any other company,
such new, substituted or additional shares or other securities shall be held by
Company under the terms of this Agreement.
6. Warrants and Rights. In the event that, during the term of
-------------------
this Agreement, subscription warrants or any other rights or options shall be
issued in connection with or with respect to the Pledged Shares, such warrants,
rights and options shall be immediately assigned by Company to the Pledgor, and
if exercised by the Pledgor all new shares or other securities so acquired by
the Pledgor shall be immediately delivered to Company to be held under the terms
of this Agreement in the same manner as the shares originally pledged hereunder.
7. Payment of the Loan. When and if the obligations evidenced
-------------------
by the Note shall have been fully performed, all rights and interest of Company
in and to the Pledged Shares and any other collateral at the time held by
Company pursuant to this Agreement shall thereupon revest in the Pledgor and
shall thereupon be reassigned to the Pledgor and the certificates representing
the securities shall be returned to the Pledgor.
8. Default. In the event that the Pledgor defaults in the
-------
performance of any of the terms of this Agreement or the Note, Company may, upon
ten (10) days' written notice to the Pledgor, sent by registered mail, and
without liability for any diminution in price which may occur, sell all the
Pledged Shares in such manner and for such price as Company may determine.
B-2
<PAGE>
At any bona fide public sale, Company shall be free to purchase all or any part
of the Pledged Shares. Out of the proceeds of any sale Company may retain any
amount equal to the principal and interest then due under the Note, plus the
amount of the expenses of the sale, and shall pay any balance of such proceeds
to the Pledgor. In the event that the proceeds of any sale are insufficient to
cover the principal and interest under the Note plus expenses of the sale, the
Pledgor shall remain liable to the Company for any deficiency.
9. Pledgor's Sale of Pledged Shares. Pledgor may, by notice to
--------------------------------
Company, determine to sell all of the Pledged Shares or such portion thereof as
will be sufficient to repay all amounts due under the Note. In such event,
Company will cooperate with Pledgor in effecting such a sale, subject to Company
receiving adequate assurance of its receipt of the proceeds thereof in repayment
of all amounts due with respect to the Note. After any such sale all
certificates remaining in the possession of Company with respect to the Pledged
Shares or any additional collateral shall forthwith be returned to Pledgor.
10. Notice. Notices to Company shall be addressed to the
------
President of Company at the principal office of Company, and shall be mailed by
certified mail with return receipt requested, or delivered in person. Notice to
Pledgor shall be addressed to Pledgor at the Pledgor's address as it appears in
the books of Company, and shall be mailed by certified mail with return receipt
requested, or delivered in person. Unless otherwise expressly provided herein,
notices shall be deemed given when mailed, if mailed, or when delivered if
delivered in person.
11. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Oklahoma.
12. Counterparts. This Agreement may be executed in multiple
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
13. Binding Effect. This Agreement shall be binding upon and
--------------
inure to the benefit of each party hereto, and upon the Pledgor's heirs,
personal representatives, successors and assigns, and Company's successors and
assigns.
14. Headings. All section headings are for convenience only and
--------
shall not be construed as part of this Agreement.
15. Amendment. This Security Agreement shall be deemed to
---------
restate the Second Amended Security Agreement and shall fully supersede all of
the terms and provisions thereof and shall be deemed in complete substitution
therefor.
B-3
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement the
day and year first written above.
"Company"
TRIBUNE/SWAB-FOX COMPANIES, INC.
By:
------------------------------------
Its
-------------------------------
"Pledgor"
---------------------------------------
ROBERT J. SWAB
B-4
<PAGE>
Exhibit "A"
to
Security Agreement
------------------
<TABLE>
<CAPTION>
Certificate Class of Number of
Number Company Name Issued In Shares Shares
------------ ------- -------------- -------- ---------
<S> <C> <C> <C> <C>
Tribune/Swab-Fox Companies, Inc. Robert J. Swab 6-1/2% **6,435
Cumulative
Convertible
Preferred
Tribune/Swab-Fox Companies, Inc. *Victoria Ann Swab Common 55,000
Tribune/Swab-Fox Companies, Inc. *Cheryl Ann Swab Common 55,000
</TABLE>
* Robert J. Swab agrees to cause such certificates to be reissued in his name
or otherwise cause the pledge of the shares to be appropriately perfected, as
from time to time directed by Company.
** These Preferred Shares are convertible into 289,575 shares of the
Common Stock of Tribune/Swab-Fox Companies, Inc.
B-5
<PAGE>
Exhibit "C"
to
Retirement Agreement
Security Interests in Common Stock
Owned by Robert J. Swab
as of 12-1-94
-------------
<TABLE>
<CAPTION>
# of Shares of Security Interest
Common Stock Granted To
------------ ----------
<C> <S>
200,000 Boatmen's Bank
200,000 Bank IV
805,000 F&M Bank
399,575 Tribune/Swab-Fox Companies, Inc.
</TABLE>
C-1
<PAGE>
Exhibit 10.20
OPERATING AGREEMENT
OF
1995 LAND COMPANY, L.L.C.
OKLAHOMA LIMITED LIABILITY COMPANY
<PAGE>
OPERATING AGREEMENT
OF
1995 LAND COMPANY, L.L.C.
OKLAHOMA LIMITED LIABILITY COMPANY
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1 - ORGANIZATIONAL MATTERS................................................................... 1
1.01 Formation..................................................................................... 1
1.02 Name.......................................................................................... 1
1.03 Principal Office.............................................................................. 1
1.04 Term.......................................................................................... 1
ARTICLE 2 - DEFINITIONS.............................................................................. 1
2.01 Definitions................................................................................... 1
ARTICLE 3 - PURPOSE.................................................................................. 5
3.01 Purpose of the Company........................................................................ 5
ARTICLE 4 - CAPITAL CONTRIBUTIONS.................................................................... 5
4.01 Units......................................................................................... 5
4.02 Initial Capital Contributions and Percentage Ownership........................................ 5
4.03 Company Loan.................................................................................. 5
4.04 Capital Accounts.............................................................................. 5
4.05 Interest...................................................................................... 6
4.06 No Withdrawal................................................................................. 6
4.07 Additional Capital Contributions.............................................................. 6
4.08 Guarantee of Company Indebtedness............................................................. 6
ARTICLE 5 - ALLOCATIONS AND DISTRIBUTIONS............................................................ 6
5.01 Order of Distributions........................................................................ 6
5.02 Distribution of Cash Available for Distribution............................................... 7
5.03 Setoff under Sale Contract.................................................................... 7
5.04 Allocation of Income and Loss................................................................. 7
ARTICLE 6 - MANAGEMENT AND OPERATION OF BUSINESS..................................................... 8
6.01 Managers...................................................................................... 8
6.02 Authority of Manager.......................................................................... 8
6.03 Restrictions on Manager....................................................................... 8
6.04 Preservation of Company Property.............................................................. 9
6.05 Number, Term and Qualifications............................................................... 9
6.06 Manner of Acting.............................................................................. 9
6.07 Removal....................................................................................... 10
</TABLE>
<PAGE>
<TABLE>
<S> <C>
6.08 Limitation on Liability of Managers........................................................... 10
6.09 Outside Activities............................................................................ 10
6.10 Company Funds................................................................................. 10
ARTICLE 7 - RIGHTS AND OBLIGATIONS OF THE MEMBERS.................................................... 10
7.01 Limitation of Liability....................................................................... 10
7.02 Rights of Member Relating to the Company...................................................... 11
7.03 Restrictions on Powers........................................................................ 11
7.04 Indemnification............................................................................... 11
ARTICLE 8 - BOOKS, RECORDS, ACCOUNTING AND REPORTS................................................... 12
8.01 Books and Records............................................................................. 12
8.02 Accounting.................................................................................... 13
8.03 Reports....................................................................................... 13
8.04 Fiscal Year................................................................................... 13
ARTICLE 9 - TAX MATTERS.............................................................................. 13
9.01 Taxable Year.................................................................................. 13
9.02 Tax Controversies............................................................................. 13
9.03 Taxation as a Partnership..................................................................... 13
ARTICLE 10 - TRANSFER OF UNITS....................................................................... 14
10.01 Transfer..................................................................................... 14
10.02 Transfer of Units by a Member................................................................ 14
10.03 Restrictions on Transfer..................................................................... 15
10.04 Issuance of Certificates..................................................................... 15
10.05 Lost, Stolen or Destroyed Certificates....................................................... 15
ARTICLE 11 - ADMISSION OF SUBSTITUTE AND ADDITIONAL MEMBERS.......................................... 16
11.01 Admission of Substitute Members.............................................................. 16
11.02 Admission of Additional Members.............................................................. 16
ARTICLE 12 - RIGHT OF PURCHASE....................................................................... 17
12.01 Right of First Refusal....................................................................... 17
ARTICLE 13 - DISSOCIATION AND LIQUIDATION............................................................ 17
13.01 Disqualification of Member................................................................... 17
13.02 Dissociation and Liquidation................................................................. 18
13.03 Method of Winding Up......................................................................... 19
13.04 Filing Articles of Dissolution............................................................... 19
13.05 Return of Capital............................................................................ 19
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
ARTICLE 14 - AMENDMENT OF AGREEMENT; MEETINGS; RECORD DATE........................................... 19
14.01 Amendments................................................................................... 19
14.02 Limitations on Amendments.................................................................... 19
14.03 Meetings..................................................................................... 19
14.04 Adjournment.................................................................................. 19
14.05 Waiver of Notice; Consent to Meeting Approval of Minutes..................................... 20
14.06 Quorum....................................................................................... 20
14.07 Action Without a Meeting..................................................................... 20
ARTICLE 15 - GENERAL PROVISIONS...................................................................... 20
15.01 Notices...................................................................................... 20
15.02 Captions..................................................................................... 20
15.03 Pronouns and Plurals......................................................................... 21
15.04 Further Action............................................................................... 21
15.05 Binding Effect............................................................................... 21
15.06 Integration.................................................................................. 21
15.07 Waiver....................................................................................... 21
15.08 Counterparts................................................................................. 21
15.09 Applicable Law............................................................................... 21
15.10 Invalidity of Provisions..................................................................... 21
15.11 Conveyances.................................................................................. 21
15.12 Power of Attorney............................................................................ 22
EXHIBIT A
EXHIBIT B
</TABLE>
iii
<PAGE>
OPERATING AGREEMENT
OF
1995 LAND COMPANY, L.L.C.
OKLAHOMA LIMITED LIABILITY COMPANY
THIS OPERATING AGREEMENT (this "Agreement") is entered into by and among John
C. Bumgarner, Jr. ("Bumgarner") and Tribune/Swab-Fox Companies, Inc., a Delaware
corporation ("T/SF")(Bumgarner and T/SF are hereinafter sometimes collectively
referred to as the "Members" and singularly referred to as a "Member"), the
members of 1995 LAND COMPANY, L.L.C., an Oklahoma limited liability company (the
"Company"). In consideration of the mutual covenants and conditions hereinafter
set forth, the Members hereby agree that the terms of the Operating Agreement
governing the Company shall be as follows:
ARTICLE 1
Organizational Matters
----------------------
Section 1.01. Formation. The Company is formed as of the date last
---------
set forth below as a limited liability company pursuant to the provisions of the
Act (as hereinafter defined). The rights and obligations of the Members, and
the affairs of the Company, shall be governed first by the Mandatory Provisions
of the Act, second by the Company's Articles of Organization, third by this
Agreement and fourth by the optional provisions of the Act. In the event of any
conflict among the foregoing, the conflict shall be resolved in the order of
priority set forth in the preceding sentence.
Section 1.02. Name. The name of the Company shall be "1995 LAND
----
COMPANY, L.L.C."
Section 1.03. Principal Office. The principal office of the Company
----------------
in the State of Oklahoma shall be located at 320 South Boston, Suite 825, Tulsa,
Oklahoma 74103. The name of its registered agent is Stephen W. Ray, 320 South
Boston, Suite 400, Tulsa, Oklahoma 74103. The Company may also maintain offices
at such other place or places as the Members deem advisable.
Section 1.04. Term. The Company shall commence upon the filing for
----
record of the Company's Articles of Organization with the Oklahoma Secretary of
State, and shall continue until December 31, 2020, unless sooner terminated as
herein provided.
ARTICLE 2
Definitions
-----------
Section 2.01. Definitions. For purposes of this Agreement, the
-----------
following terms shall have the following meanings:
"Acquisition Date" shall have the meaning expressed in Section
13.01.A of this Agreement.
<PAGE>
"Act" means the Oklahoma Limited Liability Company Act, codified at 18
Okla. Stat. (sections) 2000 et seq., as it may be amended from time to time,
-- ---
and any successor to such act.
"Affiliate" means any Person that directly or indirectly controls, is
controlled by, or is under common control with, such Person. As used in this
definition of "Affiliate," the term "control" means either (i) the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through ownership of voting
securities, by contract or otherwise or (ii) a direct or indirect equity
interest of ten percent (10%) or more in the entity.
"Agreement" means this Operating Agreement, as it may be amended or
supplemented from time to time.
"Articles of Organization" means the articles of organization, as
amended from time to time, filed by the Company under the Act.
"Assignee" means a Person to whom one or more Units have been
transferred, by transfer or assignment or otherwise, in a manner permitted under
this Agreement, and who has agreed to be bound by the terms of this Agreement
but who has not become a Substitute Member.
"Business Day" means Monday through Friday of each week, except legal
holidays recognized as such by the government of the United States or the State
of Oklahoma.
"Capital Contributions" means the sum of the total amount of cash and
the total value of property contributed or services rendered, or a promissory
note or other binding obligation to contribute cash or property or to perform
services contributed to the Company by all Members, or any one Member, as the
case may be (or the predecessor holders of any Units of any such Members).
"Capital Gain" means the Company's allocable share of gain from the
disposition by the Company of an Asset as defined in the Code (including any
portion of such gain treated as ordinary income).
"Cash Available for Distribution" means all cash receipts and funds
received and available by and to the Company (except for proceeds of the Company
Loan and for Capital Contributions), from time to time, minus (i) the amounts
then required to be repaid pursuant to the Company Loan, together with
applicable interest thereon, and (ii) all then unpaid Management Expenses,
Operating Expenses and Development Expenses, together with applicable interest
on each.
"Code" means the Internal Revenue Code of 1986, as amended, as in
effect from time to time.
"Company Loan" means a loan or loans to the Company, in principal
amount not to exceed $1,600,000.00, as further described in Section 4.03. Among
other terms and provisions, the Company Loan shall require that all default cure
rights accorded the Company pursuant thereto be extended on the same basis to
its Members, and that copies of any and all notices given pursuant to the terms
of the Company Loan documents including, without limitation, any notice of a
default, be furnished to the
2
<PAGE>
Members at the same time as furnished to the Company or its Manager. The lender
under the Company Loan may be a Member, an Affiliate or any third party.
"Company Property" means all property owned, leased or acquired by
the Company from time to time.
"Development Expenses" means all expenses advanced, from time to time,
if any, by the Manager in connection with the development or improvement of all
or any portion of the Company Property, together with interest thereon from the
date advanced at the rate of ten percent (10%) per annum, compounded monthly.
Development Expenses shall include, without limitation, expenses and costs
relating to or incurred in connection with the overall preparation of the
Company Property for use, construction of improvements, surveys, compliance with
zoning or building requirements or ordinances, utility installation or
relocation, and obtaining any permits required by applicable law. Under no
circumstances shall any expense, whether classified as an Development Expense or
Operating Expense, be charged more than once to the Company.
"Dissociated Member" has the meaning specified in Section 13.01.
"Event of Dissociation" has the meaning specified in Section 13.01.
"Income" and "Loss" mean an amount equal to the Company's taxable
income or loss (including capital loss) for each taxable year, determined in
accordance with Section 703(a) of the Code (for this purpose, all items of
income, gain, loss, or deduction required to be stated separately pursuant to
Section 703(a)(1) of the Code shall be included in taxable income or loss), with
the following adjustments:
A. Any income of the Company that is exempt from federal income
tax and not otherwise taken into account in computing Income or Loss shall
be added to such Income or Loss;
B. Any expenditures of the Company described in Section
705(a)(2)(B) of the Code or treated as Section 705(a)(2)(B) of the Code
expenditures pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(i),
and not otherwise taken into account in computing Income or Loss, shall be
subtracted from such Income or Loss; and
C. Upon the distribution of property by the Company to a Member,
gain or loss attributable to the difference between the fair market value
of the property and its basis shall be treated as recognized.
"Manager" means that Person appointed as manager of the Company
pursuant to Section 6.01.
"Management Expenses" means a management fee payable to the Manager
in the amount of $35,000.00 per year for the management of the Company Property.
Management Expenses will be deemed earned on a quarterly basis as of the end of
each calendar quarter, with the first expenses
3
<PAGE>
payable for the quarter ending March 31, 1995, in the amount of $8,750.00 per
quarter. From and after time the Management Expenses are deemed earned they
shall accrue interest at the rate of ten percent (10%) per annum, compounded
monthly. The charges assessed for Management Expenses shall be in lieu of
direct and indirect billings that might otherwise be made by the Manager to the
Company for charges such as accounting services and expenses of Manager
personnel while dedicated to Company projects, etc.
"Mandatory Provisions of the Act" means those provisions of the Act
which may not be waived by the Members acting unanimously or otherwise.
"Operating Expenses" means all expenses advanced by the Manager
(except as set forth below), from time to time, in connection with the operation
and maintenance of the Company Property, together with interest thereon at ten
percent (10%) per annum, compounded monthly. Operating Expenses shall include,
without limitation, ad valorem and other taxes and assessments and all costs and
expenses resulting from the upkeep, repair or maintenance of any of the Company
Property, as well as expenses advanced by any Member pursuant to Section 6.04,
together with interest as above expressed. In addition, Operating Expenses
shall be deemed to include interest advanced by Bumgarner in connection with
short-term purchase money secured indebtedness for the Company Property,
including also interest on short-term advances as described in Section 4.03 made
to facilitate the original purchase of Company Property. Under no circumstances
shall any expense, whether classified as an Operating Expense or Development
Expense, be charged more than once to the Company.
"Opinion of Counsel" means a written opinion of counsel (who shall be
regular counsel to the Company).
"Outstanding Units" means the number of Units issued by the Company as
shown on the Company's books and records, less any Units held by the Company.
"Person" means a natural person, partnership, domestic or foreign
limited partnership, domestic or foreign limited liability company, trust,
estate, association or domestic or foreign corporation.
"Record Holder" means the Person in whose name such unit is
registered on the books and records of the Company as of the close of business
on a particular Business Day.
"Sale Contract" shall have the meaning expressed in Section 5.03 of
this Agreement.
"Substitute Member" means a transferee of a Unit who is admitted as a
Member to the Company pursuant to Section 11.01 in place of and with all the
rights of a Member.
"Super Majority Vote" or "Super Majority Vote of the Members" means
the affirmative vote of the holders of not less than 60% of the Outstanding
Units held by the Members.
4
<PAGE>
"Tax Item" means each item of income, gain, loss, deduction or
credit of the Company for federal tax purposes, as separately stated and
calculated pursuant to the Code.
"Tax Matters Partner" means the individual designated pursuant to
Section 9.02.
"Unit" means a Unit representing a membership interest in the Company.
ARTICLE 3
Purpose
-------
Section 3.01. Purpose of the Company. The purpose of the Company
----------------------
shall be to make the Company Property ready for development and sale, and to
dispose of the same, as the Manager in the Manager's sole discretion believes
economic conditions warrant, and to transact lawful business incidental thereto.
The Members understand there are no assurances extended by the Manager that the
Company will achieve any return on equity, or even generate sufficient sale
proceeds to retire the Company Loan and advanced expenses.
ARTICLE 4
Capital Contributions
---------------------
Section 4.01. Units. There shall be an aggregate of 10,000 Units
-----
in the Company.
Section 4.02. Initial Capital Contribution and Percentage Ownership.
-----------------------------------------------------
Each Member shall contribute by cash or check the specified dollar amount set
forth opposite such Member's name on Exhibit B hereto, at the times set forth
therein. The number of Units held by each Member and each Member's percentage
ownership of the Company are set forth opposite such Member's name on Exhibit B
hereto.
Section 4.03. Company Loan. Bumgarner shall cause there to be
------------
extended to the Company the Company Loan. The proceeds of the Company Loan will
be used exclusively to purchase or refinance (only as expressly provided herein)
the Company Property described on Exhibit A hereto. The Company Loan shall be
secured by a first mortgage lien and security interest on all the Company
Property. The principal amount of the Company Loan may be increased, but not
above $1,600,000.00, to retire any short-term purchase money secured acquisition
indebtedness for the Company Property and to repay any short term advance made
to facilitate the original purchase of Company Property.
Section 4.04. Capital Accounts.
----------------
A. The Company shall maintain for each Member a separate Capital
Account. The term "Capital Account" shall mean as to any Member and as to
any Units held by that
5
<PAGE>
Member the amount of the initial Capital Contribution attributable to the
Units held by that Member, which amount shall be (i) increased by
subsequent Capital Contributions by such Member, and Capital Gain and
Income allocated to such Member pursuant to Section 5.04, and (ii)
decreased by distributions to such Member pursuant to Section 5.02 and
Losses allocated to such Member pursuant to Section 5.04.
B. The foregoing definition of Capital Account and certain other
provisions of this Agreement are intended to comply with Treasury
Regulations Section 1.704-1(b) and shall be interpreted and applied in a
manner consistent with such regulation. Such regulation contains
additional rules governing maintenance of Capital Accounts that have not
been addressed in this Agreement.
C. An Assignee of a Unit will succeed to the Capital Account
relating to the Unit transferred. However, if the transfer causes a
termination of the Company under Section 708(b)(1)(B) of the Code, the
Company Property shall be deemed to have been distributed in liquidation
of the Company to the Members (including the transferee of a Unit)
pursuant to Section 12.02 and recontributed by such Members and
transferees in reconstitution of the Company. The Capital Accounts of
such reconstituted Company shall be maintained in accordance with the
principles of this Section 4.04.
Section 4.05. Interest. No interest shall be paid by the Company on
--------
Capital Contributions, on balances in a Member's Capital Account or on any other
funds distributed or distributable under this Agreement. However, interest
shall be payable, as elsewhere provided herein, on the Company Loan, short-term
advances made to facilitate purchase of the Company Property, Development
Expenses, if any, Management Expenses, and for Operating Expenses.
Section 4.06. No Withdrawal. Except as otherwise required under any
-------------
Mandatory Provisions of the Act, no Member shall have (i) any right to resign
voluntarily or otherwise withdraw from the Company, or (ii) any right to the
withdrawal or reduction of any part of such Member's Capital Contribution,
without the written consent of all remaining Members of the Company. If a
Member is allowed to withdraw from the Company, then the provisions of Section
13.01 shall apply.
Section 4.07. Additional Capital Contributions. No Member shall be
--------------------------------
obligated to make additional Capital Contributions. However, any Member may
make additional Capital Contributions in cash or property in such amounts as may
from time to time be agreed upon by a Super Majority Vote of the Members.
Bumgarner is obligated and hereby agrees to advance to the Company the funds
necessary to satisfy Development Expenses, if any, and Operating Expenses.
Section 4.08. Guarantee of Company Indebtedness. The Members shall
---------------------------------
not be obligated to guarantee Company indebtedness or obligations unless they
unanimously agree to do so.
ARTICLE 5
6
<PAGE>
Allocations and Distributions
-----------------------------
Section 5.01. Order of Distributions. Revenues and cash available to
----------------------
the Company shall be paid in the following order of priority by the Manager as
soon as available:
A. First, to satisfy all maturities of principal and interest
then owing in accordance with the terms of the Company Loan (and to retire
the short-term advance described in Section 4.03), and as to any remaining
sums, or as to all of same if the Company Loan has been fully repaid,
distribution shall be made in the manner hereinafter provided in
subparagraphs B. through E.
B. Second, for the payment of all Operating Expenses not
previously satisfied (which payment shall be applied first to interest
accrued);
C. Third, for the payment to the Manager of all Management
Expenses not previously satisfied (which payment shall be applied first to
interest accrued);
D. Fourth, for the payment to the Manager of all Development
Expenses not previously satisfied, if any (which payment shall be applied
first to interest accrued); and
E. Finally, if there are any remaining sums, the same shall be
distributed in accordance with Section 5.02.
Section 5.02. Distribution of Cash Available for Distribution.
------------------------------------------------
Distributions of all Cash Available for Distribution shall be made as soon as
available. Subject to Section 5.03, distribution shall be made to the Members
by the Company of Cash Available for Distribution with 50.01% to Bumgarner and
49.99% to T/SF. There shall be no Cash Available for Distribution until
satisfaction of the obligations expressed in Section 5.01.
Section 5.03. Setoff under Sale Contract. In the event of a
--------------------------
breach of any of T/SF's representations, warranties or agreements set forth in
that certain Contract for Sale dated December 30, 1994 (the "Sale Contract"),
between T/SF, as seller, and the Company, as the buyer, and which results in the
Company sustaining a loss, then any amounts due to T/SF under this Agreement
which have not been satisfied shall be subject to the Company's right of setoff
described herein. Upon thirty (30) days prior written notice to T/SF, during
which time T/SF shall have the opportunity to attempt to cure the event,
condition or circumstance to the Company's reasonable satisfaction, the Company
shall have the right at any time and from time to time to setoff amounts due and
owing to T/SF pursuant to this Agreement (and irrespective of when proceeds are
realized that will be available to exercise the remedy) against any and all
losses, expenses, damages, liabilities or other amounts due and owing the
Company by T/SF arising out of or in connection with the Sale Contract or the
transactions contemplated thereby. Such right of setoff shall be exercised in
addition to any other remedies the Company may have.
7
<PAGE>
Section 5.04. Allocation of Income and Loss.
-----------------------------
A. All Tax Items shall be allocated to all Members and
Assignees in accordance with their respective Units in the Company. All
Outstanding Units shall be treated equally.
B. Upon the transfer of a Unit, Income, Capital Gain and Loss
attributable to the transferred Unit shall, for federal income tax
purposes, be allocated to the owners of such Unit on the basis of the
Income or Loss for each month that such Person was the owner of such Units,
determined on an interim closing of the books method. The Members may
revise, alter, or otherwise modify the method of allocation as they
determine necessary to comply with Section 706 of the Code and regulations
or rulings promulgated thereunder.
C. If, and to the extent that, any Member is deemed to recognize
Income as a result of any transaction between the Member and the Company
pursuant to Sections 482, 483, 1272-1274, or 7872 of the Code, or any
similar provision now or hereafter in effect, any corresponding resulting
Loss or deduction of the Company shall be allocated to the Member who was
charged with that Income.
D. All tax credits for federal or state income tax purposes
shall be allocated in the same manner as Income.
ARTICLE 6
Management and Operation of Business
------------------------------------
Section 6.01. Managers. Management of the Company shall be vested in
--------
one or more Managers, as are appointed by Super Majority Vote of the Members
from time to time pursuant to this Agreement. Initially, the Members
unanimously agree there shall be one Manager, who shall be Bumgarner. In the
event that all Managers are removed from office as provided in this Article 6,
the business of the Company shall be under the exclusive management of the
Members, and in such case, a unanimous vote of the Members shall be necessary
for all decisions affecting the Company, and individual Members shall have no
power as such.
Section 6.02. Authority of Manager. The Manager may exercise all the
--------------------
powers of the Company whether derived from law, the Articles of Organization or
this Agreement, except such powers as are by statute, by the Articles of
Organization or by this Agreement vested solely in the Members. As part of the
Manager's obligations, duties and authority, and not in limitation thereof, the
Manager shall determine and advance all Development Expenses, if any, and
Operating Expenses which the Manager, in the Manager's sole discretion, deems
necessary, appropriate or beneficial to the operation of the Company and the
operation, development or management of the Company Property, which items shall
be repaid to Manager as provided in Section 5.01.
8
<PAGE>
Section 6.03. Restrictions on Manager. Notwithstanding any other
-----------------------
provision hereof, a Manager shall not, without the written consent or written
ratification of the specific act by a Super Majority Vote of the Members:
A. Do any act which would make it impossible to carry on the ordinary
business of the Company;
B. Admit any Person as a Member, except as provided in this Agreement;
C. Distribute any Company Property in kind except upon dissolution and
winding up;
D. Sell any Company Property to the Manager or an Affiliate of the
Manager, which such vote or ratification shall not be unreasonably
withheld; or
E. Knowingly perform any act that would subject a Member to personal
liability.
Section 6.04. Preservation of Company Property. Except for the
--------------------------------
Company Loan and any renewals or extensions thereof (but not to increase the
principal balance thereof except as provided in Section 4.03), the Manager shall
not further mortgage, create any security interest in, pledge or further
encumber, or suffer there to exist any lien or security interest upon, the
Company Property or any part thereof without authorization by Super Majority
Vote of the Members. The Manager will cause there to be paid all unsatisfied
accruing maturities of principal and interest on the Company Loan when due
("Current Debt Service"), together with all taxes, assessments and other
impositions now existing or hereafter assessed, levied or imposed upon any part
of the Company Property before any interest, penalty, fine or cost may be added
for non-payment. If the Manager fails to cause the Company to pay, as
hereinabove agreed, any monies to discharge any lien attaching to the Company
Property (except for the lien of the Company Loan), the Current Debt Service, or
all taxes, assessments or other impositions when due, or if any action or
proceeding is commenced which affects the Company Property or title thereto
including, but not limited to, a taking, insolvency, code enforcement,
arrangement or proceeding involving a bankrupt, then T/SF may, upon ten (10)
days prior written notice to Manager, during which period the Manager shall have
the opportunity to cure the event, condition or circumstance to the reasonable
satisfaction of T/SF, to pay, observe or perform any such covenant, agreement or
obligation, make such appearances, disburse such sums and take such action as
T/SF deems reasonably necessary to protect the interest of the Company in the
Company Property. Any cost incurred or amount disbursed by T/SF, shall be
treated in all respects as an Operating Expense with the first priority in
repayment as among such class of expenses. Nothing contained in this Section
6.04 shall require T/SF to incur any cost or expense or do any act hereunder.
Likewise, nothing herein contained shall be construed to limit or impair the
Manager's right to protest on behalf of the Company any such lien or security
interest, levy of taxes, assessments or other impositions against the Company
Property or to make any payment of the same under protest so long as the same
shall not result in any sale of or attachment or levy upon any part of the
Company Property.
9
<PAGE>
Section 6.05. Number, Term and Qualifications. The Company shall
-------------------------------
have one Manager. Appointment of the Manager may be made as the Members shall
from time to time determine, by Super Majority Vote. Each Manager shall hold
office until such Manager's successor has been appointed or until such Manager's
death, resignation or removal.
Section 6.06. Manner of Acting. In the event there is ever more
----------------
than one Manager, the unanimous agreement of all Managers shall be necessary for
all decisions affecting the Company, and no individual Manager shall have power
as such.
Section 6.07. Removal. Any Manager elected or appointed by the
-------
Members may be removed upon default in the performance of any material
obligation or duty of the Manager pursuant hereto which shall include, without
limitation, a breach of the Manager's obligations expressed in Section 6.04 of
this Agreement. Such removal shall only be made upon thirty (30) days prior
written notice to the Manager, during which time the Manager shall have the
opportunity to cure the default to the reasonable satisfaction of the Members
seeking removal on such grounds.
Section 6.08. Limitation on Liability of Manager. A Manager shall
----------------------------------
not be liable to the Company or its Members for monetary damages for breach of
fiduciary duty as a Manager; provided, however, that nothing contained herein
shall eliminate or limit the liability of the Manager (i) for any breach of the
Manager's duty of loyalty to the Company or its Members, (ii) for acts or
omissions not in good faith or which involve intentional misconduct, gross
negligence, recklessness or a knowing violation of the law, or (iii) for any
transactions from which the Manager derived an improper personal benefit.
Section 6.09. Outside Activities. Each Member and such Member's
------------------
Affiliates may have business interests and engage in business activities in
addition to those relating to the Company including, without limitation,
business interests and activities in direct competition with the Company for
such Member's or Member's Affiliates' own account or for the account of others,
and no provision of this Agreement shall be deemed to require disclosure or to
prohibit such Member or such Member's Affiliates from conducting such businesses
and activities. Neither the Company nor the other Members shall have any rights
by virtue of this Agreement or the relationship contemplated herein in any
business ventures of such Member or such Member's Affiliates. Nothing contained
herein shall preclude a Member from acquiring or possessing a financial or
equity interest in a Person purchasing Company Property; provided, however, that
disclosure shall be made to all Members of the existence of such interest prior
to entering into an agreement for purchase and sale of the Company Property,
and, if applicable, compliance shall be had with the provisions of Section
6.03.D. hereof.
Section 6.10. Company Funds. The funds of the Company shall be
-------------
deposited in an account or accounts designated by the Members and shall not be
commingled with any other funds. All withdrawals from or charges against these
accounts shall be made by authorized agents of the Company.
ARTICLE 7
10
<PAGE>
Rights and Obligations of the Members
-------------------------------------
Section 7.01. Limitation of Liability. Anything herein to the
-----------------------
contrary notwithstanding, except as otherwise expressly agreed in writing, and
except for the express duties and obligations of the Manager as stated herein to
advance funds and preserve the Company Property, a Member shall not be
personally liable for any debts, liabilities, or obligations of the Company,
whether to the Company, to any of the other Members, or to creditors of the
Company, beyond the Capital Account of the Member, together with the Member's
share of the assets and undistributed profits of the Company.
Section 7.02. Rights of Member Relating to the Company.
-----------------------------------------
A. Subject to the restrictions of Section 7.03 and Article 14, this
Agreement may be amended only by Super Majority Vote of the Members.
B. In addition to other rights provided by this Agreement or by
applicable law, a Member shall have the right upon demand and at such
Member's own expense:
1. To obtain any and all information regarding the status of the
business and financial condition of the Company;
2. Promptly after becoming available, to obtain a copy of the
Company's federal, state, and local income tax returns for each year;
3. To obtain a current list of the name and last known business,
residence or mailing address of each Member;
4. To obtain information regarding the Capital Contributions made
by each Member;
5. To obtain a copy of this Agreement and the Articles of
Organization and all amendments hereto and thereto, together with
copies of any powers of attorney pursuant to which this Agreement, the
Articles of Organization, and all amendments hereto and thereto have
executed; and
6. To inspect and copy any of the Company's books and records.
Section 7.03. Restrictions on Powers. Except as otherwise provided herein
----------------------
or by the Mandatory Provisions of the Act, a Member shall not have the authority
or power to act on behalf of, or to bind, the Company, or any other Member, and
a Member shall not have the right or power to take any action which would change
the Company to a general partnership, change the limited liability of a Member,
or affect the status of the Company for federal income tax purposes.
Section 7.04. Indemnification.
---------------
11
<PAGE>
A. Company Indemnity. To the maximum extent permitted by law, the
-----------------
Company shall indemnify and hold harmless all Managers, and the employees
and agents of the Company (each, an "Indemnitee") from and against any and
all losses, claims, demands, costs, damages, liabilities, joint and
several, expenses of any nature (including attorneys' fees and
disbursements), judgments, fines, settlements, penalties and other expenses
actually and reasonably incurred by the Indemnitee in connection with any
and all claims, demands, actions, suits, or proceedings, civil, criminal,
administrative or investigative, in which the Indemnitee may be involved,
or threatened to be involved, as a party or otherwise, by reason of the
fact that the Indemnitee may be involved, or threatened to be involved, as
a party or otherwise, by reason of the fact that the Indemnitee is or was a
Manager of the Company or is or was an employee or agent of the Company,
arising out of or incidental to the business of the Company, provided, (i)
the Indemnitee's conduct did not constitute willful misconduct or
recklessness, (ii) the action is not based on breach of this Agreement,
(iii) the Indemnitee acted in good faith and in a manner the Indemnitee
reasonably believed to be in, or not opposed to, the best interests of the
Company and within the scope of such Indemnitee's authority and (iv) with
respect to a criminal action or proceeding, the Indemnitee had no
reasonable cause to believe his conduct was unlawful. The termination of
any action, suit, or proceeding by judgment, order, settlement, conviction,
or upon a plea of nolo contendere, or its equivalent, shall not, in and of
itself, create a presumption or otherwise constitute evidence that the
Indemnitee acted in a manner contrary to that specified above.
B. Advancement of Expenses. Expenses incurred by an Indemnitee in
-----------------------
defending any claim, demand, action, suit or proceeding subject to this
Section 7.04 may, from time to time, be advanced by the Company prior to
the final disposition of such claim, demand, action, suit or proceeding
upon receipt by the Company of an undertaking by or on behalf of the
Indemnitee to repay such amount if it shall ultimately be determined that
such Person is not entitled to be indemnified as authorized in this Section
7.04.
C. Non-Exclusivity. The indemnification provided by this Section 7.04
---------------
shall be in addition to any other rights to which the Indemnitee may be
entitled under any agreement, vote of the Members, as a matter of law or
equity, or otherwise, and shall inure to the benefit of the successors,
assignees, heirs, personal representatives and administrators of the
Indemnitee.
D. Insurance. Upon Super Majority Vote of the Members, the Company
---------
may purchase and maintain insurance, at the Company's expense, on behalf of
any Indemnitee against any liability that may be asserted against or
expense that may be incurred by an Indemnitee in connection with the
activities of the Company regardless of whether the Company would have the
power to indemnify such Indemnitee against such liability under the
provisions of this Agreement.
ARTICLE 8
12
<PAGE>
Books, Records, Accounting and Reports
--------------------------------------
Section 8.01. Books and Records. Appropriate books and records with
-----------------
respect to the Company's business, including, without limitation, all books and
records necessary to provide to the Members any information, lists and copies of
documents required to be provided pursuant to Section 7.02, shall at all times
be kept at the principal office of the Company or at the office of the Manager's
accountant. Without limiting the foregoing, the following shall be maintained
at either such office: (i) a current and a past list of the full name and last
known mailing address of each Member and Manager, (ii) copies of records that
would enable a Member to determine the relative voting rights of the Members,
(iii) a copy of the Articles of Organization, and any amendments thereto, (iv)
copies of the Company's federal and state income tax returns and reports, if
any, for the three most recent years, (v) copies of any financial statements of
the Company for the three most recent fiscal years, and copies of any effective
written operating agreements and all amendments thereto and copies of any
written operating agreements no longer in effect. Any records maintained by the
Company in the regular course of its business may be kept on, or be in the form
of, magnetic tape, photographs or any other information storage device, provided
that the records so kept are convertible into clearly legible written form
within a reasonable period of time.
Section 8.02. Accounting. The books of the Company for regulatory and
----------
financial reporting purposes shall be maintained on the cash basis of
accounting. The Company books for purposes of maintaining and determining
Capital Accounts shall be maintained in accordance with the provisions of this
Agreement and, to the extent not inconsistent therewith, the principles
described above for financial reporting and regulatory purposes.
Section 8.03. Reports. Within thirty (30) days after the end of each
-------
calendar quarter, the Manager shall cause each Member to be furnished with a
cash flow statement of the quarter and year to date. In addition, not less than
fifteen (15) days prior to the due date, the Manager shall furnish to the
Members evidence of the payment of all real estate ad valorem taxes against the
Company Property. In addition, Manager shall, within two (2) business days of
acquiring written evidence thereof, furnish the Members written notice of the
existence of any item which could become the subject of a T/SF right of cure as
expressed in Section 6.04 hereof.
Section 8.04. Fiscal Year. The fiscal year of the Company shall be the
-----------
calendar year.
ARTICLE 9
Tax Matters
-----------
Section 9.01. Taxable Year. The taxable year of the Company shall be the
------------
calendar year.
Section 9.02. Tax Controversies. Subject to the provisions hereof, the
-----------------
Manager is designated the "Tax Matters Partner" (as defined in Section 6231 of
the Code), and is authorized and required to represent the Company, at the
Company's expense, in connection with all examinations of the
13
<PAGE>
Company's affairs by tax authorities, including resulting administrative and
judicial proceedings. Each Member agrees to cooperate with the Tax Matters
Partner, and to do or refrain from doing any or all things reasonably required
by the Tax Matters Partner to conduct such proceedings.
Section 9.03. Taxation as a Partnership. No election shall be made by the
-------------------------
Company or any Member for the Company to be excluded from the application of any
provision of Subchapter K, Chapter 1 of Subtitle A of the Code or from any
similar provisions of any state tax laws.
ARTICLE 10
Transfer of Units
-----------------
Section 10.01. Transfer.
--------
A. The term "transfer," when used in Articles 10 and 12 with respect
to a Unit, shall mean a transaction by which the Member assigns all or a
portion of the Member's Units, or any interest therein, to another Person,
or by which the holder of a Unit assigns the Unit to another Person as
Assignee, and includes a sale, assignment, gift, pledge, encumbrance,
hypothecation, mortgage, transfer by will or intestate succession,
exchange, or any other voluntary or involuntary disposition or disposition
by operation of law (except a statutory merger).
B. No Units shall be transferred, in whole or in part, except in
accordance with the terms and conditions set forth in this Article 10 and,
to the extent applicable, in Section 12.01 as well. Any transfer or
purported transfer of any Units not made in accordance with this Article 10
shall be null and void. If for any reason any such transfer is not null
and void, then the Assignee shall not be a Substitute Member, and shall
have no right to participate in the Company's affairs as a Member thereof,
but instead shall be entitled to receive only the share of profits or other
compensation to which the transferring Member would otherwise be entitled
at the time the transferring Member would be entitled to receive the same.
Section 10.02. Transfer of Units by a Member.
-----------------------------
A. No Units may be transferred by a Member unless the following
conditions are first satisfied:
1. The consent of each Member has been obtained, which may be
granted or withheld in each Member's sole discretion, such consent to
be evidenced by a written instrument, dated and signed by the Manager
and the consenting Member and mailed to each Member;
2. The transferee and each Member execute and file all documents
necessary for the transferee to be a Substitute Member and be bound by
the terms hereof and such transferee is admitted as a Substitute
Member; and
14
<PAGE>
3. The Company receives an Opinion of Counsel that such transfer
would not materially adversely affect the classification of the
Company as a partnership for federal and state income tax purposes.
B. The transfer restrictions on Company Units shall be conspicuously
noted in an appropriate legend on any Unit certificates issued.
C. In no event shall any Unit be transferred to a minor or any
incompetent except by will or intestate succession.
D. The Company need not recognize, for any purpose, any transfer of
all or any fraction of a Unit unless there shall have been filed with the
Company and recorded on the Company's books a duly executed and
acknowledged counterpart of the instrument of assignment and such
instrument evidences the written acceptance by the Assignee of all of the
terms and provisions of this Agreement and represents that such assignment
was made in accordance with all applicable laws and regulations.
E. Any holder of a Unit (including a transferee thereof) shall be
deemed conclusively to have agreed to comply with and be bound by all terms
and conditions of this Agreement, with the same effect as if such holder
had executed an express acknowledgement thereof, whether or not such holder
in fact has executed such an express acknowledgement.
Section 10.03. Restrictions on Transfer. Notwithstanding the other
------------------------
provisions of this Article 10, no transfer of any Unit of any Member in the
Company shall be made if the transferor (i) would violate applicable federal or
state securities laws or rules and regulations of the Securities and Exchange
Commission, any state securities commission or any other governmental authority
with jurisdiction over the transfer, (ii) would materially adversely affect the
classification of the Company as a partnership for federal or state income tax
purposes or (iii) would affect the Company's qualification as a limited
liability company under the Act.
Section 10.04. Issuance of Certificates. The Company may issue one or
------------------------
more certificates in the name of the Member evidencing the number of Units
issued. Upon the transfer of a Unit in accordance with Article 10, the Company
shall, if certificates have been issued, issue replacement certificates. All
certificates shall contain legends required by this Agreement or otherwise
required by law.
Section 10.05. Lost, Stolen or Destroyed Certificates. The Company shall
--------------------------------------
issue a new certificate in place of any certificate previously issued if the
Record Holder of the certificate: (i) makes proof by affidavit that a
previously issued certificate has been lost, stolen or destroyed; (ii) requests
the issuance of a new certificate before the Company has been put on notice that
the Units evidenced by such certificate have been acquired by a purchaser for
value in good faith and without notice of an adverse claim; and (iii) if
required by the Company, delivers to the Company a bond with surety or sureties
acceptable to the Company, to indemnify the Company against any claim that may
be made on
15
<PAGE>
account of the alleged loss, destruction or theft of the certificate. The
Company shall be entitled to treat each Record Holder as the Member or Assignee
in fact of any Units and, accordingly, shall not be required to recognize any
equitable or other claim or interest in or with respect to the Units on the
part of any other Person, regardless of whether it has actual or other notice
thereof.
ARTICLE 11
Admission of Substitute and Additional Members
----------------------------------------------
Section 11.01. Admission of Substitute Members.
-------------------------------
A. Upon a permitted transfer of a Unit by a Member in accordance with
Article 10 (but not otherwise), the transferor shall have the power to
give, and by transfer of any Certificate issued shall be deemed to have
given, the transferee the right to apply to become a Substitute Member with
respect to the Unit acquired, subject to the conditions of and in the
manner permitted under this Agreement. A transferee of a Certificate
representing a Unit shall not be an Assignee with respect to the
transferred Unit (whether or not such transferee is a Member or Substitute
Member with respect to other previously acquired Units) until all of the
following conditions are satisfied:
1. The instrument of assignment sets forth the intentions of the
assignor that the Assignee succeed to the assignor's interest as a
Substitute Member in his place;
2. The assignor and Assignee shall have fulfilled all other
requirements of this Agreement;
3. The Assignee shall have paid all reasonable legal fees and
filing costs incurred by the Company in connection with his
substitution as a Member; and
4. The Members shall have unanimously approved such substitution
in writing, which approval may be granted or withheld by each Member
in such Member's sole and absolute discretion and may be arbitrarily
withheld, and the books and records of the Company have been modified
to reflect the admission.
The admission of an Assignee as a Substitute Member with respect to a
transferred Unit shall become effective on the date the Members give their
unanimous written consent to the admission and the books and records of the
Company have been modified to reflect such admission. Any Member who transfers
all of such Member's Units with respect to which such Person had been admitted
as a Member shall cease to be a Member of the Company upon a transfer of such
Units in accordance with Article 10 and the execution of a counterpart of this
Agreement by the transferee and shall have no further rights as a Member in or
with respect to the Company (whether or not the Assignee of such former Member
is admitted to the Company as a Substitute Member).
16
<PAGE>
Section 11.02. Admission of Additional Members. Additional Units may be
-------------------------------
authorized and issued by the Company upon such terms and conditions as may be
approved by a unanimous vote of the Members. Upon the proposed issuance of any
such additional Units, each existing Member shall the preemptive right, but not
the obligation, to purchase such portion of the newly issued Units as the ratio
of the number of Units then held by such Member bears to the total number of
Units held by Members and outstanding before the issuance of the new Units,
together with such Member's proportionate share of the other newly issued Units
as to which other Members failed to exercise their preemptive rights.
ARTICLE 12
Right of Purchase
-----------------
Section 12.01. Right of First Refusal. In the event any Member (the
----------------------
"Transferor") intends, in good faith, to transfer all or any portion of such
Member's Units to a third Person, the other Member (the "Non-Transferring
Member") shall have the option to purchase from the Transferor so many of the
Transferor's Units as are or shall be affected by such transfer (all of such
Units as are or shall be affected by such transfer being called the "Available
Units"). In the event of a proposed transfer, the Transferor shall give the
Non-Transferring Member written notice of its intent to make such transfer,
together with the bona fide sale price and all the terms and conditions of such
transfer. The Non-Transferring Member shall have the option to acquire all
Available Units from the Transferor for the same price and on the same terms and
conditions as set forth in the notice, or, if not for monetary consideration, at
the price that would apply upon a purchase of Units pursuant to Section 13.01.A.
The Non-Transferring Member shall state its intention to exercise its option and
complete the purchase of the Available Units within forty-five (45) days after
receipt of written notice of such proposed transfer. If the Non-Transferring
Member fails to state its intention to exercise its option and complete the
purchase of the Available Units within such forty-five (45) day period, then
such option is deemed to have been waived so long as the Transferor completes
the sale of Available Units within thirty (30) days thereafter. If there are
only two Members, the Non-Transferring Member may interpose another Person to
acquire the Available Units. A transfer pursuant to a statutory merger shall
not invoke any rights granted pursuant to this Article 12.
17
<PAGE>
ARTICLE 13
Dissociation and Liquidation
----------------------------
Section 13.01. Dissociation of Member. Upon the death, resignation,
----------------------
expulsion, bankruptcy or dissolution of a Member (such Member being hereinafter
sometimes referred to as a "Dissociated Member"), or the occurrence of any other
event which terminates the continued membership of a Member in the Company (any
of such events being referred to herein as an "Event of Dissociation"), the
Company shall dissolve and its affairs shall be wound up. The Company shall
thereafter conduct only activities necessary to wind-up its affairs, unless
there are at least two (2) remaining Members and within sixty (60) days after
the occurrence of an Event of Dissociation, all the remaining Members
unanimously agree to continue the Company. If an election to continue the
Company is made then:
A. The remaining Members may elect, within thirty (30) days of the
decision to continue the Company, to purchase the Dissociated Member's
Units upon such terms and conditions as the remaining Members and the
Dissociated Member or the legal representative of the Dissociated Member
may agree. In the event the remaining Members and the Dissociated Member
(or such legal representative) do not agree upon terms and conditions for a
purchase of the Units of the Dissociated Member, the remaining Members
shall have an option (to be exercised within sixty (60) days after the
occurrence of the Event of Dissociation, by giving notice to the
Dissociated Member, or such legal representative) to purchase the Units of
the Dissociated Member for a cash purchase price determined by the value of
the Capital Account of the Dissociated Member, as of the end of the
calendar month preceding the occurrence of the Event of Dissociation,
adjusted as if all Company Property were sold at fair market value (as
defined in Act Section 2027 and determined by independent appraisal),
subject to adjustment as provided below, and liabilities of the Company
were paid and the Company was liquidated in accordance with the provisions
of Section 13.02. If the value of the Capital Account of the Dissociated
Member is negative and if the remaining Members elect to continue the
Company, then it shall be the obligation of such Dissociated Member (or
such legal representative) to pay to the Company sufficient amounts to
increase the negative value to zero. If Bumgarner's Units are being
purchased, then in connection with any such sale, there shall also be first
repaid, if applicable, the full amount of any unpaid advances (with unpaid
interest, if applicable) he has made for short-term advances described in
Section 4.03, Operating Expenses, Management Expenses, and Development
Expenses, if any. An additional condition to any such sale is that
Bumgarner's estate be unconditionally released from any guaranty or other
obligations in connection with the Company Loan, or repaid in full if
Bumgarner or his Affiliate is the lender pursuant to the Company Loan. In
the event a sale of Units is to occur in accordance herewith as a result of
the death of Bumgarner, then the purchase price for his Units as
established above shall be discounted if he has died within three (3) years
of the Company's acquisition of Company Property pursuant to the Sale
Contract on December 30, 1994 (hereafter the "Acquisition Date"). If death
occurs before the second anniversary of the Acquisition Date, the purchase
price determination shall be made at fifty percent (50%) of the fair market
value, and if death occurs on or after the second anniversary of the
Acquisition Date, but before the third anniversary thereof, the purchase
price
18
<PAGE>
determination shall be made at seventy percent (70%) of fair market
value, and on or after the third anniversary of the Acquisition Date, the
fair market value without adjustment shall be used.
B. The Company shall continue until the expiration of the term for
which it was formed or until the occurrence of another Event of
Dissociation, in which event any remaining Members shall again elect
whether to continue the Company pursuant to this Section 13.01.
C. If there is only one remaining Member, such Member may interpose
another Person to acquire the Dissociated Member's Units.
Section 13.02. Dissociation and Liquidation. The Company shall be
----------------------------
dissolved and its affairs shall be wound up upon the occurrence of any of the
following: (i) the term of the Company stated in the Articles of Organization
expires; (ii) there are fewer than two (2) Members; (iii) if, upon the
occurrence of an Event of Dissociation, the remaining Members fail to continue
the Company pursuant to Section 13.01; or (iv) all Members vote to dissolve the
Company.
Section 13.03. Method of Winding Up. Upon dissolution of the Company
--------------------
pursuant to Section 13.02, the Company shall immediately commence to liquidate
and wind up its affairs. The Members shall continue to share profits and losses
during the period of liquidation and winding up in the same proportion as before
commencement of winding up and dissolution. The proceeds from the liquidation
and winding up shall be applied in the following order of priority:
A. To creditors, including Members who are creditors, to the extent
permitted by law, in satisfaction of liabilities of the Company other than
liabilities to Members on account of their Capital Contributions or on
account of a Member's withdrawal from the Company or pursuant to a
withdrawal of capital; and
B. The balance to Members in accordance with their Capital Accounts.
Unless the Members shall unanimously determine otherwise, all distributions will
be made in cash, and none of the Company Property will be distributed in kind to
the Members.
Section 13.04. Filing Articles of Dissolution. Upon the completion of the
------------------------------
distribution of Company Property as provided in Section 13.02, Articles of
Dissolution shall be filed as required by the Act, and each Member agrees to
take whatever action may be advisable or proper to carry out the provisions of
this Section.
Section 13.05. Return of Capital. The return of Capital Contributions
-----------------
shall be made solely from Company Property.
19
<PAGE>
ARTICLE 14
Amendment of Agreement; Meetings; Record Date
---------------------------------------------
Section 14.01. Amendments. All Amendments to this Agreement shall require
----------
a Super Majority Vote of the Members.
Section 14.02. Limitations on Amendments. Notwithstanding any other
-------------------------
provision of this Agreement, no amendment to this Agreement may (i) enlarge the
obligations of any Member under this Agreement or (ii) amend this Section 14.02,
Section 14.01, 7.03 or 11.02, or (iii) change any fees or expenses payable to
the Manager pursuant hereto, or (iv) amend any voting level or consent
requirements or change the definitions of Super Majority Vote without the
unanimous approval of all Members.
Section 14.03. Meetings. Meetings may be called by any Member or the
--------
Manager, by giving at least two (2) days' prior notice of the time, place and
purpose of the meeting to all Members.
Section 14.04. Adjournment. When a meeting is adjourned to another time
-----------
or place, notice need not be given of the adjourned meeting, if the time and
place thereof are announced at the meeting at which the adjournment is taken,
unless such adjournment shall be for more than forty-five (45) days. If the
adjournment is for more than forty-five (45) days, a notice of the adjourned
meeting shall be given in accordance with Section 14.03. At the adjourned
meeting, the Company may transact any business which might have been transacted
at the original meeting.
Section 14.05. Waiver of Notice; Consent to Meeting; Approval of Minutes.
---------------------------------------------------------
The transactions of any meeting of the Company, however called and noticed, and
whenever held, are as valid as though had at a meeting duly held after regular
call and notice, if a quorum is present either in person or by proxy, and if,
either before or after the meeting, each of the Members entitled to vote, but
not present in person or by proxy, approves by signing a written waiver of
notice or an approval to the holding of the meeting or an approval of the
minutes thereof. All waivers, consents, and approvals shall be filed with the
Company records or made a part of the minutes of the meeting.
Section 14.06. Quorum. The holders of not less than sixty percent (60%)
------
of the Units entitled to vote represented in person or by proxy, shall
constitute a quorum at a meeting of Members. The Members present at a duly
called or held meeting at which a quorum is present may continue to participate
at such meeting until adjournment, notwithstanding the withdrawal of enough
Members to leave less than a quorum, if any action taken (other than
adjournment) is approved by the requisite percentage of Units of Members
specified in this Agreement. In the absence of a quorum, any meeting of Members
may be adjourned from time to time by a Super Majority Vote of the Members
represented either in person or by proxy entitled to vote, but no other matters
may be proposed, approved or disapproved, except as provided in Section 14.04.
Section 14.07. Action Without a Meeting. Any action that may be taken by
------------------------
any vote of the Members may be taken without a meeting if a consent to such
action is signed by Members holding
20
<PAGE>
Units representing not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all Units
entitled to vote thereon were present and voted. Prompt notice of the taking of
any action without a meeting shall be given to those Members who have not
consented in writing.
ARTICLE 15
General Provisions
------------------
Section 15.01. Notices. Any notice, demand, request or report required or
-------
permitted to be given or made to a Member under this Agreement shall be in
writing and shall be deemed given or made when delivered in person or when sent
by first class mail to the Member at the address set forth on Exhibit B. Any
notice, payment, or report to be given or sent to a Member hereunder shall be
deemed conclusively to have been given or sent, upon mailing of such notice,
payment, or report to the address shown on the records of the Company,
regardless of any claim of any Person who may have an interest in the Unit by
reason of an assignment or otherwise.
Section 15.02. Captions. All article and section captions in this
--------
Agreement are for convenience only. They shall not be deemed part of this
Agreement and in no way define, limit, extend or describe the scope or intent of
any provisions hereof.
Section 15.03. Pronouns and Plurals. Whenever the context may require,
--------------------
any pronoun used in this Agreement shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns, pronouns and verbs
shall include the plural and vice versa.
Section 15.04. Further Action. The parties to this Agreement shall
--------------
execute and deliver all documents, provide all information and take or refrain
from taking any action as may be necessary or appropriate to achieve the
purposes of this Agreement.
Section 15.05. Binding Effect. This Agreement shall be binding upon and
--------------
inure to the benefit of the parties hereto and their heirs, executors,
administrators, successors, legal representatives and permitted assignees.
Nothing contained herein is intended to confer upon any party not a party hereto
any benefit, right or privilege agreed to herein by the Members.
Section 15.06. Integration. This Agreement constitutes the entire
-----------
agreement among the parties hereto pertaining to the subject matter hereof and
supersedes all prior agreements and understandings pertaining thereto.
Section 15.07. Waiver. No failure by any party to insist upon the strict
------
performance of any covenant, duty, agreement or condition of this Agreement or
to exercise any right or remedy consequent upon a breach thereof shall
constitute waiver of any such breach or any other covenant, duty, agreement or
condition.
21
<PAGE>
Section 15.08. Counterparts. This Agreement may be executed in
------------
counterparts, all of which together shall constitute an agreement binding on all
the parties hereto, notwithstanding that all such parties are not signatories to
the original or the same counterpart. Each party shall become bound by this
Agreement immediately upon affixing its signature hereto, independently of the
signature of any other party.
Section 15.09. Applicable Law. This Agreement shall be construed in
--------------
accordance with and governed by the laws of the State of Oklahoma, without
regard to its principles of conflict of laws.
Section 15.10. Invalidity of Provisions. If any provision of this
------------------------
Agreement is or becomes invalid, illegal, or unenforceable in any respect, the
validity, legality, and enforceability of the remaining provisions contained
herein shall not be affected thereby.
Section 15.11. Conveyances. All of the assets of the Company shall be
-----------
held in the name of the Company. Any deed, bill of sale, mortgage, lease,
contract of sale or other instrument purporting to convey or encumber the
interest of the Company of all or any portion of the assets of the Company shall
be sufficient if signed on behalf of the Company by the Manager. No Person
shall be required to inquire into the authority of any individual to sign any
instrument which is executed pursuant to the provisions of this Section 15.11.
Section 15.12. Power of Attorney.
-----------------
A. Manager as Attorney-in-Fact. By the execution of this Agreement,
---------------------------
or a counterpart hereof, each Member irrevocably constitutes and appoints
the Manager as its true and lawful attorney-in-fact and agent to
effectuate, with full power and authority to act in his name, place, and
stead in effectuating, the purposes of the Company pursuant to the terms
and conditions of this Agreement, including the execution, acknowledgment,
delivery, filing, and recording of all certificates, documents, contracts,
loan documents, or counterparts thereof, and all other documents which the
Manager deems necessary or reasonably appropriate to do any of the
following: (i) organize, qualify, or continue the Company as a limited
liability company, including qualification of the Company in such other
jurisdictions as the Company's activities may require; (ii) reflect an
amendment to this Agreement or the Company's Articles of Organization
required by a change in the name of the Company, a change in the principal
place of business of the Company or, subject to the provisions hereof;
(iii) accomplish the purposes and carry out the powers of the Company as
set forth herein; and (iv) subject to the provisions of this Agreement,
effect the dissolution and termination of the Company.
B. Nature of Special Power. The power of attorney granted herein: (i)
-----------------------
shall be deemed to be coupled with an interest, shall be irrevocable and
shall survive the death, incompetency, or legal disability of a Member;
(ii) may be exercised only by the Manager, for each Member, or any or all
of them, listing all, or any, of the Members required to execute any such
instrument and executing such instrument as attorney-in-fact for all, or
any one, of such Members; and (iii) shall be binding upon any transferee of
a membership interest of a Member hereunder, or any portion thereof, except
that where such transferee is qualified as a Substitute
22
<PAGE>
Member under this Agreement, the power of attorney shall survive the
delivery of such Units for the sole purpose of enabling the Manager, to
execute, acknowledge, and file any instrument on behalf of the transferor
of the Units necessary to effect such substitution.
C. Limitation. Notwithstanding any provision of this Section 15.12 to
----------
the contrary, no power of attorney is granted the Manager to perform any
act, duty or obligation not permitted or authorized by the terms hereof,
nor to enter into any contract or agreement involving the Manager in his
individual capacity separate from the Company, or any of the Manager's
Affiliates.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the 20th
day of December, 1994.
/s/ John C. Bumgarner, Jr.
----------------------------------
JOHN C. BUMGARNER, JR.
TRIBUNE/SWAB-FOX COMPANIES, INC.,
a Delaware corporation
By: /s/ Howard G. Barnett, Jr.
--------------------------------
Print Name: Howard G. Barnett, Jr.
------------------------
Title: President
-----------------------------
23
<PAGE>
EXHIBIT A
Legal Descriptions
------------------
1. Tract s A and B at 61st and Garnett (legal description omitted)
2. 101st and Memorial (legal description omitted)
3. 91st and Memorial (legal description omitted)
4. Tracts A and B at 75th and Memorial (legal description omitted)
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT B
Fair Market Value of Number Percentage of Date of
Name and Address of Member Contribution of Units Total Units Contribution
-------------------------- ------------ -------- ----------- -----------
<S> <C> <C> <C> <C>
John C. Bumgarner, Jr. $500.10 5001 50.01% 12/20/94
2145 East 27th Street
Tulsa, Oklahoma 74114
Tribune/Swab-Fox Companies, Inc. $499.90 4999 49.99% 12/20/94
2407 East Skelly Drive
Tulsa, Oklahoma 74105
</TABLE>
<PAGE>
Exhibit 11
TRIBUNE/SWAB-FOX COMPANIES, INC.
Computation of Earnings per Share
(In thousands except per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
--------- -------- --------
<S> <C> <C> <C>
PRIMARY EARNINGS PER SHARE:
Income (loss) before discontinued and
extraordinary item $ 2,564 $ (5,713) $ 9,142
Add:
After tax interest expense applicable
to 11% Convertible Debentures due in 1997 -- -- 125
Deduct:
Dividends on New Senior Preferred Stock (103) (103) (103)
Dividends on Class A Preferred Stock (15) (15) (15)
Dividends on 6 1/2% Preferred Stock (21) (21) --
------- -------- -------
Income (loss) before discontinued and
extraordinary losses applicable to common
and common equivalent shares 2,425 (5,852) 9,149
Discontinued operations, net of income tax (2,816) (4,800) (790)
Extraordinary loss, net of income tax -- (560) --
------- -------- -------
Net income (loss) applicable to common
and common equivalent shares $ (391) $(11,212) $ 9,149
======= ======== =======
Weighted average number of common
and common equivalent shares outstanding
Common shares 29,742 30,286 30,740
Common equivalent shares:
From 6 1/2% Preferred Stock -- -- 1,387
From 11% Convertible Debentures due in 1997 -- -- 1,404
------- -------- -------
29,742 30,286 33,531
======= ======== =======
Income (loss) per common
and common equivalent share:
Continuing operations $ 0.08 $ (0.19) $ 0.27
Discontinued operations (0.09) (0.16) (0.02)
Extraordinary loss -- (0.02) --
------- -------- -------
Net income (loss) per common share $ (0.01) $ (0.37) $ 0.25
======== ======== =======
FULLY DILUTED EARNINGS PER SHARE:
Income (loss) before discontinued and extraordinary item $ 2,564 $ (5,713) $ 9,142
Add:
After tax interest expense applicable to:
11% Convertible Debentures due in 1997 -- -- 125
11% Convertible Debentures due in 1998 57 57 57
Deduct:
Dividends on Class A Preferred Stock (15) (15) (15)
Dividends on 6 1/2% Preferred Stock (21) (21) --
-------- -------- -------
Income (loss) before discontinued and
extraordinary losses applicable to common
and common equivalent shares $ 2,585 $ (5,692) $ 9,309
Discontinued operations, net of income tax (2,816) (4,800) (790)
Extraordinary loss, net of income tax -- (560) --
-------- -------- -------
Net income (loss) applicable to common
and common equivalent shares $ (231) $(11,052) $ 8,519
======== ======== =======
</TABLE>
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC.
Computation of Earnings per Share
(In thousands except per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
FULLY DILUTED EARNINGS PER SHARE -
Continued:
Weighted average number of common
and common equivalent shares outstanding
Common shares and common equivalent shares 29,742 30,286 33,531
Assumed conversion of 11% Debentures due in 1998 348 348 348
Assumed conversion of New Senior Preferred Stock -- 976 976
-------- ------- -------
30,090 31,610 34,855
======== ======== =======
Income (loss) per common
and common equivalent share:
Continuing operations $ 0.09 $ (0.18) $ 0.26
Discontinued operations (0.09) (0.15) (0.02)
Extraordinary loss -- (0.02) --
-------- -------- -------
Net income (loss) per common share $ (0.00) $ (0.35) $ 0.24
======== ======== =======
</TABLE>
2
<PAGE>
EXHIBIT 21
TRIBUNE/SWAB-FOX COMPANIES, INC.
<TABLE>
<CAPTION>
SUBSIDIARIES PERCENT OWNED JURISDICTION OF INCORPORATION
------------- ------------- -----------------------------
<S> <C> <C> <C>
Atwood Convention 77.6% (1) Missouri - convention publications
Publishing, Inc.
BMT Communications, Inc. 77.6% (1) Oklahoma - trade publications
(formerly
BMT Publications, Inc.)
Consul Properties, Inc. 100% Oklahoma - real estate
Convention News Source, Inc. 77.6% (2) Missouri - inactive
County Line Investment 100% Oklahoma - real estate
Company
DacNet, Inc. 100% (4) Oklahoma - inactive
Expo Magazine, Inc. 77.6% (3) Kansas - trade publication
Galaxy Design & Printing, 100% (5) Maryland - commercial printing
Inc.
Galaxy Registration, Inc. 100% (1) Maryland - convention registration
M-R Creative, Inc.* 77.6% (6) New York - inactive
T/SF New York, Inc.* 77.6% (3) New York - inactive
(formerly
Marks-Roiland
Communications, Inc.)
National Employment 77.6% (4) Oklahoma - employment screening
Screening Services, Inc.
New York Community 77.6% (3) New York - inactive
Newspapers, Inc.
Shopper's Guide, Inc.** 77.6% (3) New Jersey - shopper-newspapers
South Jersey Shopper, Inc. 77.6% (7) New Jersey - inactive
Swab-Fox Properties, Inc. 100% Oklahoma - real estate
TSF Capital Corp. 100% Oklahoma - venture capital
T/SF Communications 77.6% Delaware - publishing and information
Corporation
TSF Communications Services, 77.6% (4) Oklahoma - information service
Inc.
(formerly TSF Information
Services Corp.).
T/SF Investment Co. 77.6% (3) Delaware - investment holding company
TSF Pacific, Inc. 100% Oklahoma - inactive
Transportation Information 77.6% (1) Oklahoma-motor vehicle reports and
Services, Inc. truck driver employment information
Tulsa Tribune Company 77.6% (1) Delaware - newspaper publication
until October 1, 1992
Wagco Land Development, Inc. 100% Oklahoma - real estate
</TABLE>
--------------
(1) Interests shown are owned by T/SF Investment Co.
(2) Convention News Source, Inc., is owned by Atwood Convention Publishing,
Inc.
(3) Interests shown are owned by T/SF Communications Corporation.
(4) Interests shown are owned by Transportation Information Services, Inc.
(5) Galaxy Design & Printing, Inc. is owned by Galaxy Rgistration, Inc.
(6) M-R Creative, Inc., is owned by T/SF New York, Inc.
(7) South Jersey Shopper, Inc., is owned by Shopper's Guide, Inc.
* Sold assets effective November 1, 1993.
** Sold assets effective April 30, 1994.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE DECEMBER
31, 1994 TRIBUNE/SWAB-FOX COMPANIES, INC. CONSOLIDATED FINANCIAL STATEMENTS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 4,585
<SECURITIES> 2,000
<RECEIVABLES> 9,353
<ALLOWANCES> 506
<INVENTORY> 596
<CURRENT-ASSETS> 32,205
<PP&E> 7,419
<DEPRECIATION> 2,834
<TOTAL-ASSETS> 53,581
<CURRENT-LIABILITIES> 15,142
<BONDS> 4,905
<COMMON> 3,099
525
0
<OTHER-SE> 23,855
<TOTAL-LIABILITY-AND-EQUITY> 53,581
<SALES> 51,094
<TOTAL-REVENUES> 56,919
<CGS> 35,069
<TOTAL-COSTS> 49,566
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 483
<INTEREST-EXPENSE> 736
<INCOME-PRETAX> 6,134
<INCOME-TAX> 2,589
<INCOME-CONTINUING> 2,564
<DISCONTINUED> (2,816)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (252)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
