<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 24, 1995
REGISTRATION NO. 33-57587
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 2
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
T/SF COMMUNICATIONS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
DELAWARE 2721 73-1341805
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (IRS EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
INCORPORATION OR
ORGANIZATION)
2407 EAST SKELLY DRIVE
TULSA, OKLAHOMA 74105
(918) 747-2600
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
HOWARD G. BARNETT, JR.
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
T/SF COMMUNICATIONS CORPORATION
2407 EAST SKELLY DRIVE
TULSA, OKLAHOMA 74105
(918) 747-2600
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPY TO:
ROBERT A. CURRY, ESQ.
CONNER & WINTERS
A PROFESSIONAL CORPORATION
2400 FIRST PLACE TOWER
15 EAST 5TH STREET
TULSA, OKLAHOMA 74103
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: At the
effective time of the Merger as provided in the Agreement and Plan of Merger
described herein.
If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: [_]
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- --------------------------------------------------------------------------------
<PAGE>
T/SF COMMUNICATIONS CORPORATION
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
ITEM NUMBER AND CAPTION OF HEADING OR LOCATION IN PROXY
FORM S-4 STATEMENT/PROSPECTUS
-------------------------- ----------------------------
<C> <S> <C>
A.INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus... Outside Front Cover Page
2. Inside Front and Outside Back Cover Page
of Prospectus............................ Available Information; Documents
Incorporated by Reference; Table of
Contents
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information............ Outside Front Cover Page; Summary;
Risk Factors
4. Terms of the Transaction................. Summary; The Merger; The Merger
Agreement; Description of Communications
Capital Stock; Comparative Rights of
Stockholders; Definition of Certain
Terms
5. Pro Forma Financial Information.......... Summary; Index to Pro Forma Financial
Statements and Financial Statements
6. Material Contacts with the Company Being
Acquired................................. Risk Factors; The Merger--Background of
the Merger; The Merger--Interests of
Certain Persons in the Merger
7. Additional Information Required for
Reoffering by Persons and Parties Deemed
to be Underwriters....................... Not Applicable
8. Interests of Named Experts and Counsel... Not Applicable
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.............................. Not Applicable
B.INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3 Not Applicable
Registrants..............................
11. Incorporation of Certain Information by
Reference................................ Not Applicable
12. Information With Respect to S-2 or S-3
Registrants.............................. Summary; Management's Discussion and
Analysis of Financial Condition and
Results of Operations--Communications;
Index to Pro Forma Financial Statements
and Financial Statements
13. Incorporation of Certain Information by
Reference................................ Documents Incorporated by Reference
14. Information With Respect to Registrants
Other Than S-3 or S-2 Registrants........ Not Applicable
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ITEM NUMBER AND CAPTION OF HEADING OR LOCATION IN PROXY
FORM S-4 STATEMENT/PROSPECTUS
-------------------------- ----------------------------
<S> <C> <C>
C.INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information With Respect to S-3 Not Applicable
Companies...............................
16. Information With Respect to S-2 or S-3
Companies............................... Documents Incorporated by Reference;
Summary; Management's Discussion and
Analysis of Financial Condition and
Results of Operations--Tribune/Swab-Fox;
Index to Pro Forma Financial Statements
and Financial Statements
17. Information With Respect to Companies
Other Than S-3 or S-2 Companies......... Not Applicable
D.VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or
Authorizations are to be Solicited...... Outside Front Cover Page; Documents
Incorporated by Reference; Summary; Risk
Factors; The Special Meetings; The
Merger
19. Information if Proxies, Consents or
Authorizations are not to be Solicited
or in an Exchange Offer................. Not Applicable
</TABLE>
<PAGE>
[TO BE SENT ONLY TO THE STOCKHOLDERS OF T/SF COMMUNICATIONS CORPORATION]
[COMMUNICATIONS LETTERHEAD]
APRIL 24, 1995
TO THE STOCKHOLDERS OF T/SF COMMUNICATIONS CORPORATION:
Enclosed are a Notice of Special Meeting of Stockholders, a Joint Proxy
Statement and Prospectus, and a Proxy for a Special Meeting of Stockholders
(the "Special Meeting") of T/SF Communications Corporation ("Communications")
to be held on May 24, 1995, at 2:00 p.m. local time, in the Orange Room at the
Doubletree Hotel at Warren Place, 6110 South Yale, Tulsa, Oklahoma.
At the Special Meeting you will be asked to consider and vote on a proposal
to approve and adopt an Agreement and Plan of Merger, as amended (the "Merger
Agreement"), pursuant to which Tribune/Swab-Fox Companies, Inc. ("Tribune/Swab-
Fox") will be merged with and into Communications (the "Merger"), with
Communications to be the surviving corporation in the Merger. The Special
Meeting will be held as a joint meeting in conjunction with the special meeting
of the stockholders of Tribune/Swab-Fox which will also be held to consider and
vote on the Merger Agreement.
The terms of the Merger Agreement provide that holders of Tribune/Swab-Fox
Class A Common Stock and Tribune/Swab-Fox Class B Common Stock (collectively,
the "Tribune/Swab-Fox Common Stock"), other than Communications and holders who
have perfected their appraisal rights under Delaware law, will receive, for
each share of Tribune/Swab-Fox Common Stock owned as of the effective time of
the Merger, 0.1255 of a share of Communications Common Stock or, at the
election of each Tribune/Swab-Fox stockholder, $0.88 in cash. Stockholders of
Tribune/Swab-Fox may elect to receive cash for some or all of their shares of
Tribune/Swab-Fox Common Stock in accordance with the terms and subject to the
limitations contained in the Merger Agreement. Each share of Communications
Common Stock will remain outstanding and will be unchanged as a result of the
Merger, except for the outstanding shares of Communications Common Stock owned
by Tribune/Swab-Fox, which will be cancelled.
On April 20, 1995, the closing sale price per share of Communications Common
Stock, as reported by the American Stock Exchange, was $7.88 and the closing
sale price per share of Tribune/Swab-Fox Class A Common Stock, as reported by
The Nasdaq Small-Cap Market, was $0.81. Based on such closing sale price of
Communications Common Stock, the market value of the 0.1255 of a share of
Communications Common Stock issuable for each share of Tribune/Swab-Fox Common
Stock in the Merger was $0.99.
Details of the proposal are set forth in the accompanying Joint Proxy
Statement and Prospectus, which you should read carefully.
After careful consideration, including the consideration of the fairness
opinion of Oppenheimer & Co., Inc. as described in the Joint Proxy Statement
and Prospectus, the Board of Directors of Communications has determined that
the proposed Merger is fair to and in the best interests of Communications and
its stockholders. Accordingly, the Board of Directors has unanimously approved
the Merger Agreement and recommends that all stockholders vote for its
approval.
All stockholders are cordially invited to attend the Special Meeting in
person. The affirmative vote of a majority of the outstanding shares of
Communications Common Stock will be necessary for approval and adoption of the
Merger Agreement. Tribune/Swab-Fox, which owns approximately 78% of the
outstanding shares of Communications Common Stock, intends to vote all such
shares of Communications Common Stock in favor of the Merger. Accordingly,
approval of the Merger Agreement by the stockholders of Communications is
assured.
<PAGE>
IN ORDER THAT YOUR SHARES MAY BE REPRESENTED AT THE SPECIAL MEETING, YOU ARE
URGED TO PROMPTLY COMPLETE, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY IN THE
ENCLOSED ENVELOPE, WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING. If
you attend the Special Meeting in person you may, if you wish, vote personally
on all matters brought before the Special Meeting even if you have previously
returned your Proxy. In addition, you may revoke your Proxy at any time prior
to its exercise by delivering to the Secretary of Communications a duly
executed Proxy bearing a later date.
Sincerely,
Howard G. Barnett, Jr.
Chairman, President and
Chief Executive Officer
YOUR VOTE IS IMPORTANT
PLEASE SIGN, DATE AND RETURN YOUR PROXY
<PAGE>
T/SF COMMUNICATIONS CORPORATION
2407 EAST SKELLY DRIVE
TULSA, OKLAHOMA 74105
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 24, 1995
To the Stockholders of T/SF Communications Corporation:
Notice is hereby given that a Special Meeting of Stockholders (the "Special
Meeting") of T/SF Communications Corporation ("Communications") will be held on
May 24, 1995, at 2:00 p.m. local time, in the Orange Room at the Doubletree
Hotel at Warren Place, 6110 South Yale, Tulsa, Oklahoma, for the following
purposes:
1. To consider and vote on a proposal to approve and adopt an Agreement
and Plan of Merger dated January 25, 1995, as amended (the "Merger
Agreement"), between Communications and Tribune/Swab-Fox Companies, Inc.
("Tribune/Swab-Fox") pursuant to which, among other things, (a)
Tribune/Swab-Fox will be merged with and into Communications (the
"Merger"), with Communications to be the surviving corporation in the
Merger, and (b) each stockholder of Tribune/Swab-Fox (other than
Communications and stockholders who have perfected their appraisal rights
under Delaware law) will receive, for each share of Tribune/Swab-Fox Class
A Common Stock and Tribune/Swab-Fox Class B Common Stock (collectively, the
"Tribune/Swab-Fox Common Stock") owned as of the effective time of the
Merger, a specified fraction of a share of Communications Common Stock or,
at the election of each Tribune/Swab-Fox stockholder, a specified amount of
cash, all as more fully described in the accompanying Joint Proxy Statement
and Prospectus. Tribune/Swab-Fox stockholders may elect to receive cash for
some or all of their shares of Tribune/Swab-Fox Common Stock in accordance
with the terms and subject to the limitations contained in the Merger
Agreement. A copy of the Merger Agreement is attached as Appendix A to the
Joint Proxy Statement and Prospectus.
2. To transact such other business as may properly come before the
Special Meeting or any adjournment or postponement thereof.
Only stockholders of record at the close of business on April 5, 1995, are
entitled to notice of and to vote at the Special Meeting or any adjournment or
postponement thereof. A list of Communications stockholders entitled to vote at
the Special Meeting will be available for examination, for any purpose germane
to the Special Meeting, during ordinary business hours, at the offices of
Communications for ten days prior to the Special Meeting and at the time and
place of the Special Meeting. Holders of Communications Common Stock are not
entitled to appraisal rights under Delaware law in connection with the Merger.
You are cordially invited to attend the Special Meeting in person, but if you
are unable to do so, please complete, sign, date and promptly return the
enclosed Proxy in the enclosed, self-addressed, stamped envelope. If you attend
the Special Meeting and desire to revoke your Proxy and vote in person, you may
do so. In any event, a Proxy may be revoked at any time before it is voted.
By Order of the Board of Directors,
Donna J. Peters
Secretary
Tulsa, Oklahoma
April 24, 1995
<PAGE>
[TO BE SENT ONLY TO THE STOCKHOLDERS OF TRIBUNE/SWAB-FOX COMPANIES, INC.]
[TRIBUNE/SWAB-FOX LETTERHEAD]
APRIL 24, 1995
TO THE STOCKHOLDERS OF TRIBUNE/SWAB-FOX COMPANIES, INC.:
Enclosed are a Notice of Special Meeting of Stockholders, a Joint Proxy
Statement and Prospectus, a so-called Cash Election Form, and a Proxy for a
Special Meeting of Stockholders (the "Special Meeting") of Tribune/Swab-Fox
Companies, Inc. ("Tribune/Swab-Fox") to be held on May 24, 1995, at 2:00 p.m.
local time, in the Orange Room at the Doubletree Hotel at Warren Place, 6110
South Yale, Tulsa, Oklahoma.
At the Special Meeting you will be asked to consider and vote on a proposal
to approve and adopt an Agreement and Plan of Merger, as amended (the "Merger
Agreement"), pursuant to which Tribune/Swab-Fox will be merged with and into
T/SF Communications Corporation ("Communications") (the "Merger"), with
Communications to be the surviving corporation in the Merger. The Special
Meeting will be held as a joint meeting in conjunction with the special meeting
of the stockholders of Communications which will also be held to consider and
vote on the Merger Agreement.
The terms of the Merger Agreement provide that holders of Tribune/Swab-Fox
Class A Common Stock and Tribune/Swab-Fox Class B Common Stock (collectively,
the "Tribune/Swab-Fox Common Stock"), other than Communications and holders who
have perfected their appraisal rights under Delaware law, will receive, for
each share of Tribune/Swab-Fox Common Stock owned as of the effective time of
the Merger, 0.1255 of a share of Communications Common Stock or, at the
election of each Tribune/Swab-Fox stockholder, $0.88 in cash (in other words,
for every 7.9681 shares of Tribune/Swab-Fox Common Stock held, the holder will
be entitled to receive one share of Communications Common Stock). Stockholders
of Tribune/Swab-Fox may elect to receive cash for some or all of their shares
of Tribune/Swab-Fox Common Stock in accordance with the terms and subject to
the limitations contained in the Merger Agreement.
On April 20, 1995, the closing sale price per share of Communications Common
Stock, as reported by the American Stock Exchange, was $7.88 and the closing
sale price per share of Tribune/Swab-Fox Class A Common Stock, as reported by
The Nasdaq Small-Cap Market, was $0.81. Based on such closing sale price of
Communications Common Stock, the market value of the 0.1255 of a share of
Communications Common Stock issuable for each share of Tribune/Swab-Fox Common
Stock in the Merger was $0.99.
Details of the proposal are set forth in the accompanying Joint Proxy
Statement and Prospectus, which you should read carefully.
In addition, on January 18, 1995, the Board of Directors of Tribune/Swab-Fox
declared a one-time cash dividend of $0.0344 per share of Tribune/Swab-Fox
Common Stock, payable on the date of the Special Meeting, subject to approval
of the Merger by the stockholders of both companies, to stockholders of record
on the record date for the Special Meeting.
TRIBUNE/SWAB-FOX STOCKHOLDERS WHO DESIRE TO ELECT TO RECEIVE CASH FOR ANY OF
THEIR SHARES OF TRIBUNE/SWAB-FOX COMMON STOCK MUST COMPLETE AND SIGN THE CASH
ELECTION FORM INCLUDED WITH THE JOINT PROXY STATEMENT AND PROSPECTUS AND RETURN
IT ALONG WITH THE TRIBUNE/SWAB-FOX COMMON STOCK CERTIFICATES TO BE EXCHANGED
FOR CASH (DULY ENDORSED FOR TRANSFER OR ACCOMPANIED BY AN APPROPRIATE GUARANTEE
OF DELIVERY) TO MELLON SECURITIES TRUST COMPANY, AT P.O. BOX 798, MIDTOWN
STATION, NEW YORK, NEW YORK 10018, WHICH MUST BE RECEIVED NO LATER THAN 5:00
P.M., NEW YORK TIME, ON MAY 23, 1995. If you fail to make a valid and timely
election to receive cash, your shares of Tribune/Swab-Fox Common Stock will
automatically and without any action on your part be converted at the effective
time of the Merger into the right to receive
<PAGE>
whole shares of Communications Common Stock. For information concerning the
cash election procedures, see "The Merger Agreement--Cash Election Procedures"
in the Joint Proxy Statement and Prospectus. Tribune/Swab-Fox stockholders who
vote in favor of the Merger may not seek an appraisal of their shares of
Tribune/Swab-Fox Common Stock under Delaware law. Likewise, Tribune/Swab-Fox
stockholders who elect to receive cash for all or a portion of their shares of
Tribune/Swab-Fox Common Stock may not seek an appraisal of such shares under
Delaware law.
Tribune/Swab-Fox stockholders who do not desire to elect to receive cash for
any of their shares of Tribune/Swab-Fox Common Stock should not return their
Tribune/Swab-Fox Common Stock certificates at this time. A Letter of
Transmittal containing instructions regarding the surrender of such
certificates will be mailed to Tribune/Swab-Fox stockholders promptly after the
effective time of the Merger. Tribune/Swab-Fox stockholders not making a cash
election should surrender such certificates only with the Letter of Transmittal
and should not send any certificates with the enclosed Proxy.
After careful consideration, including the consideration of the fairness
opinion of Southwest Securities, Inc. as described in the Joint Proxy Statement
and Prospectus, the Board of Directors of Tribune/Swab-Fox has determined that
the proposed Merger is fair to and in the best interests of Tribune/Swab-Fox
and its stockholders. Accordingly, the Board of Directors has unanimously
approved the Merger Agreement and recommends that all stockholders vote for its
approval.
All stockholders are cordially invited to attend the Special Meeting in
person. The affirmative vote of a majority of the outstanding shares of
Tribune/Swab-Fox Class A Common Stock will be necessary for approval and
adoption of the Merger Agreement. The directors and executive officers of
Tribune/Swab-Fox, along with their affiliates, own approximately 59% of the
outstanding Tribune/Swab-Fox Class A Common Stock and have indicated that they
intend to vote all of their shares in favor of the Merger. Accordingly,
approval of the Merger Agreement by the stockholders of Tribune/Swab-Fox is
assured.
IN ORDER THAT YOUR SHARES MAY BE REPRESENTED AT THE SPECIAL MEETING, YOU ARE
URGED TO PROMPTLY COMPLETE, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY IN THE
ENCLOSED ENVELOPE, WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING. If
you attend the Special Meeting in person you may, if you wish, vote personally
on all matters brought before the Special Meeting even if you have previously
returned your Proxy. In addition, you may revoke your Proxy at any time prior
to its exercise by delivering to the Secretary of Tribune/Swab-Fox a duly
executed Proxy bearing a later date.
Sincerely,
Howard G. Barnett, Jr.
President and Chief Executive
Officer
YOUR VOTE IS IMPORTANT
PLEASE SIGN, DATE AND RETURN YOUR PROXY
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC.
2407 EAST SKELLY DRIVE
TULSA, OKLAHOMA 74105
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 24, 1995
To the Stockholders of Tribune/Swab-Fox Companies, Inc.:
Notice is hereby given that a Special Meeting of Stockholders (the "Special
Meeting") of Tribune/Swab-Fox Companies, Inc. ("Tribune/Swab-Fox") will be held
on May 24, 1995, at 2:00 p.m. local time, in the Orange Room at the Doubletree
Hotel at Warren Place, 6110 South Yale, Tulsa, Oklahoma, for the following
purposes:
1. To consider and vote on a proposal to approve and adopt an Agreement
and Plan of Merger dated January 25, 1995, as amended (the "Merger
Agreement"), between T/SF Communications Corporation ("Communications") and
Tribune/Swab-Fox, pursuant to which, among other things, (a) Tribune/Swab-
Fox will be merged with and into Communications (the "Merger"), with
Communications to be the surviving corporation in the Merger, and (b) each
stockholder of Tribune/Swab-Fox (other than Communications and stockholders
who have perfected their appraisal rights under Delaware law) will receive,
for each share of Tribune/Swab-Fox Class A Common Stock and Tribune/Swab-
Fox Class B Common Stock (collectively, the "Tribune/Swab-Fox Common
Stock") owned as of the effective time of the Merger, a specified fraction
of a share of Communications Common Stock or, at the election of each
Tribune/Swab-Fox stockholder, a specified amount of cash, all as more fully
described in the accompanying Joint Proxy Statement and Prospectus.
Tribune/Swab-Fox stockholders may elect to receive cash for some or all of
their shares of Tribune/Swab-Fox Common Stock in accordance with the terms
and subject to the limitations contained in the Merger Agreement. A copy of
the Merger Agreement is attached as Appendix A to the Joint Proxy Statement
and Prospectus.
2. To transact such other business as may properly come before the
Special Meeting or any adjournment or postponement thereof.
Only holders of record of Tribune/Swab-Fox Common Stock at the close of
business on April 5, 1995, will be entitled to receive notice of the Special
Meeting and only holders of record of Tribune/Swab-Fox Class A Common Stock on
such date will be entitled to vote at the Special Meeting or any adjournment or
postponement thereof. A list of Tribune/Swab-Fox stockholders entitled to vote
at the Special Meeting will be available for examination, for any purpose
germane to the Special Meeting, during ordinary business hours, at the offices
of Tribune/Swab-Fox for ten days prior to the Special Meeting and at the time
and place of the Special Meeting. Tribune/Swab-Fox stockholders who follow the
procedures specified in Section 262 of the General Corporation Law of the State
of Delaware have the right to dissent from the Merger and will be entitled to
have their shares of Tribune/Swab-Fox Common Stock appraised by the Delaware
Court of Chancery and to receive payment of the "fair value" of such shares as
determined by such court.
You are cordially invited to attend the Special Meeting in person, but if you
are unable to do so, please complete, sign, date and promptly return the
enclosed Proxy in the enclosed, self-addressed, stamped envelope. If you attend
the Special Meeting and desire to revoke your Proxy and vote in person you may
do so. In any event, a Proxy may be revoked at any time before it is voted.
By Order of the Board of Directors,
Donna J. Peters
Secretary
Tulsa, Oklahoma
April 24, 1995
IF YOU DESIRE TO RECEIVE CASH FOR SOME OR ALL OF YOUR SHARES OF TRIBUNE/SWAB-
FOX COMMON STOCK, YOU MUST MAKE A CASH ELECTION WHICH MUST BE RECEIVED BY THE
EXCHANGE AGENT (AS DEFINED IN THE JOINT PROXY STATEMENT AND PROSPECTUS) BEFORE
5:00 P.M., NEW YORK TIME, ON MAY 23, 1995, IN ACCORDANCE WITH THE PROCEDURES
DESCRIBED UNDER "THE MERGER AGREEMENT--CASH ELECTION PROCEDURES" IN THE JOINT
PROXY STATEMENT AND PROSPECTUS.
<PAGE>
T/SF COMMUNICATIONS CORPORATION
AND
TRIBUNE/SWAB-FOX COMPANIES, INC.
JOINT PROXY STATEMENT
FOR SPECIAL MEETINGS OF STOCKHOLDERS
TO BE HELD MAY 24, 1995
----------------
T/SF COMMUNICATIONS CORPORATION
PROSPECTUS
COMMON STOCK
----------------
This Joint Proxy Statement and Prospectus (this "Proxy Statement/Prospectus")
is furnished in connection with the solicitation of proxies by the Boards of
Directors of T/SF Communications Corporation, a Delaware corporation
("Communications"), and Tribune/Swab-Fox Companies, Inc., a Delaware
corporation ("Tribune/Swab-Fox"), for use in connection with a Special Meeting
of Stockholders of Communications and a Special Meeting of Stockholders of
Tribune/Swab-Fox, respectively, which are to be jointly held on May 24, 1995,
or any adjournment or postponement thereof. At such meetings, the stockholders
of each of Communications and Tribune/Swab-Fox will consider and vote upon a
proposal to approve and adopt an Agreement and Plan of Merger dated January 25,
1995, as amended, between Communications and Tribune/Swab-Fox, pursuant to
which Tribune/Swab-Fox will be merged with and into Communications (the
"Merger") with Communications to be the surviving corporation in the Merger. As
a result of the Merger, each of the then outstanding shares (other than shares
held by Communications which will be cancelled) of Class A Common Stock, $.10
par value, of Tribune/Swab-Fox and Class B Common Stock, $.10 par value, of
Tribune/Swab-Fox will be converted into the right to receive a specified
fraction of a share of Common Stock, $.10 par value, of Communications (the
"Communications Common Stock") or, at the election of each Tribune/Swab-Fox
stockholder and subject to certain limitations as described herein, a specified
amount of cash (subject to appraisal rights for dissenting Tribune/Swab-Fox
stockholders).
The stockholders of Communications and Tribune/Swab-Fox also will consider
and vote upon such other business as may properly come before the meetings or
any adjournment or postponement thereof.
This Proxy Statement/Prospectus also constitutes a prospectus of
Communications with respect to up to 3,882,790 shares of Communications Common
Stock to be issued pursuant to the Merger.
FOR CERTAIN FACTORS WHICH SHOULD BE CONSIDERED IN EVALUATING THE MERGER, SEE
"RISK FACTORS."
This Proxy Statement/Prospectus and the accompanying forms of Proxy are first
being mailed to the stockholders of Communications and Tribune/Swab-Fox on or
about April 25, 1995.
----------------
THE SECURITIES TO BE ISSUED IN CONNECTION WITH THE MERGER HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this Joint Proxy Statement and Prospectus is April 24, 1995.
<PAGE>
AVAILABLE INFORMATION
Each of Communications and Tribune/Swab-Fox is subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith files reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission").
Such reports, proxy statements and other information are available for
inspection and copying at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington,
D.C. 20549, and at the regional offices of the Commission located at 7 World
Trade Center, 13th Floor, New York, New York 10048, and 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials can also
be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549, at prescribed rates.
The shares of Communications Common Stock are listed on the American Stock
Exchange and, as a result, the periodic reports, proxy statements and other
information filed by Communications with the Commission can be inspected at
the offices of the American Stock Exchange, Inc., 86 Trinity Street, New York,
New York 10006.
Communications has filed a Registration Statement on Form S-4 (together with
any amendments thereto, the "Registration Statement") with the Commission
under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the shares of Communications Common Stock to be issued in
connection with the Merger. This Proxy Statement/Prospectus does not contain
all of the information set forth in the Registration Statement, certain parts
of which are omitted in accordance with the rules and regulations of the
Commission. The Registration Statement and the exhibits filed as a part
thereof are available for inspection and copying as set forth above. Exhibits
may not be available at the regional offices of the Commission.
DOCUMENTS INCORPORATED BY REFERENCE
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES BY REFERENCE DOCUMENTS WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF SUCH DOCUMENTS
(OTHER THAN EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY
INCORPORATED BY REFERENCE) ARE AVAILABLE TO ANY PERSON, INCLUDING ANY
BENEFICIAL OWNER, TO WHOM THIS PROXY STATEMENT/PROSPECTUS IS DELIVERED, ON
WRITTEN OR ORAL REQUEST, WITHOUT CHARGE, FROM, IN THE CASE OF EITHER
COMMUNICATIONS OR TRIBUNE/SWAB-FOX DOCUMENTS, T/SF COMMUNICATIONS CORPORATION,
2407 EAST SKELLY DRIVE, TULSA, OKLAHOMA 74105, ATTENTION: DONNA J. PETERS,
SECRETARY, TELEPHONE: (918) 747-2600. IN ORDER TO ENSURE TIMELY DELIVERY OF
THE DOCUMENTS, ANY SUCH REQUEST SHOULD BE MADE BY MAY 17, 1995.
Communications' Annual Report on Form 10-K for the year ended December 31,
1994, which has been filed by Communications with the Commission pursuant to
the Exchange Act (File No. 1-10263), is incorporated by reference herein.
Tribune/Swab-Fox's Annual Report on Form 10-K for the year ended December
31, 1994, which has been filed by Tribune/Swab-Fox with the Commission
pursuant to the Exchange Act (File No. 1-6430), is incorporated by reference
herein.
Any statement contained in a document incorporated by reference herein shall
be deemed to be modified or superseded for purposes hereof to the extent that
a statement contained herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed to constitute a part
hereof except as so modified or superseded.
----------------
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED. THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE, THE SECURITIES
OFFERED BY THIS PROXY STATEMENT/PROSPECTUS, OR THE SOLICITATION OF A PROXY
FROM A PERSON, IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER,
SOLICITATION OF AN OFFER OR PROXY SOLICITATION. NEITHER THE DELIVERY OF THIS
PROXY STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF THE SECURITIES MADE UNDER
THIS PROXY STATEMENT/PROSPECTUS SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF COMMUNICATIONS OR
TRIBUNE/SWAB-FOX SINCE THE DATE OF THIS PROXY STATEMENT/PROSPECTUS.
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TABLE OF CONTENTS
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AVAILABLE INFORMATION..................................................... 2
DOCUMENTS INCORPORATED BY REFERENCE....................................... 2
SUMMARY................................................................... 5
General................................................................. 5
Tribune/Swab-Fox........................................................ 6
Communications.......................................................... 7
Recent Developments..................................................... 8
Special Meetings........................................................ 8
The Merger.............................................................. 9
Conversion of Securities.............................................. 9
Recommendations of the Boards of Directors............................ 10
Opinions of Financial Advisors........................................ 10
Interests of Certain Persons in the Merger............................ 10
Conditions to the Merger.............................................. 11
Effective Time of the Merger.......................................... 11
Cash Election Procedures.............................................. 11
Exchange of Tribune/Swab-Fox Common Stock for Communications Common
Stock................................................................ 12
Appraisal Rights...................................................... 12
Federal Income Tax Consequences....................................... 12
Accounting Treatment.................................................. 13
Resale Restrictions................................................... 13
Termination........................................................... 13
American Stock Exchange Listing....................................... 14
Risk Factors.......................................................... 14
Selected Financial Data for Tribune/Swab-Fox............................ 14
Selected Financial Data for Communications.............................. 15
Selected Financial Data for Communications Giving Effect to the Merger.. 16
Comparative Per Share Information....................................... 17
Comparative Market Price Information.................................... 17
Dividend Policy......................................................... 18
Tribune/Swab-Fox...................................................... 18
Communications........................................................ 18
RISK FACTORS.............................................................. 19
THE SPECIAL MEETINGS...................................................... 20
Matters to Be Considered at the Special Meetings........................ 20
Date, Place and Time.................................................... 21
Votes Required.......................................................... 21
Voting of Proxies....................................................... 22
Revocability of Proxies................................................. 22
Record Date; Shares Entitled to Vote; Quorum............................ 22
Solicitation of Proxies................................................. 23
THE MERGER................................................................ 23
General................................................................. 23
Background of the Merger................................................ 23
Reasons for the Merger; Recommendations of the Boards of Directors...... 27
Opinions of Financial Advisors.......................................... 29
Accounting Treatment.................................................... 37
Federal Income Tax Consequences......................................... 37
Interests of Certain Persons in the Merger.............................. 40
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Appraisal Rights........................................................ 40
Restrictions on Resales by Affiliates of Tribune/Swab-Fox............... 43
THE MERGER AGREEMENT...................................................... 43
The Merger.............................................................. 43
Cash Election Procedures................................................ 44
Exchange of Tribune/Swab-Fox Common Stock for Communications Common
Stock.................................................................. 45
Representations and Warranties.......................................... 46
Certain Covenants....................................................... 46
Conditions.............................................................. 46
Indemnification......................................................... 47
Termination; Amendments and Waivers..................................... 47
Expenses................................................................ 48
DESCRIPTION OF COMMUNICATIONS CAPITAL STOCK............................... 48
Communications Common Stock............................................. 48
Communications Preferred Stock.......................................... 48
COMPARATIVE RIGHTS OF STOCKHOLDERS........................................ 49
General................................................................. 49
Number of Directors; Removal of Directors; Filling Vacancies............ 49
Stockholder Action by Written Consent; Special Meetings................. 49
Amendments of the Certificate of Incorporation and Bylaws............... 50
"Blank Check" Preferred Stock........................................... 50
Business Combinations................................................... 50
Appraisal Rights........................................................ 51
Limitation of Liability of Directors.................................... 51
Indemnification of Directors and Officers............................... 52
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS............................................................... 52
Tribune/Swab-Fox........................................................ 52
Communications.......................................................... 57
LEGAL MATTERS............................................................. 61
EXPERTS................................................................... 61
STOCKHOLDER PROPOSALS..................................................... 61
OTHER MATTERS............................................................. 62
DEFINITION OF CERTAIN TERMS............................................... 63
INDEX TO PRO FORMA FINANCIAL STATEMENTS AND FINANCIAL STATEMENTS.......... F-1
APPENDIX A--AGREEMENT AND PLAN OF MERGER, AS AMENDED...................... A-1
APPENDIX B--FAIRNESS OPINION OF OPPENHEIMER & CO., INC. .................. B-1
APPENDIX C--FAIRNESS OPINION OF SOUTHWEST SECURITIES, INC. ............... C-1
APPENDIX D--TEXT OF SECTION 262 OF THE GENERAL CORPORATION LAW OF THE
STATE OF DELAWARE CONCERNING APPRAISAL RIGHTS OF DISSENTING STOCKHOLDERS. D-1
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SUMMARY
The following is a summary of certain information contained elsewhere in this
Joint Proxy Statement and Prospectus (this "Proxy Statement/Prospectus"). This
summary does not purport to be complete and is qualified in its entirety by
reference to the more detailed information contained elsewhere in this Proxy
Statement/Prospectus and the Appendices hereto. Stockholders are urged to
review carefully this Proxy Statement/Prospectus, the Merger Agreement, as
amended, attached as Appendix A and the other appendices attached hereto. The
information contained in this Proxy Statement/Prospectus with respect to
Communications and its affiliates has been supplied by Communications, and the
information with respect to Tribune/Swab-Fox and its affiliates has been
supplied by Tribune/Swab-Fox. Terms used herein with their initial letters
capitalized are defined herein, which definitions are summarized under
"Definition of Certain Terms."
GENERAL
This Proxy/Statement Prospectus is being distributed by the Boards of
Directors of Communications and Tribune/Swab-Fox for use in connection with a
Special Meeting of Stockholders of Communications and a Special Meeting of
Stockholders of Tribune/Swab-Fox, respectively, which will be held jointly on
May 24, 1995, or any adjournment or postponement thereof. At such meetings, the
stockholders of each of Communications and Tribune/Swab-Fox will consider and
vote upon a proposal to approve and adopt an Agreement and Plan of Merger dated
January 25, 1995, as amended (the "Merger Agreement"), between Communications
and Tribune/Swab-Fox, pursuant to which Tribune/Swab-Fox will be merged with
and into Communications (the "Merger"), with Communications to be the surviving
corporation in the Merger. As a result of the Merger, each of the then
outstanding shares (other than shares held by Communications which will be
cancelled) of Class A Common Stock, $.10 par value, of Tribune/Swab-Fox (the
"Tribune/Swab-Fox Class A Common Stock") and Class B Common Stock, $.10 par
value, of Tribune/Swab-Fox (the "Tribune/Swab-Fox Class B Common Stock"), will
be converted into the right to receive 0.1255 of a share of Common Stock, $.10
par value, of Communications (the "Communications Common Stock") or, at the
election of each Tribune/Swab-Fox stockholder and subject to certain
limitations described herein, $0.88 in cash (subject to appraisal rights for
dissenting Tribune/Swab-Fox stockholders). Unless the context requires
otherwise, the Tribune/Swab-Fox Class A Common Stock and the Tribune/Swab-Fox
Class B Common Stock are referred to collectively herein as the "Tribune/Swab-
Fox Common Stock."
The aggregate amount of cash to be paid to Tribune/Swab-Fox stockholders
pursuant to the Merger, in the event that the maximum number of shares of
Tribune/Swab-Fox Common Stock (10,000,000 shares) are purchased by
Communications pursuant to cash elections, is $8,800,000. Such cash will be
paid by Communications out of its working capital (approximately $5,300,000 to
$6,000,000) and borrowings of approximately $2,800,000 to $3,500,000 under its
bank revolving credit facilities. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Communications--Liquidity and
Capital Resources."
On April 20, 1995, the closing sale price per share of Communications Common
Stock, as reported by the American Stock Exchange, was $7.88 and the closing
sale price per share of Tribune/Swab-Fox Class A Common Stock, as reported by
The Nasdaq Small-Cap Market, was $0.81. Based on such closing sale price of
Communications Common Stock, the market value of the 0.1255 of a share of
Communications Common Stock issuable for each share of Tribune/Swab-Fox Common
Stock in the Merger was $0.99.
On January 18, 1995, the Board of Directors of Tribune/Swab-Fox (the
"Tribune/Swab-Fox Board") declared a one-time cash dividend of $0.0344 per
share of Tribune/Swab-Fox Common Stock, payable on May 24, 1995, the date of
the Special Meeting of Stockholders of Tribune/Swab-Fox (the "Tribune/Swab-Fox
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Meeting"), subject to approval of the Merger by the stockholders of both
companies, to stockholders of record on April 5, 1995, the record date for the
Tribune/Swab-Fox Meeting (the "Special Dividend"). The aggregate amount of the
Special Dividend is approximately $1,090,000, which will be paid by
Tribune/Swab-Fox out of its working capital.
TRIBUNE/SWAB-FOX
The principal activities of Tribune/Swab-Fox have included managing real
estate holdings and the activities carried on through Communications, which is
a 78% owned subsidiary of Tribune/Swab-Fox. These real estate activities were
concentrated in the Tulsa, Oklahoma, area. The market value of these properties
deteriorated beginning in the mid-1980's because of the declining economy in
Oklahoma relating to the effects of the significant downturn in the oil and gas
industry. Several years ago, the management of Tribune/Swab-Fox decided to
cease all real estate activities other than management of properties then owned
and to use its best efforts to liquidate its remaining real estate assets.
Effective November 30, 1994, Tribune/Swab-Fox's Board approved a plan to
dispose of the remaining real estate, as a result of which Tribune/Swab-Fox's
real estate business has been reclassified as a "discontinued operation" in the
Consolidated Financial Statements of Tribune/Swab-Fox included in this Proxy
Statement/Prospectus. The following is a brief summary of the most significant
transactions completed or contracted subsequent to November 30, 1994:
(i) 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. 1995 Land Company is owned
49.99% by Tribune/Swab-Fox, but the funding for the purchase was provided
through a loan from the owner of the other 50.01% (an unaffiliated
individual), who will also oversee, manage and fund the development and
sale of these properties. The purchase price for these properties was
determined through arms-length negotiations between Tribune/Swab-Fox and
the unaffiliated individual. Recent appraisals of these properties, which
were obtained by a lender (including the property subject to the option
described below), estimated the value of such properties at $6,000,000.
Prior to this transaction, Tribune/Swab-Fox had been actively trying to
sell these properties during 1994 at a price substantially less than this
appraisal without success. Accordingly, Tribune/Swab-Fox determined that
this transaction was the best available alternative for the sale of these
properties. Tribune/Swab-Fox believes that the terms of this transaction
are reasonable and not less favorable to Tribune/Swab-Fox than could be
obtained from another third party. The effect of this transaction is for
Tribune/Swab-Fox to be able to realize on the potential profits of the
ultimate sale/development of these properties through its ownership in 1995
Land Company, after the unaffiliated individual has recovered his cost of
acquisition/development. In the same transaction, Tribune/Swab-Fox also
granted 1995 Land Company an option on another parcel of raw land,
exercisable in April, 1995, at a price of $214,350. The time for exercise
of such option and the option price may be renegotiated.
(ii) On March 14, 1995, Tribune/Swab-Fox entered into an Acquisition
Agreement with Midwest Energy Companies, Inc., a Delaware corporation
("MECI"), a small publicly traded (over-the-counter symbol "MWE") oil and
gas exploration and development company indirectly controlled by Martin A.
Vaughan, a director of Tribune/Swab-Fox. Pursuant to this agreement,
Tribune/Swab-Fox sold to MECI approximately 900 acres of raw land and
certain related contracts and rights, which had a book value at December
31, 1994, of approximately $1,650,000, in exchange for 7,161,234 shares of
MECI common stock (a portion of which are held in escrow pending resolution
of certain post-closing items). The exchange ratio for this transaction was
determined through negotiations between Tribune/Swab-Fox and MECI and was
based on the book value of the real estate transferred by Tribune/Swab-Fox
(and not on any independent appraisals of such properties) and the prices
at which MECI has conducted exchanges (or proposed exchanges) of its stock
for assets of unaffiliated third parties during the last year. (The per
share valuation of MECI stock used in such transactions was $0.26.) A
material portion of the land so sold to MECI was actively marketed for sale
by Tribune/Swab-Fox during 1994. The
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Tribune/Swab-Fox Board and the Communications Board having agreed that, as
a condition to Communications entering into the Merger Agreement,
Tribune/Swab-Fox would use its best efforts to liquidate any real estate
that was not believed to be saleable for cash or cash equivalents within 12
months so that this segment could be considered discontinued for financial
reporting purposes. Given this consideration, the Tribune/Swab-Fox Board
believes that the terms of this transaction are reasonable and not less
favorable to Tribune/Swab-Fox than could be obtained from an unaffiliated
third party. As a result of this transaction, Tribune/Swab-Fox now owns
8,855,653 shares of MECI common stock, or 6.8% of MECI's outstanding
shares.
Pursuant to the Acquisition Agreement with MECI, Tribune/Swab-Fox entered
into a Registration Rights Agreement with MECI which entitles Tribune/Swab-
Fox to certain rights with respect to the registration under the Securities
Act of the MECI common stock received by Tribune/Swab-Fox under the
Acquisition Agreement. The Registration Rights Agreement provides that (a)
if MECI proposes to register any of its securities, other than a
registration relating solely to employee benefits plans or a registration
on any registration form which does not permit secondary sales,
Tribune/Swab-Fox has the right to request MECI to include in such
registration, and in any underwriting involved therein, such MECI common
stock held by Tribune/Swab-Fox, and (b) if, by December 31, 1995, MECI has
not undertaken a voluntary registration, then Tribune/Swab-Fox has the
right to require MECI to register under the Securities Act such shares of
MECI common stock held by Tribune/Swab-Fox. MECI has agreed to pay all
registration expenses incurred in connection with any registration,
qualification or compliance pursuant to any registrations contemplated
under the Registration Rights Agreement with Tribune/Swab-Fox.
(iii) Various parcels of raw land were sold or are under contract for
sale for an aggregate sale price of approximately $975,000. The purchase
prices for these properties were determined through arms-length
negotiations between Tribune/Swab-Fox and unaffiliated third parties and
were not based on any independent appraisals of such properties.
Tribune/Swab-Fox principal executive offices are located at 2407 East Skelly
Drive, Tulsa, Oklahoma 74105, and its telephone number at such offices is (918)
747-2600.
COMMUNICATIONS
Communications, operating through its subsidiaries, is a diversified
communications and information company. Communications publishes various trade
journals and, in connection therewith, owns or participates in several trade
shows. Communications also operates a convention and trade show services
business which provides publishing services consisting primarily of the
publication of various convention and trade show related publications, such as
directories and convention daily newspapers, primarily on a contract basis, and
registration services for exposition managers and other services for corporate
exhibitors. In addition, Communications engages in the business of obtaining,
processing and providing motor vehicle reports, truck driver employment
information and other services primarily to the insurance and trucking
industries. Following is a brief summary of each of Communications'
subsidiaries which make up the business of Communications.
Transportation Information Services, Inc. ("TISI"), under its tradename
"DAC," sells pre-employment screening information, primarily to the trucking
industry, and data and information used for automobile underwriting activities
in the insurance industry, primarily at the insurance agent level. DAC is well
recognized in the trucking industry as a major provider of motor vehicle
reports, various record searches and employment histories from DAC's own
proprietary data base. This information is intended to help trucking companies
to make better employment decisions and to hire qualified, safe drivers.
BMT Communications, Inc. ("BMT"), publishes four trade journals and owns or
manages four related trade shows. The major profit centers are Convenience
Store News, the leading information source for the
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convenience store industry, and International Gaming & Wagering Business which,
together with the trade shows which BMT produces for the gaming industry, has
positioned BMT as a leading source of information, education and customer
contacts for the legalized gaming industry. Communications recently announced
that it is seeking to sell three of the trade journals published by BMT,
including Convenience Store News. See "Summary--Recent Developments" for
additional information regarding this announcement.
Atwood Convention Publishing, Inc. ("Atwood") and Galaxy Registration, Inc.
("Galaxy") provide services to large expositions, trade shows and corporate
exhibitors. Atwood's primary products are daily newspapers, directories and
other special publications produced for large expositions and, through its
Exhibitor Marketing Services, single sponsor publications for corporate
exhibitors. Atwood also publishes EXPO Magazine, a controlled-circulation trade
journal serving the exposition management market. Galaxy's base business is
providing registration and data management services to trade shows and
conventions.
Communications principal executive offices are also located at 2407 East
Skelly Drive, Tulsa, Oklahoma 74105, and its telephone number is (918) 747-
2600.
RECENT DEVELOPMENTS
On December 22, 1994, Communications announced that it had engaged
Oppenheimer & Co., Inc. ("Oppenheimer") to pursue a sale of three of its trade
journals published through BMT in New York City. The journals to be sold, along
with their related activities, are Convenience Store News, United States
Distribution Journal and The Journal of Petroleum Marketing. Total revenues
attributable to these journals and their related activities during 1994 were
approximately $12,125,000. BMT will continue to publish International Gaming &
Wagering Business. The proceeds from the sale of these journals will be used by
Communications for general corporate purposes and to expand and diversify BMT's
position in the commercial gaming industry. The ultimate sale of these journals
is subject to the receipt of an acceptable price and approval of the Board of
Directors of Communications.
Following the filing of the Registration Statement, Communications and
Tribune/Swab-Fox were contacted by an unaffiliated third party who expressed an
interest in acquiring an equity interest in either Communications or
Tribune/Swab-Fox which would result in a 15% ownership position in
Communications after the Merger and indicated a willingness to pay to
Tribune/Swab-Fox a cash price of up to $0.95 per share for up to 3,500,000
shares of Tribune/Swab-Fox Class A Common Stock. The Boards of Communications
and Tribune/Swab-Fox considered the possibility of allowing this third party to
purchase such shares of Tribune/Swab-Fox Common Stock, but rejected such a
transaction because of their belief that such a transaction (which would result
in the issuance of additional shares by Tribune/Swab-Fox) would dilute the
impact of the repurchase of shares pursuant to the Cash Alternative (as defined
below). The Boards believe that it is in the best interests of both companies
and their stockholders that the full benefit of the Cash Alternative be
received which is to reduce the number of shares of Communications Common Stock
outstanding after the Merger and, thus, increase the percentage ownership in
Communications of the remaining stockholders.
SPECIAL MEETINGS
This Proxy Statement/Prospectus relates to a Special Meeting of Stockholders
of Communications (the "Communications Meeting") and the Tribune/Swab-Fox
Meeting, which meetings will be held jointly. At such joint meeting, the
stockholders of each of Communications and Tribune/Swab-Fox will consider and
vote upon proposals to approve and adopt the Merger Agreement, pursuant to
which Tribune/Swab-Fox will be merged with and into Communications.
The Communications Meeting and the Tribune/Swab-Fox Meeting will be held
jointly on May 24, 1995, at 2:00 p.m. local time, in the Orange Room at the
Doubletree Hotel at Warren Place, 6110 South Yale,
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Tulsa, Oklahoma. The record date for stockholders of each of Communications and
Tribune/Swab-Fox entitled to notice of and to vote at the Communications
Meeting and the Tribune/Swab-Fox Meeting, respectively, is as of the close of
business on April 5, 1995.
Voting rights for Communications are vested in the holders of the
Communications Common Stock, with each share of Communications Common Stock
entitled to one vote on each matter coming before the stockholders. As of April
5, 1995, there were 4,864,818 shares of Communications Common Stock
outstanding, held by approximately 29 holders of record.
The favorable vote of the holders of a majority of the outstanding shares of
Communications Common Stock is required for the approval and adoption of the
Merger Agreement. Tribune/Swab-Fox, which owns 3,777,500 (or approximately 78%)
of the outstanding shares of Communications Common Stock, intends to vote all
of its shares of Communications Common Stock in favor of the Merger.
Accordingly, approval of the Merger Agreement by the stockholders of
Communications is assured. As of April 5, 1995, directors and executive
officers of Communications and their affiliates owned 23,800 (or approximately
0.3%) of the outstanding shares of Communications Common Stock (excluding
shares held through Tribune/Swab-Fox).
As of April 5, 1995, there were issued and outstanding 26,845,864 shares of
Tribune/Swab-Fox Class A Common Stock, held by approximately 307 holders of
record, having voting power (excluding 1,142,729 shares held by
Communications), the holders thereof being entitled to one vote per share on
all matters to be voted upon by stockholders. Also, voting rights exist with
respect to the shares of Tribune/Swab-Fox Class B Common Stock under certain
circumstances, but matters anticipated to be voted upon at the Tribune/Swab-Fox
Meeting, including the Merger, do not give rise to such voting rights. As of
April 5, 1995, there were 3,703,704 shares of Tribune/Swab-Fox Class B Common
Stock outstanding, held by one holder of record who is also the beneficial
owner of such shares.
The favorable vote of the holders of a majority of the outstanding shares of
Tribune/Swab-Fox Class A Common Stock is required for the approval and adoption
of the Merger Agreement. As of April 5, 1995, directors and executive officers
of Tribune/Swab-Fox and their affiliates owned 15,810,903 (or approximately
59%) of the outstanding shares of Tribune/Swab-Fox Class A Common Stock. Such
persons have indicated that they intend to vote all of their shares in favor of
the Merger. Accordingly, approval of the Merger Agreement by the stockholders
of Tribune/Swab-Fox is assured.
THE MERGER
Conversion of Securities. Upon consummation of the transactions contemplated
by the Merger Agreement, (i) Tribune/Swab-Fox will be merged with and into
Communications, with Communications to be the surviving corporation, and (ii)
each issued and outstanding share of Tribune/Swab-Fox Common Stock (other than
shares held by Communications which will be cancelled) will be converted into
the right to receive 0.1255 of a share of Communications Common Stock or, at
the election of each Tribune/Swab-Fox stockholder, subject to compliance with
the cash election procedures and the limitations set forth in the Merger
Agreement and described under the caption "The Merger Agreement--Cash Election
Procedures," $0.88 in cash (the "Offer Price"), without interest (the "Cash
Alternative") (subject to appraisal rights for dissenting Tribune/Swab-Fox
stockholders). Fractional shares of Communications Common Stock will not be
issued in connection with the Merger. A Tribune/Swab-Fox stockholder who would
otherwise be entitled to a fractional share will receive in cash an amount
equal to the product obtained by multiplying $0.88 times the number of shares
of Tribune/Swab-Fox Common Stock which would otherwise be converted into a
fractional share of Communications Common Stock. All shares of Tribune/Swab-Fox
Common Stock held as of the record date for the Tribune/Swab-Fox Meeting will
be entitled to receive the Special Dividend regardless of whether or not such
shares are tendered for the Cash Alternative.
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At the effective time of the Merger, each share of Communications Common
Stock then issued and outstanding will continue as one share of Communications
Common Stock, except for outstanding shares of Communications Common Stock
owned by Tribune/Swab-Fox which will be cancelled.
Recommendations of the Boards of Directors. The Boards of Directors of
Communications and Tribune/Swab-Fox believe that the terms of the Merger are
fair to and in the best interests of their respective stockholders, each has,
by unanimous vote, approved the Merger Agreement, and each unanimously
recommends that its stockholders vote FOR approval of the Merger Agreement. For
a discussion of the factors considered by the Boards of Directors in reaching
their respective decisions, see "The Merger--Reasons for the Merger;
Recommendations of the Boards of Directors."
Opinions of Financial Advisors. On January 18, 1995, Oppenheimer rendered its
oral opinion to the Board of Directors of Communications (the "Communications
Board") to the effect that, as of such date, based upon the draft of the Merger
Agreement dated January 11, 1995, and based upon and subject to the matters
presented to the Communications Board, the consideration to be paid to holders
of Tribune/Swab-Fox Common Stock in connection with the Merger was fair, from a
financial point of view, to the stockholders of Communications (other than
Tribune/Swab-Fox and the officers and directors of each of Tribune/Swab-Fox and
Communications). Oppenheimer confirmed such opinion by delivery of its written
opinion dated as of January 26, 1995. When the Merger Agreement was entered
into on January 25, 1995, the original offer price for the Cash Alternative was
$0.80 (the "Original Offer Price"). The Merger Agreement was amended on March
3, 1995, to increase the Offer Price to $0.88. As a result of such increase in
the Offer Price, a subsequent written opinion dated as of April 20, 1995, was
also delivered by Oppenheimer to the Communications Board, which opinion is
substantially identical to the January 26, 1995 opinion. Mark A. Leavitt, a
director of Communications, is a Managing Director of Oppenheimer. For a
description of other relationships between Oppenheimer and Communications, see
"The Merger--Opinions of Financial Advisors."
On January 18, 1995, Southwest Securities, Inc. ("Southwest Securities")
rendered its oral opinion to the Tribune/Swab-Fox Board to the effect that,
based upon various considerations and assumptions and subject to its final
review of the Merger Agreement, the consideration to be received by the
stockholders of Tribune/Swab-Fox in connection with the Merger was, as of that
date, fair to such stockholders from a financial point of view. Southwest
Securities subsequently confirmed such opinion by delivery of its written
opinion dated the date of this Proxy Statement/Prospectus.
Copies of the full texts of the written opinions of Oppenheimer dated as of
April 20, 1995, and Southwest Securities dated as of the date of this Proxy
Statement/Prospectus, which set forth the assumptions made, procedures
followed, matters considered and limits of their respective reviews, are
attached to this Proxy Statement/Prospectus as Appendices B and C,
respectively, and should be read carefully in their entirety. See "The Merger--
Opinions of Financial Advisors."
Interests of Certain Persons in the Merger. In considering the
recommendations of the Communications Board and the Tribune/Swab-Fox Board with
respect to the Merger Agreement and the transactions contemplated thereby,
stockholders should be aware that certain members of the management of
Communications and Tribune/Swab-Fox and the Communications Board and the
Tribune/Swab-Fox Board have certain interests in the Merger that are separate
from the interests of stockholders of Communications and Tribune/Swab-Fox
generally.
Those separate interests are generally as follows: (i) Howard G. Barnett, Jr.
and David Lloyd Jones, directors of Communications, and their family members
and affiliates will receive significant shares of
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Communications Common Stock and/or cash (to the extent they or their family
members or affiliates choose the Cash Alternative) in the Merger; (ii) the
approval by the Tribune/Swab-Fox Board of the agreement with MECI (which is
indirectly controlled by Martin A. Vaughan, who is a director of Tribune/Swab-
Fox) pursuant to which Tribune/Swab-Fox acquired shares of MECI common stock in
exchange for certain real estate assets, was conditioned on Communications
entering into the Merger Agreement; (iii) Robert J. Swab, a director of
Tribune/Swab-Fox, has retired from his officer and employee positions with
Tribune/Swab-Fox pursuant to a Retirement Agreement which entitles him to
certain retirement and non- compete payments (approximately $370,000) over a
seven-year period and to be nominated to serve as a director of Communications
after the Merger; and (iv) Communications has agreed that, after consummation
of the Merger, it will indemnify each of the current and former officers and
directors of Tribune/Swab-Fox to the extent such officers and directors are
currently entitled to indemnity from Tribune/Swab-Fox. See "The Merger--
Interests of Certain Persons in the Merger."
Conditions to the Merger. The obligations of Communications and Tribune/Swab-
Fox to consummate the Merger are subject to the satisfaction of certain
conditions, including, among others, (i) obtaining requisite stockholder
approvals, (ii) the absence of any legal action prohibiting consummation of the
Merger, (iii) the absence of any material adverse change in the financial
condition or business of the other party, and (iv) the receipt of an opinion of
counsel with respect to the tax consequences of the Merger. See "The Merger
Agreement--Conditions."
Effective Time of the Merger. The Merger will become effective upon the
filing of a Certificate of Merger with the Secretary of State of the State of
Delaware (the "Effective Time of the Merger"), which certificate will be filed
as promptly as practicable after the requisite stockholder approvals have been
obtained and all other conditions to the Merger have been satisfied or waived.
Subject to the satisfaction (or waiver) of the other conditions to the
obligations of Communications and Tribune/Swab-Fox to consummate the Merger, it
is currently expected that the Merger will be consummated on May 25, 1995, or
as soon thereafter as such conditions are satisfied.
Cash Election Procedures. A Tribune/Swab-Fox stockholder who desires to elect
to receive the Cash Alternative for some or all of the shares of Tribune/Swab-
Fox Common Stock held by such stockholder must make a written election to
receive cash on the cash election form (the "Cash Election Form") included with
this Proxy Statement/Prospectus. The Merger Agreement provides that cash
elections shall not exceed 10,000,000 shares of Tribune/Swab-Fox Common Stock
less the number of shares of Tribune/Swab-Fox Common Stock held by stockholders
who have perfected their right to appraisal pursuant to Section 262 of the
General Corporation Law of the State of Delaware (the "Cash Conversion
Number"). To be valid, a cash election must be received by Mellon Securities
Trust Company, at P.O. Box 798, Midtown Station, New York, New York 10018 (the
"Exchange Agent"), not later than 5:00 p.m. New York time, on May 23, 1995 (the
"Cash Election Deadline"). A cash election will be valid only if the Cash
Election Form has been properly completed and signed by the record owner of the
Tribune/Swab-Fox Common Stock to be exchanged (in whole or in part) for cash
and is accompanied by the certificate or certificates representing such shares
of Tribune/Swab-Fox Common Stock, duly endorsed for transfer (or accompanied by
an appropriate guarantee of delivery) in accordance with the instructions
contained in the Cash Election Form. If valid cash elections exceed the Cash
Conversion Number, cash elections will be reduced proportionately. A cash
election may be changed by written notice of the change and a completed, signed
and revised Cash Election Form received by the Exchange Agent before the Cash
Election Deadline. A cash election may be revoked by written notice of
revocation received by the Exchange Agent prior to the Cash Election Deadline.
NO TRIBUNE/SWAB-FOX STOCKHOLDER WILL RECEIVE CASH FOR TRIBUNE/SWAB-FOX COMMON
STOCK UNTIL AFTER THE EFFECTIVE TIME OF THE MERGER. NO INTEREST WILL BE PAID OR
ACCRUED WITH RESPECT TO ANY CASH TO BE PAID TO A TRIBUNE/SWAB-FOX STOCKHOLDER
PURSUANT TO THE MERGER. See "The Merger Agreement--Cash Election Procedures."
11
<PAGE>
Exchange of Tribune/Swab-Fox Common Stock for Communications Common
Stock. Any Tribune/Swab-Fox stockholder who desires to receive Communications
Common Stock for all shares of Tribune/Swab-Fox Common Stock held by such
stockholder should not submit a Cash Election Form. Any Tribune/Swab-Fox Common
Stock as to which a valid and timely cash election has not been made will
automatically and without any action on the part of the Tribune/Swab-Fox
stockholder be converted only into the right to receive whole shares of
Communications Common Stock and cash in lieu of fractional shares otherwise
issuable. NO CERTIFICATES FOR COMMUNICATIONS COMMON STOCK WILL BE ISSUED IN
EXCHANGE FOR TRIBUNE/SWAB-FOX COMMON STOCK UNTIL AFTER THE EFFECTIVE TIME OF
THE MERGER. PROMPTLY AFTER THE EFFECTIVE TIME OF THE MERGER, TRIBUNE/SWAB-FOX
STOCKHOLDERS WILL RECEIVE INSTRUCTIONS CONCERNING THE EXCHANGE OF THEIR
TRIBUNE/SWAB-FOX COMMON STOCK FOR COMMUNICATIONS COMMON STOCK. TRIBUNE/SWAB-FOX
STOCKHOLDERS SHOULD NOT SEND THEIR TRIBUNE/SWAB-FOX COMMON STOCK CERTIFICATES
WITH THEIR PROXY. See "The Merger Agreement--Exchange of Tribune/Swab-Fox
Common Stock for Communications Common Stock."
Appraisal Rights. Holders of Communications Common Stock are not entitled to
appraisal rights in connection with the Merger. Holders of Tribune/Swab-Fox
Common Stock have the right to seek statutory appraisal of the fair value of
their shares of Tribune/Swab-Fox Common Stock in the Delaware Court of Chancery
and payment of the value so determined in cash in lieu of accepting the shares
of Communications Common Stock issuable to them in connection with the Merger.
Stockholders of record of Tribune/Swab-Fox who desire to exercise their
appraisal rights must: (i) hold shares of Tribune/Swab-Fox Common Stock on the
date of making a demand for appraisal; (ii) continuously hold shares of
Tribune/Swab-Fox Common Stock through the Effective Time of the Merger; (iii)
deliver, prior to the Tribune/Swab-Fox Meeting, a written demand for appraisal
to Tribune/Swab-Fox at 2407 East Skelly Drive, Tulsa, Oklahoma 74105,
Attention: Donna J. Peters, Secretary; and (iv) otherwise satisfy all of the
requirements of Section 262 of the General Corporation Law of the State of
Delaware. In order to preserve his or her appraisal rights, a Tribune/Swab-Fox
stockholder must not vote in favor of the Merger. Voting against the Merger,
abstaining from voting or failing to vote, however, will not constitute a
written demand for appraisal. Tribune/Swab-Fox stockholders who elect to
receive cash for all or a portion of their shares of Tribune/Swab-Fox Common
Stock pursuant to the Cash Alternative may not seek an appraisal of such
shares. See "The Merger--Appraisal Rights" for a detailed description of
appraisal rights and the procedures required to be followed to enforce such
rights and Appendix D to this Proxy Statement/Prospectus where Section 262 is
reprinted in its entirety.
Federal Income Tax Consequences. In the opinion of Conner & Winters, A
Professional Corporation, the Merger will qualify as a reorganization under
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code").
The Merger should qualify for such treatment if, among other things, the
Communications Common Stock received by the Tribune/Swab-Fox stockholders
represents more than 50% of the total consideration received in the Merger. For
this purpose, redemptions of capital stock of Tribune/Swab-Fox which occur
before the date of the Merger, but after Merger discussions began
(approximately September 1, 1992) will be considered as capital stock of
Tribune/Swab-Fox outstanding for which cash elections were made. The Merger
Agreement provides that cash elections may not exceed the Cash Conversion
Number. If valid cash elections exceed the Cash Conversion Number, any cash
elections made will be reduced proportionately. Accordingly, in excess of 50%
of the total consideration received by Tribune/Swab-Fox stockholders pursuant
to the Merger will be Communications Common Stock. See "The Merger--Federal
Income Tax Consequences."
Assuming the Merger qualifies for reorganization treatment, a Tribune/Swab-
Fox stockholder who receives only Communications Common Stock in exchange for
Tribune/Swab-Fox Common Stock will generally not be subject to federal income
taxation with respect thereto. Each Tribune/Swab-Fox stockholder who receives
only cash pursuant to the Merger will generally recognize capital gain or loss
for federal income tax purposes measured by the difference between such
stockholder's tax basis in the Tribune/Swab-Fox Common Stock exchanged and the
amount of cash received therefor. A Tribune/Swab-Fox stockholder who
12
<PAGE>
elects to and does receive cash for part, but not all, of such stockholder's
shares of Tribune/Swab-Fox Common Stock will be treated as though he or she had
received Communications Common Stock for all of his or her shares of
Tribune/Swab-Fox Common Stock in the Merger and then surrendered a part of the
Communications Common Stock received for the cash payment. Such Tribune/Swab-
Fox stockholder may be treated as though the exchange of stock for cash was in
payment for such stock (and receive capital gain or loss treatment), but might,
depending on such stockholder's particular circumstances, be treated as though
such stockholder received a cash distribution from Communications which may be
taxable as ORDINARY INCOME in the year in which the Merger is consummated.
Under certain circumstances a Tribune/Swab-Fox stockholder who receives only
cash pursuant to the Merger could be treated for federal income tax purposes as
constructively owning Tribune/Swab-Fox Common Stock which is exchanged for
Communications Common Stock. In such case, such Tribune/Swab-Fox stockholder
could be treated as though such stockholder received a cash distribution from
Communications which may be taxable as ORDINARY INCOME (i.e., as if it were a
dividend) in the year in which the Merger is consummated. All Tribune/Swab-Fox
stockholders should read carefully the discussion under "The Merger--Federal
Income Tax Consequences." The federal income tax consequences described herein
are for general information only. Tribune/Swab-Fox stockholders should consult
their own tax advisors as to the particular consequences of the Merger to them,
including the application of federal, state, local and foreign income and other
tax laws. See "The Merger--Federal Income Tax Consequences" and "The Merger
Agreement--Conditions."
Accounting Treatment. The Merger will be accounted for as a downstream
merger. Accordingly, the financial history of Communications (the surviving
entity in the Merger) will be that of Tribune/Swab-Fox. It is anticipated that
the Merger will be treated as a purchase of assets for accounting and financial
reporting purposes. See "The Merger--Accounting Treatment." Upon consummation
of the Merger and before taking the Cash Alternative into consideration, the
former stockholders of Tribune/Swab-Fox will own approximately 79% of the
issued and outstanding shares of Communications Common Stock (or approximately
71% in the event that the maximum number of shares (10,000,000) of
Tribune/Swab-Fox are purchased for cash pursuant to the Cash Alternative).
Resale Restrictions. All shares of Communications Common Stock received by
Tribune/Swab-Fox stockholders in the Merger will be freely transferable, except
that shares of Communications Common Stock received by persons who are deemed
to be "affiliates" (as such term is defined under the Securities Act) of
Tribune/Swab-Fox at the time of the Tribune/Swab-Fox Meeting may be resold by
such affiliates only in certain permitted circumstances. See "The Merger--
Restrictions on Resales by Affiliates of Tribune/Swab-Fox."
Termination. The Merger Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time of the Merger
(notwithstanding any approval of the Merger Agreement by the stockholders of
Communications and/or Tribune/Swab-Fox): (i) by mutual written consent of
Communications and Tribune/Swab-Fox; (ii) by either Communications or
Tribune/Swab-Fox, if the Merger has not been consummated by June 30, 1995;
(iii) by either Communications or Tribune/Swab-Fox, if any judgment,
injunction, order or decree enjoining Communications or Tribune/Swab-Fox from
consummating the Merger is entered and such judgment, injunction, order or
decree has become final and nonappealable; (iv) by either Communications or
Tribune/Swab-Fox if the approval of the stockholders of either Communications
or Tribune/Swab-Fox contemplated by the Merger Agreement shall not have been
obtained by reason of the failure to obtain the required vote at the
Communications Meeting or the Tribune/Swab-Fox Meeting or at any adjournments
thereof; and (v) by either Communications or Tribune/Swab-Fox upon a breach by
the other party of any representation, warranty, covenant or agreement of such
party, or if any representation or warranty of the other party shall become
untrue, in either case such that certain conditions to the Merger would be
incapable of being satisfied by June 30, 1995 (or such later date as the
parties may agree).
13
<PAGE>
American Stock Exchange Listing. The Communications Common Stock is listed on
the American Stock Exchange (the "AMEX"). It is a condition to Tribune/Swab-
Fox's obligation to consummate the Merger that the Communications Common Stock
to be issued to Tribune/Swab-Fox stockholders in connection with the Merger
shall have been approved for listing on the AMEX, subject only to official
notice of issuance.
Risk Factors. See "Risk Factors" with respect to certain factors which should
be considered in evaluating the Merger.
SELECTED FINANCIAL DATA FOR TRIBUNE/SWAB-FOX
The following table sets forth certain selected historical and pro forma
financial data for Tribune/Swab-Fox. It should be read in conjunction with the
historical and pro forma financial statements of Tribune/Swab-Fox included in
this Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
HISTORICAL(A) PRO FORMA(B)
------------------------------------------- ------------
YEAR
ENDED
DECEMBER 31,
YEAR ENDED DECEMBER 31, 1994
------------------------------------------- ------------
1994 1993 1992 1991 1990
------- -------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA: Continu-
ing operations (c)--
Revenues............... $56,919 $ 68,175 $95,233 $94,443 $93,436 $45,027
Operating costs....... 46,931 74,243 85,954 87,958 88,417 36,962
Depreciation and amor-
tization............. 3,118 3,779 7,378 4,891 5,313 2,372
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) 5,693
Interest............... 736 1,921 2,692 3,221 2,972 736
Unusual gain........... -- -- 24,412 -- -- --
Income (loss) from con-
tinuing operations.... 2,564 (5,713) 9,142 (1,033) (3,227) 1,973
Net income (loss)...... (252) (11,073) 8,352 (1,569) (3,385)
Earnings (loss) per
share--primary:
Continuing operations. .08 (.19) .27 (.03) (.10) .07
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 29,742
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>
- --------
(a) Tribune/Swab-Fox was a party to several events/transactions (most of which
were through its interest in Communications) which affect the comparability
of the historical information presented above. On April 30, 1994,
Communications sold the shopper-newspaper and other assets of Shopper's
Guide, Inc. (the "New Jersey Shopper"). Effective March 1, 1994,
Communications acquired the stock of Galaxy. During the third quarter of
1993, the Communications Board made the decision to offer for sale all of
its shopper-newspaper operations. On November 1, 1993, Communications sold
the shopper-newspaper
14
<PAGE>
and other operating assets of Marks-Roiland Communications, Inc. (the "New
York Shopper"). On September 30, 1992, Communications ceased publishing The
Tulsa Tribune as a result of the termination of a joint operating agreement.
In August 1990, Communications acquired all of the outstanding stock of
Atwood. The above described actions by Communications affected the
Tribune/Swab-Fox financial statements because Communications' activities and
assets are consolidated with Tribune/Swab-Fox. See the Tribune/Swab-Fox
Notes to Consolidated Financial Statements included in this Proxy
Statement/Prospectus for additional information on these
transactions/events.
(b) The pro forma operating data gives effect to: (i) the decision to sell
certain BMT assets and (ii) the April 30, 1994, sale of the New Jersey
Shopper assets, as if all such transactions had occurred on January 1,
1994. See "Index to Pro Forma Financial Statements and Financial
Statements."
(c) Restated to reflect real estate as a discontinued operation as of November
30, 1994.
SELECTED FINANCIAL DATA FOR COMMUNICATIONS
The following table sets forth certain selected historical and pro forma
financial data for Communications. It should be read in conjunction with the
historical and pro forma financial statements of Communications included in
this Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
HISTORICAL(A) PRO FORMA(B)
----------------------------------------- ------------
YEAR
YEAR ENDED DECEMBER 31, ENDED
----------------------------------------- DECEMBER 31,
1994 1993 1992 1991 1990 1994
------- ------- ------- ------- ------- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues............... $56,289 $67,977 $94,831 $93,583 $92,815 $44,397
Operating costs....... 46,150 73,207 84,932 86,961 86,905 36,181
Depreciation and amor-
tization............. 3,141 3,794 7,387 4,899 5,266 2,395
Restructuring costs... -- -- -- -- 2,441 --
Operating income (loss)
before interest,
unusual gain, and
income taxes.......... 6,998 (8,995) 2,585 1,789 (1,770) 5,821
Interest............... 559 1,620 2,388 2,886 2,643 559
Unusual gain........... -- -- 24,412 -- -- --
Income (loss) before
extraordinary loss.... 3,850 (6,518) 14,040 (1,319) (3,869) 3,049
Net income (loss)...... 3,850 (7,078) 14,040 (1,319) (3,869) 3,049
Earnings (loss) per
share of common stock:
Before extraordinary
loss................. .75 (1.23) 2.66 (.25) (.67) .59
Extraordinary loss.... -- (.11) -- -- --
Weighted average number
of common and common
equivalent shares out-
standing.............. 5,135 5,274 5,274 5,274 5,790 5,135
BALANCE SHEET DATA (AT
PERIOD END):
Total assets........... $49,137 $47,061 $69,818 $57,870 $62,111
Total liabilities other
than long-term debt... 15,496 14,863 21,314 18,598 18,443
Long-term debt, net of
current installments.. 3,674 4,005 13,233 18,041 21,118
Stockholders' equity... 29,967 28,193 35,271 21,231 22,550
</TABLE>
- -------
(a) Communications was a party to several events/transactions which affect the
comparability of the historical information presented above. On April 30,
1994, Communications sold the assets of the New Jersey Shopper. Effective
March 1, 1994, Communications acquired the stock of Galaxy. During the
third quarter of 1993, the Communications Board made the decision to offer
for sale its shopper-newspaper operations. On November 1, 1993,
Communications sold the operating assets of the New
15
<PAGE>
York Shopper. On September 30, 1992, Communications ceased publishing The
Tulsa Tribune as a result of the termination of a joint operating agreement.
In August 1990, Communications acquired all of the outstanding stock of
Atwood. See the Communications Notes to Consolidated Financial Statements
included in this Proxy Statement/Prospectus for additional information on
these transactions/events.
(b) The pro forma operating data gives effect to: (i) the decision to sell
certain BMT assets and (ii) the April 30, 1994, sale of the New Jersey
Shopper assets, as if all such transactions had occurred on January 1,
1994. See "Index to Pro Forma Financial Statements and Financial
Statements."
SELECTED FINANCIAL DATA FOR COMMUNICATIONS GIVING EFFECT TO THE MERGER
The following table sets forth certain selected pro forma financial data for
Communications giving effect to the consummation of the Merger. The Merger will
be accounted for as a downstream merger. Accordingly, the financial history of
Communications will be that of Tribune/Swab-Fox. This table should be read in
conjunction with the Unaudited Pro Forma Consolidated Financial Statements
included in this Proxy Statement/Prospectus, which, among other things, include
the assumptions underlying this information. Among other assumptions, this pro
forma information assumes that the maximum (10,000,000 shares) of Tribune/Swab-
Fox Common Stock is acquired in the Cash Alternative. See "Index to Pro Forma
Financial Statements and Financial Statements."
<TABLE>
<CAPTION>
PRO FORMA
-----------------
YEAR ENDED
DECEMBER 31, 1994
-----------------
(IN THOUSANDS)
<S> <C>
OPERATING DATA:
Revenues................................................. $44,773
Operating costs......................................... 36,962
Depreciation and amortization........................... 2,435
Operating income before interest and income taxes........ 5,376
Interest................................................. 1,310
Income from continuing operations........................ 3,878
Earnings from continuing operations per share of Common
Stock................................................... 1.06
Weighted average number of common and common equivalent
shares outstanding...................................... 3,666
BALANCE SHEET DATA (AT PERIOD END):
Total assets............................................. $47,812
Total liabilities other than long-term debt.............. 22,205
Long-term debt, net of current installments.............. 4,905
Stockholders' equity..................................... 20,702
</TABLE>
16
<PAGE>
COMPARATIVE PER SHARE INFORMATION
The following table sets forth certain comparative per share information for
Communications and Tribune/Swab-Fox. The "Prior to Merger" information for both
Communications and Tribune/Swab-Fox is historical and pro forma information,
with the pro forma Communications information giving effect to the matters
described in note (b) to the table on page 15 and the pro forma Tribune/Swab-
Fox information giving effect to the matters described in note (b) to the table
on page 14. The "Assuming Merger" information is pro forma information for
Communications giving effect to the Merger presented on a per share basis ("Per
Share") and on the basis of the fraction of a share of Communications Common
Stock into which each share of Tribune/Swab-Fox Common Stock will be converted,
using the exchange ratio of 0.1255 of a share of Communications Common Stock
for each share of Tribune/Swab-Fox Common Stock (the "Exchange Ratio").
<TABLE>
<CAPTION>
PRIOR TO MERGER ASSUMING MERGER*
----------------------------------------- --------------------
TRIBUNE/
COMMUNICATIONS SWAB-FOX
-------------------- -------------------- PER EQUIVALENT
PER TRIBUNE/
HISTORICAL PRO FORMA HISTORICAL PRO FORMA SHARE SWAB-FOX SHARE
---------- --------- ---------- --------- ----- --------------
<S> <C> <C> <C> <C> <C> <C>
Book value:
As of December 31,
1994.................. $6.16 N/A $0.77 N/A $5.65 $0.71
Income (loss) from con-
tinuing operations:
Year ended December 31,
1994.................. 0.75 0.59 0.08 0.07 1.06 0.13
Cash dividends:
Year ended December 31,
1994.................. -- -- -- -- -- --
</TABLE>
- --------
* Assumes that 10,000,000 shares (the maximum number) of Tribune/Swab-Fox
Common Stock are purchased for cash at $0.88 per share pursuant to the Cash
Alternative. If only 5,000,000 shares of Tribune/Swab-Fox Common Stock were
purchased for cash pursuant to the Cash Alternative, then (i) the Per Share
income from continuing operations for the year ended December 31, 1994, would
be $0.99 and the Per Equivalent Tribune/Swab-Fox Share would be $0.12, and
(ii) the book value Per Share as of December 31, 1994, would be $5.85 and the
Per Equivalent Tribune/Swab-Fox Share would be $0.73.
COMPARATIVE MARKET PRICE INFORMATION
The following table shows, for each of September 28, 1994 (the last trading
day prior to the announcement of the proposed Merger), and April 20, 1995 (the
latest practicable date prior to the date of this Proxy Statement/Prospectus),
(a) the last reported sales price of the Communications Common Stock, as
reported by the AMEX, (b) the average of the closing bid and asked price of the
Tribune/Swab-Fox Class A Common Stock, as reported by The Nasdaq Small-Cap
Market ("NASDAQ/SCM"), and (c) the equivalent share market values for the
Tribune/Swab-Fox Class A Common Stock assuming conversion of the Tribune/Swab-
Fox Common Stock into shares of Communications Common Stock at the Exchange
Ratio pursuant to the Merger (see note (a) to the table below):
<TABLE>
<CAPTION>
TRIBUNE/SWAB-FOX
CLASS A COMMON STOCK
------------------------------
COMMUNICATIONS
COMMON STOCK HISTORICAL EQUIVALENT SHARE(A)
-------------- ---------- -------------------
<S> <C> <C> <C>
September 28, 1994................ $5.50 $0.719 $0.69
April 20, 1995.................... $7.88 $0.906 $0.99
</TABLE>
- --------
(a) Calculated by multiplying the market price per share of the Communications
Common Stock on the indicated day by the Exchange Ratio of 0.1255, which
represents the fraction of a share of Communications Common Stock that
would be issuable in the Merger in exchange for each share of Tribune/Swab-
Fox Common Stock.
The Communications Common Stock has been primarily traded on the AMEX (symbol
"TCM") since June 8, 1989 (the first trading day for the Communications Common
Stock). The Tribune/Swab-Fox Class
17
<PAGE>
A Common Stock has been primarily traded on the NASDAQ/SCM (symbol "TSFC")
since June 22, 1985 (the first trading day for the Tribune/Swab-Fox Class A
Common Stock). The table below sets forth, for the calendar quarters indicated,
the high and low sales prices per share reported on the AMEX or NASDAQ/SCM for
the Communications Common Stock and the Tribune/Swab-Fox Class A Common Stock
as appropriate. The information with respect to NASDAQ/SCM quotations was
obtained from the National Association of Securities Dealers, Inc. and reflects
interdealer prices, without retail markup, markdown or commissions and may not
represent actual transactions.
<TABLE>
<CAPTION>
TRIBUNE/
SWAB-FOX
COMMUNICATIONS CLASS A
COMMON STOCK COMMON STOCK
--------------- ---------------
HIGH LOW HIGH LOW
------- ------- ------- -------
<S> <C> <C> <C> <C>
1993:
First Quarter................................. $ 6 1/4 $ 4 3/4 $ 5/8 $ 7/16
Second Quarter................................ 5 5/8 4 9/16 1/4
Third Quarter................................. 6 1/4 4 3/4 1/4
Fourth Quarter................................ 5 1/2 4 1/2 5/16
1994:
First Quarter................................. 5 4 1/8 9/16 5/16
Second Quarter................................ 5 4 3/8 9/16 15/32
Third Quarter................................. 6 4 1/2 13/16 5/8
Fourth Quarter................................ 6 1/4 5 3/8 3/4 11/16
1995:
First Quarter................................. 8 5 3/4 1 11/16
Second Quarter (through April 20, 1995)....... 8 1/2 7 1/4 1 13/16
</TABLE>
Because the Exchange Ratio is fixed and because the market price of
Communications Common Stock is subject to fluctuation, the market value of the
shares of Communications Common Stock that holders of Tribune/Swab-Fox Common
Stock will receive in the Merger may increase or decrease prior to and
following the Merger. STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET
QUOTATIONS FOR THE COMMUNICATIONS COMMON STOCK AND THE TRIBUNE/SWAB-FOX CLASS A
COMMON STOCK.
DIVIDEND POLICY
Tribune/Swab-Fox. Since January 1, 1993, Tribune/Swab-Fox has not paid any
cash or other dividends on the Tribune/Swab-Fox Common Stock. On January 18,
1995, the Tribune/Swab-Fox Board declared the Special Dividend, the payment of
which is subject to approval of the Merger by the stockholders of Tribune/Swab-
Fox and Communications. See "Summary--General." The Special Dividend was
declared to accommodate negotiated valuation issues (i.e., what portion of the
net value of Tribune/Swab-Fox's assets, other than its primary asset of
3,777,500 shares of Communications Common Stock, would be acquired in the
Merger by Communications for Communications Common Stock and what portion of
such net value would be paid to Tribune/Swab-Fox stockholders via a one-time
cash dividend) between Communications and Tribune/Swab-Fox in the process of
determining the Exchange Ratio. For a discussion of these negotiated valuation
issues, see "The Merger--Background of the Merger."
Communications. Since inception, Communications has not paid any cash or
other dividends on the Communications Common Stock. Communications, however,
will reevaluate from time to time its dividend payment policy based on its
judgment as to the best interests of Communications and its stockholders. The
determination of the amount of future cash dividends, if any, to be declared
and paid, however, will depend upon, among other things, Communications'
financial condition, funds received from operations, the level of its capital
expenditures and its future business prospects. Communications' current policy
of not paying dividends is based on belief of the Communications Board that, at
this time, reinvestment of Communications' earnings into its businesses to
foster future growth is in the best interest of Communications' stockholders.
18
<PAGE>
RISK FACTORS
The following factors should be considered carefully by the stockholders of
Communications and Tribune/Swab-Fox in connection with voting upon the Merger.
INTERESTS OF CERTAIN PERSONS IN THE MERGER.
Certain members of the Communications Board and the Tribune/Swab-Fox Board
(which have recommended that Communications and Tribune/Swab-Fox stockholders,
respectively, vote in favor of the Merger) and certain members of management of
Communications and Tribune/Swab-Fox have interests in the Merger that are
separate from the interests of the Communications and Tribune/Swab-Fox
stockholders generally. Those separate interests are discussed under "The
Merger--Interests of Certain Persons in the Merger."
CONTROL OF COMMUNICATIONS BY FORMER OFFICERS AND DIRECTORS OF TRIBUNE/SWAB-FOX.
Upon consummation of the Merger and before taking the Cash Alternative into
consideration, the former officers and directors of Tribune/Swab-Fox and their
affiliates and immediate family members will own approximately 55% of the
issued and outstanding shares of Communications Common Stock. Although there
are currently no agreements among such stockholders, and no such agreement is
expected to exist following the Merger, if such stockholders were to act in
concert, they would be able to elect all of Communications' directors, increase
Communications' authorized capital, dissolve, merge or sell the assets of
Communications and generally direct the affairs of Communications. In assessing
the impact of this, stockholders should bear in mind that such persons control
approximately 70% of Tribune/Swab-Fox and, through Tribune/Swab-Fox's ownership
of 78% of Communications, already indirectly control Communications. The
percentage of the then outstanding shares of Communications Common Stock owned
by this group after the Merger will be reduced or increased as a result of the
Cash Alternative. See "The Special Meetings--Votes Required."
VALUATION OF CASH ALTERNATIVE.
An unaffiliated third party has expressed an interest in acquiring an equity
interest in either Communications or Tribune/Swab-Fox which would result in a
15% ownership position in Communications after the Merger and has indicated a
willingness to pay to Tribune/Swab-Fox a cash price of up to $0.95 per share
(which is higher than the Offer Price of $0.88 per share for the Cash
Alternative) for up to 3,500,000 shares of Tribune/Swab-Fox Common Stock.
Although the Boards of Communications and Tribune/Swab-Fox have decided not to
pursue such a transaction, this expression of interest may be an indication
that potential purchasers may exist for the Communications Common Stock after
the Merger at prices higher than the relative value of Communications Common
Stock taking the Offer Price and Exchange Ratio into consideration. However,
there can be no assurance that, after the Merger, such party or any other
purchaser will be willing to pay a price for shares of Communications Common
Stock which is greater than $7.01 per share, the equivalent of the Offer Price.
See "The Merger--Background of the Merger."
DOWNSTREAM MERGER.
While the Merger is structured for legal purposes as a merger of
Tribune/Swab-Fox with and into Communications, the Merger will be accounted for
as a downstream merger. Thus, for accounting purposes, Tribune/Swab-Fox is the
acquiring entity even though, from a legal or structural standpoint,
Communications is the acquiring and surviving entity. Accordingly, following
the Merger, the historical financial statements of Communications, as the
surviving entity, will be those historical financial statements of
Tribune/Swab-Fox.
FACTORS AFFECTING MARKET PRICE OF COMMUNICATIONS COMMON STOCK.
Since the Exchange Ratio is fixed and the market price of Communications
Common Stock is subject to fluctuation, the market value of the shares of
Communications Common Stock that holders of Tribune/Swab-Fox Common Stock will
receive in the Merger may increase or decrease prior to and following the
Merger. There can be no assurance that, at or after the Effective Time of the
Merger, shares of Communications
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Common Stock will trade at the prices at which such shares have traded in the
past. The prices at which Communications Common Stock trades after the Merger
may be influenced by many factors, including, among others, the liquidity of
the market for Communications Common Stock, investor perceptions of
Communications and the industries in which it operates, the operating results
of Communications, Communications' dividend policy, and general economic and
market conditions. Similar factors affect the prices at which the Tribune/Swab-
Fox Class A Common Stock currently trades.
APPRAISAL RIGHTS
No statutory appraisal rights will be available for Communications
stockholders in connection with the Merger. However, such statutory appraisal
rights will be available for Tribune/Swab-Fox stockholders. See "The Merger--
Appraisal Rights."
LIMITED TRADING IN COMMUNICATIONS COMMON STOCK
Although the Communications Common Stock is listed for trading on the AMEX,
it is thinly traded. During the first quarter of 1995, the average weekly
trading volume for Communications Common Stock on the AMEX was approximately
18,500 shares. There can be no assurance that a more active public market for
Communications Common Stock will develop or be sustained following the Merger.
It is a condition to Tribune/Swab-Fox's obligation to consummate the Merger
that the Communications Common Stock to be issued to Tribune/Swab-Fox
stockholders in connection with the Merger shall have been approved for listing
on the AMEX, subject only to official notice of issuance.
DEPENDENCE ON KEY PERSONNEL
Communications operates through four separate subsidiaries, each of which is
dependent on one or two key managers and executive officers, the loss of any
one of which could adversely affect the operations of the affected subsidiary.
In addition, Communications itself is dependent upon the continued services and
management experience of Howard G. Barnett, Jr., Chairman, President and Chief
Executive Officer of Communications, and other executive officers. If
Communications were to lose the services of Mr. Barnett or any of such other
executive officers, Communications' operating results could be adversely
affected. Although Communications maintains key-man life insurance on certain
executive officers, including Mr. Barnett, there are no assurances that any
recovery by Communications under such insurance policies would adequately
compensate Communications for the loss of any covered officer. In addition,
Communications' growth and its ability to recover from the loss of any key
employee depend on its ability to attract and retain skilled employees and on
the ability of its officers and key employees to manage growth successfully.
ACQUISITION STRATEGY
Communications intends to continue to pursue an acquisition strategy. There
can be no assurances, however, that suitable acquisition candidates can be
found, that acquisitions can be consummated on favorable terms or that
acquisitions, if completed, will be successful. In pursuing its acquisition
strategy, Communications anticipates that it will incur additional debt.
Communications intends to incur such additional debt either as fixed rate long-
term debt or as short-term lines of credit. There is no assurance, however,
that Communications will be able to obtain such credit or that such credit will
be obtainable on satisfactory terms. Communications may also use Communications
Common Stock or other securities of Communications to finance its acquisitions.
The utilization of equity securities of Communications may have the effect of
diluting or reducing the market price for the Communications Common Stock.
THE SPECIAL MEETINGS
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETINGS
At the Communications Meeting and the Tribune/Swab-Fox Meeting, holders of
Communications Common Stock and Tribune/Swab-Fox Class A Common Stock,
respectively, will consider and vote upon a
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proposal to approve and adopt the Merger Agreement and the transactions
contemplated thereby, the complete text of which is as follows:
To approve and adopt the Agreement and Plan of Merger, dated January 25,
1995, as amended, by and between T/SF Communications Corporation
("Communications") and Tribune/Swab-Fox Companies, Inc. ("Tribune/Swab-
Fox") and to approve the merger of Tribune/Swab-Fox with and into
Communications pursuant thereto.
Communications and Tribune/Swab-Fox stockholders will also consider and vote
upon such other matters as may properly be brought before their respective
meetings or any adjournments or postponements thereof.
EACH OF THE COMMUNICATIONS BOARD AND THE TRIBUNE/SWAB-FOX BOARD UNANIMOUSLY
APPROVED THE MERGER AGREEMENT AND RECOMMENDS THAT ITS STOCKHOLDERS VOTE FOR THE
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE MERGER. See "The Merger--
Reasons for the Merger; Recommendations of the Boards of Directors."
DATE, PLACE AND TIME
The Communications Meeting and the Tribune/Swab-Fox Meeting will be held
jointly in the Orange Room at the Doubletree Hotel at Warren Place, 6110 South
Yale, Tulsa, Oklahoma, at 2:00 p.m. local time, on May 24, 1995, or at any
adjournment or postponement thereof, for the purposes set forth herein and in
the accompanying Notices of Special Meetings of Stockholders being delivered to
Communications and Tribune/Swab-Fox stockholders.
VOTES REQUIRED
The favorable vote of the holders of a majority of the outstanding shares of
Communications Common Stock entitled to vote at the Communications Meeting, in
person or by proxy, is required for the approval and adoption of the Merger
Agreement. As of April 5, 1995, directors and executive officers of
Communications and their affiliates owned 23,800 (or approximately 0.3%) of the
outstanding shares of Communications Common Stock (excluding shares held
through Tribune/Swab-Fox). The directors and executive officers of
Communications have indicated that they intend to vote their shares of
Communications Common Stock in favor of approval of the Merger Agreement.
TRIBUNE/SWAB-FOX, WHICH OWNS 3,777,500 (OR APPROXIMATELY 78%) OF THE
OUTSTANDING SHARES OF COMMUNICATIONS COMMON STOCK, INTENDS TO VOTE ALL SUCH
SHARES OF COMMUNICATIONS COMMON STOCK IN FAVOR OF APPROVAL OF THE MERGER
AGREEMENT. ACCORDINGLY, APPROVAL OF THE MERGER AGREEMENT BY THE STOCKHOLDERS OF
COMMUNICATIONS IS ASSURED.
The favorable vote of the holders of a majority of the outstanding shares of
Tribune/Swab-Fox Class A Common Stock entitled to vote at the Tribune/Swab-Fox
Meeting, in person or by proxy, is required for the approval and adoption of
the Merger Agreement. AS OF APRIL 5, 1995, DIRECTORS AND EXECUTIVE OFFICERS OF
TRIBUNE/SWAB-FOX AND THEIR AFFILIATES OWNED 15,810,903 (OR APPROXIMATELY 59%)
OF THE OUTSTANDING TRIBUNE/SWAB-FOX CLASS A COMMON STOCK. THE DIRECTORS AND
EXECUTIVE OFFICERS OF TRIBUNE/SWAB-FOX AND THEIR AFFILIATES HAVE INDICATED THAT
THEY INTEND TO VOTE THEIR SHARES OF TRIBUNE/SWAB-FOX CLASS A COMMON STOCK IN
FAVOR OF APPROVAL OF THE MERGER AGREEMENT. ACCORDINGLY, APPROVAL OF THE MERGER
AGREEMENT BY THE STOCKHOLDERS OF TRIBUNE/SWAB-FOX IS ASSURED. Certain officers
and directors of Tribune/Swab-Fox and their affiliates or family members have
indicated a present intention to elect the Cash Alternative for some or all of
their shares of Tribune/Swab-Fox Common Stock. The exact number of shares for
which such persons might elect the Cash Alternative is subject to each
individual's choice and on the favorable resolution of certain tax issues
related to the sale of part but not all of a stockholder's ownership of
Tribune/Swab-Fox Common Stock. Subject to these factors, it is currently
estimated that such persons will tender between 7,500,000 and 8,500,000 shares
of Tribune/Swab-Fox Common Stock, in the aggregate, in the Cash Alternative.
Included in this amount are 1,161,297 shares held for the benefit of the
children and a niece of Howard G. Barnett, Jr. Mr. Barnett, however, does not
intend to elect the Cash Alternative for any shares of Tribune/Swab-Fox Common
Stock owned by him for his own account. There can be no assurance that such
persons will elect
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the Cash Alternative with respect to such shares or of the number of shares for
which such election might be made. Such persons must comply with the cash
election procedures in order to be entitled to the Cash Alternative.
VOTING OF PROXIES
Shares of Communications Common Stock or Tribune/Swab-Fox Class A Common
Stock, as the case may be, represented by properly executed proxies received at
or prior to the Communications and Tribune/Swab-Fox Meetings, will be voted at
the appropriate Meeting in the manner specified by the holders of such shares.
Properly executed proxies which do not contain voting instructions will be
voted FOR approval and adoption of the Merger Agreement. An abstention (or
broker non-vote) has the same effect as a vote against the proposal, but any
stockholder present in person or by proxy (including broker non-votes) at
either the Communications Meeting or the Tribune/Swab-Fox Meeting, who abstains
from voting, will be counted for purposes of determining whether a quorum
exists.
If any other matters are properly presented at either the Communications
Meeting or the Tribune/Swab-Fox Meeting for consideration, the person or
persons named in the relevant form of proxy enclosed herewith and acting
thereunder will have discretion to vote on such matters in accordance with
their best judgment, unless the proxy indicates otherwise. Neither
Communications nor Tribune/Swab-Fox has any knowledge of any matters to be
presented at the Communications Meeting or the Tribune/Swab-Fox Meeting other
than those matters referred to and described herein.
REVOCABILITY OF PROXIES
The grant of a proxy on the enclosed Communications or Tribune/Swab-Fox form
of proxy does not preclude a stockholder from voting in person or otherwise
revoking a proxy. Attendance at the relevant Meeting will not in and of itself
constitute revocation of a proxy. A stockholder may revoke a proxy at any time
prior to its exercise by delivering to Donna J. Peters, Secretary of
Communications and Tribune/Swab-Fox, 2407 East Skelly Drive, Tulsa, Oklahoma
74105, a duly executed revocation or a proxy bearing a later date or by voting
in person at the appropriate Meeting.
RECORD DATE; SHARES ENTITLED TO VOTE; QUORUM
Only holders of record of Communications Common Stock at the close of
business on April 5, 1995, will be entitled to receive notice of and to vote at
the Communications Meeting. At April 5, 1995, Communications had outstanding
4,864,818 shares of Communications Common Stock held by approximately 29
holders of record. Each share of Communications Common Stock is entitled to one
vote on each matter on which the holders of such shares are entitled to vote. A
majority of the outstanding shares of Communications Common Stock entitled to
vote must be represented in person or by proxy at the Communications Meeting in
order for a quorum to be present. The presence at the Communications Meeting
(in person or by proxy) of a representative of Tribune/Swab-Fox will constitute
a quorum.
Only holders of record of Tribune/Swab-Fox Common Stock at the close of
business on April 5, 1995, will be entitled to receive notice of the
Tribune/Swab-Fox Meeting and only holders of record of Tribune/Swab-Fox Class A
Common Stock on such date will be entitled to vote at the Tribune/Swab-Fox
Meeting. At April 5, 1995, Tribune/Swab-Fox had outstanding 26,845,864 shares
of Tribune/Swab-Fox Class A Common Stock held by approximately 307 holders of
record (excluding 1,142,729 shares held by Communications). Voting rights also
exist with respect to the shares of Tribune/Swab-Fox Class B Common Stock under
certain circumstances, but the proposal to approve the Merger Agreement does
not give rise to such voting rights. At April 5, 1995, Tribune/Swab-Fox had
outstanding 3,703,704 shares of Tribune/Swab-Fox Class B Common Stock held by
one holder of record who is also the beneficial owner of such shares. As of
January 5, 1995, all outstanding shares of the 6 1/2% Cumulative Convertible
Preferred Stock, Class A Preferred Stock, Series 1, and New Senior Preferred
Stock of Tribune/Swab-Fox were either redeemed or converted into Tribune/Swab-
Fox Class A Common Stock, and are no longer issued and outstanding. A
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majority of the outstanding shares of Tribune/Swab-Fox Class A Common Stock
entitled to vote must be represented in person or by proxy at the Tribune/Swab-
Fox Meeting in order for a quorum to be present.
SOLICITATION OF PROXIES
Communications and Tribune/Swab-Fox will bear equally the cost of the
solicitation of proxies from the stockholders of Communications and
Tribune/Swab-Fox. In addition to solicitation by mail, the directors, officers
and employees of each company may solicit proxies from stockholders of such
company by telephone or telegram or in person. Such persons will not be
additionally compensated, but will be reimbursed for reasonable out-of-pocket
expenses incurred in connection with such solicitation. Arrangements will also
be made with brokerage firms, nominees, fiduciaries and other custodians, for
the forwarding of solicitation materials to the beneficial owners of shares
held of record by such persons, and Communications and Tribune/Swab-Fox will
reimburse such persons for their reasonable out-of-pocket expenses in
connection therewith.
STOCKHOLDERS SHOULD NOT SEND STOCK CERTIFICATES WITH THEIR PROXY CARDS.
HOWEVER, STOCKHOLDERS OF TRIBUNE/SWAB-FOX WHO ARE ELECTING, IN WHOLE OR IN
PART, THE CASH ALTERNATIVE, MUST RETURN THEIR STOCK CERTIFICATES WITH THE CASH
ELECTION FORM IN ACCORDANCE WITH THE PROCEDURES DESCRIBED UNDER "THE MERGER
AGREEMENT--CASH ELECTION PROCEDURES."
THE MERGER
GENERAL
The Merger Agreement provides for a business combination between
Tribune/Swab-Fox and Communications in which Tribune/Swab-Fox will be merged
with and into Communications and the holders of Tribune/Swab-Fox Common Stock
will be issued shares of Communications Common Stock or, at the election of
each Tribune/Swab-Fox stockholder, a specified amount of cash, in a transaction
treated as a purchase and a downstream merger for accounting purposes and as a
reorganization under Section 368(a) of the Code for federal income tax
purposes. A copy of the Merger Agreement is attached to this Proxy
Statement/Prospectus as Appendix A and is incorporated herein by reference.
BACKGROUND OF THE MERGER
Tribune/Swab-Fox caused Communications to be formed in 1989 for the reasons
described below under "The Merger--Reasons for the Merger; Recommendations of
the Boards of Directors." From that time, Tribune/Swab-Fox has publicly stated
its mission to be the sale of its assets, other than its ownership in
Communications Common Stock, and the repayment of its debts. Thus, since that
time, substantially all of the on-going operations and growth activities of
Tribune/Swab-Fox have been conducted through its ownership of Communications.
See "The Merger--Reasons for the Merger; Recommendations of the Boards of
Directors."
In September 1992, Communications' wholly-owned subsidiary, Tulsa Tribune
Company, entered into an agreement with World Publishing Company to end their
Joint Operating Agreement and, thus, close its daily newspaper, The Tulsa
Tribune (see "Management's Discussion and Analysis of Financial Condition and
Results of Operations"). Since that time, the Communications Board has, from
time to time, held discussions with the Tribune/Swab-Fox Board regarding a
possible merger.
At a retreat of the Communications Board held in November 1992, to discuss
the future of Communications after the closure of The Tulsa Tribune, management
proposed to the Communications Board that such a merger be considered. Many of
the reasons in favor of a merger put forth by management at that time are the
same reasons described below under "The Merger--Reasons for the Merger;
Recommendations of the Boards of Directors." While the Communications directors
understood the reasons and viewed the possibility of such a merger as
reasonable and, under the correct circumstances, appropriate, the
Communications Board felt that the balance sheet of Tribune/Swab-Fox was not
desirable. At that time
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the real estate and other assets of Tribune/Swab-Fox totaled a book value of
approximately $13,550,000 and the total indebtedness of Tribune/Swab-Fox,
separate from the indebtedness of Communications, exceeded $7,500,000 including
partnership indebtedness guaranteed by Tribune/Swab-Fox. It was the belief of
the Communications Board at that time that the losses which would be sustained
in maintaining that level of real estate and servicing that level of debt were
sufficiently negative to outweigh the benefits of a merger.
Management of Tribune/Swab-Fox is the same as management of Communications.
Howard G. Barnett, Jr., is President and Chief Executive Officer of
Tribune/Swab-Fox and Chairman, President and Chief Executive Officer of
Communications. Mr. Barnett is also a member of the Communications Board and
the Tribune/Swab-Fox Board and is the only overlapping director between the two
Boards. After Mr. Barnett became Chief Executive Officer of both companies in
August 1993, he convened a joint meeting of the two Boards on August 18-19,
1993. The purpose of that meeting was to set the strategic priorities of the
two companies, recognizing that the future growth of Tribune/Swab-Fox was
through Communications. At that time a possible merger of the two companies was
discussed between the two Boards. While no agreement was reached, it was clear
to all members that the Tribune/Swab-Fox Board believed a merger was in the
long-term best interest of Tribune/Swab-Fox and its stockholders, as the
reasons for the separate existence of the two companies had ceased.
As discussed below, the original purpose for creating Communications had been
to effect an equity financing for Communications, to isolate the real estate
assets and liabilities into Tribune/Swab-Fox and to improve stock value. See
"The Merger--Reasons for the Merger; Recommendations of the Boards of
Directors." The equity financing was successfully completed in 1989. As the
assets of Tribune/Swab-Fox have slowly been sold off, the need for separating
those remaining from the assets of Communications has been greatly reduced. For
this same reason, the Tribune/Swab-Fox Board believes that the existence of two
related entities creates market confusion and does not enhance the market value
of either the Tribune/Swab-Fox Class A Common Stock or the Communications
Common Stock.
At the August 1993 joint meeting, the directors of Communications voiced the
same concerns about the balance sheet of Tribune/Swab-Fox as in 1992. As a
result of such meeting, management undertook an effort to restructure the
balance sheet of Tribune/Swab-Fox to overcome its negative impact on the
possibility of a merger. To that end, substantial write-offs of real estate
assets occurred in both the third quarters of 1993 and 1994 and a strategic
effort ensued to liquidate real estate at any reasonable price to reduce debt.
The strategic imperative was that a merger of the two companies was in the
long-term best interest of the stockholders of Tribune/Swab-Fox and, therefore,
attempting to hold real estate for the period of time necessary to realize on
its full value was inappropriate in light of the need to reduce debt
substantially to facilitate a merger.
In June 1994, another joint meeting of the Communications Board and the
Tribune/Swab-Fox Board was held. At that time management reported to the two
Boards that it was highly unlikely that a sufficient amount of real estate
could be liquidated in any reasonable period of time to repay all of the
indebtedness of Tribune/Swab-Fox and, thus, fully "clean up" its balance sheet.
However, management believed that sufficient liquid assets (i.e., cash
equivalents, such as notes receivable) could be generated to offset such
indebtedness. At that time, the Communications Board gave its tentative
approval to a concept which would allow for formal merger discussions to occur
if management could convert an amount of Tribune/Swab-Fox assets to "cash
equivalents" at least sufficient to cover the then outstanding indebtedness of
Tribune/Swab-Fox.
At this same meeting, management reported that, in a possible merger,
significant other assets would likely remain. Communications' directors had
made it clear since the earliest discussions that the speculative nature of
these assets made valuation in a merger difficult. It was noted, however, that
since Tribune/Swab-Fox owned a substantial interest in Communications (now
78%), the Tribune/Swab-Fox Board need not require significant consideration for
the miscellaneous assets not converted to "cash equivalents," because
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the miscellaneous assets of Tribune/Swab-Fox transferred to Communications in a
merger would remain owned, in effect, at least 78% by the stockholders of
Tribune/Swab-Fox (excluding, for this purpose, the effect of the Cash
Alternative).
At a joint meeting of the Communications Board and the Tribune/Swab-Fox Board
held in September 1994, management reported to the Boards that it was at a
point of recommending a merger based on various agreements which were expected
to close in the succeeding several months which, if successfully closed, would
result in the "cash equivalents" of Tribune/Swab-Fox significantly exceeding
the then indebtedness of Tribune/Swab-Fox. At that meeting, the Boards agreed
to pursue formal negotiations and, thereafter, a public announcement of their
intent was made.
Each Board appointed three directors to act as a Board committee in reviewing
the assets of Tribune/Swab-Fox and generally negotiating and recommending the
ratio at which shares of Communications Common Stock would be issued in
exchange for shares of Tribune/Swab-Fox Common Stock (i.e., the Exchange
Ratio), subject to the approval of the full Boards. The Tribune/Swab-Fox
committee was composed of Jenkin Lloyd Jones, Jr., Martin A. Vaughan and Robert
J. Swab (the "Tribune/Swab-Fox Committee"). The Communications committee was
composed of William N. Griggs, David Lloyd Jones and Martin F. Beck (the
"Communications Committee"). For information regarding certain interests of
members of the Communications Committee and the Tribune/Swab-Fox Committee that
are separate from the interests of stockholders of Communications and
Tribune/Swab-Fox generally, see "The Merger--Interests of Certain Persons in
the Merger." In addition, Southwest Securities was engaged by the Tribune/Swab-
Fox Board and Oppenheimer was engaged by the Communications Board to render
fairness opinions.
To facilitate valuation in the Merger and to effect a discontinuance of the
Tribune/Swab-Fox real estate business, in December 1994, the Tribune/Swab-Fox
Board decided to sell certain real estate to 1995 Land Company and to exchange
most of Tribune/Swab-Fox's remaining real estate for MECI stock. See "Summary--
Tribune/Swab-Fox."
The determination of the Exchange Ratio was simplified by the recognition
that, because Communications was acquiring Tribune/Swab-Fox in the Merger and
Tribune/Swab-Fox's primary asset was and is 3,777,500 shares of Communications
Common Stock, Communications would (excluding the impact of the Cash
Alternative) simply issue 3,777,500 shares to the stockholders of Tribune/Swab-
Fox plus such number of shares as was agreed to be due for the net value of any
additional assets of Tribune/Swab-Fox after payment of the Special Dividend.
Therefore, the relative value of the shares of Communications Common Stock and
Tribune/Swab-Fox Class A Common Stock in the public market was not significant
in determining the Exchange Ratio, and such value was utilized primarily to
validate the decisions made.
Based on these concepts, the principal issues addressed in the determination
of the Exchange Ratio were the net value of the other assets of Tribune/Swab-
Fox and the value of the Communications Common Stock to be issued therefor.
Management of both Communications and Tribune/Swab-Fox provided an analysis of
the net value of the assets of Tribune/Swab-Fox other than shares of
Communications Common Stock owned by Tribune/Swab-Fox.
In determining such net value of the other assets of Tribune/Swab-Fox, the
following principles were applied by the Committees and Boards:
(i) Material value was only recognized for the "cash equivalents" of
Tribune/Swab-Fox and for the MECI stock. No substantial value was
recognized for the interest of Tribune/Swab-Fox in its other miscellaneous
assets, including, in particular, 1995 Land Company, since the purpose of
that transaction was to encourage the managing partner to maximize value
over time and, thus, its valuation was speculative. In this regard, the
Tribune/Swab-Fox Board determined that, because the Tribune/Swab-Fox
stockholders already own, in effect, 78% of Communications, such
stockholders would still own a substantial interest in any miscellaneous
assets of Tribune/Swab-Fox transferred to Communications in
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the Merger (excluding, for this purpose, the effect of the Cash
Alternative). Thus, little or no value from these assets being recognized
in the Merger results in the Tribune/Swab-Fox stockholders realizing only a
22% "discount" in the Merger as such stockholders would, excluding any
effect of the Cash Alternative, own at least 78% of Communications after
the Merger and thus 78% of the value of such assets. It was determined that
this 22% "discount" was immaterial in light of the strategic need to do the
Merger and, in particular, because of the difficulty in determining a fair
exchange value for such miscellaneous assets.
(ii) The net value for which Tribune/Swab-Fox received additional
consideration (i.e., consideration in addition to the 3,777,500 shares
already owned by Tribune/Swab-Fox) was the amount by which the agreed value
of the "cash equivalents" exceeded the value of all debt of Tribune/Swab-
Fox transferred to Communications in the Merger (including, for this
purpose, estimated operating costs of Tribune/Swab-Fox to the Effective
Time of the Merger and Tribune/Swab- Fox's share of the expenses of the
Merger). For this purpose, "cash equivalents" of Tribune/Swab-Fox primarily
included cash, marketable investments such as stocks and U.S. treasury
securities, options, notes receivable and tax loss carryforwards.
(iii) The final factor was the exchange rate or per share value for the
Communications Common Stock to be issued for this net asset value. In the
negotiations conducted between the Committees, the various potential values
for the Communications Common Stock, described below in "The Merger--
Opinions of Financial Advisors" were discussed and debated. In the
negotiations, the higher the Communications Committee argued the value of
the Communications Common Stock, the higher the Tribune/Swab-Fox Committee
valued the cash equivalents and/or MECI stock and vice versa. After
extensive negotiations, the Tribune/Swab-Fox Committee and the
Communications Committee agreed and recommended to their respective Boards
that the consideration Tribune/Swab-Fox should receive for the net value of
its other assets was 200,000 shares of Communications Common Stock plus the
Special Dividend.
Based on the foregoing, before the Cash Alternative is taken into
consideration, the total shares of Communications Common Stock to be issued by
Communications to holders of Tribune/Swab-Fox Common Stock in the Merger will
be 3,977,500 shares (including 143,412 shares which would otherwise be issued
to Communications for the 1,142,729 shares of Tribune/Swab-Fox Common Stock
owned by it, which shares will be cancelled in the Merger). Based on the
31,692,297 shares of Tribune/Swab-Fox Common Stock outstanding as of January
25, 1995, this translates into an Exchange Ratio of one share of Communications
Common Stock for each 7.9681 shares of Tribune/Swab-Fox Common Stock or 0.1255
of a share of Communications Common Stock for each one share of Tribune/Swab-
Fox Common Stock. No fractional shares of Communications Common Stock will be
issued in the Merger.
The Communications Board, however, desired to effect the Merger only if the
consideration to be received in the Merger by the stockholders of Tribune/Swab-
Fox included the right of such stockholders to elect to receive cash for some
or all of their shares, subject to the limitations discussed below. In this
regard, the Communications Board believes that there is some desire on the part
of holders of Tribune/Swab-Fox Common Stock to achieve some liquidity and, if
the price is reasonable, the Communications Board believes that this would be a
good investment for Communications. In the joint meeting of the Communications
Board and the Tribune/Swab-Fox Board held in September 1994, as described
above, it was agreed that Communications would offer to buy up to 10,000,000
shares of Tribune/Swab-Fox Common Stock in the Merger for cash (the Cash
Alternative) at the cash price of $0.80 per share (the "Original Offer Price").
The Original Offer Price for Tribune/Swab-Fox Common Stock was determined first
by the Communications Board, independent of the Exchange Ratio, and accepted by
the Tribune/Swab-Fox Board as part of the Merger Agreement. The determination
of the Original Offer Price related to Communications' view of value, of the
lowest price at which it was believed a significant percentage of the Cash
Alternative would be subscribed for, and of the benefit to both companies of
the repurchase of stock and related only partially to the past trading history
of Tribune/Swab-Fox Class A Common Stock because of the infrequency of such
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trading. As discussed below, the Original Offer Price was subsequently raised
to $0.88 per share (the "Offer Price") of Tribune/Swab-Fox Common Stock.
At special meetings of the Communications Board and the Tribune/Swab-Fox
Board held concurrently on January 18, 1995, Oppenheimer and Southwest
Securities rendered their oral opinions (subsequently confirmed in writing) to
the effect that the consideration to be received in connection with the Merger
was fair, from a financial point of view, to the respective stockholders of
Communications (other than Tribune/Swab-Fox and the officers and directors of
each of Tribune/Swab-Fox and Communications) and Tribune/Swab-Fox. After full
discussion, the Communications Board and the Tribune/Swab-Fox Board each
unanimously approved the Merger and authorized the entering into of the Merger
Agreement.
Following the filing of the Registration Statement, Communications and
Tribune/Swab-Fox were contacted by an unaffiliated third party who expressed an
interest in acquiring an equity interest in either Communications or
Tribune/Swab-Fox which would result in a 15% ownership position in
Communications after the Merger and indicated a willingness to pay to
Tribune/Swab-Fox a cash price of up to $0.95 per share for up to 3,500,000
shares of Tribune/Swab-Fox Class A Common Stock. The Boards of Communications
and Tribune/Swab-Fox considered the possibility of allowing this third party to
purchase such shares of Tribune/Swab-Fox Common Stock, but rejected such a
transaction because of their belief that such a transaction (which would result
in the issuance of additional shares by Tribune/Swab-Fox) would dilute the
impact of the repurchase of shares pursuant to the Cash Alternative. The Boards
believe that it is in the best interests of both companies and their
stockholders that the full benefit of the Cash Alternative be received which is
to reduce the number of shares of Communications Common Stock outstanding after
the Merger and, thus, increase the percentage ownership in Communications of
the remaining stockholders.
As a result of the discussions described above, market activity involving the
Communications Common Stock and the Tribune/Swab-Fox Class A Common Stock and
their then-current market prices, the Communications Board and the
Tribune/Swab-Fox Board each decided to amend the Merger Agreement in order to
increase the amount of the Offer Price for the Cash Alternative from $0.80 to
$0.88 per share of Tribune/Swab-Fox Common Stock. On March 3, 1995,
Communications and Tribune/Swab-Fox executed Amendment No. 1 to the Merger
Agreement whereby that change was made.
REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
In 1989, the Tribune/Swab-Fox Board decided to seek equity financing. In
pursuing that goal, it became clear that the significant real estate holdings
and their related indebtedness, as well as other miscellaneous assets then held
by Tribune/Swab-Fox, were viewed negatively by the investment community.
Therefore, Tribune/Swab-Fox created Communications and capitalized it by
contributing the stock of its various operating subsidiaries, including the
existing subsidiaries, TISI and BMT, together with certain other then
subsidiaries, such as Tulsa Tribune Company. Thus, Communications held
essentially all of the operating businesses of Tribune/Swab-Fox, other than its
real estate business.
Communications successfully completed its initial public offering in June
1989, and utilized the proceeds to repay certain indebtedness to Tribune/Swab-
Fox and for future acquisitions, including Atwood. From a stockholder
standpoint, the Tribune/Swab-Fox Board had hoped that the "freeing" of the
operating businesses from the "burden" of the real estate and related
indebtedness would allow the stock of Communications to reflect what was viewed
as the true value of the operating assets. It was hoped that the effect of this
then apparent value for the Communications Common Stock held by Tribune/Swab-
Fox would translate into increased public market value for the Tribune/Swab-Fox
Class A Common Stock.
While this effect did occur early, Communications developed operating
problems and the public market value of its stock dropped precipitously, along
with the public market value of the Tribune/Swab-Fox Class A Common Stock. At
the same time, it was becoming apparent that the liquidation of real estate by
Tribune/Swab-Fox was going to take significantly longer than originally
anticipated. From a business
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standpoint, with both companies then having significant problems, the fact that
management of the two companies were the same people created certain conflicts
in the allocation of management time. This became particularly acute as
Communications recovered from its problems and regained its ability to take
advantage of growth opportunities while, at the same time, the assets under
separate ownership of Tribune/Swab-Fox continued to need to be liquidated and
debt repaid.
As a result, as noted in "The Merger--Background of the Merger," in 1993, the
Tribune/Swab-Fox Board determined that any reason for the separate existence of
Communications had ceased and that a recombination of the two companies was in
the long-term best interest of the stockholders of Tribune/Swab-Fox. In this
regard, the Tribune/Swab-Fox Board believes that the terms of the Merger
Agreement and the transactions contemplated thereby are fair to and in the best
interests of Tribune/Swab-Fox and its stockholders. Accordingly, the
Tribune/Swab-Fox Board has unanimously approved the Merger Agreement and
recommends approval thereof by the stockholders of Tribune/Swab-Fox. In
arriving at its recommendation to stockholders, the Tribune/Swab-Fox Board
consulted with Tribune/Swab-Fox management and its legal and financial advisors
and considered the reasons or factors for the Merger discussed below.
Likewise, the Communications Board of Directors believes that the terms of
the Merger Agreement and the transactions contemplated thereby are fair to and
in the best interests of Communications and its stockholders. Accordingly, the
Communications Board has unanimously approved the Merger Agreement and
recommends approval thereof by the stockholders of Communications. In arriving
at its recommendation to stockholders, the Communications Board consulted with
Communications management and its legal and financial advisors and considered
the reasons or factors for the Merger discussed below.
The following are the significant reasons or factors considered independently
by the Tribune/Swab-Fox Board and the Communications Board in approving the
Merger:
(i) The continued existence of two related public companies--particularly
where the principal activities of one, Tribune/Swab-Fox, consist of the
liquidation of its miscellaneous assets and the ownership of 78% of the
common stock of the other--is believed to create market confusion which
inhibits the market's ability to appropriately value the separately traded
stocks of the two companies.
(ii) The maintenance of two separate companies, with the same management,
creates potential conflicts of interest as well as inefficiencies and
additional costs which, given that the separate existence of the two
companies has no business necessity, are wasteful.
(iii) As a result of the Merger, stockholders of Tribune/Swab-Fox will
have the opportunity to realize cash for their stock (the Cash
Alternative), if they so desire, at a price (the Offer Price) at or above
the trading price for the Tribune/Swab-Fox Class A Common Stock for a
significant majority of the time during the last two years (though
generally below its trading price during the several weeks preceding the
mailing of this Proxy Statement/Prospectus). In addition, even when the
market price of the Tribune/Swab-Fox Class A Common Stock has been above
the Offer Price, the thin market for the Tribune/Swab-Fox Class A Common
Stock has made realization on that value problematical. Thus, the Merger
affords the stockholders of Tribune/Swab-Fox an opportunity to achieve some
liquidity in their holdings, if desired.
(iv) The holding of 78% of the Communications Common Stock by
Tribune/Swab-Fox has created blockage and float problems for the
Communications Common Stock. The Merger, in effect "breaks up" this block
by causing its ownership to be spread among the stockholders of
Tribune/Swab-Fox. The market effect of this is to combine the independent
stockholder groups of the two companies. Thus, the market for
Communications Common Stock should have more sellers available. As the
stockholders of Tribune/Swab-Fox will, as a result of the Merger, own
Communications Common Stock, they should benefit from this increased float
opportunity.
(v) The Communications Common Stock is traded on the AMEX which is viewed
as beneficial by the Tribune/Swab-Fox Board.
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(vi) To achieve value for the Tribune/Swab-Fox Common Stock without the
Merger, the Tribune/Swab-Fox Board has determined that a significant effort
would need to be made to restructure the stockholders' equity section of
the balance sheet of Tribune/Swab-Fox with such actions as reverse stock
splits, conversion or redemption of preferred stocks and the like. The net
effect of the Merger is to effect this restructuring and to leave the
combined companies with a simple capital structure.
(vii) The opinions of Oppenheimer and Southwest Securities that the
transaction is fair, from a financial point of view, to the respective
stockholders of Communications (other than Tribune/Swab-Fox and the
officers and directors of each of Tribune/Swab-Fox and Communications) and
Tribune/Swab-Fox.
In view of the wide variety of factors considered in connection with their
respective evaluations of the proposed Merger, the Tribune/Swab-Fox Board and
the Communications Board did not find it practicable to, and did not, quantify
or otherwise attempt to assign relative weights to the specific factors
considered in reaching their respective determinations.
THE BOARD OF DIRECTORS OF EACH OF TRIBUNE/SWAB-FOX AND COMMUNICATIONS
UNANIMOUSLY RECOMMENDS THAT ITS STOCKHOLDERS VOTE TO APPROVE AND ADOPT THE
MERGER AGREEMENT.
OPINIONS OF FINANCIAL ADVISORS
Communications. The Communications Board retained Oppenheimer to render an
opinion with respect to the fairness, from a financial point of view, to the
stockholders of Communications (other than Tribune/Swab-Fox and the officers
and directors of each of Tribune/Swab-Fox and Communications) of the
consideration to be paid to holders of Tribune/Swab-Fox Common Stock in
connection with the Merger. At the January 18, 1995, meeting of the
Communications Board, Oppenheimer rendered its oral opinion that, as of such
date, based upon the draft of the Merger Agreement, dated January 11, 1995, and
based upon and subject to the matters presented to the Communications Board,
the consideration to be paid to holders of Tribune/Swab-Fox Common Stock in
connection with the Merger was fair, from a financial point of view, to the
stockholders of Communications (other than Tribune/Swab-Fox and the officers
and directors of each of Tribune/Swab-Fox and Communications). Oppenheimer
delivered to the Communications Board a written opinion dated as of January 26,
1995, confirming its oral opinion. As a result of the increase in the amount of
the Offer Price for the Cash Alternative from $0.80 to $0.88 per share of
Tribune/Swab-Fox Common Stock, a subsequent written opinion dated as of April
20, 1995, was also delivered by Oppenheimer to the Communications Board, which
opinion is substantially identical to the January 26, 1995, opinion. The full
text of Oppenheimer's written opinion dated as of April 20, 1995, which sets
forth a description of the assumptions made, procedures followed and matters
considered in connection with such opinion, is included as Appendix B to this
Proxy Statement/Prospectus and is incorporated herein by reference.
Stockholders of Communications are urged to read the opinion in its entirety,
especially with regard to the assumptions made and matters considered by
Oppenheimer. Oppenheimer's opinion relates only to the fairness, from a
financial point of view, to such stockholders of the consideration to be paid
to holders of Tribune/Swab-Fox Common Stock in connection with the Merger and
does not constitute a recommendation to any stockholder of Communications as to
how such stockholder should vote with respect to the Merger. The amount of
consideration to be received by the stockholders of Tribune/Swab-Fox in
connection with the Merger was determined through negotiations between
Communications and Tribune/Swab-Fox. See "The Merger--Background of the
Merger."
In connection with rendering its opinion, Oppenheimer (i) reviewed the Merger
Agreement; (ii) reviewed the Registration Statement; (iii) reviewed
Communications' and Tribune/Swab-Fox's recent annual reports to stockholders
and Annual Reports on Form 10-K for the five fiscal years ended December 31,
1994, and their Quarterly Reports on Form 10-Q for the fiscal years 1993 and
1994; (iv) reviewed Communications'
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and Tribune/Swab-Fox's proxy statements dated May 23, 1994; (v) reviewed and
analyzed Communications' and Tribune/Swab-Fox's unaudited financial statements
for the 11 month periods ended November 30, 1994, and November 30, 1993; (vi)
held discussions with Howard G. Barnett, Jr. (Chairman, President and Chief
Executive Officer of Communications and President, Chief Executive Officer and
Director of Tribune/Swab-Fox) and J. Gary Mourton (Senior Vice President--
Finance, Chief Financial Officer and Treasurer of Communications and
Tribune/Swab-Fox and Director of Communications); (vii) reviewed the financial
projections of Communications prepared by Communications' management dated
January 9, 1995; (viii) reviewed and analyzed information and data regarding
assets and liabilities of Tribune/Swab-Fox provided by Tribune/Swab-Fox's
management; (ix) held discussions with Communications' and Tribune/Swab-Fox's
legal counsel and accountants; (x) reviewed financial and market data for
certain public companies considered comparable to Communications; (xi)
evaluated the financial impact of the Merger on Communications' financial
statements; and (xii) performed such other analyses and reviewed such other
information as Oppenheimer deemed appropriate. In preparing its opinion,
however, Oppenheimer was not requested to and did not make an independent
evaluation or appraisal of the assets or liabilities of Tribune/Swab-Fox or
Communications, nor did Oppenheimer make any physical inspection of the
properties or assets of Tribune/Swab-Fox or Communications. Communications did
not place any limitation on the scope of Oppenheimer's review or analysis,
except that Oppenheimer was not requested to consider any alternative business
strategies that might exist for Communications.
In rendering its opinion, Oppenheimer assumed and relied upon, without
taking responsibility for independent verification, the accuracy and
completeness of all financial and other information available to Oppenheimer
from public sources and provided to Oppenheimer by Communications and
Tribune/Swab-Fox and their respective representatives and made other
assumptions of which the following were material. With respect to the
financial forecasts of Communications, Oppenheimer assumed that they were
reasonably prepared on the bases reflecting the best available information,
estimates and judgments of Communications' management. Oppenheimer did not
make any independent valuation or appraisal of the assets or liabilities of
Communications or Tribune/Swab-Fox nor was it furnished with any such
appraisals other than four separate appraisals provided to Oppenheimer by
Tribune/Swab-Fox completed in December 1994 and January 1995 pertaining to
certain real estate related assets of Tribune/Swab-Fox. Oppenheimer assumed,
without independent verification, the accuracy of the advice and the
conclusions of Communications' legal counsel and accountants as provided to
Oppenheimer by Communications' management with respect to tax and accounting
matters, including, without limitation, the treatment of the Merger as a tax-
free reorganization (other than with respect to the Cash Alternative), the
status of the Merger as a "downstream merger" for tax and accounting purposes
and the effect and accounting treatment of tax loss carryforwards. Oppenheimer
expressed no opinion as to the price at which Communications Common Stock will
trade following the consummation of the Merger. Oppenheimer was not requested
to consider, and its opinion does not address, the relative merits of the
Merger as compared with any alternative business strategies that might exist
for Communications.
In its analyses, Oppenheimer made assumptions with respect to industry
performance, general business and economic conditions and other matters, many
of which are beyond the control of Communications and Tribune/Swab-Fox. Any
estimates contained in these analyses are not necessarily indicative of actual
values or predictions of future results or values, which may be significantly
more or less favorable than as set forth therein. In addition, analyses
relating to the value of businesses, securities or assets do not purport to be
appraisals or to reflect the prices at which businesses, securities or assets
actually may trade, be acquired or sold.
In establishing its valuation of Communications, Oppenheimer considered
several valuation methodologies: comparable public company analysis,
discounted cash flow analysis, net asset/liquidation analysis, historical
stock price trading analysis and comparable merger and acquisition
transactions analysis. Oppenheimer concluded that the comparable publicly
traded company analysis was the most meaningful valuation methodology in
determining the value of Communications because the consideration being given
in the Merger consists primarily of publicly traded stock. Using this
methodology, Oppenheimer reviewed and
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analyzed certain available financial and market information for 10 selected
comparable publicly traded companies in the business publishing and information
services industries. The 10 companies consisted of American City Business
Journals, Inc., Plenum Publishing Corporation, American Business Information,
Inc., American List Corporation, Analytic Surveys, Inc., AutoInfo, Inc., DATEQ
Information Network, Inc., Find/SVP Inc., M/A/R/C Inc. and SEI Corporation (the
"Comparable Companies"). Oppenheimer selected the Comparable Companies
primarily based on the similarity of their lines of business to those of
Communications, as well as the similarities of revenues, market capitalization
and relative market position. Oppenheimer analyzed such Comparable Companies
using primarily the following measurements: (i) multiple of aggregate value to
EBITDA (last 12 months earnings before interest, taxes, depreciation and
amortization) and (ii) multiples of current stock price to calendar 1995 and
1996 earnings estimates (which were based on a compilation of securities
research analysts earnings estimates). It was Oppenheimer's perception that
investors generally value business publishing and information services
companies using these two measurements. Oppenheimer noted that Communications
traded at 3.9x aggregate value to EBITDA and 10.0x forecasted earnings for the
calendar year 1995 and 7.5x forecasted earnings for the calendar year 1996.
Compared to the average of the Comparable Companies which traded at 7.7x
aggregate value to EBITDA and 16.0x forecasted earnings for the calendar year
1995 and 14.4x forecasted earnings for the calendar year 1996. Oppenheimer
noted that there were no companies used in the comparable public company
analysis which were identical to Communications. Oppenheimer then applied
certain discounts to the aforementioned multiples of the Comparable Companies
based on the following factors: (i) the relatively small revenues and market
capitalization of Communications compared to the Comparable Companies, (ii) the
limited public float of Communications Common Stock because of the 78% control
block owned by Tribune/Swab-Fox, (iii) Communications' five years of losses or
only marginal profits from 1989 to 1993, and (iv) Communications' substantial
operating and financial restructuring.
Oppenheimer also concluded that the comparable merger and acquisition
transaction analysis was an appropriate valuation methodology, although not as
meaningful as the comparable publicly traded company analysis because the
Merger does not represent a change of control. Although Oppenheimer performed
the comparable merger and acquisition analysis as described below, it did not
include a detailed discussion of it in its presentation to the Communications
Board because Oppenheimer considered it significantly less meaningful than the
comparable public company analysis and, in any event, it did not change its
valuation as determined by the comparable public company analysis. Using this
methodology, Oppenheimer reviewed the financial terms, to the extent publicly
available, of three selected comparable merger and acquisition transactions in
the business publishing industry and four selected comparable merger and
acquisition transactions in the information services industry since March 1992
(collectively, the "Comparable Transactions") which in Oppenheimer's judgment
were comparable to the Merger for the purposes of this analysis. The Comparable
Transactions were selected from a total of 23 transactions. Oppenheimer
selected the Comparable Transactions based on the similarity of their lines of
business to those of Communications, their revenues and their relative market
positions. In addition, the Comparable Transactions were also selected because
their multiples of aggregate value (defined as equity value plus long-term debt
and short-term debt less cash and cash equivalents (the "Aggregate Value")) to
EBITDA and earnings before interest and taxes ("EBIT") represented levels which
would be consistent with Communications' if they were to be acquired due to
Communications' five years of losses or only marginal profits from 1989 to 1993
and substantial operating and financial restructuring. The seven transactions,
in reverse chronological order of public announcement, were the following: (i)
the acquisition of Sewells International by EMAP Group PLC; (ii) the
acquisition of Australian Consolidated Press Ltd. by Nine Network Australia
Ltd.; (iii) the acquisition of Extel Financial Ltd. by Financial Times (Pearson
PLC); (iv) the acquisition of Beutel, Goodman & Co. Ltd. by Duff & Phelps
Corp.; (v) the acquisition of Griggs Publishing Co. by American City Business
Journal; (vi) the acquisition of Datastream International Ltd. (Dun &
Bradstreet) by Primark Corp.; and (vii) the acquisition of Wiland Services,
Inc. by Neodata Corp. Among the ratios analyzed, Oppenheimer reviewed the
prices paid in such Comparable Transactions in terms of the aggregate value as
a multiple of EBITDA and EBIT. Oppenheimer took into account that no
transaction reviewed was identical to the Merger and that, accordingly, an
analysis of the results of the foregoing necessarily involved complex
considerations and
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judgments concerning differences in financial and operating characteristics of
Communications and other factors that would affect the acquisition value of the
companies to which it is being compared. Oppenheimer took into account that,
for the Comparable Transactions, the range of multiples of Aggregate Value to
the latest twelve months of EBITDA and EBIT were 3.0x to 9.0x and 3.0x to
12.6x, respectively. Oppenheimer took into account that Communications traded
at 3.9x EBITDA and 5.7x EBIT for the latest twelve months. Oppenheimer then
applied certain discounts to the Comparable Transactions multiples to deduct
the inherent control premium because the Merger does not represent a change of
control transaction.
Oppenheimer determined that the discounted cash flow analysis was not
meaningful because of the uncertainty of Communications' future financial
performance created by the substantial restructuring of its operations
undergone by Communications over the past several years. Oppenheimer also
determined that the liquidation analysis was not meaningful because the value
of Communications' business, providing information and services, is not
reflected in its tangible assets. Oppenheimer determined that the historical
stock price trading analysis was not meaningful because of lack of significant
trading volume in the Communications Common Stock.
With respect to valuing Tribune/Swab-Fox, Oppenheimer concluded that the net
asset valuation analysis was the appropriate valuation methodology. Oppenheimer
reached that conclusion based upon the fact that Tribune/Swab-Fox is a holding
company with no full-time employees and that the overwhelming majority of its
assets consists of Communications Common Stock. In valuing the assets other
than Communications Common Stock held by Tribune/Swab-Fox, Oppenheimer used
different methodologies appropriate for the particular asset. In valuing the
notes from entities which purchased real estate from Tribune/Swab-Fox,
Oppenheimer discounted the value of such notes from 10% to 50% to reflect the
absence of a trading market for the notes, the fact that the notes were
collateralized by illiquid real estate or personal guarantees and the fact that
the notes bear interest at rates lower than that prevailing for similar risk of
collectibility. With respect to the land owned by Tribune/Swab-Fox subject to
option, Oppenheimer valued the option at between its book value and a discount
of 30% to 40% to its exercise price. Oppenheimer valued the shares of MECI
owned by Tribune/Swab-Fox on the basis of MECI's current stock price and
projections of net revenue from producing and undeveloped nonproducing
properties provided to it by management of MECI. Oppenheimer valued the
liabilities of Tribune/Swab-Fox at the book value projected by management as of
March 31, 1995.
Based upon the foregoing, Oppenheimer concluded that the value of the shares
and cash to be offered by Communications was at least equal to the value of the
shares of Tribune/Swab-Fox to be acquired and therefore the Merger was fair,
from a financial point of view, to stockholders of Communications other than
Tribune/Swab-Fox and each of the officers and directors of Tribune/Swab-Fox and
Communications.
As described above, Oppenheimer's opinion to the Communications Board was one
of many factors taken into consideration by the Communications Board in making
its determination to approve the Merger. See "The Merger--Reasons for the
Merger; Recommendations of the Boards of Directors."
Oppenheimer, as part of its investment banking services, is regularly engaged
in the valuation of businesses and securities in connection with mergers,
acquisitions, underwritings, sales and distributions of listed and unlisted
securities and private placements. The Communications Board retained
Oppenheimer based upon its qualifications, experience and expertise and its
familiarity with Communications, having performed various investment banking
and other services for Communications and Tribune/Swab-Fox from time to time.
Oppenheimer served as placement agent in the private placement of debt and
equity securities for Tribune/Swab-Fox in 1988 and as lead managing underwriter
for Communications' initial public offering of Communications Common Stock in
1989. In 1994, Oppenheimer was engaged by Communications to assist
Communications in the sale of certain trade journals published through BMT and
has been paid $50,000 as a retainer for such assignment. Communications'
agreement with Oppenheimer provides that Oppenheimer will receive a fee of 3%
of the sale proceeds from the sale of such trade journals, up to a specified
amount, and 5% of sale proceeds in excess of that specified amount. See
"Summary--Recent Developments." Mark A. Leavitt, a director of Communications,
is a Managing Director of Oppenheimer.
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In connection with Oppenheimer's services as financial advisor to the
Communications Board, Communications agreed to pay and has paid to Oppenheimer
a fee of $225,000. Communications has also agreed to reimburse Oppenheimer for
all of its reasonable out-of-pocket expenses, including, subject to prior
approval, the fees and expenses of its legal counsel, incurred in connection
with its services. In addition, Communications has agreed to indemnify
Oppenheimer and its employees, directors, officers, agents, affiliates and each
person, if any, controlling Oppenheimer against certain liabilities and
expenses, including certain liabilities under federal securities laws, incurred
in connection with its services.
Tribune/Swab-Fox. The Tribune/Swab-Fox Board retained Southwest Securities to
render a fairness opinion in connection with the Merger. Southwest Securities
advised the Tribune/Swab-Fox Board, in its written opinion dated the date of
this Proxy Statement/Prospectus, that, as of such date and based upon and
subject to the various considerations set forth therein, the consideration to
be received by the stockholders of Tribune/Swab-Fox in connection with the
Merger is fair to such stockholders from a financial point of view. This
written opinion confirms, as of the date of this Proxy Statement/Prospectus,
Southwest Securities' oral opinion to the same effect rendered to the
Tribune/Swab-Fox Board on January 18, 1995, and acknowledges the increase in
the Cash Alternative from $0.80 per share to $0.88 per share. Southwest
Securities' analysis was initially performed prior to the oral presentation on
January 18, 1995, and was based upon the most recent data available at that
time, including the then current stock prices of Tribune/Swab-Fox and
Communications. Southwest Securities' opinion relates only to the consideration
to be received by the stockholders of Tribune/Swab-Fox in connection with the
Merger and does not constitute a recommendation to any stockholder of
Tribune/Swab-Fox as to how such stockholder should vote with respect to the
Merger. The amount of consideration to be received by the stockholders of
Tribune/Swab-Fox in connection with the Merger was determined through
negotiations between Tribune/Swab-Fox and Communications. See "The Merger--
Background of the Merger." The full text of Southwest Securities' written
opinion, which sets forth a description of the assumptions made, procedures
followed and matters considered in connection with such opinion, is included as
Appendix C to this Proxy Statement/Prospectus and is incorporated herein by
reference. Stockholders of Tribune/Swab-Fox are urged to read the opinion in
its entirety, especially with regard to the assumptions made and matters
considered by Southwest Securities.
In connection with rendering its opinion, Southwest Securities (i) reviewed
the Registration Statement and the Merger Agreement and supporting documents
and held discussions with management of Tribune/Swab-Fox and Communications
regarding the details of the Merger; (ii) reviewed the audited financial
statements of Tribune/Swab-Fox and Communications for the five years ended
December 31, 1994, and certain other relevant financial and operating data of
Tribune/Swab-Fox and Communications made available to Southwest Securities from
published sources and from the internal records of Tribune/Swab-Fox and
Communications; (iii) reviewed certain internal financial and operating
information for both Tribune/Swab-Fox and Communications (including financial
projections for the fiscal years ending December 31, 1994 through 1999, one set
prepared on a pro forma basis as if the Merger occurred at January 1, 1994, and
one set prepared assuming that the Merger did not occur) developed by the
management of Tribune/Swab-Fox and Communications; (iv) discussed the business
and operations, assets, financial condition and prospects of Tribune/Swab-Fox
and Communications with their senior management; (v) reviewed reported market
prices, the respective market capitalizations, price/earnings ratios and
trading statistics of the Tribune/Swab-Fox Class A Common Stock and the
Communications Common Stock; (vi) compared Tribune/Swab-Fox and Communications
from a financial point of view with particular regard to the value of
Tribune/Swab-Fox beyond its controlling ownership of Communications and to any
factors which add to or detract from this value; (vii) reviewed the Cash
Alternative; (viii) reviewed the terms and conditions of various notes
receivable and other assets received by Tribune/Swab-Fox as a result of the
liquidation of certain real estate assets; and (ix) performed such other
analyses and examinations and considered such other factors as Southwest
Securities deemed appropriate. Tribune/Swab-Fox did not place any limitation on
the scope of Southwest Securities' review or analysis, except that Southwest
Securities was not requested to consider any alternative business strategies
that might exist for Tribune/Swab-Fox.
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In connection with its review, Southwest Securities made certain assumptions
of which the following were material. Southwest Securities did not
independently verify any of the publicly available information or financial or
other information furnished by Tribune/Swab-Fox and Communications and assumed
and relied upon such information as being complete and accurate. With respect
to financial projections, Southwest Securities assumed and relied upon the
management of both Tribune/Swab-Fox and Communications as to the reasonableness
and achievability of such projections. Southwest Securities did not make an
independent evaluation or appraisal of the respective assets or liabilities of
Tribune/Swab-Fox or any subsidiary nor was it furnished with any such
appraisals other than appraisals of certain properties sold or to be sold by
Tribune/Swab-Fox. In addition, Southwest Securities did not solicit any
alternative proposals for a merger or acquisition of Tribune/Swab-Fox. The
opinion of Southwest Securities is based upon market, economic and other
conditions as in effect on, and the information made available to Southwest
Securities as of, the date of such opinion.
In arriving at its fairness opinion, Southwest Securities did not attribute
any particular weight to any analysis or factor considered by it, but rather
made qualitative judgments as to the significance and the relevance of each
analysis and factor. Accordingly, Southwest Securities believes that its
analyses must be considered as a whole and that considering any portions of
such analyses and of the factors considered, without considering all analyses
and factors, could create an incomplete or misleading view of the process
underlying the opinion. Any estimates contained in these analyses are not
necessarily indicative of actual values or predictions of future results or
values, which may be significantly more or less favorable than as set forth
therein. In addition, analyses relating to the value of businesses or
securities do not purport to be appraisals or to reflect the prices at which
businesses or securities actually may trade, be acquired or sold.
Because the Merger, in effect, can be viewed as the issuance by
Communications to Tribune/Swab-Fox stockholders of the same number of shares of
Communications Common Stock already owned by Tribune/Swab-Fox (being 3,777,500
shares) plus 200,000 shares of Communications Common Stock and the Special
Dividend for the other assets of Tribune/Swab-Fox, net of liabilities
(excluding the effect of the Cash Alternative), Southwest Securities considered
whether the stockholders of Tribune/Swab-Fox would benefit more by having the
Merger completed on these terms, i.e., owning more shares of Communications
Common Stock, rather than continuing the present ownership structure. The
following is a summary (in no particular order of priority) of the quantitative
and qualitative analyses performed by Southwest Securities in arriving at its
opinion:
(i) Tribune/Swab-Fox and, thus, indirectly, the stockholders of
Tribune/Swab-Fox, owns, as its principal asset, 78% of Communications. As
described in the immediately preceding paragraph, the Merger can be viewed
as preserving this ownership and providing additional consideration for the
net value of notes receivable from sales of real estate and other assets of
Tribune/Swab-Fox. Southwest Securities' focus, therefore, was to determine
whether or not the 200,000 shares of Communications Common Stock paid as
additional consideration over and above the 78% (or 3,777,500 shares) of
Communications already owned plus the Special Dividend was fair
consideration, from a financial point of view, for these net assets. The
200,000 share amount was determined through negotiations between the
Tribune/Swab-Fox Committee and the Communications Committee. The Cash
Alternative of $0.80 per share (subsequently increased to $0.88 per share)
and the Special Dividend to be paid to Tribune/Swab-Fox stockholders,
payable to both those who elect the Cash Alternative and those who do not,
were also subjects of such negotiations. The Special Dividend is to be paid
only if the Merger is approved by the stockholders of Tribune/Swab-Fox and
Communications; therefore, Southwest Securities viewed it as part of the
overall consideration to be received by Tribune/Swab-Fox stockholders in
connection with the Merger.
(ii) Southwest Securities reviewed the ownership of both Tribune/Swab-Fox
and Communications on both a pre-Merger and post-Merger basis, assuming the
Cash Alternative is exercised according to management's best estimate
(being that 7 million to 10 million shares would be exchanged for cash).
The Merger does not create any effective change in control, because the
majority ownership will not change in a sufficient amount.
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(iii) Tribune/Swab-Fox has represented that it is currently in existence
for two purposes: (a) as a holding company for 78% of Communications, and
(b) the liquidation of certain real estate properties that for the most
part were purchased in the early 1980's and have generally declined in
value since their acquisition. Because Tribune/Swab-Fox controls less than
80% of Communications, Communications cannot be consolidated into
Tribune/Swab-Fox for federal income tax purposes. Thus, from an operations
perspective, Tribune/Swab-Fox must look to real estate liquidation for cash
flow or require Communications to pay a dividend to all of its
stockholders.
(iv) Tribune/Swab-Fox's pro forma balance sheet at December 31, 1994,
shows assets of $29.609 million, liabilities of $4.661 million, and
stockholders' equity of $24.948 million. However, on a stand alone basis
(without Communications) Tribune/Swab-Fox shows only $6.339 million in
assets, $4.661 million in liabilities, and $1.678 million in stockholder's
equity ($0.0529 per share).
(v) Tribune/Swab-Fox assets, net of the 78% ownership in Communications,
are primarily long-term in nature (property, plant and equipment, notes and
contracts receivable and equity investments) while the liabilities are more
current. Tribune/Swab-Fox's pro forma current ratio at December 31, 1994,
is 0.56. Cash and cash equivalents are only $274,000. With no operating
assets and Tribune/Swab-Fox's resulting reliance upon the liquidation of
long-term assets to generate cash flow, the short-term liabilities pose a
significant problem without the Merger or financial support from
Communications, either as loans or dividends on the Communications Common
Stock. Projected income and cash flow statements for Tribune/Swab-Fox
without the Merger show cash flow losses over the next five years without
this assistance from Communications. These projections assume that asset
sales totaling nearly $1 million can be made over that time period. It
would appear as though Tribune/Swab-Fox would be forced to either liquidate
assets through a "fire sale" or rely on Communications to meet its cash
needs.
(vi) Communications' position in the negotiations between the
Tribune/Swab-Fox Committee and the Communications Committee was that
Communications Common Stock might very well have a greater value which
would be reflected in its market price once the Merger is complete and
investors recognize that Tribune/Swab-Fox's real estate write-offs are
substantially completed. Nonetheless, Southwest Securities' position in
determining fairness was not to focus necessarily on what potential value
there may or may not be in the Communications Common Stock. While, as noted
below, such an argument can be made, to be conservative and to test the
fairness without assuming the unknown of future value, Southwest Securities
viewed the current market value of Communications Common Stock on the
American Stock Exchange, albeit thinly traded, as an acceptable measure of
the value of the Communications Common Stock to Tribune/Swab-Fox
stockholders in the Merger.
(vii) Tribune/Swab-Fox has realized a series of real estate related
losses and write-downs, totaling $7,441,593 or $0.2348 per share, that has
resulted in "negative value" in the excess assets. The average 12-month
market value of Tribune/Swab-Fox Class A Common Stock (measured from
February 1, 1994, until January 24, 1995) reflects a negative value in
these excess assets of $1,768,382 or $0.0556 per share after imputing the
corresponding market value of the 78% ownership in Communications. (This
negative value is derived by subtracting from the market value of
Tribune/Swab-Fox Class A Common Stock for such period the corresponding
market value for Tribune/Swab-Fox's 78% ownership in Communications.)
However, as of April 18, 1995, the market price of Tribune Swab-Fox Class A
Common Stock had increased to $1.00 per share and the market price of
Communications Common Stock had increased to $8.25 per share. This caused a
positive change in the excess assets resulting in a positive value of
$527,922 or $0.02 per share for the excess assets.
(viii) Sales of real estate by Tribune/Swab-Fox have been primarily made
in consideration for notes. The Tribune/Swab-Fox Committee, which has a
detailed knowledge of the Tulsa real estate market, provided evaluations of
the notes, and in some cases discounted them to reflect valuation concerns,
such as security, interest rates, collectability and perceived risk.
Certain remaining assets that are unsold still have a book value of
$1,515,308 and are deemed "long-term investments" by both Committees. To
the extent any value is realized after the Merger, the Tribune/Swab-Fox
Committee believed this would still benefit Tribune/Swab-Fox stockholders
based on their resulting ownership of Communications. Thus, it can be
viewed that any such value is, in effect,
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discounted by approximately 21% to the Tribune/Swab-Fox stockholders; i.e.,
Tribune/Swab-Fox stockholders will benefit at least to the extent of their
minimum ownership after the Merger (excluding the effect of the Cash
Alternative) of more than 79% of Communications. The majority of the book
value of these remaining assets is Tribune/Swab-Fox's interest in 1995 Land
Company which involves 49.9% ownership after the other partner realizes
$1,387,000 proceeds, plus interest. If that amount is not realized by such
partner, Tribune/Swab-Fox's ownership would yield nothing.
(ix) Southwest Securities reviewed certain other relevant financial and
operating data prepared by Tribune/Swab-Fox and Communications, including
an asset summary and supporting schedules for historical asset write-downs,
certain oil and gas reserve information and financial statements for MECI,
and certain other internally generated information on MECI as it would
relate to the shares of MECI stock held by Tribune/Swab-Fox for which there
currently is no reasonable liquidity in a public market.
(x) Although, as noted below, Southwest Securities' analysis is based
more on the pragmatic features of this transaction, namely the excess
assets component, which does not lend itself to conventional analytical
techniques, Southwest Securities, as noted above, utilized the market value
for Communications Common Stock to analyze the fairness of the
consideration to the stockholders of Tribune/Swab-Fox in the Merger.
Nevertheless, Southwest Securities computed price to earnings ratios of a
selected group of publishing companies and a selected group of data
providing companies that were considered to be reasonably comparable to
Communications. The publishing companies considered were American City
Business Journals, A.H. Belo Corporation, Daily Journal Corporation, Harte
Hanks Communications and United Newspapers. The data providing companies
were American Business Information, Dun and Bradstreet Corporation, Envoy
Corporation, Equifax, Inc. and Fair, Isaac and Company, Incorporated. The
comparable publishing company group average price to earnings ratio was
15.28. Using the average for the comparable companies for this value,
Communications per share implied equity value was $10.09. The comparable
data providing company group average price to earnings ratio was 26.53.
Using the average for the comparable companies for this value,
Communications per share implied equity value was $17.51. Southwest
Securities believed that historically Communications may have been valued
lower than comparable companies because of the uncertainty associated with
its 78% parent's (i.e., Tribune/Swab-Fox) real estate holdings and the
prior multiple markets and businesses of Tribune/Swab-Fox. Southwest
Securities also performed discounted cash flow analysis of Communications
based on projections prepared by Communications' management. Discount rates
of 10, 15, 20 and 25% were used. The respective values per share of
Communications Common Stock resulting from this analysis were $11.55,
$7.62, $5.86 and $4.88. The conclusion to be drawn from this analysis of
Communications was that the market price assumption (where market value was
above the lowest derived number--$4.88 per share--and substantially below
the highest -$17.51) used in judging financial fairness for the additional
200,000 shares was conservative. For information regarding the market price
of Communications Common Stock, see "Summary--Comparative Market Price
Information."
Although Southwest Securities did not appraise the assets of
Tribune/Swab-Fox, it performed due diligence in reviewing the Tribune/Swab-
Fox Committee's investigation and conclusions regarding the write-downs of
various assets, the discounting of some of the notes receivable for risk,
and the overall judgment required to negotiate with the Communications
Committee. Any formal valuation of the excess assets does not lend itself
to conventional securities valuation techniques used in valuing businesses,
such as comparable public company analysis, discounted cash flow analysis
and capitalization of earnings analysis. Instead, the Tribune/Swab-Fox
Committee used its pragmatic business judgment in deciding what it would
take to balance the interests of Tribune/Swab-Fox's stockholders long-term
by combining with and completely tying Tribune/Swab-Fox's future with
Communications.
Most of the factors analyzed and valuation methods summarized above indicate a
higher range of values or potential benefit to Tribune/Swab-Fox's stockholder
value if the Merger is completed. In deriving its conclusion based on the
combination of these quantitative and qualitative analyses discussed above,
Southwest Securities also considered the negative factors of the Merger,
including the potential adverse tax consequences of not utilizing various tax
attributes of Tribune/Swab-Fox and the costs of the Merger. Southwest
Securities concluded, however, that, based upon the foregoing, the benefits
that would accrue to the stockholders of
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Tribune/Swab-Fox upon completion of the Merger, which would result in greater
efficiency and the resulting enhancement of the combined companies' ability to
grow, outweighed any negative factors. Furthermore, Southwest Securities
concluded that, should the higher range of values for Communications (as
indicated by the computed price to earnings ratio of the selected group of
companies deemed comparable) become reflected in the public market, this would
be of greater benefit to Tribune/Swab-Fox stockholders. Accordingly, based upon
the foregoing, Southwest Securities was of the opinion that the consideration
to be received by the stockholders of Tribune/Swab-Fox in connection with the
Merger was fair, from a financial point of view, to such stockholders.
As described above, Southwest Securities' opinion to the Tribune/Swab-Fox
Board was one of many factors taken into consideration by the Tribune/Swab-Fox
Board in making its determination to approve the Merger. See "The Merger-
Reasons for the Merger; Recommendations of the Boards of Directors."
Southwest Securities, as a usual part of its investment banking business,
regularly issues fairness opinions and is engaged in the valuation of
businesses and securities in connection with mergers and acquisitions,
underwritings and distributions of listed and unlisted securities, private
placements and valuations for corporate and other purposes. The Tribune/Swab-
Fox Board selected Southwest Securities to act as its financial advisor on the
basis of Southwest Securities' qualifications, expertise and reputation in
investment banking in general and mergers and acquisitions specifically.
In connection with Southwest Securities' services as financial advisor to the
Tribune/Swab-Fox Board, Tribune/Swab-Fox agreed to pay and has paid to
Southwest Securities a fee of $75,000. Tribune/Swab-Fox has also agreed to
reimburse Southwest Securities for (i) all of its out-of-pocket travel expenses
incurred in connection with providing such opinion, which shall not exceed
$2,500, and (ii) the fees and disbursements of its counsel, which shall not
exceed $7,500. In addition, Tribune/Swab-Fox has agreed to indemnify Southwest
Securities and its officers, directors, employees, affiliates and each person,
if any, controlling Southwest Securities against certain liabilities and
expenses, including certain liabilities under federal securities laws, incurred
in connection with its services.
ACCOUNTING TREATMENT
The Merger will be accounted for as a downstream merger. Thus, for accounting
purposes, Tribune/Swab-Fox is the acquiring entity even though, from a legal or
structural standpoint, Communications is the acquiring and surviving entity.
Accordingly, following the Merger, the historical financial statements of
Communications, as the surviving entity, will be those historical financial
statements of Tribune/Swab-Fox. It is anticipated that the Merger will be
treated as a purchase of assets for accounting and financial reporting
purposes. Upon consummation of the Merger and before taking the Cash
Alternative into consideration, the former stockholders of Tribune/Swab-Fox
will own approximately 79% of the issued and outstanding shares of
Communications Common Stock (or approximately 71% in the event that the maximum
number of shares (10,000,000) of Tribune/Swab-Fox Common Stock are purchased
for cash pursuant to the Cash Alternative).
FEDERAL INCOME TAX CONSEQUENCES
The following summary is a general discussion, based on current law, of the
material federal income tax consequences applicable to holders of Tribune/Swab-
Fox Common Stock who receive Communications Common Stock, a combination of
Communications Common Stock and cash, or all cash in exchange for Tribune/Swab-
Fox Common Stock pursuant to the Merger. This summary reflects the opinion of
Conner & Winters, a Professional Corporation, referred to below, as to all such
material federal income tax consequences. In the opinion of Conner & Winters,
this summary discusses all of the material federal income tax consequences to
citizens or residents of the United States and domestic corporations and
partnerships which hold Tribune/Swab-Fox Common Stock as a capital asset. It
does not discuss the tax consequences that might be relevant to holders of
Tribune/Swab-Fox Common Stock entitled to special treatment under federal
income tax laws (such as individual retirement accounts and other tax deferred
accounts, life insurance companies, and tax exempt organizations).
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At the Effective Time of the Merger, Conner & Winters will render a final
opinion that the Merger will qualify as a reorganization under Section 368(a)
of the Code. Such opinion will be based on certain assumptions and
representations that have or, before the Closing Date (as defined below), will
be made by managements of Communications and Tribune/Swab-Fox (such
assumptions and representations are set forth in a preliminary opinion which
is an exhibit to the Registration Statement of which this Proxy
Statement/Prospectus is a part). The Merger should qualify as a reorganization
under this provision if, among other things, Tribune/Swab-Fox stockholders in
the aggregate receive more than 50% of the value of the Merger consideration
in Communications Common Stock. For this purpose, redemptions of capital stock
of Tribune/Swab-Fox which occur before the date of the Merger, but after
Merger discussions began (approximately September 1, 1992) will be considered
as capital stock of Tribune/Swab-Fox outstanding for which cash elections were
made. The Merger Agreement provides that cash elections may not exceed the
Cash Conversion Number. If valid cash elections exceed the Cash Conversion
Number, cash elections will be reduced proportionately. As a result of such
restrictions on the cash election, in excess of 50% of the total consideration
received by Tribune/Swab-Fox stockholders pursuant to the Merger will be
Communications Common Stock.
Although it is expected that the Merger will qualify as a reorganization
under Section 368(a) of the Code, no ruling from the Internal Revenue Service
has been or will be sought. Instead, Tribune/Swab-Fox and Communications will
rely upon the opinion of Conner & Winters to the effect that the Merger will
qualify as such a reorganization. Receipt of such opinion is a condition of
consummation of the Merger under the Merger Agreement.
If the Merger qualifies as a reorganization under Section 368(a) of the
Code, a Tribune/Swab-Fox stockholder whose Tribune/Swab-Fox Common Stock is
converted into the right to receive solely Communications Common Stock will
not be subject to federal income tax by reason of the Merger and that
stockholder's tax basis in the Communications Common Stock received in the
Merger will be the same as the stockholder's tax basis in the Tribune/Swab-Fox
Common Stock exchanged therefor. A Tribune/Swab-Fox stockholder, all of whose
shares are converted into the right to receive cash in the Merger, will
generally recognize capital gain or loss for federal income tax purposes equal
to the difference, if any, between (i) the amount of cash received by such
stockholder in the Merger, and (ii) the stockholder's tax basis in the shares
of Tribune/Swab-Fox Common Stock exchanged therefor. However, if persons or
entities related to such Tribune/Swab-Fox stockholder, or treated as related
to such stockholder under the constructive ownership rules set forth in
Section 318 of the Code (see the following paragraph), receive or are deemed
to receive Communications Common Stock by reason of the Merger, such
Tribune/Swab-Fox stockholder may recognize all or part of the amount of cash
received as dividend income. A Tribune/Swab-Fox stockholder, some of whose
shares are converted into the right to receive Communications Common Stock and
some of whose shares are converted into the right to receive cash, will, for
federal income tax purposes, be treated as if he or she exchanged all of his
or her shares of Tribune/Swab-Fox Common Stock for Communications Common Stock
and then surrendered a portion of those shares to Communications in exchange
for cash. Such Tribune/Swab-Fox stockholder will recognize gain for federal
income tax purposes equal to the lesser of (a) the difference between (i) the
fair market value of the Communications Common Stock and the amount of cash
received by such stockholder in the Merger and (ii) the holder's tax basis in
the shares of Tribune/Swab-Fox Common Stock exchanged therefor; and (b) the
amount of cash received by such holder. Generally, such gain will be capital
gain, but under certain circumstances the cash received by such stockholder
may be considered as a distribution from Communications in respect of such
stockholder's Communications Common Stock which has the effect of a
distribution of a dividend (i.e., it would be treated as ordinary income).
A cash payment to a Tribune/Swab-Fox stockholder in exchange for his or her
Tribune/Swab-Fox Common Stock will not be considered a distribution which has
the effect of a distribution of a dividend if (i) it is "substantially
disproportionate" (as such phrase is used in Section 302 of the Code), (ii) it
is not "essentially equivalent to a dividend" (as such phrase is used in
Section 302 of the Code), or (iii) the exchange constitutes a termination of
such Tribune/Swab-Fox stockholder's interest in the constituent corporations
under Section 302(b) of the Code. For this purpose, a Tribune/Swab-Fox
stockholder will be deemed to (i) have exchanged all of his or her shares of
Tribune/Swab-Fox Common Stock for shares of Communications
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Common Stock, (ii) have surrendered some or all of the shares of
Communications Common Stock received or deemed to have been received in the
Merger to Communications for cash, and (iii) own Communications Common Stock
owned by certain related parties. Generally, under Section 318 of the Code, a
stockholder is deemed to own constructively shares owned by certain related
individuals and entities (including corporations in which the stockholder has
a major interest, partnerships, trusts and estates) or shares which a
stockholder has a right to acquire by exercise of an option or by conversion
(whether or not presently exercisable or convertible).
Whether the exchange would not have the effect of a distribution of a
dividend with respect to a Tribune/Swab-Fox stockholder depends upon his or
her particular circumstances, but the transaction must, in any event, result
in a "meaningful reduction" in the stockholder's interest, or, in this case,
the stockholder's deemed interest in Communications. The Internal Revenue
Service has indicated in published rulings that any actual reduction in the
interest of a small, minority stockholder in a publicly held corporation will
constitute a "meaningful reduction" if the stockholder exercises no control
with respect to corporate affairs. The exchange would be "substantially
disproportionate," with respect to a Tribune/Swab-Fox stockholder, if (i) the
percentage of the outstanding shares of Communications Common Stock held by
such holder (including shares constructively owned under Section 318 of the
Code as described above) immediately after the exchange of his or her "deemed"
shares of Communications Common Stock for cash is less than (ii) 80% of the
percentage of the outstanding shares of Communications Common Stock held or
deemed held by such holder (including shares constructively owned) immediately
before such exchange. Finally, if a Tribune/Swab-Fox stockholder is
considered, under Section 318 of the Code, as constructively owning any shares
of Communications Common Stock owned by family members, he or she might be
able to waive such constructive ownership under procedures described in
Section 302 of the Code and thus qualify the exchange transaction as a
complete termination of his or her interest.
In general, cash received by a Tribune/Swab-Fox stockholder in lieu of
fractional shares of Communications Common Stock or by one who exercises his
or her appraisal rights will be treated as a payment in redemption of
Communications Common Stock received or deemed received in the Merger.
However, if such stockholder were, under the constructive ownership rules,
deemed to own stock exchanged for Communications Common Stock and as a result
did not satisfy one of the tests set forth in the immediately preceding
paragraph, such cash would be treated as having the effect of a distribution
in respect of his or her stock, i.e., as a dividend (ordinary income without
reduction for a stockholder's basis in the stock surrendered). A stockholder
will generally report a gain or loss on the receipt of such cash redemption
payment measured by the difference between that stockholder's basis in the
shares exchanged and the amount of cash received. If shares of Tribune/Swab-
Fox Common Stock exchanged for shares of Communications Common Stock were held
as a capital asset, any gain recognized in respect of the receipt of such cash
will be a capital gain or loss, either long or short-term depending upon
whether the shares were held for more than one year.
No loss may be recognized by a Tribune/Swab-Fox stockholder receiving both
Communications Common Stock and cash in exchange for his or her Tribune/Swab-
Fox Common Stock. The Communications Common Stock received by such a
Tribune/Swab-Fox stockholder will have a basis equal to the basis of the
Tribune/Swab-Fox Common Stock exchanged decreased by the amount of cash
received and increased by the amount of gain recognized by such Tribune/Swab-
Fox stockholder with respect to the Merger.
Neither Tribune/Swab-Fox nor Communications (nor any of the Communications
stockholders, who are not parties to the reorganization and who are not making
an exchange pursuant to the Merger) will recognize any gain or loss by reason
of the Merger if the Merger qualifies as a reorganization under Section 368(a)
of the Code as contemplated by the Merger Agreement.
THE FOREGOING IS ONLY A GENERAL DESCRIPTION OF THE MATERIAL FEDERAL INCOME
TAX CONSEQUENCES TO TRIBUNE/SWAB-FOX STOCKHOLDERS UNDER CURRENT LAW, WITHOUT
REGARD TO THE PARTICULAR FACTS AND CIRCUMSTANCES OF EACH TRIBUNE/SWAB-FOX
STOCKHOLDER'S TAX SITUATION AND STATUS. ACCORDINGLY, ALL TRIBUNE/SWAB-FOX
STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE
FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE MERGER.
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INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendations of the Communications Board and the
Tribune/Swab-Fox Board with respect to the Merger Agreement and the
transactions contemplated thereby, stockholders should be aware that certain
members of the management of Communications and Tribune/Swab-Fox and the
Communications Board and the Tribune/Swab-Fox Board have certain interests in
the Merger that are separate from the interests of stockholders of
Communications and Tribune/Swab-Fox generally. Those separate interests are
summarized below.
Howard G. Barnett, Jr. and David Lloyd Jones are directors of Communications.
(Mr. Barnett is also a director of Tribune/Swab-Fox.) Mr. Barnett owns directly
1,265,389 shares of Tribune/Swab-Fox Common Stock. In addition, immediate
family members or affiliates of Mr. Barnett own 9,908,054 additional shares.
Mr. Jones owns directly 1,042,621 shares of Tribune/Swab-Fox Common Stock. In
addition, immediate family members or affiliates of Mr. Jones own 5,549,215
additional shares. Thus, both Mr. Barnett and Mr. Jones and their family
members and affiliates will receive significant shares of Communications Common
Stock and/or cash (to the extent they or their family members or affiliates
choose the Cash Alternative) in the Merger. See "The Special Meetings--Votes
Required."
Martin A. Vaughan, a director of Tribune/Swab-Fox, is also the Chairman,
President, Chief Executive Officer and controlling shareholder (indirectly) of
MECI. Effective March 14, 1995, Tribune/Swab-Fox entered into an agreement with
MECI pursuant to which Tribune/Swab-Fox has acquired shares of MECI common
stock in exchange for certain real estate assets (see "Summary--Tribune/Swab-
Fox"). A prerequisite to entering into this agreement and consummating the
transactions contemplated thereby was approval of the Merger Agreement by the
Boards of Tribune/Swab-Fox and Communications. Therefore, MECI, and thus Mr.
Vaughan, in effect benefitted when the two Boards approved the Merger
Agreement.
Effective December 31, 1994, Robert J. Swab, a director of Tribune/Swab-Fox,
retired and resigned from his officer and employee positions with Tribune/Swab-
Fox pursuant to a Retirement Agreement. This Retirement Agreement provides,
among other things, for Tribune/Swab-Fox (or Communications, if the Merger is
consummated) to pay Mr. Swab over a six-year period approximately $370,000, in
the aggregate, as retirement and non-compete payments. In addition, if the
Merger is consummated, Mr. Swab will be nominated to serve as a director of
Communications. This nomination is expected to occur at the 1995 annual meeting
of stockholders of Communications. If the Merger is consummated, the Retirement
Agreement provides that, for a period of five years, Mr. Swab will continue to
be nominated as a director of Communications as long as he continues to own at
least 50,000 shares of Communications Common Stock. In connection with his
retirement, Mr. Swab also sold 200,000 shares of Tribune/Swab-Fox Common Stock
to Tribune/Swab-Fox at a price of $.80 per share.
Communications has agreed that, from and after the consummation of the
Merger, it will indemnify each of the current and former officers and directors
of Tribune/Swab-Fox to the extent such officers and directors are currently
entitled to indemnity from Tribune/Swab-Fox. See "The Merger Agreement--
Indemnification."
APPRAISAL RIGHTS
The following is a summary of the rights of holders of common stock seeking
appraisal under Section 262 of the Delaware General Corporation Law ("Section
262"). Section 262 is reprinted in its entirety as Appendix D to this Proxy
Statement/Prospectus and is incorporated herein by reference.
COMMUNICATIONS STOCKHOLDERS. No holder of Communications Common Stock will
have any statutory appraisal rights in connection with, or as a result of, the
matters to be acted upon at the Communications Meeting. Under Section 262,
appraisal rights are not available for the shares of any class or series of
stock which, at the record date fixed to determine the stockholders entitled to
receive notice of and to vote at the meeting of stockholders to act upon an
agreement of merger, were listed on a national securities exchange.
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Communications Common Stock was listed on the AMEX on the record date for the
Communications Meeting; therefore, no appraisal rights are available.
TRIBUNE/SWAB-FOX STOCKHOLDERS
Eligible Stockholders. Under Section 262, holders of shares of Tribune/Swab-
Fox Common Stock ("Shares") may demand an appraisal of the fair value of their
Shares and payment of cash in lieu of accepting the shares of Communications
Common Stock issuable to them in connection with the Merger. All references in
Section 262 and this summary thereof to a "stockholder" are to the record
holder of the Shares as to which appraisal rights are asserted. A person having
a beneficial interest in Shares that are held of record in the name of another
person, such as a broker or nominee, and who desires to exercise appraisal
rights, must act promptly to cause the record holder to follow properly the
steps summarized below, in a timely manner to perfect the appraisal rights the
beneficial owner may have.
Exercising Procedures. Tribune/Swab-Fox must notify each Tribune/Swab-Fox
stockholder, not less than 20 days prior to the Tribune/Swab-Fox Meeting, that
appraisal rights are available together with a copy of Section 262. This Proxy
Statement/Prospectus constitutes such notice. Stockholders of record who desire
to exercise their appraisal rights must: (i) hold Shares on the date of making
a demand for appraisal; (ii) continuously hold Shares through the Effective
Time of the Merger; (iii) deliver, prior to the Tribune/Swab-Fox Meeting, a
written demand for appraisal to Tribune/Swab-Fox at 2407 East Skelly Drive,
Tulsa, Oklahoma 74105, Attention: Donna J. Peters, Secretary; and (iv)
otherwise satisfy all of the following conditions. A request for appraisal
rights need not be made with respect to all Shares owned by a stockholder where
such stockholder holds shares of record as nominee for the beneficial owner
thereof. It is not clear, however, and the Delaware courts have not decided the
question of whether a single beneficial owner must request appraisal rights
with regard to all Shares owned by such stockholder in order to preserve
appraisal rights or whether an individual stockholder can seek an appraisal as
to part, but not all, of his or her holdings in all contexts. Although a
stockholder must not have voted in favor of the Merger, Section 262 does not
require that a stockholder vote against the Merger in order to preserve his or
her appraisal rights. Voting against the Merger, abstaining from voting or
failing to vote, however, will not constitute a written demand for appraisal.
Within 120 days after the Effective Time of the Merger, Communications, as
the surviving corporation in the Merger, or any stockholder who has satisfied
the foregoing conditions and is otherwise entitled to appraisal rights under
Section 262, may file a petition in the Delaware Chancery Court demanding a
determination of the value of the Shares. Communications does not intend to
file a petition or initiate any negotiations with respect to the fair value of
these Shares. Accordingly, stockholders of Tribune/Swab-Fox who wish to
exercise appraisal rights should regard it as their obligation to initiate all
necessary action with respect to the perfection of their appraisal rights
within the time periods prescribed in Section 262.
Only a holder of record of Shares is entitled to assert appraisal rights for
Shares registered in that holder's name. The demand should be executed by or
for the holder of record, fully and correctly, as the holder's name appears on
the holder's stock certificate. If the Shares are owned of record in a
fiduciary capacity, such as by a trustee, guardian or custodian, execution of
the demand should be made in that capacity, and if the Shares are owned of
record by more than one person, as in a joint tenancy or tenancy in common, the
demand should be executed by or for all joint owners. An authorized agent,
including one of two or more joint owners, may execute the demand for appraisal
for a holder of record; however, the agent must identify the record owner or
owners and expressly disclose the fact that, in executing the demand, the agent
is acting as authorized agent for the record owner.
A record holder, such as a broker, who holds Shares as nominee for the
beneficial owner thereof may exercise the holder's right of appraisal with
respect to such Shares. If such record holder holds Shares as nominee for more
than one beneficial owner, it may exercise the holder's right of appraisal with
respect to
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the Shares held for all or less than all of those beneficial owners. In that
case, the written demand should set forth the number of Shares covered by it.
Where no number of shares is expressly mentioned, the demand will be presumed
to cover all shares outstanding in the name of the applicable record owner.
Within 120 days after the Effective Time of the Merger, any stockholder of
Tribune/Swab-Fox who has complied with the requirements for exercise of
appraisal rights, as discussed above, is entitled, upon written request, to
receive from Communications a statement setting forth the aggregate number of
Shares with respect to which demands for appraisal have been made and the
aggregate number of holders of those Shares. This statement must be mailed
within 10 days after the written request therefore has been received by
Communications, or within 10 days after the expiration of the period for
delivery of demands for appraisal, whichever is later.
A stockholder will fail to perfect, and will effectively lose his or her
right to appraisal, if no petition for appraisal is filed within 120 days after
the Effective Time of the Merger, or if the stockholder delivers to
Communications a written withdrawal of his demand for an appraisal, except that
any attempt to withdraw made more than 60 days after the Effective Time of the
Merger requires the written approval of Communications. If any stockholder of
Tribune/Swab-Fox who demands appraisal of his or her Shares under Section 262
fails to perfect, or effectively withdraws or loses, his or her right to
appraisal, the Shares of that holder will be converted into the right to
receive shares of Communications Common Stock in accordance with the terms of
the Merger, without any interest thereon. Furthermore, no appraisal proceeding
in the Delaware Chancery Court will be dismissed as to any stockholder without
the approval of the Court, which approval may be conditioned upon terms that
the Court deems just.
Fair Value Determination. If a petition for appraisal is timely filed, after
a hearing on the petition, the Delaware Chancery Court will determine the
stockholders of Tribune/Swab-Fox entitled to appraisal rights and will appraise
the Shares owned by those stockholders, determining "fair value" exclusive of
any element of value arising from the accomplishment or expectation of the
Merger, together with a fair rate of interest, if any, to be paid upon the
amount determined to be the fair value. Simple or compound interest may be
paid. The judicial determination of the "fair value" of the Shares is required
to be based on all relevant factors involving the value of a company, including
market value, asset value, dividends, earnings prospects, the nature of the
enterprise and any other facts which could be ascertained as of the date of the
Merger which throw any light on future prospects of the merged corporation. In
Weinberger v. UOP, Inc., the Delaware Supreme Court stated, among other things,
that "proof of value by any techniques or methods which are generally
considered acceptable in the financial community and otherwise admissible in
court" should be considered in an appraisal proceeding. In Weinberger, the
Delaware Supreme Court held that "elements of future value, including the
nature of the enterprise, which are known or susceptible of proof as of the
date of the merger and not the product of speculation, may be considered." The
presiding Court shall direct payment of the fair value of the Shares by
Communications to the stockholders entitled thereto. Stockholders considering
exercising their rights of appraisal should bear in mind that the fair value of
their Shares determined under Section 262 could be more than, the same as or
less than the value of the shares of Communications Common Stock (or the Offer
Price if the Cash Alternative is elected) they would receive if they did not
seek appraisal of their shares.
Costs. The cost of the appraisal proceeding may be determined by the Delaware
Chancery Court and taxed against the parties as the Delaware Chancery Court
deems equitable in the circumstances. Upon application of a dissenting
stockholder, the Delaware Chancery Court may order all or a portion of the
expenses of experts incurred by any dissenting stockholder in connection with
the appraisal proceeding, including without limitation reasonable attorneys'
fees and the fees and expenses of such experts, be charged pro rata against the
value of all shares entitled to appraisal. Thus, the Delaware Chancery Court
has the ability to ensure that all stockholders who benefit from the action
share the expenses.
Voting Rights; Dividends; Etc. Any stockholder who has duly demanded
appraisal in compliance with Section 262 will not, after the Effective Time of
the Merger, be entitled to vote the Shares subject to such
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demand for any purpose or to receive payment of dividends or other
distributions on such Shares, except for dividends or distributions payable to
stockholders of record at a date prior to the Effective Time of the Merger,
including without limitation the Special Dividend.
Dissenters who elect to receive cash for their Tribune/Swab-Fox Common Stock
may be subject to federal and/or state income tax on any gain resulting from
the transaction. See "The Merger--Federal Income Tax Consequences."
The maximum number of shares of Tribune/Swab-Fox Common Stock which
Communications is offering to buy in the Cash Alternative (10,000,000 shares)
will be reduced by the number of shares for which appraisal rights have been
properly perfected as of the Effective Time of the Merger.
THE PROVISIONS OF SECTION 262 ARE TECHNICAL IN NATURE AND COMPLEX. IT IS
SUGGESTED THAT ANY STOCKHOLDER WHO DESIRES TO DISSENT CONSULT INDEPENDENT LEGAL
COUNSEL BECAUSE FAILURE TO COMPLY STRICTLY WITH THE PROVISIONS OF SECTION 262
MAY PRECLUDE THE EXERCISE OF APPRAISAL RIGHTS.
RESTRICTIONS ON RESALES BY AFFILIATES OF TRIBUNE/SWAB-FOX
All shares of Communications Common Stock received by Tribune/Swab-Fox
stockholders in the Merger will be freely transferable, except that shares of
Communications Common Stock received by persons who are deemed to be
"affiliates" (as such term is defined under the Securities Act) of
Tribune/Swab-Fox prior to the Merger may be resold by them only in transactions
permitted by the resale provisions of Rule 145 promulgated under the Securities
Act (or Rule 144 in the case of such persons who become affiliates of
Communications) or as otherwise permitted under the Securities Act. Persons who
may be deemed to be affiliates of Tribune/Swab-Fox or Communications generally
include individuals or entities that control, are controlled by, or are under
common control with, such party and may include certain officers and directors
of such party as well as principal stockholders of such party. The Merger
Agreement requires Tribune/Swab-Fox to exercise its reasonable efforts to cause
each of its affiliates to execute a written agreement to the effect that such
person will not offer to sell, transfer or otherwise dispose of any of the
shares of Communications Common Stock issued to such person in or pursuant to
the Merger unless (i) such sale, transfer or other disposition has been
registered under the Securities Act, (ii) such sale, transfer or other
disposition is made in conformity with Rule 145 under the Securities Act, or
(iii) in the opinion of counsel, such sale, transfer or other disposition is
exempt from registration under the Securities Act.
THE MERGER AGREEMENT
The following is a brief summary of all material provisions of the Merger
Agreement, a copy of which is attached as Appendix A to this Proxy
Statement/Prospectus and is incorporated herein by reference.
THE MERGER
Pursuant to the Merger Agreement, subject to the terms and conditions
thereof, at the Effective Time of the Merger, Tribune/Swab-Fox will be merged
with and into Communications. The Merger will have the effects specified in the
Delaware General Corporation Law.
At the Effective Time of the Merger, Tribune/Swab-Fox will be merged with and
into Communications in accordance with the Delaware General Corporation Law,
whereupon the separate existence of Tribune/Swab-Fox will cease, and
Communications will be the surviving corporation. Each share of Tribune/Swab-
Fox Common Stock then issued and outstanding (other than (i) shares held by
stockholders of Tribune/Swab-Fox who have perfected their right to appraisal
and have not withdrawn or otherwise lost such right; and (ii) shares held by
Communications, all of which will be cancelled), shall then be converted into
and represent the right to receive, and shall be exchangeable for 0.1255 of a
share of Communications Common Stock (the "Stock Consideration") or, at the
election of the holder thereof in the manner provided
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below, $0.88 in cash (the "Cash Consideration"); provided, however, that a
holder's right to receive the Cash Consideration shall be subject to proration
as provided below. The Stock Consideration and the Cash Consideration are
hereinafter together referred to as the "Merger Consideration."
The Merger shall become effective at such time as the Certificate of Merger
is duly filed with the Secretary of State of the State of Delaware or at such
later time as is specified in the Certificate of Merger (the Effective Time of
the Merger). Such filing is anticipated to be made on and to be effective as of
the Closing Date (as defined below).
At the Effective Time of the Merger, each share of Communications Common
Stock then issued and outstanding will continue as one share of Communications
Common Stock, except for outstanding shares of Communications Common Stock
owned by Tribune/Swab-Fox, which will be cancelled.
The closing of the transactions contemplated by the Merger Agreement will
take place on the next day after the day on which the last of the conditions
set forth in the Merger Agreement (other than those that are waived by the
party or parties for whose benefit such conditions exist) are satisfied or at
such other time, place or date as the parties to the Merger Agreement may agree
(the "Closing Date"). There are various conditions precedent to the
consummation of the Merger. See "The Merger Agreement--Conditions." There is no
assurance that the Merger will be consummated.
CASH ELECTION PROCEDURES
Each Tribune/Swab-Fox stockholder who desires to elect to receive cash for
some or all shares of Tribune/Swab-Fox Common Stock held by such stockholder
must make a written election to receive cash on the Cash Election Form included
with this Proxy Statement/Prospectus. To be valid, a cash election must be
received by Mellon Securities Trust Company, as the Exchange Agent, at P.O. Box
798, Midtown Station, New York, New York 10018, not later than 5:00 p.m. New
York time, on May 23, 1995 (the Cash Election Deadline).
A CASH ELECTION WILL BE VALID ONLY IF THE CASH ELECTION FORM HAS BEEN
PROPERLY COMPLETED AND SIGNED AND ACCOMPANIED BY CERTIFICATES FOR THE SHARES OF
TRIBUNE/SWAB-FOX COMMON STOCK TO WHICH SUCH CASH ELECTION FORM RELATES (OR BY
AN APPROPRIATE GUARANTEE OF DELIVERY OF SUCH CERTIFICATES, AS SET FORTH IN SUCH
CASH ELECTION FORM, FROM A MEMBER OF ANY REGISTERED NATIONAL SECURITIES
EXCHANGE OR THE NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. OR A
COMMERCIAL BANK OR TRUST COMPANY IN THE UNITED STATES, PROVIDED SUCH
CERTIFICATES ARE IN FACT DELIVERED BY THE TIME SET FORTH IN SUCH GUARANTEE OF
DELIVERY), DULY ENDORSED IN BLANK OR OTHERWISE IN A FORM ACCEPTABLE FOR
TRANSFER ON THE BOOKS OF TRIBUNE/SWAB-FOX.
The Merger Agreement provides that Communications will not accept cash
elections in excess of the Cash Conversion Number. Section 1.4 of the Merger
Agreement describes the selection procedure for cash elections. If cash
elections are received for a number of shares of Tribune/Swab-Fox Common Stock
which is greater than the Cash Conversion Number, all cash elections will be
reduced proportionately so that each share of Tribune/Swab-Fox Common Stock
covered by a cash election and not converted into the right to receive the Cash
Consideration as set forth above will be converted into the Stock
Consideration. If cash elections are received for a number of shares of
Tribune/Swab-Fox Common Stock which is less than or equal to the Cash
Conversion Number, all shares of Tribune/Swab-Fox Common Stock for which
effective cash elections have been received will be converted into the right to
receive the Cash Consideration.
A cash election may be changed by written notice of the change and a
completed, signed and revised Cash Election Form being given to, and received
by, the Exchange Agent before the Cash Election Deadline. A cash election may
be revoked by written notice of revocation given to, and received by, the
Exchange Agent prior to the Effective Time of the Merger. TRIBUNE/SWAB-FOX
STOCKHOLDERS WILL NOT BE GIVEN FORMAL NOTICE OF THE EFFECTIVE TIME OF THE
MERGER; HOWEVER, IT IS ANTICIPATED THAT THE EFFECTIVE TIME OF THE MERGER WILL
OCCUR ON THE NEXT DAY AFTER THE TRIBUNE/SWAB-FOX MEETING OR VERY SOON
THEREAFTER. In addition, all cash elections
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will automatically be revoked if the Exchange Agent is notified in writing by
Communications and Tribune/Swab-Fox that the Merger Agreement has been
terminated. If a cash election is revoked, the certificate or certificates (or
guarantee of delivery, as appropriate) for the shares of Tribune/Swab-Fox
Common Stock to which such cash election relates will be promptly returned to
the person who submitted the same to the Exchange Agent.
NO TRIBUNE/SWAB-FOX STOCKHOLDER WILL RECEIVE CASH FOR TRIBUNE/SWAB-FOX COMMON
STOCK UNTIL AFTER THE EFFECTIVE TIME OF THE MERGER. NO INTEREST WILL BE PAID OR
ACCRUED ON THE CASH AMOUNTS PAYABLE TO TRIBUNE/SWAB-FOX STOCKHOLDERS PURSUANT
TO THE MERGER. The cash to be paid to Tribune/Swab-Fox stockholders pursuant to
the Merger will be paid out of working capital of Communications and other
funds available to it for this purpose.
For information regarding the federal income tax consequences of electing to
receive cash for some or all shares of Tribune/Swab-Fox Common Stock, see "The
Merger--Federal Income Tax Consequences."
The Cash Election Form contains information regarding the backup withholding
tax rules. Under these rules, unless an exception applies under the applicable
law and regulations, the Exchange Agent will be required to withhold, and will
withhold, 31% of the gross cash proceeds to be paid to a Tribune/Swab-Fox
stockholder or other designated payee pursuant to the Merger unless the
Tribune/Swab-Fox stockholder or other payee provides such stockholder's tax
identification number (employer identification number or social security
number) and certifies that such number is correct.
All interpretations and decisions concerning application of the procedures
for cash elections will be made by Tribune/Swab-Fox and Communications, and all
such interpretations and decisions will be final and binding on all holders of
shares of Tribune/Swab-Fox Common Stock.
EXCHANGE OF TRIBUNE/SWAB-FOX COMMON STOCK FOR COMMUNICATIONS COMMON STOCK
Any Tribune/Swab-Fox stockholder who desires to receive Communications Common
Stock for all shares of Tribune/Swab-Fox Common Stock held should not submit a
Cash Election Form. Any Tribune/Swab-Fox Common Stock as to which a valid and
timely cash election has not been made will automatically and without any
action on the part of a Tribune/Swab-Fox stockholder be converted at the
Effective Time of the Merger only into the right to receive whole shares of
Communications Common Stock. No fractional shares of Communications Common
Stock or scrip representing the same will be issued in connection with the
Merger. In lieu of such fractional shares, any holder of Tribune/Swab-Fox
Common Stock who would otherwise be entitled to a fractional share of
Communications Common Stock will, upon surrender of his or her Tribune/Swab-Fox
Common Stock certificate, receive in cash an amount equal to the product
obtained by multiplying $0.88 times the number of shares of Tribune/Swab-Fox
Common Stock which would otherwise be converted into a fractional share of
Communications Common Stock. NO CERTIFICATES FOR COMMUNICATIONS COMMON STOCK
WILL BE ISSUED IN EXCHANGE FOR TRIBUNE/SWAB-FOX COMMON STOCK UNTIL AFTER THE
EFFECTIVE TIME OF THE MERGER.
A letter of transmittal containing instructions with regard to the surrender
of certificates (the "Letter of Transmittal") will be mailed to Tribune/Swab-
Fox stockholders promptly after the Effective Time of the Merger. Tribune/Swab-
Fox stockholders not making a cash election should surrender such certificates
ONLY with the Letter of Transmittal. Tribune/Swab-Fox stockholders should NOT
send any certificates with the enclosed proxy card. However, Tribune/Swab-Fox
stockholders making a cash election MUST return their stock certificates with
the Cash Election Form as described above. See "The Merger Agreement--Cash
Election Procedures."
If the Merger Consideration (or any portion thereof) is to be delivered to a
person other than the person in whose name the Tribune/Swab-Fox Common Stock
certificates surrendered in exchange therefor are registered, it will be a
condition to the payment of such Merger Consideration that the certificates so
surrendered will be properly endorsed or accompanied by appropriate stock
powers and otherwise in proper
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form for transfer, that such transfer otherwise be proper and that the person
requesting such transfer pay to the Exchange Agent any transfer or other taxes
payable by reason of the foregoing or establish to the satisfaction of the
Exchange Agent that such taxes have been paid or are not required to be paid.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties relating
to, among other things: (i) the due incorporation, existence and good standing
of Tribune/Swab-Fox and Communications and similar corporate matters; (ii) the
authorization, execution, delivery and enforceability of the Merger Agreement;
(iii) authorization of certain governmental bodies; (iv) the absence of
conflicts under certificates of incorporation or bylaws, violations of any law
and defaults under any obligations; (v) the capital structure of Tribune/Swab-
Fox and Communications; (vi) certain documents filed by each of Tribune/Swab-
Fox and Communications with the Commission and the accuracy of information
contained therein; (vii) litigation; (viii) no brokers' or finders' fees with
respect to the Merger; (ix) takeover statutes; and (x) the due authorization
and issuance of the Communications Common Stock.
CERTAIN COVENANTS
Tribune/Swab-Fox has agreed, among other things, to conduct its business
prior to the consummation of the Merger only in the ordinary and usual course
consistent with past practice and that, without the prior written consent of
Communications, Tribune/Swab-Fox will not, among other things, (i) amend its
Certificate of Incorporation or Bylaws; (ii) split, combine or reclassify any
of its outstanding capital stock; (iii) declare, set aside or pay any dividend
or other distribution with respect to its capital stock, other than payment of
the Special Dividend; (iv) issue, sell or agree to issue or sell any
securities, any rights, options or warrants to acquire its capital stock, or
securities convertible into or exchangeable or exercisable for its capital
stock; (v) merge or consolidate with, or transfer all or substantially all of
its assets to, another entity; or (vi) liquidate, wind-up or dissolve.
Tribune/Swab-Fox has also agreed to use its best efforts to obtain and deliver
to Communications certain letters from its "affiliates," as defined under Rule
145 under the Securities Act.
CONDITIONS
The respective obligations of Tribune/Swab-Fox and Communications to
consummate the Merger are subject to the satisfaction (or waiver by the party
for whose benefit such conditions exist) of the following conditions, among
others: (i) adoption of the Merger Agreement by a majority of the stockholders
of Tribune/Swab-Fox and Communications; (ii) no court, arbitrator or
governmental body, agency or official having issued any order, and there not
being any statute, rule or regulation, restraining or prohibiting the
consummation of the Merger; (iii) all actions by or in respect of or filings
with any governmental body, agency, official, or authority required to permit
the consummation of the Merger having been obtained; and (iv) Tribune/Swab-Fox
and Communications having obtained an opinion of Conner & Winters, A
Professional Corporation, to the effect that the Merger will be a
reorganization under Section 368(a) of the Code and the regulations thereunder,
and such opinion not having been withdrawn.
The obligations of Communications to consummate the Merger are subject to the
satisfaction (or waiver by Communications) of the following further conditions:
(i) Tribune/Swab-Fox having performed in all material respects all of its
obligations required under the Merger Agreement at or prior to the Effective
Time of the Merger, and the representations and warranties of Tribune/Swab-Fox
having been accurate in all material respects both when made and at and as of
the Effective Time of the Merger; (ii) all other statutory requirements for the
valid consummation by Communications of the transactions contemplated by the
Merger Agreement having been fulfilled; (iii) Communications having received
from its investment banker, Oppenheimer, a written opinion addressed to
Communications, that the Merger Consideration is fair, from a financial point
of view, to the stockholders of Communications, and such opinion not having
been withdrawn; (iv) the holders of not more than 10% of the Tribune/Swab-Fox
Common Stock having exercised their right to appraisal pursuant to Section 262
of the Delaware General Corporation Law; and (v) no material adverse change
having occurred in the business or financial condition of Tribune/Swab-Fox.
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The obligations of Tribune/Swab-Fox to consummate the Merger are subject to
the satisfaction (or waiver by Tribune/Swab-Fox) of the following further
conditions: (i) Communications having performed in all material respects all of
its obligations required under the Merger Agreement at or prior to the
Effective Time of the Merger, and the representations and warranties of
Communications having been accurate in all material respects both when made and
at and as of the Effective Time of the Merger; (ii) the Communications Common
Stock required to be issued under the Merger Agreement having been approved for
listing on the AMEX, subject to official notice of issuance; (iii) all other
statutory requirements for the valid consummation by Tribune/Swab-Fox of the
transactions contemplated by the Merger Agreement having been fulfilled; (iv)
Tribune/Swab-Fox having received from its investment banker, Southwest
Securities, a written opinion addressed to Tribune/Swab-Fox, that the Merger
Consideration is fair, from a financial point of view, to the stockholders of
Tribune/Swab-Fox, and such opinion not having been withdrawn; and (v) no
material adverse change having occurred in the business or financial condition
of Communications.
INDEMNIFICATION
The Merger Agreement provides that Communications shall indemnify and hold
harmless each person who is, or has been at any time prior to the date of the
Merger Agreement or who becomes prior to the Effective Time of the Merger, an
officer or director of Tribune/Swab-Fox, in respect of acts or omissions
occurring prior to the Effective Time of the Merger (including but not limited
to the transactions contemplated by the Merger Agreement) to the extent
provided under the certificate of incorporation and bylaws of Tribune/Swab-Fox,
provided, that such indemnification will be subject to any limitation imposed
from time to time under applicable law. See "Comparative Rights of
Stockholders--Indemnification of Directors and Officers." In the opinion of the
staff of the Commission, indemnification of directors, officers and control
persons for liabilities arising under the Securities Act is unenforceable as
against public policy.
TERMINATION; AMENDMENTS AND WAIVERS
The Merger Agreement may be terminated and the Merger may be abandoned at any
time prior to the Effective Time of the Merger (notwithstanding any approval of
the Merger Agreement by the stockholders of Communications or Tribune/Swab-
Fox): (i) by mutual written consent of Communications and Tribune/Swab-Fox;
(ii) by either Communications or Tribune/Swab-Fox, if the Merger has not been
consummated by June 30, 1995; (iii) by either Communications or Tribune/Swab-
Fox, if any judgment, injunction, order or decree enjoining Communications or
Tribune/Swab-Fox from consummating the Merger is entered and such judgment,
injunction, order or decree has become final and nonappealable; (iv) by either
Communications or Tribune/Swab-Fox if the approvals of the stockholders of
Communications or Tribune/Swab-Fox contemplated by the Merger Agreement have
not been obtained by reason of the failure to obtain the required vote at the
Communications Meeting or the Tribune/Swab-Fox Meeting or at any adjournments
thereof; and (v) by either Communications or Tribune/Swab-Fox upon a breach by
the other party of any representation, warranty, covenant or agreement of such
party, or if any representation or warranty of the other party has become
untrue, in either case such that certain conditions to the Merger would be
incapable of being satisfied by June 30, 1995 (or such later date as the
parties may have agreed).
Any provision of the Merger Agreement may be amended or waived prior to the
Effective Time of the Merger if, and only if, such amendment or waiver is in
writing and signed, in the case of an amendment, by Tribune/Swab-Fox and
Communications or, in the case of a waiver, by the party against whom the
waiver is to be effective; provided, that, after the adoption of the Merger
Agreement by the stockholders of Tribune/Swab-Fox, no such amendment or waiver
shall, without the further approval of such stockholders, alter or change (i)
the amount or kind of consideration to be received in exchange for any shares
of Tribune/Swab-Fox Common Stock, (ii) any term of the certificate of
incorporation of Communications, or (iii) any of the terms or conditions of the
Merger Agreement if such alteration or change would adversely affect the
holders of any shares of Tribune/Swab-Fox Common Stock.
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EXPENSES
Whether or not the Merger is consummated, except as otherwise agreed in
writing by Communications and Tribune/Swab-Fox, (i) Tribune/Swab-Fox will bear
the fees and expenses of Southwest Securities and any attorneys (other than
Conner & Winters, A Professional Corporation) engaged by Tribune/Swab-Fox, (ii)
Communications will bear the fees and expenses of Oppenheimer and any attorneys
(other than Conner & Winters, A Professional Corporation) engaged by
Communications, and (iii) all other expenses, including the fees and expenses
of any accountants and other attorneys, incurred in connection with the Merger
Agreement and the transactions contemplated hereby will be borne equally by
Tribune/Swab-Fox and Communications. Communications and Tribune/Swab-Fox each
estimate that the total amount of the expenses incurred and to be incurred by
it in connection with the Merger Agreement and the transactions contemplated
thereby will be $400,000 and $225,000, respectively.
DESCRIPTION OF COMMUNICATIONS CAPITAL STOCK
The authorized capital stock of Communications consists of 10,000,000 shares
of Communications Common Stock and 1,000,000 shares of preferred stock, par
value $10.00 per share ("Communications Preferred Stock"). No class of capital
stock of Communications entitles the holder thereof to any preemptive rights to
purchase or subscribe for shares of any class or any other securities.
COMMUNICATIONS COMMON STOCK. All issued and outstanding shares of
Communications Common Stock are validly issued, fully paid and nonassessable,
and the shares of Communications Common Stock to be issued in the Merger, when
issued pursuant to the Merger Agreement, will be validly issued, fully paid and
nonassessable. The holders of Communications Common Stock are entitled to one
vote for each share held on all matters submitted to a vote of common
stockholders, including the election of directors. The Communications Common
Stock does not have cumulative voting rights. Each share of Communications
Common Stock is entitled to participate equally in dividends, as and when
declared by the Communications Board out of funds legally available therefor,
and in the distribution of assets in the event of liquidation, subject in all
cases to any prior rights of outstanding shares of Communications Preferred
Stock. The shares of Communications Common Stock have no preemptive or
conversion rights, redemption rights or sinking fund provisions.
The outstanding shares of Communications Common Stock are listed on the AMEX
and trade under the symbol "TCM." Bank of Oklahoma, N.A. is the transfer agent
and registrar for the Communications Common Stock.
COMMUNICATIONS PREFERRED STOCK. Pursuant to Communications' Certificate of
Incorporation (the "Communications Charter"), Communications is authorized to
issue up to 1,000,000 shares of Communications Preferred Stock, and the
Communications Board by resolution may establish one or more series of
Communications Preferred Stock having the number of shares, designations,
relative voting rights, dividend rights, liquidation and other rights,
preferences and limitations that the Communications Board fixes without any
stockholder approval. The issuance of Communications Preferred Stock may
adversely affect the rights of the holders of Communications Common Stock. In
addition, the Communications Preferred Stock may be issued as an "anti-
takeover" device. See "Comparative Rights of Stockholders--"Blank Check'
Preferred Stock." As of the date of this Proxy Statement/Prospectus, no shares
of Communications Preferred Stock have been issued and no series of
Communications Preferred Stock has been designated by the Communications Board.
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COMPARATIVE RIGHTS OF STOCKHOLDERS
GENERAL
As a result of the Merger, holders of Tribune/Swab-Fox Common Stock (other
than holders who exercise their appraisal rights or holders who elect the Cash
Alternative for all of their shares and have all such shares acquired for the
Cash Consideration) will become stockholders of Communications and the rights
of all such former Tribune/Swab-Fox stockholders will thereafter be governed by
the Communications Charter and the Communications bylaws as currently in effect
(the "Communications Bylaws"). The following is a summary of the material
differences between, as well as a summary of, the rights of holders of
Communications Common Stock and holders of Tribune/Swab-Fox Common Stock.
Because both Tribune/Swab-Fox and Communications are organized and exist under
Delaware law and are subject to the corporate laws of Delaware, these
differences arise principally from various provisions of the certificates of
incorporation and bylaws of the two companies. For a more complete description
of these differences and rights, reference is made to the corporate laws of
Delaware and the full text of the Communications Charter, the Communications
Bylaws, the Tribune/Swab-Fox Certificate of Incorporation (the "Tribune/Swab-
Fox Charter") and the bylaws of Tribune/Swab-Fox as currently in effect (the
"Tribune/Swab-Fox Bylaws"). For information as to how to obtain copies of such
documents, see "Documents Incorporated By Reference."
NUMBER OF DIRECTORS; REMOVAL OF DIRECTORS; FILLING VACANCIES
Communications. The Communications Bylaws provide that the number of
directors of Communications will be determined by the Board prior to the
mailing of the notice of the annual meeting of stockholders, at any regular or
special meeting of the Board, but in no event may the number of directors be
less than three nor more than fifteen. The Communications Board currently
consists of seven members.
Stockholders of Communications may remove a director or the entire
Communications Board, with or without cause, at any time upon the affirmative
vote of holders of a majority of the then outstanding shares of stock entitled
to vote generally in the election of directors.
The Communications Bylaws provide that any vacancies occurring in the
Communications Board may be filled by the affirmative vote of a majority of the
remaining directors, though less than a quorum. A director elected to fill a
vacancy created by the resignation or termination of a director will serve the
remainder of the term of the resigning or terminated director. The
Communications Charter and the Communications Bylaws both provide that any
directorship to be filled by reason of an increase in the number of directors
shall be filled by an election at an annual or special meeting of stockholders
called for that purpose, unless the vacancy was created by the stockholders, in
which case it may be filled by the directors.
Tribune/Swab-Fox. The Tribune/Swab-Fox Bylaws contain substantially similar
provisions relating to the determination of the number of directors; however,
in no event may the number of directors of Tribune/Swab-Fox be less than three
nor more than eleven. The Tribune/Swab-Fox Board currently consists of six
members.
Stockholders of Tribune/Swab-Fox have the same rights with respect to the
removal of directors.
The Tribune/Swab-Fox Charter and the Tribune/Swab-Fox Bylaws contain the same
provisions relating to the filling of board vacancies of directors.
STOCKHOLDER ACTION BY WRITTEN CONSENT; SPECIAL MEETINGS
Action by stockholders of Communications or Tribune/Swab-Fox may be taken
without a meeting of the stockholders by written consent so long as the stock
ownership represented by those consenting in writing to the action amounts at
least to the number of votes that would have been necessary to approve such
action
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at a meeting of stockholders. Special meetings of the stockholders of
Communications or Tribune/Swab-Fox may be called at any time by such company's
Board of Directors or as otherwise allowed by law. Business at such special
meeting shall be confined to the objects stated in the call.
AMENDMENTS OF THE CERTIFICATE OF INCORPORATION AND BYLAWS
The Communications Charter and the Tribune/Swab-Fox Charter may each be
amended by approval by the respective holders of a majority of the outstanding
stock of such company entitled to vote thereon. The Communications Bylaws and
the Tribune/Swab-Fox Bylaws may each be amended by the approval by the
respective holders of a majority of the outstanding stock of such company
entitled to vote thereon, or by approval of a majority of such company's Board
of Directors.
"BLANK CHECK" PREFERRED STOCK
Communications. Subject to certain limitations prescribed by law and the
rules of the AMEX, the Communications Board is authorized by the Communications
Charter, without any approval or other action by the Communications
stockholders, to provide for the issuance of shares of Communications Preferred
Stock in one or more series, to establish the number of shares of each such
series and to fix the designations, powers, preferences and rights of the
shares of each such series and any qualifications, limitations or restrictions
thereof. See "Description of Communications Capital Stock--Communications
Preferred Stock."
Tribune/Swab-Fox. The Tribune/Swab-Fox Charter contains substantially similar
provisions relating to Tribune/Swab-Fox Class A Preferred Stock, par value
$10.00 per share.
Management of Communications believes that the ability of the Communications
Board to issue one or more series of Communications Preferred Stock provides
Communications with flexibility in structuring possible future financings and
acquisitions and in meeting other corporate needs that might arise. Although
the Communications Board has no intention at the present time of doing so, it
could issue a series of Communications Preferred Stock that could, depending on
the terms of such series, impede the completion of a merger, tender offer or
other takeover attempt. The Communications Board will make any determination to
issue such shares based on its judgment as to the best interests of
Communications and its stockholders. The Communications Board, in so acting,
could issue Communications Preferred Stock having terms that discourage an
acquisition attempt through which an acquiror may be able to change the
composition of the Communications Board, including a tender offer or other
transaction that some of the Communications stockholders might believe to be in
their best interests or in which stockholders might receive a premium for their
stock over the then current market price of such stock.
BUSINESS COMBINATIONS
Communications. Communications is a Delaware corporation and is subject to
Section 203 of the Delaware General Corporation Law. In general, Section 203
prevents an "interested stockholder" (defined generally as a person owning 15%
or more of Communications' outstanding voting stock) from engaging in a
"business combination" (as defined in Section 203) with Communications for
three years following the date that person becomes an interested stockholder
unless (i) before that person became an interested stockholder, the
Communications Board approved either the transaction in which the interested
stockholder became an interested stockholder or the business combination, (ii)
upon completion of the transaction that resulted in the interested
stockholder's becoming an interested stockholder, the interested stockholder
owns at least 85% of the Communications voting stock outstanding at the time
the transaction commenced (excluding stock held by directors who are also
officers of Communications and by employee stock plans that do not provide
employees with the right to determine confidentially whether shares held
subject to the plan will be tendered in a tender or exchange offer), or (iii)
following the transaction in which that person became an interested
stockholder, the business combination is approved by the Communications Board
and authorized at a meeting
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of stockholders by the affirmative vote of the holders of at least two-thirds
of the Communications voting stock not owned by the interested stockholder.
Under Section 203, these restrictions also do not apply to certain business
combinations proposed by an interested stockholder following the announcement
or notification of one of certain extraordinary transactions involving
Communications and a person who was not an interested stockholder during the
previous three years or who became an interested stockholder with the approval
of a majority of Communications' directors, if that extraordinary transaction
is approved or not opposed by a majority of the directors who were directors
before any person became an interested stockholder in the previous three years
or who were recommended for election or elected to succeed such directors by a
majority of such directors then in office.
Tribune/Swab-Fox. Tribune/Swab-Fox is also a Delaware corporation and is also
subject to Section 203 of the Delaware General Corporation Law, with generally
the same effect as that described for Communications.
The provisions of Section 203 will not apply to the Merger because
Communications is not an "interested stockholder" of Tribune/Swab-Fox (it owns
less than 15% of the outstanding Tribune/Swab-Fox voting stock), and, although
Tribune/Swab-Fox is an "interested stockholder" of Communications, it became an
"interested stockholder" more than three years ago. Under certain
circumstances, Section 203, as described above, may make it difficult for a
person who would be an "interested stockholder" to effect various business
combinations with a corporation for a three-year period. The provisions of
Section 203 may encourage companies interested in acquiring Communications to
negotiate in advance with the Communications Board, since the stockholder
approval requirement would be avoided if a majority of the directors then in
office approve either the business combination or the transaction that results
in the stockholder becoming an interested stockholder.
APPRAISAL RIGHTS
Communications. Section 262 of the Delaware General Corporation Law provides
for appraisal rights only in connection with certain mergers and
consolidations. Furthermore, the Delaware General Corporation Law eliminates
appraisal rights with respect to shares of any class or series of stock listed
on a national securities exchange or held of record by more than 2,000
stockholders. Communications Common Stock is listed for trading on the AMEX,
thus, no appraisal rights are available to Communications stockholders in the
Merger or any other merger or consolidation.
Tribune/Swab-Fox. Tribune/Swab-Fox is also a Delaware corporation and is also
subject to Section 262 of the Delaware General Corporation Law. Tribune/Swab-
Fox Common Stock is not, however, traded on a national securities exchange or
the Nasdaq National Market or held of record by more than 2,000 stockholders;
thus, Tribune/Swab-Fox stockholders currently have appraisal rights in
connection with certain mergers and consolidations and specifically with
respect to the Merger. As a result of the Merger, however, Tribune/Swab-Fox
stockholders who receive shares of Communications Common Stock in the Merger
will become stockholders of Communications and will no longer have appraisal
rights available to them. See "The Merger--Appraisal Rights."
LIMITATION OF LIABILITY OF DIRECTORS
Communications. As permitted by Delaware law, the Communications Charter
provides that a director will not be personally liable to Communications or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to
Communications or its stockholders, (ii) for acts or omissions not in good
faith or that involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the Delaware General Corporation Law (which concerns
unlawful payments of dividends, stock purchases or redemptions), or (iv) for
any transaction from which the director derived an improper personal benefit.
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Tribune/Swab-Fox. The Tribune/Swab-Fox Charter contains the same limitation
on director liability.
While these provisions provide directors with protection from awards for
monetary damages for breaches of their duty of care, they do not eliminate such
duty. Accordingly, these provisions will have no effect on the availability of
equitable remedies, such as an injunction or rescission based on a director's
breach of his duty of care. The provisions described above apply to an officer
of the corporation only if he is a director of the corporation and is acting in
his capacity as a director and do not apply to officers who are not also
directors.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Communications. The Communications Charter provides that each person who is
involved in any actual or threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that such person serves as a director or officer of the
corporation, will be indemnified by the corporation to the fullest extent
permitted by Section 145 of the Delaware General Corporation Law or any
successor statute. The indemnification conferred by the Communications Charter
is not exclusive of any other right to which a person seeking indemnification
may be entitled under any law, bylaw, agreement, vote of stockholders or
disinterested directors or otherwise.
Tribune/Swab-Fox. The Tribune/Swab-Fox Charter contains the same provision
relating to the indemnification of directors and officers.
Section 145 of the Delaware General Corporation Law permits a corporation to
indemnify officers, directors, employees and agents for actions taken in good
faith and in a manner they reasonably believed to be in, or not opposed to, the
best interests of the corporation, and with respect to any criminal action,
which they had no reasonable cause to believe was unlawful. Section 145
provides that a corporation may advance expenses of defense (upon receipt of a
written undertaking to reimburse the corporation if indemnification is not
appropriate) and must reimburse a successful defendant for expenses, including
attorneys' fees, actually and reasonably incurred, and permits a corporation to
purchase and maintain liability insurance for its directors and officers.
Communications and Tribune/Swab-Fox maintain directors and officers liability
insurance. Section 145 provides that indemnification may not be made for any
claim, issue or matter as to which a person has been adjudged by a court of
competent jurisdiction, after exhaustion of all appeals therefrom, to be liable
to the corporation, unless and only to the extent a court determines that the
person is entitled to indemnity for such expenses, despite the adjudication of
liability, as the court deems proper.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
TRIBUNE/SWAB-FOX
RESULTS OF OPERATIONS
Year Ended December 31, 1994, Compared to 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.
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Revenues of $56,919,000 for 1994 were $11,256,000 lower than for 1993.
Substantially all of the decrease is attributable to the operations of
Communications which are consolidated in Tribune/Swab-Fox's financial
statements. The revenue decrease consisted of $26,212,000 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 exposition
services (which is Atwood's activities), plus Galaxy's revenues of $8,003,000
from March 1, 1994. Convention publishing revenues 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 termination of this business
during the first quarter of 1994 due to competitive and regulatory
considerations. In terminating this business, Communications 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 journal. Also included in other income is interest income
related to the contract receivable from 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 capital 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. An increase in costs in 1994 related to the growth of the
World Gaming Congress conference and trade show, as noted in other revenue
above, partially offsets the shopper-newspapers decrease. Trade journal costs
increased in 1994 related to the above described 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 capital investments were sold in 1994.
General and administrative expenses were $3,138,000 lower for 1994, as
compared with 1993. The decrease in 1994 relating 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 Communications and Tribune/Swab-Fox.
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 of interest expense decline in 1994 from debt reductions.
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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 Tribune/Swab-Fox 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 certain acquisitions is not deductible for income tax purposes.
Year Ended December 31, 1993, Compared to Year Ended December 31,
1992. Revenues for 1993 decreased $27,058,000 from 1992. Revenues of
Communications for 1993 decreased $26,854,000 from revenues for 1992. Aside
from the Communications 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 Communications decrease, approximately $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 approximately $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 approximately $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
the joint operating arrangement and an $800,000 increase in revenue from
conferences sponsored by Communications' trade journal group, as a result of an
increase in 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
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decision to sell the shopper-newspapers, Communications recognized a loss of
$9,224,000 to reduce the assets of these operations to net 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 Communications and Tribune/Swab-Fox.
Interest expense decreased $771,000 in 1993, essentially all attributable to
a reduction in Communications' 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 Communications' increased slightly related to
renegotiation of certain debt.
Depreciation and amortization decreased $3,599,000 in 1993 attributable to
Communications' operations including sale of the newspaper publishing assets
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 Tribune/Swab-Fox financial position or results of operations.
Year Ended December 31, 1992, Compared to Year Ended December 31,
1991. Tribune/Swab-Fox's revenues for 1992 increased by $790,000 over revenues
for 1991. Revenues for Communications increased $1,248,000 for 1992 over 1991.
Aside from Communications' increase, the changes in revenues from other
businesses of Tribune/Swab-Fox, separate from Communications, 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 Communications' 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, and in
shopper-newspapers of $750,000 and convention/trade show publishing of
$2,000,000, because of both growth of operations and new services.
The early termination of the joint operating arrangement between
Communications' newspaper publishing division and World Publishing Company, 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. Communications' 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.
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Other costs and expenses for Tribune/Swab-Fox, separate from Communications,
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 approximately $529,000 in 1992 of which $500,000
was a decrease in Communications' interest. These decreases in 1992 are a
result of significant debt reduction by Communications, scheduled debt payments
on Tribune/Swab-Fox'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 Communications.
LIQUIDITY AND CAPITAL RESOURCES
Prior to the formation of Communications, Tribune/Swab-Fox was the recipient
of the cash generated by certain of the businesses now owned by Communications.
Tribune/Swab-Fox owns 78% of Communications and, therefore, unless a dividend
is declared by Communications payable pro rata to all stockholders (which is
unlikely), Tribune/Swab-Fox no longer has access to the cash flow of the
businesses of Communications.
However, in the formation of Communications, Tribune/Swab-Fox was repaid
certain indebtedness representing advances made by Tribune/Swab-Fox in the
acquisition of the assets of BMT. This amount, being $6,500,000, served to
provide Tribune/Swab-Fox with significant liquidity to meet its obligations for
several years. Tribune/Swab-Fox plans no significant cash expenditures in 1995,
other than debt repayment. The assets owned by Tribune/Swab-Fox separate from
Communications, 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, Tribune/Swab-Fox will
operate at a negative cash flow basis.
To meet its needs, it was necessary for Tribune/Swab-Fox to renegotiate its
real estate debt obligations and lending arrangements in 1993. In July 1993,
Tribune/Swab-Fox 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, Tribune/Swab-Fox used available cash
to repay other indebtedness. At December 31, 1993, Tribune/Swab-Fox had
borrowed $3,250,000 from BancFirst secured by real estate owned by
Tribune/Swab-Fox. At the time the loan arrangements were entered into, several
of the material loans were with partnerships of which Tribune/Swab-Fox was a
general partner. Subsequent to entering into these loan arrangements,
Tribune/Swab-Fox acquired the interest of its partner thus becoming responsible
for 100% of this indebtedness. As a practical matter, because the partner had
been unable to make payments for a number of years, Tribune/Swab-Fox was fully
responsible for this debt. Therefore, Tribune/Swab-Fox made the decision to
acquire the interest of the partner for the payment by the partner of $50,000
in cash to Tribune/Swab-Fox and the formal assumption by Tribune/Swab-Fox of
this indebtedness, as well as the forgiveness by Tribune/Swab-Fox of
approximately $3,400,000 in accrued advances by Tribune/Swab-Fox to such
partner. While the value of the land thus acquired was possibly less than the
rights of Tribune/Swab-Fox given up, Tribune/Swab-Fox 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 make the Merger possible (See "The Merger--Background of the Merger"),
Tribune/Swab-Fox has essentially liquidated or otherwise sold all of its real
estate and paid much of its debt. It was necessary for Tribune/Swab-Fox to
borrow cash (in the form of a line-of-credit of $2,500,000) from Communications
to redeem its outstanding preferred stock and pay some of its debts, which debt
to Communications is secured by 625,000 shares of Communications Common Stock.
As Tribune/Swab-Fox no longer has any significant cash flow, if the Merger does
not occur, Tribune/Swab-Fox will have to renegotiate the terms of this loan and
seek new revenue sources or risk default on its debt to Communications and
other note holders. Possible sources of revenue and cash include sale of its
notes receivable at a discount, sale of a portion of the shares of
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its investment in Communications, or a dividend from Communications payable to
all Communications stockholders. No determination has been made as to which
course of action would be taken if the Merger is not completed.
INFLATION
Other than with respect to the businesses conducted through Communications
(see "Management's Discussion and Analysis of Financial Condition and Results
of Operations--Communications--Inflation."), Tribune/Swab-Fox does not
anticipate that inflation will have a material impact on its business
activities in 1995.
COMMUNICATIONS
Communications is a 78 percent-owned subsidiary of Tribune/Swab-Fox and,
accordingly, Communications is consolidated in the financial statements of
Tribune/Swab-Fox. Since the only operating business of Tribune/Swab-Fox, other
than the businesses conducted through Communications, are its real estate
activities, the following discussion relating to the results of operations of
Communications is substantially similar to the preceding discussion relating to
the results of operations of Tribune/Swab-Fox for the same periods.
RESULTS OF OPERATIONS
Year Ended December 31, 1994, Compared to 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 $11,000,000 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.
Revenues of $56,289,000 for 1994 were $11,688,000 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 Communications' termination of this
business during the first quarter of 1994 due to competitive and regulatory
considerations. In terminating this business, Communications 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 conference and 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.
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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. An increase in costs in 1994 related to the growth of the
World Gaming Congress conference and trade show, as noted in other revenue
above, partially offsets the shopper-newspapers decrease. Trade journal costs
increased in 1994 related to the above described increase in pages as compared
with 1993.
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.
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.
General and administrative expenses were $3,244,000 lower in 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 chairman and chief executive officer of Communications.
Interest expense decreased $1,061,000 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 interest expense decline in 1994 from debt reductions.
Depreciation and amortization decreased $653,000 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.
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 certain acquisitions is not deductible for income tax purposes.
Year Ended December 31, 1993, Compared to Year Ended December 31,
1992. Revenues for 1993 decreased $26,854,000 from 1992. $19,900,000 of the
decrease was due to newspaper publishing revenues for 1992 through September
30, 1992, when The Tulsa Tribune ceased publication after the agreement with
World Publishing Company which terminated the joint operating arrangement.
Revenues from the shopper-newspapers were $11,500,000 lower in 1993 as compared
with 1992. Fourth quarter 1992 revenues 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 for 1993 as compared with 1992 mainly
attributable to the effect on operations of moving to a new location over a
three month period in early 1993. This resulted in the commercial printing
operations being shut-down for approximately one month. The other major reason
New Jersey Shopper revenues were lower in 1993 was lower volume and prices in
the preprint insert business caused by the competitive environment.
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Revenues from 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 record 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 $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 $850,000 which consisted of a $730,000
increase in interest income attributable to the contract receivable from the
World Publishing Company that was a part of the termination of the joint
operating arrangement and an $800,000 increase in revenue from conferences
sponsored by Communications' trade journal group, as a result of an increase in
conference exhibitors and attendees and a new conference. Included in 1992
other income was a $950,000 lawsuit settlement from MCI.
Costs and expenses were $16,000,000 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 operations 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. Partially offsetting the above cost decreases,
Communications recognized a loss of $9,224,000 to reduce the shopper-newspapers
assets to net realizable value as a result of the decision to sell the shopper-
newspapers. 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 $1,800,000 for retirement
expenses related to the resignation of the former chairman and chief executive
officer of Communications.
Interest expense decreased $770,000 in 1993, attributable to a reduction in
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.
Depreciation and amortization decreased $3,600,000 in 1993 attributable to
the sale of the newspaper publishing assets on 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.
Communications' 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 Communications' financial position or results of operations.
Year Ended December 31, 1992, Compared to Year Ended December 31,
1991. Communications' revenues for 1992 increased $1,248,000 over revenues for
1991. A $3,121,000 increase in information services revenues consisted of a
$950,000 lawsuit settlement with MCI, a $1,100,000 increase in resale of long
distance telephone services, and $1,100,000 increase from all other services.
An overall revenue decrease of $1,915,000 from publishing activities is a net
result of a decrease in newspaper publishing revenues in 1992 of $6,050,000
attributable to The Tulsa Tribune ceasing publication on September 30, 1992
(thus having only nine months of operations), substantially offset by increased
revenues from trade journals of $1,500,000 due mainly to
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higher number of advertising pages, shopper-newspapers of $750,000, most of
which was higher volume of print and mail advertising products and commercial
printing, and convention/trade show publishing of $2,000,000 because of both
continued growth of this operation and new products and services.
The early termination of the joint operating arrangement between
Communications' newspaper publishing division and World Publishing Company, the
publisher of the morning newspaper in Tulsa, resulted in an "Unusual Gain"
before income taxes of $24,412,000, consisting of payments of $12,850,000
received in 1992, and the present value of future payments of $450,000 per
month through March 1996 reduced by severance costs of $2,200,000. Although a
substantial portion of the total payments is to be received in the future, the
gain on this transaction was required to be recognized currently for financial
reporting purposes.
Costs and expenses were $2,150,000 lower in 1992, composed of decreased costs
in newspaper publishing of $6,500,000, attributable to only nine months'
operations of the newspaper publishing operations and $500,000 lower newsprint
costs during the nine months in 1992; decreased costs in shopper-newspaper
operation of $380,000, which is mostly lower newsprint costs; and increased
costs in trade journals of $930,000, convention/trade show publishing of
$2,000,000 and information services of $1,800,000 (most of which in each
division is related to increased volume and additional personnel costs).
General and administrative expenses decreased $369,000 in 1992 attributable
to lower newspaper publishing expenses partially offset by an increase in
corporate costs, mainly personnel costs and professional fees, and an increase
at the convention/trade show publishing division and information services
division due to growth in operations.
Interest expense decreased $500,000 in 1992 related to a decrease in debt of
$8,000,000, as a result of both the early payoff of bank lines of credit and a
term loan and scheduled debt payments. Depreciation and amortization increased
$2,488,000 in 1992, substantially all related to the effect of a change in the
estimated lives used to depreciate and amortize certain machinery and
equipment, advertising lists and covenants-not-to-compete at the shopper-
newspapers.
LIQUIDITY AND CAPITAL RESOURCES
Communications' available cash reserves, lines of credit and cash flow have
been sufficient to service debt, provide working capital and finance necessary
capital expenditures in the ordinary course of operations. Because of the cash
to be received ($450,000 per month through March 1996) from the transaction
with World Publishing Company, it is anticipated that Communications' cash flow
and current lines of credit will be sufficient to meet its scheduled debt and
other payment requirements, including the prepayment (if desired) of the
indebtedness of Tribune/Swab-Fox to be assumed in the Merger, the anticipated
capital expenditures for 1995 and the funding of the Cash Alternative (though,
as noted below, if the full Cash Alternative were taken up, substantially all
of Communications' cash and available credit would likely be needed).
Significant additional cash would be needed during 1995 only if a substantial
acquisition for cash were undertaken. To provide cash for the possibility of an
acquisition and to keep current borrowing to a minimum, Communications is
offering three of its trade journals for sale. Communications may also pursue
other sources of finance, including private or public placements of debt or
common stock or other equity securities of Communications. The utilization of
equity securities of Communications may have the effect of diluting or reducing
the market price for the Communications Common Stock.
In 1993, Communications utilized available cash and the proceeds from the
sale of the New York Shopper to prepay its 10.32% Senior Notes owned by The
Prudential Insurance Company of America. The total amount prepaid was
$8,889,000 in remaining principal, plus accrued interest and a prepayment
penalty of $802,000. This prepayment penalty was a negotiated reduction from
the $1,300,000 prepayment penalty which would have been required under the
terms of the notes.
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Also in 1993, Communications prepaid all of its indebtedness to Bank of
Oklahoma, N.A. and entered into four, separate revolving credit agreements
with BancFirst. These agreements provide for different types of collateral and
borrowing arrangements, but together comprise a revolving credit arrangement
allowing Communications to borrow up to $6,000,000. During the quarter ended
September 30, 1994, Communications and its subsidiaries renewed two credit
agreements and decreased their one-year bank lines of credit to $3,750,000. No
funds are currently drawn on these lines of credit. It is possible that, if
the full Cash Alternative is taken up, Communications could utilize
substantially all of its cash and lines of credit. Communications has held
informal discussions with BancFirst and management is confident that, in such
circumstances, additional lines of credit could be arranged if needed. If the
sale by Communications of its three trade journals being offered for sale were
to occur, however, it is expected that there would be sufficient cash from the
proceeds of such sale, along with cash on hand, to prepay (if desired) the
indebtedness of Tribune/Swab-Fox to be assumed in the Merger, fund the full
Cash Alternative, and use the remaining funds for general corporate purposes
and to expand and diversify BMT's position in the commercial gaming industry.
See "Summary--Recent Developments," for a discussion of the three trade
journals being offered for sale.
Communications anticipates that capital expenditures in 1995 will be
approximately $2,600,000, excluding the Cash Alternative and any acquisitions.
Other than Communications' information division, the primary capital
expenditures will be for computers, software, furniture and office equipment
and to acquire additional "reader boxes" at Galaxy. Communications'
information division continues to offer its customers in the trucking industry
credits for providing employment information to be utilized in its data base,
which credits can be used against charges for future services from such
division. All of the credits earned are considered capital expenditures for
the acquisition of such data. At December 31, 1994, Communications' current
assets exceeded current liabilities by $16,176,000.
INFLATION
Except for the costs of newsprint and postage at BMT, Communications
anticipates the effect of inflation on its operations during 1995 will be
primarily limited to the effects which general inflation will have on costs in
most areas in which Communications operates. The price of coated paper used in
Communications' publishing segment is expected to increase in price more than
50 percent in 1995. Also, postage increased 10 percent to 18 percent in 1995
(depending on postal class) which will have a particularly significant impact
on Communications' journals.
LEGAL MATTERS
The validity of the shares of Communications Common Stock to be issued in
connection with the Merger will be passed upon for Communications by Conner &
Winters, A Professional Corporation, Tulsa, Oklahoma. The federal income tax
consequences in connection with the Merger will also be passed upon for
Communications and Tribune/Swab-Fox by Conner & Winters, A Professional
Corporation.
EXPERTS
The audited financial statements and schedules of Communications and
Tribune/Swab-Fox included or incorporated by reference in this Proxy
Statement/Prospectus have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto, and
are included or incorporated by reference herein in reliance upon the
authority of said firm as experts in giving said reports.
STOCKHOLDER PROPOSALS
Any Communications stockholder desiring to present a proposal for
consideration at the 1995 annual meeting of stockholders of Communications
must comply with the rules promulgated by the Commission. In order for a
proposal to be included in Communications' proxy materials relating to its
1995 annual meeting, a stockholder must have submitted such proposal in
writing to Communications not later than December 31, 1994.
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Any Tribune/Swab-Fox stockholder desiring to present a proposal for
consideration at the 1995 annual meeting of stockholders of Tribune/Swab-Fox,
in the event the Merger is not consummated, must comply with the rules
promulgated by the Commission. In order for a proposal to be included in the
Tribune/Swab-Fox proxy materials relating to its 1995 annual meeting, if any, a
stockholder must have submitted such proposal in writing to Tribune/Swab-Fox
not later than December 31, 1994.
OTHER MATTERS
The Communications Board and the Tribune/Swab-Fox Board have no knowledge of
any business to be presented for consideration at the Communications Meeting or
the Tribune/Swab-Fox Meeting, as the case may be, other than as described in
this Proxy Statement/Prospectus. Should any such other matters properly come
before either such Meeting or any adjournment or postponement thereof, the
persons named in the enclosed forms of proxy will have discretionary authority
to vote such proxies in accordance with their best judgment on such other
matters and with respect to matters incident to the conduct of such Meetings.
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DEFINITION OF CERTAIN TERMS
Unless the context requires otherwise, when used in this Proxy
Statement/Prospectus, the following terms have the meanings indicated below.
"AMEX" means the American Stock Exchange, Inc.
"Atwood" means Atwood Convention Publishing, Inc., a Missouri corporation.
"BancFirst" means BancFirst, an Oklahoma banking institution.
"BMT" means BMT Communications, Inc., an Oklahoma corporation.
"Cash Alternative" means the offer of Communications to acquire up to
10,000,000 shares of Tribune/Swab-Fox Common Stock for cash in the Merger from
stockholders of Tribune/Swab-Fox at the Offer Price.
"Cash Consideration" means the Offer Price which shall be exchangeable for
shares of Tribune/Swab-Fox Common Stock in the Merger, paid to those
Tribune/Swab-Fox stockholders who elect to receive Cash Consideration.
"Cash Conversion Number" means that number of shares of Tribune/Swab-Fox
Common Stock which is equal to 10,000,000 shares of Tribune/Swab-Fox Common
Stock less the number of shares of Tribune/Swab-Fox Common Stock held by
stockholders who have perfected their right to appraisal pursuant to Section
262 of the Delaware General Corporation Law.
"Cash Election Deadline" means the time by which the Cash Election Form must
be received by the Exchange Agent in order to constitute a valid election to
receive cash for some or all shares of Tribune/Swab-Fox Common Stock. The Cash
Election Deadline is 5:00 p.m., New York time, on May 23, 1995.
"Cash Election Form" means the form to be used to elect to receive cash for
some or all shares of Tribune/Swab-Fox Common Stock. A copy of the Cash
Election Form is included with this Proxy Statement/Prospectus.
"Certificate of Merger" means the certificate of merger, prepared and
executed in accordance with the applicable provisions of the Delaware General
Corporation Law, which will be filed with the Secretary of State of Delaware to
cause the Merger to become effective.
"Closing Date" is the date on which the Merger will be consummated, which
(assuming all conditions to the parties' respective obligations to consummate
the Merger have then been satisfied or waived) will be the next day following
the day on which the Communications Meeting and the Tribune/Swab-Fox Meeting
are held or such later date as is agreed upon by Communications and
Tribune/Swab-Fox.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission.
"Communications" means T/SF Communications Corporation, a Delaware
corporation.
"Communications Board" means the Board of Directors of Communications.
"Communications Bylaws" means the bylaws of Communications, as currently in
effect.
"Communications Charter" means the Certificate of Incorporation of
Communications, as currently in effect.
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"Communications Committee" means the committee appointed by the
Communications Board, composed of William N. Griggs, David Lloyd Jones and
Martin F. Beck, assigned to negotiate and recommend the Exchange Ratio.
"Communications Common Stock" means the common stock, par value $0.10 per
share, of Communications.
"Communications Meeting" means the Special Meeting of Stockholders of
Communications to be held at 2:00 p.m. local time, on May 24, 1995, or any
adjournment or postponement thereof, for the purpose of considering and voting
on the Merger Agreement.
"Communications Preferred Stock" means the preferred stock, par value $10.00
per share, of Communications.
"Delaware General Corporation Law" means the General Corporation Law of the
State of Delaware.
"Effective Time of the Merger" is the time at which the Merger is effective,
which will be when the Certificate of Merger is accepted for filing by the
Secretary of State of the State of Delaware or at such time thereafter as is
provided in the Certificate of Merger. The Certificate of Merger will be filed
on the Closing Date.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Agent" means the person who will be engaged to effect the exchange
of certificates representing Tribune/Swab-Fox Common Stock for certificates
representing Communications Common Stock, or upon the election of a
Tribune/Swab-Fox stockholder, the payment of a specified amount of cash. See
"The Merger Agreement--Cash Election Procedures." The Exchange Agent will be
Mellon Securities Trust Company or such other agent as may be selected by
Communications and be reasonably satisfactory to Tribune/Swab-Fox.
"Exchange Ratio" means the ratio at which shares of Communications Common
Stock will be issued in exchange for each share of Tribune/Swab-Fox Common
Stock and is the number equal to 0.1255.
"Galaxy" means Galaxy Registration, Inc., a Maryland corporation.
"Letter of Transmittal" means the letter of transmittal to be used to effect
the exchange of certificates representing Tribune/Swab-Fox Common Stock for
certificates representing Communications Common Stock. A copy of the Letter of
Transmittal will be mailed to each record holder of Tribune/Swab-Fox Common
Stock entitled to receive Communications Common Stock in exchange therefor as
soon as practicable after the Effective Time of the Merger.
"MECI" means Midwest Energy Companies, Inc., a Delaware corporation.
"Merger" means the merger of Tribune/Swab-Fox with and into Communications
pursuant to the Merger Agreement.
"Merger Agreement" means the Agreement and Plan of Merger, dated January 25,
1995, as amended, by and between Communications and Tribune/Swab-Fox.
"Merger Consideration" means, collectively, the Cash Consideration and the
Stock Consideration.
"New Jersey Shopper" means the shopper newspaper of Shopper's Guide, Inc., a
New Jersey corporation.
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"New York Shopper" means the shopper newspaper of Marks-Roiland
Communications, Inc., a New York corporation.
"1995 Land Company" means 1995 LAND COMPANY, L.L.C., an Oklahoma limited
liability company.
"Offer Price" means the cash amount to be paid per share for Tribune/Swab-Fox
Common Stock to those Tribune/Swab-Fox stockholders who elect to receive cash
in lieu of Communications Common Stock. The Offer Price equals $0.88 per share
of Tribune/Swab-Fox Common Stock.
"Original Offer Price" means the original cash amount to be offered in the
Cash Alternative which was subsequently replaced with the Offer Price. The
Original Offer Price equaled $0.80 per share of Tribune/Swab-Fox Common Stock.
"Oppenheimer" means Oppenheimer & Co., Inc., an investment banking firm
retained by the Communications Board to render an opinion regarding the
fairness, from a financial point of view, to Communications' stockholders
(other than Tribune/Swab-Fox and the officers and directors of each of
Tribune/Swab-Fox and Communications) of the consideration to be paid to holders
of Tribune/Swab-Fox Common Stock in connection with the Merger. See "The
Merger--Opinions of Financial Advisors."
"Registration Statement" means the Registration Statement on Form S-4, as
amended (Reg. No. 33-57587), filed by Communications with the Commission with
respect to the shares of Communications Common Stock to be issued in the
Merger. This Proxy Statement/Prospectus forms a part of such Registration
Statement.
"Section 145" means Section 145 of the Delaware General Corporation Law which
relates to indemnification of officers, directors, employees and agents.
"Section 203" means Section 203 of the Delaware General Corporation Law which
relates to business combinations with interested stockholders.
"Section 262" means Section 262 of the Delaware General Corporation Law which
relates to appraisal rights.
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" means shares of Tribune/Swab-Fox Common Stock.
"Southwest Securities" means Southwest Securities, Inc., an investment
banking firm retained by the Tribune/Swab-Fox Board to render an opinion
regarding the fairness of the consideration, from a financial point of view, to
be received by the Tribune/Swab-Fox stockholders in connection with the Merger.
See "The Merger--Opinions of Financial Advisors."
"Special Dividend" means that one-time cash dividend of $0.0344 per share of
Tribune/Swab-Fox Common Stock, payable on the date of the Tribune/Swab-Fox
Meeting, subject to approval of the Merger by stockholders of Tribune/Swab-Fox
and Communications, to stockholders of record on the record date for the
Tribune/Swab-Fox Meeting, declared by the Tribune/Swab-Fox Board on January 18,
1995.
"Stock Consideration" means the 0.1255 of a share of Communications Common
Stock which shall be exchangeable for each share of Tribune/Swab-Fox Common
Stock in the Merger.
"Tribune/Swab-Fox" means Tribune/Swab-Fox Companies, Inc., a Delaware
corporation.
"Tribune/Swab-Fox Board" means the Board of Directors of Tribune/Swab-Fox.
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"Tribune/Swab-Fox Bylaws" means the bylaws of Tribune/Swab-Fox, as currently
in effect.
"Tribune/Swab-Fox Charter" means the Certificate of Incorporation of
Tribune/Swab-Fox, as currently in effect.
"Tribune/Swab-Fox Class A Common Stock" means the class A common stock, par
value $.10 per share, of Tribune/Swab-Fox.
"Tribune/Swab-Fox Class A Preferred Stock" means the class A preferred stock,
series 1, par value $10.00 per share, of Tribune/Swab-Fox.
"Tribune/Swab-Fox Class B Common Stock" means the class B common stock, par
value $.10 per share, of Tribune/Swab-Fox.
"Tribune/Swab-Fox Common Stock" means, collectively, the Tribune/Swab-Fox
Class A Common Stock and the Tribune/Swab-Fox Class B Common Stock.
"Tribune/Swab-Fox Committee" means the committee appointed by the
Tribune/Swab-Fox Board, composed of Jenkin Lloyd Jones, Jr., Martin A. Vaughan
and Robert J. Swab, assigned to negotiate and recommend the Exchange Ratio.
"Tribune/Swab-Fox Meeting" means the Special Meeting of Stockholders of
Tribune/Swab-Fox to be held at 2:00 p.m. local time, on May 24, 1995, or any
adjournment or postponement thereof, for the purpose of considering and voting
on the Merger Agreement.
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INDEX TO PRO FORMA FINANCIAL STATEMENTS AND FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS TRIBUNE/SWAB-FOX
Preliminary statement................................................... F-2
Unaudited pro forma consolidated statement of operations for the year
ended
December 31, 1994...................................................... F-3
COMMUNICATIONS
Preliminary statement................................................... F-4
Unaudited pro forma consolidated statement of operations for the year
ended
December 31, 1994...................................................... F-5
POST-MERGER COMMUNICATIONS
Preliminary statement................................................... F-6
Unaudited pro forma consolidated statement of operations for the year
ended
December 31, 1994...................................................... F-7
Unaudited pro forma consolidated balance sheet as of December 31, 1994.. F-8
HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS
TRIBUNE/SWAB-FOX
Report of independent public accountants................................ F-10
Consolidated balance sheets as of December 31, 1994 and 1993............ F-12
Consolidated statements of operations for the years ended December 31,
1994, 1993 and 1992.................................................... F-14
Consolidated statements of changes in stockholders' equity for the years
ended
December 31, 1994, 1993 and 1992....................................... F-15
Consolidated statements of cash flows for the years ended December 31,
1994, 1993 and 1992.................................................... F-16
Notes to consolidated financial statements for the years ended December
31, 1994,
1993 and 1992.......................................................... F-17
COMMUNICATIONS
Report of independent public accountants................................ F-32
Consolidated balance sheets as of December 31, 1994 and 1993............ F-33
Consolidated statements of operations for the years ended December 31,
1994, 1993 and 1992.................................................... F-34
Consolidated statements of changes in stockholders' equity for the years
ended
December 31, 1994, 1993 and 1992....................................... F-35
Consolidated statements of cash flows for the years ended December 31,
1994, 1993 and 1992.................................................... F-36
Notes to consolidated financial statements for the years ended December
31, 1994,
1993 and 1992.......................................................... F-37
</TABLE>
F-1
<PAGE>
TRIBUNE/SWAB-FOX
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
The Tribune/Swab-Fox Unaudited Pro Forma Consolidated Statement of Operations
for the year ended December 31, 1994, which includes Communications (a 78%
owned subsidiary), presents the results of operations of Tribune/Swab-Fox for
such period as if (i) the decision by Communications to sell the three BMT
trade journals and (ii) the April 30, 1994 sale of the New Jersey Shopper
assets had each taken place on January 1, 1994. The pro forma information
assumes no gain or loss on the ultimate sale of, and no earnings on any
proceeds from the sale of, the three BMT trade journals.
The Tribune/Swab-Fox Unaudited Pro Forma Consolidated Statement of Operations
for the year ended December 31, 1994, does not purport to be indicative of the
results of operations which actually would have occurred had the
decisions/transactions described above been effected on January 1, 1994, or
which may be expected to occur in the future. The Tribune/Swab-Fox Unaudited
Pro Forma Consolidated Statement of Operations for the year ended December 31,
1994, should be read in conjunction with the Tribune/Swab-Fox December 31,
1994, financial statements included elsewhere in this Proxy
Statement/Prospectus.
F-2
<PAGE>
TRIBUNE/SWAB-FOX
UNAUDITED PRO FORMA CONSOLIDATED
STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1994
-----------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
(UNAUDITED)
<S> <C> <C> <C>
Revenues.................................... $56,919 $(11,892)(1) $45,027
------- -------- -------
Operating costs and expenses................ 35,069 (8,165)(1) 26,904
General and administrative.................. 11,862 (1,804)(1) 10,058
Interest expense............................ 736 -- 736
Depreciation and amortization............... 3,118 (746)(1) 2,372
------- -------- -------
Total costs and expenses.................. 50,785 (10,715) 40,070
------- -------- -------
Income before provision for income taxes.... 6,134 (1,177) 4,957
Provision for income taxes.................. (2,589) 376 (1) (2,213)
Minority interest in earnings of Communica-
tions...................................... (981) 210 (1) (771)
------- -------- -------
Income from continuing operations........... $ 2,564 $ (591) $ 1,973
======= ======== =======
Per share amounts:
Earnings from continuing operations per
common and common equivalent share....... $ 0.08 $ 0.07
======= =======
Weighted average number of common and common
equivalent shares outstanding.............. 29,742 29,742
======= =======
</TABLE>
- --------
(1) These adjustments relate to Communications' consolidation in Tribune/Swab-
Fox and consist of: (i) the elimination of operations for the period of the
three BMT trade journals held for sale (no gain or loss on sale or earnings
on any proceeds from such sale are assumed) and (ii) the recognition of
interest income on the investment of the proceeds from the sale of the New
Jersey Shopper assets. (See Communications Unaudited Pro Forma Consolidated
Statement of Operations for the year ended December 31, 1994, included
elsewhere in this Proxy Statement/Prospectus.) The adjustments are
summarized as follows:
<TABLE>
<CAPTION>
NEW JERSEY
BMT SHOPPER TOTAL
-------- ---------- --------
<S> <C> <C> <C>
Revenues..................................... $(11,967) $ 75 $(11,892)
Operating costs and expenses................. (8,165) -- (8,165)
General and administrative................... (1,804) -- (1,804)
Depreciation and amortization................ (746) -- (746)
Provision for income taxes................... 404 (28) 376
Minority interest in earnings of Communica-
tions....................................... 223 (13) 210
-------- ---- --------
$ (625) $ 34 $ (591)
======== ==== ========
</TABLE>
F-3
<PAGE>
COMMUNICATIONS
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
The Communications Unaudited Pro Forma Consolidated Statement of Operations
for the year ended December 31, 1994, presents the results of operations of
Communications for such period as if (i) the decision to sell the three BMT
trade journals and (ii) the April 30, 1994 sale of the New Jersey Shopper
assets had each taken place on January 1, 1994. The pro forma information
assumes no gain or loss on the ultimate sale of, and no earnings on any
proceeds from the sale of, the three BMT trade journals.
The Communications Unaudited Pro Forma Consolidated Statement of Operations
for the year ended December 31, 1994, does not purport to be indicative of the
results of operations which actually would have occurred had the
decisions/transactions described above been effected on January 1, 1994, or
which may be expected to occur in the future. The Communications Unaudited Pro
Forma Consolidated Statement of Operations for the year ended December 31,
1994, should be read in conjunction with the Communications December 31, 1994,
financial statements included elsewhere in this Proxy Statement/Prospectus.
F-4
<PAGE>
COMMUNICATIONS
UNAUDITED PRO FORMA CONSOLIDATED
STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1994
-----------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
(UNAUDITED)
<S> <C> <C> <C>
Revenues.................................... $56,289 $(11,892)(1) $44,397
------- -------- -------
Operating costs and expenses................ 35,069 (8,165)(1) 26,904
General and administrative expenses......... 11,081 (1,804)(1) 9,277
Interest expense............................ 559 -- 559
Depreciation and amortization............... 3,141 (746)(1) 2,395
------- -------- -------
Total costs and expenses.................. 49,850 (10,715) 39,135
------- -------- -------
Income before income taxes.................. 6,439 (1,177) 5,262
Provision for income taxes.................. (2,589) 376 (1) (2,213)
------- -------- -------
Net income.................................. $ 3,850 $ (801) $ 3,049
======= ======== =======
Per share amounts:
Earnings per common and common equivalent
share.................................... $ 0.75 $ 0.59
======= =======
Weighted average number of common and com-
mon equivalent shares outstanding........ 5,135 5,135
======= =======
</TABLE>
- --------
(1) These adjustments consist of (i) the elimination of operations for the
period of the three BMT trade journals held for sale (no gain or loss on
sale or earnings on any proceeds from such sale are assumed) and (ii) the
recognition of interest income on the investment of the proceeds from the
sale of the New Jersey Shopper assets. The adjustments are summarized as
follows:
<TABLE>
<CAPTION>
NEW JERSEY
BMT SHOPPER TOTAL
-------- ---------- --------
<S> <C> <C> <C>
Revenues..................................... $(11,967) $ 75 $(11,892)
Operating cost and expenses.................. (8,165) -- (8,165)
General and administrative expenses.......... (1,804) -- (1,804)
Depreciation and amortization................ (746) -- (746)
Provision for income taxes................... 404 (28) 376
-------- ---- --------
$ (848) $ 47 $ (801)
======== ==== ========
</TABLE>
F-5
<PAGE>
POST-MERGER COMMUNICATIONS
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The Merger of Tribune/Swab-Fox and Communications will be accounted for as a
downstream merger. Accordingly, the financial history of Communications will be
that of Tribune/Swab-Fox. Therefore, the Post-Merger Communications Unaudited
Pro Forma Consolidated Statement of Operations for the year ended December 31,
1994, presents the Tribune/Swab-Fox Unaudited Pro Forma Consolidated Statement
of Operations for the year ended December 31, 1994, adjusted for the following
effects of the Merger: (i) increased interest expense related to the assumed
borrowing of a portion of the $8.8 million used to buy back 10 million shares
of Tribune/Swab-Fox Common Stock in the Cash Alternative (the maximum number of
shares to be bought), (ii) increased amortization resulting from goodwill
generated in the purchase accounting treatment of the Merger, (iii) elimination
of minority interest, and (iv) the related tax effect of the Merger, as if the
Merger had occurred on January 1, 1994. The Post-Merger Communications
Unaudited Pro Forma Consolidated Balance Sheet as of December 31, 1994,
presents the Tribune/Swab-Fox Consolidated Balance Sheet as of December 31,
1994, adjusted for the following effects of the Merger: (i) the borrowing of a
portion of the $8.8 million necessary to buy back 10 million shares (the
maximum number of shares to be bought in the Cash Alternative) of Tribune/Swab-
Fox Common Stock, (ii) the purchase adjustment, including goodwill generated in
the purchase accounting treatment of the Merger, (iii) the elimination of
minority interest, and (iv) the accrual of the estimated costs of the Merger.
The purchase price of $7,323,000 for the acquisition of the minority interest
in Communications (1,087,318 shares) was based on the approximate midpoint
between Communications' closing stock price of $6.00 per share on January 25,
1995, the date the Merger Agreement was executed, and the equivalent
Communications share price utilizing the Original Offer Price for each
Tribune/Swab-Fox share, plus the estimated costs of the Merger. The purchase
price exceeded the carrying value of the minority interest by approximately
$625,000. This excess was allocated to goodwill since the carrying value of the
Communications' assets and liabilities approximate their fair value.
The Post-Merger Communications Unaudited Pro Forma Consolidated Financial
Statements do not purport to be indicative of the results of operations which
actually would have occurred had the Merger taken place on January 1, 1994, or
which may be expected to occur in the future. The Post-Merger Communications
Unaudited Pro Forma Consolidated Financial Statements should be read in
conjunction with the Tribune/Swab-Fox December 31, 1994, financial statements
included elsewhere in this Proxy Statement/Prospectus.
F-6
<PAGE>
POST-MERGER COMMUNICATIONS
UNAUDITED PRO FORMA CONSOLIDATED
STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1994
---------------------------------
TRIBUNE/ PRO FORMA
SWAB-FOX ADJUSTMENTS ASSUMING
PRO FORMA FOR MERGER MERGER
--------- ----------- ---------
(UNAUDITED)
<S> <C> <C> <C>
Revenues.................................. $45,027 $ (254)(1) $44,773
------- ------- -------
Operating costs and expenses.............. 26,904 -- 26,904
General and administrative................ 10,058 -- 10,058
Interest expense.......................... 736 574 (2) 1,310
Depreciation and amortization............. 2,372 63 (3) 2,435
------- ------- -------
Total costs and expenses................ 40,070 637 40,707
------- ------- -------
Income before income taxes................ 4,957 (891) 4,066
Provision for income taxes................ (2,213) 2,025 (4) (188)
Minority interest in earnings............. (771) 771 (5) --
------- ------- -------
Income from continuing operations......... $ 1,973 $ 1,905 $ 3,878
======= ======= =======
Per share amounts:
Earnings from continuing operations per
common and common equivalent shares.... $ 1.06
=======
Weighted average number of common and
common equivalent shares outstanding..... 3,666 (6)
=======
</TABLE>
- --------
(1) Eliminates investment income on cash used to acquire Tribune/Swab-Fox
Common Stock in the Cash Alternative.
(2) Reflects interest expense on borrowings under lines-of-credit used to
complete the minority interest purchase and to acquire 10,000,000 shares of
Tribune/Swab-Fox Common Stock in the Cash Alternative.
(3) Reflects amortization of goodwill for the period resulting from the
purchase of the minority interest.
(4) Adjusts the tax provision for the effect of pro forma adjustments and the
effect of filing a consolidated federal income tax return rather than
separate federal income tax returns.
(5) Reflects elimination of minority interest through purchase by Tribune/Swab-
Fox.
(6) Reflects common shares outstanding after the Merger assuming that the
maximum number of shares were acquired in the Cash Alternative.
F-7
<PAGE>
POST-MERGER COMMUNICATIONS
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
TRIBUNE/ ADJUSTMENTS ASSUMING
SWAB-FOX FOR MERGER MERGER
-------- ----------- ---------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current Assets................................. $32,205 $(6,394)(a) $25,811
Contract Receivable and Investments............ 3,019 -- 3,019
Property, Plant and Equipment, net............. 4,585 -- 4,585
Deferred Tax Assets............................ 732 -- 732
Intangibles and Other Assets, net.............. 13,040 625 (b) 13,665
------- ------- -------
$53,581 $(5,769) $47,812
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities............................ $15,142 $ 4,082 (c) $19,224
Long-Term Debt................................. 4,905 -- 4,905
Deferred Contract Liabilities.................. 2,456 -- 2,456
Minority Interest.............................. 6,698 (6,698)(d) --
Common Stock Subject to Put.................... 525 -- 525
Stockholders' Equity........................... 23,855 (3,153)(e) 20,702
------- ------- -------
$53,581 $(5,769) $47,812
======= ======= =======
</TABLE>
- --------
These adjustments consist of (i) payment of the Special Dividend of $0.0344
per share by Tribune/Swab-Fox to Tribune/Swab-Fox stockholders prior to the
Effective Time of the Merger (excluding shares owned by Communications and
assumed retired), (ii) the purchase of the minority interest in Communications
by Tribune/Swab-Fox accounted for as an asset purchase through issuance of
Communications shares to Tribune/Swab-Fox stockholders based on 0.1255 of a
share of Communications for each Tribune/Swab-Fox share not purchased in the
Cash Alternative, (iii) the purchase of 10,000,000 shares of Tribune/Swab-Fox
at $0.88 per share in the Cash Alternative, (iv) borrowings under the lines-of-
credit used to partially fund the purchase of shares in the Cash Alternative,
and (v) accrual of the estimated costs of the Merger.
F-8
<PAGE>
The following summarizes the adjustments necessary to give effect on a pro
forma basis to transactions described above:
<TABLE>
<C> <S> <C>
(a) The adjustment to current assets relates to the:
Payment of the Special Dividend................................ $(1,051)
Purchase of 10,000,000 shares of Tribune/Swab-Fox at $0.88 per
share in the Cash Alternative................................. (8,800)
Borrowings under lines-of-credit............................... 3,500
Transfer of costs of the Merger incurred prior to December 31,
1994, to intangibles and other assets......................... (43)
-------
$(6,394)
=======
(b) The adjustment to intangibles and other assets, relates to the:
Goodwill resulting from the purchase of the minority interest
in Communications............................................. $ 625
=======
(c) The adjustment to current liabilities relates to the:
Borrowings under lines of credit............................... $ 3,500
Accrual of estimated costs of the Merger not incurred prior to
December 31, 1994............................................. 582
-------
$ 4,082
=======
(d) The adjustment to minority interest relates to the:
Purchase of the minority interest in Communications............ $(6,698)
=======
(e) The adjustment to stockholders' equity relates to the:
Payment of the Special Dividend................................ $(1,051)
Purchase of the minority interest in Communications (1,087,318
shares at $6.16 per share).................................... 6,698
Purchase of 10,000,000 shares of Tribune/Swab-Fox at $0.88 per
share in the Cash Alternative................................. (8,800)
-------
$(3,153)
=======
</TABLE>
F-9
<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-10
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
F-11
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1994 1993
------- -------
<S> <C> <C>
ASSETS
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 receiv-
able 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 Receiv-
able (Note 2)................ 2,786 7,090
------- -------
Property, Plant and Equip-
ment, 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 depreci-
ation.................... 2,834 3,650
------- -------
4,585 13,966
------- -------
Deferred Tax Assets (Note 8).. 732 --
------- -------
Intangibles and Other As-
sets, 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-12
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1994 1993
------- -------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
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, 81 shares authorized, no
shares and 46 shares issued and outstanding at December
31, 1994 and 1993, respectively........................... -- 459
Common stock, Class A, $.10 par value, 50,000 shares
authorized, 27,289 and 26,802 shares issued and
outstanding at December 31, 1994 and 1993, respectively... 2,729 2,680
Common stock, Class B, $.10 par value, 10,000 shares
authorized, 3,704 shares issued and outstanding at
December 31, 1994 and 1993, respectively.................. 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-13
<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-14
<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
======= ======= =======
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-15
<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 tax-
es............................................ (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
------- -------- -------
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 Op-
erating Agreement............................... -- -- 9,720
Proceeds from the sale of property, plant and
equipment, investments and marketable securi-
ties............................................ 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 equiva-
lents............................................. 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-16
<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.
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
F-17
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
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:
<TABLE>
<CAPTION>
DECEMBER 31,
AMORTIZATION ------------------
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
F-18
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
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.
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-19
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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.
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
F-20
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
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
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Revenues........................................... $ 58,469 $ 76,419
Income (loss) from continuing operations........... 2,726 (5,477)
Earnings (loss) per common from continuing opera-
tions............................................. 0.09 (0.18)
</TABLE>
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. Management's 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 Shopper's 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
F-21
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
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.
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-Fox's 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-
Fox's 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
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
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.
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
F-22
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
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.
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>
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>
F-23
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
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.
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>
F-24
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
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
------ -------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Income tax provision (benefit) at statutory
rates........................................... $1,128 $ (5,956) $ 7,787
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 ba-
sis which was not previously tax effected....... (36) (369) --
State income taxes............................... 217 (444) 1,107
Other............................................ (5) (12) (11)
------ -------- -------
$2,589 $ (4,437) $10,569
====== ======== =======
</TABLE>
Significant components of deferred tax liabilities and assets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1994 1993
------- -------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax liabilities:
Fixed asset basis differences............................. $ (330) $ (654)
Unusual gain recognized in different accounting period
for income tax reporting purposes...................... (2,293) (4,136)
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 purposes.................................... 1,045 508
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 tax assets........... (3,917) (4,265)
------- -------
Net deferred tax assets............................. 2,532 5,241
------- -------
Net deferred tax liabilities.......................... $ (91) $ (87)
======= =======
</TABLE>
F-25
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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
------- --------
(IN THOUSANDS)
<S> <C> <C>
Long-term--Deferred tax liabilities....................... $ -- $ (1,531)
Long-term--Deferred tax assets............................ 732 --
Current liabilities--Deferred tax liabilities............. (823) --
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).
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.
F-26
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
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. Communications'
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.
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.
F-27
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
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-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 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.
F-28
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
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
---------------- ----------
<C> <S>
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 Services Publisher of various convention/trade show
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 Services Provider of motor vehicle reports, truck driver
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 Operations properties, including commercial buildings, motels,
residential units and warehouses and investment in
undeveloped real estate. This segment was
discontinued in 1994.
</TABLE>
F-29
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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
======= ======== =======
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>
F-30
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
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.
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-31
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
T/SF Communications Corporation:
We have audited the accompanying consolidated balance sheets of T/SF
Communications Corporation (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 T/SF Communications
Corporation 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-32
<PAGE>
T/SF COMMUNICATIONS CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1994 1993
------- -------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.................................... $ 4,311 $ 2,633
Short-term investments....................................... 2,000 --
Accounts receivable, less reserve for doubtful accounts of
$506 in 1994 and $465 in 1993............................... 8,535 6,300
Inventories (Note 1)......................................... 596 188
Deferred tax assets (Note 6)................................. -- 1,444
Current contract receivable and other current assets......... 6,347 5,621
Refundable income taxes...................................... 167 404
Assets held for sale (Note 4)................................ 6,287 4,350
Loan to Parent company (Note 9).............................. 1,250 --
------- -------
Total current assets....................................... 29,493 20,940
------- -------
Contract Receivable and Investments (Notes 2 and 9)............ 2,419 6,702
------- -------
Property, Plant and Equipment, at cost (Note 1):
Exposition equipment......................................... 2,712 --
Other........................................................ 4,696 4,524
------- -------
7,408 4,524
Less--accumulated depreciation............................... 2,824 2,378
------- -------
4,584 2,146
------- -------
Deferred Tax Assets (Note 6)................................... 732 --
------- -------
Intangibles and Other Assets, net (Notes 1 and 3).............. 11,909 17,273
------- -------
$49,137 $47,061
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable............................................. $ 4,388 $ 3,451
Accrued liabilities (Note 10)................................ 7,055 6,736
Deferred tax liabilities (Note 6)............................ 823 --
Current portion of long-term debt (Note 5)................... 1,051 785
------- -------
Total current liabilities.................................. 13,317 10,972
------- -------
Long-term Debt (Note 5)........................................ 3,674 4,005
------- -------
Deferred Contract Liabilities.................................. 2,179 2,360
------- -------
Deferred Tax Liabilities (Note 6).............................. -- 1,531
------- -------
Stockholders' Equity, per accompanying statement (Notes 1 and
7):
Preferred stock, $10 par value, 1,000 shares authorized, no
shares issued and outstanding............................... -- --
Common stock, $.10 par value, 10,000 shares authorized, 4,865
and 5,274 shares issued and outstanding at December 31, 1994
and 1993, respectively...................................... 486 527
Additional paid-in capital................................... 20,242 22,277
Retained earnings............................................ 9,239 5,389
------- -------
Total stockholders' equity................................. 29,967 28,193
------- -------
$49,137 $47,061
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-33
<PAGE>
T/SF COMMUNICATIONS CORPORATION
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, 2, 3 and 4):
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............. 5,195 3,985 3,141
------- -------- --------
56,289 67,977 94,831
------- -------- --------
Costs and Expenses (Notes 1, 3, 4 and 9):
Publishing...................................... 11,988 31,567 48,621
Exposition services............................. 14,137 8,631 7,449
Information services............................ 8,944 9,460 8,214
General and administrative...................... 11,081 14,325 20,648
Interest........................................ 559 1,620 2,388
Depreciation and amortization................... 3,141 3,794 7,387
Loss on assets held for sale.................... -- 9,224 --
------- -------- --------
49,850 78,621 94,707
------- -------- --------
Income (loss) before unusual gain, equity earnings
and income taxes................................. 6,439 (10,644) 124
Unusual gain (Note 2)............................. -- -- 24,412
Earnings of equity investments.................... -- 29 73
(Provision for) benefit from income taxes (Note
6)............................................... (2,589) 4,097 (10,569)
------- -------- --------
Income (loss) before extraordinary loss......... 3,850 (6,518) 14,040
Extraordinary loss, net of tax of $340 (Note 5)... -- (560) --
------- -------- --------
Net income (loss)................................. $ 3,850 $ (7,078) $ 14,040
======= ======== ========
Per Share Amounts (Note 1):
Earnings (loss) per common and common equivalent
share:
Before extraordinary loss..................... $ 0.75 $ (1.23) $ 2.66
Extraordinary loss............................ -- (0.11) --
------- -------- --------
Earnings (loss) per common share.............. $ 0.75 $ (1.34) $ 2.66
======= ======== ========
Cash dividends per common share................. $ -- $ -- $ --
======= ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-34
<PAGE>
T/SF COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Common Stock:
Balance at beginning of year...................... $ 527 $ 527 $ 527
Issuance of common stock (Note 3)................. 8 -- --
Acquisition and retirement of common stock (Note
7)............................................... (49) -- --
------- ------- -------
Balance at end of year............................ $ 486 $ 527 $ 527
======= ======= =======
Additional Paid-in Capital:
Balance at beginning of year...................... $22,277 $22,277 $22,277
Issuance of common stock (Note 3)................. 339 -- --
Acquisition and retirement of common stock (Note
7)............................................... (2,562) -- --
Issuance of restricted stock (Note 7)............. 188 -- --
------- ------- -------
Balance at end of year............................ $20,242 $22,277 $22,277
======= ======= =======
Retained Earnings (Deficit):
Balance at beginning of year...................... $ 5,389 $12,467 $(1,573)
Net income (loss)................................. 3,850 (7,078) 14,040
------- ------- -------
Balance at end of year............................ $ 9,239 $ 5,389 $12,467
======= ======= =======
Stockholders' Equity:
Balance at beginning of year...................... $28,193 $35,271 $21,231
Issuance of common stock (Note 3)................. 347 -- --
Acquisition and retirement of common stock (Note
7)............................................... (2,611) -- --
Issuance of restricted stock (Note 7)............. 188 -- --
Net income (loss)................................. 3,850 (7,078) 14,040
------- ------- -------
Balance at end of year............................ $29,967 $28,193 $35,271
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-35
<PAGE>
T/SF COMMUNICATIONS CORPORATION
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)............................... $ 3,850 $ (7,078) $ 14,040
------- -------- --------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.................. 3,141 3,794 7,387
Earnings of equity investments................. -- (29) (73)
Accretion of interest expense.................. 47 170 217
Unusual gain................................... -- -- (24,412)
Loss (gain) on sale of property, plant and
equipment..................................... 204 (25) (22)
Loss on assets held for sale................... -- 9,224 --
Deferred compensation.......................... 7 1,856 37
Changes in assets and liabilities:
Accounts receivable and refundable income tax-
es........................................... (1,900) (845) 2,800
Inventories................................... (213) 184 564
Current contract receivable and other current
assets....................................... (276) (333) 14
Intangibles and other assets.................. 142 (407) (34)
Accounts payable and accrued liabilities...... 511 193 (728)
Deferred income taxes......................... (343) (4,837) 4,809
------- -------- --------
Total adjustments........................... 1,320 8,945 (9,441)
------- -------- --------
Net cash provided by operating activities....... 5,170 1,867 4,599
------- -------- --------
Cash flows from investing activities:
Purchases of short-term investments............. (2,000) -- --
Capital expenditures............................ (3,233) (1,822) (1,323)
Collections on contract receivable.............. 4,714 4,354 1,039
Payments on deferred contract liabilities....... (502) (1,013) (1,304)
Net (additions to) distributions from invest-
ments.......................................... (201) (190) 34
Net proceeds from early termination of Joint Op-
erating Agreement.............................. -- -- 9,720
Proceeds from the sale of property, plant and
equipment...................................... 3,956 4,560 1,272
Payments for acquisitions, net of cash acquired. (1,114) -- --
------- -------- --------
Net cash provided by investing activities..... 1,620 5,889 9,438
------- -------- --------
Cash flows from financing activities:
Borrowings under bank lines-of-credit........... 3,300 -- 3,200
Payments under bank lines-of-credit............. (3,300) -- (5,075)
Principal payments of long-term debt............ (1,598) (12,182) (6,137)
Loan to parent company.......................... (1,250) -- --
Issuance of common stock........................ 347 -- --
Acquisition of common stock retired............. (2,611) -- --
------- -------- --------
Net cash used in financing activities......... (5,112) (12,182) (8,012)
------- -------- --------
Net increase (decrease) in cash and cash
equivalents...................................... 1,678 (4,426) 6,025
Cash and cash equivalents at beginning of year.... 2,633 7,059 1,034
------- -------- --------
Cash and cash equivalents at end of year.......... $ 4,311 $ 2,633 $ 7,059
======= ======== ========
Supplemental disclosures of cash flow information:
Cash paid for:
Interest....................................... $ 690 $ 1,405 $ 2,195
Income taxes................................... 2,783 1,485 5,344
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-36
<PAGE>
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Relationship with Tribune/Swab-Fox Companies, Inc.
T/SF Communications Corporation (together with its subsidiaries referred to
as "Communications" unless the context indicates otherwise) is a 78 percent-
owned subsidiary of Tribune/Swab-Fox Companies, Inc. (Tribune/Swab-Fox).
Communications was incorporated on March 17, 1989, as a wholly-owned subsidiary
of Tribune/Swab-Fox, and succeeded to the publishing and information businesses
of Tribune/Swab-Fox. Through a public stock offering and certain subsequent
stock transactions, Tribune/Swab-Fox's ownership interest is presently 78
percent.
On January 25, 1995, Communications entered into an Agreement and Plan of
Merger, as amended, with Tribune/Swab-Fox whereby, subject to the 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.
Pursuant to a management agreement between Communications and Tribune/Swab-
Fox, Communications provides certain administrative services to Tribune/Swab-
Fox and charges a management fee. The management agreement provides that the
management fee be reviewed and agreed to annually by both Communications and
Tribune/Swab-Fox. Communications also leased office space from Tribune/Swab-Fox
and received property management services related to this leased space. (See
Note 9.)
Principles of Consolidation
The consolidated financial statements include the accounts of Communications
and its wholly-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.
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. 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, Communications used agency accounting
for its 40 percent ownership of NPC, whereby its share of NPC's individual
assets, liabilities, revenues and expenses are
F-37
<PAGE>
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
included in these financial statements. Printing equipment utilized by NPC, as
agent, was owned directly by Tribune and World.
Inventories
Inventories include newsprint, 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 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:
<TABLE>
<CAPTION>
DECEMBER 31,
AMORTIZATION ----------------
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 11,882 17,779
Other...................................... 4-9 years 2,774 2,110
------- -------
16,457 26,020
Accumulated amortization................... (4,548) (8,747)
------- -------
$11,909 $17,273
======= =======
</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, Communications 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), Communications'
then owned New Jersey free-distribution shopper-newspaper, and equipment and
advertising lists of Marks-Roiland Communications, Inc. (Marks-Roiland),
Communications' then owned Long Island free-distribution shopper-newspaper.
Management of Communications 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
F-38
<PAGE>
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
by approximately $2,400,000 and to decrease 1992 net income by approximately
$2,150,000 or $0.41 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 Communications as an
agent for its customers. As provided in the agreements with customers,
Communications charges a fee for its service and is also reimbursed for state
charges.
Exposition services revenues are recognized when the services are provided.
Advertising revenues from Communications' 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, Communications 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 Communications'
financial position or its results of operations.
Earnings per Common Share
Earnings per share computations are based upon the weighted average number of
shares of Common Stock and common stock equivalents outstanding during the
year. The weighted average number of common and common equivalent shares
outstanding was 5,135,000 in 1994 and 5,274,000 in 1993 and 1992.
Postretirement Benefits
Communications does not offer any postretirement medical or insurance
benefits for any employees.
Statements of Cash Flows
For purposes of the statements of cash flows, Communications considers all
highly liquid debt instruments purchased with a maturity of three months or
less to be cash equivalents.
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:
F-39
<PAGE>
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(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 financial statements 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 for 1992 includes the income taxes related to the
Unusual Gain.
3. ACQUISITIONS:
Atwood Convention Publishing (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 a part of Communications' 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 period.
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
Communications' 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 former owner of Galaxy,
who is 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
F-40
<PAGE>
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
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
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Revenues........................................... $ 57,839 $ 76,221
Income (loss) before extraordinary loss............ 4,012 (6,282)
Earnings (loss) per common share before extraordi-
nary loss......................................... 0.78 (1.19)
</TABLE>
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. Management's 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 Shopper's Guide.
Communications received $1,750,000 in cash, $1,100,000 in 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, as defined, from the business conducted with the assets
sold, over the next five years 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, if any, 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-41
<PAGE>
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
5. NOTES PAYABLE AND 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, payable $100,000
annually, plus accrued interest, each August with
final payment on August, 1998........................ 365 465
6% Promissory note, unsecured, quarterly payments of
$75,000, plus accrued interest, through March 31,
1997................................................. 675 --
Other................................................. 45 78
------- ------
4,725 4,790
Less portion due within one year...................... (1,051) (785)
------- ------
$ 3,674 $4,005
======= ======
</TABLE>
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........................................................ $1,051
1996........................................................ 1,007
1997........................................................ 782
1998........................................................ 672
1999........................................................ 607
Thereafter................................................... 606
------
$4,725
======
</TABLE>
In connection with the sale of the Marks-Roiland assets (see Note 4),
Communications agreed to a prepayment of the $8,889,000 remaining principal of
the Senior Notes held by The Prudential Insurance Company of America
(Prudential). As provided by the Senior Notes, a yield maintenance premium was
required to be paid as part of the prepayment. Through negotiations with
Prudential, Communications 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, Communications has two separate revolving credit
arrangements with a bank which together allow Communications to borrow up to
$3,750,000. Interest on amounts borrowed is payable monthly at a rate (10
percent at December 31, 1994) of 1 1/2 percent above the Chase Manhattan base
rate. Certain of the facilities are secured by accounts and contract
receivables. 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-42
<PAGE>
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
6. 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
------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Income tax provision (benefit) at statutory
rates......................................... $ 2,189 $ (3,915) $ 8,367
Amortization of acquired assets not deductible
for income tax purposes....................... 224 313 1,103
Excess of tax basis of assets sold over book
basis which was not previously tax effected... (36) (369) --
State income taxes............................. 217 (444) 1,107
Other.......................................... (5) (22) (8)
------- -------- --------
$ 2,589 $ (4,437) $ 10,569
======= ======== ========
</TABLE>
F-43
<PAGE>
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
Significant components of Communications' deferred tax liabilities and assets
are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1994 1993
------- -------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax liabilities:
Fixed asset basis differences........................... $ (300) $ (516)
Unusual gain recognized in different accounting period
for income tax reporting purposes...................... (2,293) (4,136)
------- -------
Deferred tax liabilities.............................. (2,593) (4,652)
------- -------
Deferred tax assets:
Income recognized in different accounting period for
income tax
purposes............................................... 1,045 508
Deferred compensation and severance benefits payable.... 938 993
Reserves on assets...................................... 200 2,330
Accrued expenses deductible when paid................... 319 553
Other, net.............................................. -- 181
------- -------
Deferred tax assets................................... 2,502 4,565
------- -------
Net deferred tax liabilities.......................... $ (91) $ (87)
======= =======
</TABLE>
Net deferred tax liabilities are reflected on the accompanying balance sheets
as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1994 1993
------- --------
(IN THOUSANDS)
<S> <C> <C>
Long-term--Deferred tax liability......................... $ -- $ (1,531)
Current liabilities--Deferred tax liability............... (823) --
Long-term--Deferred tax asset............................. 732 --
Current assets--Deferred tax asset........................ -- 1,444
------ --------
$ (91) $ (87)
====== ========
</TABLE>
7. CAPITAL STOCK:
Communications has authorized capital consisting of 10,000,000 shares of
$0.10 par value Common Stock and 1,000,000 shares of $10.00 par value Preferred
Stock. No shares of Preferred Stock have been issued.
Communications' incentive stock option plan authorizes an aggregate of
150,000 shares of Communications' Common Stock which may be granted to key
employees. Options for 79,064 shares were outstanding and exercisable at
December 31, 1994, at option prices of $5.50, $8.00 and $12.00 per share.
During 1994, options for 20,000 shares were granted and options for 29,166
shares lapsed or were canceled. No options were exercised during 1994. Options
are granted at the discretion of the Compensation Committee of the Board of
Directors 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.
F-44
<PAGE>
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
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. Communications'
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 and are reflected as
additional paid-in capital in the accompanying balance sheet. Communications
granted options for 202,500 shares in 1994 under this plan at an option price
of $4.25 which will expire in 2004 and vest 100 percent in 1997.
In August, 1994, Communications purchased and retired 483,900 shares of its
Common Stock from one stockholder for $5.375 per share.
8. COMMITMENTS AND CONTINGENCIES:
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,
$1,420,000 and $2,094,000, respectively.
As of December 31, 1994, Communications' 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.
F-45
<PAGE>
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
9. RELATED PARTY TRANSACTIONS:
Effective August 1, 1993, the Chairman and Chief Executive Officer of
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 Common Stock and 111 shares of 6 1/2 percent Cumulative
Convertible Preferred Stock of Tribune/Swab-Fox 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 a Tribune/Swab-Fox 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. These
security acquisitions are reflected in investments on the accompanying balance
sheets. Subsequent to December 31, 1994, upon exercise of an option,
Communications acquired 389,000 shares of Tribune/Swab-Fox common stock from
the Profit Sharing Plan and Trust of Tribune/Swab-Fox 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.
Under a management agreement with Tribune/Swab-Fox, Communications provides
management and administrative services to Tribune/Swab-Fox. During 1994, 1993
and 1992, management fees charged to Tribune/Swab-Fox were $280,000, $460,000
and $520,000, respectively. Pursuant to the management agreement, the
management fees are to be reviewed annually and approved by both Communications
and Tribune/Swab-Fox. The management fees approved for 1995 are a fixed $45,000
with a redetermination if the merger of Communications and Tribune/Swab-Fox is
not approved. Additionally, through December 31, 1993, Communications leased
office space from Tribune/Swab-Fox. In December, 1993, Communications acquired
from Tribune/Swab-Fox one of the previously leased office buildings for
$255,000 or $47 per square foot, a price comparable to prices paid by
independent third parties for similar buildings in the immediate area. The
lease on the remaining office building was not renewed.
On December 30, 1994, Communications loaned $1,250,000 under a $2,500,000
line-of-credit to Tribune/Swab-Fox which bears interest (10% at December 31,
1994) at 1.5 percent above the Chase Manhattan prime rate and is due July 1,
1995.
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 stockholders of Tribune/Swab-Fox in this leasing company for
approximately $70,000.
F-46
<PAGE>
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
10. 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............................................ 112 197
Accrued vacation............................................ 249 413
Accrued payroll............................................. 1,522 763
Deferred revenue............................................ 2,750 2,607
Accrued other liabilities................................... 1,889 2,324
------- -------
$ 7,055 $ 6,736
======= =======
</TABLE>
11. BUSINESS SEGMENT INFORMATION:
Communications' 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
---------------- ----------
<C> <S>
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 September 30, 1993), and
publication of five trade journals (four after August,
1994) by BMT Communications, Inc.
Information Services. Provider of motor vehicle reports, truck driver
employment information, worker's compensation
information, credit reports, criminal records 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.
Exposition Services.. Publisher of various convention/trade show publications
and publisher of trade journal, provider of registra-
tion services, exhibitor marketing and information
services, all to the exposition industry. Prior to
1994, Communications included Atwood in the Publishing
segment. In connection with the Galaxy acquisition,
Communications added the Exposition Services segment
which also includes Atwood. Atwood has been reclassi-
fied into the Exposition Services segment for 1993 and
1992.
</TABLE>
F-47
<PAGE>
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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..................................... 1,533 1,343 545
------- -------- -------
$56,289 $ 67,977 $94,831
======= ======== =======
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....................... (338) (2,288) (1,430)
Interest expense.............................. (559) (1,620) (2,388)
------- -------- -------
Income (loss) from operations before unusual
gain, income taxes and extraordinary loss.... $ 6,439 $(10,615) $ 197
======= ======== =======
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..................................... 10,631 5,538 7,310
------- -------- -------
$49,137 $ 47,061 $69,818
======= ======== =======
Depreciation and amortization:
Publishing.................................... $ 866 $ 2,563 $ 5,967
Exposition services........................... 1,167 291 248
Information services.......................... 1,035 898 1,100
Corporate..................................... 73 42 72
------- -------- -------
$ 3,141 $ 3,794 $ 7,387
======= ======== =======
Capital expenditures:
Publishing.................................... $ 109 $ 578 $ 418
Exposition services........................... 3,175 180 201
Information services.......................... 935 800 702
Corporate..................................... 128 264 2
------- -------- -------
$ 4,347 $ 1,822 $ 1,323
======= ======== =======
</TABLE>
Operating profit 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
estimates of time devoted to each segment and general corporate matters.
Included in 1993 corporate general and administrative expenses is the
retirement and deferred compensation expenses related to the former Chairman of
the Board.
F-48
<PAGE>
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
Included in the information services division operating profit in 1992 is
settlement of a major lawsuit with MCI that had been in process since late
1989. Costs and expenses related to the lawsuit were expensed by Communications
as incurred.
Identifiable assets by segment are those assets that are used in the
operations of each segment. Corporate assets consist of cash and cash
equivalents, prepaid expenses, other equipment, goodwill and deferred finance
charges.
Capital expenditures include additions to property, plant and equipment,
goodwill and advertising lists.
During 1994, 1993 and 1992, no customer represented ten percent or more of
Communications' revenues.
F-49
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered into
this 25th day of January, 1995, by and between T/SF Communications Corporation,
a Delaware corporation ("Communications"), and Tribune/Swab-Fox Companies,
Inc., a Delaware corporation ("Tribune/Swab-Fox").
R E C I T A L S
A. The respective Boards of Directors of Communications and Tribune/Swab-Fox
have determined that it is in the best interests of their respective
stockholders to consummate the Merger (as defined in Section 1.1(a) below).
B. The respective Boards of Directors of Communications and Tribune/Swab-Fox
have determined that this Agreement is in the best interests of Communications
or Tribune/Swab-Fox, as the case may be, and its respective stockholders and
have duly approved this Agreement and authorized its execution and delivery.
C. It is the intention of the parties to this Agreement that, for Federal
income tax purposes, the Merger shall qualify as a "reorganization" within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code").
NOW, THEREFORE, in consideration of the premises and of the representations,
warranties, covenants and agreements set forth herein, Communications and
Tribune/Swab-Fox hereby agree as follows:
ARTICLE I
THE MERGER
Section 1.1. The Merger. (a) At the Effective Time (as defined in Section
1.1(b) below), Tribune/Swab-Fox shall be merged with and into Communications in
accordance with the General Corporation Law of the State of Delaware (the
"DGCL") (the "Merger"), whereupon the separate existence of Tribune/Swab-Fox
shall cease, and Communications shall be the surviving corporation (the
"Surviving Corporation").
(b) The Merger shall become effective at such time as the certificate of
merger is duly filed with the Secretary of State of the State of Delaware or at
such later time as is specified in the certificate of merger (the "Effective
Time"); such filing shall be made at the time of Closing (as defined in Section
1.6 below).
(c) From and after the Effective Time, the Surviving Corporation shall
possess all the rights, privileges, powers and franchises and be subject to all
of the restrictions, disabilities and duties of Tribune/Swab-Fox and
Communications, all as provided under the DGCL.
Section 1.2. Conversion of Shares. At the Effective Time:
(a) Each share of (i) Class A Common Stock, par value $.10 per share, of
Tribune/Swab-Fox ("Tribune/Swab-Fox Class A Common Stock"), and (ii) Class
B Common Stock, par value $.10 per share, of Tribune/Swab-Fox
("Tribune/Swab-Fox Class B Common Stock"), then held in the treasury of
Tribune/Swab-Fox or then held by any Subsidiary (as defined in Section 3.1
below) of Tribune/Swab-Fox (including without limitation those shares held
directly or indirectly by Communications), shall be cancelled and retired
without payment of any consideration therefor and without any conversion
thereof. The Tribune/Swab-Fox Class A Common Stock and the Tribune/Swab-Fox
Class B Common Stock are hereinafter together referred to as the
"Tribune/Swab-Fox Common Stock."
A-1
<PAGE>
(b) Each share of Tribune/Swab-Fox Common Stock then issued and outstanding,
other than (i) those shares referred to in Section 1.2(a) above, and (ii) those
shares held by stockholders who have perfected their right to appraisal
pursuant to Section 262 of the DGCL and have not withdrawn or otherwise lost
such right (the "Dissenting Stockholder(s)"), shall be converted into and
represent the right to receive, and shall be exchangeable for, as provided in
Section 1.5 below, 0.1255 of a share of Common Stock, par value $.10 per share,
of Communications ("Communications Common Stock") (the "Stock Consideration")
or, at the election of the holder thereof in the manner provided in Section 1.3
below, $.80 in cash (the "Cash Consideration"); provided, however, that a
holder's right to receive the Cash Consideration shall be subject to proration
as provided in Section 1.4 below. The Stock Consideration and the Cash
Consideration are hereinafter together referred to as the "Merger
Consideration."
(c) Each share of Tribune/Swab-Fox Common Stock then issued and outstanding
held by a Dissenting Stockholder shall be converted into the right to receive
such consideration as may be determined to be due such Dissenting Stockholder
pursuant to Section 262 of the DGCL; provided, however, shares of Tribune/Swab-
Fox Common Stock issued and outstanding at the Effective Time and held by a
Dissenting Stockholder who shall, after the Effective Time, withdraw or lose
his or her appraisal as provided in Section 262 of the DGCL, shall be deemed to
be converted, as of the Effective Time, into the right to receive the Stock
Consideration (without interest).
(d) Each share of Communications Common Stock then issued and outstanding
held directly by Tribune/Swab-Fox shall be cancelled and retired without
payment of any consideration therefor.
Section 1.3. Election Procedure. (a) Each holder of shares of Tribune/Swab-
Fox Common Stock (other than holders of Tribune/Swab-Fox Common Stock to be
cancelled as set forth in Section 1.2(a) above and Dissenting Stockholders)
shall have the right to submit a request in accordance with the provisions of
this Section 1.3, to receive the Cash Consideration, specifying in such request
the number of shares of Tribune/Swab-Fox Common Stock owned by such holder and
the number of such shares which such holder desires to have converted into the
right to receive the Cash Consideration in the Merger ("Cash Election").
(b) Communications shall appoint one or more exchange agents selected jointly
by Tribune/Swab-Fox and Communications (the "Exchange Agent") to receive Cash
Elections and to act as Exchange Agent hereunder. Tribune/Swab-Fox and
Communications shall prepare a form pursuant to which holders of Tribune/Swab-
Fox Common Stock may make Cash Elections and a form letter of transmittal
(which shall specify that delivery shall be effective, and risk of loss and
title to shares of Tribune/Swab-Fox Common Stock shall pass, only upon proper
delivery of the certificates representing such shares to the Exchange Agent)
with instructions for use in effecting the surrender of shares of Tribune/Swab-
Fox Common Stock (collectively, the "Forms" and individually, a "Form"). The
Forms (accompanied by the Tribune/Swab-Fox Proxy Statement hereinafter referred
to) shall be mailed to Tribune/Swab-Fox stockholders of record as of the record
date for the Tribune/Swab-Fox stockholder meeting contemplated by Section 5.1
below. Tribune/Swab-Fox will use its best efforts to make the Forms
(accompanied by the Tribune/Swab-Fox Proxy Statement) available to all persons
who become Tribune/Swab-Fox stockholders of record during the period between
such record date and the business day (the "Election Date") immediately prior
to the date of the Tribune/Swab-Fox Stockholder Meeting (as defined in Section
5.1 below).
(c) A Cash Election shall be validly made only if the Exchange Agent
receives, at its office designated in the Form, no later than 5:00 p.m. (local
time in the city in which such office is located) on the Election Date, a Form
properly completed and signed and accompanied by certificates for the shares of
Tribune/Swab-Fox Common Stock to which such Form, relates (or by an appropriate
guarantee of delivery of such certificates, as set forth in such Form, from a
member of any registered national securities exchange or the National
Association of Securities Dealers, Inc. or a commercial bank or trust company
in the United States, provided such certificates are in fact delivered by the
time set forth in such guarantee of delivery), duly endorsed in blank or
otherwise in a form acceptable for transfer on the books of Tribune/Swab-Fox.
A-2
<PAGE>
(d) Any holder of shares of Tribune/Swab-Fox Common Stock may, at any time
prior to the Election Date, revoke or change his or her Cash Election by
written notice received by the Exchange Agent, at its office designated in the
Form, no later than 5:00 p.m. (local time in the city in which such office is
located) on the Election Date, accompanied in the case of a change by a
properly completed, revised Form. Cash Elections may also be revoked by written
notice received by the Exchange Agent at such designated office no later than
5:00 p.m. (local time in the city in which such office is located) on the last
business day prior to the Effective Time. In addition, all Cash Elections shall
automatically be revoked if the Exchange Agent is notified in writing by
Tribune/Swab-Fox and Communications that this Agreement has been terminated. If
a Cash Election is revoked, the certificate or certificates (or guarantee of
delivery, as appropriate) for the shares of Tribune/Swab-Fox Common Stock to
which such Cash Election relates shall be promptly returned to the person
submitting the same to the Exchange Agent.
(e) Tribune/Swab-Fox and Communications shall have the right to make rules,
not inconsistent with the terms of this Agreement, governing the validity of
the Cash Elections, whether any modification or revocation thereof shall be
treated as effective, the manner and extent to which Cash Elections are to be
taken into account in making the determinations prescribed by Section 1.4
below, and the issuance and delivery upon consummation of the Merger of the
Merger Consideration. All such rules and determinations shall be final and
binding on all holders of shares of Tribune/Swab-Fox Common Stock.
Section 1.4. Manner of Conversion. The manner in which each share of
Tribune/Swab-Fox Common Stock (other than shares of Tribune/Swab-Fox Common
Stock to be cancelled as set forth in Section 1.2(a) above and shares held by
Dissenting Stockholders), shall be converted at the Effective Time into the
right to receive either the Stock Consideration or the Cash Consideration is as
follows:
(a) As is more fully set forth below, the number of shares of
Tribune/Swab-Fox Common Stock to be converted into the right to receive the
Cash Consideration in the Merger pursuant to this Agreement shall not
exceed that number which is equal to 10,000,000 shares of Tribune/Swab-Fox
Common Stock less the number of shares of Tribune/Swab-Fox Common Stock
held by Dissenting Stockholders (the "Cash Conversion Number") .
(b) If Cash Elections are received for a number of shares of
Tribune/Swab-Fox Common Stock which is greater than the Cash Conversion
Number, the shares of Tribune/Swab-Fox Common Stock for which Cash
Elections have been received shall be converted into the Merger
Consideration in the following manner:
(i) A cash proration factor (the "Cash Proration Factor") shall be
determined by dividing the Cash Conversion Number by the total number
of shares of Tribune/Swab-Fox Common Stock with respect to which
effective Cash Elections were made.
(ii) The number of shares of Tribune/Swab-Fox Common Stock covered by
each Cash Election to be converted into the right to receive the Cash
Consideration shall be determined by multiplying the Cash Proration
Factor by the total number of shares of Tribune/Swab-Fox Common Stock
covered by such Cash Election, rounded to the next higher integer.
(iii) Each share of Tribune/Swab-Fox Common Stock covered by a Cash
Election and not converted into the right to receive the Cash
Consideration as set forth above shall be converted into the right to
receive the Stock Consideration.
(c) If Cash Elections are received for a number of shares of
Tribune/Swab-Fox Common Stock which is less than or equal to the Cash
Conversion Number, all shares of Tribune/Swab-Fox Common Stock for which
effective Cash Elections have been received shall be converted into the
right to receive the Cash Consideration.
(d) Outstanding shares of Tribune/Swab-Fox Common Stock (other than
shares to be cancelled pursuant to Section 1.2(a) above and shares held by
Dissenting Stockholders) as to which no Cash Election has been made as of
the Election Date, or with respect to which a Cash Election has been
A-3
<PAGE>
revoked thereafter, are herein referred to as "Non-Electing Shares." All
Non-Electing Shares shall be converted into the right to receive the Stock
Consideration. If Tribune/Swab-Fox and Communications shall determine for
any reason that any Cash Election was not properly made with respect to
shares of Tribune/Swab-Fox Common Stock, the shares of Tribune/Swab-Fox
Common Stock covered by such Cash Election shall, for purposes hereof, be
deemed to be Non-Electing Shares.
Section 1.5. Payment. (a) As soon as practicable after the Effective Time and
surrender to the Exchange Agent of any certificate which immediately prior to
the Effective Time represented any shares of Tribune/Swab-Fox Common Stock
(other than certificates formerly representing shares of Tribune/Swab-Fox
Common Stock cancelled pursuant to Section 1.2(a) above and certificates
representing shares of Tribune/Swab-Fox Common Stock held by Dissenting
Stockholders) (the "Certificates"), Communications shall cause to be
distributed to the person in whose name such Certificate was issued (i)
certificates registered in the name of such person representing the shares of
Communications Common Stock (if any) into which any shares previously
represented by the surrendered Certificate shall have been converted at the
Effective Time and/or (ii) a check payable to such person representing payment
of the Cash Consideration (if any) into which any shares previously represented
by the surrendered Certificate shall have been converted at the Effective Time,
and (iii) payment (which shall be made by check) of any cash payable as a
result of fractional share interests pursuant to Section 1.5(d) below. Any
Certificate formerly representing Tribune/Swab-Fox Common Stock which was
delivered to the Exchange Agent as contemplated by Section 1.3(c) above and not
withdrawn shall be deemed to have been surrendered as of the Effective Time for
purposes of this Section 1.5(a). No interest shall accrue or be paid on any
cash payable with respect to shares of Tribune/Swab-Fox Common Stock converted
into the right to receive the Cash Consideration or with respect to fractional
share interests.
(b) As soon as practicable after the Effective Time, the Exchange Agent shall
mail to each holder of record of a Certificate not previously surrendered to
the Exchange Agent pursuant to Section 1.3(a) above a form letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent), with instructions for use in effecting the
surrender of the Certificates. Until surrendered as contemplated by the
preceding sentence, each such Certificate shall be deemed for all purposes to
represent only the right to receive upon such surrender the certificate(s)
and/or payment contemplated by Section 1.5(a) above.
(c) If the Merger Consideration (or any portion thereof) is to be delivered
to a person other than the person in whose name the Certificates surrendered in
exchange therefor are registered, it shall be a condition to the payment of
such Merger Consideration that the Certificates so surrendered shall be
properly endorsed or accompanied by appropriate stock powers and otherwise in
proper form for transfer, that such transfer otherwise be proper and that the
person requesting such transfer pay to the Exchange Agent any transfer or other
taxes payable by reason of the foregoing or establish to the satisfaction of
the Exchange Agent that such taxes have been paid or are not required to be
paid.
(d) No fractional shares of Communications Common Stock or certificate or
scrip representing the same shall be issued in connection with the Merger; no
stock split or dividend with respect to shares of Communications Common Stock
shall relate to any fractional share interest; and no such fractional share
interest shall entitle the owner thereof to vote or to have any rights of a
stockholder of Communications. In lieu of such fractional shares, any holder of
Tribune/Swab-Fox Common Stock who would otherwise be entitled to a fractional
share of Communications Common Stock will, upon surrender of his or her
Certificate, receive in cash an amount equal to the product obtained by
multiplying $0.80 times the number of shares of Tribune/Swab-Fox Common Stock
which would otherwise be converted into a fractional share of Communications
Common Stock.
(e) In the event any Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of the fact by the person claiming such
Certificate to be lost, stolen or destroyed, Communications will issue and/or
cause to be paid, in exchange for such lost, stolen or destroyed Certificate,
the Merger Consideration deliverable in respect thereof as determined in
accordance with this Article I. When authorizing such issuance
A-4
<PAGE>
and/or payment of the Merger Consideration in exchange therefor, the Board of
Directors of Communications may, in its sole discretion and as a condition
precedent thereto, require the owner of such lost, stolen or destroyed
Certificate to give Communications a bond in such sum as it may direct as
indemnity against any claim that may be made against Communications with
respect to the Certificate alleged to have been lost, stolen or destroyed.
(f) At and after the Effective Time, the holder of a Certificate shall cease
to have any rights as a stockholder of Tribune/Swab-Fox, and such holder's sole
right shall be to surrender his or her Certificates in exchange for payment of
the Merger Consideration as provided in this Section 1.5. Each share of
Communications Common Stock into which shares of Tribune/Swab-Fox Common Stock
shall be converted in the Merger shall be deemed to have been issued at the
Effective Time. Until the surrender of a Certificate, dividends or other
distributions in respect of shares of Communications Common Stock, if any, the
ownership of which is evidenced by such Certificate, shall be accumulated and
not paid or delivered, but (i) any such dividends or distributions which shall
have become payable with respect to such Communications Common Stock between
the Effective Time and the time of such surrender, shall be paid upon such
surrender (without interest thereon) to the person in whose name the
certificates representing such Communications Common Stock shall have been
issued, and (ii) any such dividends or distributions which shall have a record
date prior to such surrender and a payment date after such surrender, shall be
paid (without interest thereon) on such payment date to the person in whose
name the certificates representing such Communications Common Stock shall have
been issued. Payment of the Merger Consideration and any such accumulated
dividends or distributions shall be subject to applicable escheat and other
similar laws.
(g) After the Effective Time, the stock transfer books of Tribune/Swab-Fox
shall be closed and there shall be no further registration of transfers on the
records of Tribune/Swab-Fox of shares of Tribune/Swab-Fox Common Stock which
shall have been converted into the Merger Consideration as provided in this
Article I.
Section 1.6 Closing. The closing of the Merger (the "Closing") shall take
place (i) at the offices of Conner & Winters, A Professional Corporation, 2400
First Place Tower, 15 E. 5th Street, Tulsa, Oklahoma 74103-4391, at 10:00 A.M.
local time on the next day after the day on which the last of the conditions
set forth in Article VIII (other than those that are waived by the party or
parties for whose benefit such conditions exist) are satisfied, or (ii) at such
other place and/or time and/or on such other date as the parties may agree. The
date upon which the Closing shall occur is herein called the "Closing Date."
ARTICLE II
CERTAIN MATTERS RELATING TO COMMUNICATIONS
AND THE SURVIVING CORPORATION
Section 2.1. Certificate of Incorporation and Bylaws of the Surviving
Corporation. (a) The Certificate of Incorporation of Communications in effect
at the Effective Time shall be the Certificate of Incorporation of the
Surviving Corporation until amended in accordance with applicable law.
(b) The Bylaws of Communications in effect at the Effective Time shall be the
Bylaws of the Surviving Corporation until amended in accordance with applicable
law.
Section 2.2. Directors and Officers of the Surviving Corporation. (a) The
directors of Communications immediately prior to the Effective Time shall be
and remain (until their respective successors are duly elected and qualify,
unless they earlier die, resign or are removed) the directors of the Surviving
Corporation.
(b) The officers of Communications immediately prior to the Effective Time
shall be and remain (until their respective successors are duly elected and
qualify, unless they earlier die, resign or are removed) the officers of the
Surviving Corporation.
A-5
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF TRIBUNE/SWAB-FOX
Tribune/Swab-Fox represents and warrants to Communications that:
Section 3.1 Corporate Existence and Power. Tribune/Swab-Fox is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware, and has all corporate powers and all governmental licenses,
authorizations, consents and approvals required to carry on its business as now
conducted. Tribune/Swab-Fox is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where the character of
the property owned or leased by it or the nature of its activities makes such
qualification necessary, except for those jurisdictions where the failure to be
so qualified would not, individually or in the aggregate, have a Material
Adverse Effect on Tribune/Swab-Fox. For purposes of this Agreement, a "Material
Adverse Effect" means, with respect to any person, a material adverse effect,
whether existing or prospective, on the financial condition, business or
properties of such person and its Subsidiaries taken as a whole or on the
ability of such person to perform its obligations hereunder. For purposes of
this Agreement, any reference to any event, change or effect being "material"
with respect to any person means an event, change or effect, whether existing
or prospective, which is material in relation to the financial condition,
business or properties of such person and its Subsidiaries taken as a whole or
on the ability of such person to perform its obligations hereunder. For
purposes of this Agreement, the word "Subsidiary," when used with respect to
any person, means any corporation or other organization, whether incorporated
or unincorporated, of which (i) at least a majority of the securities or other
interests having by their terms ordinary voting power to elect a majority of
the board of directors or others performing similar functions with respect to
such corporation or other organization is directly or indirectly owned or
controlled by such person or by any one or more of its Subsidiaries, or (ii)
such person or any other Subsidiary of such person is a general partner.
Section 3.2. Corporate Authorization. The execution, delivery and performance
by Tribune/Swab-Fox of this Agreement and the consummation by Tribune/Swab-Fox
of the transactions contemplated hereby are within the corporate powers of
Tribune/Swab-Fox and, except as set forth in the next sentence, have been duly
authorized by all necessary corporate action. The affirmative vote of the
holders of a majority of the outstanding shares of Tribune/Swab-Fox Common
Stock entitled to vote thereon is the only vote of any class or series of
Tribune/Swab-Fox capital stock necessary to approve this Agreement and the
transactions contemplated hereby. This Agreement constitutes a valid and
binding agreement of Tribune/Swab-Fox, enforceable in accordance with its terms
(except insofar as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally, or by principles governing the availability of equitable
remedies).
Section 3.3. Governmental Authorization. The execution, delivery and
performance by Tribune/Swab-Fox of this Agreement and the consummation of the
Merger by Tribune/Swab-Fox require no action by or in respect of, or filing
with, any governmental body, agency, official or authority other than (i) the
filing of a certificate of merger in accordance with the DGCL; (ii) compliance
with any applicable requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"); (iii) compliance with any applicable requirements
of the Securities Act of 1933, as amended (the "1933 Act"); (iv) compliance
with any applicable foreign or state securities or Blue Sky laws; and (v)
immaterial actions or filings relating to ordinary operational matters.
Section 3.4. Non-Contravention. The execution, delivery and performance by
Tribune/Swab-Fox of this Agreement and the consummation by Tribune/Swab-Fox of
the transactions contemplated hereby do not and will not (except, in the case
of clauses (ii), (iii) and (iv) of this Section 3.4, for any such matters that
singly or in the aggregate have not had, and would not reasonably be expected
to have, a Material Adverse Effect on Tribune/Swab-Fox) (i) contravene or
conflict with the Certificate of Incorporation or Bylaws of Tribune/Swab-Fox;
(ii) assuming compliance with the matters referred to in Section 3.3 above,
contravene
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<PAGE>
or conflict with or constitute a violation of any provision of any law,
regulation, judgment, injunction, order or decree binding upon or applicable to
Tribune/Swab-Fox; (iii) constitute a default under or give rise to a right of
termination, cancellation or acceleration of any right or obligation of
Tribune/Swab-Fox or to a loss of any benefit to which Tribune/Swab-Fox is
entitled under any provision of any agreement, contract or other instrument or
any license, franchise, permit or other similar authorization held by
Tribune/Swab-Fox; or (iv) result in the creation or imposition of any Lien on
any asset of Tribune/Swab-Fox. For purposes of this Agreement, "Lien" means,
with respect to any asset, any mortgage, lien, pledge, charge, security
interest or encumbrance of any kind in respect of such asset.
Section 3.5. Capitalization. (a) The authorized capital stock of
Tribune/Swab-Fox consists of fifty million (50,000,000) shares of Tribune/Swab-
Fox Class A Common Stock, ten million (10,000,000) shares of Tribune/Swab-Fox
Class B Common Stock, sixty thousand (60,000) shares of 6 1/2 % Cumulative
Convertible Preferred Stock, par value $10.00 per share, two hundred thousand
(200,000) shares of Class A Preferred Stock, par value $10.00 per share, and
twenty thousand (20,000) shares of New Senior Preferred Stock, par value $10.00
per share (such preferred stock being referred to collectively as the
"Tribune/Swab-Fox Preferred Stock"). As of the date hereof, (i) 27,988,593
shares of Tribune/Swab-Fox Class A Common Stock were issued and outstanding,
(ii) 3,703,704 shares of Tribune/Swab-Fox Class A Common Stock were reserved
for issuance pursuant to the conversion of all outstanding shares of
Tribune/Swab-Fox Class B Common Stock, (iii) no shares of Tribune/Swab-Fox
Class A Common Stock were held in treasury, (iv) 3,703,704 shares of
Tribune/Swab-Fox Class B Common Stock were issued and outstanding, and (v) no
shares of Tribune/Swab-Fox Preferred Stock were issued and outstanding. All
outstanding shares of capital stock of Tribune/Swab-Fox have been duly
authorized and validly issued and are fully paid and nonassessable. Except as
set forth in this Section 3.5(a), there are outstanding (x) no shares of
capital stock or other voting securities of Tribune/Swab-Fox, (y) no securities
of Tribune/Swab-Fox or any of its Subsidiaries convertible into or exchangeable
for shares of capital stock or voting securities of Tribune/Swab-Fox (except
for the Tribune/Swab-Fox 11% Convertible Subordinated Debenture held by the
Tulsa Tribune Foundation, which is convertible into Tribune/Swab-Fox Class A
Common Stock), and (z) no options or other rights to acquire from Tribune/Swab-
Fox or any of its Subsidiaries, and no obligation of Tribune/Swab-Fox or any of
its Subsidiaries to issue, any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of
Tribune/Swab-Fox, except that the Tribune/Swab-Fox Class B Common Stock has
preemptive rights (the items in clauses (x), (y) and (z) being referred to
collectively as the "Tribune/Swab-Fox Securities"). There are no outstanding
obligations of Tribune/Swab-Fox or any of its Subsidiaries to repurchase,
redeem or otherwise acquire any Tribune/Swab-Fox Securities.
(b) As of the date hereof, there are no outstanding bonds, debentures, notes
or other indebtedness of Tribune/Swab-Fox having the right to vote (or
convertible into or exercisable for Tribune/Swab-Fox Securities having the
right to vote) on any matters upon which holders of Tribune/Swab-Fox Class A
Common Stock may vote (except for the Tribune/Swab-Fox 11% Convertible
Subordinated Debenture held by the Tulsa Tribune Foundation, which is
convertible into Tribune/Swab-Fox Class A Common Stock).
Section 3.6. Disclosure Documents. Each document required to be filed by
Tribune/Swab-Fox with the Securities and Exchange Commission (the "SEC") in
connection with the transactions contemplated by this Agreement (the
"Tribune/Swab-Fox Disclosure Documents"), including without limitation the
definitive proxy statement of Tribune/Swab-Fox (the "Tribune/Swab-Fox Proxy
Statement") to be filed with the SEC in connection with the Merger, and any
amendments or supplements thereto, will, when filed, comply as to form in all
material respects with the applicable requirements of the Exchange Act. At the
time the Tribune/Swab-Fox Proxy Statement or any amendment or supplement
thereto is first mailed to stockholders of Tribune/Swab-Fox and at the time of
such stockholders vote on adoption of this Agreement, the Tribune/Swab-Fox
Proxy Statement, as supplemented or amended, if applicable, will not contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. At the time of the
filing of any Tribune/Swab-Fox Disclosure Document (other than the
Tribune/Swab-Fox Proxy Statement) and
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at the time of any distribution thereof, such Tribune/Swab-Fox Disclosure
Document will not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements made therein,
in light of the circumstances under which they were made, not misleading. The
representations and warranties contained in this Section 3.6 will not apply to
statements or omissions included in Tribune/Swab-Fox Disclosure Documents based
upon information furnished to Tribune/Swab-Fox in writing by Communications
specifically for use therein.
Section 3.7. Information Supplied. The information supplied or to be supplied
by Tribune/Swab-Fox for inclusion or incorporation by reference in (i) the
Communications Proxy Statement (as defined in Section 4.6 below) or any
amendment or supplement thereto will not, at the time the Communications Proxy
Statement is first mailed to stockholders of Communications and at the time
such stockholders vote on adoption of this Agreement, contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading; (ii) any Communications Disclosure
Document (as defined in Section 4.6 below) (other than the Communications Proxy
Statement) will not, at the time of effectiveness of such Communications
Disclosure Document and at the time of any distribution thereof, contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements made therein, in light of the circumstances
under which they were made, not misleading; and (iii) the Form S-4 (as defined
in Section 6.3 below) will not, at the time the Form S-4 becomes effective
under the 1933 Act and at the Effective Time, contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
Section 3.8. Litigation. There is no action, suit, investigation or
proceeding (or any basis therefor known to Tribune/Swab-Fox) pending or, to the
knowledge of Tribune/Swab-Fox, threatened against or affecting Tribune/Swab-Fox
or any of its respective properties which in any manner challenges or seeks to
prevent, enjoin, alter or materially delay the consummation of the Merger.
Section 3.9. Finders' Fees. Except for Southwest Securities, Inc. ("Southwest
Securities"), there is no investment banker, broker, finder or other
intermediary which has been retained by or is authorized to act on behalf of
Tribune/Swab-Fox who might be entitled to any fee or commission upon
consummation of the transactions contemplated by this Agreement.
Section 3.10. Takeover Statutes. No "fair price," "moratorium," "control
share acquisition" or other similar anti-takeover statute or regulation enacted
under state or federal laws in the United States (each a "Takeover Statute"),
including without limitation Section 203 of the DGCL, applicable to
Tribune/Swab-Fox is applicable to the Merger.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF COMMUNICATIONS
Communications represents and warrants to Tribune/Swab-Fox that:
Section 4.1. Corporate Existence and Power. Communications is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware and has all corporate powers and all governmental licenses,
authorizations, consents and approvals required to carry on its business as now
conducted. Communications is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where the character of
the property owned or leased by it or the nature of its activities makes such
qualification necessary, except for those jurisdictions where the failure to be
so qualified would not, individually or in the aggregate, have a Material
Adverse Effect on Communications.
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Section 4.2. Corporate Authorization. The execution, delivery and performance
by Communications of this Agreement and the consummation by Communications of
the transactions contemplated hereby are within the corporate powers of
Communications and, except as set forth in the next sentence, have been duly
authorized by all necessary corporate action. The affirmative vote of the
holders of a majority of the outstanding shares of Communications Common Stock
entitled to vote thereon is the only vote of any class or series of
Communications capital stock necessary to approve this Agreement and the
transactions contemplated hereby. This Agreement constitutes a valid and
binding agreement of Communications, enforceable in accordance with its terms
(except insofar as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally, or by principles governing the availability of equitable
remedies).
Section 4.3. Governmental Authorization. The execution, delivery and
performance by Communications of this Agreement and the consummation of the
Merger by Communications require no action by or in respect of, or filing with,
any governmental body, agency, official or authority other than (i) the filing
of a certificate of merger in accordance with the DGCL; (ii) compliance with
any applicable requirements of the Exchange Act; (iii) compliance with any
applicable requirements of the 1933 Act; (iv) compliance with any applicable
foreign or state securities or Blue Sky laws; and (v) immaterial actions or
filings relating to ordinary operational matters.
Section 4.4. Non-Contravention. The execution, delivery and performance by
Communications of this Agreement and the consummation by Communications of the
transactions contemplated hereby do not and will not (except, in the case of
clauses (ii), (iii) and (iv) of this Section 4.4, for any such matters that
singly or in the aggregate have not had, and would not reasonably be expected
to have, a Material Adverse Effect on Communications) (i) contravene or
conflict with the Certificate of Incorporation or Bylaws of Communications;
(ii) assuming compliance with the matters referred to in Section 4.3 above,
contravene or conflict with or constitute a violation of any provision of any
law, regulation, judgment, injunction, order or decree binding upon or
applicable to Communications or any Subsidiary of Communications; (iii)
constitute a default under or give rise to any right of termination,
cancellation or acceleration of any right or obligation of Communications or
any of its Subsidiaries or to a loss of any benefit to which Communications or
any of its Subsidiaries is entitled under any agreement, contract or other
instrument or any license, franchise, permit or other similar authorization
held by Communications or any of its Subsidiaries; or (iv) result in the
creation or imposition of any Lien on any asset of Communications or any
Subsidiary of Communications.
Section 4.5. Capitalization. (a) The authorized capital stock of
Communications consists of ten million (10,000,000) shares of Communications
Common Stock and one million (1,000,000) shares of Preferred Stock, par value
$10.00 per share ("Communications Preferred Stock"). As of the date hereof, (i)
4,864,818 shares of Communications Common Stock were issued and outstanding,
(ii) 600,000 shares of Communications Common Stock were reserved for issuance
pursuant to employee stock plans, (iii) no shares of Communications Common
Stock were held in treasury, (iv) no shares of Communications Preferred Stock
were issued and outstanding, and (v) employee stock options to purchase an
aggregate of 301,664 shares of Communications Common Stock were issued and
outstanding (of which options to purchase an aggregate of 79,164 shares were
exercisable). All outstanding shares of capital stock of Communications have
been duly authorized and validly issued and are fully paid and nonassessable.
Except as set forth in this Section 4.5(a), there are outstanding (x) no shares
of capital stock or other voting securities of Communications, (y) no
securities of Communications or any of its Subsidiaries convertible into or
exchangeable for shares of capital stock or voting securities of
Communications, and (z) no options or other rights to acquire from
Communications or any of its Subsidiaries, and no obligation of Communications
or any of its Subsidiaries to issue, any capital stock, voting securities or
securities convertible into or exchangeable for capital stock or voting
securities of Communications, except pursuant to Communications' executive
compensation plan (the items in clauses (x), (y) and (z) being referred to
collectively as the "Communications Securities"). There are no outstanding
obligations of Communications or any Subsidiary of Communications to
repurchase, redeem or otherwise acquire any Communications Securities.
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(b) As of the date hereof, there are no outstanding bonds, debentures, notes
or other indebtedness of Communications having the right to vote (or
convertible into or exercisable for Communications Securities having the right
to vote) on any matters on which holders of Communications Common Stock may
vote.
Section 4.6. Disclosure Documents. Each document required to be filed by
Communications with the SEC in connection with the transactions contemplated by
this Agreement (the "Communications Disclosure Documents"), including without
limitation the definitive proxy statement of Communications (the
"Communications Proxy Statement") to be filed with the SEC in connection with
the Merger, and any amendments or supplements thereto, will, when filed, comply
as to form in all material respects with the applicable requirements of the
Exchange Act. At the time the Communications Proxy Statement or any amendment
or supplement thereto is first mailed to stockholders of Communications and at
the time of such stockholders vote on adoption of this Agreement, the
Communications Proxy Statement, as supplemented or amended, if applicable, will
not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading. At the time of
the filing of any Communications Disclosure Document (other than the
Communications Proxy Statement) and at the time of any distribution thereof,
such Communications Disclosure Document will not contain any untrue statement
of a material fact or omit to state a material fact necessary in order to make
the statements made therein, in light of the circumstances under which they
were made, not misleading. The representations and warranties contained in this
Section 4.6 will not apply to statements or omissions included in the
Communications Disclosure Documents based upon information furnished to
Communications in writing by Tribune/Swab-Fox specifically for use therein.
Section 4.7. Information Supplied. The information supplied or to be supplied
by Communications for inclusion or incorporation by reference in (i) the
Tribune/Swab-Fox Proxy Statement or any amendment or supplement thereto will
not, at the time the Tribune/Swab-Fox Proxy Statement is first mailed to
stockholders of Tribune/Swab-Fox and at the time such stockholders vote on
adoption of this Agreement contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not
misleading; and (ii) any Tribune/Swab-Fox Disclosure Document (other than the
Tribune/Swab-Fox Proxy Statement) will not, at the time of effectiveness of
such Tribune/Swab-Fox Disclosure Document and at the time of any distribution
thereof, contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading.
Section 4.8. Litigation. There is no action, suit, investigation or
proceeding (or any basis therefor known to Communications) pending or, to the
knowledge of Communications, threatened against or affecting Communications or
any of its Subsidiaries or any of their respective properties which in any
manner challenges or seeks to prevent, enjoin, alter or materially delay the
consummation of the Merger.
Section 4.9. Finders' Fees. Except for Oppenheimer & Co., Inc.
("Oppenheimer"), there is no investment banker, broker, finder or other
intermediary which has been retained by or is authorized to act on behalf of
Communications who might be entitled to any fee or commission upon consummation
of the transactions contemplated by this Agreement.
Section 4.10. Takeover Statutes. No Takeover Statute, including without
limitation Section 203 of the DGCL, applicable to Communications or any of its
Subsidiaries is applicable to the Merger.
Section 4.11. Communications Common Stock. The Communications Common Stock
which is part of the Merger Consideration will, upon issuance thereof in
connection with the Merger, be duly authorized, validly issued, fully paid and
nonassessable.
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ARTICLE V
COVENANTS OF TRIBUNE/SWAB-FOX
Section 5.1. Stockholder Meeting. Tribune/Swab-Fox shall cause a special
meeting of its stockholders (the "Tribune/Swab-Fox Stockholder Meeting") to be
duly called and held as soon as reasonably practicable after the date of this
Agreement for the purpose of voting on the approval and adoption of this
Agreement and the Merger. Except as required by fiduciary obligations under
applicable law (as advised in writing by counsel), the board of directors of
Tribune/Swab-Fox shall recommend approval and adoption of this Agreement and
the Merger by its stockholders.
Section 5.2. Rule 145 Affiliates. At least 10 days prior to the Closing Date,
Tribune/Swab-Fox shall deliver to Communications a letter identifying all
persons who will, at the time of the Tribune/Swab-Fox Stockholder Meeting, be
deemed to be "affiliates" of Tribune/Swab-Fox for purposes of Rule 145 under
the 1933 Act (the "1933 Act Affiliates"). Tribune/Swab-Fox shall use its
reasonable best efforts to cause each person who is identified as a possible
1933 Act Affiliate to deliver to Communications, on or prior to the Closing
Date, an agreement substantially in the form of Exhibit A to this Agreement.
Section 5.3. Certain Filings; Proxy Materials. Tribune/Swab-Fox (a) will
promptly prepare and file with the SEC, will use its reasonable best efforts to
have cleared by the SEC and will thereafter mail to its stockholders as
promptly as practicable the Tribune/Swab-Fox Proxy Statement and all other
proxy materials for the Tribune/Swab-Fox Stockholder Meeting, (b) will use its
reasonable best efforts to obtain the necessary approvals by its stockholders
of this Agreement and the transactions contemplated hereby, (c) will otherwise
comply with all legal requirements applicable to such meeting and (d) will make
all other filings or recordings required under the DGCL in connection with the
Merger.
Section 5.4. Conduct of Business Pending Closing. Tribune/Swab-Fox covenants
and agrees with Communications that, from the date of this Agreement until the
Effective Time, Tribune/Swab-Fox will conduct its business only in the ordinary
and usual course consistent with past practices and that, without the prior
written consent of Communications:
(a) Tribune/Swab-Fox will not (i) amend its Certificate of Incorporation
or Bylaws, (ii) split, combine or reclassify any of its outstanding capital
stock, (iii) declare, set aside or pay any dividends or other distributions
(whether payable in cash, property or securities) with respect to its
capital stock, except Tribune/Swab-Fox may pay dividends to its
stockholders in an aggregate amount not in excess of $1,090,200 or such
other amount as Tribune/Swab-Fox and Communications shall agree, (iv)
issue, sell or agree to issue or sell any securities, including its capital
stock, any rights, options or warrants to acquire its capital stock, or
securities convertible into or exchangeable or exercisable for its capital
stock, (v) purchase, cancel, retire, redeem or otherwise acquire any of
Tribune/Swab-Fox Class A Common Stock or the Tribune/Swab-Fox Class B
Common Stock, (vi) merge or consolidate with, or transfer all or
substantially all of its assets to, another corporation or other business
entity, (vii) liquidate, wind-up, or dissolve (or suffer any liquidation or
dissolution), or (viii) enter into any contract, agreement, commitment or
arrangement with respect to any of the foregoing;
(b) Tribune/Swab-Fox will (i) pay all taxes, assessments and other
governmental charges imposed upon any of its assets or with respect to its
business, income or assets before any penalty or interest accrues thereon,
and (ii) comply in all material respects with the requirements of all
applicable laws, rules, regulations and other governmental authority; and
(c) Tribune/Swab-Fox will at all times preserve and keep in full force
and effect its corporate existence, rights and franchises material to its
performance under this Agreement.
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ARTICLE VI
COVENANTS OF COMMUNICATIONS
Section 6.1. Stockholder Meeting. Communications shall cause a special
meeting of its stockholders (the "Communications Stockholder Meeting") to be
duly called and held as soon as reasonably practicable after the date of this
Agreement for the purpose of voting on the approval and adoption of this
Agreement and the Merger. Except as required by fiduciary obligations under
applicable law (as advised in writing by counsel), the board of directors of
Communications shall recommend approval and adoption of this Agreement and the
Merger by its stockholders.
Section 6.2. Director and Officer Liability. (a) Communications shall
indemnify and hold harmless each person who is, or has been at any time prior
to the date hereof or who becomes prior to the Effective Time, an officer or
director of Tribune/Swab-Fox, in respect of acts or omissions occurring prior
to the Effective Time (the "Indemnified Parties"), including but not limited to
the transactions contemplated by this Agreement, to the extent provided under
the Certificate of Incorporation and Bylaws of Tribune/Swab-Fox; provided, that
such indemnification shall be subject to any limitation imposed from time to
time under applicable law.
(b) Any determination to be made as to whether any Indemnified Party has met
any standard of conduct imposed by law shall be made by legal counsel
reasonably acceptable to such Indemnified Party and Communications, retained at
Communications' expense.
(c) This Section 6.2 is intended to benefit the Indemnified Parties, their
heirs, executors and personal representatives and shall be binding on
successors and assigns of Communications.
Section 6.3. Certain Filings; Proxy Materials. Communications (a) will
promptly prepare and file with the SEC, will use its reasonable best efforts to
have cleared by the SEC and will thereafter mail to its stockholders as
promptly as practicable the Communications Proxy Statement and all other proxy
materials for the Communications Stockholder Meeting, (b) will use its
reasonable best efforts to obtain the necessary approvals by its stockholders
of this Agreement and the transactions contemplated hereby, (c) will otherwise
comply with all legal requirements applicable to such meeting, and (d) will
make all other filings or recordings required under the DGCL in connection with
the Merger. Communications will prepare and file with the SEC the registration
statement on Form S-4 (the "Form S-4") (in which the Communications Proxy
Statement will be included as a prospectus) and will take any action (other
than qualifying to do business in any jurisdiction in which it is not now so
qualified) required to be taken under any applicable state Blue Sky law in
connection with the issuance of Communications Common Stock.
ARTICLE VII
COVENANTS OF COMMUNICATIONS AND TRIBUNE/SWAB-FOX
Section 7.1. Reasonable Best Efforts. Subject to the terms and conditions of
this Agreement, each party will use its reasonable best efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate the transactions contemplated by this Agreement.
Section 7.2. Public Announcements. Communications and Tribune/Swab-Fox will
consult with each other before issuing any press release with respect to this
Agreement and the transactions contemplated hereby and, except as may be
required by applicable law or any listing agreement with any national
securities exchange, will not issue any such press release prior to such
consultation.
Section 7.3. Further Assurances. At and after the Effective Time, the
officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of Tribune/Swab-Fox, any deeds,
bills of sale, assignments or assurances and to take and do, in the name and on
behalf of
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Tribune/Swab-Fox, any other actions and things to vest, perfect or confirm of
record or otherwise in the Surviving Corporation any and all right, title and
interest in, to and under any of the rights, properties or assets of
Tribune/Swab-Fox acquired or to be acquired by the Surviving Corporation as a
result of, or in connection with, the Merger.
Section 7.4. Anti-Takeover Statutes. If any Takeover Statute is or may become
applicable to the transactions contemplated hereby, each of Communications and
Tribune/Swab-Fox and the members of their respective Boards of Directors will
grant such approvals and take such actions as are necessary so that the
transactions contemplated by this Agreement may be consummated as promptly as
practicable on the terms contemplated hereby and otherwise act to eliminate or
minimize the effects of any Takeover Statute on any of the transactions
contemplated by this Agreement.
ARTICLE VIII
CONDITIONS TO THE MERGER
Section 8.1. Conditions to the Obligation of Each Party. The obligations of
Tribune/Swab-Fox and Communications to consummate the Merger are subject to the
satisfaction (or waiver by both parties) of the following conditions:
(a) This Agreement shall have been approved and adopted by the
stockholders of Tribune/Swab-Fox and Communications in accordance with the
DGCL.
(b) No court, arbitrator or governmental body, agency or official shall
have issued any order, and there shall not be any statute, rule or
regulation, restraining or prohibiting the consummation of the Merger.
(c) All actions by or in respect of or filings with any governmental
body, agency, official, or authority required to permit the consummation of
the Merger shall have been obtained, but excluding any consent, approval,
clearance or confirmation the failure to obtain which could not reasonably
be expected to have a Material Adverse Effect on the Surviving Corporation
after the Effective Time.
(d) Tribune/Swab-Fox and Communications shall have obtained an opinion of
Conner & Winters, A Professional Corporation, to the effect that (1) the
Merger will qualify as a "reorganization" under Section 368(a) of the Code
and the regulations thereunder, (2) each of Tribune/Swab-Fox and
Communications will be a party to such reorganization within the meaning of
Section 368(b) of the Code and the regulations thereunder, (3) no gain or
loss will be recognized by Tribune/Swab-Fox or Communications as a result
of the Merger, and (4) no gain or loss will be recognized by a stockholder
of Tribune/Swab-Fox as a result of the Merger with respect to the shares of
Tribune/Swab-Fox Common Stock converted solely into shares of
Communications Common Stock.
Section 8.2. Conditions to the Obligation of Communications. The obligation
of Communications to consummate the Merger is subject to the satisfaction (or
waiver by Communications) of the following further conditions:
(a) Tribune/Swab-Fox shall have performed in all material respects all of
its obligations hereunder required to be performed by it at or prior to the
Effective Time, and the representations and warranties of Tribune/Swab-Fox
shall have been accurate in all material respects both when made and at and
as of the Effective Time as if made at and as of such time, except for the
representations and warranties of Tribune/Swab-Fox contained in Section
3.5(a) above, which shall be accurate in all respects both when made and at
and as of the Effective Time as if made at and as of that time.
(b) All other statutory requirements for the valid consummation by
Communications of the transactions contemplated by this Agreement shall
have been fulfilled.
(c) Communications shall have received from Oppenheimer a written opinion
addressed to Communications, for inclusion in the Communications Proxy
Statement, that the Merger Consideration
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is fair, from a financial point of view, to the stockholders of
Communications, and such opinion shall not have been withdrawn.
(d) The holders of not more than 10 percent of the Tribune/Swab-Fox
Common Stock shall have exercised their right to appraisal pursuant to
Section 262 of the DGCL.
(e) No material adverse change shall have occurred, in the reasonable
opinion of the board of directors of Communications, in the business or
financial condition of Tribune/Swab-Fox since the date of this Agreement.
Section 8.3. Conditions to the Obligation of Tribune/Swab-Fox. The obligation
of Tribune/Swab-Fox to consummate the Merger is subject to the satisfaction (or
waiver by Tribune/Swab-Fox) of the following further conditions:
(a) Communications shall have performed in all material respect all of
its respective obligations hereunder required to be performed by it at or
prior to the Effective Time, and the representations and warranties of
Communications shall have been accurate in all material respects both when
made and at and as of the Effective Time as if made at and as of such time,
except for the representations and warranties of Communications contained
in Section 4.5(a) above, which shall be accurate in all respects when made
and at and as of the Effective Time as if made at and as of that time;
(b) The Communications Common Stock required to be issued hereunder shall
have been approved for listing on the American Stock Exchange, subject to
official notice of issuance;
(c) All other statutory requirements for the valid consummation by
Tribune/Swab-Fox of the transactions contemplated by this Agreement shall
have been fulfilled; and
(d) Tribune/Swab-Fox shall have received from Southwest Securities a
written opinion addressed to Tribune/Swab-Fox, for inclusion in the
Tribune/Swab-Fox Proxy Statement, that the Merger Consideration is fair,
from a financial point of view, to the stockholders of Tribune/Swab-Fox,
and such opinion shall not have been withdrawn.
(e) No material adverse change shall have occurred, in the reasonable
opinion of the board of directors of Tribune/Swab-Fox, in the business or
financial condition of Communications since the date of this Agreement.
ARTICLE IX
TERMINATION
Section 9.1. Termination. This Agreement may be terminated and the Merger may
be abandoned at any time prior to the Effective Time (notwithstanding any
approval of this Agreement by the stockholders of Communications and/or
Tribune/Swab-Fox):
(a) By mutual written consent of Communications and Tribune/Swab-Fox.
(b) By either Communications or Tribune/Swab-Fox, if the Merger has not
been consummated by June 30, 1995.
(c) By either Communications or Tribune/Swab-Fox, if any judgment,
injunction, order or decree enjoining Communications or Tribune/Swab-Fox
from consummating the Merger is entered and such judgment, injunction,
order or decree has become final and nonappealable.
(d) By either Communications or Tribune/Swab-Fox if the approvals of the
stockholders of Communications or Tribune/Swab-Fox contemplated by this
Agreement shall not have been obtained by reason of the failure to obtain
the required vote at a duly held meeting of stockholders or any adjournment
thereof.
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(e) By Communications, upon a breach of any representation, warranty,
covenant or agreement of Tribune/Swab-Fox, or if any representation or
warranty of Tribune/Swab-Fox shall become untrue, in either case such that
the condition set forth in Section 8.2(a) above would be incapable of being
satisfied by June 30, 1995 (or such later date as the parties may have
otherwise agreed).
(f) By Tribune/Swab-Fox, upon a breach of any representation, warranty,
covenant or agreement of Communications, or if any representation or
warranty of Communications shall become untrue, in either case such that
the condition set forth in Section 8.3(a) above would be incapable of being
satisfied by June 30, 1995 (or such later date as the parties may have
otherwise agreed).
Section 9.2. Effect of Termination. If this Agreement is terminated pursuant
to Section 9.1 above, this Agreement shall become void and of no effect with no
liability on the part of any party hereto, except that (a) the agreements
contained in this Section 9.2 and Section 10.4 below shall survive the
termination hereof, and (b) no such termination shall relieve any party of any
liability or damages resulting from any breach by that party of this Agreement.
ARTICLE X
MISCELLANEOUS
Section 10.1. Notices. All notices, requests and other communications
required or permitted to be given to either party hereunder shall be in writing
(including facsimile or similar writing) and shall be given to that party at
its principal office or at such other address or facsimile number as such party
may hereafter specify for the purpose by notice to the other party hereto. Each
such notice, request or other communication shall be effective when delivered
at the address specified in this Section 10.1.
Section 10.2. Entire Agreement; Survival of Representations and
Warranties. (a) This Agreement, together with any other agreements contemplated
hereby, constitutes the entire agreement among the parties with respect to the
subject matter hereof and supersede all prior agreements, understandings and
negotiations, both written and oral, between the parties with respect to such
subject matter. No representation, inducement, promise, understanding,
condition or warranty not set forth herein has been made or relied upon by
either party hereto. Neither this Agreement nor any other agreement
contemplated hereby is intended to confer upon any person other than the
parties hereto any rights or remedies (except that Section 6.2 above is
intended to confer rights and remedies on officers and directors of
Tribune/Swab-Fox).
(b) The representations, warranties and covenants contained herein shall not
survive the Effective Time or the termination of this Agreement except for the
agreements set forth in this Section 10.2 and Sections 6.2 above and 10.4
below.
Section 10.3. Amendments; No Waivers. (a) Any provision of this Agreement may
be amended or waived prior to the Effective Time if, and only if, such
amendment or waiver is in writing and signed, in the case of an amendment, by
Tribune/Swab-Fox and Communications or, in the case of a waiver, by the party
against whom the waiver is to be effective; provided, that after the adoption
of this Agreement by the stockholders of Tribune/Swab-Fox, no such amendment or
waiver shall, without the further approval of such stockholders, alter or
change (i) the amount or kind of consideration to be received in exchange for
any shares of capital stock of Tribune/Swab-Fox, (ii) any term of the
Certificate of Incorporation of the Surviving Corporation, or (iii) any of the
terms or conditions of this Agreement if such alteration or change would
adversely affect the holders of any shares of capital stock of Tribune/Swab-
Fox.
(b) No failure or delay by either party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
A-15
<PAGE>
Section 10.4. Expenses. Except as otherwise agreed in writing by the parties,
(a) Tribune/Swab-Fox shall bear the fees and expenses of Southwest Securities
and any attorneys (other than Conner & Winters, A Professional Corporation)
engaged by Tribune/Swab-Fox, (b) Communications shall bear the fees and
expenses of Oppenheimer and any attorneys (other than Conner & Winters, A
Professional Corporation) engaged by Communications, and (c) all other
expenses, including the fees and expenses of any accountants and other
attorneys, incurred in connection with this Agreement and the transactions
contemplated hereby shall be borne equally by Tribune/Swab-Fox and
Communications.
Section 10.5. Successors and Assigns. The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided, however, that no party may assign,
delegate or otherwise transfer any of its rights or obligations under this
Agreement without the consent of the other party hereto.
Section 10.6. Governing Law. This Agreement shall be construed in accordance
with and governed by the laws of the State of Delaware (without regard to
principles of conflict of laws).
Section 10.7. Counterparts; Effectiveness. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures were upon the same instrument. This Agreement shall
become effective when each party hereto shall have received counterparts hereof
signed by the other party hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.
T/SF COMMUNICATIONS CORPORATION
By: /s/ Robert E. Craine, Jr.
-----------------------------------
Robert E. Craine, Jr.
Executive Vice President
TRIBUNE/SWAB-FOX COMPANIES, INC.
By: /s/ Howard G. Barnett, Jr.
-----------------------------------
Howard G. Barnett, Jr.
President and Chief Executive
Officer
A-16
<PAGE>
EXHIBIT A
FORM OF AFFILIATE LETTER
, 1995
T/SF Communications Corporation
2407 East Skelly Drive
Tulsa, Oklahoma 74105
Ladies and Gentlemen:
I have been advised that, as of the date of this letter, I may be deemed to
be an "affiliate" of Tribune/Swab-Fox Companies, Inc. ("Tribune/Swab-Fox"), a
Delaware corporation, as that term is defined for purposes of Rule 145(c) and
(d) promulgated by the Securities and Exchange Commission (the "SEC") under the
Securities Act of 1933, as amended (the "Securities Act"). Pursuant to the
terms of that certain Agreement and Plan of Merger dated January 25, 1995,
between T/SF Communications Corporation ("Communications"), a Delaware
corporation, and Tribune/Swab-Fox, Tribune/Swab-Fox will be merged with and
into Communications (such merger being referred to herein as the "Merger" and
such agreement being referred to herein as the "Merger Agreement"). As a result
of the Merger, I may receive shares of common stock, par value $.10 per share,
of Communications (the "Communications Common Stock") in exchange for shares of
common stock of Tribune/Swab-Fox.
I hereby represent and warrant to, and covenant and agree with,
Communications that, if I receive any Communications Common Stock as a result
of the Merger:
1. I shall not make any sale, transfer, or other disposition of the
Communications Common Stock in violation of the Securities Act or the rules
and regulations of the SEC promulgated thereunder.
2. I have read this letter and the Merger Agreement and have discussed
their requirements and other applicable limitations on my ability to sell,
transfer or otherwise dispose of my shares of Communications Common Stock,
to the extent I believed necessary, with my counsel or counsel for
Tribune/Swab-Fox.
3. I have been advised that the issuance of Communications Common Stock
pursuant to the Merger has been registered under the Securities Act on a
Registration Statement on Form S-4. I have also been advised, however,
that, to the extent I am considered an "affiliate" of Tribune/Swab-Fox at
the time the Merger Agreement is submitted for a vote of the stockholders
of Tribune/Swab-Fox, any public offering or sale by me of any shares of
Communications Common Stock that I receive pursuant to the Merger will,
under current law, require either (a) the further registration under the
Securities Act of any shares of Communications Common Stock to be sold by
me, (b) compliance with Rule 145 under the Securities Act, or (c) the
availability of another exemption from such registration under the
Securities Act.
4. I understand that stop transfer instructions will be given to
Communications' transfer agent with respect to shares of Communications
Common Stock received by me pursuant to the Merger and that a legend
substantially as follows will be placed on the certificates for the shares
of Communications Common Stock issued to me pursuant to the Merger:
THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A TRANSACTION
TO WHICH RULE 145 UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
APPLIES. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY ONLY BE
TRANSFERRED IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE
REGISTERED HOLDER HEREOF AND T/SF COMMUNICATIONS CORPORATION, A COPY OF
WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICES OF T/SF
COMMUNICATIONS CORPORATION.
A-17
<PAGE>
I also understand that, unless the transfer by me of my Communications Common
Stock has been registered under the Securities Act or is a sale made in
conformity with the provisions of Rule 145, Communications reserves the right
to put the following legend on the certificates issued to my transferee:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND WERE ACQUIRED FROM A PERSON WHO RECEIVED SUCH SHARES IN A
TRANSACTION TO WHICH RULE 145 UNDER THE SECURITIES ACT APPLIES. THE
SHARES HAVE BEEN ACQUIRED BY THE HOLDER NOT WITH A VIEW TO, OR FOR
RESALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN THE MEANING
OF THE SECURITIES ACT AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT IN ACCORDANCE WITH AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
It is understood and agreed that the legends set forth above shall be removed
by delivery of substitute certificates without such legends if such legends are
not required for purposes of the Securities Act or this letter. It is
understood and agreed that such legends referred to above will be removed if
(a) two years shall have elapsed from the date the undersigned acquired the
Communications Common Stock received in the Merger and the provisions of Rule
145(d)(2) are then available to the undersigned, (b) three years shall have
elapsed from the date the undersigned acquired the Communications Common Stock
received in the Merger and the provisions of Rule 145(d)(3) are then applicable
to the undersigned, or (c) Communications has received either an opinion of
counsel, which opinion and counsel shall be reasonably satisfactory to
Communications, or a "no action" letter obtained from the staff of the SEC, to
the effect that the restrictions imposed by Rule 145 under the Securities Act
no longer apply to the undersigned.
Execution of this letter should not be considered an admission on my part
that I am an "affiliate" of Tribune/Swab-Fox as described in the first
paragraph of this letter or as a waiver of any rights I may have to object to
any claim that I am such an affiliate on or after the date of this letter.
Sincerely,
_____________________________________
Name: _______________________________
Accepted on
, 1995
T/SF Communications Corporation
By: _________________________
Name: _______________________
Title: ______________________
A-18
<PAGE>
AMENDMENT NO. 1
TO
AGREEMENT AND PLAN OF MERGER
THIS AMENDMENT NO.1 TO AGREEMENT AND PLAN OF MERGER (this "Amendment") is
made and entered into this 3rd day of March, 1995, by and between T/SF
Communications Corporation, a Delaware corporation ("Communications"), and
Tribune/Swab-Fox Companies, Inc., a Delaware corporation ("Tribune/Swab-Fox").
RECITALS
A. Communications and Tribune/Swab-Fox entered into a certain Agreement and
Plan of Merger dated January 25, 1995 (the "Merger Agreement"), pursuant to
which Tribune/Swab-Fox will be merged with and into Communications.
B. Communications and Tribune/Swab-Fox desire to amend certain sections of
the Merger Agreement to provide for an increase in the Cash Consideration (as
such term is defined in the Merger Agreement) and an increase in the amount of
cash to be paid in lieu of any fractional shares of Common Stock, par value
$.10 per share, of Communications.
NOW, THEREFORE, in consideration of the premises and the covenants and
agreements set forth herein, Communications and Tribune/Swab-Fox hereby agree
as follows:
1. Amendment. The Merger Agreement shall be amended as follows:
(a) In Section 1.2(b) of the Merger Agreement, the amount defined as the
Cash Consideration which is equal to "$.80" is hereby deleted and the
amount of "$0.88" is substituted therefor.
(b) In the last sentence of Section 1.5(d) of the Merger Agreement, the
amount of "$0.80" is hereby deleted and the amount of "$0.88" is
substituted therefor.
2. Effective Date. This Amendment shall be effective as of the day and year
first above written.
3. Full Force and Effect. Except as amended by this Amendment, all terms and
provisions of the Merger Agreement shall remain in full force and effect in
accordance with their terms.
4. Counterparts. This Amendment may be signed in any number of counterparts,
each of which shall be an original, with the same effect as if the signatures
were upon the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed by their respective authorized officers as of the day and year first
above written.
T/SF Communications Corporation Tribune/Swab-Fox Companies, Inc.
By: /s/ Robert E. Craine, Jr. By: /s/ Howard G. Barnett, Jr.
----------------------- ---------------------------
Robert E. Craine, Jr. Howard G. Barnett, Jr.
Executive Vice President President and Chief Executive
Officer
A-19
<PAGE>
APPENDIX B
[OPPENHEIMER & CO., INC. LETTERHEAD]
April 20, 1995
Confidential
Board of Directors
T/SF Communications Corporation
2407 East Skelly Drive
Tulsa, OK 74105
Gentlemen:
You have asked Oppenheimer & Co., Inc. ("Oppenheimer") to render an opinion
(the "Opinion") as to the fairness from a financial point of view to the
stockholders of T/SF Communications Corporation ("Communications") of the
consideration to be paid to the holders of Class A and B common stock of
Tribune/Swab-Fox Companies, Inc. ("Tribune/Swab-Fox") (collectively
"Tribune/Swab-Fox Common Stock") in connection with the proposed merger of
Tribune/Swab-Fox with and into Communications (the "Merger") pursuant to the
terms and conditions set forth in the Agreement and Plan of Merger between
Communications and Tribune/Swab-Fox dated January 25, 1995, as amended (the
"Merger Agreement").
The principal terms and conditions of the Merger Agreement provide that each
outstanding share of Tribune/Swab-Fox Common Stock (other than treasury shares
or shares held by Communications) will be converted into 0.1255 of a share of
the common stock of Communications, or at the election of each Tribune/Swab-Fox
stockholder, subject to compliance with the cash election procedures and
limitations set forth in the Merger Agreement, $0.88 cash, without interest
(subject to appraisal rights for dissenting Tribune/Swab-Fox stockholders). In
addition, as disclosed in the Joint Proxy/Registration Statement on Form S-4,
as amended (the "Registration Statement"), Tribune/Swab-Fox will pay a cash
dividend of approximately $1,090,000 or $0.0344 per share to Tribune/Swab-Fox
stockholders. We have not served as financial advisor to Communications in
connection with its determination to enter into the Merger.
In arriving at our Opinion we:
(i) reviewed the executed Merger Agreement;
(ii) reviewed the Registration Statement;
(iii) reviewed Communications' and Tribune/Swab-Fox's recent annual
reports to stockholders and annual reports on Form 10-K for the five fiscal
years ended December 31, 1994 and their quarterly reports on Form 10-Q for
fiscal 1993 and 1994;
(iv) reviewed Communications' and Tribune/Swab-Fox's proxy statements
dated May 23, 1994;
(v) reviewed and analyzed Communications' and Tribune/Swab-Fox's
unaudited financial statements for the 11 month periods ended November 30,
1994 and November 30, 1993;
B-1
<PAGE>
(vi) held discussions with Howard G. Barnett, Jr. (Chairman, President
and Chief Executive Officer of Communications and President, Chief
Executive Officer and Director of Tribune/Swab-Fox) and J. Gary Mourton
(Senior Vice President--Finance, Chief Financial Officer and Treasurer of
Communications and Tribune/Swab-Fox and Director of Communications);
(vii) reviewed the financial projections of Communications prepared by
Communications' management dated January 9, 1995;
(viii) reviewed and analyzed information and data regarding assets and
liabilities of Tribune/Swab-Fox provided by Tribune/Swab-Fox's management;
(ix) held discussions with Communications' and Tribune/Swab-Fox's legal
counsel and accountants;
(x) reviewed financial and market data for certain public companies
considered comparable to Communications;
(xi) evaluated the financial impact of the Merger on Communications'
financial statements; and
(xii) performed such other analyses and reviewed such other information
as we deemed appropriate.
In rendering our opinion we relied upon and assumed, without independent
verification or investigation, the accuracy and completeness of all of the
financial and other information available to us from public sources and
provided to us by Communications and Tribune/Swab-Fox and their respective
representatives. We have relied as to all legal, tax and accounting matters on
advice of legal counsel and accountants to Communications. In this connection,
we have assumed, without independent verification, the accuracy of the advice
and the conclusions of Communications' legal counsel and accountants with
respect to tax and accounting matters as provided to Oppenheimer by
Communications' management, including without limitation, the treatment of the
Merger as a tax free reorganization (other than with respect to the so-called
Cash Alternative), the status of the Merger as a "downstream merger" for tax
and accounting purposes and the effect and accounting treatment of tax loss
carryforwards. With respect to forecasts regarding Communications' future
financial condition and operating results provided to us as described in clause
(vii) above, we assumed, without independent verification or investigation,
that such forecasts were reasonably prepared on bases reflecting the best
available information, estimates and judgment of Communications' management. In
addition, we have neither made nor obtained any independent evaluations or
appraisals of the assets or liabilities of Communications or Tribune/Swab-Fox
other than four separate appraisals provided to us by Tribune/Swab-Fox
completed in December 1994 and January 1995 pertaining to certain real estate
related assets of Tribune/Swab-Fox.
Our Opinion is based upon analyses of the foregoing factors in light of our
assessment of general economic, financial and market conditions as of the date
hereof that can be evaluated by us as of such date.
Oppenheimer, as part of its investment banking services, is regularly engaged
in the valuation of businesses and securities in connection with mergers,
acquisitions, underwritings, sales and distributions of listed and unlisted
securities and private placements. Oppenheimer has performed investment banking
and other services for Communications and Tribune/Swab-Fox in the past and has
been compensated for such services. Oppenheimer served as placement agent in
the private placement of debt and equity securities for Tribune/Swab-Fox in
1988 and as lead managing underwriter for Communications' initial public
offering of common stock in 1989. In 1994, Oppenheimer was engaged by
Communications as financial advisor and exclusive agent to assist
Communications in the sale of certain assets and operations of Communications.
An officer of Oppenheimer is a member of Communications' Board of Directors.
Based upon and subject to the foregoing, it is our Opinion that, as of the
date hereof, the consideration to be paid to the holders of Tribune/Swab-Fox
Common Stock in connection with the Merger is fair, from a financial point of
view, to the stockholders of Communications other than Tribune/Swab-Fox and
both companies' officers and directors.
B-2
<PAGE>
We understand that this Opinion may be reproduced in full in the Registration
Statement. Subject to reviewing the description of the Opinion and the
description of any services provided by Oppenheimer in such Registration
Statement, we consent to such use. Except as set forth in the preceding two
sentences, this Opinion may not be used or relied upon, or disclosed, referred
to or communicated by you in whole or in part to anyone for any purpose
whatsoever without Oppenheimer's written consent in each instance.
Very truly yours,
OPPENHEIMER & CO., INC.
B-3
<PAGE>
APPENDIX C
[SOUTHWEST SECURITIES LETTERHEAD]
April 24, 1995
Board of Directors
Tribune/Swab-Fox Companies, Inc.
2407 East Skelly Drive
Tulsa, Oklahoma 74105
Dear Madam and Sirs:
You have asked our opinion as to the fairness, from a financial point of
view, to the holders of Class A and Class B common stock, par value $0.10 per
share ("Tribune/Swab-Fox Common Stock"), of Tribune/Swab-Fox Companies, Inc., a
Delaware corporation ("Tribune/Swab-Fox"), of the consideration to be received
in the proposed merger (the "Merger") of Tribune/Swab-Fox with and into its 78%
owned subsidiary, T/SF Communications Corporation ("Communications"), a
Delaware corporation, pursuant to the terms of an Agreement and Plan of Merger
dated January 25, 1995, as amended, between Tribune/Swab-Fox and Communications
(the "Merger Agreement"). The Merger Agreement provides that Tribune/Swab-Fox
will be merged with and into Communications, and each issued and outstanding
share of Tribune/Swab-Fox Common Stock (other than shares held by Tribune/Swab-
Fox as treasury stock or shares held by Communications, all of which will be
canceled) will be converted into the right to receive 0.1255 of a share of
$0.10 par value common stock of Communications ("Communications Common Stock")
or, at the election of each Tribune/Swab-Fox stockholder, subject to compliance
with the cash election procedures and limitations set forth in the Merger
Agreement, $0.88 cash, without interest (subject to appraisal rights for
dissenting Tribune/Swab-Fox stockholders). Subject to the approval of the
Merger by the stockholders of Tribune/Swab-Fox and Communications,
Tribune/Swab-Fox will pay a one-time cash dividend of approximately $1,090,000
or $0.0344 per share to Tribune/Swab-Fox stockholders of record in accordance
with the provisions of the Form S-4 Registration Statement, as amended (the
"Registration Statement") filed with the Securities and Exchange Commission
with respect to the proposed Merger.
As a usual part of our investment banking business, Southwest Securities,
Inc. regularly issues fairness opinions and is engaged in the valuation of
businesses and securities in connection with mergers and acquisitions,
underwritings and distributions of listed and unlisted securities, private
placements and valuations for corporate and other purposes.
For purposes of the opinion set forth herein, we have, among other things:
(i) reviewed the Registration Statement and the Merger Agreement and
supporting documents and held discussions with management of Tribune/Swab-
Fox and Communications regarding the details of the Merger;
(ii) reviewed the audited financial statements of Tribune/Swab-Fox and
Communications for the five years ended December 31, 1994, and certain
other relevant financial and operating data of
<PAGE>
Tribune/Swab-Fox and Communications made available to us from published
sources and from the internal records of Tribune/Swab-Fox and
Communications;
(iii) reviewed certain internal financial and operating information for
both companies (including financial projections for the fiscal years ending
December 31, 1994 through 1999, one set prepared on a pro forma basis as if
the Merger occurred at January 1, 1994 and one set prepared assuming that
the Merger did not occur) developed by the management of Tribune/Swab-Fox
and Communications;
(iv) discussed the business and operations, assets, financial condition
and prospects of the companies with the senior management of both
Tribune/Swab-Fox and Communications;
(v) reviewed reported market prices, the respective market
capitalizations, price/earnings ratios and trading statistics of the common
stock of Tribune/Swab-Fox and Communications;
(vi) compared Tribune/Swab-Fox and Communications from a financial point
of view with particular regard to Tribune/Swab-Fox's value beyond its
controlling ownership of Communications and to any factors which add to or
detract from this value;
(vii) reviewed the cash alternative provided to holders of Tribune/Swab-
Fox Common Stock;
(viii) reviewed the terms and conditions of various notes receivable and
other assets received by Tribune/Swab-Fox as a result of the liquidation of
real estate assets; and
(ix) performed such other analyses and examinations and considered such
other factors as we deemed appropriate.
In connection with our opinion, we were not authorized to, and consequently,
did not solicit any alternative proposals for a merger or acquisition of
Tribune/Swab-Fox. We have not independently verified the accuracy or
completeness of the information considered in the foregoing review and, for
purposes of the opinion set forth herein, we have assumed and relied upon the
accuracy and completeness of all such information available to us from public
sources or provided to us by management of either of the companies. We relied
upon the management of both companies as to the reasonableness and
achievability of the financial projections provided to us and referred to in
(iii) above. We did not make an independent evaluation or appraisal of the
respective assets or liabilities of Tribune/Swab-Fox or any subsidiary nor have
we been furnished with any such appraisals other than appraisals of certain
properties sold or to be sold by Tribune/Swab-Fox. We express no opinion as to
the fairness of the Merger to Communications or its stockholders.
It should be noted that this opinion is based, in part, on economic, market
and other conditions as in effect on, and information made available to us as
of, the date hereof, and does not represent an opinion as to what value
Communications Common Stock actually will have to Tribune/Swab-Fox stockholders
if and when the Merger is consummated. Events occurring after the date hereof
such as changes in market conditions, general economic conditions and other
factors which generally influence the price of securities could materially
affect the assumptions used both in preparing this opinion and in the documents
reviewed by us. We have not undertaken to reaffirm or revise this opinion or
otherwise comment upon any such events occurring after the date hereof. This
fairness opinion is a considered judgment, not a statement of fact or prophecy.
We are not opining, and were not requested to opine, as to the fairness of
any aspect of the proposed Merger other than the consideration, including the
cash dividend, to be received by the stockholders of Tribune/Swab-Fox. Our
opinion does not constitute a recommendation to any stockholder of
Tribune/Swab-Fox as how such stockholder should vote with respect to the
proposed Merger. This letter is for the information of the Board of Directors
of Tribune/Swab-Fox only and is not to be quoted or referred to, in whole or in
part, without our prior written consent other than as required by law or
judicial process. We
C-2
<PAGE>
consent to the filing of this letter as an exhibit to the Registration
Statement and the inclusion of this letter in its entirety in the proxy
statement/prospectus included in the Registration Statement and to the
references to our firm and such opinion included in the Registration Statement.
Based upon and subject to the foregoing, including the various assumptions
and limitations set forth herein, we are of the opinion that, as of the date
hereof, the consideration to be received by the stockholders of Tribune/Swab-
Fox in connection with the Merger is fair, from a financial point of view, to
such stockholders.
Sincerely,
Southwest Securities, Inc.
C-3
<PAGE>
APPENDIX D
SECTION 262 OF THE GENERAL
CORPORATION LAW OF THE
STATE OF DELAWARE
(S)262 APPRAISAL RIGHTS.
(a) Any stockholder of a corporation of this State who holds shares of stock
on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to Section
228 of this title shall be entitled to an appraisal by the Court of Chancery of
the fair value of his shares of stock under the circumstances described in
subsections (b) and (c) of this section. As used in this section, the word
"stockholder" means a holder of record of stock in a stock corporation and also
a member of record of a nonstock corporation; the words "stock" and "share"
mean and include what is ordinarily meant by those words and also membership or
membership interest of a member of a nonstock corporation; and the words
"depository receipt" mean a receipt or other instrument issued by a depository
representing an interest in one or more shares, or fractions thereof, solely of
stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or series
of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Sections 251, 252, 254, 257, 258, 263 or 264 of this
title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock,
or depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
Sections 251, 252, 254, 257, 258, 263, and 264 of this title to accept for
such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect
thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock or depository receipts at the
effective date of the merger or consolidation will be either listed on
a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or held of record by more than
2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section 253 of this title is not owned by
the parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
D-1
<PAGE>
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets
of the corporation. If the certificate of incorporation contains such a
provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for
such meeting with respect to shares for which appraisal rights are
available pursuant to subsection (b) or (c) hereof that appraisal rights
are available for any or all of the shares of the constituent corporation,
and shall include in such notice a copy of this section. Each stockholder
electing to demand the appraisal of his shares shall deliver to the
corporation, before the taking of the vote on the merger or consolidation,
a written demand for appraisal of this shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to Section 228
or 253 of this title, the surviving or resulting corporation, either before
the effective date of the merger or consolidation or within 10 days
thereafter, shall notify each of the stockholders entitled to appraisal
rights of the effective date of the merger or consolidation and that
appraisal rights are available for any or all of the shares of the
constituent corporation, and shall include in such notice a copy of this
section. The notice shall be sent by certified or registered mail, return
receipt requested, addressed to the stockholder at his address as it
appears on the records of the corporation. Any stockholder entitled to
appraisal rights may, within 20 days after the date of mailing of the
notice, demand in writing from the surviving or resulting corporation the
appraisal of his shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of his shares.
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw his demand for
appraisal and to accept the terms offered upon the merger or consolidation.
Within 120 days after the effective date of the merger or consolidation, any
stockholder who has complied with the requirements of subsections (a) and (d)
hereof, upon written request, shall be entitled to receive from the corporation
surviving the merger or resulting from the consolidation a statement setting
forth the aggregate number of shares not voted in favor of the merger or
consolidation and with respect to which demands for appraisal have been
received and the aggregate number of holders of such shares. Such written
statement shall be mailed to the stockholder within 10 days after his written
request for such a statement is received by the surviving or resulting
corporation or within 10 days after expiration of the period for delivery of
demands for appraisal under subsection (d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the
D-2
<PAGE>
Register in Chancery in which the petition was filed a duly verified list
containing the names and addresses of all stockholders who have demanded
payment for their shares and with whom agreements as to the value of their
shares have not been reached by the surviving or resulting corporation. If the
petition shall be filed by the surviving or resulting corporation, the petition
shall be accompanied by such a duly verified list. The Register in Chancery, if
so ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1 or more
publications at least 1 week before the day of the hearing, in a newspaper of
general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail and
by publication shall be approved by the Court, and the costs thereof shall be
borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled
to appraisal rights. The Court may require the stockholders who have demanded
an appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as
to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger
or consolidation, together with a fair rate of interest, if any, to be paid
upon the amount determined to be the fair value. In determining such fair
value, the Court shall take into account all relevant factors. In determining
the fair rate of interest, the Court may consider all relevant factors,
including the rate of interest which the surviving or resulting corporation
would have had to pay to borrow money during the pendency of the proceeding.
Upon application by the surviving or resulting corporation or by any
stockholder entitled to participate in the appraisal proceeding, the Court may,
in its discretion, permit discovery or other pretrial proceedings and may
proceed to trial upon the appraisal prior to the final determination of the
stockholder entitled to an appraisal. Any stockholder whose name appears on the
list filed by the surviving or resulting corporation pursuant to subsection (f)
of this section and who has submitted his certificates of stock to the Register
in Chancery, if such is required, may participate fully in all proceedings
until it is finally determined that he is not entitled to appraisal rights
under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to
the stockholders entitled thereto. Interest may be simple or compound, as the
Court may direct. Payment shall be so made to each such stockholder, in the
case of holders of uncertificated stock forthwith, and the case of holders of
shares represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the court and taxed upon
the parties as the Court deems equitable in the circumstances. Upon application
of a stockholder, the Court may order all or a portion of the expenses incurred
by any stockholder in connection with the appraisal proceeding, including,
without limitation, reasonable attorney's fees and the fees and expenses of
experts, to be charged pro rata against the value of all the shares entitled to
an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall
deliver to the surviving or resulting corporation a
D-3
<PAGE>
written withdrawal of his demand for an appraisal and an acceptance of the
merger or consolidation, either within 60 days after the effective date of the
merger or consolidation as provided in subsection (c) of this section or
thereafter with the written approval of the corporation, then the right of such
stockholder to an appraisal shall cease. Notwithstanding the foregoing, no
appraisal proceeding in the Court of Chancery shall be dismissed as to any
stockholder without the approval of the Court, and such approval may be
conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation.
D-4
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20--INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article Eleven of the Certificate of Incorporation of the registrant provides
that the registrant must indemnify its officers and directors to the fullest
extent permitted by the Delaware General Corporation Law. Pursuant to Section
145 of the Delaware General Corporation Law, the registrant generally has the
power to indemnify its present and former directors and officers against
expenses and liabilities incurred by them in connection with any suit to which
they are, or are threatened to be made, a party by reason of their serving in
those positions so long as they acted in good faith and in a manner they
reasonably believed to be in, or not opposed to, the best interests of the
registrant, and with respect to any criminal action, they had no reasonable
cause to believe their conduct was unlawful. With respect to suits by or in the
right of the registrant, however, indemnification is generally limited to
attorneys' fees and other expenses and is not available if the person is
adjudged to be liable to the registrant unless the court determines that
indemnification is appropriate. The statute expressly provides that the power
to indemnify authorized thereby is not exclusive of any rights granted under
any by-law, agreement, vote of stockholders or disinterested directors, or
otherwise. The registrant also has the power to purchase and maintain insurance
for its directors and officers. The registrant maintains directors and officers
liability insurance which indemnifies the directors and officers of the
registrant against damages arising out of certain kinds of claims which might
be made against them based on their negligent acts or omissions while acting in
their capacity as such. The registrant's Certificate of Incorporation
eliminates the liability of the registrant's directors for monetary damages for
breach of their fiduciary duty as directors. This provision, however, does not
eliminate a director's liability (i) for any breach of the director's duty of
loyalty to the registrant or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) in respect of certain unlawful dividend payments or stock
redemptions or repurchases, or (iv) for any transaction from which a director
derived an improper personal benefit.
ITEM 21--EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following exhibits are included as a part of this Registration Statement:
<TABLE>
<C> <S>
***2.1 Agreement and Plan of Merger, dated January 25, 1995, between T/SF
Communications Corporation ("Communications") and Tribune/Swab-Fox
Companies, Inc. ("Tribune/Swab-Fox"); and Amendment No. 1 to
Agreement and Plan of Merger, dated March 3, 1995, between
Communications and Tribune/Swab-Fox (attached as Appendix A to the
Joint Proxy Statement and Prospectus forming a part of this
Registration Statement).
3.1 Certificate of Incorporation of Communications (incorporated by
reference to Exhibit 3.1 to Communications' Registration Statement
on Form S-1, No. 33-27811, effective June 8, 1989 (the "S-1
Registration Statement")).
3.2 Bylaws of Communications (incorporated by reference to Exhibit 3.2
to the S-1 Registration Statement).
***5.1 Opinion of Conner & Winters, A Professional Corporation, as to the
legality of the securities to be registered.
***8.1 Opinion of Conner & Winters, A Professional Corporation, as to
federal income tax consequences.
10.1 Agreement for Purchase and Sale of Stock dated March 17, 1994,
between Communications, T/SF Investment Co., John R. Laughlin and
the Galaxy Registration, Inc. Employee Stock Ownership Plan and
Trust (incorporated by reference to Exhibit 2 to Communications'
report on Form 8-K dated March 17, 1994).
</TABLE>
II-1
<PAGE>
<TABLE>
<C> <S>
10.2 Asset Purchase Agreement dated November 1, 1993, by and among
Communications, 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 Communications' report on Form 8-K dated November 1, 1993).
10.3 Asset Purchase Agreement, dated May 2, 1994, by and among
Communications, Shopper's Guide, Inc., and Dickson Media, Inc.
(incorporated by reference to Exhibit 10.1 to Communications'
report on Form 8-K dated May 2, 1994).
10.4 Management Agreement effective January 1, 1989, between
Communications and Tribune/Swab-Fox (incorporated by reference to
Exhibit 10.11 to the S-1 Registration Statement).
10.5 Retirement Agreement effective August 1, 1993, by and among G.
Douglas Fox, Communications and Tribune/Swab-Fox (incorporated by
reference to Communications' report on Form 10-Q for the quarter
ended June 30, 1993).
10.6 Retirement Agreement dated December 14, 1994, by and among Robert
J. Swab, Communications and Tribune/Swab-Fox (incorporated by
reference to Exhibit 10.19 of Tribune/Swab-Fox's report on Form 10-
K for the year ended December 31, 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 Communications' 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 Communications' report on Form 8-K
dated September 30, 1992).
10.9 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 to
Communications' report on Form 10-Q for the quarter ended September
30, 1993).
10.10 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 Communications' report on Form 10-Q for the
quarter ended September 30, 1993).
10.11 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
Communications' report on Form 10-Q for the quarter ended September
30, 1994).
10.12 Revolving Credit Loan Agreement dated as of July 14, 1993, between
Communications and BancFirst, together with exhibits, including
forms of various closing documents executed in connection therewith
(incorporated by reference to Exhibit 10.26 to Communications'
report on Form 10-Q for the quarter ended September 30, 1993).
10.13 Revolving Credit Loan Agreement dated as of June 30, 1994, between
Communications and BancFirst (incorporated by reference to Exhibit
10.1 to Communications' report on Form 10-Q for the quarter ended
September 30, 1994).
10.14 Revolving Credit Loan Agreement dated November 30, 1993, between
Tulsa Tribune Company and BancFirst (incorporated by reference to
Exhibit 10(iii) to Communications' report on Form 10-K for the year
ended December 31, 1993).
10.15 T/SF Communications Corporation 1994 Incentive Stock Plan
(incorporated by reference to Exhibit A to Communications' Proxy
Statement for Annual Meeting of Stockholders dated May 23, 1994).
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
10.16 T/SF Communications Corporation Employee Stock Purchase Plan
(incorporated by reference to Exhibit 10.1 to the S-1 Registration
Statement).
10.17 T/SF Communications Corporation Incentive Stock Option Plan
(incorporated by reference to Exhibit 10.2 to the S-1 Registration
Statement).
*23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Conner & Winters, A Professional Corporation (included
in the opinion filed as Exhibit 5.1 to this Registration
Statement).
23.3 Consent of Conner & Winters, A Professional Corporation (included
in the opinion filed as Exhibit 8.1 to this Registration
Statement).
23.4 Consent of Oppenheimer & Co., Inc. (included in the opinion filed
as Exhibit 99.1 to this Registration Statement).
23.5 Consent of Southwest Securities, Inc. (included in the opinion
filed as Exhibit 99.2 to this Registration Statement).
***23.6 Consent of Robert J. Swab.
**24.1 The power of attorney of officers and directors of Communications
is set forth on the signature page of this Registration Statement.
*99.1 Opinion of Oppenheimer & Co., Inc. as to the fairness of the
consideration to be paid in connection with the Merger (attached as
Appendix B to the Joint Proxy Statement and Prospectus forming a
part of this Registration Statement).
*99.2 Opinion of Southwest Securities, Inc. as to the fairness of the
consideration to be paid in connection with the Merger (attached as
Appendix C to the Joint Proxy Statement and Prospectus forming a
part of this Registration Statement).
*99.3 Form of Proxy for Special Meeting of Stockholders of
Communications.
*99.4 Form of Proxy for Special Meeting of Stockholders of Tribune/Swab-
Fox.
***99.5 Form of Cash Election Form.
</TABLE>
- --------
* Filed herewith.
** Filed with the Registrant's Registration Statement on Form S-4, No. 33-
57587, on February 3, 1995.
*** Filed with Amendment No. 1 to the Registrant's Registration Statement on
Form S-4, No. 33-57587, on April 3, 1995.
ITEM 22--UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(1) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(2) To reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this Registration Statement; and
(3) To include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or
any material change to such information in this Registration Statement;
provided, however, that clauses (1) and (2) above do not apply if the
information required to be included in a post-effective amendment by those
clauses is contained in periodic reports filed by the registrant pursuant
to Section 13 or Section 15(d) of the Exchange Act that are incorporated by
reference into this Registration Statement;
II-3
<PAGE>
(b) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof; and
(c) To remove from registration by means of a post-effective amendment
any of the securities being registered that remain unsold at the
termination of the offering.
(g) The undersigned registrant hereby undertakes as follows:
(1) That, prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this Registration
Statement, by any person who is deemed to be an underwriter within the
meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items
of the applicable form.
(2) That every prospectus (i) that is filed pursuant to paragraph (1)
immediately preceding or (ii) that purports to meet the requirements of
section 10(a)(3) of the Securities Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to this Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(h) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers, and controlling persons of the
registrant pursuant to the provisions described in Item 20 above or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer, or
controlling person of the registrant in the successful defense of any action,
suit, or proceeding) is asserted by such director, officer, or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of this Registration Statement through
the date of responding to such request.
The undersigned registrant hereby undertakes to supply by means of a post-
effective amendment all information concerning a transaction, and the company
being acquired involved therein, that was not the subject of and included in
this Registration Statement when it became effective.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT NO. 2 TO REGISTRATION STATEMENT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF TULSA,
STATE OF OKLAHOMA, ON THE 21ST DAY OF APRIL, 1995.
T/SF Communications Corporation
By: /s/ Howard G. Barnett, Jr.
---------------------------------
HOWARD G. BARNETT, JR.
CHAIRMAN, CHIEF EXECUTIVE
OFFICER AND PRESIDENT
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 2 TO REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Howard G. Barnett, Jr. Chairman, Chief April 21, 1995
- ------------------------------------- Executive Officer,
HOWARD G. BARNETT, JR. President and
Director (principal
executive officer)
/s/ Mark A. Leavitt* Director April 21, 1995
- -------------------------------------
MARK A. LEAVITT
/s/ Martin F. Beck* Director April 21, 1995
- -------------------------------------
MARTIN F. BECK
/s/ William N. Griggs* Director April 21, 1995
- -------------------------------------
WILLIAM N. GRIGGS
/s/ J. Gary Mourton Senior Vice April 21, 1995
- ------------------------------------- President, Chief
J. GARY MOURTON Financial Officer,
Treasurer and
Director (principal
financial officer
and principal
accounting officer)
/s/ David Lloyd Jones* Director April 21, 1995
- -------------------------------------
DAVID LLOYD JONES
/s/ Robert E. Craine, Jr.* Director and April 21, 1995
- ------------------------------------- Executive Vice
ROBERT E. CRAINE, JR. President
*By: /s/ Howard G. Barnett, Jr.
--------------------------------
HOWARD G. BARNETT, JR.
ATTORNEY-IN-FACT
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
INDEX DESCRIPTION
------- -----------
<C> <S>
***2.1 Agreement and Plan of Merger, dated January 25, 1995, between T/SF
Communications Corporation ("Communications") and Tribune/Swab-Fox
Companies, Inc. ("Tribune/Swab-Fox"); and Amendment No. 1 to
Agreement and Plan of Merger, dated March 3, 1995, between
Communications and Tribune/Swab-Fox (attached as Appendix A to the
Joint Proxy Statement and Prospectus forming a part of this
Registration Statement).
3.1 Certificate of Incorporation of Communications (incorporated by
reference to Exhibit 3.1 to Communications' Registration Statement on
Form S-1, No. 33-27811, effective June 8, 1989 (the "S-1 Registration
Statement")).
3.2 Bylaws of Communications (incorporated by reference to Exhibit 3.2 to
the S-1 Registration Statement).
***5.1 Opinion of Conner & Winters, A Professional Corporation, as to the
legality of the securities to be registered.
***8.1 Opinion of Conner & Winters, A Professional Corporation, as to
federal income tax consequences.
10.1 Agreement for Purchase and Sale of Stock dated March 17, 1994,
between Communications, T/SF Investment Co., John R. Laughlin and the
Galaxy Registration, Inc. Employee Stock Ownership Plan and Trust
(incorporated by reference to Exhibit 2 to Communications' report on
Form 8-K dated March 17, 1994).
10.2 Asset Purchase Agreement dated November 1, 1993, by and among
Communications, 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
Communications' report on Form 8-K dated November 1, 1993).
10.3 Asset Purchase Agreement, dated May 2, 1994, by and among
Communications, Shopper's Guide, Inc., and Dickson Media, Inc.
(incorporated by reference to Exhibit 10.1 to Communications' report
on Form 8-K dated May 2, 1994).
10.4 Management Agreement effective January 1, 1989, between
Communications and Tribune/Swab-Fox (incorporated by reference to
Exhibit 10.11 to the S-1 Registration Statement).
10.5 Retirement Agreement effective August 1, 1993, by and among G.
Douglas Fox, Communications and Tribune/Swab-Fox (incorporated by
reference to Communications' report on Form 10-Q for the quarter
ended June 30, 1993).
10.6 Retirement Agreement dated December 14, 1994, by and among Robert J.
Swab, Communications and Tribune/Swab-Fox (incorporated by reference
to Exhibit 10.19 of Tribune/Swab-Fox's report on Form 10-K for the
year ended December 31, 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 Communications' 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 Communications' report on Form 8-K
dated September 30, 1992).
10.9 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 to
Communications' report on Form 10-Q for the quarter ended September
30, 1993).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
INDEX DESCRIPTION
------- -----------
<C> <S>
10.10 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 Communications' report on Form 10-Q for the quarter ended
September 30, 1993).
10.11 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
Communications' report on Form 10-Q for the quarter ended September
30, 1994).
10.12 Revolving Credit Loan Agreement dated as of July 14, 1993, between
Communications and BancFirst, together with exhibits, including forms
of various closing documents executed in connection therewith
(incorporated by reference to Exhibit 10.26 to Communications' report
on Form 10-Q for the quarter ended September 30, 1993).
10.13 Revolving Credit Loan Agreement dated as of June 30, 1994, between
Communications and BancFirst (incorporated by reference to Exhibit
10.1 to Communications' report on Form 10-Q for the quarter ended
September 30, 1994).
10.14 Revolving Credit Loan Agreement dated November 30, 1993, between
Tulsa Tribune Company and BancFirst (incorporated by reference to
Exhibit 10(iii) to Communications' report on Form 10-K for the year
ended December 31, 1993).
10.15 T/SF Communications Corporation 1994 Incentive Stock Plan
(incorporated by reference to Exhibit A to Communications' Proxy
Statement for Annual Meeting of Stockholders dated May 23, 1994).
10.16 T/SF Communications Corporation Employee Stock Purchase Plan
(incorporated by reference to Exhibit 10.1 to the S-1 Registration
Statement).
10.17 T/SF Communications Corporation Incentive Stock Option Plan
(incorporated by reference to Exhibit 10.2 to the S-1 Registration
Statement).
*23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Conner & Winters, A Professional Corporation (included in
the opinion filed as Exhibit 5.1 to this Registration Statement).
23.3 Consent of Conner & Winters, A Professional Corporation (included in
the opinion filed as Exhibit 8.1 to this Registration Statement).
23.4 Consent of Oppenheimer & Co., Inc. (included in the opinion filed as
Exhibit 99.1 to this Registration Statement).
23.5 Consent of Southwest Securities, Inc. (included in the opinion filed
as Exhibit 99.2 to this Registration Statement).
***23.6 Consent of Robert J. Swab.
**24.1 The power of attorney of officers and directors of Communications is
set forth on the signature page of this Registration Statement.
*99.1 Opinion of Oppenheimer & Co., Inc. as to the fairness of the
consideration to be paid in connection with the Merger (attached as
Appendix B to the Joint Proxy Statement and Prospectus forming a part
of this Registration Statement).
*99.2 Opinion of Southwest Securities, Inc. as to the fairness of the
consideration to be paid in connection with the Merger (attached as
Appendix C to the Joint Proxy Statement and Prospectus forming a part
of this Registration Statement).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
INDEX DESCRIPTION
------- -----------
<C> <S>
*99.3 Form of Proxy for Special Meeting of Stockholders of Communications.
*99.4 Form of Proxy for Special Meeting of Stockholders of Tribune/Swab-Fox.
***99.5 Form of Cash Election Form.
</TABLE>
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* Filed herewith.
** Filed with the Registrant's Registration Statement on Form S-4, No. 33-
57587, on February 3, 1995.
*** Filed with Amendment No. 1 to the Registrant's Registration Statement on
Form S-4, No. 33-57587, on April 3, 1995.
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports and to all references to our Firm included in or made a part of this
T/SF Communications Corporation registration statement on Form S-4 (Registration
No. 33-57587).
ARTHUR ANDERSEN LLP
Tulsa, Oklahoma
April 21, 1995
<PAGE>
EXHIBIT 99.3
[FORM OF PROXY]
T/SF COMMUNICATIONS CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE SPECIAL MEETING OF STOCKHOLDERS TO BE HELD MAY 24, 1995
The undersigned hereby appoints Howard G. Barnett, Jr. and Robert E.
Craine, Jr., and each of them, with full power of substitution, as proxies to
represent and vote all of the shares of Common Stock the undersigned is entitled
to vote at the Special Meeting of Stockholders of T/SF Communications
Corporation to be held on the 24th day of May, 1995, at 2:00 p.m. local time, in
the Orange Room at the Doubletree Hotel at Warren Place 6110 South Yale, Tulsa,
Oklahoma, and at any and all adjournments or postponements thereof, on all
matters coming before said meeting.
PLEASE MARK, SIGN AND DATE THE PROXY ON THE OTHER SIDE
AND RETURN THE PROXY PROMPTLY USING
THE ENCLOSED ENVELOPE.
(continued on other side)
[REVERSE]
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSAL
1.
1. To approve and adopt the Agreement and Plan of Merger, dated January 25,
1995, as amended, between T/SF Communications Corporation
("Communications") and Tribune/Swab-Fox Companies, Inc. ("Tribune/Swab-
Fox") and to approve the merger of Tribune/Swab-Fox with and into
Communications pursuant thereto.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING AND AT ANY AND ALL
ADJOURNMENTS OR POSTPONEMENTS THEREOF.
Dated: ________________________ , 1995
_______________________________________
Signature
_______________________________________
Signature if held jointly
IMPORTANT: Please date this proxy
and sign exactly as your name appears
herein. If shares are held by joint
tenants, both must sign. When
signing as attorney, executor,
administrator, trustee or guardian,
please give full title as such. If a
corporation, please sign in full
corporate name by duly authorized
officer and give title of officer.
If a partnership, please sign in
partnership name by authorized
person.
<PAGE>
EXHIBIT 99.4
[FORM OF PROXY]
TRIBUNE/SWAB-FOX COMPANIES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE SPECIAL MEETING OF STOCKHOLDERS TO BE HELD MAY 24, 1995
The undersigned hereby appoints Howard G. Barnett, Jr. and Robert E.
Craine, Jr., and each of them, with full power of substitution, as proxies to
represent and vote all of the shares of Class A Common Stock the undersigned is
entitled to vote at the Special Meeting of Stockholders of Tribune/Swab-Fox
Companies, Inc. to be held on the 24th day of May, 1995, at 2:00 p.m. local
time, in the Orange Room at the Doubletree Hotel at Warren Place, 6110 South
Yale, Tulsa, Oklahoma, and at any and all adjournments or postponements thereof,
on all matters coming before said meeting.
PLEASE MARK, SIGN AND DATE THE PROXY ON THE OTHER SIDE
AND RETURN THE PROXY PROMPTLY USING
THE ENCLOSED ENVELOPE.
(continued on other side)
- --------------------------------------------------------------------------------
[REVERSE]
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
PROPOSAL 1.
1. To approve and adopt the Agreement and Plan of Merger, dated January 25,
1995, as amended, between T/SF Communications Corporation
("Communications") and Tribune/Swab-Fox Companies, Inc. ("Tribune/Swab-
Fox") and to approve the merger of Tribune/Swab-Fox with and into
Communications pursuant thereto.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING AND AT ANY AND ALL
ADJOURNMENTS OR POSTPONEMENTS THEREOF.
Dated: , 1995
-------------------------
--------------------------------------
Signature
--------------------------------------
Signature if held jointly
IMPORTANT: Please date this proxy
and sign exactly as your name appears
herein. If shares are held by joint
tenants, both must sign. When
signing as attorney, executor,
administrator, trustee or guardian,
please give full title as such. If a
corporation, please sign in full
corporate name by duly authorized
officer and give title of officer.
If a partnership, please sign in
partnership name by authorized
person.
