<PAGE>
As filed with the Securities and Exchange Commission on February 3, 1995
Registration No. 33-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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 jurisdiction (Primary Standard Industrial (IRS Employer
of incorporation or Classification Code Number) Identification Number)
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: [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==============================================================================================================
Proposed Proposed
Title of each class of Amount to be maximum offering maximum aggregate Amount of
securities to be registered registered price per unit offering price registration fee
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common stock, $.10 par value.. 3,882,790(1) $5.73(2) $22,237,096(2) $7,672(2)
==============================================================================================================
</TABLE>
(1) A maximum of 3,882,790 shares of Common Stock of the registrant are to be
offered in exchange for 27,234,864 shares of Class A Common Stock, par
value $.10 per share, of Tribune/Swab-Fox Companies, Inc. ("Tribune/Swab-
Fox") and 3,703,704 shares of Class B Common Stock, par value $.10 per
share, of Tribune/Swab-Fox.
(2) The registration fee has been computed pursuant to Rule 457(f)(1) under the
Securities Act of 1933, as amended. Pursuant to such rule, the maximum
aggregate offering price has been determined on the basis of the average of
the bid and asked prices for shares of common stock of Tribune/Swab-Fox
reported on The Nasdaq Small-Cap Market on January 31, 1995 ($.71875), and
the maximum number of such shares (30,938,568) that may be exchanged for
the securities being registered. The proposed maximum offering price per
share has been determined by dividing the maximum aggregate offering price
by the number of shares being registered.
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
================================================================================
<PAGE>
T/SF COMMUNICATIONS CORPORATION
CROSS REFERENCE SHEET
Pursuant to Item 501(b) of Regulation S-K
Item Number and Caption of Heading or Location in Proxy
Form S-4 Statement/Prospectus
--------------------------- ----------------------------------------------
A. INFORMATION ABOUT THE
TRANSACTION
1. Forepart of Registration Outside Front Cover Page
Statement and Outside
Front Cover Page of
Prospectus
2. Inside Front and Outside Available Information; Documents Incorporated
Back Cover Page of by Reference; Table of Contents
Prospectus
3. Risk Factors, Ratio of Outside Front Cover Page; Summary; Special
Earnings to Fixed Charges Considerations
and Other Information
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 Summary; Index to Pro Forma Financial
Information Statements and Financial Statements
6. Material Contacts with the Special Considerations; The
Company Being Acquired Merger--Background of the Merger; The
Merger--Interests of Certain Persons in the
Merger
7. Additional Information Not Applicable
Required for Reoffering by
Persons and Parties Deemed
to be Underwriters
8. Interests of Named Experts Not Applicable
and Counsel
9. Disclosure of Commission Not Applicable
Position on
Indemnification for
Securities Act Liabilities
B. INFORMATION ABOUT THE
REGISTRANT
10. Information with Respect Not Applicable
to S-3 Registrants
11. Incorporation of Certain Not Applicable
Information by Reference
12. Information With Respect Summary; Management's Discussion and Analysis
to S-2 or S-3 Registrants of Financial Condition and Results of
Operations-Communications; Index to Pro Forma
Financial Statements and Financial Statements
13. Incorporation of Certain Documents Incorporated by Reference
Information by Reference
14. Information With Respect Not Applicable
to Registrants Other Than
S-3 or S-2 Registrants
<PAGE>
C. INFORMATION ABOUT THE
COMPANY BEING ACQUIRED
15. Information With Respect Not Applicable
to S-3 Companies
16. Information With Respect Documents Incorporated by Reference; Summary;
to S-2 or S-3 Companies 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 Not Applicable
to Companies Other Than
S-3 or S-2 Companies
D. VOTING AND MANAGEMENT
INFORMATION
18. Information if Proxies, Outside Front Cover Page; Documents
Consents or Authorizations Incorporated by Reference; Summary; Special
are to be Solicited Considerations; The Special Meetings; The
Merger
19. Information if Proxies, Not Applicable
Consents or Authorizations
are not to be Solicited or
in an Exchange Offer
<PAGE>
[To be sent only to the stockholders of T/SF Communications Corporation]
PRELIMINARY COPY
[COMMUNICATIONS LETTERHEAD]
________________, 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 ___________________, 1995, at 9:00 a.m.
local time, at _________________________________________________________,
Tulsa, Oklahoma.
At the Special Meeting you will be asked to consider and vote on a
proposal to approve and adopt a Merger Agreement pursuant to which
Tribune/Swab-Fox Companies, Inc. ("Tribune/Swab-Fox") will be merged with
and into Communications (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, $0.80 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.
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 Common Stock in favor of the Merger. Accordingly, approval
of the Merger Agreement by the stockholders of Communications 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.
Sincerely,
Howard G. Barnett, Jr.
Chairman, President and Chief Executive Officer
YOUR VOTE IS IMPORTANT
PLEASE SIGN, DATE AND RETURN YOUR PROXY
<PAGE>
PRELIMINARY COPY
T/SF Communications Corporation
2407 East Skelly Drive
Tulsa, Oklahoma 74105
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON ___________________, 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 _______________, 1995, at 9:00 a.m. local time, at
___________________________________________________________________________
__ _______, 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 (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
___________________, 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,
Tulsa, Oklahoma Donna J. Peters
_______________, 1995 Secretary
<PAGE>
[To be sent only to the stockholders of Tribune/Swab-Fox Companies, Inc.]
PRELIMINARY COPY
[TRIBUNE/SWAB-FOX LETTERHEAD]
________________, 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, 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 ___________________, 1995, at 9:00 a.m. local time, at
_________________________________________________________, Tulsa, Oklahoma.
At the Special Meeting you will be asked to consider and vote on a
proposal to approve and adopt a Merger Agreement pursuant to which
Tribune/Swab-Fox will be merged with and into T/SF Communications
Corporation ("Communications") (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, $0.80 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.
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
consummation of the Merger, 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 ____________, 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 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
<PAGE>
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 56% 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.
Sincerely,
Howard G. Barnett, Jr.
President and Chief Executive Officer
YOUR VOTE IS IMPORTANT
PLEASE SIGN, DATE AND RETURN YOUR PROXY
<PAGE>
PRELIMINARY COPY
Tribune/Swab-Fox Companies, Inc.
2407 East Skelly Drive
Tulsa, Oklahoma 74105
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON ___________________, 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 _______________, 1995, at 9:00 a.m. local time, at
______________________________________________________________, 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 (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 _______________, 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.
<PAGE>
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,
Tulsa, Oklahoma Donna J. Peters
_______________, 1995 Secretary
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 _________________, 1995, IN
ACCORDANCE WITH THE PROCEDURES DESCRIBED UNDER "THE MERGER AGREEMENT--CASH
ELECTION PROCEDURES" IN THE JOINT PROXY STATEMENT AND PROSPECTUS.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED FEBRUARY 3, 1995
PRELIMINARY COPY
T/SF COMMUNICATIONS CORPORATION
AND
TRIBUNE/SWAB-FOX COMPANIES, INC.
JOINT PROXY STATEMENT
FOR SPECIAL MEETINGS OF STOCKHOLDERS
TO BE HELD ____________, 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 _________________, 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, between
Communications and Tribune/Swab-Fox, pursuant to which Tribune/Swab-Fox
will be merged with and into Communications (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 "Special Considerations."
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 _________________, 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 _____________, 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. For further information with respect to
Communications and the Communications Common Stock, reference is made to
the Registration Statement, including the exhibits filed as a part thereof.
Statements contained herein concerning the provisions of certain documents
are not necessarily complete, and in each instance, reference is made to
the copy of such document filed as an exhibit to the Registration Statement
or otherwise filed with the Commission. Each such statement is qualified
in its entirety by such reference. 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
_______________________, 1995.
The following Communications documents, which have been filed by
Communications with the Commission pursuant to the Exchange Act (File No.
1-10263), are incorporated by reference herein:
1. Annual Report on Form 10-K for the year ended December 31, 1993,
as amended;
2. Quarterly Reports on Form 10-Q for the quarters ended March 31,
1994, June 30, 1994, and September 30, 1994; and
3. Current Reports on Form 8-K dated March 17, 1994, as amended, and
May 2, 1994.
-2-
<PAGE>
The following Tribune/Swab-Fox documents, which have been filed by
Tribune/Swab-Fox with the Commission pursuant to the Exchange Act (File No.
1-6430), are incorporated by reference herein:
1. Annual Report on Form 10-K for the year ended December 31, 1993,
as amended;
2. Quarterly Reports on Form 10-Q for the quarters ended March 31,
1994, June 30, 1994, and September 30, 1994; and
3. Current Reports on Form 8-K dated March 17, 1994, as amended, and
May 2, 1994.
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
AVAILABLE INFORMATION................................................... 2
DOCUMENTS INCORPORATED BY REFERENCE..................................... 2
SUMMARY................................................................. 5
General.............................................................. 5
Tribune/Swab-Fox..................................................... 5
Communications....................................................... 6
Recent Developments.................................................. 7
Special Meetings..................................................... 7
The Merger........................................................... 8
Conversion of Securities........................................... 8
Recommendations of the Boards of Directors......................... 8
Opinions of Financial Advisors..................................... 8
Interests of Certain Persons in the Merger......................... 9
Conditions to the Merger........................................... 9
Effective Time of the Merger....................................... 9
Cash Election Procedures........................................... 9
Exchange of Tribune/Swab-Fox Common Stock for
Communications Common Stock...................................... 10
Appraisal Rights................................................... 10
Federal Income Tax Consequences.................................... 10
Accounting Treatment............................................... 11
Resale Restrictions................................................ 11
Termination........................................................ 11
American Stock Exchange Listing.................................... 11
Special Considerations............................................. 11
Selected Financial Data for Tribune/Swab-Fox......................... 12
Selected Financial Data for Communications........................... 13
Selected Financial Data for Communications Giving Effect to the
Merger............................................................. 15
Comparative Per Share Information.................................... 16
Comparative Market Price Information................................. 17
Dividend Policy...................................................... 18
Tribune/Swab-Fox................................................... 18
Communications..................................................... 18
SPECIAL CONSIDERATIONS.................................................. 19
THE SPECIAL MEETINGS.................................................... 21
Matters to Be Considered at the Special Meetings..................... 21
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.............................................................. 24
General.............................................................. 24
Background of the Merger............................................. 25
Reasons for the Merger; Recommendations of the Boards of Directors.. 27
Opinions of Financial Advisors....................................... 29
Accounting Treatment................................................. 36
Federal Income Tax Consequences...................................... 37
Interests of Certain Persons in the Merger........................... 39
Appraisal Rights..................................................... 40
Restrictions on Resales by Affiliates of Tribune/Swab-Fox............ 42
THE MERGER AGREEMENT.................................................... 43
The Merger........................................................... 43
Cash Election Procedures............................................. 43
Exchange of Tribune/Swab-Fox Common Stock for Communications
Common Stock....................................................... 44
Representations and Warranties....................................... 45
Certain Covenants.................................................... 45
Conditions........................................................... 46
Indemnification...................................................... 46
Termination; Amendments and Waivers.................................. 47
Expenses............................................................. 47
DESCRIPTION OF COMMUNICATIONS CAPITAL STOCK............................. 48
Communications Common Stock.......................................... 48
Communications Preferred Stock....................................... 48
COMPARATIVE RIGHTS OF STOCKHOLDERS...................................... 48
General.............................................................. 48
Number of Directors; Removal of Directors; Filling Vacancies......... 49
Stockholder Action by Written Consent; Special Meetings.............. 49
Amendment of the Certificate of Incorporation and Bylaws............. 50
"Blank Check" Preferred Stock........................................ 50
Business Combinations................................................ 50
Appraisal Rights..................................................... 52
Limitation of Liability of Directors................................. 52
Indemnification of Directors and Officers............................ 53
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS................................................. 53
Tribune/Swab-Fox..................................................... 53
Communications....................................................... 58
LEGAL MATTERS........................................................... 63
EXPERTS................................................................. 63
STOCKHOLDER PROPOSALS................................................... 63
OTHER MATTERS........................................................... 63
DEFINITION OF CERTAIN TERMS............................................. 64
INDEX TO PRO FORMA FINANCIAL STATEMENTS AND FINANCIAL STATEMENTS........ F-1
APPENDIX A--AGREEMENT AND PLAN OF MERGER................................ 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, the Appendices
hereto and the documents referred to herein. Stockholders are urged to
review carefully this Proxy Statement/Prospectus, the Merger Agreement
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 ________________, 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 (the "Merger
Agreement"), between Communications and Tribune/Swab-Fox, pursuant to which
Tribune/Swab-Fox will be merged with and into Communications (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 shares 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, $0.80 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."
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 ______________, 1995,
the date of the Special Meeting of Stockholders of Tribune/Swab-Fox (the
"Tribune/Swab-Fox Meeting"), subject to consummation of the Merger, to
stockholders of record on ____________, 1995, the record date for the
Tribune/Swab-Fox Meeting (the "Special Dividend").
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.
Since September 30, 1994, Tribune/Swab-Fox has completed or contracted
for several significant real estate transactions, as a result of which its
real estate business has been reclassified as a "discontinued operation" in
the Unaudited Pro Forma Consolidated Financial Statements of
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Tribune/Swab-Fox included in this Proxy Statement/Prospectus. The following
is a brief summary of the most significant of these transactions:
(i) On December 30, 1994, Tribune/Swab-Fox sold three significant
parcels of raw land to 1995 Land Company, 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 remaining 50.01%, who will also
oversee, manage and fund the development and sale of these properties. In
the same transaction, Tribune/Swab-Fox also granted 1995 Land Company an
option on another parcel of raw land, exercisable at any time on or before
February 28, 1995, at a price of $214,350.
(ii) On February ___, 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, which had a book value at September 30, 1994, of approximately
$1,750,000, in exchange for _______ shares of MECI common stock. As a
result of this transaction, Tribune/Swab-Fox now owns _______ shares of
MECI common stock, or ___% of MECI's outstanding shares.
(iii) Various parcels of raw land were sold or are under contract for
sale for an aggregate sale price of approximately $975,000.
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 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
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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 1993 were approximately $11,000,000. 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.
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 _____________________, 1995, at 9:00 a.m. local time, at
___________________________, 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
______________________, 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
______________________, 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
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 _______________, 1995,
directors and executive officers of Communications and their affiliates
owned approximately 0.5% of the outstanding shares of Communications Common
Stock (excluding shares held through Tribune/Swab-Fox).
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As of __________, 1995, there were issued and outstanding 27,234,864
shares of Tribune/Swab-Fox Class A Common Stock, held by approximately 307
holders of record, having voting power (excluding 753,729 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 _______________, 1995, there were 3,703,704 shares of
Tribune/Swab-Fox Class B Common Stock outstanding, held by one holder of
record.
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 _____________, 1995,
directors and executive officers of Tribune/Swab-Fox and their affiliates
owned approximately 56% 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, and (ii) 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
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," $0.80 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 $0.80 times the number of shares of Tribune/Swab-
Fox Common Stock which would otherwise be converted into a fractional share
of Communications Common Stock. 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.
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. Mark A. Leavitt, a director of
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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 and
Southwest Securities, 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 in addition to their interests as stockholders of Communications
and Tribune/Swab-Fox generally. 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 _____________, 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 ______________, 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
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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."
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 need not submit any 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. 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 are entitled to appraisal rights in
connection with the Merger. See "The Merger--Appraisal Rights."
Federal Income Tax Consequences. The Merger is intended to 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 elects to and does receive cash for part,
but not all, of such stockholder's shares of Tribune/Swab-Fox Common Stock
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 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 which may be taxable as ordinary income in the year in which
the Merger is consummated.
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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 reverse
acquisition of Communications by Tribune/Swab-Fox. 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."
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).
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.
Special Considerations. See "Special Considerations" with respect to
factors which should be considered in evaluating the Merger.
-11-
<PAGE>
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)
--------------------------------------------------------------------- ----------------------------
Nine Months Year
Ended Ended
Nine Months Ended September 30, December 31,
September 30, Year ended December 31, 1994 1993
------------------- ------------------------------------------------ ------------- -------------
1994 1993 1993 1992 1991 1990 1989
-------- --------- --------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(In thousands, except per share data)
Operating Data:
Revenues...................... $42,575 $ 58,427 $ 68,540 $95,639 $95,119 $94,142 $75,667 $33,527 $31,307
Operating costs............. 36,902 69,901 78,897 86,661 88,553 89,198 69,059 26,752 37,942
Depreciation and
amortization............. 2,192 3,346 3,928 7,516 5,031 5,470 4,370 1,600 1,316
Restructuring costs......... -- -- -- -- -- 2,441 -- -- --
Operating income (loss)
before interest, unusual
gain, income taxes and
minority interest........... 3,463 (14,812) (14,282) 1,499 1,527 (2,673) 1,734 5,175 (7,922)
Interest...................... 780 1,868 2,257 3,007 3,623 3,405 3,747 569 1,326
Unusual Gain.................. -- -- -- 24,412 -- -- -- -- --
Income (loss) before
extraordinary loss.......... (457) (10,306) (10,513) 8,352 (1,569) (3,385) (1,562) 1,954 (4,323)
Net income (loss)............. (457) (10,866) (11,073) 8,352 (1,569) (3,385) (2,881)
Earnings (loss) from
continuing operations per
share of Common
Stock:
Before extraordinary loss... (.02) (.34) (.35) .25 (.06) (.11) (.04) .06 (.14)
Extraordinary loss.......... -- (.02) (.02) -- -- -- --
Weighted average number
of common and common
equivalent shares
outstanding................. 31,138 30,440 30,286 33,531 30,960 31,542 35,882 31,138 30,286
Balance Sheet Data
(at period end):
Total assets.................. $58,155 $ 73,037 $ 60,059 $88,102 $78,760 $84,270 $88,737 $55,077
Total liabilities other than
long-term debt.............. 26,001 37,109 24,336 33,221 26,104 27,206 29,824 25,311
Long-term debt, net of
current installments........ 6,259 9,168 9,273 16,593 22,421 24,921 22,043 5,391
Stockholders' equity.......... 25,895 26,760 26,450 38,288 30,235 32,143 36,870 24,375
</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 assets of the Shopper's Guide, Inc.
shopper-newspaper (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 operating assets of the Marks-Roiland
Communications, Inc. shopper-newspaper (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 for the
Years Ended December 31, 1993, 1992 and 1991, 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 as if such assets had been sold as of January
1 of the respective period; (ii) the discontinuance of the real estate
segment in December 1994; (iii) the April 30, 1994, sale of the New
Jersey Shopper assets; and (iv) the November 1, 1993, sale of the New
York Shopper assets, as if all such transactions had occurred on
January 1, 1993, or January 1, 1994, as applicable. The pro forma
balance sheet data gives effect to the decision to sell certain BMT
assets and the discontinuance of the real estate segment in December
1994 as if all such decisions had occurred on September 30, 1994. See
"Index to Pro Forma Financial Statements and Financial Statements."
-12-
<PAGE>
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)
----------------------------------------------------------------- ----------------------------
Nine Months Year
Ended Ended
Nine Months Ended September 30, December 31,
September 30, Year ended December 31, 1994 1993
----------------- ---------------------------------------------- ------------- -------------
1994 1993 1993 1992 1991 1990 1989
------- -------- -------- ------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(In thousands, except per share data)
Operating Data:
Revenues...................... $41,432 $58,046 $67,977 $94,831 $93,583 $92,815 $74,273 $32,941 $31,109
Operating costs............. 33,179 64,396 73,207 84,932 86,961 86,905 65,841 26,040 36,906
Depreciation and
amortization............ 2,191 3,246 3,794 7,387 4,899 5,266 4,201 1,631 1,331
Restructuring costs......... --- --- --- --- --- 2,441 --- -- --
Operating income (loss)
before interest, unusual
gain, and income taxes...... 6,062 (9,596) (8,995) 2,585 1,789 (1,770) 4,231 5,270 (7,099)
Interest...................... 424 1,398 1,620 2,388 2,886 2,643 3,262 424 1,025
Unusual gain.................. --- --- --- 24,412 --- --- --- --- ---
Income (loss) before
extraordinary loss.......... 3,372 (6,589) (6,518) 14,040 (1,319) (3,869) 325 2,952 (4,578)
Net income (loss)............. 3,372 (7,149) (7,078) 14,040 (1,319) (3,869) 325 2,952
Earnings (loss) per share of
common stock:
Before extraordinary loss... .64 (1.25) (1.23) 2.66 (.25) (.67) --- $.57 $( .87)
Extraordinary loss.......... --- (.11) (.11) --- --- --- --- --
Pro forma earnings per
share of common stock (c) $.10
Weighted average number
of common and common
equivalent shares
outstanding................. 5,224 5,274 5,274 5,274 5,274 5,790 --- 5,224 5,274
Pro forma common shares
outstanding(c).............. 5,059
Balance Sheet Data
(at period end):
Total assets.................. $51,323 $58,733 $47,061 $69,818 $57,870 $62,111 $62,334 $51,222
Total liabilities other than
long-term debt.............. 18,062 26,454 14,863 21,314 18,598 18,443 16,261 17,961
Long-term debt, net of
current installments........ 3,960 4,157 4,005 13,233 18,041 21,118 18,118 3,960
Stockholders' equity.......... 29,301 28,122 28,193 35,271 21,231 22,550 27,955 29,301
</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 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 for the Years Ended December 31,
1993, 1992 and 1991, 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 as if such assets had been sold as of January
1 of the respective period; (ii) the April 30, 1994, sale of the New
Jersey Shopper assets; and (iii) the November 1, 1993, sale of the New
York Shopper assets, as if all such transactions had occurred on
January 1, 1993, or January 1, 1994, as applicable. The pro forma
balance sheet data gives effect to the decision to sell certain BMT
assets, as if the decision had occurred on September 30, 1994. See
"Index to Pro Forma Financial Statements and Financial Statements."
(c) Pursuant to a Contribution Agreement, Communications issued 3,600,000
shares of its Common Stock to Tribune/Swab-Fox in May 1989. Pro forma
earnings per share for the period January 1 through June 14, 1989, are
based upon an assumed 4,194,788 common and common equivalent shares
outstanding during the period, representing the sum of the 3,600,000
shares issued to Tribune/Swab-Fox under the Contribution Agreement
plus 594,788 of the
-13-
<PAGE>
shares issued in Communications' June 15, 1989, public stock offering,
the proceeds of which, after underwriters' discounts and offering
costs, were applied to the repayment of the $6,500,000 payable to
Tribune/Swab-Fox. From June 15, 1989, through December 31, 1989,
common and common equivalent shares outstanding were 5,790,000,
representing the aggregate of the 3,600,000 shares issued to
Tribune/Swab-Fox and the full 2,190,000 shares issued in
Communications' June 15, 1989, public stock offering. For the year
ended December 31, 1989, pro forma net income was $526,000.
-14-
<PAGE>
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 reverse acquisition of Communications
by Tribune/Swab-Fox. 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. See "Index to Pro Forma Financial
Statements and Financial Statements."
<TABLE>
<CAPTION>
Pro Forma
--------------------------------------
Nine Months
Ended Year Ended
September 30, 1994 December 31, 1993
------------------ ------------------
<S> <C> <C>
(In thousands)
Operating Data:
Revenues............................... $33,357 $31,079
Operating costs...................... 26,752 37,942
Depreciation and amortization........ 1,636 1,364
Operating income (loss) before interest
and income taxes..................... 4,969 (8,198)
Interest............................... 1,004 1,986
Income (loss) from continuing
operations........................... 3,698 (6,303)
Earnings (loss) from continuing
operations per share of Common Stock. 1.00 (1.70)
Weighted average number of common
and common equivalent shares
outstanding.......................... 3,715 3,715
Balance Sheet Data (at period end):
Total assets........................... 47,990
Total liabilities other than long-term 20,764
debt..................................
Long-term debt, net of current 5,391
installments..........................
Stockholders' equity................... 21,835
</TABLE>
-15-
<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 13 and the
pro forma Tribune/Swab-Fox information giving effect to the matters
described in note (b) to the table on page 12. 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 September 30, 1994 $ 6.02 $ 6.02 $ 0.82 $ 0.77 $ 5.88 $ 0.74
As of December 31, 1993 5.35 N/A 0.83 N/A N/A N/A
Income (loss) from continuing
operations:
Nine months ended
September 30, 1994 0.64 0.57 (0.02) 0.06 1.00 0.13
Year ended December 31, 1993 (1.23) (0.87) (0.35) (0.14) (1.70) (0.21)
Cash dividends:
Nine months ended
September 30, 1994 -- -- -- -- -- --
Year ended December 31, 1993 -- -- -- -- -- --
</TABLE>
- -------------------------
* Assumes that 10,000,000 shares (the maximum number) of Tribune/Swab-Fox
Common Stock are purchased for cash at $0.80 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 nine months ended
September 30, 1994, would be $0.89 and the Per Equivalent Tribune/Swab-
Fox Share would be $0.11 and for the year ended December 31, 1993, the
Per Share would be a loss of $1.41 and the Per Equivalent Tribune/Swab-
Fox Share would be a loss of $0.18, and (ii) the book value Per Share as
of September 30, 1994, would be $5.95 and the Per Equivalent
Tribune/Swab-Fox Share would be $0.75.
-16-
<PAGE>
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
_____________________, 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 last
reported sales 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 $0.625 $0.69
_____________, 1995.. $ $ $
-------------- ------------- ----------------------
</TABLE>
- -------------------------
(a) Calculated by multiplying the historical 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 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 $7/16 $3/8
Second Quarter........................ 5-5/8 4 7/16 3/16
Third Quarter......................... 6-1/4 4 5/8 3/16
Fourth Quarter........................ 5-1/2 4 7/16 5/16
1994:
First Quarter......................... 5 4-1/8 7/16 5/16
Second Quarter........................ 5 4-3/8 1/2 7/16
Third Quarter......................... 6 4-1/2 13/16 7/16
Fourth Quarter........................ 6-1/4 5-3/8 11/16 5/8
1995:
First Quarter (through ______, 1995)..
</TABLE>
-17-
<PAGE>
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 consummation of the Merger.
See "Summary--General." The Special Dividend was declared to accommodate
negotiated valuation issues between Communications and Tribune/Swab-Fox in
the process of determining the Exchange Ratio.
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>
SPECIAL CONSIDERATIONS
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 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."
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.
Limited Trading in Communications Common Stock.
Although the Communications Common Stock is listed for trading on the
AMEX, it is thinly traded. During the fourth quarter of 1994, the average
weekly trading volume for Communications Common Stock on the AMEX was
approximately 8,200 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.
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 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 industry 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 Common Stock currently trades.
-19-
<PAGE>
Reverse Acquisition.
The Merger will be accounted for as a reverse acquisition of
Communications by Tribune/Swab-Fox. 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.
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."
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.
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. To the extent
any of the officers or directors of Tribune/Swab-Fox elect the Cash
Alternative, or the Cash Alternative is not fully elected, this factor will
be reduced. See "The Special Meetings--Votes Required."
-20-
<PAGE>
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 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, 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 at ___________________________, Tulsa, Oklahoma, at 9:00 a.m.
local time, on _________________, 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 _____________, 1995, directors
and executive officers of Communications and their affiliates owned
approximately 0.5% 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 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 _____________, 1995,
directors and executive officers of Tribune/Swab-Fox and their affiliates
owned approximately 56% 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,
-21-
<PAGE>
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 have indicated a present intention to elect the Cash Alternative
for some or all of their shares of Tribune/Swab-Fox Common Stock, amounting
to approximately _________ shares of Tribune/Swab-Fox Common Stock in the
aggregate. Included in this amount are _________ 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 the Cash Alternative with
respect to such shares. 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 __________, 1995, will be entitled to receive notice of and to
vote at the Communications Meeting. At __________, 1995, Communications
had outstanding 4,864,818 shares of Communications Common Stock. 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 __________, 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 __________, 1995, Tribune/Swab-Fox had
outstanding 27,988,593
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shares of Tribune/Swab-Fox Class A Common Stock. 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 ____________, 1995,
Tribune/Swab-Fox had outstanding 3,703,704 shares of Tribune/Swab-Fox Class
B Common Stock. 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 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."
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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 reverse acquisition for
accounting purposes and as a reorganization under Section 368(a) of the
Code for federal income tax purposes. The discussion in this Proxy
Statement/Prospectus of the Merger and the description of the Merger's
principal terms are subject to and qualified in their entirety by reference
to the Merger Agreement, a copy of which is attached to this Proxy
Statement/Prospectus as Appendix A and which 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 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
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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) 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 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.
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<PAGE>
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.
After the various valuation efforts were concluded, the Tribune/Swab-
Fox Committee and the Communications Committee commenced negotiations and
agreed on the Exchange Ratio. The recommended Exchange Ratio was then
approved by the Communications Board and the Tribune/Swab-Fox Board at the
January 18, 1995, special meetings discussed below.
In reaching agreement, the Committees and Boards considered the
specific assets and liabilities of Tribune/Swab-Fox, as well as its
intangible values, such as the benefits described below under "Reasons for
the Merger; Recommendations of the Boards of Directors." Also, the value
of Communications and the Communications Common Stock was carefully
reviewed and agreed upon.
The Communications Board 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 of
Communications' surplus cash. 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
million shares of Tribune/Swab-
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Fox Common Stock for cash in the Merger (the Cash Alternative) at the cash
price of $0.80 per share (the Offer Price). The Offer Price for
Tribune/Swab-Fox Common Stock was determined first by the Communications
Board and accepted as part of the Merger Agreement. The determination of
the Offer Price related more to Communications' view of value and benefit
to both companies and related only partially to the past trading history of
Tribune/Swab-Fox Class A Common Stock because of the infrequency of such
trading.
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 94,593 shares which would otherwise be
issued to Communications for the 753,729 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 one share of Tribune/Swab-Fox Common Stock for each 0.1255
of a share of Communications Common Stock. No fractional shares of
Communications Common Stock will be issued in the Merger.
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.
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 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
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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. 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
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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.
(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. The full text of Oppenheimer's 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 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
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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 (draft dated
January 26, 1995); (iii) reviewed Communications' and Tribune/Swab-Fox's
annual reports to stockholders and Annual Reports on Form 10-K for the five
fiscal years ended December 31, 1993, and their Quarterly Reports on Form
10-Q for the fiscal years 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; (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.
In rendering its opinion, Oppenheimer assumed and relied upon, without
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. 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
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.
Oppenheimer concluded that the comparable publicly traded company
analysis was the appropriate valuation methodology in determining the value
of Communications. Using this
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methodology, Oppenheimer analyzed the market values, aggregate values,
market value multiples and aggregate value multiples for publicly traded
companies in the business publishing and information services industries.
Oppenheimer determined that there were approximately 19 comparable publicly
traded companies and then selected a subset of ten such companies based
primarily on revenues and market capitalization, relative market position
and diversification of earnings base. Oppenheimer analyzed such 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 estimated
earnings. Oppenheimer then applied discounts to the public company
multiples based on the following four factors: (i) the relatively small
revenues and market capitalization of Communications compared to the other
publicly traded companies, (ii) the limited public float of Communications
Common Stock because of the 78 percent bloc owned by Tribune/Swab-Fox,
(iii) Communications' five years of losses and marginal profits from 1989
to 1993, and (iv) Communications' substantial operating and financial
restructuring.
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 proportion 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. For example, in valuing notes payable to
Tribune/Swab-Fox, Oppenheimer considered the interest rate, maturity,
collateral, liquidity and collectibility of such notes. 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 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 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 to act as its financial advisor 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 first $10,000,000 of sale proceeds from the sale
of such trade journals and 5% of sale proceeds in excess of $10,000,000.
See "Summary--Recent Developments." Mark A. Leavitt, a director of
Communications, is a Managing Director of Oppenheimer.
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 $200,000. 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
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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. 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 (draft dated January 26, 1995) 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, 1993, the
unaudited eleven-month statements for the periods ended November 30, 1994,
and November 30, 1993, 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.
In connection with its review, 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
relied upon such information as being complete and accurate. With respect
to financial projections, Southwest Securities relied upon the management
of both Tribune/Swab-Fox and Communications as to the reasonableness and
achievability of such projections. Southwest Securities
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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. In its analyses,
Southwest Securities made numerous assumptions with respect to industry
performance, general business and economic conditions and other matters,
many of which are beyond the control of Tribune/Swab-Fox and
Communications. 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 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 consummated; 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 projected pro forma balance sheet at
December 31, 1994, shows assets of $29.962 million, liabilities of
$4.441 million, and stockholders' equity of $25.521 million. However,
on a stand alone basis (without Communications) Tribune/Swab-Fox shows
only $6.384 million in assets, $4.441 million in liabilities, and
$1.943 million in stockholder's equity ($0.0613 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 projected pro
forma current ratio at December 31, 1994 is 0.43. Cash and cash
equivalents are only $25,000. 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 may very well have a greater value which
will 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
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.)
(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
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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, discounted by approximately 22% 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 78% 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. If
that $1,387,000 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, 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. 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
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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 its stockholders long-term by combining with and
completely tying its 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, 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 the benefits that would
accrue to the stockholders of 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. Accordingly, 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 reverse acquisition of
Communications by Tribune/Swab-Fox. 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.
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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 discusses only certain 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).
Both Communications and Tribune/Swab-Fox contemplate that the Merger
will qualify as a reorganization under Section 368(a) of the Code. 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 an opinion of counsel 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. At the Effective Time of the Merger, Conner & Winters, A
Professional Corporation, will render an opinion to Tribune/Swab-Fox and
Communications to the effect that the Merger, if consummated in accordance
with the Merger Agreement, will constitute a reorganization under Section
368(a) of the Code under current applicable law. A preliminary draft of
such opinion has been filed with the Securities and Exchange Commission as
an exhibit to the Registration Statement of which this Proxy
Statement/Prospectus is a part.
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 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
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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. Such gain
will generally be capital gain, but under certain circumstances such gain
may be considered a distribution in respect of such stockholder's stock
which may constitute dividend 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 in
respect of such stockholder's stock 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 own Tribune/Swab-Fox 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 be not "essentially equivalent to 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. 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 Tribune/Swab-Fox Common Stock held by such holder (including
shares constructively owned under Section 318 of the Code as described
above) immediately after the exchange of all of his or her shares of
Tribune/Swab-Fox Common Stock for cash (without giving effect to the
conversion of shares of Tribune/Swab-Fox Common Stock into Communications
Common Stock pursuant to the Merger), is less than (ii) 80% of the
outstanding shares of Tribune/Swab-Fox Common Stock 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 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
stock. 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 a distribution in
respect of his or her stock and probably a dividend (ordinary income
without reduction for a stockholder's basis in the stock surrendered) under
Sections 302 and 354 or 301 of the Code. 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
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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.
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 1,023,621 shares of
Tribune/Swab-Fox Common Stock. In addition, immediate family members or
affiliates of Mr. Jones own 5,744,215 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. On February ___, 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 seven-
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,
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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
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 of the Delaware General Corporation Law ("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. 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. 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. Section 262 is reprinted in its entirety as Appendix D to this
Proxy Statement/Prospectus. 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.
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 no court has ruled on, whether a single beneficial owner must
request appraisal rights with regard to all Shares owned by such
stockholder in order to preserve appraisal rights. 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
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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 recordholder holds Shares as nominee for
more than one beneficial owner, it may exercise the holder's right of
appraisal with respect to 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.
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. The presiding Court shall direct
payment of the fair value of the Shares by Communications to the
stockholders entitled thereto.
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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.
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.
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 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 million
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.
Reference is made to Appendix D to this Proxy Statement/Prospectus for
the complete text of the provisions of Section 262 relating to the rights
of dissenting Tribune/Swab-Fox stockholders. The statements made in this
summary are qualified in their entirety by reference to such Appendix D.
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.
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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. This summary
is qualified in its entirety by reference to the full text of the Merger
Agreement.
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 below, $0.80 in cash (the "Cash Consideration"); provided,
however, that a holder's right to receive the Cash Consideration shall be
subject to proration as provided 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 ___________________, 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
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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 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 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.
The Cash Election Form contains information regarding the backup
withholding tax rules. Under these rules, unless an exception applies
under the applicable law and regulation, 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 need 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
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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 $0.80 times the number
of shares of Tribune/Swab-Fox Common Stock which would otherwise be
converted into a fractional share of Communications Common Stock. 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 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.
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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 shall
have 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.
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,
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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.
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.
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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.
The following description of the capital stock of Communications is
subject to the provisions of Communications' Certificate of Incorporation
(the "Communications Charter") and bylaws as currently in effect (the
"Communications Bylaws"). This description does not purport to be complete
or to give full effect to the terms of the provisions of statutory or
common law and is subject to, and qualified in its entirety by reference
to, the Communications Charter and the Communications Bylaws, which are
filed as exhibits to Communications' Annual Report on Form 10-K for the
year ended December 31, 1993, as amended, which is incorporated into this
Proxy Statement/Prospectus by reference.
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 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.
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. The following is a summary of the material
differences between, as well as a summary of, the rights of holders of
Communications Common Stock
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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. This summary is qualified in its entirety
by reference 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 Tribune/Swab-Fox. The
Communications Bylaws provide Tribune/Swab-Fox Bylaws contain
that the number of directors of substantially similar provisions
Communications will be relating to the determination of
determined by the Board prior to the number of directors;
the mailing of the notice of the however, in no event may the
annual meeting of stockholders, number of directors of
at any regular or special Tribune/Swab-Fox be less than
meeting of the Board, but in no three nor more than eleven. The
event may the number of Tribune/Swab-Fox Board currently
directors be less than three nor consists of six members.
more than fifteen. The
Communications Board currently
consists of seven members.
Stockholders of Communications Stockholders of Tribune/Swab-Fox
may remove a director or the have the same rights with
entire Communications Board, respect to the removal of
with or without cause, at any directors.
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 The Tribune/Swab-Fox Charter and
provide that any vacancies the Tribune/Swab-Fox Bylaws
occurring in the Communications contain the same provisions
Board may be filled by the relating to the filling of board
affirmative vote of a majority vacancies of directors.
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.
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 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
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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 Tribune/Swab-Fox. The
certain limitations prescribed Tribune/Swab-Fox Charter
by law and the rules of the contains substantially similar
AMEX, the Communications Board provisions relating to
is authorized by the Tribune/Swab-Fox Class A
Communications Charter, without Preferred Stock, par value
any approval or other action by $10.00 per share.
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."
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. Tribune/Swab-Fox. Tribune/Swab-
Communications is a Delaware Fox is also a Delaware
corporation and is subject to corporation and is also subject
Section 203 of the Delaware to Section 203 of the Delaware
General Corporation Law. In General Corporation Law, with
general, Section 203 prevents an generally the same effect as
"interested stockholder" that described for
(defined generally as a person Communications.
owning 15% or more of
Communications' outstanding
voting stock) from engaging in a
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"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 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.
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
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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 Tribune/Swab-Fox.
of the Delaware General Tribune/Swab-Fox is also a
Corporation Law provides for Delaware corporation and is also
appraisal rights only in subject to Section 262 of the
connection with certain mergers Delaware General Corporation
and consolidations. Furthermore, Law. Tribune/Swab-Fox Common
the Delaware General Corporation Stock is not, however, traded on
Law eliminates appraisal rights a national securities exchange
with respect to shares of any or held of record by more than
class or series of stock listed 2,000 stockholders; thus,
on a national securities Tribune/Swab-Fox stockholders
exchange or held of record by currently have appraisal rights
more than 2,000 stockholders. in connection with certain
Communications Common Stock is mergers and consolidations and
listed for trading on the AMEX, specifically with respect to the
thus, no appraisal rights are Merger. As a result of the
available to Communications Merger, however, Tribune/Swab-
stockholders in the Merger or Fox stockholders who receive
any other merger or shares of Communications Common
consolidation. 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 Tribune/Swab-Fox. The
by Delaware law, the Tribune/Swab-Fox Charter
Communications Charter provides contains the same limitation on
that a director will not be director liability.
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.
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.
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Indemnification of Directors and Officers
Communications. The Tribune/Swab-Fox. The
Communications Charter provides Tribune/Swab-Fox Charter
that each person who is involved contains the same provision
in any actual or threatened, relating to the indemnification
pending or completed action, of directors and officers.
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.
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
---------------------
Nine Months Ended September 30, 1994, Compared with Nine Months
Ended September 30, 1993. Operations for the nine months ended
September 30, 1994, have four major variations from the same period
ended September 30, 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 in the 1994
period in exposition services along with the operations of Atwood.
Third, indebtedness has been reduced by over $15,000,000 during the
past fifteen 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.
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Revenues of $42,575,000 for the nine months ended September 30, 1994,
were $15,852,000 lower than for the same period in 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 of $2,656,000 in
the convention publishing component of exposition services (which is
Atwood's activities), plus Galaxy's revenues of $5,520,000 from March 1,
1994. Publishing revenues for the nine months ended September 30, 1994,
were approximately the same as the same period in the prior year. An
increase in advertising pages in Gaming and Wagering Business during the
nine months ended September 30, 1994, was offset by a decrease in
advertising revenue in Convenience Store News because the 1994 annual
convention issue was in October, whereas the 1993 issue was in September.
The 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 were reclassified from publishing to exposition services.
The information services revenue increase of $337,000 for the nine months
in 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 $1,972,000
decrease during the nine months ended September 30, 1994, in long distance
telephone resale revenue as a result of 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 the nine months ended September 30, 1994 and 1993, is
substantially all related to the World Gaming Congress trade show sponsored
by the 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.
In addition, Tribune/Swab-Fox had a gain of approximately $440,000 during
the nine months ended September 30, 1994, on the sale of its last
significant venture capital investment and had gains of approximately
$450,000 during the nine months ended September 30, 1993, related to sales
of developed real estate properties (which properties were not part of
those written down in 1993).
Publishing costs and expenses were $20,898,000 lower for the nine
months ended September 30, 1994, as compared with the same period in 1993.
The decrease in costs related to the shopper-newspapers was approximately
$21,600,000 for the nine months ended September 30, 1994. The increase 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
increase in pages, although the change in issue date of the Convenience
Store News convention issue offset those costs for nine months in 1994 as
compared to the same period in 1993.
Information services costs and expenses were $459,000 lower for the
nine months ended September 30, 1994, as compared with the same period in
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 $1,775,000 for the
nine months ended September 30, 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 seven months in 1994. The increase of $4,019,000 for
the nine months ended September 30, 1994, includes increases of $1,337,000
related to the convention publishing business as noted above and Galaxy's
1994 operating costs for the seven months of $2,682,000.
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The write-down of real estate assets during the nine months ended
September 30, 1994, of approximately $2,800,000 and during the nine months
ended September 30, 1993, of approximately $4,400,000 represent the major
changes in other operating expenses.
General and administrative expenses were $4,537,000 lower for the nine
months ended September 30, 1994, as compared with the same period in 1993.
The decrease in 1994 relating to the shopper-newspapers was $5,422,000.
Galaxy's general and administrative expenses of $1,700,000 for the seven
months ended September 30, 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, the nine
months ended September 30, 1993, included retirement and deferred
compensation expense of approximately $1,800,000 attributable to the
retirement of the then chief executive officer of Communications and
Tribune/Swab-Fox.
Interest expense decreased $1,088,000 for the nine months ended
September 30, 1994, as compared with the same period in 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.
Depreciation and amortization decreased $1,154,000 for the nine months
ended September 30, 1994, as compared with the same period in 1993,
substantially all related to disposition of the depreciable and amortizable
assets of the shopper-newspapers. Galaxy's depreciation and amortization
of $515,000 for seven months is included in 1994.
The loss on assets held for sale for the nine months ended September
30, 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 April 1994 with no additional loss.
Provision/benefit for income taxes as a percent of income (loss) before
income taxes is higher (or lower) than the statutory federal income tax
rate because goodwill amortization related to acquisitions is not
deductible for income tax purposes.
Year Ended December 31, 1993, Compared to Year Ended December 31, 1992.
Revenues for 1993 decreased $27,099,000 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 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.
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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 $600,000 which
consisted of a $730,000 increase in interest income attributable to the
contract receivable from World Publishing Company that was a part of the
termination of a Joint Operating Agreement and an $800,000 increase in
revenue from conferences sponsored by Communications' trade journal group,
as a result of an increase in existing conference exhibitors and attendees
and a new conference. Included in 1992 other income was a $950,000 lawsuit
settlement from MCI.
Costs and expenses other than interest and depreciation and
amortization were $7,750,000 lower in 1993 as compared with 1992.
Newspaper publishing costs were $15,000,000 lower in 1993 (the costs
incurred in the nine months of the operation of The Tulsa Tribune in 1992),
and shopper-newspaper costs were $10,500,000 lower in 1993, a result of
only nine months' costs being included in 1993. As a result of the
decision to sell the shopper-newspapers, 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. 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.
Other operating expenses increased $4,000,000 in 1993. This increase
consisted of a write-down of the net book value of real estate of
$4,400,000 recognized in 1993 based on Tribune/Swab-Fox's decision to
accelerate the liquidation of its real estate assets.
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 $750,000 in 1993, including Communications'
decrease of $770,000 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 $3,600,000 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.
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Year Ended December 31, 1992, Compared to Year Ended December 31, 1991.
Tribune/Swab-Fox's revenues for 1992 increased by $520,000 over revenues
for 1991. Revenues for Communications increased $1,248,000 for 1992 over
1991, which revenues are consolidated in Tribune/Swab-Fox's financial
information. 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 publishing revenue decreased $1,915,000
overall. Newspaper publishing revenues declined $6,050,000 in 1992 related
to only nine months operations which was substantially offset by increases
in trade journal revenues of $1,500,000, attributable to increased
advertising pages, shopper-newspapers of $750,000 and convention/trade show
publishing of $2,000,000, because of both growth of operation and services.
The early termination of the Joint Operating Agreement 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.
Costs and expenses, other than interest, depreciation and amortization,
decreased approximately $1,900,000 for 1992 as compared with 1991.
Communications' costs decreased approximately $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 operation in 1992 and lower newsprint costs, offset by an
increase in trade journals of $930,000, an increase in convention/trade
show publishing of $2,000,000 and an increase in information services of
$1,800,000, mainly attributable to growth in volume.
Other costs and expenses for 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 $600,000 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 $2,485,000 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 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,
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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 meet its obligation under the Merger Agreement, 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. Sources of revenue and cash include
sale of its notes receivable at a discount, sale of a portion of the shares
of 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.
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
---------------------
Nine Months Ended September 30, 1994, Compared with Nine Months Ended
September 30, 1993. Operations for the nine months ended September 30,
1994, have four major variations from the same period ended September 30,
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 nine months ended September 30,
1994, in exposition services along with the operations of Atwood. Third,
indebtedness has been reduced by over $11,000,000 during the past fifteen
months. Fourth, during the third quarter of 1993, a $9,224,000
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loss on assets held for sale was recognized related to the intended
disposition of the shopper-newspapers.
Revenues of $41,432,000 for the nine months ended September 30, 1994,
were $16,614,000 lower than for the same period in 1993. The revenue
decrease consisted of $26,212,000 which related to the shopper-newspapers.
Partially offsetting this decrease is the revenue increase of $2,656,000,
for the nine months ended September 30, 1994, in the convention publishing
component of the exposition services (which is Atwood's activities) plus
Galaxy's revenues of $5,520,000 from March 1, 1994. Publishing revenues
for the nine months ended September 30, 1994, were approximately the same
as the prior year. An increase in advertising pages in Gaming and Wagering
Business during the nine months ended September 30, 1994, was offset by a
decrease in advertising revenue in Convenience Store News because the 1994
annual convention issue was in October, whereas this issue was in September
in 1993. 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 were reclassified from publishing to exposition services.
The information services revenue increase of $337,000 for the nine months
in 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 $1,972,000
decrease during the nine months ended September 30, 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 the nine months ended September 30, 1994 and 1993, is
substantially all related to the World Gaming Congress trade show sponsored
by Communications' Gaming and Wagering Business trade publication. Also
included in other income is interest income related to the contract
receivable from the World Publishing Company, income from a co-sponsored
trade show and covenant-not-to-compete income related to the New York
Shopper sale in November 1993.
Publishing costs and expenses were $20,898,000 lower for the nine
months ended September 30, 1994, as compared with the same period in 1993.
The decrease in costs related to the shopper-newspapers was $21,600,000 for
the nine months ended September 30, 1994. The increase 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 increase in pages
although the change in issue date of the Convenience Store News convention
issue offset those costs for the nine months in 1994 as compared to the
same period in 1993.
Information services costs and expenses were $459,000 lower for the
nine months ended September 30, 1994, as compared with the same period in
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 $1,775,000 for the
nine months ended September 30, 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 seven months in 1994. The increase of $4,019,000 for
the nine months ended September 30, 1994, includes increases of $1,337,000
related to the convention publishing business as noted above and Galaxy's
1994 operating costs for the seven months of $2,682,000.
General and administrative expenses were $4,655,000 lower for the nine
months ended September 30, 1994, as compared with the same period in 1993.
The decrease in 1994 related to the
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shopper-newspapers was $5,422,000. Galaxy's general and administrative
expenses of $1,700,000 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, the nine months ended
September 30, 1993, included retirement and deferred compensation expense
of approximately $1,800,000 attributable to the retirement of the then
chief executive officer of Communications.
Interest expense decreased $974,000 for the nine months ended September
30, 1994, as compared with the same period in 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.
Depreciation and amortization decreased $1,055,000 for the nine months
ended September 30, 1994, as compared with the same period in 1993,
substantially all related to disposition of the depreciable and amortizable
assets of the shopper-newspapers. Galaxy's depreciation and amortization
of $515,000 for seven months is included in 1994.
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
April 1994 with no additional loss.
Provision/benefit for income taxes as a percent of income (loss) before
income taxes is higher (or lower) than the statutory federal income tax
rate because goodwill amortization related to 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.
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 a Joint Operating Agreement and an $800,000 increase in
revenue from conferences sponsored by Communications' trade journal group,
as a result of an increase in existing conference exhibitors and attendees
and a new conference. Included in 1992 other income was a $950,000 lawsuit
settlement from MCI.
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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 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 Agreement 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
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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. 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
publications 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.
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 and decreased their one-year bank lines of credit to $3,750,000.
In February 1995, Communications added an additional $2,000,000 line of
credit, bringing its total available credit to $5,750,000. No funds are
currently drawn on these lines of credit.
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
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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 September 30, 1994,
Communications' current assets exceeded current liabilities by $9,831,000.
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.
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
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 million shares of Tribune/Swab-Fox Common Stock for cash in the Merger
from shareholders 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
____________, 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.
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"Communications Bylaws" means the bylaws of Communications, as
currently in effect.
"Communications Charter" means the Certificate of Incorporation of
Communications, as currently in effect.
"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 9:00 a.m. local time, on ________, 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 shares 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.
-65-
<PAGE>
"Merger Agreement" means the Agreement and Plan of Merger, dated
January 25, 1995, 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.
"New York Shopper" means the shopper newspaper of Marks-Roiland
Communications, Inc., a New York corporation.
"1995 Land Company" means 1995 Land Company, 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 $0.80 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-_________), 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 consummation of the Merger, 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.
-66-
<PAGE>
"Stock Consideration" means that share of Communications Common Stock
multiplied by the Exchange Ratio 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.
"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 9:00 a.m. local time, on ________, 1995, or
any adjournment or postponement thereof, for the purpose of considering and
voting on the Merger Agreement.
"Tribune/Swab-Fox New Senior Preferred Stock" means the new senior
preferred stock, par value $10.00 per share, of Tribune/Swab-Fox.
"Tribune/Swab-Fox 6 1/2% Cumulative Convertible Preferred Stock" means
the 6 1/2% cumulative convertible preferred stock, par value $10.00 per
share, of Tribune/Swab-Fox.
-67-
<PAGE>
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-3
Unaudited pro forma consolidated statement of operations for
the nine months ended September 30, 1994.................. F-4
Unaudited pro forma consolidated statement of operations for
the year ended December 31, 1993.......................... F-5
Unaudited pro forma consolidated balance sheet as of
September 30, 1994........................................ F-6
COMMUNICATIONS
Preliminary statement......................................... F-7
Unaudited pro forma consolidated statement of operations for
the nine months ended September 30, 1994.................. F-8
Unaudited pro forma consolidated statement of operations for
the year ended December 31, 1993.......................... F-9
Unaudited pro forma consolidated balance sheet as of
September 30, 1994........................................ F-10
POST-MERGER COMMUNICATIONS
Preliminary statement......................................... F-11
Unaudited pro forma consolidated statement of operations for
the nine months ended September 30, 1994.................. F-12
Unaudited pro forma consolidated statement of operations for
the year ended December 31, 1993.......................... F-13
Unaudited pro forma consolidated balance sheet as of
September 30, 1994........................................ F-14
HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS
TRIBUNE/SWAB-FOX
Nine months ended September 30, 1994 (unaudited)
Consolidated balance sheets as of September 30, 1994 and
December 31, 1993......................................... F-15
Consolidated statements of operations for the nine months
ended September 30, 1994 and 1993......................... F-17
Consolidated statements of cash flows for the nine months
ended September 30, 1994 and 1993......................... F-18
Notes to consolidated financial statements for the nine
months ended September 30, 1994 and 1993.................. F-20
Years ended December 31, 1993, 1992, and 1991
Report of independent public accountants.................... F-22
Consolidated balance sheets as of December 31, 1993 and
1992...................................................... F-23
Consolidated statements of operations for the years ended
December 31, 1993, 1992 and 1991.......................... F-25
Consolidated statements of changes in stockholders' equity
for the years ended December 31, 1993, 1992 and 1991...... F-26
</TABLE>
F-1
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Consolidated statements of cash flows for the years ended
December 31, 1993, 1992 and 1991........................ F-28
Notes to consolidated financial statements for the years
ended December 31, 1993, 1992 and 1991.................. F-30
COMMUNICATIONS
Nine months ended September 30, 1994 (unaudited)
Consolidated balance sheets as of September 30, 1994 and
December 31, 1993....................................... F-47
Consolidated statements of operations for the nine months
ended September 30, 1994 and 1993....................... F-49
Consolidated statements of cash flows for the nine months
ended September 30, 1994 and 1993....................... F-50
Notes to consolidated financial statements for the nine
months ended September 30, 1994 and 1993................ F-52
Years ended December 31, 1993, 1992, and 1991
Report of independent public accountants.................. F-54
Consolidated balance sheets as of December 31, 1993 and
1992.................................................... F-55
Consolidated statements of operations for the years ended
December 31, 1993, 1992 and 1991........................ F-57
Consolidated statements of changes in stockholders' equity
for the years ended December 31, 1993, 1992 and 1991.... F-58
Consolidated statements of cash flows for the years ended
December 31, 1993, 1992 and 1991........................ F-59
Notes to consolidated financial statements for the years
ended December 31, 1993, 1992 and 1991.................. F-61
</TABLE>
F-2
<PAGE>
TRIBUNE/SWAB-FOX
Unaudited Pro Forma Consolidated Financial Statements
The Tribune/Swab-Fox Unaudited Pro Forma Consolidated Statement of
Operations for the nine months ended September 30, 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 decision to discontinue the real
estate segment, had each been made on January 1, 1994. The pro forma
information assumes no gain or loss on the ultimate sale of, and no earnings on
the 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, 1993, presents the results of operations of Tribune/Swab-Fox for
such period, including Communications, as if the following had occurred on
January 1, 1993: (i) the decision by Communications to sell the three BMT trade
journals (with an assumption of no gain or loss on the ultimate sale thereof,
and no earnings on the proceeds from such sale), (ii) the decision to
discontinue the real estate segment, (iii) the November 1, 1993 sale of the New
York Shopper assets by Communications, and (iv) the April 30, 1994 sale of the
New Jersey Shopper assets by Communications, which were reflected as assets held
for sale at December 31, 1993. The Tribune/Swab-Fox Unaudited Pro Forma
Consolidated Balance Sheet as of September 30, 1994, presents the financial
position of Tribune/Swab-Fox, including Communications, as if (i) the
Communications decision to sell the three BMT trade journals, (ii) the decision
to discontinue the real estate segment, and (iii) the redemption, conversion and
repurchase of various capital stocks by Tribune/Swab-Fox, had each been made on
September 30, 1994.
The Tribune/Swab-Fox Unaudited Pro Forma Consolidated Financial
Statements do not purport to be indicative of the results of operations which
actually would have occurred had the decisions/transactions described above been
effected on the dates indicated or which may be expected to occur in the future.
The Tribune/Swab-Fox Unaudited Pro Forma Consolidated Financial Statements
should be read in conjunction with the Tribune/Swab-Fox December 31, 1993, and
September 30, 1994, financial statements included elsewhere in this Proxy
Statement/Prospectus.
F-3
<PAGE>
Tribune/Swab-Fox
Unaudited Pro Forma Consolidated
Statement of Operations
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30, 1994
---------------------------------------------------------------------------------
Pro Forma Adjustments
---------------------
Historical Real Estate Communications Pro Forma
---------- ----------- -------------- ---------
(Unaudited)
<S> <C> <C> <C> <C>
Revenues $ 42,575 $ (557)(1) $ (8,491)(2) $ 33,527
-------- -------- -------- --------
Operating costs and expenses 28,391 (2,963)(1) (5,917)(2) 19,511
General and administrative 8,511 (48)(1) (1,222)(2) 7,241
Interest expense 780 (211)(1) -- 569
Depreciation and amortization 2,192 (32)(1) (560)(2) 1,600
Total costs and expenses 39,874 (3,254) (7,699) 28,921
-------- -------- -------- --------
Income (loss) before benefit from
(provision for) income taxes 2,701 2,697 (1) (792)(2) 4,606
Equity earnings (loss) (18) 18 (1) -- --
Benefit from (provision for) income taxes (2,266) -- 372 (2) (1,894)
Minority interest in (earnings) losses
of Communications (874) -- 116 (2) (758)
-------- -------- -------- --------
Income (loss) from continuing operations $ (457) $ 2,715 $ (304) $ 1,954
======== ======== ======== ========
Per share amounts:
Earnings (loss) from continuing operations
per common and common equivalent share $ (0.02) $ 0.06
======== ========
Weighted average number of common and
common equivalents share outstanding 31,138 31,138
======== ========
</TABLE>
- ------------------------
(1) Reclassification of the results of operations of the real estate segment to
discontinued operations based on the December, 1994, approval by the Board
of Directors of Tribune/Swab-Fox of a plan to dispose of the remaining real
estate segment assets.
(2) Elimination of operations for the period of the three BMT trade journals
held for sale, including the related income tax effect and minority interest
effect. No gain or loss on sale or earnings on proceeds from such sale are
assumed. (See Communications September 30, 1994, Unaudited Pro Forma
Consolidated Statement of Operations included elsewhere in this Proxy
Statement/Prospectus.)
F-4
<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, 1993
----------------------------------------------------------
Pro Forma Adjustments
Historical Real Estate Communications Pro Forma
---------- ----------- -------------- ---------
(Unaudited)
<S> <C> <C> <C> <C>
Revenues $ 68,540 $ (365)(1) $ (36,868)(2) $ 31,307
-------- -------- -------- --------
Operating costs and expenses 54,613 (4,594)(1) (29,151)(2) 20,868
General and administrative 15,060 (60)(1) (7,150)(2) 7,850
Interest expense 2,257 (336)(1) (595)(2) 1,326
Depreciation and amortization 3,928 (149)(1) (2,463)(2) 1,316
Loss on assets held for sale 9,224 -- -- 9,224
-------- -------- -------- --------
Total costs and expenses 85,082 (5,139) (39,359) 40,584
-------- -------- -------- --------
Income (loss) before benefit from
(provision for) income taxes (16,542) 4,774(1) 2,491(2) (9,277)
Equity earnings 3 26(1) -- 29
Benefit (provision) for income taxes 4,097 -- (551)(2) 3,546
Minority interest in (earnings) losses
of Communications 1,929 -- (550)(2) 1,379
-------- -------- -------- --------
Income (loss) from continuing operations $ (10,513) $ 4,800 $ 1,390 $ (4,323)
======== ======== ======== ========
Per share amounts:
Earnings (loss) from continuing
operations per common and
common equivalent share $ (0.35) $ (0.14)
======== ========
Weighted average number of common
and common equivalent shares
outstanding 30,286 30,286
======== ========
</TABLE>
- ------------------------
(1) Reclassification of the results of operations of the real estate segment to
discontinued operations based on the December, 1994, approval by the Board
of Directors of Tribune/Swab-Fox of a plan to dispose of the remaining real
estate segment assets.
(2) These adjustments relate to Communications' consolidation in Tribune/Swab-
Fox and consist of: (i) the elimination of the New Jersey Shopper and New
York Shopper operations for the period, (ii) the recognition of income for
the period from the covenant-not-to-compete entered into with the buyer of
the shopper-newspapers, (iii) 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 proceeds from such sale are assumed), (iv) the reduction in
interest expense based on the assumed utilization of proceeds from the sale
of assets and covenant-not-to-compete to retire the 10.32% Senior Notes as
required in connection with the November 1, 1993, sale of the New York
Shopper assets, and (v) the recognition of the income tax effect resulting
from the adjustments described in (i)-(iv) above. (See Communications
December 31, 1993, Unaudited Pro Forma Consolidated Statement of Operations
included elsewhere in this Proxy Statement/Prospectus.)
F-5
<PAGE>
Tribune/Swab-Fox
Unaudited Pro Forma Consolidated
Balance Sheet
September 30, 1994
(in thousands)
<TABLE>
<CAPTION>
Pro Forma Adjustments
Historical Real Estate Communications Pro Forma
---------- ----------- -------------- ---------
(Unaudited)
<S> <C> <C> <C> <C>
ASSETS
- ------
Current Assets $ 26,001 $ 884(1)(2) $ 6,493(3) $ 33,378
Contract Receivable and Investments 4,743 (175)(1) -- 4,568
Property, Plant and Equipment, net 9,735 (4977)(1) (568)(3) 4,190
Intangibles and Other Assets, net 17,676 1,291(1) (6,026)(3) 12,941
--------- --------- --------- --------
$ 58,155 $ (2,977) $ (101) $ 55,077
========= ========= ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities $ 16,784 $ (538)(1) $ (101)(3) $ 16,145
Long-Term Debt 6,259 (868)(1) -- 5,391
Deferred Contract Liabilities 2,344 (51)(1) -- 2,293
Deferred Income Taxes 326 -- -- 326
Minority Interest 6,547 -- -- 6,547
Stockholders' Equity 25,895 (1,520)(2) -- 24,375
--------- --------- -------- --------
$ 58,155 $ (2,977) $ (101) $ 55,077
========= ========= ======== ========
</TABLE>
- ------------------------
(1) Reclassification of the net assets of the discontinued real estate segment.
(2) Redemption of Class A Preferred Stock and New Senior Preferred Stock,
conversion of 6 1/2% Cumulative Convertible Preferred Stock, and repurchase
and retirement of 200,000 shares of Class A Common Stock for $0.80 per
share on December 19, 1994.
(3) Reclassification to assets held for sale of the Communications net assets of
the three BMT trade journals held for sale. (See Communications
September 30, 1994, Unaudited Pro Forma Consolidated Balance Sheet included
elsewhere in this Proxy Statement/Prospectus.)
F-6
<PAGE>
COMMUNICATIONS
Unaudited Pro Forma Consolidated Financial Statements
The Communications Unaudited Pro Forma Consolidated Statement of
Operations for the nine months ended September 30, 1994, presents the results of
operations of Communications for such period as if the decision to sell the
three BMT trade journals had been made on January 1, 1994. The pro forma
information assumes no gain or loss on the ultimate sale of, and no earnings on
the 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, 1993, presents the results of operations of Communications for such
period as if the following had occurred on January 1, 1993: (i) the decision to
sell the three BMT trade journals (with an assumption of no gain or loss on the
ultimate sale thereof and no earnings on the proceeds from such sale), (ii) the
November 1, 1993, sale of the New York Shopper assets, and (iii) the April 30,
1994, sale of the New Jersey Shopper assets, which were reflected as assets held
for sale at December 31, 1993. The Communications Unaudited Pro Forma
Consolidated Balance Sheet as of September 30, 1994, presents the financial
position of Communications as if the decision to sell the three BMT trade
journals had been made on September 30, 1994.
The 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 decisions/transactions described above been effected
on the dates indicated or which may be expected to occur in the future. The
Communications Unaudited Pro Forma Consolidated Financial Statements should be
read in conjunction with the Communications December 31, 1993, and September 30,
1994, financial statements included elsewhere in this Proxy
Statement/Prospectus.
F-7
<PAGE>
Communications
Unaudited Pro Forma Consolidated
Statement of Operations
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30, 1994
-------------------------------------------
Pro Forma
Adjustments
-----------
BMT Trade
Historical Journals Pro Forma
---------- ------------ ---------
(Unaudited)
<S> <C> <C> <C>
Revenues $ 41,432 $ (8,491)(1)(2) $ 32,941
-------- -------- ---------
Operating costs and expenses 25,428 (5,917)(1) 19,511
General and administrative 7,751 (1,222)(1) 6,529
Interest expense 424 -- 424
Depreciation and amortization 2,191 (560)(1) 1,631
-------- -------- ---------
Total costs and expenses 35,794 7,699 28,095
-------- -------- ---------
Income before provision for
income taxes 5,638 (792) 4,846
Provision for income taxes (2,266) 372(1) (1,894)
-------- -------- ---------
Net income $ 3,372 $ (420) $ 2,952
======== ========= =========
Per share amounts:
Earnings per common and
common equivalent share $ 0.64 $ 0.57
======== =========
Weighted average number of common and
common equivalent shares outstanding 5,224 5,224
======== =========
</TABLE>
- ------------------------
(1) Elimination of operations for the period for the three BMT trade journals
held for sale including the related income tax effect. No gain or loss on
the sale or earnings from proceeds from such sale are assumed.
(2) Recognition of interest income on the assumed investment of the proceeds
from the sale of the New Jersey Shopper assets.
F-8
<PAGE>
Communications
Unaudited Pro Forma Consolidated
Statement of Operations
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
For the Year Ended
December 31, 1993
------------------------------------------------------------------
Pro Forma Adjustments
-----------------------------
Shopper- BMT Trade
Historical Newspapers Journals Pro Forma
---------- ---------- --------- ---------
(Unaudited)
<S> <C> <C> <C> <C>
Revenues $ 67,977 $(25,813)(1)(2) $(11,055)(2) $ 31,109
-------- -------- -------- --------
Operating costs and expenses 49,658 (21,601)(1) (7,550)(2) 20,507
General and administrative 14,325 (5,422)(1) (1,728)(3) 7,175
Interest expense 1,620 (595)(1)(4) -- 1,025
Depreciation and amortization 3,794 (1,680)(1) (783)(3) 1,331
Loss on assets held for sale 9,224 -- -- 9,224
-------- -------- -------- --------
Total costs and expenses 78,621 (29,298) (10,061) (39,262)
-------- -------- -------- --------
Income (loss) before (provision
for) benefit from income taxes (10,644) 3,485 (994) (8,153)
Earnings of Equity Investments 29 -- -- 29
(Provision for) benefit from
income taxes 4,097 (1,014)(5) 463(5) (3,546)
-------- -------- -------- --------
Income (loss) before
extraordinary loss $ (6,518) $ 2,471 $ (531) $ (4,578)
======== ======== ======== ========
Per share amounts:
Earnings (loss) per common
and common equivalent share
before extraordinary loss $ (1.23) $ (0.87)
======== ========
Weighted average number of common
and common equivalent shares
outstanding 5,274 5,274
======== ========
</TABLE>
- ------------------
(1) Elimination of the New Jersey Shopper operations and New York Shopper
operations for the period.
(2) Recognition of income for the period from the covenant-not-to-compete
entered into with the buyer of the shopper-newspapers and interest income
on the assumed investment of the proceeds from the sale of such shopper-
newspapers.
(3) Elimination of operations for the period of the three BMT trade journals
held for sale. No gain or loss on the sale or earnings from proceeds from
such sale are assumed.
(4) Reduction in interest expense based on the assumed utilization of proceeds
from the sale of assets and covenant-not-to-compete to retire the 10.32%
Senior Notes, as required in connection with the November 1, 1993, sale of
the New York Shopper assets.
(5) Recognition of the income tax effect resulting from the adjustments
described in notes (1) through (4) above.
F-9
<PAGE>
Communications
Unaudited Pro Forma Consolidated
Balance Sheet
September 30, 1994
(in thousands)
<TABLE>
<CAPTION>
Pro Forma
Adjustments
-----------
BMT Trade
Historical Journals Pro Forma
---------- ----------- ---------
(Unaudited)
<S> <C> <C> <C>
ASSETS
- ------
Current Assets $ 25,274 $ 6,493 (1) $ 31,767
Contract Receivable and Investments 3,566 -- 3,566
Property, Plant and Equipment, net 4,758 (568)(1) 4,190
Intangibles and Other Assets, net 17,725 (6,026)(1) 11,699
-------- -------- --------
$ 51,323 $ (101) $ 51,222
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities $ 15,443 $ (101)(1) $ 15,342
Long-Term Debt 3,960 -- 3,960
Deferred Contract Liabilities 2,293 -- 2,293
Deferred Income Taxes 326 -- 326
Stockholders' Equity 29,301 -- 29,301
-------- -------- --------
$ 51,323 $ (101) $ 51,222
======== ======== ========
</TABLE>
- --------------------------------
(1) Reclassifcation to assets held for sale of the net assets of the three BMT
trade journals held for sale.
F-10
<PAGE>
POST-MERGER COMMUNICATIONS
Unaudited Pro Forma Consolidated Financial Statements
The Merger of Tribune/Swab-Fox and Communications will be accounted for
as a reverse acquisition of Communications by Tribune/Swab-Fox. Accordingly,
the financial history of Communications will be that of Tribune/Swab-Fox.
Therefore, the Post-Merger Communications Unaudited Pro Forma Consolidated
Statements of Operations for the nine months ended September 30, 1994, and the
year ended December 31, 1993, present the respective Tribune/Swab-Fox Unaudited
Pro Forma Consolidated Statements of Operations adjusted for the following
effects of the Merger: (i) increased interest expense related to the assumed
borrowing of a portion of the $8 million used to buy back 10 million shares of
Tribune/Swab-Fox 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, with respect to the operations for the nine month
period ended September 30, 1994, and January 1, 1993, with respect to the
operations for the year ended December 31, 1993. The Post-Merger Communications
Unaudited Pro Forma Consolidated Balance Sheet as of September 30, 1994,
presents the September 30, 1994, Tribune/Swab-Fox Unaudited Pro Forma
Consolidated Balance Sheet adjusted for the following effects of the Merger:
(i) the borrowing of a portion of the $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, (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 estimated costs of the
Merger.
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 the dates indicated
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, 1993, and September 30, 1994,
financial statements included elsewhere in this Proxy Statement/Prospectus.
F-11
<PAGE>
Post-Merger Communications
Unaudited Pro Forma Consolidated
Statement of Operations
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30, 1994
--------------------------------------------
Tribune Pro Forma
Swab-Fox Adjustments Assuming
Pro Forma for Merger Merger
--------- ----------- ---------
<S> <C> <C> <C>
Revenues $ 33,527 $ (170)(1) $ 33,357
--------- --------- --------
Operating costs and expenses 19,511 -- 19,511
General and administrative 7,241 -- 7,241
Interest expense 569 435(1) 1,004
Depreciation and amortization 1,600 36(2) 1,636
--------- --------- --------
Total costs and expenses 28,921 471 29,392
--------- --------- --------
Income (loss) before income taxes 4,606 (641) 3,965
Benefit from (provision for) income taxes (1,894) 1,627(3) (267)
--
Minority interest in earnings (losses) (758) 758(4) --
--------- --------- --------
Income (loss) from continuing operations $ 1,954 $ 1,744 $ 3,698
========= ========= ========
Per share amounts:
Earnings (loss) from continuing
operations per common
and common equivalent shares $ 1.00
========
Weighted average number of common
and common equivalent shares
outstanding 3,715 (5)
========
</TABLE>
- ------------------------
(1) Elimination of investment income on cash used for the purchase of minority
interest and reflects interest expense on borrowings under lines of credit
used to complete the minority interest purchase, including payment of the
Special Dividend and acquiring 10,000,000 shares of Tribune/Swab-Fox stock
in the Cash Alternative.
(2) Reflects amortization of goodwill for the period resulting from the purchase
of the minority interest.
(3) Adjust tax provision for effect of pro forma adjustments and the effect of
filing a consolidated federal income tax return rather than separate income
tax returns including utilization of net operating loss carryforward for
federal income tax purposes not previously recognized as deferred tax
assets.
(4) Reflects elimination of minority interest through purchase by Tribune/Swab-
Fox.
(5) Reflects common shares outstanding after the Merger assuming that the
maximum number of shares were acquired in the Cash Alternative.
F-12
<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, 1993
------------------------------------------------
Tribune Pro Forma
Swab-Fox Adjustments Assuming
Pro Forma for Merger Merger
--------- ----------- ---------
<S> <C> <C> <C>
Revenues $ 31,307 $ (228)(1) $ 31,079
-------- -------- --------
Operating costs and expenses 20,868 -- 20,868
General and administrative 7,850 -- 7,850
Interest expense 1,326 660 (1) 1,986
Depreciation and amortization 1,316 48 (2) 1,364
Loss on assets held for sale 9,224 -- 9,224
-------- -------- --------
Total costs and expenses 40,584 708 41,292
-------- -------- --------
Income (loss) before income taxes (9,277) (936) (10,213)
Equity earnings 29 -- 29
Benefit from (provision for) income taxes 3,546 335 (3) 3,881
Minority interest in earnings (losses) 1,379 (1,379)(4) --
-------- -------- --------
Income (loss) from continuing operations $ (4,323) $ (1,980) $ (6,303)
======== ======== ========
Per share amounts :
Earnings (loss) from continuing operations
per common and and common equivalent shares $ (1.70)
========
Weighted average number of common and common
equivalent shares outstanding 3,715 (5)
========
</TABLE>
- --------------------------------
(1) Elimination of investment income on cash used for the purchase of minority
interest and reflects interest expense on borrowings under lines of credit
used to complete the minority interest purchase, including payment of the
Special Dividend and acquiring 10,000,000 shares of Tribune/Swab-Fox stock
in the Cash Alternative.
(2) Reflects amortization of goodwill for the period resulting from the purchase
of the minority interest.
(3) Adjust tax provision for effect of pro forma adjustments and the effect of
filing a consolidated federal income tax return rather than separate income
tax returns.
(4) Reflects elimination of minority interest through purchase by Tribune/Swab-
Fox.
(5) Reflects common shares outstanding after the Merger assuming that the
maximum number of shares were acquired in the Cash Alternative.
F-13
<PAGE>
Post-Merger Communications
Unaudited Pro Forma Consolidated
Balance Sheet
September 30, 1994
(in thousands)
<TABLE>
<CAPTION>
Tribune/ Pro Forma
Swab-Fox Adjustments Assuming
Pro Forma for Merger Merger
--------- --------- ---------
ASSETS
- ------
<S> <C> <C> <C>
Current Assets $ 33,378 $ (7,564)(1)(2) $ 25,814
Contract Receivable and Investments 4,568 -- 4,568
Property, Plant and Equipment, net 4,190 -- 4,190
Intangibles and Other Assets, net 12,941 477 (2) 13,418
--------- --------- ---------
$ 55,077 $ (7,087) $ 47,990
========= ========= =========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
<S> <C> <C> <C>
Current Liabilities $ 16,145 $ 2,000(2) $ 18,145
Long-Term Debt 5,391 -- 5,391
Deferred Contract Liabilities 2,293 -- 2,293
Deferred Income Taxes 326 -- 326
Minority Interest 6,547 (6,547)(2) --
Stockholders' Equity 24,375 (2,540)(1)(2) 21,835
--------- --------- ---------
$ 55,077 $ (7,087) $ 47,990
========= ========= =========
</TABLE>
- ------------------------
(1) Reflects 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).
(2) Reflects purchase of minority interest in Communications by Tribune/Swab-Fox
accounted for as an asset purchase, the purchase of 10,000,000 shares of
Tribune/Swab-Fox at $0.80 per share in the Cash Alternative, borrowings
under the lines of credit of $1,500,000 used to partially fund the purchase
of shares in the Cash Alternative, issuance of Communications shares to
Tribune/Swab-Fox stockholders based on 0.1255 shares of Communications for
each Tribune/Swab-Fox share not purchased in the Cash Alternative, and
accrual of the estimated costs of the Merger.
F-14
<PAGE>
TRIBUNE/SWAB-FOX
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993
-------- --------
(Unaudited)
ASSETS
------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 7,719 $ 2,808
Short-term investments 2,000 --
Accounts receivable, less reserve for doubtful accounts
of $612 in 1994 and $465 in 1993 8,707 6,541
Inventories 395 188
Deferred tax asset 152 1,444
Current contract receivable and other current assets 6,779 5,661
Refundable income taxes 249 404
Assets held for sale -- 4,350
-------- --------
Total current assets 26,001 21,396
-------- --------
Investments 93 366
-------- --------
Contract and notes receivable 4,650 7,090
-------- --------
Property, plant and equipment, at cost 12,849 17,616
Less accumulated depreciation 3,114 3,650
-------- --------
9,735 13,966
-------- --------
Intangibles and other assets, net of amortization 17,676 17,241
-------- --------
$ 58,155 $ 60,059
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
F-15
<PAGE>
TRIBUNE/SWAB-FOX
CONSOLIDATED BALANCE SHEETS - Continued
(In thousands, except share amounts)
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY (Unaudited)
------------------------------------
<S> <C> <C>
Current Liabilities:
Accounts payable $ 5,592 $ 3,635
Accrued liabilities 9,503 6,867
Current portion of long-term debt 1,689 1,880
-------- --------
Total current liabilities 16,784 12,382
-------- --------
Long-term debt, net of current portion 6,259 9,273
-------- --------
Deferred contract liabilities 2,344 2,424
-------- --------
Deferred tax liability 326 1,531
-------- --------
Minority interests in consolidated subsidiaries 6,547 7,999
-------- --------
Stockholders' Equity:
Preferred stock, $10 par value 459 459
Common stock, Class A, $.10 par value, 50,000,000 shares authorized 2,680 2,680
Common stock, Class B, $.10 par value, 10,000,000 shares authorized 370 370
Additional paid-in capital 19,211 19,211
Retained earnings 3,740 4,295
-------- --------
26,460 27,015
Less stock of parent company held by a subsidiary 565 565
-------- --------
Total stockholders' equity 25,895 26,450
-------- --------
$ 58,155 $ 60,059
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
F-16
<PAGE>
TRIBUNE/SWAB-FOX
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------
1994 1993
---- ----
(Unaudited)
<S> <C> <C>
Revenues:
Publishing $ 10,498 $ 36,704
Information services 11,349 11,012
Exposition services 15,389 7,206
Other operating income and interest 5,339 3,505
-------- --------
Total revenues 42,575 58,427
-------- --------
Costs and Expenses:
Publishing 8,548 29,446
Information services 6,714 7,173
Exposition services 10,166 6,147
Other operating expenses 2,963 4,863
General and administrative 8,511 13,048
Interest 780 1,868
Depreciation and amortization 2,192 3,346
Loss on assets held for sale -- 9,224
-------- --------
Total costs and expenses 39,874 75,115
-------- --------
Income (loss) before income taxes
and extraordinary loss 2,701 ( 16,688 )
Earnings (losses) from equity investments ( 18 ) 8
Benefit from (provision for) income taxes ( 2,266 ) 4,405
Minority interest in (income) losses
of consolidated subsidiaries ( 874 ) 1,969
-------- --------
Income (loss) before extraordinary loss ( 457 ) ( 10,306 )
Extraordinary loss, net of tax of $340 ( -- ) ( 560 )
-------- --------
Net income (loss) ( 457 ) ( 10,866 )
Dividends on preferred shares 98 98
-------- --------
Income (loss) applicable to common shares $( 555 ) $( 10,964 )
======== ========
Per Share Amounts:
Primary earnings (loss) per common
and common equivalent share:
Before extraordinary loss $( 0.02 ) $( 0.34 )
Extraordinary loss -- ( 0.02 )
-------- --------
$( 0.02 ) $( 0.36 )
======== ========
Fully Diluted earnings (loss) per common
and common equivalent share:
Before extraordinary loss $ N/A $ N/A
Extraordinary loss N/A N/A
-------- --------
$ N/A $ N/A
======== ========
Cash dividends per common share $ -- $ --
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
F-17
<PAGE>
TRIBUNE/SWAB-FOX
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------
1994 1993
---- ----
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $( 457 ) $( 10,866 )
------- -------
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 2,192 3,346
(Earnings) losses from equity investments 18 ( 8 )
Accretion of interest expense 37 200
Gain on sale of property, plant and equipment ( 720 ) ( 39 )
Reserves provided on real estate and
venture capital investments 2,812 4,737
Loss on assets held for sale -- 9,224
Deferred compensation -- 1,855
Changes in assets and liabilities:
Accounts receivable ( 1,405 ) ( 2,078 )
Inventory ( 12 ) 15
Other current assets ( 732 ) ( 967 )
Intangibles and other assets 152 106
Accounts payable and accrued liabilities 4,376 1,950
Minority interest 874 ( 1,969 )
Deferred taxes (1,341) ( 5,342 )
------- -------
Total adjustments 6,251 11,030
------- -------
Net cash provided by operating activities 5,794 164
------- -------
Cash flows from investing activities:
Purchase of short-term investments ( 2,000 ) ( 501 )
Capital expenditures ( 2,170 ) ( 1,229 )
Net collections on notes and
contract receivables 3,552 2,427
Payments on deferred contract liabilities ( 403 ) ( 879 )
Additions to investments -- ( 213 )
Proceeds from the sale of assets held for sale
and property, plant and equipment 8,323 74
Payment for acquisition, net of cash acquired ( 1,114 ) --
Distributions from equity investments 29 51
------- -------
Net cash provided (used) by investing activities 6,217 ( 270 )
------- -------
</TABLE>
See accompanying notes to consolidated financial statements
F-18
<PAGE>
TRIBUNE/SWAB-FOX
CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
---------------------
1994 1993
---- ----
(Unaudited)
<S> <C> <C>
Cash flows from financing activities:
Payments on notes payable ( 152 ) ( 51 )
Principal payments of long-term debt ( 4,586 ) ( 3,787 )
Issuance of common stock 347 --
Acquisition of common stock retired ( 2,611 ) ( 100 )
Dividends on preferred stock ( 98 ) ( 98 )
------- -------
Net cash used in financing activities ( 7,100 ) ( 4,036 )
------- -------
Change in cash and cash equivalents 4,911 ( 4,142 )
Cash and cash equivalents at beginning of period 2,808 9,763
------- -------
Cash and cash equivalents at end of period $ 7,719 $ 5,621
======= =======
</TABLE>
See accompanying notes to consolidated financial statements
F-19
<PAGE>
TRIBUNE/SWAB-FOX
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
For the nine months ended September 30, 1994 and 1993
1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10
Regulation S-X of the Securities and Exchange Commission. Accordingly, the
financial statements do not include all of the information and notes required by
generally accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments considered necessary for a fair
presentation have been included. Results of operations for the nine months
ended September 30, 1994, are not necessarily indicative of the results to be
expected for the year ending December 31, 1994. For further information, refer
to the consolidated financial statements and related notes thereto included in
Tribune/Swab-Fox's annual report on Form 10-K for the year ended December 31,
1993.
Effective March 1, 1994, Tribune/Swab-Fox acquired 100% of the
outstanding common stock of Galaxy Registration, Inc. ("Galaxy"), which has been
accounted for as a purchase for financial reporting purposes.
2. Common Stock and Earnings Per Share.
Weighted average shares of common stock issued and outstanding during the
nine months ended September 30, 1994 and 1993 were 29,757,000 and 30,440,000,
respectively.
3. Income Taxes
Income tax provision or benefit for the nine months ended September 30,
1994 and 1993, does not bear a normal relationship to the statutory federal
income tax rate of 34% mainly as a result of amortization of goodwill related to
acquisitions, state income taxes and because Tribune/Swab-Fox is a tax filing
entity separate and apart from T/SF Communications Corporation, its 78% owned
subsidiary ("Communications").
4. Assets Held for Sale
Effective April 30, 1994, Tribune/Swab-Fox completed the sale of its
shopper-newspaper and commercial printing operation in southern New Jersey,
known as Shopper's Guide, Inc. The assets of this operation were reduced to net
realizable value and recognized as "Assets Held for Sale" at September 30, 1993.
The sale of these assets did not result in any gain or loss.
F-20
<PAGE>
5. Proposed Merger with Communications
In September, 1994, Tribune/Swab-Fox announced that a preliminary
agreement had been reached to merge with its 78% owned subsidiary,
Communications. Final terms are pending valuation of certain of Tribune/Swab-
Fox's investment assets. The merger will be structured such that Tribune/Swab-
Fox's stockholders, subject to their approval of the transaction, will receive
Communications' common stock or cash or a combination of both. Communications
will acquire up to 10,000,000 shares, or approximately one-third, of
Tribune/Swab-Fox's outstanding common stock for cash at an estimated offer price
of $0.80 per share, with the remaining shares of Tribune/Swab-Fox to be
exchanged for Communications shares on a to-be determined ratio, which is
estimated to be in a range of one share of Communications' stock for every 8.0
to 8.4 shares of Tribune/Swab-Fox's stock. Communications intends to file a
registration statement with the Securities and Exchange Commission covering
Communications' shares of common stock to be issued in the merger. The
transaction will require the approval of Tribune/Swab-Fox's and Communications'
stockholders.
6. Write-down of Real Estate
Tribune/Swab-Fox's Board of Directors made the decision to reduce the
book value of the Tribune/Swab-Fox's remaining real estate by approximately
$2,800,000 as of September 30, 1994, to reflect the value of such assets related
to attempting quick sales of these assets such that proceeds can be used to
retire debt prior to the merger with Communications as set forth above.
7. Reclassifications
Certain reclassifications have been made in the 1993 financial statements
to conform to the 1994 presentation.
F-21
<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
(Tribune/Swab-Fox) as of December 31, 1993 and 1992, 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, 1993. 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 as of
December 31, 1993 and 1992, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1993, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Tulsa, Oklahoma
March 4, 1994
F-22
<PAGE>
TRIBUNE/SWAB-FOX
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
December 31,
1993 1992
---- ----
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 2,808 $ 9,763
Accounts receivable, less reserve for
doubtful accounts of $465 in 1993 and
$1,226 in 1992 6,541 10,107
Inventories (Note 1) 188 1,025
Deferred tax assets (Notes 1 and 8) 1,444 --
Current contract receivable and other
current assets 5,661 4,915
Refundable income taxes 404 45
Assets held for sale (Note 4) 4,350 --
------- -------
Total current assets 21,396 25,855
------- -------
Investments (Note 5):
Equity investments 325 1,125
Other investments, at cost 41 436
------- -------
366 1,561
------- -------
Contract and Notes Receivable (Note 2) 7,090 15,140
------- -------
Property, Plant and Equipment, at cost
(Notes 1, 6 and 7):
Printing equipment -- 4,518
Rental property and other real estate 13,337 10,721
Computers, leasehold improvements, furniture
and fixtures and other machinery 4,279 6,572
------- -------
17,616 21,811
Less - accumulated depreciation 3,650 7,256
------- -------
13,966 14,555
------- -------
Intangibles and Other Assets, net (Notes
1 and 3) 17,241 30,991
------- -------
$60,059 $88,102
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-23
<PAGE>
TRIBUNE/SWAB-FOX
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
December 31,
1993 1992
---- ----
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities:
Notes payable $ -- $ 349
Accounts payable 3,635 4,353
Accrued liabilities (Note 13) 6,867 7,513
Deferred tax liabilities (Notes 1 and 8) -- 989
Current portion of long-term debt (Note 7) 1,880 4,320
------- -------
Total current liabilities 12,382 17,524
------- -------
Long-Term Debt (Note 7) 9,273 16,593
------- -------
Deferred Contract Liabilities and Credits 2,424 1,834
------- -------
Deferred Tax Liabilities (Notes 1 and 8) 1,531 3,935
------- -------
Minority Interests in Consolidated
Subsidiaries (Note 1) 7,999 9,928
------- -------
Commitments and Contingencies (Notes 3 and 10)
Stockholders' Equity, per accompanying statement
(Notes 1, 7 and 11):
Preferred stocks, $10 par value 459 459
Common stock, Class A, $.10 par value,
50,000 shares authorized 2,680 2,690
Common stock, Class B, $.10 par value,
10,000 shares authorized 370 370
Additional paid-in capital 19,211 19,262
Retained earnings 4,295 15,507
------- -------
27,015 38,288
Less stock of parent company held by
subsidiary (Note 11) (565) --
------- -------
Total stockholders' equity 26,450 38,288
------- -------
$60,059 $88,102
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-24
<PAGE>
TRIBUNE/SWAB-FOX
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Year Ended December31,
1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Revenues (Notes 1 and 3):
Publishing $ 49,493 $ 79,017 $ 81,263
Information services 14,499 12,673 10,522
Other operating income and interest 4,548 3,949 3,334
------- ------- -------
68,540 95,639 95,119
------- ------- -------
Costs and Expenses (Notes 1, 3, 4 and 6):
Publishing 40,198 56,070 59,244
Information services 9,460 8,214 6,795
Other operating expenses 4,955 975 694
General and administrative 15,060 21,402 21,820
Interest 2,257 3,007 3,623
Depreciation and amortization 3,928 7,516 5,031
Loss on assets held for sale 9,224 -- --
------- ------- -------
85,082 97,184 97,207
------- ------- -------
Loss before unusual gain, equity earnings and
income taxes (16,542) ( 1,545) ( 2,088)
Unusual gain (Note 2) -- 24,412 --
Earnings (losses) of equity investments
(Note 5) 3 37 ( 8)
Income tax (provision) benefit
(Notes 1 and 8) 4,097 (10,569) 158
Minority interest in (earnings) losses of
consolidated subsidiaries (Note 1) 1,929 ( 3,983) 369
------- ------- -------
Income (loss) before extraordinary loss (10,513) 8,352 (1,569)
Extraordinary loss, net of tax of $340 (Note 7) ( 560) -- --
------- ------- -------
Net income (loss) (11,073) 8,352 (1,569)
Dividends on preferred shares (Note 9) ( 139) ( 139) ( 139)
------- ------- -------
Income (loss) applicable to common shares $(11,212) $ 8,213 $ (1,708)
======= ======= =======
Per Share Amounts (Note 1):
Primary earnings (loss) per common
and common equivalent share:
Before extraordinary loss $( .35) $ .25 $ ( .06)
Extraordinary loss ( .02) -- --
------- ------- -------
$( .37) $ .25 ( .06)
======= ======= =======
Fully diluted earnings (loss) per common
and common equivalent share:
Before extraordinary loss $ N/A $ .24 $ N/A
Extraordinary loss N/A -- N/A
------- ------- -------
$ N/A $ .24 $ N/A
======= ======= =======
Cash dividends per common share $ -- -- --
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-25
<PAGE>
TRIBUNE/SWAB-FOX
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Preferred Stock:
Balance at end of year $ 459 $ 459 $ 459
-------- -------- --------
Common Stock, Class A:
Beginning balance 2,690 2,722 2,762
Purchase and retirement ( 10) ( 32) ( 40)
-------- -------- --------
Balance at end of year 2,680 2,690 2,722
-------- -------- --------
Common Stock, Class B:
Balance at end of year 370 370 370
-------- -------- --------
Additional Paid-in Capital:
Beginning balance 19,262 19,390 19,550
Purchase and retirement ( 51) ( 128) ( 160)
-------- -------- --------
Balance at end of year 19,211 19,262 19,390
-------- -------- --------
Retained Earnings:
Beginning balance 15,507 7,294 9,002
Net income (loss) ( 11,073) 8,352 ( 1,569)
Cash dividends on preferred shares ( 139) ( 139) ( 139)
-------- -------- --------
Balance at end of year 4,295 15,507 7,294
-------- -------- --------
Less stock of parent company held by a subsidiary ( 565) -- --
-------- -------- --------
$ 26,450 $ 38,288 $ 30,235
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-26
<PAGE>
TRIBUNE/SWAB-FOX
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Continued
(In thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Preferred Shares:
Balance at end of year 46 46 46
======== ======== ========
Common Shares, Class A:
Beginning balance 26,903 27,223 27,623
Purchase and retirement ( 101) ( 320) ( 400)
-------- -------- --------
Balance at end of year 26,802 26,903 27,223
======== ======== ========
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-27
<PAGE>
TRIBUNE/SWAB-FOX
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
1993 1992 1991
-------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $( 11,073 ) $ 8,352 $( 1,569 )
-------- --------- ---------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 3,928 7,516 5,031
(Earnings) losses of equity investments ( 3 ) ( 37 ) 8
Accretion of interest expense 228 270 410
Unusual gain -- ( 24,412 ) --
Gain on sale of property,
plant and equipment, investments
and marketable securities ( 41 ) ( 231 ) ( 340 )
Loss on assets held for sale 9,224 -- --
Reserves provided on venture capital
and real estate investments 4,815 691 165
Deferred compensation 1,856 37 34
Changes in assets and liabilities:
Accounts receivable and refundable
income taxes ( 744 ) 3,189 375
Inventories 184 535 1,112
Current contract receivable and
other current assets ( 314 ) 53 131
Intangibles and other assets ( 103 ) ( 33 ) ( 161 )
Accounts payable and accrued liabilities ( 257 ) ( 797 ) ( 1,681 )
Deferred income taxes ( 4,837 ) 4,809 ( 56 )
Minority interests ( 1,929 ) 3,983 ( 369 )
-------- -------- --------
Total adjustments 12,007 ( 4,427 ) 4,659
-------- -------- --------
Net cash provided by operating activities 934 3,925 3,090
-------- -------- --------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-28
<PAGE>
TRIBUNE/SWAB-FOX
CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued
(In thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Cash flows from investing activities:
Net sales (purchases) of short-term investments -- 905 ( 905)
Net advances on notes receivable ( 455) ( 558) ( 994)
Investments - venture capital and equity ( 215) ( 46) ( 611)
Distributions from equity investees 51 40 39
Capital expenditures ( 1,618) ( 1,402) ( 1,832)
Net proceeds from early termination of
Joint Operating Agreement -- 9,720 --
Proceeds from the sale of property,
plant and equipment, investments
and marketable securities 4,616 1,921 647
Collections on contract receivable 4,354 1,039 --
Payments on deferred contract liabilities ( 1,013) ( 1,304) ( 1,523)
------ ------ ------
Net cash provided by (used in) investing activities 5,720 10,315 ( 5,179)
------ ------ ------
Cash flows from financing activities:
Payments of notes payable, net ( 51) ( 140) ( 105)
Principal payments of long-term debt (13,319) ( 6,612) ( 3,984)
Borrowings under bank lines-of-credit -- 3,200 15,510
Payments under bank lines-of-credit -- ( 5,075) (12,035)
Repurchase of common stock ( 100) -- --
Dividends paid ( 139) ( 139) ( 139)
------ ------ ------
Net cash used in financing activities (13,609) ( 8,766) ( 753)
------ ------ ------
Net increase (decrease) in cash
and cash equivalents ( 6,955) 5,474 ( 2,842)
Cash and cash equivalents at beginning of year 9,763 4,289 7,131
------ ------ ------
Cash and cash equivalents at end of year $ 2,808 $ 9,763 $ 4,289
====== ====== ======
Supplemental disclosures of cash
flow information:
Cash paid for:
Interest $ 1,993 $ 2,765 $ 3,647
Income taxes 1,485 5,344 263
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-29
<PAGE>
TRIBUNE/SWAB-FOX
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1993, 1992 and 1991
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 free-distribution weekly shopper-newspapers (see Note 4), several
trade journals, newspapers and other publications for conventions and trade
shows, providing information services to the insurance and trucking industries,
real estate investments and, until October 1, 1992, published a daily newspaper.
T/SF Communications Corporation, a 72 percent-owned subsidiary
(Communications), conducts the publishing and information businesses of
Tribune/Swab-Fox.
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
represent 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.
F-30
<PAGE>
TRIBUNE/SWAB-FOX
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1993, 1992 and 1991
Prior to the termination of the JOA, Tribune/Swab-Fox used agency
accounting for its 40 percent ownership of NPC, whereby its share of NPC's
individual assets, liabilities, revenues and expenses are included in these
financial statements. Printing equipment utilized by NPC, as agent, was owned
directly by Tribune and World.
Inventories
Inventories include newsprint and related printing supplies, computers and
computer-related equipment and 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 $128,000 and $944,000 and
inventories of computers and computer-related equipment were $60,000 and $81,000
at December 31, 1993 and 1992, respectively.
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 and goodwill related to acquisitions, deferred
finance charges incurred in connection with the issuance of the 10.32 percent
Senior Notes (prior to 1993) 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>
Amortization December 31,
Period 1993 1992
------ ---- ----
(In thousands)
<S> <C> <C> <C>
Advertising lists 3 1/2-11 years $ 3,941 $ 8,679
Covenants-not-to-compete
and consulting agreement 3-10 years 2,190 6,860
Goodwill 30 years 17,963 29,700
Other 4-9 years 1,754 2,167
25,848 47,406
Accumulated amortization (8,607) (16,415)
------- -------
$17,241 $30,991
======= =======
</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.
F-31
<PAGE>
TRIBUNE/SWAB-FOX
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1993, 1992 and 1991
Valuation reserves are provided if the carrying value of acquired goodwill is
determined to be permanently impaired.
Change in Accounting Estimates
During the third quarter of 1992, Tribune/Swab-Fox revised the estimated
lives used to depreciate or amortize certain machinery and equipment,
advertising lists and covenants of Shopper's Guide, Inc. (Shopper's Guide),
Tribune/Swab-Fox's New Jersey free-distribution shopper-newspaper, and equipment
and advertising lists of Marks-Roiland Communications, Inc. (Marks-Roiland),
Tribune/Swab-Fox's Long Island free-distribution shopper-newspaper. Management
of Tribune/Swab-Fox made the change in estimates to reflect the effect of the
local economies of each operation on the useful lives of these assets. The
effect of this change in accounting estimates was to increase 1992 depreciation
and amortization by approximately $2,400,000 and to decrease 1992 net income by
approximately $1,540,000 or $0.05 per share.
Revenue Recognition
Revenues from information services are net of the cost of charges from
state motor vehicle record departments which are incurred by Tribune/Swab-Fox as
an agent for its customers. As provided in the agreements with customers,
Tribune/Swab-Fox charges a fee for its service and is also reimbursed for state
charges.
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.
F-32
<PAGE>
TRIBUNE/SWAB-FOX
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1993, 1992 and 1991
Postretirement Benefits
SFAS No. 106, Employers' Accounting for Postretirement Benefits Other Than
Pensions, was adopted by Tribune/Swab-Fox in 1992; however, Tribune/Swab-Fox
does not offer any postretirement medical or insurance benefits for any
employees, thus this statement had no effect on Tribune/Swab-Fox's financial
position or its results of operations.
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.
The weighted average number of common and common equivalent shares
outstanding was 30,286,000 in 1993, 33,531,000 in 1992 and 30,960,000 in 1991.
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 1993 and 1991 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
F-33
<PAGE>
TRIBUNE/SWAB-FOX
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1993, 1992 and 1991
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, 1993, $10,709,000, 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.
The unaudited pro forma results of operations for the year ended December
31, 1992, which gives effect to the termination of the JOA as if such
termination had occurred on January 1, 1992, are revenues of $76,923,000, net
income of $6,890,000 and earnings per share of $0.21. This unaudited pro forma
information is presented in response to applicable accounting rules relating to
disposition transactions. It is not necessarily indicative of the actual
results that would have been achieved had the transaction occurred on January 1,
1992, and is not necessarily indicative of future results.
3. Acquisitions:
Atwood Convention Publishing, Inc. (Atwood)
In August, 1990, Tribune/Swab-Fox acquired 100 percent of the outstanding
stock of Atwood. Atwood publishes daily newspapers and other publications for
conventions and trade shows.
In addition to the original purchase price, Tribune/Swab-Fox agreed to, and
has paid or accrued, 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 have been paid or accrued 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. Incentive compensation payments of $229,000, $317,000 and
$204,000 were earned by the former owners and were expensed in 1993, 1992 and
1991, respectively.
Galaxy Registration, Inc. (Galaxy)
Effective March 1, 1994, Tribune/Swab-Fox completed the acquisition of
Galaxy. Galaxy provides, on a national basis, registration, information and
marketing services to the convention/trade
F-34
<PAGE>
TRIBUNE/SWAB-FOX
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1993, 1992 and 1991
show industry. Tribune/Swab-Fox 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. 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.
4. Assets Held for Sale:
During the third quarter of 1993, Tribune/Swab-Fox's Board of Directors
made the decision to offer for sale all of Tribune/Swab-Fox's 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, Tribune/Swab-Fox sold all of the operating
assets, except cash, of Marks-Roiland, one of the shopper-newspapers. The
Company received $4,675,000 in cash, and the buyer assumed certain liabilities
totaling approximately $1,560,000. In addition, Tribune/Swab-Fox entered into a
three-year covenant-not-to-compete whereby Tribune/Swab-Fox may not compete with
the buyer in the geographic area of the operations that were sold.
Tribune/Swab-Fox received $1,425,000 in cash for the covenant which will be
recognized in income ratably over the term of the covenant.
Unaudited pro forma results of operations for the year ended December 31,
1993, had the transactions occurred on January 1, 1993, would have been revenues
of $55,872,000, loss before extraordinary loss of $9,672,000 and loss per common
share before extraordinary loss of $0.32. This unaudited pro forma information
is presented in response to applicable accounting rules relating to disposition
transactions. It is not necessarily indicative of the actual results that would
have been achieved had the transactions occurred on January 1, 1993, and is not
necessarily indicative of future results.
Tribune/Swab-Fox continues to pursue the sale of its other shopper-
newspaper, Shopper's Guide. At December 31, 1993, the net assets of Shopper's
Guide are reflected as "Assets held for sale" in the accompanying balance sheet.
5. Investments:
Real estate subsidiaries of Tribune/Swab-Fox are general partners 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).
A subsidiary of Tribune/Swab-Fox has venture capital investments in several
corporations 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 is represented on the Boards of
Directors of certain of these investments. These investments are accounted for
at cost until Tribune/Swab-Fox's ownership reaches 20
F-35
<PAGE>
TRIBUNE/SWAB-FOX
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1993, 1992 and 1991
percent or Tribune/Swab-Fox can exercise significant influence, at which time
Tribune/Swab-Fox accounts for the investment on the equity method. To the extent
such investments include goodwill, such goodwill is being amortized over periods
up to 30 years. The carrying value of such investments is reduced by a charge to
income when, in the opinion of management, a permanent impairment in value has
occurred.
6. Real Estate:
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 will be implemented by offering the real estate assets for sale at
discounts from retail values that might otherwise be achieved if the assets were
held for sale in the normal course of business. As part of this plan,
Tribune/Swab-Fox acquired the interests of several partners in certain real
estate partnerships in exchange for notes receivable from such partners of
approximately $3,400,000, assumed partnership bank debt of approximately
$1,700,000 and made cash payments of $335,000. After these interests were
acquired, Tribune/Swab-Fox generally owned 100 percent of these partnerships and
properties. As a part of the liquidation plan, a review of the current market
for each property was made and a write-down of the real estate assets of
approximately $4,400,000 was recognized. This write-down is reflected in "other
operating expenses" in the accompanying statements of operations.
F-36
<PAGE>
TRIBUNE/SWAB-FOX
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1993, 1992 and 1991
7. Long-Term Debt:
Long-term debt outstanding consists of the following:
<TABLE>
<CAPTION>
December 31,
1993 1992
---- ----
(In thousands)
<S> <C> <C>
10.32% Senior Notes paid in November, 1993. $ --- $ 11,111
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 (6.0% at
December 31, 1993). 4,247 4,854
7.5% Promissory note, unsecured, with annual principal payments of
$100,000 plus accrued interest, payable each August with remaining
principal and accrued interest payable August, 1998. 465 ---
11% convertible subordinated debenture due August, 1998, interest
payable quarterly. 831 831
11% convertible subordinated debentures due in 1997, interest payable
quarterly, reduced 10% annually, if requested by debenture holders. 1,265 1,743
Subordinated debenture, extended in 1993, with annual principal payments
of $200,000 through 1997, interest payable quarterly based upon Chase
Manhattan base rate plus 1% (7% at December 31, 1993). 800 897
Real estate term notes, payable $125,000 quarterly, plus interest at Chase
Manhattan base rate plus 2% (8% at December 31, 1993), with unpaid
principal due at maturity on June 30, 1995. 3,250 633
Other 295 844
-------- --------
11,153 20,913
Less portion due within one year (1,880) (4,320)
-------- --------
$ 9,273 $ 16,593
======== ========
</TABLE>
F-37
<PAGE>
TRIBUNE/SWAB-FOX
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1993, 1992 and 1991
Installments due on long-term debt during each of the five years subsequent
to December 31, 1993, are as follows:
<TABLE>
<CAPTION>
(In thousands)
<S> <C>
1994 $ 1,880
1995 3,835
1996 1,084
1997 1,639
1998 1,503
Thereafter 1,212
-------
$11,153
=======
</TABLE>
The 11 percent convertible subordinated debenture due 1998 is convertible
into Common Stock of Tribune/Swab-Fox at any time prior to maturity at a rate of
$2.39 per share.
The 11 percent convertible subordinated debentures due 1997 include
$760,000 owned by directors and officers of Tribune/Swab-Fox. These debentures
have a demand right for repayment of ten percent of each debenture annually, if
requested by the debenture holder. Prior to maturity, holders may request
conversion of the debentures into Common Stock of Tribune/Swab-Fox at a rate of
$1.50 per share.
At December 31, 1993, assets with a net book value of approximately
$12,650,000 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
the Senior Notes held by 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,
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, 1993, Tribune/Swab-Fox has four separate revolving credit
arrangements with a bank which together allow Tribune/Swab-Fox to borrow up to
$6,000,000. Interest on amounts borrowed is payable monthly at a rate of 1 1/2
percent above the Chase Manhattan base rate (7 1/2 percent at December 31,
1993). Certain of the facilities are secured by accounts and contract
receivables. At December 31, 1993, 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-38
<PAGE>
TRIBUNE/SWAB-FOX
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1993, 1992 and 1991
8. Income Taxes:
The provision for (benefit from) income taxes is comprised of the
following:
<TABLE>
<CAPTION>
Year Ended December 31,
1993 1992 1991
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Current:
Federal $ 352 $ 4,948 $( 179)
State 48 1,003 77
------- ------- ------
400 5,951 102
------- ------- ------
Deferred:
Federal (4,137) 3,944 ( 47)
State ( 700) 674 ( 9)
------- ------- ------
(4,837) 4,618 ( 56)
------- ------- ------
$(4,437) $10,569 $( 158)
======= ======= ======
</TABLE>
The reconciliation of income tax computed at the federal statutory
rate (34%) to income tax (benefit) expense is as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1993 1992 1991
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Income tax provision (benefit) at statutory rates $(5,956) $ 7,787 $( 713)
Amortization of acquired assets not deductible for
income tax purposes 302 1,092 482
Losses without tax benefit 2,042 594 ---
Excess of tax basis of assets sold over book basis
which was not previously tax effected ( 369) --- ---
State income taxes ( 444) 1,107 ---
Other ( 12) ( 11) 73
------- ------- -----
$(4,437) $10,569 $( 158)
======= ======= =====
</TABLE>
F-39
<PAGE>
TRIBUNE/SWAB-FOX
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1993, 1992 and 1991
Significant components of Tribune/Swab-Fox's deferred tax liabilities and
assets are as follows:
<TABLE>
<CAPTION>
December 31,
1993 1992
---- ----
(In thousands)
<S> <C> <C>
Deferred tax liabilities:
Fixed asset basis differences $( 654) $( 705)
Unusual gain recognized in different accounting period
for income tax reporting purposes (4,136) (5,874)
Assigned acquisition basis ( 472) ( 814)
Other, net ( 66) ( 166)
------- -------
Deferred tax liabilities (5,328) (7,559)
------- -------
Deferred tax assets:
Income from covenant-not-to compete recognized in
different accounting period for income tax purposes 508 ---
Deferred severance benefits payable 993 346
Reserves on assets held for sale 5,338 2,785
Accrued expenses deductible when paid 553 441
Tax loss carryforwards 1,926 752
Other, net 188 295
------- -------
Total deferred tax assets 9,506 295
Valuation allowance for deferred tax assets (4,265) (1,984)
------- -------
Net deferred tax assets 5,241 2,635
------- -------
Net deferred tax liabilities $( 87) $(4,924)
======= =======
</TABLE>
Net deferred tax liabilities are reflected on the accompanying balance
sheets as follows:
<TABLE>
<CAPTION>
December 31,
1993 1992
---- ----
(In thousands)
<S> <C> <C>
Long-term - Deferred tax liabilities $(1,531) $(3,935)
Current liabilities - Deferred tax liabilities --- ( 989)
Current assets - Deferred tax assets 1,444 ---
------- -------
$( 87) $(4,924)
======= =======
</TABLE>
F-40
<PAGE>
TRIBUNE/SWAB-FOX
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1993, 1992 and 1991
At December 31, 1993, Tribune/Swab-Fox has net operating loss carryforwards
of approximately $3,700,000 for income tax reporting purposes. If not offset
against future taxable income, the carryforwards will begin to expire in the
year 2006. In addition, Tribune/Swab-Fox has a capital loss carryforward of
approximately $1,394,000 which, if not offset against future capital gain
income, will expire in 1998.
9. Capital Stock:
Tribune/Swab-Fox has three classes of preferred stock outstanding:
6 1/2 percent Cumulative Convertible Preferred Stock, $10.00 par value per
share, 60,000 shares authorized, 30,815 shares issued and outstanding at
December 31, 1993. This stock is redeemable from holders at a price of
$10.50 per share plus accumulated and unpaid dividends. In the event of
liquidation, holders are entitled to cash equal to $10.50 per share plus
accumulated and unpaid dividends. Liquidation rights are subordinated to
those of the New Senior Preferred Stock. Each preferred share is entitled
to 30 votes and may be converted into 45 shares of common stock at any
time.
Class A Preferred Stock, Series 1, $10.00 par value per share, 1,400 shares
authorized and outstanding at December 31, 1993, held by Tribune/Swab-Fox's
Profit Sharing Plan and Trust. Holders are entitled to one vote per share
and to receive cash dividends of $11.00 per share annually. The stock may
be redeemed by Tribune/Swab-Fox at a price of $110 per share plus dividends
accrued and unpaid. In the event of liquidation, holders are entitled to
cash equal to $110 per share plus accumulated and unpaid dividends.
Redemption rights are subordinate to those of the 6 1/2 percent Cumulative
Convertible Preferred Stock.
New Senior Preferred Stock, $10.00 par value per share, 20,000 shares
authorized, 13,657 shares issued and outstanding at December 31, 1993.
Holders are entitled to receive cash dividends of $7.50 per share annually.
The shares may be redeemed by Tribune/Swab-Fox at $100 per share. The
shares may be converted into common stock, at the option of the holder, at
a conversion rate of 71.43 shares of common stock per share of New Senior
Preferred Stock.
In December 1993, June 1992 and February 1991 Tribune/Swab-Fox purchased
and retired 101,073 shares, 320,000 shares and 400,000 shares, respectively, of
its Class A Common Stock owned by certain officers and directors of
Tribune/Swab-Fox for a purchase price of $0.60 per share in 1993 and $0.50 per
share in 1992 and 1991. As part of these transactions, Tribune/Swab-Fox
received payments on loans of $60,000 in 1993, $224,000 in 1992 and $450,000 in
1991.
Tribune/Swab-Fox has an incentive stock option plan whereby 747,500 shares
of Common Stock are reserved for issuance at December 31, 1993. Options may be
granted to key employees and are exercisable up to ten years from date of grant.
At December 31, 1993, options for 41,000
F-41
<PAGE>
TRIBUNE/SWAB-FOX
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1993, 1992 and 1991
shares were outstanding and exercisable at $1.60 per share. During 1993, no
options were exercised, and options for 160,000 shares were canceled or expired.
Warrants to purchase 350,000 shares of Tribune/Swab-Fox's Common Stock are
outstanding at December 31, 1993 which were issued on August 15, 1988 in
connection with the issuance of the 10.32 percent Senior Notes. The warrants
are exercisable at $1.25 per share and expire in 1994 if not exercised.
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 has operating lease agreements, principally for office
facilities and equipment, expiring at various dates through 2000. Rent expense
in 1993, 1992 and 1991 under operating leases was approximately $1,317,000,
$1,995,000 and $2,083,000, respectively.
As of December 31, 1993, Tribune/Swab-Fox's future minimum lease payments
are as follows:
<TABLE>
<CAPTION>
Minimum Lease
Year Ending December 31 Payments
----------------------- -------------
(In thousands)
<S> <C>
1994 $ 852
1995 693
1996 638
1997 527
1998 299
Thereafter 245
------
$3,254
======
</TABLE>
Tribune/Swab-Fox has employment agreements with five executives of
Tribune/Swab-Fox and its subsidiaries. The agreements provide for individual
compensation ranging from $72,000 to $248,000 annually ($704,000 annually in the
aggregate) and expire at various dates through 1997.
Tribune/Swab-Fox 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
Tribune/Swab-Fox.
In February, 1993, Tribune/Swab-Fox received notice of assessments of
Federal income tax for the years 1989 through 1991 of approximately $955,000,
due principally to the
F-42
<PAGE>
TRIBUNE/SWAB-FOX
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1993, 1992 and 1991
disallowance of certain deductions related to amortization of intangible assets,
specifically advertising lists and covenants-not-to-compete. Tribune/Swab-Fox
does not agree with the Internal Revenue Service's position and filed a protest
of the assessments with the Internal Revenue Service. No date has been set for a
protest hearing. If the assessment is upheld, the deductibility of these same
costs in future years will also be affected. Management of Tribune/Swab-Fox
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
Tribune/Swab-Fox.
11. Related Party Transactions:
Effective August 1, 1993, the Chairman and Chief Executive Officer of
Tribune/Swab-Fox 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 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. These Communications acquisitions
of Company Stock are reflected as a reduction in stockholders' equity in the
accompanying balance sheets. Communications also acquired an 11 percent
Convertible Subordinated Debenture due 1997 in the principal amount of $141,000
held by the former Chairman and Chief Executive Officer which is shown as a
reduction of long-term debt in the accompanying balance sheets.
NPC paid approximately $170,000 and $222,000 to Green Country Distributors,
Inc. (Green Country), an affiliated company of Tribune, for transportation
services in 1992 and 1991, respectively.
NPC paid approximately $198,000 and $230,000 to a leasing company owned by
certain stockholders of Tribune/Swab-Fox, World and the General Manager of NPC
for vehicle leases in 1992 and 1991, respectively. Green Country paid
approximately $79,000 and $108,000 to this leasing company for vehicle leases in
1992 and 1991, respectively. 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 Common Stock of Tribune/Swab-
Fox. The borrower is required to make semi-annual interest payments through
April, 1995 at which time the principal and accrued interest then outstanding on
the loan will be payable in semi-annual installments equal to one-fifteenth of
the outstanding principal with all of the balance due on October 1, 1999.
Under the terms of a promissory note, a director of Tribune/Swab-Fox has
the right to borrow up to $350,000 from Tribune/Swab-Fox at an interest rate of
11 percent. At
F-43
<PAGE>
TRIBUNE/SWAB-FOX
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1993, 1992 and 1991
December 31, 1993, $349,000 was outstanding under this note. The borrower is
required to make annual interest payments. The unpaid principal balance of the
promissory note plus any accrued interest is due on July 1, 1994. A security
interest in favor of Tribune/Swab-Fox covering 6,435 shares of 6 1/2 percent
Cumulative Convertible Preferred Stock and 110,000 shares of Class A Common
Stock of Tribune/Swab-Fox secures this note.
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:
Business Segment Operations
---------------- ----------
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),
publication of five trade journals by BMT
Publications, Inc. and publication of convention
newspapers and one trade journal by Atwood.
Information Provider of motor vehicle reports, truck driver
Services employment information, worker's compensation
information, credit reports, criminal record reports
and reseller of long-distance telephone service to the
insurance and trucking industries.
Real Estate Ownership and management of various rental properties,
including commercial buildings, motels, residential
units and warehouses and investment in undeveloped
real estate.
Summarized financial information by industry segment is as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1993 1992 1991
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Net revenues from sales to
unaffiliated customers:
Publishing $ 52,135 $ 80,643 $ 82,558
Information services 14,499 13,643 10,522
Real estate 313 347 364
Corporate and other 1,593 1,006 1,675
-------- -------- --------
$ 68,540 $ 95,639 $ 95,119
======== ======== ========
</TABLE>
F-44
<PAGE>
TRIBUNE/SWAB-FOX
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1993, 1992 and 1991
Summarized financial information by industry segment - Continued:
<TABLE>
<CAPTION>
Year Ended December 31,
1993 1992 1991
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Operating profit (loss):
Publishing $( 9,212) $ 1,307 $ 1,400
Information services 2,505 2,708 1,232
Real estate ( 4,515) ( 535) ( 447)
--------- --------- ---------
Operating profit (loss) from segments (11,222) 3,480 2,185
Corporate expenses, net ( 3,060) ( 1,981) ( 658)
Interest expense ( 2,257) ( 3,007) ( 3,623)
--------- --------- ---------
Loss from operations before unusual gain,
income taxes and extraordinary loss $(16,539) $( 1,508) $( 2,096)
========= ========= =========
Identifiable assets:
Publishing $ 29,136 $ 51,048 $ 45,049
Information services 12,387 11,460 11,230
Real estate 12,431 13,477 13,594
Corporate 6,105 12,117 8,887
-------- -------- --------
$ 60,059 $ 88,102 $ 78,760
======== ======== ========
Depreciation and amortization:
Publishing $ 2,854 $ 6,215 $ 3,961
Information services 898 1,100 854
Real estate 149 138 140
Corporate 27 63 76
-------- -------- --------
$ 3,928 $ 7,516 $ 5,031
======== ======== ========
Capital expenditures:
Publishing $ 758 $ 619 $ 1,164
Information services 800 702 504
Real estate 3,994 79 130
Corporate 12 2 34
-------- -------- --------
$ 5,564 $ 1,402 $ 1,832
======== ======== ========
</TABLE>
F-45
<PAGE>
TRIBUNE/SWAB-FOX
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1993, 1992 and 1991
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 have been expensed by Tribune/Swab-Fox
as incurred.
Identifiable assets by segment are those assets that are used in the
operations of each segment. Included in identifiable assets of the real estate
segment are Tribune/Swab-Fox's investments in the net equity of certain real
estate partnerships and joint ventures. 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 1993, 1992 and 1991, no customer represented ten percent or more of
Tribune/Swab-Fox's revenues.
During 1993, 1992 and 1991, Tribune/Swab-Fox incurred maintenance and
repair expenses of $703,000, $1,371,000 and $1,497,000, respectively, and
amortization expenses of its intangible assets of $2,025,000, $4,605,000 and
$2,795,000, respectively.
13. Accrued Liabilities:
<TABLE>
<CAPTION>
Accrued liabilities consist of the following:
December 31,
1993 1992
---- ----
(In thousands)
<S> <C> <C>
Current portion of deferred contract liabilities $ 432 $1,014
Accrued interest 204 168
Accrued vacation 413 598
Accrued payroll 767 1,079
Deferred revenue 2,607 904
Accrued income taxes 72 729
Accrued other liabilities 2,372 3,021
------ ------
$6,867 $7,513
====== ======
</TABLE>
F-46
<PAGE>
COMMUNICATIONS
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993
-------- --------
(Unaudited)
ASSETS
------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 7,386 $ 2,633
Short-term investments 2,000 --
Accounts receivable, less reserve for doubtful accounts
of $612 in 1994 and $465 in 1993 8,550 6,300
Inventories 395 188
Deferred tax asset 152 1,444
Current contract receivable and other current assets 6,542 5,621
Refundable income taxes 249 404
Assets held for sale -- 4,350
-------- --------
Total current assets 25,274 20,940
-------- --------
Contract receivable and investments 3,566 6,702
-------- --------
Property, plant and equipment, at cost 7,712 4,524
Less accumulated depreciation 2,954 2,378
-------- --------
4,758 2,146
-------- --------
Intangibles and other assets, net of amortization 17,725 17,273
-------- --------
$ 51,323 $ 47,061
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
F-47
<PAGE>
COMMUNICATIONS
CONSOLIDATED BALANCE SHEETS - Continued
(In thousands, except share amounts)
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993
-------- --------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
Current Liabilities:
Accounts payable $ 5,444 $ 3,451
Accrued liabilities 8,992 6,736
Current portion of long-term debt 1,007 785
-------- --------
Total current liabilities 15,443 10,972
-------- --------
Long-term debt, net of current portion 3,960 4,005
-------- --------
Deferred contract liabilities 2,293 2,360
-------- --------
Deferred tax liability 326 1531
-------- --------
Stockholders' Equity:
Preferred stock, $10 par value, authorized 1,000,000 shares -- --
Common stock, $.10 par value, authorized 10,000,000 shares 486 527
Additional paid-in capital 20,054 22,277
Retained earnings 8,761 5,389
-------- --------
Total stockholders' equity 29,301 28,193
-------- --------
$ 51,323 $ 47,061
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
F-48
<PAGE>
COMMUNICATIONS
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
---------------------------------
1994 1993
---- ----
(Unaudited)
<S> <C> <C>
Revenues:
Publishing $ 10,498 $ 36,704
Information services 11,349 11,012
Exposition services 15,389 7,206
Other operating income and interest 4,196 3,124
-------- --------
Total revenues 41,432 58,046
-------- --------
Costs and Expenses:
Publishing 8,548 29,446
Information services 6,714 7,173
Exposition services 10,166 6,147
General and administrative 7,751 12,406
Interest 424 1,398
Depreciation and amortization 2,191 3,246
Loss on assets held for sale -- 9,224
-------- --------
Total costs and expenses 35,794 69,040
-------- --------
Income (loss) before income taxes
and extraordinary loss 5,638 (10,994)
Benefit from (provision for) income taxes (2,266) 4,405
-------- --------
Income (loss) before extraordinary loss 3,372 ( 6,589)
Extraordinary loss, net of tax of $340 -- ( 560)
-------- --------
Net income (loss) $ 3,372 $ ( 7,149)
======== ========
Per Share Amounts:
Earnings (loss) per common and
common equivalent share:
Before extraordinary loss $ 0.64 $ ( 1.25)
Extraordinary loss -- ( 0.11)
-------- --------
Earnings (loss) per common share $ 0.64 $ ( 1.36)
======== ========
Cash dividends per common share $ -- $ --
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
F-49
<PAGE>
COMMUNICATIONS
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------
1994 1993
---- ----
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 3,372 $ (7,149)
------- -------
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 2,191 3,246
Accretion of interest expense 37 158
(Gain) loss on sale of property, plant and equipment 204 ( 23)
Loss on assets held for sale -- 9,224
Deferred compensation -- 1,855
Changes in assets and liabilities:
Accounts receivable (1,401) (2,101)
Inventory ( 12) 15
Other current assets ( 618) ( 973)
Other assets 156 ( 282)
Accounts payable and accrued liabilities 4,016 1,952
Deferred taxes (1,341) (5,342)
------- -------
Total adjustments 3,232 7,729
------- -------
Net cash provided by operating activities 6,604 580
------- -------
Cash flows from investing activities:
Purchase of short-term investments (2,000) ( 501)
Capital expenditures (2,168) (1,221)
Payments on contract receivable 3,500 2,865
Payments on deferred contract liabilities ( 403) ( 879)
Additions to investments -- ( 241)
Proceeds from sale of assets held for sale
and property, plant and equipment 3,955 25
Payment for acquisition, net of cash acquired (1,114) --
------- -------
Net cash provided by investing activities 1,770 48
------- -------
</TABLE>
See accompanying notes to consolidated financial statements
F-50
<PAGE>
COMMUNICATIONS
CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
------------------
1994 1993
------ ------
(Unaudited)
<S> <C> <C>
Cash flows from financing activities:
Principal payments of long-term debt (1,357) (3,144)
Issuance of common stock 347 --
Acquisition of common stock retired (2,611) --
------ ------
Net cash used in financing activities (3,621) (3,144)
------ ------
Change in cash and cash equivalents 4,753 (2,516)
Cash and cash equivalents at beginning of period 2,633 7,059
------ ------
Cash and cash equivalents at end of period $ 7,386 $ 4,543
====== ======
</TABLE>
See accompanying notes to consolidated financial statements
F-51
<PAGE>
COMMUNICATIONS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
For the Nine Months Ended September 30, 1994 and 1993
1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10
Regulation S-X of the Securities and Exchange Commission. Accordingly, the
financial statements do not include all of the information and notes required by
generally accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of only normal recurring
accruals) considered necessary for a fair presentation have been included.
Results of operations for the nine months ended September 30, 1994, are not
necessarily indicative of the results to be expected for the year ending
December 31, 1994. For further information, refer to the consolidated financial
statements and related notes thereto included in Communications' annual report
on Form 10-K for the year ended December 31, 1993.
Effective March 1, 1994, Communications acquired 100% of the outstanding
common stock of Galaxy Registration, Inc. ("Galaxy"), which has been accounted
for as a purchase for financial reporting purposes.
2. Common Stock and Earnings Per Share
There were 5,224,518 and 5,273,718 weighted average shares of common
stock issued and outstanding during the nine months ended September 30, 1994 and
1993, respectively. In March, 1994, Communications sold 75,000 shares of
Communications' common stock to the former majority stockholder of Galaxy for
$4.625 per share. In August, 1994, Communications purchased and retired 483,900
shares of Communications' common stock from one stockholder for $5.375 per
share.
3. Income Taxes
Income tax provision or benefit for the nine months ended September 30,
1994 and 1993, does not bear a normal relationship to the statutory federal
income tax rate of 34% mainly as a result of amortization of goodwill related to
acquisitions which is not deductible for income tax purposes, except as related
to assets held for sale.
4. Related Party Transactions
Management and administrative services are provided by Communications'
corporate staff to Tribune/Swab-Fox Companies, Inc. ("Tribune/Swab-Fox") which,
at September 30, 1994, owned 78% of Communications' outstanding common stock.
The monthly charge of $23,333 to Tribune/Swab-Fox in 1994 and $38,333 per month
in 1993 for these services is based on an
F-52
<PAGE>
agreement between Tribune/Swab-Fox and Communications (which is subject to
review again at December 31, 1994), and is reflected in the accompanying
statements of operations as a reduction of general and administrative expenses.
5. Assets Held for Sale
Effective April 30, 1994, Communications completed the sale of its
shopper-newspaper and commercial printing operation in southern New Jersey,
known as Shopper's Guide, Inc. The assets of this operation were reduced to
estimated net realizable value and recognized as assets held for sale at
September 30, 1993. The sale of these assets did not result in any gain or
loss.
6. Proposed Merger with Parent Company
In September, 1994, Communications announced that a preliminary agreement
had been reached to acquire its parent company, Tribune/Swab-Fox, by merger.
Final terms are pending valuation of certain Tribune/Swab-Fox investment assets.
The merger will be structured such that Tribune/Swab-Fox stockholders, subject
to their approval of the transaction, will receive Communications' common stock
or cash or a combination of both. Communications will acquire up to 10,000,000
shares, or approximately one-third of Tribune/Swab-Fox outstanding common stock,
for cash at an estimated offer price of $0.80 per share, with the remaining
shares of Tribune/Swab-Fox to be exchanged for Communications' shares on a to-be
determined ratio, which is estimated to be in a range of one share of
Communications' stock for every 8.0 to 8.4 shares of Tribune/Swab-Fox.
Communications intends to file a registration statement with the Securities and
Exchange Commission covering Communications' shares of common stock to be issued
in the merger. The transaction will require the approval of the stockholders of
Tribune/Swab-Fox and Communications.
7. Reclassifications
Certain reclassifications have been made in the 1993 financial statements
to conform to the 1994 presentation.
F-53
<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
(Communications) as of December 31, 1993 and 1992, 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, 1993. These financial
statements are the responsibility of Communication'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 Communications as of
December 31, 1993 and 1992, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1993, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Tulsa, Oklahoma
March 4, 1994
F-54
<PAGE>
COMMUNICATIONS
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
December 31,
1993 1992
------ ------
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 2,633 $ 7,059
Accounts receivable, less reserve for
doubtful accounts of $465 in 1993
and $1,226 in 1992 6,300 9,858
Inventories (Note 1) 188 1,025
Deferred tax asset (Note 6) 1,444 --
Current contract receivable and
other current assets 5,621 4,859
Refundable income taxes 404 --
Assets held for sale (Note 4) 4,350 --
------ ------
Total current assets 20,940 22,801
------ ------
Contract Receivable and Investments
(Notes 2 and 9) 6,702 11,181
------ ------
Property, Plant and Equipment, at cost
(Note 1):
Printing equipment -- 4,518
Other 4,524 6,541
------ ------
4,524 11,059
Less - accumulated depreciation 2,378 5,988
------ ------
2,146 5,071
------ ------
Intangibles and Other Assets, net
(Notes 1 and 3) 17,273 30,765
------ ------
$47,061 $69,818
====== ======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-55
<PAGE>
COMMUNICATIONS
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
December 31,
1993 1992
---- ----
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities:
Accounts payable $ 3,451 $ 4,035
Accrued liabilities (Note 10) 6,736 7,297
Deferred tax liability (Note 6) -- 989
Current portion of long-term debt (Note 5) 785 3,303
------ ------
Total current liabilities 10,972 15,624
------ ------
Long-term Debt (Note 5) 4,005 13,233
------ ------
Deferred Contract Liabilities 2,360 1,755
------ ------
Deferred Tax Liability (Note 6) 1,531 3,935
------ ------
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, 5,274 shares issued and
outstanding 527 527
Additional paid-in capital 22,277 22,277
Retained earnings 5,389 12,467
------ ------
Total stockholders' equity 28,193 35,271
------ ------
$47,061 $69,818
====== ======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-56
<PAGE>
COMMUNICATIONS
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31,
1993 1992 1991
--------- --------- ---------
<S> <C> <C> <C>
Revenues (Notes 2, 3 and 4):
Publishing $ 49,493 $ 79,017 $ 81,263
Information services 14,499 12,673 10,522
Other operating income and interest 3,985 3,141 1,798
--------- --------- ---------
67,977 94,831 93,583
--------- --------- ---------
Costs and Expenses (Notes 1, 3, 4 and 9):
Publishing 40,198 56,070 59,244
Information services 9,460 8,214 6,795
General and administrative 14,325 20,648 20,922
Interest 1,620 2,388 2,886
Depreciation and amortization 3,794 7,387 4,899
Loss on assets held for sale 9,224 -- --
--------- --------- ---------
78,621 94,707 94,746
--------- --------- ---------
Income (loss) before unusual gain,
equity earnings and income taxes ( 10,644) 124 ( 1,163)
Unusual gain (Note 2) -- 24,412 --
Earnings of equity investments 29 73 66
Benefit from (provision for) income taxes (Note 6) 4,097 ( 10,569) ( 222)
--------- --------- ---------
Income (loss) before extraordinary loss ( 6,518) 14,040 ( 1,319)
Extraordinary loss, net of tax of $340 (Note 5) ( 560) -- --
--------- --------- ---------
Net income (loss) $( 7,078) $ 14,040 $( 1,319)
========= ========= =========
Per Share Amounts (Note 1):
Earnings (loss) per common and
common equivalent share:
Before extraordinary loss $( 1.23) $ 2.66 $( .25)
Extraordinary loss ( 0.11) -- --
--------- --------- ---------
Earnings (loss) per common share $( 1.34) $ 2.66 $( .25)
========= ========= =========
Cash dividends per common share $ -- $ -- $ --
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-57
<PAGE>
COMMUNICATIONS
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Common Stock:
Balance at end of year $ 527 $ 527 $ 527
======= ======= =======
Additional Paid-in Capital:
Balance at end of year $ 22,277 $ 22,277 $ 22,277
======= ======= =======
Retained Earnings (Deficit):
Beginning balance $ 12,467 $( 1,573) $( 254)
Net income (loss) ( 7,078) 14,040 ( 1,319)
------- ------- -------
Balance at end of year $ 5,389 $ 12,467 $( 1,573)
======= ======= =======
Stockholders' Equity:
Beginning balance $ 35,271 $ 21,231 $ 22,550
Net income (loss) ( 7,078) 14,040 ( 1,319)
------- ------- -------
Balance at end of year $ 28,193 $ 35,271 $ 21,231
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-58
<PAGE>
COMMUNICATIONS
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (7,078) $ 14,040 $ (1,319)
-------- -------- --------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 3,794 7,387 4,899
Earnings of equity investments ( 29) ( 73) ( 66)
Accretion of interest expense 170 217 362
Unusual gain -- (24,412) --
Loss (gain) on sale of property, plant
and equipment ( 25) ( 22) 45
Loss on assets held for sale 9,224 -- --
Deferred compensation 1,856 37 34
Changes in assets and liabilities:
Accounts receivable and refundable
income taxes ( 845) 2,800 ( 81)
Inventories 184 564 1,112
Current contract receivable and other
current assets ( 333) 14 279
Intangibles and other assets ( 407) ( 34) ( 120)
Accounts payable and accrued liabilities 193 ( 728) (1,637)
Deferred income taxes (4,837) 4,809 ( 56)
-------- -------- --------
Total adjustments 8,945 ( 9,441) 4,771
-------- -------- --------
Net cash provided by operating activities 1,867 4,599 3,452
-------- -------- --------
Cash flows from investing activities:
Capital expenditures (1,822) (1,323) (1,680)
Collections on contract receivable 4,354 1,039 --
Payments on deferred contract liabilities (1,013) (1,304) (1,523)
Additions to investments ( 241) -- --
Net proceeds from early termination of
Joint Operating Agreement -- 9,720 --
Proceeds from the sale of property, plant
and equipment 4,560 1,272 41
Distributions from equity investments 51 34 33
-------- -------- --------
Net cash provided by (used in) investing
activities 5,889 9,438 (3,129)
-------- -------- --------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-59
<PAGE>
COMMUNICATIONS
CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued
(In thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
1993 1992 1991
-------- ------- --------
<S> <C> <C> <C>
Cash flows from financing activities:
Borrowings under bank lines-of-credit -- 3,200 15,510
Payments under bank lines-of-credit -- ( 5,075 ) ( 12,035 )
Principal payments of long-term debt ( 12,182 ) ( 6,137 ) ( 3,775 )
-------- ------- --------
Net cash used in financing activities ( 12,182 ) ( 8,012 ) ( 300 )
-------- ------- --------
Net increase (decrease) in cash
and cash equivalents ( 4,426 ) 6,025 23
Cash and cash equivalents at beginning of year 7,059 1,034 1,011
-------- ------- --------
Cash and cash equivalents at end of year $ 2,633 $ 7,059 $ 1,034
======== ======= ========
Supplemental disclosures of cash
flow information:
Cash paid for:
Interest $ 1,405 $ 2,195 $ 2,959
Income taxes 1,485 5,344 252
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-60
<PAGE>
COMMUNICATIONS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1993, 1992 and 1991
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 72 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 72
percent.
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 material 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.
F-61
<PAGE>
COMMUNICATIONS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1993, 1992 and 1991
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 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 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 $128,000 and $944,000 and
inventories of computers and computer-related equipment were $60,000 and $81,000
at December 31, 1993 and 1992, respectively.
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 and goodwill related to acquisitions, deferred
finance charges incurred in connection with the issuance of the 10.32 percent
Senior Notes (prior to 1993) 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>
Amortization December 31,
Period 1993 1992
------ ---- ----
<S> <C> <C> <C>
(In thousands)
Advertising lists 3 1/2-11 years $ 3,941 $ 8,679
Covenants-not-to-compete
and consulting agreements 3-10 years 2,190 6,860
Goodwill 30 years 17,779 29,516
Other 4-9 years 2,110 2,150
------- ------
26,020 47,205
Accumulated amortization ( 8,747) 16,440
------- ------
$ 17,273 $ 30,765
======= ======
</TABLE>
F-62
<PAGE>
COMMUNICATIONS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1993, 1992 and 1991
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' New Jersey free-distribution shopper-newspaper, and equipment
and advertising lists of Marks-Roiland Communications, Inc. (Marks-Roiland),
Communications' 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 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.
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.
F-63
<PAGE>
COMMUNICATIONS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1993, 1992 and 1991
Earnings per Common Share
Earnings per share computations are based upon the weighted average number
of shares of Common Stock outstanding during the year.
Postretirement Benefits
SFAS No. 106, Employers' Accounting for Postretirement Benefits Other Than
Pensions, postretirement medical or insurance benefits for any employees, thus
this statement had no effect on Communications' financial position or its
results of operations.
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:
(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, 1993, $10,709,000, 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
F-64
<PAGE>
COMMUNICATIONS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1993, 1992 and 1991
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.
The unaudited pro forma results of operations for the year ended December
31, 1992, which gives effect to the termination of the JOA as if such
termination had occurred on January 1, 1992, are revenues of $76,115,000, net
income of $11,999,000 and earnings per share of $2.28. This unaudited pro forma
information is presented in response to applicable accounting rules relating to
disposition transactions. It is not necessarily indicative of the actual results
that would have been achieved had the transaction occurred on January 1, 1992,
and is not necessarily indicative of future results.
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.
In addition to the original purchase price, Communications agreed to, and
has paid or accrued, 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 have been paid or accrued 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. Incentive compensation payments of $229,000, $317,000 and
$204,000 were earned by the former owners and were expensed in 1993, 1992 and
1991, respectively.
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. 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. 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.
4. Assets Held for Sale:
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
F-65
<PAGE>
COMMUNICATIONS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1993, 1992 and 1991
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.
Unaudited pro forma results of operations for the year ended December 31,
1993, had the transactions occurred on January 1, 1993, would have been revenues
of $55,309,000, loss before extraordinary loss of $5,334,000 and loss per common
share before extraordinary loss of $1.01. This unaudited pro forma information
is presented in response to applicable accounting rules relating to disposition
transactions. It is not necessarily indicative of the actual results that would
have been achieved had the transactions occurred on January 1, 1993, and is not
necessarily indicative of future results.
Communications continues to pursue the sale of its other shopper-newspaper,
Shopper's Guide. At December 31, 1993, the net assets of Shopper's Guide are
reflected as "Assets held for sale" in the accompanying balance sheet.
5. Notes Payable and Long-Term Debt:
Long-term debt outstanding consists of the following:
<TABLE>
<CAPTION>
December 31,
1993 1992
---- ----
<S> <C> <C>
(In thousands)
10.32% Senior Notes paid in November, $ -- $ 11,111
1993.
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
(6.0% at December 31, 1993). 4,247 4,854
7.5% Promissory note, unsecured, with
annual principal payments of $100,000
plus accrued interest, payable each
August with remaining principal and
accrued interest payable August, 1998. 465 --
Other 78 571
----- -------
4,790 16,536
Less portion due within one year (785) (3,303)
----- -------
$ 4,005 $ 13,233
===== =======
</TABLE>
F-66
<PAGE>
COMMUNICATIONS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1993, 1992 and 1991
Installments due on long-term debt during each of the five years subsequent
to December 31, 1993, are as follows:
<TABLE>
<CAPTION>
(In thousands)
<S> <C>
1994 $ 785
1995 707
1996 707
1997 707
1998 672
Thereafter 1,212
-----
$ 4,790
=====
</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 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, 1993, Communications has four separate revolving credit
arrangements with a bank which together allow Communications to borrow up to
$6,000,000. Interest on amounts borrowed is payable monthly at a rate of 1 1/2
percent above the Chase Manhattan base rate (7 1/2 percent at December 31,
1993). Certain of the facilities are secured by accounts and contract
receivables. At December 31, 1993, 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.
6. Income Taxes:
The provision for (benefit from) income taxes is comprised of the
following:
<TABLE>
<CAPTION>
Year Ended December 31,
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
(In Thousands)
Current:
Federal $ 352 $ 4,948 $ 136
State 48 1,003 142
------- ------ ----
400 5,951 278
------- ------ ----
Deferred:
Federal ( 4,137) 3,944 ( 47)
State ( 700) 674 ( 9)
------- ------ ----
( 4,837) 4,618 ( 56)
------- ------ ----
$ ( 4,437) $ 10,569 $ 222
======= ====== ====
</TABLE>
F-67
<PAGE>
COMMUNICATIONS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1993, 1992 and 1991
The reconciliation of income tax computed at the federal statutory rate
(34%) to income tax (benefit) expense is as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
(In Thousands)
Income tax provision
(benefit at statutory rates $ ( 3,915) $ 8,367 $ ( 373)
Amortization of acquired
assets not deductible for
income tax purposes 313 1,103 492
Excess of tax basis of assets
sold over book basis which
was not previously tax
effected ( 369) -- --
State income taxes ( 444) 1,107 71
Other ( 22) ( 8) 32
------- ------- -------
$ ( 4,437 $ 10,569 $ 222
======= ======= =======
</TABLE>
Significant components of Communications' deferred tax liabilities and
assets are as follows:
<TABLE>
<CAPTION>
December 31,
1993 1992
---- ----
<S> <C> <C>
(In Thousands)
Deferred tax liabilities:
Fixed asset basis differences $( 516) $( 559)
Unusual gain recognized in different
accounting period for income tax
reporting purposes ( 4,136) (5,874)
Assigned acquisition basis -- ( 342)
Other, net -- ( 108)
------- -------
Deferred tax liabilities ( 4,652) (6,883)
------- -------
Deferred tax assets:
Income from covenant-not-to-compete
recognized in different accounting
period for income tax purposes 508 --
Deferred severance benefits payable 993 346
Reserves on assets held for sale 2,330 878
Accrued expenses deductible when paid 553 441
Other, net 181 294
------- -------
Deferred tax assets 4,565 1,959
------- -------
Net deferred tax liabilities $ ( 87) $ (4,924)
======= =======
</TABLE>
F-68
<PAGE>
COMMUNICATIONS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1993, 1992 and 1991
Net deferred tax liabilities are reflected on the accompanying balance
sheets as follows:
<TABLE>
<CAPTION>
December 31,
1993 1992
---- ----
<S> <C> <C>
(In thousands)
Long-term - Deferred tax liability $ (1,531) (3,935)
Current liabilities - Deferred tax -- ( 989)
liability
Current assets - Deferred tax asset 1,444 --
------- ------
$ ( 87) $ (4,924)
======= ======
</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 has
issued warrants to underwriters to purchase 67,500 shares of Common Stock which
are exercisable at $15.00 per share through June 8, 1994.
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 79,164 shares were outstanding and exercisable at
December 31, 1993, at option prices of $12.00 and $13.20 per share. No options
were granted or exercised during 1993 and options for 29,166 shares were
canceled. Options are granted at the discretion 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.
In January, 1994, Communications' Board of Directors approved the
establishment of an incentive stock plan which will permit Communications to
grant stock options and awards of restricted stock to executives and key
employees. The plan will be submitted for stockholder approval at the next
Annual Meeting of Stockholders.
8. Commitments and Contingencies:
Communications has operating lease agreements, principally for office
facilities and equipment, expiring at various dates through 2000. Rent expense
in 1993, 1992 and 1991 under operating leases was approximately $1,420,000,
$2,094,000 and $2,178,000, respectively.
F-69
<PAGE>
COMMUNICATIONS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1993, 1992 and 1991
As of December 31, 1993, Communications' future minimum lease payments are
as follows:
<TABLE>
<CAPTION>
Minimum Lease
Year Ending December 31, Payments
------------------------ --------
<S> <C>
(In thousands)
1994 $ 852
1995 693
1996 638
1997 527
1998 299
Thereafter 245
-----
$ 3,254
=====
</TABLE>
Communications has employment agreements with five executives of
Communications and its subsidiaries. The agreements provide for individual
compensation ranging from $72,000 to $248,000 annually ($704,000 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 does not agree with the Internal Revenue Service's position and
filed a protest of the assessments with the Internal Revenue Service. No date
has been set for a protest hearing. If the assessment is upheld, the
deductibility of these same costs in the future years will also be affected.
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.
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-
F-70
<PAGE>
COMMUNICATIONS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1993, 1992 and 1991
Fox 11 percent Convertible Subordinated Debenture due 1997 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.
NPC paid approximately $170,000 and $222,000 to Green Country Distributors,
Inc. (Green Country), an affiliated company of Tribune, for transportation
services in 1992 and 1991, respectively.
NPC paid approximately $198,000 and $230,000 to a leasing company owned by
certain stockholders of Tribune/Swab-Fox, World and the General Manager of NPC
for vehicle leases in 1992 and 1991, respectively. Green Country paid
approximately $79,000 and $108,000 to this leasing company for vehicle leases in
1992 and 1991, respectively. 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.
Under a management agreement with Tribune/Swab-Fox, Communications provides
management and administrative services to Tribune/Swab-Fox. During 1993, 1992
and 1991, management fees charged to Tribune/Swab-Fox were $460,000, $520,000
and $580,000, 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 1994 are $280,000.
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.
10. Accrued Liabilities:
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
December 31,
1993 1992
----- -----
<S> <C> <C>
(In thousands)
Current portion of deferred contract
liabilities $ 432 $ 1,014
Accrued interest 197 152
Accrued vacation 413 598
Accrued payroll 763 1,079
Deferred revenue 2,607 904
Accrued income taxes 72 729
Accrued other liabilities 2,252 2,821
----- -----
$ 6,736 $ 7,297
===== =====
</TABLE>
F-71
<PAGE>
COMMUNICATIONS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1993, 1992 and 1991
11. Business Segment Information:
Communications' operations are conducted primarily through two business
segments entirely within the continental United States. These segments and the
primary operations of each are as follows:
Business Segment Operations
---------------- ----------
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), publication
of five trade journals by BMT Publications, Inc. and
publication of convention newspapers and one trade
journal by Atwood.
Information Provider of motor vehicle reports, truck driver
Services employment information, worker's compensation
information, credit reports, criminal records reports
and reseller of long-distance telephone service to the
insurance and trucking industries.
Summarized financial information by industry segment is as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
(In thousands)
Net revenues from sales to
unaffiliated customers:
Publishing $ 52,135 $ 80,643 $ 82,558
Information services 14,499 13,643 10,522
Corporate 1,343 545 503
------- ------- -------
$ 67,977 $ 94,831 $ 93,583
======= ======= =======
Operating profit (loss):
Publishing $ ( 9,212) $ 1,307 $ 1,400
Information services 2,505 2,708 1,232
------- ------- -------
Operating profit (loss) ( 6,707) 4,015 2,632
from segments
Corporate expenses, net ( 2,288) ( 1,430) ( 843)
Interest expense ( 1,620) ( 2,388) ( 2,886)
------- ------- -------
Income (loss) from operations
before unusual gain, income
taxes and extraordinary loss $ (10,615) $ 197 $ ( 1,097)
======= ======= =======
</TABLE>
F-72
<PAGE>
COMMUNICATIONS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1993, 1992 and 1991
Summarized financial information by industry segment - Continued:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Identifiable assets:
Publishing $ 29,136 $ 51,048 $ 45,049
Information services 12,387 11,460 11,230
Corporate 5,538 7,310 1,591
------- ------- -------
$ 47,061 $ 69,818 $ 57,870
======= ======= =======
Depreciation and amortization:
Publishing $ 2,854 $ 6,215 $ 3,961
Information services 898 1,100 854
Corporate 42 72 84
------- ------- -------
$ 3,794 $ 7,387 $ 4,899
------- ------- -------
Capital expenditures:
Publishing $ 758 $ 619 $ 1,164
Information services 800 702 504
Corporate 264 2 12
------- ------- -------
$ 1,822 $ 1,323 $ 1,680
======= ======= =======
</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.
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.
F-73
<PAGE>
COMMUNICATIONS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1993, 1992 and 1991
Capital expenditures include additions to property, plant and equipment,
goodwill and advertising lists.
During 1993, 1992 and 1991, no customer represented ten percent or more of
Communications' revenues.
During 1993, 1992 and 1991, Communications incurred maintenance and repair
expenses of $662,000, $1,331,000 and $1,440,000, respectively, and amortization
expenses of its intangible assets of $2,075,000, $4,655,000 and $2,845,000,
respectively.
F-74
<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
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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."
(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
A-2
<PAGE>
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.
(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:
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<PAGE>
(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 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
A-4
<PAGE>
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 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
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<PAGE>
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.
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
A-6
<PAGE>
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 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)
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<PAGE>
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 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
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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.
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).
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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.
(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
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"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.
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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 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
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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 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):
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(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.
(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).
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(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.
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.
A-17
<PAGE>
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-18
<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-19
<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-20
<PAGE>
APPENDIX B
[Oppenheimer & Co., Inc. Letterhead]
January 26, 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 (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, $0.80 cash,
without interest (subject to appraisal rights for dissenting Tribune/Swab-Fox
stockholders). In addition, as disclosed in the draft Joint Proxy/Registration
Statement on Form S-4 dated January 26, 1994 (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 annual reports and
10-Ks for the five fiscal years ended December 31, 1993 and the 10-
Qs 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;
(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
B-1
<PAGE>
January 26, 1995
Page 2
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, 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 "reverse
acquisition" 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
B-2
<PAGE>
January 26, 1995
Page 3
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.
We understand that this Opinion may be reproduced in full in the Joint
Proxy Statement/Prospectus that will be filed with the Securities and Exchange
Commission. Subject to reviewing the description of the Opinion and the
description of any services provided by Oppenheimer in such Joint
Proxy/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]
__________, 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 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,
$0.80 cash, without interest (subject to appraisal rights for dissenting
Tribune/Swab-Fox stockholders). Subject to the completion of the Merger,
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 (the "Registration
Statement") to be 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 draft dated January 26, 1995 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, 1993, the unaudited
eleven-month statements for the periods ended November 30, 1994 and
November 30, 1993 and certain other relevant financial and operating
data of Tribune/Swab-Fox and Communications made available to us from
published sources and from the internal records of Tribune/Swab-Fox and
Communications;
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<PAGE>
Board of Directors
__________, 1995
Page 2
(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
C-2
<PAGE>
Board of Directors
__________, 1995
Page 3
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 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,
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
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<PAGE>
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.
(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
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<PAGE>
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 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
D-3
<PAGE>
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 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.
The preceding discussion of the registrant's Certificate of Incorporation
and Section 145 of the Delaware General Corporation Law is not intended to be
exhaustive and is qualified in its entirety by the registrant's Certificate of
Incorporation and Section 145 of the Delaware General Corporation Law.
Item 21 -- Exhibits and Financial Statement Schedules
The following exhibits are included as a part of this Registration
Statement:
*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") (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).
3.2 Bylaws of Communications (incorporated by reference to Exhibit 3.2 to
Communications' Registration Statement on Form S-1, No. 33-27811,
effective June 8, 1989).
II-1
<PAGE>
**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.
*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.
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.
________________
* Filed herewith.
** To be filed by amendment.
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;
II-2
<PAGE>
(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;
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.
II-3
<PAGE>
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 Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Tulsa,
State of Oklahoma, on the 2nd day of February, 1995.
T/SF COMMUNICATIONS CORPORATION
By: /s/ Howard G. Barnett, Jr.
---------------------------------
Howard G. Barnett, Jr.
Chairman, Chief Executive Officer
and President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature
appears below constitutes and appoints Howard G. Barnett, Jr., J. Gary Mourton
and Robert E. Craine, Jr., and each of them, his true and lawful attorneys-in-
fact and agents with full power of substitution, for him and in his name, place
and stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto, and all documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agents, or his or their
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
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 Executive February 2, 1995
- --------------------------- Officer, President and Director
Howard G. Barnett, Jr. (principal executive officer)
/s/ Mark A. Leavitt Director February 2, 1995
- ---------------------------
Mark A. Leavitt
/s/ Martin F. Beck Director February 2, 1995
- ---------------------------
Martin F. Beck
/s/ William N. Griggs Director February 2, 1995
- ---------------------------
William N. Griggs
/s/ J. Gary Mourton Senior Vice President, Chief February 2, 1995
- --------------------------- Financial Officer, Treasurer and
J. Gary Mourton Director (principal financial
officer and principal accounting
officer)
/s/ David Lloyd Jones Director February 2, 1995
- ---------------------------
David Lloyd Jones
/s/ Robert E. Craine, Jr. Director, Executive Vice February 2, 1995
- --------------------------- President
Robert E. Craine, Jr.
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
Exhibit
No. Title Page
- ------- ----- ----
* 2.1 Agreement and Plan of Merger, dated January 25, 1995, between
T/SF Communications Corporation ("Communication") and
Tribune/Swab-Fox Companies, Inc. ("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).
3.2 Bylaws of Communications (incorporated) by reference to
Exhibit 3.2 to Communications' Registration Statement on
Form S-1, No. 33-27811, effective June 8, 1989).
** 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.
* 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.
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.
- -------------------------
* Filed herewith.
** To be filed by amendment.
<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 dated
February 3, 1995.
ARTHUR ANDERSEN LLP
Tulsa, Oklahoma
February 2, 1995
<PAGE>
Exhibit 23.5
CONSENT OF SOUTHWEST SECURITIES, INC.
We hereby consent to use in the Joint Proxy Statement of T/SF
Communications Corporation and Tribune/Swab-Fox Companies, Inc., and Prospectus
of T/SF Communications Corporation included in the Registration Statement on
Form S-4 (the "Registration Statement") of T/SF Communications Corporation of
our opinion and to the references to our firm and such opinion included in the
Registration Statement. In giving this consent, we do not admit that we are
within the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended.
SOUTHWEST SECURITIES, INC.
By: /s/ C. William Dedmon, Jr.
-----------------------------
C. William Dedmon, Jr.
Senior Vice President
February 2, 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 ___________, 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 ___ day of ______, 1995, at 9:00 a.m. local time,
at ________________________________, 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, 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 ___________, 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 ___ day of ______, 1995, at 9:00 a.m. local
time, at ________________________________, 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, 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 99.5
CASH ELECTION FORM and LETTER OF TRANSMITTAL
To accompany certificates for shares of Common Stock of
TRIBUNE/SWAB-FOX COMPANIES, INC.
When surrendered pursuant to an election to receive cash in connection with the
proposed merger of Tribune/Swab-Fox Companies, Inc.
with and into T/SF Communications Corporation
THIS FORM IS TO BE USED ONLY IF YOU WISH TO MAKE AN ELECTION TO RECEIVE
CASH IN EXCHANGE FOR ALL OR ANY NUMBER OF YOUR SHARES OF THE COMMON STOCK OF
TRIBUNE/SWAB-FOX COMPANIES, INC. ("TRIBUNE/SWAB-FOX") IN CONNECTION WITH THE
PROPOSED MERGER OF TRIBUNE/SWAB-FOX WITH AND INTO T/SF COMMUNICATIONS
CORPORATION ("COMMUNICATIONS").
IF YOU DO NOT WISH TO MAKE A CASH ELECTION AS TO ANY OF YOUR TRIBUNE/SWAB-
FOX SHARES, DO NOT RETURN THIS FORM OR YOUR STOCK CERTIFICATES TO THE EXCHANGE
AGENT AT THIS TIME. A NEW LETTER OF TRANSMITTAL WITH APPROPRIATE INSTRUCTIONS
WILL BE FORWARDED TO YOU FOLLOWING THE EFFECTIVE TIME OF THE MERGER.
IN ORDER FOR A CASH ELECTION TO BE VALID, THIS FORM MUST BE PROPERLY
COMPLETED, SIGNED, AND DELIVERED TO THE EXCHANGE AGENT NAMED BELOW, TOGETHER
WITH THE CERTIFICATES REPRESENTING THE SHARES OF TRIBUNE/SWAB-FOX COMMON STOCK
TO BE EXCHANGED FOR CASH (OR A GUARANTEE OF DELIVERY AS DESCRIBED HEREIN), SO
THAT IT IS RECEIVED BY THE EXCHANGE AGENT NO LATER THAN 5:00 P.M., NEW YORK
TIME, ON ________, 1995.
PLEASE READ THE INSTRUCTIONS TO THIS FORM CAREFULLY BEFORE FILLING IT OUT
AND DELIVERING IT. AN IMPROPERLY COMPLETED FORM COULD PREJUDICE YOUR RIGHTS TO
MAKE THE CASH ELECTION.
______________________________________
MELLON SECURITIES TRUST COMPANY, EXCHANGE AGENT
If Mailed: If Hand Delivered:
Mellon Securities Trust Company Mellon Securities Trust Company
P.O. Box 798 120 Broadway
Midtown Station Thirteenth Floor
New York, New York 10018 New York, New York 10271
Attn:________________________ Attn:________________________
If Sent By Facsimile:
(201) 296-4062
Please call (800) 777-3674 to confirm
receipt of facsimile by the Exchange Agent.
DELIVERY OF THIS FORM TO AN ADDRESS, OR TRANSMISSION OF INSTRUCTIONS VIA A
FACSIMILE NUMBER, OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID
DELIVERY.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Name(s) and address(es) of Certificates Enclosed or Delivery Guaranteed
Registered Holder(s) (Attach list if necessary)
(Please Print)
- --------------------------------------------------------------------------------
<S> <C> <C>
Certificate Number
Number of Shares
--------------------------------------------
--------------------------------------------
--------------------------------------------
--------------------------------------------
--------------------------------------------
Total Shares
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
TO: MELLON SECURITIES TRUST COMPANY, EXCHANGE AGENT
Ladies and Gentlemen:
1. General. Pursuant to the Agreement and Plan of Merger dated January
25, 1995 (the "Merger Agreement") between T/SF Communications Corporation, a
Delaware corporation ("Communications"), and Tribune/Swab-Fox Companies, Inc., a
Delaware corporation ("Tribune/Swab-Fox"), the undersigned hereby submits the
above-described certificate(s) ("Tribune/Swab-Fox Certificate(s)") representing
shares of the Class A Common Stock, par value $.10 per share, of Tribune/Swab-
Fox or the Class B Common Stock, par value $.10 per share, of Tribune/Swab-Fox
(collectively, the "Tribune/Swab-Fox Common Stock") to you, and makes the cash
election specified in paragraph 2 below, subject to and in accordance with the
terms and conditions specified in the Joint Proxy Statement and Prospectus dated
______, 1995 (the "Proxy Statement/Prospectus") (receipt of which is hereby
acknowledged), the terms of the Merger Agreement annexed as Appendix A to the
Proxy Statement/Prospectus and the accompanying instructions hereto. If
Tribune/Swab-Fox Certificates are not delivered herewith, there is furnished
below a guarantee of delivery of such Tribune/Swab-Fox Certificates from a
member of a registered national securities exchange or the National Association
of Securities Dealers, Inc. or a commercial bank or trust company in the United
States. 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. For information regarding
appraisal rights, see the Proxy Statement/Prospectus at "The Merger--Appraisal
Rights" at pages ___ thereof.
IMPORTANT:
ANY SHARES OF TRIBUNE/SWAB-FOX COMMON STOCK AS TO WHICH A CASH ELECTION IS NOT
MADE WILL BE CONVERTED AT THE EFFECTIVE TIME OF THE MERGER INTO THE RIGHT TO
RECEIVE WHOLE SHARES OF THE COMMON STOCK, $.10 PAR VALUE, OF COMMUNICATIONS (THE
"COMMUNICATIONS COMMON STOCK"), AT THE RATE OF 0.1255 OF A SHARE OF
COMMUNICATIONS COMMON STOCK FOR EACH SHARE OF TRIBUNE/SWAB-FOX COMMON STOCK, AND
CASH IN LIEU OF ANY FRACTIONAL SHARE OF COMMUNICATIONS COMMON STOCK.
2. Cash Election. COMPLETE THIS PARAGRAPH IF YOU WISH TO MAKE AN
ELECTION TO RECEIVE CASH IN EXCHANGE FOR ALL OR ANY NUMBER OF YOUR SHARES OF
TRIBUNE/SWAB-FOX COMMON STOCK IN THE PROPOSED MERGER:
A. [ ] Check here if an election is being made to receive cash in the
amount of $0.80 per share for ALL shares of Tribune/Swab-Fox Common
Stock represented by the Tribune/Swab-Fox Certificates submitted
hereby.
OR
B. [ ] Check here if an election is being made to receive cash in the
amount of $0.80 per share for ONLY A PORTION of the shares of
Tribune/Swab-Fox Common Stock represented by the Tribune/Swab-Fox
Certificates submitted hereby, and indicate in the space provided
below the number of shares of Tribune/Swab-Fox Common Stock
represented by such Tribune/Swab-Fox Certificates as to which the cash
election is being made: _________________________.
IF NEITHER BOX ABOVE IS CHECKED, THE EXCHANGE AGENT WILL ASSUME THAT A CASH
ELECTION IS MADE WITH RESPECT TO ALL OF THE SHARES OF TRIBUNE/SWAB-FOX COMMON
---
STOCK SUBMITTED HEREBY.
2
<PAGE>
3. Special Instructions in the Event of Partial Cash Elections.
COMPLETE THIS PARAGRAPH ONLY IF YOU HAVE ELECTED TO RECEIVE CASH IN THE PROPOSED
MERGER FOR ONLY A PORTION OF THE SHARES OF TRIBUNE/SWAB-FOX COMMON STOCK
REPRESENTED BY THE TRIBUNE/SWAB-FOX CERTIFICATES SUBMITTED HEREBY (See
Instructions I(c)):
A. [ ] Please hold the Tribune/Swab-Fox Certificates submitted hereby
pending the Merger and, promptly after the effective time of the
Merger, cause to be issued and delivered to the undersigned, or in
accordance with the instructions of the undersigned contained in this
Form, the certificate(s) for the Communications Common Stock into
which the balance of the shares of Tribune/Swab-Fox Common Stock
represented by such Tribune/Swab-Fox Certificates have been converted,
and a check in the amount of any cash payable in lieu of any
fractional share of Communications Common Stock.
OR
B. [ ] Please do not hold the Tribune/Swab-Fox Certificates submitted
hereby pending the Merger. Promptly after receipt of this Form, cause
to be issued and delivered to the undersigned, or in accordance with
the instructions of the undersigned contained in this Form, a new
Tribune/Swab-Fox Certificate for the number of the shares of
Tribune/Swab-Fox Common Stock represented by such Tribune/Swab-Fox
Certificates submitted hereby for which the cash election is not being
made.
The undersigned acknowledges that following the effective time of the
Merger, such new Tribune/Swab-Fox Certificate must be surrendered to
the Exchange Agent in order to receive the certificate(s) for the
Communications Common Stock (and cash in lieu of any fractional share
of Communications Common Stock) into which the shares of Tribune/Swab-
Fox Common Stock represented thereby will have been converted by
virtue of the proposed Merger. A new letter of transmittal for such
purpose will be forwarded to the registered holder of such new
Tribune/Swab-Fox Certificate following the effective time of the
Merger. The undersigned acknowledges that a new Tribune/Swab-Fox
Certificate will not be issued and delivered as provided above if the
Exchange Agent has been notified by Tribune/Swab-Fox no later than
_________, 1995 that the Merger will be consummated within five
business days thereafter.
IF NEITHER BOX ABOVE IS CHECKED, THE EXCHANGE AGENT WILL FOLLOW THE INSTRUCTIONS
SET FORTH NEXT TO BOX A ABOVE.
4. Payment and Delivery. Unless otherwise indicated under Special
Payment Instructions below, please issue or cause to be issued any check for the
cash election payment and, if a partial cash election has been made, any
certificate for shares of Communications Common Stock and any check for cash in
lieu of a fractional share of Communications Common Stock (or, if the
undersigned has checked Box B in paragraph 3 above, the new Tribune/Swab-Fox
Certificate for the balance of the shares of Tribune/Swab-Fox Common Stock) in
the name of the registered holder(s) of the Tribune/Swab-Fox Certificates
submitted hereby. Similarly, unless otherwise indicated under Special Delivery
Instructions below, please mail any check and any such certificate to the
registered holder(s) of the Tribune/Swab-Fox Certificates submitted hereby at
the address or addresses of the registered holder(s) as shown in the stock
transfer records of Tribune/Swab-Fox.
The undersigned understands and agrees that the cash election payment will
not be paid for the Tribune/Swab-Fox Common Stock until after the effective time
of the Merger and that no interest will be paid in respect thereof. Promptly
following the effective time of the Merger, the Exchange Agent will cause its
check to be issued in the amount of the cash election payment and delivered as
provided in this Form. If a partial cash
3
<PAGE>
election has been made and Box A under paragraph 3 above has been checked, or
neither Box under said paragraph has been checked, then promptly after the
effective time of the Merger, Communications will cause the transfer agent for
the Communications Common Stock, to issue the certificate(s) for the shares of
Communications Common Stock and to deliver such certificate(s), as provided in
this Form, together with a check for the amount of any cash payment to be made
in lieu of issuing any fractional share of Communications Common Stock. If a
partial cash election has been made and Box B under paragraph 3 above has been
checked, the Exchange Agent will, subject to the provisions of said paragraph,
cause the new Tribune/Swab-Fox Certificate for the balance of the Tribune/Swab-
Fox shares to be issued and delivered as provided in this Form.
5. Representations of the Undersigned. The undersigned represents and
warrants that the undersigned has full power and authority to surrender, sell,
assign and transfer the Tribune/Swab-Fox Certificates, and shares of
Tribune/Swab-Fox Common Stock represented thereby, to which this Form relates,
free and clear of all liens, restrictions, charges, encumbrances and adverse
claims. The undersigned will execute and deliver, upon request, any additional
documents necessary or desirable to complete the surrender of the Tribune/Swab-
Fox Common Stock referred to in this Form. Delivery of the Tribune/Swab-Fox
Certificate(s) submitted hereby shall be effected, and risk of loss and title to
such certificate(s) shall pass, only upon delivery thereof to the Exchange
Agent.
6. Appointment of Exchange Agent as Agent. The undersigned hereby
irrevocably constitutes and appoints the Exchange Agent the true and lawful
agent and attorney in fact of the undersigned with respect to the Tribune/Swab-
Fox Certificates, and shares of Tribune/Swab-Fox Common Stock represented
thereby, to which this Form relates, with full power of substitution, and
instructs the Exchange Agent on behalf of the undersigned to surrender and
deliver such Certificates, to receive in exchange for the shares of
Tribune/Swab-Fox Common Stock represented thereby the cash election payment to
be made in connection with the proposed Merger, and to issue and deliver or
cause to be issued and delivered its check therefor and any certificate for
Communications Common Stock issuable in the Merger (or, if so instructed, any
new Tribune/Swab-Fox Certificate), all as the undersigned has instructed in this
Form, subject to the terms, conditions, and limitations set forth in the Merger
Agreement and this Form. All authority herein conferred or agreed to be
conferred shall survive the death or incapacity of the undersigned and shall be
binding upon the heirs, personal representatives, successors and assigns of the
undersigned.
4
<PAGE>
- --------------------------------------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(See Instructions III and V)
Fill in ONLY if the check(s) are to be made payable to or any
certificate(s) for Communications Common Stock (or any new Tribune/Swab-Fox
Certificate) are to be registered in the name of someone OTHER THAN the
registered holder(s) of the Tribune/Swab-Fox Certificate(s).
Issue check(s) and register stock certificate(s) in the name of:
Name
----------------------------------------------------------------------------
(Please Print)
Address
-------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Including Zip Code)
- --------------------------------------------------------------------------------
(Social Security Number or Other Taxpayer Identification Number)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTION
(See Instruction V)
Fill in ONLY if the check(s) or any certificate(s) for Communications
Common Stock (or any new Tribune/Swab-Fox Certificate) are to be issued in the
name of the registered holder(s) of the Tribune/Swab-Fox Certificate(s), but are
to be delivered to an address OTHER THAN the address of the registered holder(s)
as shown in the stock transfer records of Tribune/Swab-Fox.
Deliver check(s) and stock certificate(s) to:
Name
----------------------------------------------------------------------------
(Please Print)
Address
-------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Including Zip Code)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SIGNATURE
- --------------------------------------------------------------------------------
(Social Security Number or other Taxpayer Identification Number)
Telephone Number:( )
---------------------------------------------------------------
Dated: , 1995
-------------
SIGN
HERE
----------------------------------------------------------------------------
(Signature(s) of Stockholder(s) or Agent)
- --------------------------------------------------------------------------------
(Print Name, and, if Applicable, Capacity)
(Must be signed by registered holder(s), exactly as name(s) appears on
certificate(s) or by person(s) authorized to become registered holder(s)
pursuant to the documents transmitted herewith. If any certificate surrendered
hereby is owned of record by two or more joint owners, all such owners must sign
this Form. If signature is by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, please set forth full title and enclose proper evidence
of authority to so act. See Instruction III.)
- ------------------------------------------------------------------------------
5
<PAGE>
- ------------------------------------------------------------------------------
SIGNATURE GUARANTEE
(See Instruction V.)
To be completed ONLY if required by Instruction V.
The undersigned hereby guarantees the signature(s) which appears on this
Form and the certificate(s) surrendered pursuant to this Form.
- ------------------------------------------------------------------------------
(Name of Firm Issuing Guarantee)
- ------------------------------------------------------------------------------
(Signature of Officer)
- ------------------------------------------------------------------------------
(Title of Officer Signing This Guarantee)
- ------------------------------------------------------------------------------
(Address of Guaranteeing Firm)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
GUARANTEE OF DELIVERY
(TO BE USED ONLY IF CERTIFICATES ARE NOT SURRENDERED HEREWITH)
The undersigned is:
[ ] a member of a registered national securities exchange,
[ ] a member of the National Association of Securities Dealers, Inc., or
[ ] a commercial bank or trust company in the United States;
and guarantees to deliver to the Exchange Agent the certificate(s) for
Tribune/Swab-Fox Common Stock to which this Form relates, duly endorsed in
blank or otherwise in form acceptable for transfer on the books of
Tribune/Swab-Fox, no later than 5:00 P.M., New York time on the eighth
American Stock Exchange, Inc. trading day after ________, 1995.
- --------------------------------------------------------------------------------
(Firm - Please Print)
- --------------------------------------------------------------------------------
(Authorized Signature)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Address)
- --------------------------------------------------------------------------------
(Area Code and Telephone Number)
- ------------------------------------------------------------------------------
6
<PAGE>
TO BE COMPLETED BY EVERY STOCKHOLDER TO WHOM PAYMENT IS TO BE MADE (See
Instructions under "IMPORTANT TAX INFORMATION," below).
PAYER'S NAME: MELLON SECURITIES TRUST COMPANY
SUBSTITUTE
Form W-9
Department of the Treasury, Internal Revenue Service
Payer's Request for Taxpayer Identification Number (TIN)
Part 1--PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT AND CERTIFY BY SIGNING
AND DATING BELOW
Social Security Number
| |
----------------------------------
OR
----------------------------------
Employer Identification Number
|
----------------------------------
- --------------------------------------------------------------------------------
Part 2--Check the box if you are NOT subject to backup withholding under
the provisions of Section 3406(a)(1)(C) of the Internal Revenue Code because (1)
you are exempt from backup withholding, or (2) you have not been notified that
you are subject to backup withholding as a result of failure to report all
interest or dividends, or (3) the IRS has notified you that you are no longer
subject to backup withholding.
[ ]
- --------------------------------------------------------------------------------
Part 3--Check the box if you are Awaiting TIN
[ ]
- --------------------------------------------------------------------------------
CERTIFICATION--UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT THE INFORMATION
PROVIDED ON THIS FORM IS TRUE, CORRECT AND COMPLETE.
SIGNATURE DATE
---------------------------------------------- ---------------------
- --------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY CASH PAYMENTS MADE TO YOU PURSUANT TO
THE MERGER AGREEMENT. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9
FOR ADDITIONAL DETAILS.
INSTRUCTIONS
I. Special Conditions for Cash Elections.
(a) Time in Which to Make a Cash Election.
To make a valid cash election, this Form or a facsimile thereof,
accompanied by the Tribune/Swab-Fox Certificates as to which the cash election
is being made or a proper guarantee of delivery thereof, must be received by the
Exchange Agent at one of the addresses set forth on the first page of this Form,
not later than 5:00 P.M., New York time, on ________, 1995. Tribune/Swab-Fox
stockholders whose Tribune/Swab-Fox Certificates are not immediately available
may also make a cash election by completing this Form or a facsimile thereof,
and having the Guarantee of Delivery box properly completed and duly executed
(subject to the condition that the Tribune/Swab-Fox Certificates the delivery of
which is thereby guaranteed are in fact delivered to the Exchange Agent, duly
endorsed in blank or otherwise in form acceptable for transfer on the books of
Tribune/Swab-Fox, no later than 5:00 P.M., New York time, on the eighth trading
day after ________, 1995). Holders whose Forms and stock certificates (or proper
guarantees of delivery of stock certificates) are not so received will not be
entitled to receive cash in connection with the proposed Merger, but their
shares will be converted into shares of Communications Common Stock (and/or cash
in lieu of fractional shares) in accordance with the Merger Agreement as set
forth in the Proxy Statement/Prospectus.
7
<PAGE>
(b) Change or Revocation of Cash Election.
A cash election may be changed by written notice of the change accompanied
by a completed, signed and revised copy of this Form received by the Exchange
Agent before 5:00 P.M., New York time, on ________, 1995. A cash election may be
revoked by written notice of revocation received by the Exchange Agent prior to
5:00 P.M., New York time, on the last business day 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 Special Meeting of the
Tribune/Swab-Fox stockholders or very soon thereafter. In addition, all cash
elections shall automatically be revoked if the Exchange Agent is notified in
writing by Tribune/Swab-Fox and Communications 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 shall be promptly returned (at
the stockholder's risk) to the person submitting the same to the Exchange Agent.
(c) Surrender of Certificates Evidencing Shares in Excess of Those Covered
by Cash Election.
If a cash election made hereby is intended to relate to less than all of
the shares of Tribune/Swab-Fox Common Stock evidenced by the certificate(s)
listed on the first page of this Form, then the stockholder signing this Form
should clearly so indicate by checking Box B in paragraph 2 above and filling in
the number of shares to which the cash election does relate in the space
provided following Box B in said paragraph. IF A CASH ELECTION IS MADE AS
INDICATED BY A CHECK MARK IN ONE OF THE BOXES IN PARAGRAPH 2 ABOVE BUT THE
NUMBER OF SHARES TO WHICH THE ELECTION RELATES IS NOT CLEARLY INDICATED, THEN
THE EXCHANGE AGENT WILL ASSUME A CASH ELECTION IS BEING MADE AS TO ALL OF THE
SHARES REPRESENTED BY THE SUBMITTED TRIBUNE/SWAB-FOX CERTIFICATE(S). IF NEITHER
BOX IN PARAGRAPH 2 ABOVE IS CHECKED, THE EXCHANGE AGENT WILL ASSUME A CASH
ELECTION IS BEING MADE WITH RESPECT TO ALL OF THE SHARES REPRESENTED BY THE
CERTIFICATE(S) SUBMITTED HEREBY.
If a cash election made hereby relates to less than all of the shares of
Tribune/Swab-Fox Common Stock evidenced by the certificate(s) listed on the
first page of this Form, then the balance of the Tribune/Swab-Fox shares will be
converted at the effective time of the Merger into the right to receive
Communications Common Stock, at the rate of 0.1255 of a share of Communications
Common Stock for each share of Tribune/Swab-Fox Common Stock, and cash in lieu
of any fractional share of Communications Common Stock, as provided in the
Merger Agreement and as set forth in the Proxy Statement/Prospectus. Unless Box
B under paragraph 3 above is checked, the Exchange Agent will hold the
Tribune/Swab-Fox Certificate(s) submitted hereby pending the Merger and promptly
following the effective time of the Merger will cause the certificate(s) for the
Communications Common Stock (and a check for any payment in lieu of any
fractional share) into which the balance of the Tribune/Swab-Fox shares have
been converted to be issued and delivered in accordance with the instructions
contained in this Form. If the stockholder signing this Form does not wish the
Exchange Agent to hold the Tribune/Swab-Fox Certificates pending the Merger,
then Box B under paragraph 3 above should be clearly marked. In such event, a
new Tribune/Swab-Fox Certificate representing the balance of the shares of
Tribune/Swab-Fox Common Stock as to which no cash election has been made will be
issued and delivered in accordance with the instructions contained in this Form
as promptly as practicable after the receipt of this Form, unless on or before
such date Tribune/Swab-Fox has notified the Exchange Agent that the Merger will
be consummated within five business days thereafter. If a new Tribune/Swab-Fox
Certificate is issued, such new Tribune/Swab-Fox Certificate must be surrendered
to the Exchange Agent following the effective time of the Merger in order to
receive the certificate(s) for the Communications Common Stock (and check for
the fractional share payment) into which the shares represented thereby will
have been converted by virtue of the Merger. A new transmittal letter will be
forwarded to the registered holder of such Tribune/Swab-Fox Certificate for such
purpose.
8
<PAGE>
(d) Possible Prorationing.
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. Section 1.4 of the Merger Agreement sets forth the procedures
by which cash elections will be prorated if valid cash elections exceed such
amount. The procedure is summarized in the Proxy Statement/Prospectus at "The
Merger Agreement--Cash Election Procedures" at pages _____ thereof.
(e) Fractional Shares.
No fractional shares of Communications Common Stock 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 such Tribune/Swab-
Fox 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.
II. Submission of this Form.
This Form or a facsimile hereof must be properly filled in, dated and
signed, and must be delivered together with the Tribune/Swab-Fox Certificate(s)
as to which a cash election is being made or with a duly signed guarantee of
delivery of such certificates (see Instruction I(a)), and any supporting
documents (see Instruction III), to the Exchange Agent at either of the
addresses set forth on the first page of this Form. The method of delivery is at
your option and risk, but, if sent by mail, registered and insured mail, return
receipt requested, is suggested. A return envelope is enclosed for your
convenience. If any shares of Tribune/Swab-Fox Common Stock are registered in
different forms of your name (e.g. "John Doe" and "J. Doe") or in different
forms of ownership, you should complete as many separate Forms as there are
different registrations. If there is insufficient space to list all your
Tribune/Swab-Fox Certificates being submitted to the Exchange Agent, please
attach a separate list.
III. Signatures.
The signature (or signatures, in the case of certificates owned by two or
more joint holders) on this Form should correspond EXACTLY with the name(s) as
written on the face of the Tribune/Swab-Fox Certificate(s) surrendered unless
the shares described on this Form have been assigned by the registered
holder(s), in which event this Form should be signed in exactly the same form as
the name(s) of the last transferee(s) indicated on the transfers attached to or
endorsed on the Tribune/Swab-Fox Certificate(s). If the "Special Payment
Instructions" box is completed, then the signature(s) on this Form must be
guaranteed as specified in Instruction V.
If this Form, or any endorsement or stock power required by Instruction V,
is signed by a trustee, executor, administrator, guardian, officer of a
corporation, attorney-in-fact, or other person acting in representative or
fiduciary capacity, the person signing must give such person's full title in
such capacity and appropriate documentary evidence of authority to so act in
such capacity must be forwarded with this Form. If additional documents are
required by the Exchange Agent, you will be so advised. If the registered holder
is deceased or unable to act and no executor or administrator or personal
representative has been appointed or if there are questions or a need for
assistance in connection with, among other things, supporting documents, see
Instruction VII.
IV. When Endorsement of Certificates is Not Required.
When this Form is signed by the registered holder(s) of the Tribune/Swab-
Fox Certificate(s) submitted herewith and the check for the cash election
payment and any certificate for the Communications Common Stock
9
<PAGE>
(or new Tribune/Swab-Fox Certificate (See Instruction I(c)) are to be issued in
exactly the same name as appears on the face of the surrendered Tribune/Swab-
Fox Certificate(s), no endorsement of the Tribune/Swab-Fox Certificate(s) being
submitted or separate stock powers or signature guarantees are required, nor
will you be required to make payment for transfer taxes.
V. Signature Guarantees and Endorsements; Stock Transfer Taxes; Special
Delivery Instructions.
(a) If this Form is signed by a person or entity other than the registered
holder(s) of the Tribune/Swab-Fox Certificate(s) submitted herewith or if the
check for the cash election payment or any certificate for the Communications
Common Stock (or any new Tribune/Swab-Fox Certificate (see Instruction I(c)) is
to be made payable to or issued in the name of a person or entity other than the
registered holder shown on the face of the surrendered Tribune/Swab-Fox
Certificate, then (i) the name and address of such person or entity must be
indicated in the Special Payment Instructions box on this Form, (ii) the
Tribune/Swab-Fox Certificate(s) submitted must be endorsed by or accompanied by
separate stock powers signed by the registered holder(s) exactly as the name or
names of the registered holder(s) appear on the face of the surrendered
Tribune/Swab-Fox Certificate(s), and (iii) the SIGNATURE(S) on this Form and on
the endorsed Certificate(s) or separate stock powers MUST BE GUARANTEED, by a
commercial bank or trust company in the United States or by a firm of brokers
which is a member of a registered national securities exchange or the National
Association of Securities Dealers, Inc. Further, the amount of any stock
transfer taxes (whether imposed on the registered holder or such person) payable
on account of the transfer to such person must be delivered to the Exchange
Agent, or satisfactory evidence of the payment of such taxes or exemption
therefrom must be submitted to the Exchange Agent, before any such check or
stock certificate will be issued.
(b) If the check for the cash election payment or any certificate for
Communications Common Stock (or new Tribune/Swab-Fox Certificate) is to be made
payable to or issued in the name of the registered holder shown on the front of
the Tribune/Swab-Fox Certificate(s), but sent to someone other than the
registered holder or to an address other than that set forth in Tribune/Swab-
Fox's stock transfer records, the name and address of such other person or the
registered holder's new address should be indicated in the Special Delivery
Instructions box.
VI. Lost or Destroyed Certificates.
If your Tribune/Swab-Fox Certificate(s) have been either lost or destroyed,
an affidavit of loss and bond of indemnity satisfactory to the Exchange Agent
and Communications must be submitted to the Exchange Agent. Promptly notify the
Exchange Agent and you will then be instructed as to the steps you must take in
order to receive the consideration in the Merger. See Instruction VII.
VII. Inquiries.
All inquiries regarding appropriate procedures for surrendering
Tribune/Swab-Fox Certificates should be directed to the Exchange Agent at any of
the addresses set forth on the front side hereof or by telephone at
(800) 777-3674. Additional copies of this Form also may be obtained from the
Exchange Agent at any of such addresses.
VIII. Substitute Form W-9.
See "IMPORTANT TAX INFORMATION" below for instructions on completing
Substitute Form W-9.
10
<PAGE>
IX. Miscellaneous.
All questions with respect to this Form and the cash elections intended to
be made thereby (including, without limitation, questions relating to the
timeliness or effectiveness of a cash election or of a revocation of such
election) will be determined by Communications and Tribune/Swab-Fox, which
determinations shall be conclusive and binding.
IMPORTANT TAX INFORMATION
Under Federal income tax law, a stockholder whose shares of Tribune/Swab-
Fox Common Stock are surrendered herewith is required by law to provide the
Exchange Agent (as payer) with such stockholder's correct taxpayer
identification number ("TIN") on Substitute Form W-9 above. If such stockholder
is an individual, the TIN is such stockholder's social security number. If the
Exchange Agent is not provided with the correct TIN, the stockholder may be
subject to a $50 penalty imposed by the Internal Revenue Service. In addition,
cash payments in respect of shares of Tribune/Swab-Fox Common Stock surrendered
in connection with the Merger may be subject to backup withholding. See the
enclosed Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9 for additional instructions.
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, that stockholder must submit a statement, signed under penalties of
perjury, attesting to that individual's exempt status. Such statements can be
obtained from the Exchange Agent.
If backup withholding applies, the Exchange Agent is required to withhold
31% of any such cash payments made to the stockholder. Backup withholding is not
an additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained from the Internal
Revenue Service.
Purpose of Substitute Form W-9
To prevent backup withholding on any cash payment made to a stockholder in
respect of shares of Tribune/Swab-Fox Common Stock surrendered in connection
with the Merger, the stockholder is required to provide the Exchange Agent with
a correct TIN on Substitute Form W-9, which is provided above, and, if the
stockholder is NOT subject to backup withholding, to indicate by checking the
box in Part 2 of the Substitute Form W-9. The box in Part 3 of the Substitute
Form W-9 may be checked if the stockholder has not been issued a TIN and has
applied for a number or intends to apply for a number in the near future. If
the box in Part 3 is checked, the Exchange Agent will withhold 31% of all cash
amounts payable to you in connection with the Merger until a TIN is provided to
the Exchange Agent. However, if a properly certified TIN is provided to the
Exchange Agent within 60 days, the backup tax will be refunded upon request.
What Number to Give the Exchange Agent
The stockholder is required to give the Exchange Agent the social security
number or employer identification number of the registered holder of the shares
of Tribune/Swab-Fox Common Stock being surrendered in connection with the
Merger. If such shares are in more than one name or are not in the name of the
actual owner, consult the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 for additional guidelines on which
number to report.
11
