<PAGE>
As filed with the Securities and Exchange Commission on April 3, 1995
Registration No. 33-57587
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1
to
Form S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
T/SF COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 2721 73-1341805
(State or other (Primary Standard (IRS Employer
jurisdiction of Industrial Identification
incorporation Classification Number)
or organization) Code Number)
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: [ ]
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
<TABLE>
<CAPTION>
Item Number and Caption of Heading or Location in Proxy
Form S-4 Statement/Prospectus
-------------------------- ----------------------------
<C> <S> <C>
A. INFORMATION ABOUT THE
TRANSACTION
1. Forepart of Registration 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; Risk
Earnings to Fixed Charges Factors
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 Risk Factors; The Merger--Background of the
Company Being Acquired 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
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C>
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; Risk
are to be Solicited Factors; The Special Meetings; The Merger
19. Information if Proxies, Not Applicable
Consents or Authorizations
are not to be Solicited or
in an Exchange Offer
</TABLE>
<PAGE>
[To be sent only to the stockholders of T/SF Communications Corporation]
REVISED PRELIMINARY COPY
[COMMUNICATIONS LETTERHEAD]
April __, 1995
To the Stockholders of T/SF Communications Corporation:
Enclosed are a Notice of Special Meeting of Stockholders, a Joint Proxy
Statement and Prospectus, and a Proxy for a Special Meeting of Stockholders
(the "Special Meeting") of T/SF Communications Corporation
("Communications") to be held on May __, 1995, at 2:00 p.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 an Agreement and Plan of Merger, as amended
(the "Merger Agreement"), pursuant to which Tribune/Swab-Fox Companies,
Inc. ("Tribune/Swab-Fox") will be merged with and into Communications (the
"Merger"), with Communications to be the surviving corporation in the
Merger. The Special Meeting will be held as a joint meeting in conjunction
with the special meeting of the stockholders of Tribune/Swab-Fox which will
also be held to consider and vote on the Merger Agreement.
The terms of the Merger Agreement provide that holders of Tribune/Swab-
Fox Class A Common Stock and Tribune/Swab-Fox Class B Common Stock
(collectively, the "Tribune/Swab-Fox Common Stock"), other than
Communications and holders who have perfected their appraisal rights under
Delaware law, will receive, for each share of Tribune/Swab-Fox Common Stock
owned as of the effective time of the Merger, 0.1255 of a share of
Communications Common Stock or, at the election of each Tribune/Swab-Fox
stockholder, $0.88 in cash. Stockholders of Tribune/Swab-Fox may elect to
receive cash for some or all of their shares of Tribune/Swab-Fox Common
Stock in accordance with the terms and subject to the limitations contained
in the Merger Agreement. Each share of Communications Common Stock will
remain outstanding and will be unchanged as a result of the Merger, except
for the outstanding shares of Communications Common Stock owned by
Tribune/Swab-Fox, which will be cancelled.
On _______________________, 1995, the closing sale price per share of
Communications Common Stock, as reported by the American Stock Exchange,
was $__________ and the closing sale price per share of Tribune/Swab-Fox
Class A Common Stock, as reported by The Nasdaq Small-Cap Market, was
$__________. Based on such closing sale price of Communications Common
Stock, the market value of the 0.1255 of a share of Communications Common
Stock issuable for each share of Tribune/Swab-Fox Common Stock in the
Merger was $___________.
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
<PAGE>
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. In addition, you may
revoke your Proxy at any time prior to its exercise by delivering to the
Secretary of Communications a duly executed Proxy bearing a later date.
Sincerely,
Howard G. Barnett, Jr.
Chairman, President and
Chief Executive Officer
YOUR VOTE IS IMPORTANT
PLEASE SIGN, DATE AND RETURN YOUR PROXY
<PAGE>
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.]
REVISED PRELIMINARY COPY
[TRIBUNE/SWAB-FOX LETTERHEAD]
April __, 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 May __, 1995, at 2:00 p.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 an Agreement and Plan of Merger, as amended
(the "Merger Agreement"), pursuant to which Tribune/Swab-Fox will be merged
with and into T/SF Communications Corporation ("Communications") (the
"Merger"), with Communications to be the surviving corporation in the
Merger. The Special Meeting will be held as a joint meeting in conjunction
with the special meeting of the stockholders of Communications which will
also be held to consider and vote on the Merger Agreement.
The terms of the Merger Agreement provide that holders of Tribune/Swab-
Fox Class A Common Stock and Tribune/Swab-Fox Class B Common Stock
(collectively, the "Tribune/Swab-Fox Common Stock"), other than
Communications and holders who have perfected their appraisal rights under
Delaware law, will receive, for each share of Tribune/Swab-Fox Common Stock
owned as of the effective time of the Merger, 0.1255 of a share of
Communications Common Stock or, at the election of each Tribune/Swab-Fox
stockholder, $0.88 in cash (in other words, for every 7.9681 shares of
Tribune/Swab-Fox Common Stock held, the holder will be entitled to receive
one share of Communications Common Stock). Stockholders of Tribune/Swab-
Fox may elect to receive cash for some or all of their shares of
Tribune/Swab-Fox Common Stock in accordance with the terms and subject to
the limitations contained in the Merger Agreement.
On ____________________, 1995, the closing sale price per share of
Communications Common Stock, as reported by the American Stock Exchange,
was $___________ and the closing sale price per share of Tribune/Swab-Fox
Class A Common Stock, as reported by The Nasdaq Small-Cap Market, was
$_____________. Based on such closing sale price of Communications Common
Stock, the market value of the 0.1255 of a share of Communications Common
Stock issuable for each share of Tribune/Swab-Fox Common Stock in the
Merger was $___________.
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
<PAGE>
certificates to be exchanged for cash (duly endorsed for transfer or
accompanied by an appropriate guarantee of delivery) to Mellon Securities
Trust Company, at P.O. Box 798, Midtown Station, New York, New York 10018,
which must be received no later than 5:00 p.m., New York time, on May
_____, 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 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 60% of the
outstanding Tribune/Swab-Fox Class A Common Stock and have indicated that
they intend to vote all of their shares in favor of the Merger.
Accordingly, approval of the Merger Agreement by the stockholders of
Tribune/Swab-Fox is assured.
In order that your shares may be represented at the Special Meeting, you
are urged to promptly complete, sign, date and return the accompanying
Proxy in the enclosed envelope, whether or not you plan to attend the
Special Meeting. If you attend the Special Meeting in person you may, if
you wish, vote personally on all matters brought before the Special Meeting
even if you have previously returned your Proxy. In addition, you may
revoke your Proxy at any time prior to its exercise by delivering to the
Secretary of Tribune/Swab-Fox a duly executed Proxy bearing a later date.
Sincerely,
Howard G. Barnett, Jr.
President and Chief Executive Officer
YOUR VOTE IS IMPORTANT
PLEASE SIGN, DATE AND RETURN YOUR PROXY
<PAGE>
REVISED PRELIMINARY COPY
Tribune/Swab-Fox Companies, Inc.
2407 East Skelly Drive
Tulsa, Oklahoma 74105
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY __, 1995
To the Stockholders of Tribune/Swab-Fox Companies, Inc.:
Notice is hereby given that a Special Meeting of Stockholders (the
"Special Meeting") of Tribune/Swab-Fox Companies, Inc. ("Tribune/Swab-Fox")
will be held on May __, 1995, at 2:00 p.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, as amended (the "Merger
Agreement"), between T/SF Communications Corporation
("Communications") and Tribune/Swab-Fox, pursuant to which, among
other things, (a) Tribune/Swab-Fox will be merged with and into
Communications (the "Merger"), with Communications to be the surviving
corporation in the Merger, and (b) each stockholder of Tribune/Swab-
Fox (other than Communications and stockholders who have perfected
their appraisal rights under Delaware law) will receive, for each
share of Tribune/Swab-Fox Class A Common Stock and Tribune/Swab-Fox
Class B Common Stock (collectively, the "Tribune/Swab-Fox Common
Stock") owned as of the effective time of the Merger, a specified
fraction of a share of Communications Common Stock or, at the election
of each Tribune/Swab-Fox stockholder, a specified amount of cash, all
as more fully described in the accompanying Joint Proxy Statement and
Prospectus. Tribune/Swab-Fox stockholders may elect to receive cash
for some or all of their shares of Tribune/Swab-Fox Common Stock in
accordance with the terms and subject to the limitations contained in
the Merger Agreement. A copy of the Merger Agreement is attached as
Appendix A to the Joint Proxy Statement and Prospectus.
2. To transact such other business as may properly come before the
Special Meeting or any adjournment or postponement thereof.
Only holders of record of Tribune/Swab-Fox Common Stock at the close of
business on April 5, 1995, will be entitled to receive notice of the
Special Meeting and only holders of record of Tribune/Swab-Fox Class A
Common Stock on such date will be entitled to vote at the Special Meeting
or any adjournment or postponement thereof. A list of Tribune/Swab-Fox
stockholders entitled to vote at the Special Meeting will be available for
examination, for any purpose germane to the Special Meeting, during
ordinary business hours, at the offices of Tribune/Swab-Fox for ten days
prior to the Special Meeting and at the time and place of the Special
Meeting. Tribune/Swab-Fox stockholders who follow the procedures specified
in Section 262 of the General Corporation Law of the State of Delaware have
the right to dissent from the Merger and will be entitled to have their
shares of Tribune/Swab-Fox Common Stock appraised by the Delaware Court of
Chancery and to receive payment of the "fair value" of such shares as
determined by such court.
<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
April __, 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 MAY ____, 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 APRIL 3, 1995
REVISED PRELIMINARY COPY
T/SF COMMUNICATIONS CORPORATION
AND
TRIBUNE/SWAB-FOX COMPANIES, INC.
JOINT PROXY STATEMENT
FOR SPECIAL MEETINGS OF STOCKHOLDERS
TO BE HELD MAY __, 1995
____________________
T/SF COMMUNICATIONS CORPORATION
PROSPECTUS
COMMON STOCK
____________________
This Joint Proxy Statement and Prospectus (this "Proxy
Statement/Prospectus") is furnished in connection with the solicitation of
proxies by the Boards of Directors of T/SF Communications Corporation, a
Delaware corporation ("Communications"), and Tribune/Swab-Fox Companies,
Inc., a Delaware corporation ("Tribune/Swab-Fox"), for use in connection
with a Special Meeting of Stockholders of Communications and a Special
Meeting of Stockholders of Tribune/Swab-Fox, respectively, which are to be
jointly held on May __, 1995, or any adjournment or postponement thereof.
At such meetings, the stockholders of each of Communications and
Tribune/Swab-Fox will consider and vote upon a proposal to approve and
adopt an Agreement and Plan of Merger dated January 25, 1995, as amended,
between Communications and Tribune/Swab-Fox, pursuant to which
Tribune/Swab-Fox will be merged with and into Communications (the "Merger")
with Communications to be the surviving corporation in the Merger. As a
result of the Merger, each of the then outstanding shares (other than
shares held by Communications which will be cancelled) of Class A Common
Stock, $.10 par value, of Tribune/Swab-Fox and Class B Common Stock, $.10
par value, of Tribune/Swab-Fox will be converted into the right to receive
a specified fraction of a share of Common Stock, $.10 par value, of
Communications (the "Communications Common Stock") or, at the election of
each Tribune/Swab-Fox stockholder and subject to certain limitations as
described herein, a specified amount of cash (subject to appraisal rights
for dissenting Tribune/Swab-Fox stockholders).
The stockholders of Communications and Tribune/Swab-Fox also will
consider and vote upon such other business as may properly come before the
meetings or any adjournment or postponement thereof.
This Proxy Statement/Prospectus also constitutes a prospectus of
Communications with respect to up to 3,882,790 shares of Communications
Common Stock to be issued pursuant to the Merger.
For certain factors which should be considered in evaluating the Merger,
see "Risk Factors."
This Proxy Statement/Prospectus and the accompanying forms of Proxy are
first being mailed to the stockholders of Communications and Tribune/Swab-
Fox on or about April __, 1995.
____________________
THE SECURITIES TO BE ISSUED IN CONNECTION WITH THE MERGER HAVE NOT
BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
____________________
The date of this Joint Proxy Statement and Prospectus is April __, 1995.
<PAGE>
AVAILABLE INFORMATION
Each of Communications and Tribune/Swab-Fox is subject to the
informational requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and in accordance therewith files reports,
proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information are available for inspection and copying at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and at the regional
offices of the Commission located at 7 World Trade Center, 13th Floor, New
York, New York 10048, and 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such materials can also be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549 at prescribed rates. The shares of
Communications Common Stock are listed on the American Stock Exchange and,
as a result, the periodic reports, proxy statements and other information
filed by Communications with the Commission can be inspected at the offices
of the American Stock Exchange, Inc., 86 Trinity Street, New York, New York
10006.
Communications has filed a Registration Statement on Form S-4 (together
with any amendments thereto, the "Registration Statement") with the
Commission under the Securities Act of 1933, as amended (the "Securities
Act"), with respect to the shares of Communications Common Stock to be
issued in connection with the Merger. This Proxy Statement/Prospectus does
not contain all of the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and
regulations of the Commission. The Registration Statement and the exhibits
filed as a part thereof are available for inspection and copying as set
forth above. Exhibits may not be available at the regional offices of the
Commission.
DOCUMENTS INCORPORATED BY REFERENCE
This Proxy Statement/Prospectus incorporates by reference documents which
are not presented herein or delivered herewith. Copies of such documents
(other than exhibits to such documents unless such exhibits are
specifically incorporated by reference) are available to any person,
including any beneficial owner, to whom this Proxy Statement/Prospectus is
delivered, on written or oral request, without charge, from, in the case of
either Communications or Tribune/Swab-Fox documents, T/SF Communications
Corporation, 2407 East Skelly Drive, Tulsa, Oklahoma 74105, Attention:
Donna J. Peters, Secretary, Telephone: (918) 747-2600. In order to ensure
timely delivery of the documents, any such request should be made by
_______________________, 1995.
Communications' Annual Report on Form 10-K for the year ended December
31, 1994, which has been filed by Communications with the Commission
pursuant to the Exchange Act (File No. 1-10263), is incorporated by
reference herein.
Tribune/Swab-Fox's Annual Report on Form 10-K for the year ended December
31, 1994, which has been filed by Tribune/Swab-Fox with the Commission
pursuant to the Exchange Act (File No. 1-6430), is incorporated by
reference herein.
Any statement contained in a document incorporated by reference herein
shall be deemed to be modified or superseded for purposes hereof to the
extent that a statement contained herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed to
constitute a part hereof except as so modified or superseded.
____________________
-2-
<PAGE>
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
<TABLE>
<CAPTION>
<S> <C>
AVAILABLE INFORMATION............................................ 2
DOCUMENTS INCORPORATED BY
REFERENCE...................................................... 2
SUMMARY.......................................................... 5
General...................................................... 5
Tribune/Swab-Fox............................................. 6
Communications............................................... 7
Recent Developments.......................................... 8
Special Meetings............................................. 8
The Merger................................................... 9
Conversion of Securities..................................... 9
Recommendations of the Boards of Directors................... 10
Opinions of Financial Advisors............................... 10
Interests of Certain Persons in the Merger................... 10
Conditions to the Merger..................................... 11
Effective Time of the Merger................................. 11
Cash Election Procedures..................................... 11
Exchange of Tribune/Swab-Fox Common Stock
for Communications Common Stock............................ 11
Appraisal Rights............................................. 12
Federal Income Tax Consequences.............................. 12
Accounting Treatment......................................... 13
Resale Restrictions.......................................... 13
Termination.................................................. 13
American Stock Exchange Listing.............................. 13
Risk Factors................................................. 13
Selected Financial Data for Tribune/Swab-Fox................. 14
Selected Financial Data for
Communications............................................. 15
Selected Financial Data for
Communications Giving Effect
to the Merger.............................................. 16
Comparative Per Share Information............................ 17
Comparative Market Price Information......................... 18
Dividend Policy.............................................. 19
Tribune/Swab-Fox........................................... 19
Communications............................................. 19
RISK FACTORS..................................................... 20
THE SPECIAL MEETINGS............................................. 23
Matters to Be Considered at the
Special Meetings........................................... 23
Date, Place and Time......................................... 23
Votes Required............................................... 23
Voting of Proxies............................................ 24
Revocability of Proxies...................................... 24
Record Date; Shares Entitled to Vote;
Quorum..................................................... 24
Solicitation of Proxies...................................... 25
THE MERGER....................................................... 26
General...................................................... 26
Background of the Merger..................................... 26
Reasons for the Merger; Recommendations
of the Boards of Directors................................. 30
Opinions of Financial Advisors............................... 32
Accounting Treatment......................................... 41
Federal Income Tax Consequences.............................. 41
Interests of Certain Persons in the
Merger....................................................... 44
Appraisal Rights............................................. 44
Restrictions on Resales by Affiliates of
Tribune/Swab-Fox........................................... 47
THE MERGER AGREEMENT............................................. 47
The Merger................................................... 47
Cash Election Procedures..................................... 48
Exchange of Tribune/Swab-Fox Common
Stock for Communications Common Stock...................... 49
Representations and Warranties............................... 50
Certain Covenants............................................ 50
Conditions................................................... 50
Indemnification.............................................. 51
Termination; Amendments and Waivers.......................... 51
Expenses..................................................... 52
DESCRIPTION OF COMMUNICATIONS
CAPITAL STOCK.................................................. 53
Communications Common Stock.................................. 53
Communications Preferred Stock............................... 53
COMPARATIVE RIGHTS OF STOCKHOLDERS............................... 53
General...................................................... 53
Number of Directors; Removal of
Directors; Filling Vacancies............................... 54
Stockholder Action by Written
Consent; Special Meetings.................................. 54
Amendment of the Certificate of
Incorporation and Bylaws................................... 55
"Blank Check" Preferred Stock................................ 55
Business Combinations........................................ 55
Appraisal Rights............................................. 57
Limitation of Liability of Directors......................... 57
Indemnification of Directors and
Officers................................................... 58
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.................................................. 58
Tribune/Swab-Fox............................................. 58
Communications............................................... 63
LEGAL MATTERS.................................................... 68
EXPERTS.......................................................... 68
STOCKHOLDER PROPOSALS............................................ 68
OTHER MATTERS.................................................... 68
DEFINITION OF CERTAIN TERMS...................................... 69
INDEX TO PRO FORMA FINANCIAL
STATEMENTS AND FINANCIAL
STATEMENTS..................................................... F-1
APPENDIX A--AGREEMENT AND PLAN OF MERGER,
AS AMENDED..................................................... A-1
APPENDIX B--FAIRNESS OPINION OF
OPPENHEIMER & CO., INC......................................... B-1
APPENDIX C--FAIRNESS OPINION OF
SOUTHWEST SECURITIES, INC...................................... C-1
APPENDIX D--TEXT OF SECTION 262 OF
THE GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE
CONCERNING APPRAISAL
RIGHTS OF DISSENTING STOCKHOLDERS.............................. D-1
</TABLE>
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SUMMARY
The following is a summary of certain information contained elsewhere
in this Joint Proxy Statement and Prospectus (this "Proxy
Statement/Prospectus"). This summary does not purport to be complete and
is qualified in its entirety by reference to the more detailed information
contained elsewhere in this Proxy Statement/Prospectus and the Appendices
hereto. Stockholders are urged to review carefully this Proxy
Statement/Prospectus, the Merger Agreement, as amended, attached as
Appendix A and the other appendices attached hereto. The information
contained in this Proxy Statement/Prospectus with respect to Communications
and its affiliates has been supplied by Communications, and the information
with respect to Tribune/Swab-Fox and its affiliates has been supplied by
Tribune/Swab-Fox. Terms used herein with their initial letters capitalized
are defined herein, which definitions are summarized under "Definition of
Certain Terms."
General
This Proxy/Statement Prospectus is being distributed by the Boards of
Directors of Communications and Tribune/Swab-Fox for use in connection with
a Special Meeting of Stockholders of Communications and a Special Meeting
of Stockholders of Tribune/Swab-Fox, respectively, which will be held
jointly on May __, 1995, or any adjournment or postponement thereof. At
such meetings, the stockholders of each of Communications and Tribune/Swab-
Fox will consider and vote upon a proposal to approve and adopt an
Agreement and Plan of Merger dated January 25, 1995, as amended (the
"Merger Agreement"), between Communications and Tribune/Swab-Fox, pursuant
to which Tribune/Swab-Fox will be merged with and into Communications (the
"Merger"), with Communications to be the surviving corporation in the
Merger. As a result of the Merger, each of the then outstanding shares
(other than shares held by Communications which will be cancelled) of Class
A Common Stock, $.10 par value, of Tribune/Swab-Fox (the "Tribune/Swab-Fox
Class A Common Stock") and Class B Common Stock, $.10 par value, of
Tribune/Swab-Fox (the "Tribune/Swab-Fox Class B Common Stock"), will be
converted into the right to receive 0.1255 of a share of Common Stock, $.10
par value, of Communications (the "Communications Common Stock") or, at the
election of each Tribune/Swab-Fox stockholder and subject to certain
limitations described herein, $0.88 in cash (subject to appraisal rights
for dissenting Tribune/Swab-Fox stockholders). Unless the context requires
otherwise, the Tribune/Swab-Fox Class A Common Stock and the Tribune/Swab-
Fox Class B Common Stock are referred to collectively herein as the
"Tribune/Swab-Fox Common Stock."
The aggregate amount of cash to be paid to Tribune/Swab-Fox
stockholders pursuant to the Merger, in the event that the maximum number
of shares of Tribune/Swab-Fox Common Stock (10,000,000 shares) are
purchased by Communications pursuant to cash elections, is $8,800,000.
Such cash will be paid by Communications out of its working capital
(approximately $5,300,000 to $6,000,000) and borrowings of approximately
$2,800,000 to $3,500,000 under its bank revolving credit facility. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Communications--Liquidity and Capital Resources."
On ________________, 1995, the closing sale price per share of
Communications Common Stock, as reported by the American Stock Exchange,
was $__________ and the closing sale price per share of Tribune/Swab-Fox
Class A Common Stock, as reported by The Nasdaq Small-Cap Market, was
$________. Based on such closing sale price of Communications Common
Stock, the market value of the 0.1255 of a share of Communications Common
Stock issuable for each share of Tribune/Swab-Fox Common Stock in the
Merger was $________.
On January 18, 1995, the Board of Directors of Tribune/Swab-Fox (the
"Tribune/Swab-Fox Board") declared a one-time cash dividend of $0.0344 per
share of Tribune/Swab-Fox Common Stock, payable on May __, 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 April 5, 1995, the record date for the
Tribune/Swab-Fox Meeting (the "Special Dividend"). The
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aggregate amount of the Special Dividend is approximately $1,090,000, which
will be paid by Tribune/Swab-Fox out of its working capital.
Tribune/Swab-Fox
The principal activities of Tribune/Swab-Fox have included managing
real estate holdings and the activities carried on through Communications,
which is a 78% owned subsidiary of Tribune/Swab-Fox. These real estate
activities were concentrated in the Tulsa, Oklahoma, area. The market
value of these properties deteriorated beginning in the mid-1980's because
of the declining economy in Oklahoma relating to the effects of the
significant downturn in the oil and gas industry. Several years ago, the
management of Tribune/Swab-Fox decided to cease all real estate activities
other than management of properties then owned and to use its best efforts
to liquidate its remaining real estate assets.
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 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, L.L.C., an Oklahoma limited
liability company ("1995 Land Company"), for $1,386,650. 1995 Land Company
is owned 49.99% by Tribune/Swab-Fox, but the funding for the purchase was
provided through a loan from the owner of the other 50.01% (an unaffiliated
individual), who will also oversee, manage and fund the development and
sale of these properties. The purchase price for these properties was
determined through arms-length negotiations between Tribune/Swab-Fox and
the unaffiliated individual. Recent appraisals of these properties
(including the property subject to the option described below) estimated
the value of such properties at $6,000,000. Prior to this transaction,
Tribune/Swab-Fox had been actively trying to sell these properties during
1994 at a price substantially less than this appraisal without success.
Accordingly, Tribune/Swab-Fox determined that this transaction was the best
available alternative for the sale of these properties. Tribune/Swab-Fox
believes that the terms of this transaction are reasonable and not less
favorable to Tribune/Swab-Fox than could be obtained from another third
party. The effect of this transaction is for Tribune/Swab-Fox to be able
to realize on the potential profits of the ultimate sale/development of
these properties through its ownership in 1995 Land Company, after the
unaffiliated individual has recovered his cost of acquisition/development.
In the same transaction, Tribune/Swab-Fox also granted 1995 Land Company an
option on another parcel of raw land, exercisable at any time on or before
April 13, 1995, at a price of $214,350.
(ii) On March 14, 1995, Tribune/Swab-Fox entered into an Acquisition
Agreement with Midwest Energy Companies, Inc., a Delaware corporation
("MECI"), a small publicly traded (over-the-counter symbol "MWE") oil and
gas exploration and development company indirectly controlled by Martin A.
Vaughan, a director of Tribune/Swab-Fox. Pursuant to this agreement,
Tribune/Swab-Fox sold to MECI approximately 900 acres of raw land and
certain related contracts and rights, which had a book value at September
30, 1994, of approximately $1,750,000, in exchange for 7,161,234 shares of
MECI common stock (a portion of which are held in escrow pending resolution
of certain post-closing items). The exchange ratio for this transaction
was determined through negotiations between Tribune/Swab-Fox and MECI and
was based on the book value of the real estate transferred by Tribune/Swab-
Fox (and not on any independent appraisals of such properties) and the
prices at which MECI has conducted exchanges (or proposed exchanges) of its
stock for assets of unaffiliated third parties during the last year. (The
per share valuation of MECI stock used in such transactions was $0.26.) A
material portion of the land so sold to MECI was actively marketed for sale
by Tribune/Swab-Fox during 1994. The Tribune/Swab-Fox Board and the
Communications Board having agreed that, as a condition to Communications
entering into the Merger Agreement, Tribune/Swab-Fox would use its
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best efforts to liquidate any real estate that was not believed to be
saleable for cash or cash equivalents within 12 months so that this segment
could be considered discontinued for financial reporting purposes. The
Tribune/Swab-Fox Board believes that the terms of this transaction are
reasonable and not less favorable to Tribune/Swab-Fox than could be
obtained from an unaffiliated third party. As a result of this
transaction, Tribune/Swab-Fox now owns 8,855,653 shares of MECI common
stock, or 6.8% of MECI's outstanding shares.
Pursuant to the Acquisition Agreement with MECI, Tribune/Swab-Fox
entered into a Registration Rights Agreement with MECI which entitles
Tribune/Swab-Fox to certain rights with respect to the registration under
the Securities Act of the MECI common stock received by Tribune/Swab-Fox
under the Acquisition Agreement. The Registration Rights Agreement
provides that (a) if MECI proposes to register any of its securities, other
than a registration relating solely to employee benefits plans or a
registration on any registration form which does not permit secondary
sales, Tribune/Swab-Fox has the right to request MECI to include in such
registration, and in any underwriting involved therein, such MECI common
stock held by Tribune/Swab-Fox, and (b) if, by December 31, 1995, MECI has
not undertaken a voluntary registration, then Tribune/Swab-Fox has the
right to require MECI to register under the Securities Act such shares of
MECI common stock held by Tribune/Swab-Fox. MECI has agreed to pay all
registration expenses incurred in connection with any registration,
qualification or compliance pursuant to any registrations contemplated
under the Registration Rights Agreement with Tribune/Swab-Fox.
(iii) Various parcels of raw land were sold or are under contract for
sale for an aggregate sale price of approximately $975,000. The purchase
prices for these properties were determined through arms-length
negotiations between Tribune/Swab-Fox and unaffiliated third parties and
were not based on any independent appraisals of such properties.
Tribune/Swab-Fox principal executive offices are located at 2407 East
Skelly Drive, Tulsa, Oklahoma 74105, and its telephone number at such
offices is (918) 747-2600.
Communications
Communications, operating through its subsidiaries, is a diversified
communications and information company. Communications publishes various
trade journals and, in connection therewith, owns or participates in
several trade shows. Communications also operates a convention and trade
show services business which provides publishing services consisting
primarily of the publication of various convention and trade show related
publications, such as directories and convention daily newspapers,
primarily on a contract basis, and registration services for exposition
managers and other services for corporate exhibitors. In addition,
Communications engages in the business of obtaining, processing and
providing motor vehicle reports, truck driver employment information and
other services primarily to the insurance and trucking industries.
Following is a brief summary of each of Communications' subsidiaries which
make up the business of Communications.
Transportation Information Services, Inc. ("TISI"), under its
tradename "DAC," sells pre-employment screening information, primarily to
the trucking industry, and data and information used for automobile
underwriting activities in the insurance industry, primarily at the
insurance agent level. DAC is well recognized in the trucking industry as
a major provider of motor vehicle reports, various record searches and
employment histories from DAC's own proprietary data base. This
information is intended to help trucking companies to make better
employment decisions and to hire qualified, safe drivers.
BMT Communications, Inc. ("BMT"), publishes four trade journals and
owns or manages four related trade shows. The major profit centers are
Convenience Store News, the leading information source for the 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
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a leading source of information, education and customer contacts for the
legalized gaming industry. Communications recently announced that it is
seeking to sell three of the trade journals published by BMT, including
Convenience Store News. See "Summary--Recent Developments" for additional
information regarding this announcement.
Atwood Convention Publishing, Inc. ("Atwood") and Galaxy Registration,
Inc. ("Galaxy") provide services to large expositions, trade shows and
corporate exhibitors. Atwood's primary products are daily newspapers,
directories and other special publications produced for large expositions
and, through its Exhibitor Marketing Services, single sponsor publications
for corporate exhibitors. Atwood also publishes EXPO Magazine, a
controlled-circulation trade journal serving the exposition management
market. Galaxy's base business is providing registration and data
management services to trade shows and conventions.
Communications principal executive offices are also located at 2407
East Skelly Drive, Tulsa, Oklahoma 74105, and its telephone number is (918)
747-2600.
Recent Developments
On December 22, 1994, Communications announced that it had engaged
Oppenheimer & Co., Inc. ("Oppenheimer") to pursue a sale of three of its
trade journals published through BMT in New York City. The journals to be
sold, along with their related activities, are Convenience Store News,
United States Distribution Journal and The Journal of Petroleum Marketing.
Total revenues attributable to these journals and their related activities
during 1994 were approximately $12,125,000. BMT will continue to publish
International Gaming & Wagering Business. The proceeds from the sale of
these journals will be used by Communications for general corporate
purposes and to expand and diversify BMT's position in the commercial
gaming industry.
Following the filing of the Registration Statement, Communications and
Tribune/Swab-Fox were contacted by an unaffiliated third party who
expressed an interest in acquiring a significant equity interest in either
Communications or Tribune/Swab-Fox and indicated a willingness to pay a
cash price in excess of $0.88 per share for shares of Tribune/Swab-Fox
Class A Common Stock. The Boards of Communications and Tribune/Swab-Fox
considered the possibility of allowing this third party to purchase all or
a portion of the shares of Tribune/Swab-Fox Common Stock for which the Cash
Alternative is available (though it was unclear whether or not such third
party's interest at such higher price would have applied to the full
10,000,000 shares for which the Cash Alternative is available), but
rejected such a transaction because of their belief that it is in the best
interests of both companies and their stockholders that any such shares be
purchased by Communications so as to reduce the number of shares of
Communications Common Stock outstanding after the Merger and, thus,
increase the percentage ownership in Communications of the remaining
stockholders.
Special Meetings
This Proxy Statement/Prospectus relates to a Special Meeting of
Stockholders of Communications (the "Communications Meeting") and the
Tribune/Swab-Fox Meeting, which meetings will be held jointly. At such
joint meeting, the stockholders of each of Communications and Tribune/Swab-
Fox will consider and vote upon proposals to approve and adopt the Merger
Agreement, pursuant to which Tribune/Swab-Fox will be merged with and into
Communications.
The Communications Meeting and the Tribune/Swab-Fox Meeting will be
held jointly on May __, 1995, at 2:00 p.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 April 5, 1995.
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Voting rights for Communications are vested in the holders of the
Communications Common Stock, with each share of Communications Common Stock
entitled to one vote on each matter coming before the stockholders. As of
April 5, 1995, there were 4,864,818 shares of Communications Common Stock
outstanding, held by approximately 29 holders of record.
The favorable vote of the holders of a majority of the outstanding
shares of Communications Common Stock is required for the approval and
adoption of the Merger Agreement. Tribune/Swab-Fox, which owns 3,777,500
(or approximately 78%) of the outstanding shares of Communications Common
Stock, intends to vote all of its shares of Communications Common Stock in
favor of the Merger. Accordingly, approval of the Merger Agreement by the
stockholders of Communications is assured. As of April 5, 1995, directors
and executive officers of Communications and their affiliates owned 23,800
(or approximately 0.3%) of the outstanding shares of Communications Common
Stock (excluding shares held through Tribune/Swab-Fox).
As of April 5, 1995, there were issued and outstanding 26,845,865
shares of Tribune/Swab-Fox Class A Common Stock, held by approximately 307
holders of record, having voting power (excluding 1,142,728 shares held by
Communications), the holders thereof being entitled to one vote per share
on all matters to be voted upon by stockholders. Also, voting rights exist
with respect to the shares of Tribune/Swab-Fox Class B Common Stock under
certain circumstances, but matters anticipated to be voted upon at the
Tribune/Swab-Fox Meeting, including the Merger, do not give rise to such
voting rights. As of April 5, 1995, there were 3,703,704 shares of
Tribune/Swab-Fox Class B Common Stock outstanding, held by one holder of
record who is also the beneficial owner of such shares.
The favorable vote of the holders of a majority of the outstanding
shares of Tribune/Swab-Fox Class A Common Stock is required for the
approval and adoption of the Merger Agreement. As of April 5, 1995,
directors and executive officers of Tribune/Swab-Fox and their affiliates
owned 16,083,903 (or approximately 60%) of the outstanding shares of
Tribune/Swab-Fox Class A Common Stock. Such persons have indicated that
they intend to vote all of their shares in favor of the Merger.
Accordingly, approval of the Merger Agreement by the stockholders of
Tribune/Swab-Fox is assured.
The Merger
Conversion of Securities. Upon consummation of the transactions
contemplated by the Merger Agreement, (i) Tribune/Swab-Fox will be merged
with and into Communications, with Communications to be the surviving
corporation, and (ii) each issued and outstanding share of Tribune/Swab-Fox
Common Stock (other than shares held by Communications which will be
cancelled) will be converted into the right to receive 0.1255 of a share of
Communications Common Stock or, at the election of each Tribune/Swab-Fox
stockholder, subject to compliance with the cash election procedures and
the limitations set forth in the Merger Agreement and described under the
caption "The Merger Agreement--Cash Election Procedures," $0.88 cash (the
"Offer Price"), without interest (the "Cash Alternative") (subject to
appraisal rights for dissenting Tribune/Swab-Fox stockholders). Fractional
shares of Communications Common Stock will not be issued in connection with
the Merger. A Tribune/Swab-Fox stockholder who would otherwise be entitled
to a fractional share will receive in cash an amount equal to the product
obtained by multiplying $0.88 times the number of shares of Tribune/Swab-
Fox Common Stock which would otherwise be converted into a fractional share
of Communications Common Stock. All shares of Tribune/Swab-Fox Common
Stock held as of the record date for the Tribune/Swab-Fox Meeting will be
entitled to receive the Special Dividend regardless of whether or not such
shares are tendered for the Cash Alternative.
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.
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Recommendations of the Boards of Directors. The Boards of Directors
of Communications and Tribune/Swab-Fox believe that the terms of the Merger
are fair to and in the best interests of their respective stockholders,
each has, by unanimous vote, approved the Merger Agreement, and each
unanimously recommends that its stockholders vote FOR approval of the
Merger Agreement. For a discussion of the factors considered by the Boards
of Directors in reaching their respective decisions, see "The Merger--
Reasons for the Merger; Recommendations of the Boards of Directors."
Opinions of Financial Advisors. On January 18, 1995, Oppenheimer
rendered its oral opinion to the Board of Directors of Communications (the
"Communications Board") to the effect that, as of such date, based upon the
draft of the Merger Agreement dated January 11, 1995, and based upon and
subject to the matters presented to the Communications Board, the
consideration to be paid to holders of Tribune/Swab-Fox Common Stock in
connection with the Merger was fair, from a financial point of view, to the
stockholders of Communications (other than Tribune/Swab-Fox and the
officers and directors of each of Tribune/Swab-Fox and Communications).
Oppenheimer confirmed such opinion by delivery of its written opinion dated
as of January 26, 1995. When the Merger Agreement was entered into on
January 25, 1995, the original offer price for the Cash Alternative was
$0.80 (the "Original Offer Price"). The Merger Agreement was amended on
March 3, 1995, to increase the Offer Price to $0.88. As a result of such
increase in the Offer Price, a subsequent written opinion dated as of the
date of this Proxy Statement/Prospectus was also delivered by Oppenheimer
to the Communications Board, which opinion is substantially identical to
the January 26, 1995 opinion. Mark A. Leavitt, a director of
Communications, is a Managing Director of Oppenheimer. For a description
of other relationships between Oppenheimer and Communications, see "The
Merger--Opinions of Financial Advisors."
On January 18, 1995, Southwest Securities, Inc. ("Southwest
Securities") rendered its oral opinion to the Tribune/Swab-Fox Board to the
effect that, based upon various considerations and assumptions and subject
to its final review of the Merger Agreement, the consideration to be
received by the stockholders of Tribune/Swab-Fox in connection with the
Merger was, as of that date, fair to such stockholders from a financial
point of view. Southwest Securities subsequently confirmed such opinion by
delivery of its written opinion dated the date of this Proxy
Statement/Prospectus.
Copies of the full texts of the written opinions of Oppenheimer and
Southwest Securities, both dated as of the date of this Proxy
Statement/Prospectus, which set forth the assumptions made, procedures
followed, matters considered and limits of their respective reviews, are
attached to this Proxy Statement/Prospectus as Appendices B and C,
respectively, and should be read carefully in their entirety. See "The
Merger--Opinions of Financial Advisors."
Interests of Certain Persons in the Merger. In considering the
recommendations of the Communications Board and the Tribune/Swab-Fox Board
with respect to the Merger Agreement and the transactions contemplated
thereby, stockholders should be aware that certain members of the
management of Communications and Tribune/Swab-Fox and the Communications
Board and the Tribune/Swab-Fox Board have certain interests in the Merger
that are separate from the interests of stockholders of Communications and
Tribune/Swab-Fox generally.
Those separate interests are generally as follows: (i) Howard G.
Barnett, Jr. and David Lloyd Jones, directors of Communications, and their
family members and affiliates will receive significant shares of
Communications Common Stock and/or cash (to the extent they or their family
members or affiliates choose the Cash Alternative) in the Merger; (ii) the
approval by the Tribune/Swab-Fox Board of the agreement with MECI, which is
indirectly controlled by Martin A. Vaughan, who is a director of
Tribune/Swab-Fox, pursuant to which Tribune/Swab-Fox acquired shares of
MECI common stock in exchange for certain real estate assets, which was
conditioned on Communications entering into the Merger Agreement; (iii)
Robert J. Swab, a director of Tribune/Swab-Fox, has retired from his
officer and employee positions with Tribune/Swab-Fox pursuant to a
Retirement Agreement which entitles him to certain retirement and non-
compete payments (approximately $370,000) over a seven-year period and
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to be nominated to serve as a director of Communications after the Merger;
and (iv) Communications has agreed that, after consummation of the Merger,
it will indemnify each of the current and former officers and directors of
Tribune/Swab-Fox to the extent such officers and directors are currently
entitled to indemnity from Tribune/Swab-Fox. See "The Merger--Interests of
Certain Persons in the Merger."
Conditions to the Merger. The obligations of Communications and
Tribune/Swab-Fox to consummate the Merger are subject to the satisfaction
of certain conditions, including, among others, (i) obtaining requisite
stockholder approvals, (ii) the absence of any legal action prohibiting
consummation of the Merger, (iii) the absence of any material adverse
change in the financial condition or business of the other party, and (iv)
the receipt of an opinion of counsel with respect to the tax consequences
of the Merger. See "The Merger Agreement--Conditions."
Effective Time of the Merger. The Merger will become effective upon
the filing of a Certificate of Merger with the Secretary of State of the
State of Delaware (the "Effective Time of the Merger"), which certificate
will be filed as promptly as practicable after the requisite stockholder
approvals have been obtained and all other conditions to the Merger have
been satisfied or waived. Subject to the satisfaction (or waiver) of the
other conditions to the obligations of Communications and Tribune/Swab-Fox
to consummate the Merger, it is currently expected that the Merger will be
consummated on May ___, 1995, or as soon thereafter as such conditions are
satisfied.
Cash Election Procedures. A Tribune/Swab-Fox stockholder who desires
to elect to receive the Cash Alternative for some or all of the shares of
Tribune/Swab-Fox Common Stock held by such stockholder must make a written
election to receive cash on the cash election form (the "Cash Election
Form") included with this Proxy Statement/Prospectus. The Merger Agreement
provides that cash elections shall not exceed 10,000,000 shares of
Tribune/Swab-Fox Common Stock less the number of shares of Tribune/Swab-Fox
----
Common Stock held by stockholders who have perfected their right to
appraisal pursuant to Section 262 of the General Corporation Law of the
State of Delaware (the "Cash Conversion Number"). To be valid, a cash
election must be received by Mellon Securities Trust Company, at P.O. Box
798, Midtown Station, New York, New York 10018 (the "Exchange Agent"), not
later than 5:00 p.m. New York time, on May ___, 1995 (the "Cash Election
Deadline"). A cash election will be valid only if the Cash Election Form
has been properly completed and signed by the record owner of the
Tribune/Swab-Fox Common Stock to be exchanged (in whole or in part) for
cash and is accompanied by the certificate or certificates representing
such shares of Tribune/Swab-Fox Common Stock, duly endorsed for transfer
(or accompanied by an appropriate guarantee of delivery) in accordance with
the instructions contained in the Cash Election Form. If valid cash
elections exceed the Cash Conversion Number, cash elections will be reduced
proportionately. A cash election may be changed by written notice of the
change and a completed, signed and revised Cash Election Form received by
the Exchange Agent before the Cash Election Deadline. A cash election may
be revoked by written notice of revocation received by the Exchange Agent
prior to the Cash Election Deadline. No Tribune/Swab-Fox stockholder will
receive cash for Tribune/Swab-Fox Common Stock until after the Effective
Time of the Merger. No interest will be paid or accrued with respect to
any cash to be paid to a Tribune/Swab-Fox stockholder pursuant to the
Merger. See "The Merger Agreement--Cash Election Procedures."
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
-11-
<PAGE>
Stock for Communications Common Stock. Tribune/Swab-Fox stockholders
should not send their Tribune/Swab-Fox Common Stock certificates with their
Proxy. See "The Merger Agreement--Exchange of Tribune/Swab-Fox Common
Stock for Communications Common Stock."
Appraisal Rights. Holders of Communications Common Stock are not
entitled to appraisal rights in connection with the Merger. Holders of
Tribune/Swab-Fox Common Stock have the right to seek statutory appraisal of
the fair value of their shares of Tribune/Swab-Fox Common Stock in the
Delaware Court of Chancery and payment of the value so determined in cash
in lieu of accepting the shares of Communications Common Stock issuable to
them in connection with the Merger. Stockholders of record of
Tribune/Swab-Fox who desire to exercise their appraisal rights must: (i)
hold shares of Tribune/Swab-Fox Common Stock on the date of making a demand
for appraisal; (ii) continuously hold shares of Tribune/Swab-Fox Common
Stock through the Effective Time of the Merger; (iii) deliver, prior to the
Tribune/Swab-Fox Meeting, a written demand for appraisal to Tribune/Swab-
Fox at 2407 East Skelly Drive, Tulsa, Oklahoma 74105, Attention: Donna J.
Peters, Secretary; and (iv) otherwise satisfy all of the requirements of
Section 262 of the General Corporation Law of the State of Delaware. In
order to preserve his or her appraisal rights, a Tribune/Swab-Fox
stockholder must not vote in favor of the Merger. Voting against the
Merger, abstaining from voting or failing to vote, however, will not
constitute a written demand for appraisal. Tribune/Swab-Fox stockholders
who elect to receive cash for all or a portion of their shares of
Tribune/Swab-Fox Common Stock pursuant to the Cash Alternative may not seek
an appraisal of such shares. See "The Merger--Appraisal Rights" for a
detailed description of appraisal rights and the procedures required to be
followed to enforce such rights and Appendix D to this Proxy
Statement/Prospectus where Section 262 is reprinted in its entirety.
Federal Income Tax Consequences. In the opinion of Conner & Winters,
A Professional Corporation, the Merger will qualify as a reorganization
under Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code"). The Merger should qualify for such treatment if, among other
things, the Communications Common Stock received by the Tribune/Swab-Fox
stockholders represents more than 50% of the total consideration received
in the Merger. For this purpose, redemptions of capital stock of
Tribune/Swab-Fox which occur before the date of the Merger, but after
Merger discussions began (approximately September 1, 1992) will be
considered as capital stock of Tribune/Swab-Fox outstanding for which cash
elections were made. The Merger Agreement provides that cash elections may
not exceed the Cash Conversion Number. If valid cash elections exceed the
Cash Conversion Number, any cash elections made will be reduced
proportionately. Accordingly, in excess of 50% of the total consideration
received by Tribune/Swab-Fox stockholders pursuant to the Merger will be
Communications Common Stock. See "The Merger--Federal Income Tax
Consequences."
Assuming the Merger qualifies for reorganization treatment, a
Tribune/Swab-Fox stockholder who receives only Communications Common Stock
in exchange for Tribune/Swab-Fox Common Stock will generally not be subject
to federal income taxation with respect thereto. Each Tribune/Swab-Fox
stockholder who receives only cash pursuant to the Merger will generally
recognize capital gain or loss for federal income tax purposes measured by
the difference between such stockholder's tax basis in the Tribune/Swab-Fox
Common Stock exchanged and the amount of cash received therefor. A
Tribune/Swab-Fox stockholder who elects to and does receive cash for part,
but not all, of such stockholder's shares of Tribune/Swab-Fox Common Stock
will be treated as though he or she had received Communications Common
Stock for all of his or her shares of Tribune/Swab-Fox Common Stock in the
Merger and then surrendered a part of the Communications Common Stock
received for the cash payment. Such Tribune/Swab-Fox stockholder may be
treated as though the exchange of stock for cash was in payment for such
stock (and receive capital gain or loss treatment), but might, depending on
such stockholder's particular circumstances, be treated as though such
stockholder received a cash distribution from Communications which may be
taxable as ordinary income in the year in which the Merger is consummated.
Under certain circumstances a Tribune/Swab-Fox stockholder who receives
only cash pursuant to the Merger could be treated for federal income tax
purposes as constructively owning Tribune/Swab-Fox Common Stock which is
exchanged for Communications
-12-
<PAGE>
Common Stock. In such case, such Tribune/Swab-Fox stockholder could be
treated as though such stockholder received a cash distribution from
Communications (i.e. as if it were a dividend) which may be taxable as
ordinary income in the year in which the Merger is consummated. All
Tribune/Swab-Fox stockholders should read carefully the discussion under
"The Merger--Federal Income Tax Consequences." The federal income tax
consequences described herein are for general information only.
Tribune/Swab-Fox stockholders should consult their own tax advisors as to
the particular consequences of the Merger to them, including the
application of federal, state, local and foreign income and other tax laws.
See "The Merger--Federal Income Tax Consequences" and "The Merger
Agreement--Conditions."
Accounting Treatment. The Merger will be accounted for as a 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." Upon consummation of
the Merger and before taking the Cash Alternative into consideration, the
former stockholders of Tribune/Swab-Fox will own approximately 79% of the
issued and outstanding shares of Communications Common Stock (or
approximately 71% in the event that the maximum number of shares
(10,000,000) of Tribune/Swab-Fox are purchased for cash pursuant to the
Cash Alternative).
Resale Restrictions. All shares of Communications Common Stock
received by Tribune/Swab-Fox stockholders in the Merger will be freely
transferable, except that shares of Communications Common Stock received by
persons who are deemed to be "affiliates" (as such term is defined under
the Securities Act) of Tribune/Swab-Fox at the time of the Tribune/Swab-Fox
Meeting may be resold by such affiliates only in certain permitted
circumstances. See "The Merger--Restrictions on Resales by Affiliates of
Tribune/Swab-Fox."
Termination. The Merger Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time of the Merger
(notwithstanding any approval of the Merger Agreement by the stockholders
of Communications and/or Tribune/Swab-Fox): (i) by mutual written consent
of Communications and Tribune/Swab-Fox; (ii) by either Communications or
Tribune/Swab-Fox, if the Merger has not been consummated by June 30, 1995;
(iii) by either Communications or Tribune/Swab-Fox, if any judgment,
injunction, order or decree enjoining Communications or Tribune/Swab-Fox
from consummating the Merger is entered and such judgment, injunction,
order or decree has become final and nonappealable; (iv) by either
Communications or Tribune/Swab-Fox if the approval of the stockholders of
either Communications or Tribune/Swab-Fox contemplated by the Merger
Agreement shall not have been obtained by reason of the failure to obtain
the required vote at the Communications Meeting or the Tribune/Swab-Fox
Meeting or at any adjournments thereof; and (v) by either Communications or
Tribune/Swab-Fox upon a breach by the other party of any representation,
warranty, covenant or agreement of such party, or if any representation or
warranty of the other party shall become untrue, in either case such that
certain conditions to the Merger would be incapable of being satisfied by
June 30, 1995 (or such later date as the parties may agree).
American Stock Exchange Listing. The Communications Common Stock is
listed on the American Stock Exchange (the "AMEX"). It is a condition to
Tribune/Swab-Fox's obligation to consummate the Merger that the
Communications Common Stock to be issued to Tribune/Swab-Fox stockholders
in connection with the Merger shall have been approved for listing on the
AMEX, subject only to official notice of issuance.
Risk Factors. See "Risk Factors" with respect to certain factors
which should be considered in evaluating the Merger.
-13-
<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)
----------------------------------------------- ---------------
Year
Ended
December 31,
Year ended December 31, 1994
----------------------------------------------- ---------------
1994 1993 1992 1991 1990
------- --------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
(In thousands, except per share data)
Operating Data: Continuing
operations (c) -
Revenues..................... 56,919 $ 68,175 $95,233 $94,443 $93,436 $45,027
Operating costs............ 46,931 74,243 85,954 87,958 88,417 36,962
Depreciation and
amortization............ 3,118 3,779 7,378 4,891 5,313 2,372
Restructuring costs........ -- -- -- -- 2,441 --
Operating income (loss)
before interest, unusual
gain, income taxes and
minority interest.......... 6,870 (9,818) 1,974 1,661 (2,948) 5,693
Interest..................... 736 1,921 2,692 3,221 2,972 736
Unusual Gain................. -- -- 24,412 -- -- --
Income (loss) from
continuing operations...... 2,564 (5,713) 9,142 (1,033) (3,227) 1,973
Net income (loss)............ (252) (11,073) 8,352 (1,569) (3,385)
Earnings (loss) per share -
primary:
Continuing operations...... .08 (.19) .27 (.03) (.10) .07
Extraordinary loss......... -- (.02) -- -- --
Net income (loss).......... (.01) (.37) .25 (.06) (.11)
Weighted average
number of common and
common equivalent
shares outstanding......... 29,742 30,286 33,531 30,960 31,542 29,742
Balance Sheet Data
(at period end):
Total assets................. 53,581 $ 60,059 $88,102 $78,760 $84,270
Total liabilities other
than long-term debt........ 24,821 24,336 33,221 26,104 27,206
Long-term debt, net of
current installments....... 4,905 9,273 16,593 22,421 24,921
Stockholders' equity......... 23,855 26,450 38,288 30,235 32,143
</TABLE>
(a) Tribune/Swab-Fox was a party to several events/transactions (most of which
were through its interest in Communications) which affect the comparability
of the historical information presented above. On April 30, 1994,
Communications sold the 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
included in this Proxy Statement/Prospectus for additional information on
these transactions/events.
(b) The pro forma operating data gives effect to: (i) the decision to sell
certain BMT assets and (ii) the April 30, 1994, sale of the New Jersey
Shopper assets, as if all such transactions had occurred on January 1,
1994. See "Index to Pro Forma Financial Statements and Financial
Statements."
(c) Restated to reflect real estate as a discontinued operation as of
November 30, 1994.
-14-
<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)
---------------------------------------------- ---------------
Year
Ended
December 31,
Year ended December 31, 1994
---------------------------------------------- ---------------
1994 1993 1992 1991 1990
------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
(In thousands, except per share data)
Operating Data:
Revenues..................... $56,289 $67,977 $94,831 $93,583 $92,815 $44,397
Operating costs............ 46,150 73,207 84,932 86,961 86,905 36,181
Depreciation and
amortization........... 3,141 3,794 7,387 4,899 5,266 2,395
Restructuring costs........ --- --- --- --- 2,441 ---
Operating income (loss)
before interest,
unusual gain, and
income taxes............... 6,998 (8,995) 2,585 1,789 (1,770) 5,821
Interest..................... 559 1,620 2,388 2,886 2,643 559
Unusual gain................. --- --- 24,412 --- --- ---
Income (loss) before
extraordinary loss......... 3,850 (6,518) 14,040 (1,319) (3,869) 3,049
Net income (loss)............ 3,850 (7,078) 14,040 (1,319) (3,869) 3,049
Earnings (loss) per share
of common stock:
Before extraordinary loss.. .75 (1.23) 2.66 (.25) (.67) .59
Extraordinary loss......... --- (.11) --- --- ---
Weighted average
number of common
and common
equivalent shares
outstanding................ 5,135 5,274 5,274 5,274 5,790 5,135
Balance Sheet Data
(at period end):
Total assets................. 49,137 $47,061 $69,818 $57,870 $62,111
Total liabilities other
than long-term debt........ 15,496 14,863 21,314 18,598 18,443
Long-term debt, net of
current installments....... 3,674 4,005 13,233 18,041 21,118
Stockholders' equity......... 29,967 28,193 35,271 21,231 22,550
</TABLE>
--------------
(a) Communications was a party to several events/transactions which affect
the comparability of the historical information presented above. On
April 30, 1994, Communications sold the assets of the New Jersey
Shopper. Effective March 1, 1994, Communications acquired the stock of
Galaxy. During the third quarter of 1993, the Communications Board
made the decision to offer for sale its shopper-newspaper operations.
On November 1, 1993, Communications sold the operating assets of the
New York Shopper. On September 30, 1992, Communications ceased
publishing The Tulsa Tribune as a result of the termination of a joint
operating agreement. In August 1990, Communications acquired all of
the outstanding stock of Atwood. See the Communications Notes to
Consolidated Financial Statements included in this Proxy
Statement/Prospectus for additional information on these
transactions/events.
(b) The pro forma operating data gives effect to: (i) the decision to sell
certain BMT assets and (ii) the April 30, 1994, sale of the New Jersey
Shopper assets, as if all such transactions had occurred on January 1,
1994. See "Index to Pro Forma Financial Statements and Financial
Statements."
-15-
<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
------------------
Year Ended
December 31, 1994
------------------
(In thousands)
Operating Data:
<S> <C>
Revenues..................................... $44,773
Operating costs............................ 36,962
Depreciation and amortization.............. 2,435
Operating income (loss) before interest
and income taxes........................... 5,376
Interest..................................... 1,310
Income from continuing
operations................................. 3,878
Earnings from continuing
operations per share of Common Stock....... 1.06
Weighted average number of common
and common equivalent shares
outstanding................................ 3,666
Balance Sheet Data (at period end):
Total assets................................. $47,773
Total liabilities other than long-term debt.. 22,205
Long-term debt, net of current installments.. 4,905
Stockholders' equity......................... 20,663
</TABLE>
-16-
<PAGE>
Comparative Per Share Information
The following table sets forth certain comparative per share information
for Communications and Tribune/Swab-Fox. The "Prior to Merger" information
for both Communications and Tribune/Swab-Fox is historical and pro forma
information, with the pro forma Communications information giving effect to
the matters described in note (b) to the table on page 15 and the pro forma
Tribune/Swab-Fox information giving effect to the matters described in note
(b) to the table on page 14. The "Assuming Merger" information is pro forma
information for Communications giving effect to the Merger presented on a per
share basis ("Per Share") and on the basis of the fraction of a share of
Communications Common Stock into which each share of Tribune/Swab-Fox Common
Stock will be converted, using the exchange ratio of 0.1255 of a share of
Communications Common Stock for each share of Tribune/Swab-Fox Common Stock
(the "Exchange Ratio").
<TABLE>
<CAPTION>
Prior to Merger Assuming Merger*
-------------------------------------------- ---------------------
Tribune/
Communications Swab-Fox Per Equivalent
--------------------- --------------------- Per Tribune/
Historical Pro Forma Historical Pro Forma Share Swab-Fox Share
---------- --------- ---------- --------- ----- --------------
<S> <C> <C> <C> <C> <C> <C>
Book value:
As of December 31, 1994..... $6.16 N/A $0.77 N/A $5.64 $0.71
Income (loss) from continuing
operations:
Year ended December 31,
1994...................... 0.75 0.59 0.08 0.07 1.06 0.13
Cash dividends:
Year ended December 31,
1994...................... -- -- -- -- -- --
</TABLE>
- -------------
* Assumes that 10,000,000 shares (the maximum number) of Tribune/Swab-Fox
Common Stock are purchased for cash at $0.88 per share pursuant to the
Cash Alternative. If only 5,000,000 shares of Tribune/Swab-Fox Common
Stock were purchased for cash pursuant to the Cash Alternative, then
(i) the Per Share income from continuing operations for the year ended
December 31, 1994, would be $0.99 and the Per Equivalent Tribune/Swab-
Fox Share would be $0.12, and (ii) the book value Per Share as of
December 31, 1994, would be $4.90 and the Per Equivalent Tribune/Swab-
Fox Share would be $0.61.
-17-
<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 April __, 1995
(the latest practicable date prior to the date of this Proxy
Statement/Prospectus), (a) the last reported sales price of the
Communications Common Stock, as reported by the AMEX, (b) the average of the
closing bid and asked price of the Tribune/Swab-Fox Class A Common Stock, as
reported by The Nasdaq Small-Cap Market ("NASDAQ/SCM"), and (c) the
equivalent share market values for the Tribune/Swab-Fox Class A Common Stock
assuming conversion of the Tribune/Swab-Fox Common Stock into shares of
Communications Common Stock at the Exchange Ratio pursuant to the Merger (see
note (a) to the table below):
<TABLE>
<CAPTION>
Tribune/Swab-Fox Class A Common Stock
--------------------------------------
Communications
Common Stock Historical Equivalent Share (a)
-------------- ------------- -----------------------
<S> <C> <C> <C>
September 28, 1994.. $5.50 $0.719 $0.69
April __, 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 $ 5/8 $ 7/16
Second Quarter........................ 5-5/8 4 9/16 1/4
Third Quarter......................... 6-1/4 4 3/4 1/4
Fourth Quarter........................ 5-1/2 4 1/2 5/16
1994:
First Quarter......................... 5 4-1/8 9/16 5/16
Second Quarter........................ 5 4-3/8 9/16 15/32
Third Quarter......................... 6 4-1/2 13/16 5/8
Fourth Quarter........................ 6-1/4 5-3/8 3/4 11/16
1995:
First Quarter.........................
Second Quarter (through _____, 1995)..
</TABLE>
-18-
<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
(i.e., what portion of the net value of Tribune/Swab-Fox's assets, other than
its primary asset of 3,777,500 shares of Communications Common Stock, would
be acquired in the Merger by Communications for Communications Common Stock
and what portion of such net value would be paid to Tribune/Swab-Fox
stockholders via a one-time cash dividend) between Communications and
Tribune/Swab-Fox in the process of determining the Exchange Ratio. For a
discussion of these negotiated valuation issues, see "The Merger--Background
of the Merger."
Communications. Since inception, Communications has not paid any cash or
other dividends on the Communications Common Stock. Communications, however,
will reevaluate from time to time its dividend payment policy based on its
judgment as to the best interests of Communications and its stockholders.
The determination of the amount of future cash dividends, if any, to be
declared and paid, however, will depend upon, among other things,
Communications' financial condition, funds received from operations, the
level of its capital expenditures and its future business prospects.
Communications' current policy of not paying dividends is based on belief of
the Communications Board that, at this time, reinvestment of Communications'
earnings into its businesses to foster future growth is in the best interest
of Communications' stockholders.
-19-
<PAGE>
RISK FACTORS
The following factors should be considered carefully by the stockholders of
Communications and Tribune/Swab-Fox in connection with voting upon the
Merger.
Interests of Certain Persons in the Merger.
Certain members of the Communications Board and the Tribune/Swab-Fox Board
(which have recommended that Communications and Tribune/Swab-Fox stockholders
vote in favor of the Merger) and certain members of management of
Communications and Tribune/Swab-Fox have interests in the Merger that are
separate from the interests of the Communications and Tribune/Swab-Fox
stockholders generally. Those separate interests are discussed under "The
Merger--Interests of Certain Persons in the Merger."
Control of Communications by Former Officers and Directors of Tribune/Swab-
Fox.
Upon consummation of the Merger and before taking the Cash Alternative into
consideration, the former officers and directors of Tribune/Swab-Fox and
their affiliates and immediate family members will own approximately 55% of
the issued and outstanding shares of Communications Common Stock. Although
there are currently no agreements among such stockholders, and no such
agreement is expected to exist following the Merger, if such stockholders
were to act in concert, they would be able to elect all of Communications'
directors, increase Communications' authorized capital, dissolve, merge or
sell the assets of Communications and generally direct the affairs of
Communications. In assessing the impact of this, stockholders should bear in
mind that such persons control approximately 70% of Tribune/Swab-Fox and,
through Tribune/Swab-Fox's ownership of 78% of Communications, already
indirectly control Communications. This factor may be reduced or increased
as a result of the Cash Alternative. See "The Special Meetings--Votes
Required."
Valuation of Cash Alternative.
An unaffiliated third party has expressed an interest in acquiring a
significant equity interest in either Communications or Tribune/Swab-Fox and
has indicated a willingness to pay a cash price in excess of $0.88 per share,
which is the Offer Price for the Cash Alternative, for shares of
Tribune/Swab-Fox Common Stock. Although the Boards of Communications and
Tribune/Swab-Fox have decided not to pursue such a transaction, this
expression of interest may be an indication that potential purchasers may
exist for the Communications Common Stock after the Merger at prices higher
than the relative value of Communications Common Stock taking the Offer Price
and Exchange Ratio into consideration. However, there can be no assurance
that, after the Merger, such party or any other purchaser will be willing to
pay a price for shares of Communications Common Stock which is greater than
$7.01 per share, the equivalent of the Offer Price. See "The Merger--
Background of the Merger."
Reverse Acquisition.
While the Merger is structured for legal purposes as a merger of
Tribune/Swab-Fox with and into Communications, the Merger will be accounted
for as a 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.
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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
industries in which it operates, the operating results of Communications,
Communications' dividend policy, and general economic and market conditions.
Similar factors affect the prices at which the Tribune/Swab-Fox Class A
Common Stock currently trades.
Appraisal Rights.
No statutory appraisal rights will be available for Communications
stockholders in connection with the Merger. However, such statutory
appraisal rights will be available for Tribune/Swab-Fox stockholders. See
"The Merger--Appraisal Rights."
Limited Trading in Communications Common Stock.
Although the Communications Common Stock is listed for trading on the AMEX,
it is thinly traded. During the 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.
Dependence on Key Personnel
Communications operates through four separate subsidiaries, each of which
is dependent on one or two key managers and executive officers, the loss of
any one of which could adversely affect the operations of the affected
subsidiary. In addition, Communications itself is dependent upon the
continued services and management experience of Howard G. Barnett, Jr.,
Chairman, President and Chief Executive Officer of Communications, and other
executive officers. If Communications were to lose the services of Mr.
Barnett or any of such other executive officers, Communications' operating
results could be adversely affected. Although Communications maintains key-
man life insurance on certain executive officers, including Mr. Barnett,
there are no assurances that any recovery by Communications under such
insurance policies would adequately compensate Communications for the loss of
any covered officer. In addition, Communications' growth and its ability to
recover from the loss of any key employee depend on its ability to attract
and retain skilled employees and on the ability of its officers and key
employees to manage growth successfully.
Acquisition Strategy.
Communications intends to continue to pursue an acquisition strategy.
There can be no assurances, however, that suitable acquisition candidates can
be found, that acquisitions can be consummated on favorable terms or that
acquisitions, if completed, will be successful. In pursuing its acquisition
strategy, Communications anticipates that it will incur additional debt.
Communications intends to incur such additional debt either as fixed rate
long-term debt or as short-term lines of credit. There is no assurance,
however, that Communications will be able to obtain such credit or that such
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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.
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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, as amended, by and between T/SF Communications Corporation
("Communications") and Tribune/Swab-Fox Companies, Inc. ("Tribune/Swab-
Fox") and to approve the merger of Tribune/Swab-Fox with and into
Communications pursuant thereto.
Communications and Tribune/Swab-Fox stockholders will also consider and vote
upon such other matters as may properly be brought before their respective
meetings or any adjournments or postponements thereof.
Each of the Communications Board and the Tribune/Swab-Fox Board unanimously
approved the Merger Agreement and recommends that its stockholders vote FOR
the approval and adoption of the Merger Agreement and the Merger. See "The
Merger--Reasons for the Merger; Recommendations of the Boards of Directors."
Date, Place and Time
The Communications Meeting and the Tribune/Swab-Fox Meeting will be held
jointly at ___________________________, Tulsa, Oklahoma, at 2:00 p.m. local
time, on May __, 1995, or at any adjournment or postponement thereof, for the
purposes set forth herein and in the accompanying Notices of Special Meetings
of Stockholders being delivered to Communications and Tribune/Swab-Fox
stockholders.
Votes Required
The favorable vote of the holders of a majority of the outstanding shares
of Communications Common Stock entitled to vote at the Communications
Meeting, in person or by proxy, is required for the approval and adoption of
the Merger Agreement. As of April 5, 1995, directors and executive officers
of Communications and their affiliates owned 23,800 (or approximately 0.3%)
of the outstanding shares of Communications Common Stock (excluding shares
held through Tribune/Swab-Fox). The directors and executive officers of
Communications have indicated that they intend to vote their shares of
Communications Common Stock in favor of approval of the Merger Agreement.
Tribune/Swab-Fox, which owns 3,777,500 (or approximately 78%) of the
outstanding shares of Communications Common Stock, intends to vote all such
shares of Communications Common Stock in favor of approval of the Merger
Agreement. Accordingly, approval of the Merger Agreement by the stockholders
of Communications is assured.
The favorable vote of the holders of a majority of the outstanding shares
of Tribune/Swab-Fox Class A Common Stock entitled to vote at the
Tribune/Swab-Fox Meeting, in person or by proxy, is required for the approval
and adoption of the Merger Agreement. As of April 5, 1995, directors and
executive officers of Tribune/Swab-Fox and their affiliates owned 16,083,903
(or approximately 60%) 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-
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Fox Class A Common Stock in favor of approval of the Merger Agreement.
Accordingly, approval of the Merger Agreement by the stockholders of
Tribune/Swab-Fox is assured. Certain officers and directors of Tribune/Swab-
Fox and their affiliates 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 1,161,297 shares held for the
benefit of the children and a niece of Howard G. Barnett, Jr. Mr. Barnett,
however, does not intend to elect the Cash Alternative for any shares of
Tribune/Swab-Fox Common Stock owned by him for his own account. There can be
no assurance that such persons will elect 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 April 5, 1995, will be entitled to receive notice of and to vote
at the Communications Meeting. At April 5, 1995, Communications had
outstanding 4,864,818 shares of Communications Common Stock held by
approximately 29 holders of record. Each share of Communications Common
Stock is entitled to one vote on each matter on which the holders of such
shares are entitled to vote. A majority of the outstanding shares of
Communications Common Stock entitled to vote must be represented in person or
by proxy at the Communications Meeting in order for a quorum to be present.
The presence at the Communications Meeting (in person or by proxy) of a
representative of Tribune/Swab-Fox will constitute a quorum.
Only holders of record of Tribune/Swab-Fox Common Stock at the close of
business on April 5, 1995, will be entitled to receive notice of the
Tribune/Swab-Fox Meeting and only holders of record of Tribune/Swab-Fox Class
A Common Stock on such date will be entitled to vote at the Tribune/Swab-Fox
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Meeting. At April 5, 1995, Tribune/Swab-Fox had outstanding 26,845,865
shares of Tribune/Swab-Fox Class A Common Stock held by approximately 307
holders of record (excluding 1,142,728 shares held by Communications).
Voting rights also exist with respect to the shares of Tribune/Swab-Fox Class
B Common Stock under certain circumstances, but the proposal to approve the
Merger Agreement does not give rise to such voting rights. At April 5, 1995,
Tribune/Swab-Fox had outstanding 3,703,704 shares of Tribune/Swab-Fox Class B
Common Stock held by one holder of record who is also the beneficial owner of
such shares. As of January 5, 1995, all outstanding shares of the 6 1/2%
Cumulative Convertible Preferred Stock, Class A Preferred Stock, Series 1,
and New Senior Preferred Stock of Tribune/Swab-Fox were either redeemed or
converted into Tribune/Swab-Fox Class A Common Stock, and are no longer
issued and outstanding. A 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. A copy of the Merger Agreement is attached to this
Proxy Statement/Prospectus as Appendix A and is incorporated herein by
reference.
Background of the Merger
Tribune/Swab-Fox caused Communications to be formed in 1989 for the reasons
described below under "The Merger--Reasons for the Merger; Recommendations of
the Boards of Directors." From that time, Tribune/Swab-Fox has publicly
stated its mission to be the sale of its assets, other than its ownership in
Communications Common Stock, and the repayment of its debts. Thus, since
that time, substantially all of the on-going operations and growth activities
of Tribune/Swab-Fox have been conducted through its ownership of
Communications. See "The Merger--Reasons for the Merger; Recommendations of
the Boards of Directors."
In September 1992, Communications' wholly-owned subsidiary, Tulsa Tribune
Company, entered into an agreement with World Publishing Company to end their
Joint Operating Agreement and, thus, close its daily newspaper, The Tulsa
Tribune (see "Management's Discussion and Analysis of Financial Condition and
Results of Operations"). Since that time, the Communications Board has, from
time to time, held discussions with the Tribune/Swab-Fox Board regarding a
possible merger.
At a retreat of the Communications Board held in November 1992, to discuss
the future of Communications after the closure of The Tulsa Tribune,
management proposed to the Communications Board that such a merger be
considered. Many of the reasons in favor of a merger put forth by management
at that time are the same reasons described below under "The Merger--Reasons
for the Merger; Recommendations of the Boards of Directors." While the
Communications directors understood the reasons and viewed the possibility of
such a merger as reasonable and, under the correct circumstances,
appropriate, the Communications Board felt that the balance sheet of
Tribune/Swab-Fox was not desirable. At that time the real estate and other
assets of Tribune/Swab-Fox totaled a book value of approximately $13,550,000
and the total indebtedness of Tribune/Swab-Fox, separate from the
indebtedness of Communications, exceeded $7,500,000 including partnership
indebtedness guaranteed by Tribune/Swab-Fox. It was the belief of the
Communications Board at that time that the losses which would be sustained in
maintaining that level of real estate and servicing that level of debt were
sufficiently negative to outweigh the benefits of a merger.
Management of Tribune/Swab-Fox is the same as management of Communications.
Howard G. Barnett, Jr., is President and Chief Executive Officer of
Tribune/Swab-Fox and Chairman, President and Chief Executive Officer of
Communications. Mr. Barnett is also a member of the Communications Board and
the Tribune/Swab-Fox Board and is the only overlapping director between the
two Boards. After Mr. Barnett became Chief Executive Officer of both
companies in August 1993, he convened a joint meeting of the two Boards on
August 18 - 19, 1993. The purpose of that meeting was to set the strategic
priorities of the two companies, recognizing that the future growth of
Tribune/Swab-Fox was through Communications. At that time a possible merger
of the two companies was discussed between the two Boards. While no
agreement was reached, it was clear to all members that the Tribune/Swab-Fox
Board
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believed a merger was in the long-term best interest of Tribune/Swab-Fox and
its stockholders, as the reasons for the separate existence of the two
companies had ceased.
As discussed below, the original purpose for creating Communications had
been to effect an equity financing for Communications, to isolate the real
estate assets and liabilities into Tribune/Swab-Fox and to improve stock
value. See "The Merger--Reasons for the Merger; Recommendations of the
Boards of Directors." The equity financing was successfully completed in
1989. As the assets of Tribune/Swab-Fox have slowly been sold off, the need
for separating those remaining from the assets of Communications has been
greatly reduced. For this same reason, the Tribune/Swab-Fox Board believes
that the existence of two related entities creates market confusion and does
not enhance the market value of either the Tribune/Swab-Fox Class A Common
Stock or the Communications Common Stock.
At the August 1993 joint meeting, the directors of Communications voiced
the same concerns about the balance sheet of Tribune/Swab-Fox as in 1992. As
a result of such meeting, management undertook an effort to restructure the
balance sheet of Tribune/Swab-Fox to overcome its negative impact on the
possibility of a merger. To that end, substantial write-offs of real estate
assets occurred in both the third quarters of 1993 and 1994 and a strategic
effort ensued to liquidate real estate at any reasonable price to reduce
debt. The strategic imperative was that a merger of the two companies was in
the long-term best interest of the stockholders of Tribune/Swab-Fox and,
therefore, attempting to hold real estate for the period of time necessary to
realize on its full value was inappropriate in light of the need to reduce
debt substantially to facilitate a merger.
In June 1994, another joint meeting of the Communications Board and the
Tribune/Swab-Fox Board was held. At that time management reported to the two
Boards that it was highly unlikely that a sufficient amount of real estate
could be liquidated in any reasonable period of time to repay all of the
indebtedness of Tribune/Swab-Fox and, thus, fully "clean up" its balance
sheet. However, management believed that sufficient liquid assets (i.e.,
cash equivalents, such as notes receivable) could be generated to offset such
indebtedness. At that time, the Communications Board gave its tentative
approval to a concept which would allow for formal merger discussions to
occur if management could convert an amount of Tribune/Swab-Fox assets to
"cash equivalents" at least sufficient to cover the then outstanding
indebtedness of Tribune/Swab-Fox.
At this same meeting, management reported that, in a possible merger,
significant other assets would likely remain. Communications' directors had
made it clear since the earliest discussions that the speculative nature of
these assets made valuation in a merger difficult. It was noted, however,
that since Tribune/Swab-Fox owned a substantial interest in Communications
(now 78%), the Tribune/Swab-Fox Board need not require significant
consideration for the miscellaneous assets not converted to "cash
equivalents," because 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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Each Board appointed three directors to act as a Board committee in
reviewing the assets of Tribune/Swab-Fox and generally negotiating and
recommending the ratio at which shares of Communications Common Stock would
be issued in exchange for shares of Tribune/Swab-Fox Common Stock (i.e., the
Exchange Ratio), subject to the approval of the full Boards. The
Tribune/Swab-Fox committee was composed of Jenkin Lloyd Jones, Jr., Martin A.
Vaughan and Robert J. Swab (the "Tribune/Swab-Fox Committee"). The
Communications committee was composed of William N. Griggs, David Lloyd Jones
and Martin F. Beck (the "Communications Committee"). For information
regarding certain interests of members of the Communications Committee and
the Tribune/Swab-Fox Committee that are separate from the interests of
stockholders of Communications and Tribune/Swab-Fox generally, see "The
Merger--Interests of Certain Persons in the Merger." In addition, Southwest
Securities was engaged by the Tribune/Swab-Fox Board and Oppenheimer was
engaged by the Communications Board to render fairness opinions.
To facilitate valuation in the Merger and to effect a discontinuance of the
Tribune/Swab-Fox real estate business, in December 1994, the Tribune/Swab-Fox
Board decided to sell certain real estate to 1995 Land Company and to
exchange most of Tribune/Swab-Fox's remaining real estate for MECI stock.
See "Summary--Tribune/Swab-Fox."
The determination of the Exchange Ratio was simplified by the recognition
that, because Communications was acquiring Tribune/Swab-Fox in the Merger and
Tribune/Swab-Fox's primary asset was and is 3,777,500 shares of
Communications Common Stock, Communications would (excluding the impact of
the Cash Alternative) simply issue 3,777,500 shares to the stockholders of
Tribune/Swab-Fox plus such number of shares as was agreed to be due for the
net value of any additional assets of Tribune/Swab-Fox after payment of the
Special Dividend. Therefore, the relative value of the shares of
Communications Common Stock and Tribune/Swab-Fox Class A Common Stock in the
public market was not significant in determining the Exchange Ratio, and such
value was utilized primarily to validate the decisions made.
Based on these concepts, the principal issues addressed in the
determination of the Exchange Ratio were the net value of the other assets of
Tribune/Swab-Fox and the value of the Communications Common Stock to be
issued therefor. Management of both Communications and Tribune/Swab-Fox
provided an analysis of the net value of the assets of Tribune/Swab-Fox other
than shares of Communications Common Stock owned by Tribune/Swab-Fox.
In determining such net value of the other assets of Tribune/Swab-Fox, the
following principles were applied by the Committees and Boards:
(i) Material value was only recognized for the "cash equivalents" of
Tribune/Swab-Fox and for the MECI stock. No substantial value was
recognized for the interest of Tribune/Swab-Fox in its other
miscellaneous assets, including, in particular, 1995 Land Company,
since the purpose of that transaction was to encourage the managing
partner to maximize value over time and, thus, its valuation was
speculative. In this regard, the Tribune/Swab-Fox Board determined
that, because the Tribune/Swab-Fox stockholders already own, in effect,
78% of Communications, such stockholders would still own a substantial
interest in any miscellaneous assets of Tribune/Swab-Fox transferred to
Communications in the Merger (excluding, for this purpose, the effect
of the Cash Alternative). Thus, little or no value from these assets
being recognized in the Merger results in the Tribune/Swab-Fox
stockholders realizing only a 22% "discount" in the Merger as such
stockholders would, excluding any effect of the Cash Alternative, own
at least 78% of Communications after the Merger and thus 78% of the
value of such assets. It was determined that this 22% "discount" was
immaterial in light of the strategic need to do the Merger and, in
particular, because of the difficulty in determining a fair exchange
value for such miscellaneous assets.
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(ii) The net value for which Tribune/Swab-Fox received additional
consideration (i.e., consideration in addition to the 3,777,500 shares
already owned by Tribune/Swab-Fox) was the amount by which the agreed
value of the "cash equivalents" exceeded the value of all debt of
Tribune/Swab-Fox transferred to Communications in the Merger
(including, for this purpose, estimated operating costs of
Tribune/Swab-Fox to the Effective Time of the Merger and Tribune/Swab-
Fox's share of the expenses of the Merger). For this purpose, "cash
equivalents" of Tribune/Swab-Fox primarily included cash, marketable
investments such as stocks and U.S. treasury securities, options, notes
receivable and tax loss carryforwards.
(iii) The final factor was the exchange rate or per share value for
the Communications Common Stock to be issued for this net asset value.
In the negotiations conducted between the Committees, the various
potential values for the Communications Common Stock, described below
in "The Merger--Opinions of Financial Advisors" were discussed and
debated. In the negotiations, the higher the Communications Committee
argued the value of the Communications Common Stock, the higher the
Tribune/Swab-Fox Committee valued the cash equivalents and/or MECI
stock and vice versa. After extensive negotiations, the Tribune/Swab-
Fox Committee and the Communications Committee agreed and recommended
to their respective Boards that the consideration Tribune/Swab-Fox
should receive for the net value of its other assets was 200,000 shares
of Communications Common Stock plus the Special Dividend.
Based on the foregoing, before the Cash Alternative is taken into
consideration, the total shares of Communications Common Stock to be issued
by Communications to holders of Tribune/Swab-Fox Common Stock in the Merger
will be 3,977,500 shares (including 143,412 shares which would otherwise be
issued to Communications for the 1,142,728 shares of Tribune/Swab-Fox Common
Stock owned by it, which shares will be cancelled in the Merger). Based on
the 31,692,297 shares of Tribune/Swab-Fox Common Stock outstanding as of
January 25, 1995, this translates into an Exchange Ratio of one share of
Communications Common Stock for each 7.9681 shares of Tribune/Swab-Fox Common
Stock or 0.1255 of a share of Communications Common Stock for each one share
of Tribune/Swab-Fox Common Stock. No fractional shares of Communications
Common Stock will be issued in the Merger.
The Communications Board, however, desired to effect the Merger only if the
consideration to be received in the Merger by the stockholders of
Tribune/Swab-Fox included the right of such stockholders to elect to receive
cash for some or all of their shares, subject to the limitations discussed
below. In this regard, the Communications Board believes that there is some
desire on the part of holders of Tribune/Swab-Fox Common Stock to achieve
some liquidity and, if the price is reasonable, the Communications Board
believes that this would be a good investment for Communications. In the
joint meeting of the Communications Board and the Tribune/Swab-Fox Board held
in September 1994, as described above, it was agreed that Communications
would offer to buy up to 10,000,000 shares of Tribune/Swab-Fox Common Stock
in the Merger for cash (the Cash Alternative) at the cash price of $0.80 per
share (the "Original Offer Price"). The Original Offer Price for
Tribune/Swab-Fox Common Stock was determined first by the Communications
Board, independent of the Exchange Ratio, and accepted by the Tribune/Swab-
Fox Board as part of the Merger Agreement. The determination of the Original
Offer Price related to Communications' view of value, of the lowest price at
which it was believed a significant percentage of the Cash Alternative would
be subscribed for, and of the benefit to both companies of the repurchase, in
effect, of stock and related only partially to the past trading history of
Tribune/Swab-Fox Class A Common Stock because of the infrequency of such
trading. As discussed below, the Original Offer Price was subsequently
raised to $0.88 per share (the "Offer Price") of Tribune/Swab-Fox Common
Stock.
At special meetings of the Communications Board and the Tribune/Swab-Fox
Board held concurrently on January 18, 1995, Oppenheimer and Southwest
Securities rendered their oral opinions (subsequently confirmed in writing)
to the effect that the consideration to be received in connection with
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the Merger was fair, from a financial point of view, to the respective
stockholders of Communications (other than Tribune/Swab-Fox and the officers
and directors of each of Tribune/Swab-Fox and Communications) and
Tribune/Swab-Fox. After full discussion, the Communications Board and the
Tribune/Swab-Fox Board each unanimously approved the Merger and authorized
the entering into of the Merger Agreement.
Following the filing of the Registration Statement, Communications and
Tribune/Swab-Fox were contacted by an unaffiliated third party who expressed
an interest in acquiring a significant equity interest in either
Communications or Tribune/Swab-Fox and indicated a willingness to pay a cash
price in excess of $0.88 per share for shares of Tribune/Swab-Fox Class A
Common Stock. The Boards of Communications and Tribune/Swab-Fox considered
the possibility of allowing this third party to purchase all or a portion of
the shares of Tribune/Swab-Fox Common Stock for which the Cash Alternative
was to apply (though it was unclear whether or not such third party's
interest at such higher price would have applied to the full 10,000,000
shares for which the Cash Alternative is available) but rejected such a
transaction because of their belief that it is in the best interests of both
companies and their stockholders that any such shares be purchased by
Communications so as to reduce the number of shares of Communications Common
Stock outstanding after the Merger and, thus, increase the percentage
ownership in Communications of the remaining stockholders.
As a result of the discussions described above, market activity involving
the Communications Common Stock and the Tribune/Swab-Fox Class A Common Stock
and their then-current market prices, the Communications Board and the
Tribune/Swab-Fox Board each decided to amend the Merger Agreement in order to
increase the amount of the Offer Price for the Cash Alternative from $0.80 to
$0.88 per share of Tribune/Swab-Fox Common Stock. On March 3, 1995,
Communications and Tribune/Swab-Fox executed Amendment No. 1 to the Merger
Agreement whereby that change was made.
Reasons for the Merger; Recommendations of the Boards of Directors
In 1989, the Tribune/Swab-Fox Board decided to seek equity financing. In
pursuing that goal, it became clear that the significant real estate holdings
and their related indebtedness, as well as other miscellaneous assets then
held by Tribune/Swab-Fox, were viewed negatively by the investment community.
Therefore, Tribune/Swab-Fox created Communications and capitalized it by
contributing the stock of its various operating subsidiaries, including the
existing subsidiaries, TISI and BMT, together with certain other then
subsidiaries, such as Tulsa Tribune Company. Thus, Communications held
essentially all of the operating businesses of Tribune/Swab-Fox, other than
its real estate business.
Communications successfully completed its initial public offering in June
1989 and utilized the proceeds to repay certain indebtedness to Tribune/Swab-
Fox and for future acquisitions, including Atwood. From a stockholder
standpoint, the Tribune/Swab-Fox Board had hoped that the "freeing" of the
operating businesses from the "burden" of the real estate and related
indebtedness would allow the stock of Communications to reflect what was
viewed as the true value of the operating assets. It was hoped that the
effect of this then apparent value for the Communications Common Stock held
by Tribune/Swab-Fox would translate into increased public market value for
the Tribune/Swab-Fox Class A Common Stock.
While this effect did occur early, Communications developed operating
problems and the public market value of its stock dropped precipitously,
along with the public market value of the Tribune/Swab-Fox Class A Common
Stock. At the same time, it was becoming apparent that the liquidation of
real estate by Tribune/Swab-Fox was going to take significantly longer than
originally anticipated. From a business standpoint, with both companies then
having significant problems, the fact that management of the two companies
were the same people created certain conflicts in the allocation of
management time. This became particularly acute as Communications recovered
from its problems and regained its
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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 market for
Communications Common Stock should have more sellers
available.
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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. As a result of the
increase in the amount of the Offer Price for the Cash Alternative from $0.80
to $0.88 per share of Tribune/Swab-Fox Common Stock, a subsequent written
opinion dated as of the date of this Proxy Statement/Prospectus was also
delivered by Oppenheimer to the Communications Board, which opinion is
substantially identical to the January 26, 1995, opinion. The full text of
Oppenheimer's written opinion dated as of the date of this Proxy
Statement/Prospectus 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
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the fairness, from a financial point of view, to such stockholders of the
consideration to be paid to holders of Tribune/Swab-Fox Common Stock in
connection with the Merger and does not constitute a recommendation to any
stockholder of Communications as to how such stockholder should vote with
respect to the Merger. The amount of consideration to be received by the
stockholders of Tribune/Swab-Fox in connection with the Merger was determined
through negotiations between Communications and Tribune/Swab-Fox. See "The
Merger--Background of the Merger."
In connection with rendering its opinion, Oppenheimer (i) reviewed the
Merger Agreement; (ii) reviewed the Registration Statement; (iii) reviewed
Communications' and Tribune/Swab-Fox's annual reports to stockholders and
Annual Reports on Form 10-K for the five fiscal years ended December 31,
1994, and their Quarterly Reports on Form 10-Q for the fiscal years 1993 and
1994; (iv) reviewed Communications' and Tribune/Swab-Fox's proxy statements
dated May 23, 1994; (v) reviewed and analyzed Communications' and
Tribune/Swab-Fox's unaudited financial statements for the 11 month periods
ended November 30, 1994, and November 30, 1993; (vi) held discussions with
Howard G. Barnett, Jr. (Chairman, President and Chief Executive Officer of
Communications and President, Chief Executive Officer and Director of
Tribune/Swab-Fox) and J. Gary Mourton (Senior Vice President -Finance, Chief
Financial Officer and Treasurer of Communications and Tribune/Swab-Fox and
Director of Communications); (vii) reviewed the financial projections of
Communications prepared by Communications' management dated January 9, 1995;
(viii) reviewed and analyzed information and data regarding assets and
liabilities of Tribune/Swab-Fox provided by Tribune/Swab-Fox's management;
(ix) held discussions with Communications' and Tribune/Swab-Fox's legal
counsel and accountants; (x) reviewed financial and market data for certain
public companies considered comparable to Communications; (xi) evaluated the
financial impact of the Merger on Communications' financial statements; and
(xii) performed such other analyses and reviewed such other information as
Oppenheimer deemed appropriate. In preparing its opinion, however,
Oppenheimer was not requested to and did not make an independent evaluation
or appraisal of the assets or liabilities of Tribune/Swab-Fox or
Communications, nor did Oppenheimer make any physical inspection of the
properties or assets of Tribune/Swab-Fox or Communications. Communications
did not place any limitation on the scope of Oppenheimer's review or
analysis, except that Oppenheimer was not requested to consider any
alternative business strategies that might exist for Communications.
In rendering its opinion, Oppenheimer assumed and relied upon, without
taking responsibility for independent verification, the accuracy and
completeness of all financial and other information available to Oppenheimer
from public sources and provided to Oppenheimer by Communications and
Tribune/Swab-Fox and their respective representatives and made other
assumptions of which the following were material. With respect to the
financial forecasts of Communications, Oppenheimer assumed that they were
reasonably prepared on the bases reflecting the best available information,
estimates and judgments of Communications' management. Oppenheimer did not
make any independent valuation or appraisal of the assets or liabilities of
Communications or Tribune/Swab-Fox nor was it furnished with any such
appraisals other than four separate appraisals provided to Oppenheimer by
Tribune/Swab-Fox completed in December 1994 and January 1995 pertaining to
certain real estate related assets of Tribune/Swab-Fox. Oppenheimer assumed,
without independent verification, the accuracy of the advice and the
conclusions of Communications' legal counsel and accountants as provided to
Oppenheimer by Communications' management with respect to tax and accounting
matters, including, without limitation, the treatment of the Merger as a tax-
free reorganization (other than with respect to the Cash Alternative), the
status of the Merger as a "reverse acquisition" for tax and accounting
purposes and the effect and accounting treatment of tax loss carryforwards.
Oppenheimer expressed no opinion as to the price at which Communications
Common Stock will trade following the consummation of the Merger.
Oppenheimer was not requested to consider, and its opinion does not address,
the relative merits of the Merger as compared with any alternative business
strategies that might exist for Communications.
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In its analyses, Oppenheimer made assumptions with respect to industry
performance, general business and economic conditions and other matters, many
of which are beyond the control of Communications and Tribune/Swab-Fox. Any
estimates contained in these analyses are not necessarily indicative of
actual values or predictions of future results or values, which may be
significantly more or less favorable than as set forth therein. In addition,
analyses relating to the value of businesses, securities or assets do not
purport to be appraisals or to reflect the prices at which businesses,
securities or assets actually may trade, be acquired or sold.
In establishing its valuation of Communications, Oppenheimer
considered several valuation methodologies: comparable public company
analysis, discounted cash flow analysis, net asset/liquidation analysis,
historical stock price trading analysis and comparable merger and acquisition
transactions analysis. Oppenheimer concluded that the comparable publicly
traded company analysis was the most meaningful valuation methodology in
determining the value of Communications because the consideration being given
in the Merger consists primarily of publicly traded stock. Using this
methodology, Oppenheimer reviewed and analyzed certain available financial
and market information for 10 selected comparable publicly traded companies
in the business publishing and information services industries. The 10
companies consisted of American City Business Journals, Inc., Plenum
Publishing Corporation, American Business Information, Inc., American List
Corporation, Analytic Surveys, Inc., AutoInfo, Inc., DATEQ Information
Network, Inc., Find/SVP Inc., M/A/R/C Inc. and SEI Corporation (the
"Comparable Companies"). Oppenheimer selected the Comparable Companies
primarily based on the similarity of their lines of business to those of
Communications, as well as the similarities of revenues, market
capitalization and relative market position. Oppenheimer analyzed such
Comparable Companies using primarily the following measurements: (i)
multiple of aggregate value to EBITDA (last 12 months earnings before
interest, taxes, depreciation and amortization) and (ii) multiples of current
stock price to calendar 1994 and 1995 earnings estimates (which were based on
a compilation of securities research analysts earnings estimates). It was
Oppenheimer's perception that investors generally value business publishing
and information services companies using these two measurements.
Oppenheimer noted that Communications traded at 2.6x aggregate value to
EBITDA and 7.2x forecasted earnings for the calendar year 1994 and 7.1x
forecasted earnings for the calendar year 1995. Compared to the average of
the Comparable Companies which traded at 7.6x aggregate value to EBITDA and
17.2x forecasted earnings for the calendar year 1994 and 13.3x forecasted
earnings for the calendar year 1995. Oppenheimer noted that there were no
companies used in the comparable public company analysis which were identical
to Communications. Oppenheimer then applied certain discounts to the
aforementioned multiples of the Comparable Companies based on the following
factors: (i) the relatively small revenues and market capitalization of
Communications compared to the Comparable Companies, (ii) the limited public
float of Communications Common Stock because of the 78% control block owned
by Tribune/Swab-Fox, (iii) Communications' five years of losses or only
marginal profits from 1989 to 1993, and (iv) Communications' substantial
operating and financial restructuring.
Oppenheimer also concluded that the comparable merger and acquisition
transaction analysis was an appropriate valuation methodology, although not
as meaningful as the comparable publicly traded company analysis because the
Merger does not represent a change of control. Although Oppenheimer
performed the comparable merger and acquisition analysis as described below,
it did not include a detailed discussion of it in its presentation to the
Communications Board because Oppenheimer considered it significantly less
meaningful than the comparable public company analysis and, in any event, it
did not change its valuation as determined by the comparable public company
analysis. Using this methodology, Oppenheimer reviewed the financial terms,
to the extent publicly available, of three selected comparable merger and
acquisition transactions in the business publishing industry and four
selected comparable merger and acquisition transactions in the information
services industry since March 1992 (collectively, the "Comparable
Transactions") which in Oppenheimer's judgment were comparable to the Merger
for the purposes of this analysis. The Comparable Transactions were selected
from a total of 23 transactions. Oppenheimer selected the Comparable
Transactions based on the similarity of their lines of business to those of
Communications, their revenues and their relative market positions. In
addition,
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the Comparable Transactions were also selected because their multiples of
aggregate value (defined as equity value plus long-term debt and short-term
debt less cash and cash equivalents (the "Aggregate Value")) to EBITDA and
earnings before interest and taxes ("EBIT") represented levels which would be
consistent with Communications' if they were to be acquired due to
Communications' five years of losses or only marginal profits from 1989 to
1993 and substantial operating and financial restructuring. The seven
transactions, in reverse chronological order of public announcement, were the
following: (i) the acquisition of Sewells International by EMAP Group PLC;
(ii) the acquisition of Australian Consolidated Press Ltd. by Nine Network
Australia Ltd.; (iii) the acquisition of Extel Financial Ltd. by Financial
Times (Pearson PLC); (iv) the acquisition of Beutel, Goodman & Co. Ltd. by
Duff & Phelps Corp.; (v) the acquisition of Griggs Publishing Co. by American
City Business Journal; (vi) the acquisition of Datastream International Ltd.
(Dun & Bradstreet) by Primark Corp.; and (vii) the acquisition of Wiland
Services, Inc. by Neodata Corp. Among the ratios analyzed, Oppenheimer
reviewed the prices paid in such Comparable Transactions in terms of the
aggregate value as a multiple of EBITDA and EBIT. Oppenheimer took into
account that no transaction reviewed was identical to the Merger and that,
accordingly, an analysis of the results of the foregoing necessarily involved
complex considerations and judgments concerning differences in financial and
operating characteristics of Communications and other factors that would
affect the acquisition value of the companies to which it is being compared.
Oppenheimer took into account that, for the Comparable Transactions, the
range of multiples of Aggregate Value to the latest twelve months of EBITDA
and EBIT were 3.0x to 9.0x and 3.0x to 12.6x, respectively. Oppenheimer took
into account that Communications traded at 2.6x EBITDA and 3.7x EBIT for the
latest twelve months. Oppenheimer then applied certain discounts to the
Comparable Transactions multiples to deduct the inherent control premium
because the Merger does not represent a change of control transaction.
Oppenheimer determined that the discounted cash flow analysis was not
meaningful because of the uncertainty of Communications' future financial
performance created by the substantial restructuring of its operations
undergone by Communications over the past several years. Oppenheimer also
determined that the liquidation analysis was not meaningful because the value
of Communications' business, providing information and services, is not
reflected in its tangible assets. Oppenheimer determined that the historical
stock price trading analysis was not meaningful because of lack of
significant trading volume in the Communications Common Stock.
With respect to valuing Tribune/Swab-Fox, Oppenheimer concluded that
the net asset valuation analysis was the appropriate valuation methodology.
Oppenheimer reached that conclusion based upon the fact that Tribune/Swab-Fox
is a holding company with no full-time employees and that the overwhelming
majority of its assets consists of Communications Common Stock. In valuing
the assets other than Communications Common Stock held by Tribune/Swab-Fox,
Oppenheimer used different methodologies appropriate for the particular
asset. In valuing the notes from entities which purchased real estate from
Tribune/Swab-Fox, Oppenheimer discounted the value of such notes from 10% to
50% to reflect the absence of a trading market for the notes, the fact that
the notes were collateralized by illiquid real estate or personal guarantees
and the fact that the notes bear interest at rates lower than that prevailing
for similar risk of collectibility. With respect to the land owned by
Tribune/Swab-Fox subject to option, Oppenheimer valued the option at between
its book value and a discount of 30% to 40% to its exercise price.
Oppenheimer valued the shares of MECI owned by Tribune/Swab-Fox on the basis
of MECI's current stock price and projections of net revenue from producing
and undeveloped nonproducing properties provided to it by management of MECI.
Oppenheimer valued the liabilities of Tribune/Swab-Fox at the book value
projected by management as of March 31, 1995.
Based upon the foregoing, Oppenheimer concluded that the value of the
shares and cash to be offered by Communications was at least equal to the
value of the shares of Tribune/Swab-Fox to be acquired and therefore the
Merger was fair, from a financial point of view, to stockholders of
Communications other than Tribune/Swab-Fox and each of the officers and
directors of Tribune/Swab-Fox and Communications.
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As described above, Oppenheimer's opinion to the Communications Board
was one of many factors taken into consideration by the Communications Board
in making its determination to approve the Merger. See "The Merger--Reasons
for the Merger; Recommendations of the Boards of Directors."
Oppenheimer, as part of its investment banking services, is regularly
engaged in the valuation of businesses and securities in connection with
mergers, acquisitions, underwritings, sales and distributions of listed and
unlisted securities and private placements. The Communications Board
retained Oppenheimer based upon its qualifications, experience and expertise
and its familiarity with Communications, having performed various investment
banking and other services for Communications and Tribune/Swab-Fox from time
to time. Oppenheimer served as placement agent in the private placement of
debt and equity securities for Tribune/Swab-Fox in 1988 and as lead managing
underwriter for Communications' initial public offering of Communications
Common Stock in 1989. In 1994, Oppenheimer was engaged by Communications to
assist Communications in the sale of certain trade journals published through
BMT and has been paid $50,000 as a retainer for such assignment.
Communications' agreement with Oppenheimer provides that Oppenheimer will
receive a fee of 3% of the sale proceeds from the sale of such trade
journals, up to a specified amount, and 5% of sale proceeds in excess of that
specified amount. See "Summary--Recent Developments." Mark A. Leavitt, a
director of Communications, is a Managing Director of Oppenheimer.
In connection with Oppenheimer's services as financial advisor to the
Communications Board, Communications agreed to pay and has paid to
Oppenheimer a fee of $225,000. Communications has also agreed to reimburse
Oppenheimer for all of its reasonable out-of-pocket expenses, including,
subject to prior approval, the fees and expenses of its legal counsel,
incurred in connection with its services. In addition, Communications has
agreed to indemnify Oppenheimer and its employees, directors, officers,
agents, affiliates and each person, if any, controlling Oppenheimer against
certain liabilities and expenses, including certain liabilities under federal
securities laws, incurred in connection with its services.
Tribune/Swab-Fox. The Tribune/Swab-Fox Board retained Southwest
Securities to render a fairness opinion in connection with the Merger.
Southwest Securities advised the Tribune/Swab-Fox Board, in its written
opinion dated the date of this Proxy Statement/Prospectus, that, as of such
date and based upon and subject to the various considerations set forth
therein, the consideration to be received by the stockholders of
Tribune/Swab-Fox in connection with the Merger is fair to such stockholders
from a financial point of view. This written opinion confirms, as of the
date of this Proxy Statement/Prospectus, Southwest Securities' oral opinion
to the same effect rendered to the Tribune/Swab-Fox Board on January 18,
1995. Southwest Securities' opinion relates only to the consideration to be
received by the stockholders of Tribune/Swab-Fox in connection with the
Merger and does not constitute a recommendation to any stockholder of
Tribune/Swab-Fox as to how such stockholder should vote with respect to the
Merger. The amount of consideration to be received by the stockholders of
Tribune/Swab-Fox in connection with the Merger was determined through
negotiations between Tribune/Swab-Fox and Communications. See "The Merger--
Background of the Merger." The full text of Southwest Securities' written
opinion, which sets forth a description of the assumptions made, procedures
followed and matters considered in connection with such opinion, is included
as Appendix C to this Proxy Statement/Prospectus and is incorporated herein
by reference. Stockholders of Tribune/Swab-Fox are urged to read the opinion
in its entirety, especially with regard to the assumptions made and matters
considered by Southwest Securities.
In connection with rendering its opinion, Southwest Securities (i)
reviewed the Registration Statement and the Merger Agreement and supporting
documents and held discussions with management of Tribune/Swab-Fox and
Communications regarding the details of the Merger; (ii) reviewed the audited
financial statements of Tribune/Swab-Fox and Communications for the five
years ended December 31, 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
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records of Tribune/Swab-Fox and Communications; (iii) reviewed certain
internal financial and operating information for both Tribune/Swab-Fox and
Communications (including financial projections for the fiscal years ending
December 31, 1994 through 1999, one set prepared on a pro forma basis as if
the Merger occurred at January 1, 1994, and one set prepared assuming that
the Merger did not occur) developed by the management of Tribune/Swab-Fox and
Communications; (iv) discussed the business and operations, assets, financial
condition and prospects of Tribune/Swab-Fox and Communications with their
senior management; (v) reviewed reported market prices, the respective market
capitalizations, price/earnings ratios and trading statistics of the
Tribune/Swab-Fox Class A Common Stock and the Communications Common Stock;
(vi) compared Tribune/Swab-Fox and Communications from a financial point of
view with particular regard to the value of Tribune/Swab-Fox beyond its
controlling ownership of Communications and to any factors which add to or
detract from this value; (vii) reviewed the Cash Alternative; (viii) reviewed
the terms and conditions of various notes receivable and other assets
received by Tribune/Swab-Fox as a result of the liquidation of certain real
estate assets; and (ix) performed such other analyses and examinations and
considered such other factors as Southwest Securities deemed appropriate.
Tribune/Swab-Fox did not place any limitation on the scope of Southwest
Securities' review or analysis, except that Southwest Securities was not
requested to consider any alternative business strategies that might exist
for Tribune/Swab-Fox.
In connection with its review, Southwest Securities made certain
assumptions of which the following were material. Southwest Securities did
not independently verify any of the publicly available information or
financial or other information furnished by Tribune/Swab-Fox and
Communications and assumed and relied upon such information as being complete
and accurate. With respect to financial projections, Southwest Securities
assumed and relied upon the management of both Tribune/Swab-Fox and
Communications as to the reasonableness and achievability of such
projections. Southwest Securities did not make an independent evaluation or
appraisal of the respective assets or liabilities of Tribune/Swab-Fox or any
subsidiary nor was it furnished with any such appraisals other than
appraisals of certain properties sold or to be sold by Tribune/Swab-Fox. In
addition, Southwest Securities did not solicit any alternative proposals for
a merger or acquisition of Tribune/Swab-Fox. The opinion of Southwest
Securities is based upon market, economic and other conditions as in effect
on, and the information made available to Southwest Securities as of, the
date of such opinion.
In arriving at its fairness opinion, Southwest Securities did not
attribute any particular weight to any analysis or factor considered by it,
but rather made qualitative judgments as to the significance and the
relevance of each analysis and factor. Accordingly, Southwest Securities
believes that its analyses must be considered as a whole and that considering
any portions of such analyses and of the factors considered, without
considering all analyses and factors, could create an incomplete or
misleading view of the process underlying the opinion. Any estimates
contained in these analyses are not necessarily indicative of actual values
or predictions of future results or values, which may be significantly more
or less favorable than as set forth therein. In addition, analyses relating
to the value of businesses or securities do not purport to be appraisals or
to reflect the prices at which businesses or securities actually may trade,
be acquired or sold.
Because the Merger, in effect, can be viewed as the issuance by
Communications to Tribune/Swab-Fox stockholders of the same number of shares
of Communications Common Stock already owned by Tribune/Swab-Fox (being
3,777,500 shares) plus 200,000 shares of Communications Common Stock and the
Special Dividend for the other assets of Tribune/Swab-Fox, net of liabilities
(excluding the effect of the Cash Alternative), Southwest Securities
considered whether the stockholders of Tribune/Swab-Fox would benefit more by
having the Merger completed on these terms, i.e., owning more shares of
Communications Common Stock, rather than continuing the present ownership
structure. The following is a summary (in no particular order of priority)
of the quantitative and qualitative analyses performed by Southwest
Securities in arriving at its opinion:
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(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.
(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
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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
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 Corporation, Harte Hanks Communications and United
Newspapers. The data providing companies were American Business
Information, Dun and
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Bradstreet Corporation, Envoy Corporation, Equifax, Inc. and Fair,
Isaac and Company, Incorporated. The comparable publishing company
group average price to earnings ratio was 15.28. Using the average for
the comparable companies for this value, Communications per share
implied equity value was $10.09. The comparable data providing company
group average price to earnings ratio was 26.53. Using the average for
the comparable companies for this value, Communications per share
implied equity value was $17.51. Southwest Securities believed that
historically Communications may have been valued lower than comparable
companies because of the uncertainty associated with its 78% parent's
(i.e., Tribune/Swab-Fox) real estate holdings and the prior multiple
markets and businesses of Tribune/Swab-Fox. Southwest Securities also
performed discounted cash flow analysis of Communications based on
projections prepared by Communications' management. Discount rates of
10, 15, 20 and 25% were used. The respective values per share of
Communications Common Stock resulting from this analysis were $11.55,
$7.62, $5.86 and $4.88. The conclusion to be drawn from this analysis
of Communications was that the market price assumption (where market
value was above the lowest derived number -- $4.88 per share -- and
substantially below the highest -$17.51) used in judging financial
fairness for the additional 200,000 shares was conservative. For
information regarding the market price of Communications Common Stock,
see "Summary--Comparative Market Price Information."
Although Southwest Securities did not appraise the assets of
Tribune/Swab-Fox, it performed due diligence in reviewing the
Tribune/Swab-Fox Committee's investigation and conclusions regarding
the write-downs of various assets, the discounting of some of the notes
receivable for risk, and the overall judgment required to negotiate
with the Communications Committee. Any formal valuation of the excess
assets does not lend itself to conventional securities valuation
techniques used in valuing businesses, such as comparable public
company analysis, discounted cash flow analysis and capitalization of
earnings analysis. Instead, the Tribune/Swab-Fox Committee used its
pragmatic business judgment in deciding what it would take to balance
the interests of 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
discussed above, Southwest Securities also considered the negative factors of
the Merger, including the potential adverse tax consequences of not utilizing
various tax attributes of Tribune/Swab-Fox and the costs of the Merger.
Southwest Securities concluded, however, that, based upon the foregoing, the
benefits that would accrue to the stockholders of Tribune/Swab-Fox upon
completion of the Merger, which would result in greater efficiency and the
resulting enhancement of the combined companies' ability to grow, outweighed
any negative factors. Furthermore, Southwest Securities concluded that,
should the higher range of values for Communications (as indicated by the
computed price to earnings ratio of the selected group of companies deemed
comparable) become reflected in the public market, this would be of greater
benefit to Tribune/Swab-Fox stockholders. Accordingly, based upon the
foregoing, Southwest Securities was of the opinion that the consideration to
be received by the stockholders of Tribune/Swab-Fox in connection with the
Merger was fair, from a financial point of view, to such stockholders.
As described above, Southwest Securities' opinion to the Tribune/Swab-
Fox Board was one of many factors taken into consideration by the
Tribune/Swab-Fox Board in making its determination to approve the Merger.
See "The Merger-Reasons for the Merger; Recommendations of the Boards of
Directors."
Southwest Securities, as a usual part of its investment banking
business, regularly issues fairness opinions and is engaged in the valuation
of businesses and securities in connection with mergers and acquisitions,
underwritings and distributions of listed and unlisted securities, private
placements and
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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. Upon consummation of the Merger and before taking the Cash
Alternative into consideration, the former stockholders of Tribune/Swab-Fox
will own approximately 79% of the issued and outstanding shares of
Communications Common Stock (or approximately 71% in the event that the
maximum number of shares (10,000,000) of Tribune/Swab-Fox Common Stock are
purchased for cash pursuant to the Cash Alternative).
Federal Income Tax Consequences
The following summary is a general discussion, based on current law, of
the material federal income tax consequences, upon which Conner & Winters, A
Professional Corporation, has opined, 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).
At the Effective Time of the Merger, Conner & Winters will render an
opinion that the Merger will qualify as a reorganization under Section 368(a)
of the Code. Such opinion will be based on certain assumptions and
representations that have or, before the Closing Date (as defined below),
will be made by managements of Communications and Tribune/Swab-Fox (such
assumptions and representations are set forth in a preliminary opinion which
is an exhibit to the Registration Statement of which this Proxy
Statement/Prospectus is a part). The Merger should qualify as a
reorganization under this provision if, among other things, Tribune/Swab-Fox
stockholders in the aggregate receive more than 50% of the value of the
Merger consideration in Communications Common Stock. For this purpose,
redemptions of capital stock of Tribune/Swab-Fox which occur before the date
of the Merger, but after Merger discussions began (approximately September 1,
1992) will be considered as capital stock of Tribune/Swab-Fox outstanding for
which cash elections were made. The Merger Agreement provides that cash
elections may not exceed the Cash Conversion Number. If valid cash elections
exceed the Cash Conversion Number, cash elections will be reduced
proportionately. As a result of such restrictions on the cash election, in
excess of 50%
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of the total consideration received by Tribune/Swab-Fox stockholders pursuant
to the Merger will be Communications Common Stock.
Although it is expected that the Merger will qualify as a
reorganization under Section 368(a) of the Code, no ruling from the Internal
Revenue Service has been or will be sought. Instead, Tribune/Swab-Fox and
Communications will rely upon the opinion of Conner & Winters to the effect
that the Merger will qualify as such a reorganization. Receipt of such
opinion is a condition of consummation of the Merger under the Merger
Agreement.
If the Merger qualifies as a reorganization under Section 368(a) of the
Code, a Tribune/Swab-Fox stockholder whose Tribune/Swab-Fox Common Stock is
converted into the right to receive solely Communications Common Stock will
not be subject to federal income tax by reason of the Merger and that
stockholder's tax basis in the Communications Common Stock received in the
Merger will be the same as the stockholder's tax basis in the Tribune/Swab-
Fox Common Stock exchanged therefor. A Tribune/Swab-Fox stockholder, all of
whose shares are converted into the right to receive cash in the Merger, will
generally recognize capital gain or loss for federal income tax purposes
equal to the difference, if any, between (i) the amount of cash received by
such stockholder in the Merger, and (ii) the stockholder's tax basis in the
shares of Tribune/Swab-Fox Common Stock exchanged therefor. However, if
persons or entities related to such Tribune/Swab-Fox stockholder, or treated
as related to such stockholder under the constructive ownership rules set
forth in Section 318 of the Code (see the following paragraph), receive or
are deemed to receive Communications Common Stock by reason of the Merger,
such Tribune/Swab-Fox stockholder may recognize all or part of the amount of
cash received as dividend income. A Tribune/Swab-Fox stockholder, some of
whose shares are converted into the right to receive Communications Common
Stock and some of whose shares are converted into the right to receive cash,
will, for federal income tax purposes, be treated as if he or she exchanged
all of his or her shares of Tribune/Swab-Fox Common Stock for Communications
Common Stock and then surrendered a portion of those shares to Communications
in exchange for cash. Such Tribune/Swab-Fox stockholder will recognize gain
for federal income tax purposes equal to the lesser of (a) the difference
between (i) the fair market value of the Communications Common Stock and the
amount of cash received by such stockholder in the Merger and (ii) the
holder's tax basis in the shares of Tribune/Swab-Fox Common Stock exchanged
therefor; and (b) the amount of cash received by such holder. Generally,
such gain will be capital gain, but under certain circumstances the cash
received by such stockholder may be considered as a distribution from
Communications in respect of such stockholder's Communications Common Stock
which has the effect of a distribution of a dividend (i.e., it would be
treated as ordinary income).
A cash payment to a Tribune/Swab-Fox stockholder in exchange for his or
her Tribune/Swab-Fox Common Stock will not be considered a distribution which
has the effect of a distribution of a dividend if (i) it is "substantially
disproportionate" (as such phrase is used in Section 302 of the Code), (ii)
it is not "essentially equivalent to a dividend" (as such phrase is used in
Section 302 of the Code), or (iii) the exchange constitutes a termination of
such Tribune/Swab-Fox stockholder's interest in the constituent corporations
under Section 302(b) of the Code. For this purpose, a Tribune/Swab-Fox
stockholder will be deemed to (i) have exchanged all of his or her shares of
Tribune/Swab-Fox Common Stock for shares of Communications Common Stock, (ii)
have surrendered some or all of the shares of Communications Common Stock
received or deemed to have been received in the Merger to Communications for
cash, and (iii) own Communications Common Stock owned by certain related
parties. Generally, under Section 318 of the Code, a stockholder is deemed
to own constructively shares owned by certain related individuals and
entities (including corporations in which the stockholder has a major
interest, partnerships, trusts and estates) or shares which a stockholder has
a right to acquire by exercise of an option or by conversion (whether or not
presently exercisable or convertible).
Whether the exchange would not have the effect of a distribution of a
dividend with respect to a Tribune/Swab-Fox stockholder depends upon his or
her particular circumstances, but the transaction must, in any event, result
in a "meaningful reduction" in the stockholder's interest, or, in this case,
the
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stockholder's deemed interest in Communications. The Internal Revenue
Service has indicated in published rulings that any actual reduction in the
interest of a small, minority stockholder in a publicly held corporation will
constitute a "meaningful reduction" if the stockholder exercises no control
with respect to corporate affairs. The exchange would be "substantially
disproportionate," with respect to a Tribune/Swab-Fox stockholder, if (i) the
percentage of the outstanding shares of Communications Common Stock held by
such holder (including shares constructively owned under Section 318 of the
Code as described above) immediately after the exchange of his or her
"deemed" shares of Communications Common Stock for cash is less than (ii) 80%
of the outstanding shares of Communications Common Stock held or deemed held
by such holder (including shares constructively owned) immediately before
such exchange. Finally, if a Tribune/Swab-Fox stockholder is considered,
under Section 318 of the Code, as constructively owning any shares of
Communications Common Stock owned by family members, he or she might be able
to waive such constructive ownership under procedures described in Section
302 of the Code and thus qualify the exchange transaction as a complete
termination of his or her interest.
In general, cash received by a Tribune/Swab-Fox stockholder in lieu of
fractional shares of Communications Common Stock or by one who exercises his
or her appraisal rights will be treated as a payment in redemption of
Communications Common Stock received or deemed received in the Merger.
However, if such stockholder were, under the constructive ownership rules,
deemed to own stock exchanged for Communications Common Stock and as a result
did not satisfy one of the tests set forth in the immediately preceding
paragraph, such cash would be treated as having the effect of a distribution
in respect of his or her stock, i.e., as a dividend (ordinary income without
reduction for a stockholder's basis in the stock surrendered). A stockholder
will generally report a gain or loss on the receipt of such cash redemption
payment measured by the difference between that stockholder's basis in the
shares exchanged and the amount of cash received. If shares of Tribune/Swab-
Fox Common Stock exchanged for shares of Communications Common Stock were
held as a capital asset, any gain recognized in respect of the receipt of
such cash will be a capital gain or loss, either long or short-term depending
upon whether the shares were held for more than one year.
No loss may be recognized by a Tribune/Swab-Fox stockholder receiving
both Communications Common Stock and cash in exchange for his or her
Tribune/Swab-Fox Common Stock. The Communications Common Stock received by
such a Tribune/Swab-Fox stockholder will have a basis equal to the basis of
the Tribune/Swab-Fox Common Stock exchanged decreased by the amount of cash
received and increased by the amount of gain recognized by such Tribune/Swab-
Fox stockholder with respect to the Merger.
Neither Tribune/Swab-Fox nor Communications (nor any of the
Communications stockholders who are not parties to the reorganization and who
are not making an exchange pursuant to the Merger) will recognize any gain or
loss by reason of the Merger if the Merger qualifies as a reorganization
under Section 368(a) of the Code as contemplated by the Merger Agreement.
THE FOREGOING IS ONLY A GENERAL DESCRIPTION OF THE MATERIAL FEDERAL
INCOME TAX CONSEQUENCES TO TRIBUNE/SWAB-FOX STOCKHOLDERS UNDER CURRENT LAW,
WITHOUT REGARD TO THE PARTICULAR FACTS AND CIRCUMSTANCES OF EACH
TRIBUNE/SWAB-FOX STOCKHOLDER'S TAX SITUATION AND STATUS. ACCORDINGLY, ALL
TRIBUNE/SWAB-FOX STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS
WITH RESPECT TO THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE
MERGER.
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Interests of Certain Persons in the Merger
In considering the recommendations of the Communications Board and the
Tribune/Swab-Fox Board with respect to the Merger Agreement and the
transactions contemplated thereby, stockholders should be aware that certain
members of the management of Communications and Tribune/Swab-Fox and the
Communications Board and the Tribune/Swab-Fox Board have certain interests in
the Merger that are separate from the interests of stockholders of
Communications and Tribune/Swab-Fox generally. Those separate interests are
summarized below.
Howard G. Barnett, Jr. and David Lloyd Jones are directors of
Communications. (Mr. Barnett is also a director of Tribune/Swab-Fox.) Mr.
Barnett owns directly 1,265,389 shares of Tribune/Swab-Fox Common Stock. In
addition, immediate family members or affiliates of Mr. Barnett own 9,908,054
additional shares. Mr. Jones owns directly 1,023,621 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. Effective March 14, 1995, Tribune/Swab-Fox entered
into an agreement with MECI pursuant to which Tribune/Swab-Fox has acquired
shares of MECI common stock in exchange for certain real estate assets (see
"Summary--Tribune/Swab-Fox"). A prerequisite to entering into this agreement
and consummating the transactions contemplated thereby was approval of the
Merger Agreement by the Boards of Tribune/Swab-Fox and Communications.
Therefore, MECI, and thus Mr. Vaughan, in effect benefitted when the two
Boards approved the Merger Agreement.
Effective December 31, 1994, Robert J. Swab, a director of
Tribune/Swab-Fox, retired and resigned from his officer and employee
positions with Tribune/Swab-Fox pursuant to a Retirement Agreement. This
Retirement Agreement provides, among other things, for Tribune/Swab-Fox (or
Communications, if the Merger is consummated) to pay Mr. Swab over a 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, Mr. Swab also sold 200,000 shares of Tribune/Swab-Fox Common
Stock to Tribune/Swab-Fox at a price of $.80 per share.
Communications has agreed that, from and after the consummation of the
Merger, it will indemnify each of the current and former officers and
directors of Tribune/Swab-Fox to the extent such officers and directors are
currently entitled to indemnity from Tribune/Swab-Fox. See "The Merger
Agreement--Indemnification."
Appraisal Rights
The following is a summary of the rights of holders of common stock
seeking appraisal under Section 262 of the Delaware General Corporation Law
("Section 262"). Section 262 is reprinted in its entirety as Appendix D to
this Proxy Statement/Prospectus and is incorporated herein by reference.
Communications Stockholders. No holder of Communications Common Stock
will have any statutory appraisal rights in connection with, or as a result
of, the matters to be acted upon at the Communications Meeting. Under
Section 262, appraisal rights are not available for the shares of any
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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.
Eligible Stockholders. Under Section 262, holders of shares of
Tribune/Swab-Fox Common Stock ("Shares") may demand an appraisal of the fair
value of their Shares and payment of cash in lieu of accepting the shares of
Communications Common Stock issuable to them in connection with the Merger.
All references in Section 262 and this summary thereof to a "stockholder" are
to the record holder of the Shares as to which appraisal rights are asserted.
A person having a beneficial interest in Shares that are held of record in
the name of another person, such as a broker or nominee, and who desires to
exercise appraisal rights, must act promptly to cause the record holder to
follow properly the steps summarized below, in a timely manner to perfect the
appraisal rights the beneficial owner may have.
Exercising Procedures. Tribune/Swab-Fox must notify each Tribune/Swab-
Fox stockholder, not less than 20 days prior to the Tribune/Swab-Fox Meeting,
that appraisal rights are available together with a copy of Section 262.
This Proxy Statement/Prospectus constitutes such notice. Stockholders of
record who desire to exercise their appraisal rights must: (i) hold Shares
on the date of making a demand for appraisal; (ii) continuously hold Shares
through the Effective Time of the Merger; (iii) deliver, prior to the
Tribune/Swab-Fox Meeting, a written demand for appraisal to Tribune/Swab-Fox
at 2407 East Skelly Drive, Tulsa, Oklahoma 74105, Attention: Donna J.
Peters, Secretary; and (iv) otherwise satisfy all of the following
conditions. A request for appraisal rights need not be made with respect to
all Shares owned by a stockholder where such stockholder holds shares of
record as nominee for the beneficial owner thereof. It is not clear,
however, and the Delaware courts have not decided the question of whether a
single beneficial owner must request appraisal rights with regard to all
Shares owned by such stockholder in order to preserve appraisal rights or
whether an individual stockholder can seek an appraisal as to part, but not
all, of his or her holdings in all contexts. Although a stockholder must not
have voted in favor of the Merger, Section 262 does not require that a
stockholder vote against the Merger in order to preserve his or her appraisal
rights. Voting against the Merger, abstaining from voting or failing to
vote, however, will not constitute a written demand for appraisal.
Within 120 days after the Effective Time of the Merger, Communications,
as the surviving corporation in the Merger, or any stockholder who has
satisfied the foregoing conditions and is otherwise entitled to appraisal
rights under Section 262 may file a petition in the Delaware Chancery Court
demanding a determination of the value of the Shares. Communications does
not intend to file a petition or initiate any negotiations with respect to
the fair value of these Shares. Accordingly, stockholders of Tribune/Swab-
Fox who wish to exercise appraisal rights should regard it as their
obligation to initiate all necessary action with respect to the perfection of
their appraisal rights within the time periods prescribed in Section 262.
Only a holder of record of Shares is entitled to assert appraisal
rights for Shares registered in that holder's name. The demand should be
executed by or for the holder of record, fully and correctly, as the holder's
name appears on the holder's stock certificate. If the Shares are owned of
record in a fiduciary capacity, such as by a trustee, guardian or custodian,
execution of the demand should be made in that capacity, and if the Shares
are owned of record by more than one person, as in a joint tenancy or tenancy
in common, the demand should be executed by or for all joint owners. An
authorized agent, including one of two or more joint owners, may execute the
demand for appraisal for a holder of record; however, the agent must identify
the record owner or owners and expressly disclose the fact that, in executing
the demand, the agent is acting as authorized agent for the record owner.
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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.
Fair Value Determination. If a petition for appraisal is timely filed,
after a hearing on the petition, the Delaware Chancery Court will determine
the stockholders of Tribune/Swab-Fox entitled to appraisal rights and will
appraise the Shares owned by those stockholders, determining "fair value"
exclusive of any element of value arising from the accomplishment or
expectation of the Merger, together with a fair rate of interest, if any, to
be paid upon the amount determined to be the fair value. Simple or compound
interest may be paid. The judicial determination of the "fair value" of the
Shares is required to be based on all relevant factors involving the value of
a company, including market value, asset value, dividends, earnings
prospects, the nature of the enterprise and any other facts which could be
ascertained as of the date of the Merger which throw any light on future
prospects of the merged corporation. In Weinberger v. UOP, Inc., the
Delaware Supreme Court stated, among other things, that "proof of value by
any techniques or methods which are generally considered acceptable in the
financial community and otherwise admissible in court" should be considered
in an appraisal proceeding. In Weinberger, the Delaware Supreme Court held
that "elements of future value, including the nature of the enterprise, which
are known or susceptible of proof as of the date of the merger and not the
product of speculation, may be considered." The presiding Court shall direct
payment of the fair value of the Shares by Communications to the stockholders
entitled thereto. Stockholders considering exercising their rights of
appraisal should bear in mind that the fair value of their Shares determined
under Section 262 could be more than, the same as or less than the value of
the shares of Communications Common Stock (or the Offer Price if the Cash
Alternative is elected) they would receive if they did not seek appraisal of
their shares.
Costs. The cost of the appraisal proceeding may be determined by the
Delaware Chancery Court and taxed against the parties as the Delaware
Chancery Court deems equitable in the circumstances. Upon application of a
dissenting stockholder, the Delaware Chancery Court may order all or a
portion of the expenses of experts incurred by any dissenting stockholder in
connection with the appraisal proceeding, including without limitation
reasonable attorneys' fees and the fees and expenses of such
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experts, be charged pro rata against the value of all shares entitled to
appraisal. Thus, the Delaware Chancery Court has the ability to ensure that
all stockholders who benefit from the action share the expenses.
Voting Rights; Dividends; Etc. Any stockholder who has duly demanded
appraisal in compliance with Section 262 will not, after the Effective Time
of the Merger, be entitled to vote the Shares subject to such 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.
THE PROVISIONS OF SECTION 262 ARE TECHNICAL IN NATURE AND COMPLEX. IT
IS SUGGESTED THAT ANY STOCKHOLDER WHO DESIRES TO DISSENT CONSULT INDEPENDENT
LEGAL COUNSEL BECAUSE FAILURE TO COMPLY STRICTLY WITH THE PROVISIONS OF
SECTION 262 MAY PRECLUDE THE EXERCISE OF APPRAISAL RIGHTS.
Restrictions on Resales by Affiliates of Tribune/Swab-Fox
All shares of Communications Common Stock received by Tribune/Swab-Fox
stockholders in the Merger will be freely transferable, except that shares of
Communications Common Stock received by persons who are deemed to be
"affiliates" (as such term is defined under the Securities Act) of
Tribune/Swab-Fox prior to the Merger may be resold by them only in
transactions permitted by the resale provisions of Rule 145 promulgated under
the Securities Act (or Rule 144 in the case of such persons who become
affiliates of Communications) or as otherwise permitted under the Securities
Act. Persons who may be deemed to be affiliates of Tribune/Swab-Fox or
Communications generally include individuals or entities that control, are
controlled by, or are under common control with, such party and may include
certain officers and directors of such party as well as principal
stockholders of such party. The Merger Agreement requires Tribune/Swab-Fox
to exercise its reasonable efforts to cause each of its affiliates to execute
a written agreement to the effect that such person will not offer to sell,
transfer or otherwise dispose of any of the shares of Communications Common
Stock issued to such person in or pursuant to the Merger unless (i) such
sale, transfer or other disposition has been registered under the Securities
Act, (ii) such sale, transfer or other disposition is made in conformity with
Rule 145 under the Securities Act, or (iii) in the opinion of counsel, such
sale, transfer or other disposition is exempt from registration under the
Securities Act.
THE MERGER AGREEMENT
The following is a brief summary of all material provisions of the
Merger Agreement, a copy of which is attached as Appendix A to this Proxy
Statement/Prospectus and is incorporated herein by reference.
The Merger
Pursuant to the Merger Agreement, subject to the terms and conditions
thereof, at the Effective Time of the Merger, Tribune/Swab-Fox will be merged
with and into Communications. The Merger will have the effects specified in
the Delaware General Corporation Law.
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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, $0.88 in cash (the "Cash Consideration"); provided, however,
that a holder's right to receive the Cash Consideration shall be subject to
proration as provided below. The Stock Consideration and the Cash
Consideration are hereinafter together referred to as the "Merger
Consideration."
The Merger shall become effective at such time as the Certificate of
Merger is duly filed with the Secretary of State of the State of Delaware or
at such later time as is specified in the Certificate of Merger (the
Effective Time of the Merger). Such filing is anticipated to be made on and
to be effective as of the Closing Date (as defined below).
At the Effective Time of the Merger, each share of Communications
Common Stock then issued and outstanding will continue as one share of
Communications Common Stock, except for outstanding shares of Communications
Common Stock owned by Tribune/Swab-Fox, which will be cancelled.
The closing of the transactions contemplated by the Merger Agreement
will take place on the next day after the day on which the last of the
conditions set forth in the Merger Agreement (other than those that are
waived by the party or parties for whose benefit such conditions exist) are
satisfied or at such other time, place or date as the parties to the Merger
Agreement may agree (the "Closing Date"). There are various conditions
precedent to the consummation of the Merger. See "The Merger Agreement--
Conditions." There is no assurance that the Merger will be consummated.
Cash Election Procedures
Each Tribune/Swab-Fox stockholder who desires to elect to receive cash
for some or all shares of Tribune/Swab-Fox Common Stock held by such
stockholder must make a written election to receive cash on the Cash Election
Form included with this Proxy Statement/Prospectus. To be valid, a cash
election must be received by Mellon Securities Trust Company, as the Exchange
Agent, at P.O. Box 798, Midtown Station, New York, New York 10018, not later
than 5:00 p.m. New York time, on May ___, 1995 (the Cash Election Deadline).
A cash election will be valid only if the Cash Election Form has been
properly completed and signed and accompanied by certificates for the shares
of Tribune/Swab-Fox Common Stock to which such Cash Election Form relates (or
by an appropriate guarantee of delivery of such certificates, as set forth in
such Cash Election Form, from a member of any registered national securities
exchange or the National Association of Securities Dealers, Inc. or a
commercial bank or trust company in the United States, provided such
certificates are in fact delivered by the time set forth in such guarantee of
delivery), duly endorsed in blank or otherwise in a form acceptable for
transfer on the books of Tribune/Swab-Fox.
The Merger Agreement provides that Communications will not accept cash
elections in excess of the Cash Conversion Number. Section 1.4 of the Merger
Agreement describes the selection procedure for cash elections. If cash
elections are received for a number of shares of Tribune/Swab-Fox Common
Stock which is greater than the Cash Conversion Number, all cash elections
will be reduced proportionately so that each share of Tribune/Swab-Fox Common
Stock covered by a cash election and not converted into the right to receive
the Cash Consideration as set forth above will be converted into the Stock
Consideration. If cash elections are received for a number of shares of
Tribune/Swab-Fox
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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.
For information regarding the federal income tax consequences of
electing to receive cash for some or all shares of Tribune/Swab-Fox Common
Stock, see "The Merger--Federal Income Tax Consequences."
The Cash Election Form contains information regarding the backup
withholding tax rules. Under these rules, unless an exception applies under
the applicable law and regulations, the Exchange Agent will be required to
withhold, and will withhold, 31% of the gross cash proceeds to be paid to a
Tribune/Swab-Fox stockholder or other designated payee pursuant to the Merger
unless the Tribune/Swab-Fox stockholder or other payee provides such
stockholder's tax identification number (employer identification number or
social security number) and certifies that such number is correct.
All interpretations and decisions concerning application of the
procedures for cash elections will be made by Tribune/Swab-Fox and
Communications, and all such interpretations and decisions will be final and
binding on all holders of shares of Tribune/Swab-Fox Common Stock.
Exchange of Tribune/Swab-Fox Common Stock for Communications Common Stock
Any Tribune/Swab-Fox stockholder who desires to receive Communications
Common Stock for all shares of Tribune/Swab-Fox Common Stock held 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 the Effective Time of the Merger only into the right to receive whole
shares of Communications Common Stock. No fractional shares of
Communications Common Stock or scrip representing the same will be issued in
connection with the Merger. In lieu of such fractional shares, any holder of
Tribune/Swab-Fox Common Stock who would otherwise be entitled to a fractional
share of Communications Common Stock will, upon surrender of his or her
Tribune/Swab-Fox Common Stock certificate, receive in cash an amount equal to
the product obtained by multiplying $0.88 times the number of shares of
Tribune/Swab-Fox Common Stock which would otherwise be converted into a
fractional share of Communications Common Stock. No certificates for
Communications Common Stock will be issued in exchange for Tribune/Swab-Fox
Common Stock until after the Effective Time of the Merger.
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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.
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
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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, 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;
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(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. Communications and
Tribune/Swab-Fox each estimate that the total amount of the expenses incurred
and to be incurred by it in connection with the Merger Agreement and the
transactions contemplated thereby will be $400,000 and $225,000,
respectively.
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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.
Communications Common Stock. All issued and outstanding shares of
Communications Common Stock are validly issued, fully paid and nonassessable,
and the shares of Communications Common Stock to be issued in the Merger,
when issued pursuant to the Merger Agreement, will be validly issued, fully
paid and nonassessable. The holders of Communications Common Stock are
entitled to one vote for each share held on all matters submitted to a vote
of common stockholders, including the election of directors. The
Communications Common Stock does not have cumulative voting rights. Each
share of Communications Common Stock is entitled to participate equally in
dividends, as and when declared by the Communications Board out of funds
legally available therefor, and in the distribution of assets in the event of
liquidation, subject in all cases to any prior rights of outstanding shares
of Communications Preferred Stock. The shares of Communications Common Stock
have no preemptive or conversion rights, redemption rights or sinking fund
provisions.
The outstanding shares of Communications Common Stock are listed on the
AMEX and trade under the symbol "TCM." Bank of Oklahoma, N.A. is the
transfer agent and registrar for the Communications Common Stock.
Communications Preferred Stock. Pursuant to Communications'
Certificate of Incorporation (the "Communications Charter"), Communications
is authorized to issue up to 1,000,000 shares of Communications Preferred
Stock, and the Communications Board by resolution may establish one or more
series of Communications Preferred Stock having the number of shares,
designations, relative voting rights, dividend rights, liquidation and other
rights, preferences and limitations that the Communications Board fixes
without any stockholder approval. The issuance of Communications Preferred
Stock may adversely affect the rights of the holders of Communications Common
Stock. In addition, the Communications Preferred Stock may be issued as an
"anti-takeover" device. See "Comparative Rights of Stockholders--'Blank
Check' Preferred Stock." As of the date of this Proxy Statement/Prospectus,
no shares of Communications Preferred Stock have been issued and no series of
Communications Preferred Stock has been designated by the Communications
Board.
COMPARATIVE RIGHTS OF STOCKHOLDERS
General
As a result of the Merger, holders of Tribune/Swab-Fox Common Stock
(other than holders who exercise their appraisal rights or holders who elect
the Cash Alternative for all of their shares and have all such shares
acquired for the Cash Consideration) will become stockholders of
Communications and the rights of all such former Tribune/Swab-Fox
stockholders will thereafter be governed by the Communications Charter and
the Communications bylaws as currently in effect (the "Communications
Bylaws"). The following is a summary of the material differences between, as
well as a summary of, the rights of holders of Communications Common Stock
and holders of Tribune/Swab-Fox Common Stock. Because both Tribune/Swab-Fox
and Communications are organized and exist under Delaware law and are subject
to the corporate laws of Delaware, these differences arise principally from
various provisions of the certificates of incorporation and bylaws of the two
companies. For a more complete description of these differences and rights,
reference is made to the corporate laws of Delaware and the full text of the
Communications Charter, the Communications Bylaws, the Tribune/Swab-Fox
Certificate of Incorporation (the "Tribune/Swab-Fox Charter") and the bylaws
of Tribune/Swab-Fox as currently in effect
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(the "Tribune/Swab-Fox Bylaws"). For information as to how to obtain copies
of such documents, see "Documents Incorporated By Reference."
Number of Directors; Removal of Directors; Filling Vacancies
Communications. The Communications Bylaws provide that the number of
directors of Communications will be determined by the Board prior to
the mailing of the notice of the annual meeting of stockholders, at
any regular or special meeting of the Board, but in no event may the
number of directors be less than three nor more than fifteen. The
Communications Board currently consists of seven members.
Stockholders of Communications may remove a director or the entire
Communications Board, with or without cause, at any time upon the
affirmative vote of holders of a majority of the then outstanding
shares of stock entitled to vote generally in the election of
directors.
The Communications Bylaws provide that any vacancies occurring in
the Communications Board may be filled by the affirmative vote of a
majority of the remaining directors, though less than a quorum. A
director elected to fill a vacancy created by the resignation or
termination of a director will serve the remainder of the term of the
resigning or terminated director. The Communications Charter and the
Communications Bylaws both provide that any directorship to be filled
by reason of an increase in the number of directors shall be filled by
an election at an annual or special meeting of stockholders called for
that purpose, unless the vacancy was created by the stockholders, in
which case it may be filled by the directors.
Tribune/Swab-Fox. The Tribune/Swab-Fox Bylaws contain substantially
similar provisions relating to the determination of the number of
directors; however, in no event may the number of directors of
Tribune/Swab-Fox be less than three nor more than eleven. The
Tribune/Swab-Fox Board currently consists of six members.
Stockholders of Tribune/Swab-Fox have the same rights with respect
to the removal of directors.
The Tribune/Swab-Fox Charter and the Tribune/Swab-Fox Bylaws contain
the same provisions relating to the filing of board vacancies of
directors.
Stockholder Action by Written Consent; Special Meetings
Action by stockholders of Communications or Tribune/Swab-Fox may be
taken without a meeting of the stockholders by written consent so long as
the stock ownership represented by those consenting in writing to the
action amounts at least to the number of votes that would have been
necessary to approve such action at a meeting of stockholders. Special
meetings of the stockholders of Communications or Tribune/Swab-Fox may be
called at any time by such company's Board of Directors or as otherwise
allowed by law. Business at such special meeting shall be confined to the
objects stated in the call.
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Amendments of the Certificate of Incorporation and Bylaws
The Communications Charter and the Tribune/Swab-Fox Charter may each be
amended by approval by the respective holders of a majority of the
outstanding stock of such company entitled to vote thereon. The
Communications Bylaws and the Tribune/Swab-Fox Bylaws may each be amended
by the approval by the respective holders of a majority of the outstanding
stock of such company entitled to vote thereon, or by approval of a
majority of such company's Board of Directors.
"Blank Check" Preferred Stock
Communications. Subject to certain limitations prescribed by law and
the rules of the AMEX, the Communications Board is authorized by the
Communications Charter, without any approval or other action by the
Communications stockholders, to provide for the issuance of shares of
Communications Preferred Stock in one or more series, to establish the
number of shares of each such series and to fix the designations,
powers, preferences and rights of the shares of each such series and
any qualifications, limitations or restrictions thereof. See
"Description of Communications Capital Stock --Communications
Preferred Stock."
Tribune/Swab-Fox. The Tribune/Swab-Fox Charter contains
substantially similar provisions relating to Tribune/Swab-Fox Class A
Preferred Stock, par value $10.00 per share.
Management of Communications believes that the ability of the
Communications Board to issue one or more series of Communications Preferred
Stock provides Communications with flexibility in structuring possible future
financings and acquisitions and in meeting other corporate needs that might
arise. Although the Communications Board has no intention at the present
time of doing so, it could issue a series of Communications Preferred Stock
that could, depending on the terms of such series, impede the completion of a
merger, tender offer or other takeover attempt. The Communications Board
will make any determination to issue such shares based on its judgment as to
the best interests of Communications and its stockholders. The
Communications Board, in so acting, could issue Communications Preferred
Stock having terms that discourage an acquisition attempt through which an
acquiror may be able to change the composition of the Communications Board,
including a tender offer or other transaction that some of the Communications
stockholders might believe to be in their best interests or in which
stockholders might receive a premium for their stock over the then current
market price of such stock.
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Business Combinations
Communications. Communications is a Delaware corporation and is
subject to Section 203 of the Delaware General Corporation Law. In
general, Section 203 prevents an "interested stockholder" (defined
generally as a person owning 15% or more of Communications'
outstanding voting stock) from engaging in a "business combination"
(as defined in Section 203) with Communications for three years
following the date that person becomes an interested stockholder
unless (i) before that person became an interested stockholder, the
Communications Board approved either the transaction in which the
interested stockholder became an interested stockholder or the
business combination, (ii) upon completion of the transaction that
resulted in the interested stockholder's becoming an interested
stockholder, the interested stockholder owns at least 85% of the
Communications voting stock outstanding at the time the transaction
commenced (excluding stock held by directors who are also officers of
Communications and by employee stock plans that do not provide
employees with the right to determine confidentially whether shares
held subject to the plan will be tendered in a tender or exchange
offer), or (iii) following the transaction in which that person became
an interested stockholder, the business combination is approved by the
Communications Board and authorized at a meeting of stockholders by
the affirmative vote of the holders of at least two-thirds of the
Communications voting stock not owned by the interested stockholder.
Under Section 203, these restrictions also do not apply to certain
business combinations proposed by an interested stockholder following
the announcement or notification of one of certain extraordinary
transactions involving Communications and a person who was not an
interested stockholder during the previous three years or who became
an interested stockholder with the approval of a majority of
Communications' directors, if that extraordinary transaction is
approved or not opposed by a majority of the directors who were
directors before any person became an interested stockholder in the
previous three years or who were recommended for election or elected
to succeed such directors by a majority of such directors then in
office.
Tribune/Swab-Fox. Tribune/ Swab-Fox is also a Delaware corporation
and is also subject to Section 203 of the Delaware General Corporation
Law, with generally the same effect as that described for
Communications.
The provisions of Section 203 will not apply to the Merger because
Communications is not an "interested stockholder" of Tribune/Swab-Fox (it
owns less than 15% of the outstanding Tribune/Swab-Fox voting stock), and,
although Tribune/Swab-Fox is an "interested stockholder" of Communications,
it became an "interested stockholder" more than three years ago. Under
certain circumstances, Section 203, as described above, may make it difficult
for a person who would be an "interested stockholder" to effect various
business combinations with a corporation for a three-year period. The
provisions of Section 203 may encourage companies interested in acquiring
Communications to negotiate in advance with the Communications Board, since
the stockholder approval requirement would be avoided if a
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majority of the directors then in office approve either the business
combination or the transaction that results in the stockholder becoming an
interested stockholder.
Appraisal Rights
Communications. Section 262 of the Delaware General Corporation Law
provides for appraisal rights only in connection with certain mergers
and consolidations. Furthermore, the Delaware General Corporation Law
eliminates appraisal rights with respect to shares of any class or
series of stock listed on a national securities exchange or held of
record by more than 2,000 stockholders. Communications Common Stock is
listed for trading on the AMEX, thus, no appraisal rights are
available to Communications stockholders in the Merger or any other
merger or consolidation.
Tribune/Swab-Fox. Tribune/Swab-Fox is also a Delaware corporation
and is also subject to Section 262 of the Delaware General Corporation
Law. Tribune/Swab-Fox Common Stock is not, however, traded on a
national securities exchange or the Nasdaq National Market or held of
record by more than 2,000 stockholders; thus, Tribune/Swab-Fox
stockholders currently have appraisal rights in connection with
certain mergers and consolidations and specifically with respect to
the Merger. As a result of the Merger, however, Tribune/Swab-Fox
stockholders who receive shares of Communications Common Stock in the
Merger will become stockholders of Communications and will no longer
have appraisal rights available to them. See "The Merger--Appraisal
Rights."
Limitation of Liability of Directors
Communications. As permitted by Delaware law, the Communications
Charter provides that a director will not be personally liable to
Communications or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach
of the director's duty of loyalty to Communications or its
stockholders, (ii) for acts or omissions not in good faith or that
involve intentional misconduct or a knowing violation of law, (iii)
under Section 174 of the Delaware General Corporation Law (which
concerns unlawful payments of dividends, stock purchases or
redemptions), or (iv) for any transaction from which the director
derived an improper personal benefit.
Tribune/Swab-Fox. The Tribune/Swab-Fox Charter contains the same
limitation on director liability.
While these provisions provide directors with protection from awards
for monetary damages for breaches of their duty of care, they do not
eliminate such duty. Accordingly, these provisions will have no effect on
the availability of equitable remedies, such as an injunction or rescission
based on a director's breach of his duty of care. The provisions described
above apply to an officer of the corporation only if he is a director of the
corporation and is acting in his capacity as a director and do not apply to
officers who are not also directors.
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Indemnification of Directors and Officers
Communications. The Communications Charter provides that each person
who is involved in any actual or threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that such person serves as a
director or officer of the corporation, will be indemnified by the
corporation to the fullest extent permitted by Section 145 of the
Delaware General Corporation Law or any successor statute. The
indemnification conferred by the Communications Charter is not
exclusive of any other right to which a person seeking indemnification
may be entitled under any law, bylaw, agreement, vote of stockholders
or disinterested directors or otherwise.
Tribune/Swab-Fox. The Tribune/Swab-Fox Charter contains the same
provision relating to the indemnification of directors and officers.
Section 145 of the Delaware General Corporation Law permits a
corporation to indemnify officers, directors, employees and agents for
actions taken in good faith and in a manner they reasonably believed to be
in, or not opposed to, the best interests of the corporation, and with
respect to any criminal action, which they had no reasonable cause to believe
was unlawful. Section 145 provides that a corporation may advance expenses
of defense (upon receipt of a written undertaking to reimburse the
corporation if indemnification is not appropriate) and must reimburse a
successful defendant for expenses, including attorneys' fees, actually and
reasonably incurred, and permits a corporation to purchase and maintain
liability insurance for its directors and officers. Communications and
Tribune/Swab-Fox maintain directors and officers liability insurance.
Section 145 provides that indemnification may not be made for any claim,
issue or matter as to which a person has been adjudged by a court of
competent jurisdiction, after exhaustion of all appeals therefrom, to be
liable to the corporation, unless and only to the extent a court determines
that the person is entitled to indemnity for such expenses, despite the
adjudication of liability, as the court deems proper.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Tribune/Swab-Fox
Results of Operations
---------------------
Year Ended December 31, 1994, Compared to Year Ended December 31, 1993.
Operations for the year ended December 31, 1994, have four major variations
from the same period ended December 31, 1993. First, the 1994 period did not
include any shopper-newspaper operations because these operations were sold
during the past year. Second, Galaxy, which is a provider of registration
and information services to the exposition industry, was acquired effective
March 1, 1994, and its operations are included for the ten months ended
December 31, 1994, in exposition services along with the operations of
Atwood. Third, indebtedness has been reduced by over $16,000,000 during the
past eighteen months. Fourth, during the third quarter of 1993, a $9,224,000
loss on assets held for sale was recognized related to the intended
disposition of the shopper-newspapers. In addition, the real estate segment
is a discontinued operation as of December 31, 1994, and the financials have
been restated to recognize this discontinued operation.
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Revenues of $56,919,000 for 1994 were $11,256,000 lower than for 1993.
The revenue decrease consisted of $26,212,000 related to the shopper-
newspapers. Partially offsetting this decrease is the revenue increase in
1994 of $2,571,000 in the convention publishing component of exposition
services (which is Atwood's activities), plus Galaxy's revenues of $8,003,000
from March 1, 1994. Convention publishing revenues increased as a result of
additional conventions, including specialty publications, and higher revenues
from a trade journal which published more issues in 1994. Convention
publishing revenues for 1993 and 1992 were reclassified from publishing to
exposition services. Publishing revenues for 1994, disregarding the shopper-
newspapers, were $2,148,000 higher than the prior year. An increase in
advertising pages in Gaming and Wagering Business and Convenience Store News
in 1994 represents the major increases. The information services revenue
increase of $592,000 for 1994 consists mainly of an increase in employment
histories revenue, resulting from both higher volume and an increase in the
price of employment histories, a new product introduced in 1993 (criminal
records), and an increase in motor vehicle report revenues, offset by a
$2,613,000 decrease in 1994 in long distance telephone resale revenue,
resulting from Tribune/Swab-Fox's termination of this business during the
first quarter of 1994 due to competitive and regulatory considerations. In
terminating this business, Communications maintained an override interest and
the ability to continue marketing services of the purchaser.
Other revenue for 1994 and 1993, is substantially all related to the
World Gaming Congress trade show sponsored by Communications' Gaming and
Wagering Business trade journal. Also included in other income is interest
income related to the contract receivable from World Publishing Company,
income from a co-sponsored trade show and covenant-not-to-compete income
related to the New York Shopper sale in November 1993. Gains of
approximately $440,000 relating to the sale of the remaining venture capital
investments are included in 1994 other revenue.
Publishing costs and expenses were $19,579,000 lower for 1994, as
compared with 1993. The decrease in costs related to the shopper-newspapers
was $21,600,000 for 1994. 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 as compared with
1993.
Exposition services costs and expenses consist of Atwood for 1994 and
1993 and Galaxy for ten months in 1994. The increase of $5,506,000 for 1994,
includes increases of $1,557,000 related to the convention publishing
business as noted above and Galaxy's 1994 operating costs for the ten months
of $3,949,000.
Information services costs and expenses were $516,000 lower for 1994,
as compared with 1993. The increase in costs related to the criminal records
product introduced in 1993 and higher volumes, including additional personnel
and related costs, was more than offset by the decrease of $2,394,000 in
1994, related to long distance telephone resale costs because of the
termination of this business in early 1994.
Other operating expenses in 1993 related to the venture capital
operations, which remaining venture capital investments were sold in 1994.
General and administrative expenses were $3,138,000 lower for 1994, as
compared with 1993. The decrease in 1994 relating to the shopper-newspapers
was $5,422,000. Galaxy's general and administrative expenses of $2,700,000
in 1994 and increases in each of the other divisions related to continued
growth, mainly personnel costs, partially offset the decrease from the
shopper-newspapers. In addition, retirement and deferred compensation
expense of approximately $1,800,000 was included in 1993, attributable to the
retirement of the then chief executive officer of Communications and
Tribune/Swab-Fox.
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Interest expense decreased $1,185,000 for 1994, as compared with 1993,
which is related to the payoff of the 10.32% Senior Notes in November 1993,
and other principal payments on debt and reductions in deferred contract
liabilities during the past year. The interest rate increase on current
outstanding debt reduced the amount of interest expense declined in 1994 from
debt reductions.
Depreciation and amortization decreased $661,000 in 1994, as compared
with 1993, substantially all related to disposition of the depreciable and
amortizable assets of the shopper-newspapers. Galaxy's depreciation and
amortization of $823,000 is included for ten months in 1994 and partially
offset the decrease from the shopper-newspapers.
The loss on assets held for sale in 1993 represented the reduction from
book value to estimated net value of the shopper-newspaper assets which were
being held for sale and were subsequently sold in November, 1993, and May,
1994 with no additional loss. No loss was recognized on the assets of the
three trade journals held for sale at December 31, 1994, as Tribune/Swab-Fox
believes that the net value of the trade journals are greater than the net
book value.
Provision for income taxes as a percent of income before income taxes
is higher than the statutory federal income tax rate because goodwill
amortization related to certain acquisitions is not deductible for income tax
purposes.
Year Ended December 31, 1993, Compared to Year Ended December 31, 1992.
Revenues for 1993 decreased $27,058,000 from 1992. Revenues of Communications
for 1993 decreased $26,854,000 from revenues for 1992. Aside from the
Communications decrease, the decrease in revenues is mainly attributable to
lower interest income on short-term investments, related to both the
continued decline in short-term interest rates and decrease in amounts
invested.
With respect to the Communications decrease, approximately $19,900,000
of the decrease was newspaper publishing revenues for 1992 through September
30, 1992, when The Tulsa Tribune ceased publication after the agreement with
World Publishing Company which terminated their joint operating arrangement.
Revenues from the shopper-newspapers were $11,500,000 lower in 1993 as
compared with 1992. Revenues for the fourth quarter of 1992 from shopper-
newspapers were $9,500,000, whereas no fourth quarter revenue was recognized
from shopper-newspapers in 1993 due to the operations being held for sale.
The New Jersey Shopper revenues were $2,000,000 lower during 1993 as compared
with 1992 mainly because of the effect on operations of moving to a new
location in early 1993 which resulted in the commercial printing operations
being shut-down for approximately one month. The other major reason for
lower revenue from the New Jersey Shopper in 1993 was lower volume and prices
in the preprint insert business caused by the competitive environment.
Revenues from exposition services convention/trade show publishing
increased approximately $1,500,000, most of which was attributable to
continued growth of this operation, including a $300,000 increase from a
small trade publication acquired in mid-1992.
Information services revenues increased approximately $1,800,000 in
1993 as compared with 1992, consisting mainly of revenue from a new product,
criminal records reports, of $640,000; higher revenue from employment history
information of $700,000, a result of both higher volume and an increase in
price; and an increase in revenue from motor vehicle reports of approximately
$300,000, as a result of higher volume and a new service, "MVR Express,"
which provides a motor vehicle report faster for a premium price.
Other revenue and interest increased approximately $640,000 which
consisted of a $730,000 increase in interest income attributable to the
contract receivable from World Publishing Company that was a part of the
termination of 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
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conference exhibitors and attendees and a new conference. Included in 1992
other income was a $950,000 lawsuit settlement from MCI.
Costs and expenses other than interest and depreciation and
amortization were $11,711,000 lower in 1993 as compared with 1992. Newspaper
publishing costs were $15,000,000 lower in 1993 (the costs incurred in the
nine months of the operation of The Tulsa Tribune in 1992), and shopper-
newspaper costs were $10,500,000 lower in 1993, a result of only nine months'
costs being included in 1993. As a result of the decision to sell the
shopper-newspapers, Communications recognized a loss of $9,224,000 to reduce
the assets of these operations to net realizable value which partially offset
the above decreases. Exposition services convention/trade show publishing
costs and expenses increased $1,300,000 in 1993 as a result of continued
growth of this operation. Information services costs and expenses increased
$1,250,000 consisting of the direct cost of criminal record reports, which is
a new product, and an increase in personnel costs due to an increase in the
number of employees for new products and growth in existing products.
General and administrative expenses in 1993 include approximately
$1,800,000 for retirement expenses related to the resignation of the former
chairman and chief executive officer of Communications and Tribune/Swab-Fox.
Interest expense decreased $771,000 in 1993, essentially all
attributable to a reduction in Communications' debt of $11,750,000 as a
result of scheduled debt payments and the early payoff of the 10.32% Senior
Notes in November 1993. This payoff was required by the holder of the 10.32%
Senior Notes in connection with the sale of the assets of the New York
Shopper. The early termination penalty ("yield maintenance premium")
required by the 10.32% Senior Notes was reduced through negotiations with the
holder of the 10.32% Senior Notes. This premium is accounted for as an
extraordinary loss in the financial statements. Interest on debt other than
Communications increased slightly related to renegotiation of certain debt.
Depreciation and amortization decreased $3,599,000 in 1993 attributable
to Communications' operations including sale of the newspaper publishing
assets September 30, 1992, the reduction in shopper-newspaper assets to net
realizable value at September 30, 1993, and higher depreciation and
amortization of approximately $2,400,000 in 1992 related to a change in
estimated lives used to depreciate and amortize certain assets.
Adoption of the change in accounting for income taxes as required by
Financial Accounting Standards Statement No. 109 did not have a material
effect on the Tribune/Swab-Fox financial position or results of operations.
Year Ended December 31, 1992, Compared to Year Ended December 31, 1991.
Tribune/Swab-Fox's revenues for 1992 increased by $790,000 over revenues for
1991. Revenues for Communications increased $1,248,000 for 1992 over 1991,
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 overall publishing revenues decreased
$1,915,000. Newspaper publishing revenues declined $6,050,000 in 1992
related to only nine months operations which was substantially offset by
increases in trade journal revenues of $1,500,000, attributable to increased
advertising pages, shopper-newspapers of $750,000 and convention/trade show
publishing of $2,000,000, because of both growth of operations and new
services.
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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 in 1992.
Costs and expenses, other than interest, depreciation and amortization,
decreased $2,004,000 for 1992 as compared with 1991. Communications' costs
decreased $2,150,000 in 1992, composed of a decrease in newspaper publishing
costs of $6,500,000 and a decrease in shopper-newspaper costs of $380,000,
related to only nine months newspaper publishing operations in 1992 and lower
newsprint costs, offset by an increase in trade journals of $930,000, an
increase in convention/trade show publishing of $2,000,000 and an increase in
information services of $1,800,000, mainly attributable to growth in volume.
Other costs and expenses for Tribune/Swab-Fox, separate from
Communications, were higher in 1992 primarily related to an increase in
valuation reserves for venture capital investments. Lower general and
administrative costs are mainly attributable to the newspaper publishing
operation.
Interest expense decreased approximately $529,000 in 1992 of which
$500,000 was a decrease in Communications' interest. These decreases in 1992
are a result of significant debt reduction by Communications, scheduled debt
payments on Tribune/Swab-Fox's debt, and lower interest rates. Depreciation
and amortization increased $2,487,000 in 1992, substantially all related to
the effect of a change in the estimated lives used to depreciate or amortize
certain machinery, equipment and advertising lists by Communications.
Liquidity and Capital Resources
-------------------------------
Prior to the formation of Communications, Tribune/Swab-Fox was the
recipient of the cash generated by the businesses now owned by
Communications. Tribune/Swab-Fox owns 78% of Communications and, therefore,
unless a dividend is declared by Communications payable pro rata to all
stockholders (which is unlikely), Tribune/Swab-Fox no longer has access to
the cash flow of the businesses of Communications.
However, in the formation of Communications, Tribune/Swab-Fox was
repaid certain indebtedness representing advances made by Tribune/Swab-Fox in
the acquisition of the assets of BMT. This amount, being $6,500,000, served
to provide Tribune/Swab-Fox with significant liquidity to meet its
obligations for several years. Tribune/Swab-Fox plans no significant cash
expenditures in 1995, other than debt repayment. The assets owned by
Tribune/Swab-Fox separate from Communications, being primarily notes
receivable and shares of MECI stock produce only small amounts of revenues.
Thus, if the Merger were not completed, unless certain of such assets are
sold during 1995, Tribune/Swab-Fox will operate at a negative cash flow
basis.
To meet its needs, it was necessary for Tribune/Swab-Fox to renegotiate
its real estate debt obligations and lending arrangements in 1993. In July
1993, Tribune/Swab-Fox entered into three separate loan agreements with
BancFirst, an Oklahoma banking institution ("BancFirst"), to effect such
refinancing. In addition, as a part of this transaction, Tribune/Swab-Fox
used available cash to repay other indebtedness. At December 31, 1993,
Tribune/Swab-Fox had borrowed $3,250,000 from BancFirst secured by real
estate owned by Tribune/Swab-Fox. At the time the loan arrangements were
entered into, several of the material loans were with partnerships of which
Tribune/Swab-Fox was a general partner. Subsequent to entering into these
loan arrangements, Tribune/Swab-Fox acquired the interest of its partner thus
becoming responsible for 100% of this indebtedness. As a practical matter,
because the partner had been unable to make payments for a number of years,
Tribune/Swab-Fox was fully responsible for this debt. Therefore,
Tribune/Swab-Fox made the decision to acquire the interest of the partner for
the payment by the partner of $50,000 in cash to Tribune/Swab-Fox and the
formal assumption by Tribune/Swab-Fox of this indebtedness, as well as the
forgiveness by Tribune/Swab-Fox
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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. Possible 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.
Inflation
Other than with respect to the businesses conducted through
Communications (see "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Communications--Inflation."),
Tribune/Swab-Fox does not anticipate that inflation will have a material
impact on its business activities in 1995.
Communications
Communications is a 78 percent-owned subsidiary of Tribune/Swab-Fox
and, accordingly, Communications is consolidated in the financial statements
of Tribune/Swab-Fox. Since the only operating business of Tribune/Swab-Fox,
other than the businesses conducted through Communications, are its real
estate activities, the following discussion relating to the results of
operations of Communications is substantially similar to the preceding
discussion relating to the results of operations of Tribune/Swab-Fox for the
same periods.
Results of Operations
Year Ended December 31, 1994, Compared to Year Ended December 31, 1993.
Operations for the year ended December 31, 1994, have four major variations
from the same period ended December 31, 1993. First, the 1994 period did not
include any shopper-newspaper operations because these operations were sold
during the past year. Second, Galaxy, which is a provider of registration
and information services to the exposition industry, was acquired effective
March 1, 1994, and its operations are included for the ten months ended
December 31, 1994, in exposition services along with the operations of
Atwood. Third, indebtedness has been reduced by over $11,000,000 during the
past eighteen months. Fourth, during the third quarter of 1993, a $9,224,000
loss on assets held for sale was recognized related to the intended
disposition of the shopper-newspapers.
Revenues of $56,289,000 for 1994 were $11,688,000 lower than for 1993.
The revenue decrease consisted of $26,212,000 which related to the shopper-
newspapers. Partially offsetting this decrease is the revenue increase in
1994 of $2,571,000 in the convention publishing component of the exposition
services (which is Atwood's activities) plus Galaxy's revenues of $8,003,000
from March 1, 1994. Convention publishing revenue increased as a result of
additional conventions, including specialty publications, and higher revenues
from a trade journal which published more issues in 1994. Convention
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publishing revenues for 1993 and 1992 were reclassified from publishing to
exposition services. Publishing revenues for 1994, disregarding the shopper-
newspapers, were $2,148,000 higher than the prior year. An increase in
advertising pages in Gaming and Wagering Business and Convenience Store News
in 1994 represents the major increases. The information services revenue
increase of $592,000 for 1994 consists mainly of an increase in employment
histories revenue, resulting from both higher volume and an increase in the
price of employment histories, a new product introduced in 1993 (criminal
records), and an increase in motor vehicle report revenues, offset by a
$2,613,000 decrease in 1994 in long distance telephone resale revenue,
resulting from Communications' termination of this business during the first
quarter of 1994 due to competitive and regulatory considerations. In
terminating this business, Communications maintained an override interest and
the ability to continue marketing services of the purchaser.
Other revenue for 1994 and 1993, is substantially all related to the
World Gaming Congress conference and trade show sponsored by Communications'
Gaming and Wagering Business trade publication. Also included in other
income is interest income related to the contract receivable from the World
Publishing Company, income from a co-sponsored trade show and covenant-not-
to-compete income related to the New York Shopper sale in November 1993.
Publishing costs and expenses were $19,579,000 lower for 1994, as
compared with 1993. The decrease in costs related to the shopper-newspapers
was $21,600,000 for 1994. The increase in 1994 related to the growth of the
World Gaming Congress conference and trade show, as noted in other revenue
above, partially offsets the shopper-newspapers decrease. Trade journal
costs increased in 1994 related to the increase in pages as compared with
1993.
Information services costs and expenses were $516,000 lower for 1994,
as compared with 1993. The increase in costs related to the criminal records
product introduced in 1993 and higher volumes, including additional personnel
and related costs, was more than offset by the decrease of $2,394,000 in
1994, related to long distance telephone resale costs because of the
termination of this business in early 1994.
Exposition services costs and expenses consist of Atwood for 1994 and
1993 and Galaxy for ten months in 1994. The increase of $5,506,000 for 1994,
includes increases of $1,557,000 related to the convention publishing
business as noted above and Galaxy's 1994 operating costs for the ten months
of $3,949,000.
General and administrative expenses were $3,244,000 lower in 1994, as
compared with 1993. The decrease in 1994 related to the shopper-newspapers
was $5,422,000. Galaxy's general and administrative expenses of $2,700,000
in 1994 and increases in each of the other divisions related to continued
growth, mainly personnel costs, partially offset the decrease from the
shopper-newspapers. In addition, retirement and deferred compensation
expense of approximately $1,800,000 was included in 1993, attributable to the
retirement of the then chairman and chief executive officer of
Communications.
Interest expense decreased $1,061,000 for 1994, as compared with 1993,
which is related to the payoff of the 10.32% Senior Notes in November 1993,
and other principal payments on debt and reductions in deferred contract
liabilities during the past year. The interest rate increase on current
outstanding debt reduced the amount interest expense declined in 1994 from
debt reductions.
Depreciation and amortization decreased $653,000 in 1994, as compared
with 1993, substantially all related to disposition of the depreciable and
amortizable assets of the shopper-newspapers. Galaxy's depreciation and
amortization of $823,000 is included for ten months in 1994 and partially
offset the decrease from the shopper-newspapers.
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The loss on assets held for sale in 1993 represented the reduction from
book value to estimated net value of the shopper-newspaper assets which were
being held for sale and were subsequently sold in November 1993 and May 1994
with no additional loss. No loss was recognized on the assets of the three
trade journals held for sale at December 31, 1994.
Provision for income taxes as a percent of income before income taxes
is higher than the statutory federal income tax rate because goodwill
amortization related to certain acquisitions is not deductible for income tax
purposes.
Year Ended December 31, 1993, Compared to Year Ended December 31, 1992.
Revenues for 1993 decreased $26,854,000 from 1992. $19,900,000 of the
decrease was due to newspaper publishing revenues for 1992 through September
30, 1992, when The Tulsa Tribune ceased publication after the agreement with
World Publishing Company which terminated the joint operating arrangement.
Revenues from the shopper-newspapers were $11,500,000 lower in 1993 as
compared with 1992. Fourth quarter 1992 revenues from shopper-newspapers
were $9,500,000, whereas no fourth quarter revenue was recognized from
shopper-newspapers in 1993 due to the operations being held for sale. The
New Jersey Shopper revenues were $2,000,000 lower for 1993 as compared with
1992 mainly attributable to the effect on operations of moving to a new
location over a three month period in early 1993. This resulted in the
commercial printing operations being shut-down for approximately one month.
The other major reason New Jersey Shopper revenues were lower in 1993 was
lower volume and prices in the preprint insert business caused by the
competitive environment.
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.
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.
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<PAGE>
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 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
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<PAGE>
change in the estimated lives used to depreciate and amortize certain
machinery and equipment, advertising lists and covenants-not-to-compete at
the shopper-newspapers.
Liquidity and Capital Resources
Communications' available cash reserves, lines of credit and cash flow
have been sufficient to service debt, provide working capital and finance
necessary capital expenditures in the ordinary course of operations. Because
of the cash to be received ($450,000 per month through March 1996) from the
transaction with World Publishing Company, it is anticipated that
Communications' cash flow and current lines of credit will be sufficient to
meet its scheduled debt and other payment requirements, including the
prepayment (if desired) of the indebtedness of Tribune/Swab-Fox to be assumed
in the Merger, the anticipated capital expenditures for 1995 and the funding
of the Cash Alternative (though, as noted below, if the full Cash Alternative
were taken up, substantially all of Communications' cash and available credit
would likely be needed). Significant additional cash would be needed during
1995 only if a substantial acquisition for cash were undertaken. To provide
cash for the possibility of an acquisition and to keep current borrowing to a
minimum, Communications is offering three of its trade 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
two credit agreements and decreased their one-year bank lines of credit to
$3,750,000. No funds are currently drawn on these lines of credit. It is
possible that, if the full Cash Alternative is taken up, Communications could
utilize substantially all of its cash and lines of credit. Communications
has held informal discussions with BancFirst and management is confident
that, in such circumstances, additional lines of credit could be arranged if
needed.
Communications anticipates that capital expenditures in 1995 will be
approximately $2,600,000, excluding the Cash Alternative and any
acquisitions. Other than Communications' information division, the primary
capital expenditures will be for computers, software, furniture and office
equipment and to acquire additional "reader boxes" at Galaxy.
Communications' information division continues to offer its customers in the
trucking industry credits for providing employment information to be utilized
in its data base, which credits can be used against charges for future
services from such division. All of the credits earned are considered
capital expenditures for the acquisition of such data. At December 31, 1994,
Communications' current assets exceeded current liabilities by $16,176,000.
Inflation
Except for the costs of newsprint and postage at BMT, Communications
anticipates the effect of inflation on its operations during 1995 will be
primarily limited to the effects which general inflation will have on costs
in most areas in which Communications operates. The price of coated paper
used in Communications' publishing segment is expected to increase in price
more than 50 percent in 1995.
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<PAGE>
Also, postage increased 10 percent to 18 percent in 1995 (depending on postal
class) which will have a particularly significant impact on Communications'
journals.
LEGAL MATTERS
The validity of the shares of Communications Common Stock to be issued
in connection with the Merger will be passed upon for Communications by
Conner & Winters, A Professional Corporation, Tulsa, Oklahoma. The federal
income tax consequences in connection with the Merger will also be passed
upon for Communications and Tribune/Swab-Fox by Conner & Winters, A
Professional Corporation.
EXPERTS
The audited financial statements and schedules of Communications and
Tribune/Swab-Fox included or incorporated by reference in this Proxy
Statement/Prospectus have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto, and
are included or incorporated by reference herein in reliance upon the
authority of said firm as experts in giving said reports.
STOCKHOLDER PROPOSALS
Any Communications stockholder desiring to present a proposal for
consideration at the 1995 annual meeting of stockholders of Communications
must comply with the rules promulgated by the Commission. In order for a
proposal to be included in Communications' proxy materials relating to its
1995 annual meeting, a stockholder must have submitted such proposal in
writing to Communications not later than December 31, 1994.
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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<PAGE>
DEFINITION OF CERTAIN TERMS
Unless the context requires otherwise, when used in this Proxy
Statement/Prospectus, the following terms have the meanings indicated below.
"AMEX" means the American Stock Exchange, Inc.
"Atwood" means Atwood Convention Publishing, Inc., a Missouri
corporation.
"BancFirst" means BancFirst, an Oklahoma banking institution.
"BMT" means BMT Communications, Inc., an Oklahoma corporation.
"Cash Alternative" means the offer of Communications to acquire up to
10,000,000 shares of Tribune/Swab-Fox Common Stock for cash in the Merger
from stockholders of Tribune/Swab-Fox at the Offer Price.
"Cash Consideration" means the Offer Price which shall be exchangeable
for shares of Tribune/Swab-Fox Common Stock in the Merger, paid to those
Tribune/Swab-Fox stockholders who elect to receive Cash Consideration.
"Cash Conversion Number" means that number of shares of Tribune/Swab-
Fox Common Stock which is equal to 10,000,000 shares of Tribune/Swab-Fox
Common Stock less the number of shares of Tribune/Swab-Fox Common Stock held
----
by stockholders who have perfected their right to appraisal pursuant to
Section 262 of the Delaware General Corporation Law.
"Cash Election Deadline" means the time by which the Cash Election Form
must be received by the Exchange Agent in order to constitute a valid
election to receive cash for some or all shares of Tribune/Swab-Fox Common
Stock. The Cash Election Deadline is 5:00 p.m., New York time, on May ___,
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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<PAGE>
"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 2:00 p.m. local time, on May __, 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.
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<PAGE>
"Merger Agreement" means the Agreement and Plan of Merger, dated
January 25, 1995, as amended, by and between Communications and
Tribune/Swab-Fox.
"Merger Consideration" means, collectively, the Cash Consideration and
the Stock Consideration.
"New Jersey Shopper" means the shopper newspaper of Shopper's Guide,
Inc., a New Jersey corporation.
"New York Shopper" means the shopper newspaper of Marks-Roiland
Communications, Inc., a New York corporation.
"1995 Land Company" means 1995 LAND COMPANY, L.L.C., an Oklahoma
limited liability company.
"Offer Price" means the cash amount to be paid per share for
Tribune/Swab-Fox Common Stock to those Tribune/Swab-Fox stockholders who
elect to receive cash in lieu of Communications Common Stock. The Offer
Price equals $0.88 per share of Tribune/Swab-Fox Common Stock.
"Original Offer Price" means the original cash amount which was
subsequently replaced with the Offer Price. The Original Offer Price equaled
$0.80 per share of Tribune/Swab-Fox Common Stock.
"Oppenheimer" means Oppenheimer & Co., Inc., an investment banking firm
retained by the Communications Board to render an opinion regarding the
fairness, from a financial point of view, to Communications' stockholders
(other than Tribune/Swab-Fox and the officers and directors of each of
Tribune/Swab-Fox and Communications) of the consideration to be paid to
holders of Tribune/Swab-Fox Common Stock in connection with the Merger. See
"The Merger--Opinions of Financial Advisors."
"Registration Statement" means the Registration Statement on Form S-4,
as amended (Reg. No. 33-57587), filed by Communications with the Commission
with respect to the shares of Communications Common Stock to be issued in the
Merger. This Proxy Statement/Prospectus forms a part of such Registration
Statement.
"Section 145" means Section 145 of the Delaware General Corporation Law
which relates to indemnification of officers, directors, employees and
agents.
"Section 203" means Section 203 of the Delaware General Corporation Law
which relates to business combinations with interested stockholders.
"Section 262" means Section 262 of the Delaware General Corporation Law
which relates to appraisal rights.
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" means shares of Tribune/Swab-Fox Common Stock.
"Southwest Securities" means Southwest Securities, Inc., an investment
banking firm retained by the Tribune/Swab-Fox Board to render an opinion
regarding the fairness of the consideration, from a financial point of view,
to be received by the Tribune/Swab-Fox stockholders in connection with the
Merger. See "The Merger--Opinions of Financial Advisors."
"Special Dividend" means that one-time cash dividend of $0.0344 per
share of Tribune/Swab-Fox Common Stock, payable on the date of the
Tribune/Swab-Fox Meeting, subject to consummation of the
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<PAGE>
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.
"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 2:00 p.m. local time, on May __, 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.
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INDEX TO PRO FORMA FINANCIAL STATEMENTS
AND FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
TRIBUNE/SWAB-FOX
Preliminary statement........................................... F-2
Unaudited pro forma consolidated statement of operations for the
year ended December 31, 1994.................................. F-3
COMMUNICATIONS
Preliminary statement........................................... F-4
Unaudited pro forma consolidated statement of operations for the
year ended December 31, 1994................................. F-5
POST-MERGER COMMUNICATIONS
Preliminary statement........................................... F-6
Unaudited pro forma consolidated statement of operations for the
year ended December 31, 1994................................. F-7
Unaudited pro forma consolidated balance sheet as of
December 31, 1994............................................ F-8
HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS
TRIBUNE/SWAB-FOX
Years ended December 31, 1994, 1993 and 1992:
Report of independent public accountants...................... F-10
Consolidated balance sheets as of December 31, 1994 and 1993.. F-11
Consolidated statements of operations for the years ended
December 31, 1994, 1993 and 1992............................ F-13
Consolidated statements of changes in stockholders' equity for
the years ended December 31, 1994, 1993 and 1992............ F-14
Consolidated statements of cash flows for the years ended
December 31, 1994, 1993 and 1992............................ F-16
Notes to consolidated financial statements for the years ended
December 31, 1994, 1993 and 1992............................ F-18
COMMUNICATIONS
Years ended December 31, 1994, 1993 and 1992:
Report of independent public accountants........................ F-39
Consolidated balance sheets as of December 31, 1994 and 1993.... F-40
Consolidated statements of operations for the years ended
December 31, 1994, 1993 and 1992.............................. F-42
Consolidated statements of changes in stockholders' equity for
the years ended December 31, 1994, 1993 and 1992.............. F-43
Consolidated statements of cash flows for the years ended
December 31, 1994, 1993 and 1992.............................. F-44
Notes to consolidated financial statements for the years ended
December 31, 1994, 1993 and 1992.............................. F-46
</TABLE>
F-1
<PAGE>
TRIBUNE/SWAB-FOX
Unaudited Pro Forma Consolidated Statement of Operations
The Tribune/Swab-Fox Unaudited Pro Forma Consolidated Statement of
Operations for the year ended December 31, 1994, which includes Communications
(a 78% owned subsidiary), presents the results of operations of Tribune/Swab-Fox
for such period as if (i) the decision by Communications to sell the three BMT
trade journals and (ii) the April 30, 1994 sale of the New Jersey Shopper
assets had each taken place on January 1, 1994. The pro forma information
assumes no gain or loss on the ultimate sale of, and no earnings on any proceeds
from the sale of, the three BMT trade journals.
The Tribune/Swab-Fox Unaudited Pro Forma Consolidated Statement of
Operations for the year ended December 31, 1994, does not purport to be
indicative of the results of operations which actually would have occurred had
the decisions/transactions described above been effected on January 1, 1994, or
which may be expected to occur in the future. The Tribune/Swab-Fox Unaudited
Pro Forma Consolidated Statement of Operations for the year ended December 31,
1994, should be read in conjunction with the Tribune/Swab-Fox December 31, 1994,
financial statements included elsewhere in this Proxy Statement/Prospectus.
F-2
<PAGE>
Tribune/Swab-Fox
Unaudited Pro Forma Consolidated
Statement of Operations
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
For the Year Ended
December 31, 1994
--------------------------------------
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
(Unaudited)
<S> <C> <C> <C>
Revenues $56,919 $ (11,892)(1) $45,027
------- ---------- -------
Operating costs and expenses 35,069 (8,165)(1) 26,904
General and administrative 11,862 (1,804)(1) 10,058
Interest expense 736 0 736
Depreciation and amortization 3,118 (746)(1) 2,372
------- ---------- -------
Total costs and expenses 50,785 (10,715) 40,070
------- ---------- -------
Income before provision for income taxes 6,134 (1,177) 4,957
Provision for income taxes (2,589) 376 (1) (2,213)
Minority interest in earnings of
Communications (981) 210 (1) (771)
------- ---------- -------
Income from continuing operations $ 2,564 $ (591) $ 1,973
======= ========== =======
Per share amounts:
Earnings from continuing operations
per common and common
equivalent share $ 0.08 $ 0.07
======= =======
Weighted average number of common
and common equivalent shares
outstanding 29,742 29,742
======= =======
</TABLE>
(1) These adjustments relate to Communications' consolidation in Tribune/Swab-
Fox and consist of: (i) the elimination of operations for the period of the
three BMT trade journals held for sale (no gain or loss on sale or earnings
on any proceeds from such sale are assumed) and (ii) the recognition of
interest income on the investment of the proceeds from the sale of the New
Jersey Shopper assets. (See Communications Unaudited Pro Forma Consolidated
Statement of Operations for the year ended December 31, 1994, included
elsewhere in this Proxy Statement/Prospectus.) The adjustments are
summarized as follows:
<TABLE>
<CAPTION>
New Jersey
BMT Shopper Total
--- ---------- -----
<S> <C> <C> <C>
Revenues $(11,967) $ 75 $(11,892)
Operating costs and expenses (8,165) 0 (8,165)
General and administrative (1,804) 0 (1,804)
Depreciation and amortization (746) 0 (746)
Provision for income taxes 404 (28) 376
Minority interest in earnings
of Communications 223 (13) 210
-------- ------ --------
$ (625) $ 34 $ (591)
======== ====== ========
</TABLE>
F-3
<PAGE>
COMMUNICATIONS
Unaudited Pro Forma Consolidated Statement of Operations
The Communications Unaudited Pro Forma Consolidated Statement of
Operations for the year ended December 31, 1994, presents the results of
operations of Communications for such period as if (i) the decision to sell the
three BMT trade journals and (ii) the April 30, 1994 sale of the New Jersey
Shopper assets had each taken place on January 1, 1994. The pro forma
information assumes no gain or loss on the ultimate sale of, and no earnings on
any proceeds from the sale of, the three BMT trade journals.
The Communications Unaudited Pro Forma Consolidated Statement of
Operations for the year ended December 31, 1994, does not purport to be
indicative of the results of operations which actually would have occurred had
the decisions/transactions described above been effected on January 1, 1994, or
which may be expected to occur in the future. The Communications Unaudited Pro
Forma Consolidated Statement of Operations for the year ended December 31, 1994,
should be read in conjunction with the Communications December 31, 1994,
financial statements included elsewhere in this Proxy Statement/Prospectus.
F-4
<PAGE>
Communications
Unaudited Pro Forma Consolidated
Statement of Operations
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
For the Year Ended
December 31, 1994
----------------------------------------
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
(Unaudited)
<S> <C> <C> <C>
Revenues $ 56,289 $ (11,892)(1) $ 44,397
-------- --------- --------
Operating costs and expenses 35,069 (8,165)(1) 26,904
General and administrative expenses 11,081 (1,804)(1) 9,277
Interest expense 559 0 559
Depreciation and amortization 3,141 (746)(1) 2,395
-------- --------- --------
Total costs and expenses 49,850 (10,715) 39,135
-------- --------- --------
Income before income taxes 6,439 (1,177) 5,262
Provision for income taxes (2,589) 376 (1) (2,213)
-------- --------- --------
Net income $ 3,850 $ (801) $ 3,049
======== ========= ========
Per share amounts:
Earnings per common
and common equivalent share $ 0.75 $ 0.59
======== ========
Weighted average number of common
and common equivalent shares
outstanding 5,135 5,135
======== ========
</TABLE>
- -------------------
(1) These adjustments consist of (i) the elimination of operations for the
period of the three BMT trade journals held for sale (no gain or loss on
sale or earnings on any proceeds from such sale are assumed) and (ii) the
recognition of interest income on the investment of the proceeds from the
sale of the New Jersey Shopper assets. The adjustments are summarized as
follows:
<TABLE>
<CAPTION>
New Jersey
BMT Shopper Total
--- ---------- -----
<S> <C> <C> <C>
Revenues $(11,967) $ 75 $(11,892)
Operating cost and expenses (8,165) 0 (8,165)
General and administrative expenses (1,804) 0 (1,804)
Depreciation and amortization (746) 0 (746)
Provision for income taxes 404 (28) 376
-------- -------- --------
$ (848) $ 47 $ (801)
======== ======== ========
</TABLE>
F-5
<PAGE>
POST-MERGER COMMUNICATIONS
Unaudited Pro Forma Consolidated Financial Statements
The Merger of Tribune/Swab-Fox and Communications will be accounted for
as a 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
Statement of Operations for the year ended December 31, 1994, presents the
Tribune/Swab-Fox Unaudited Pro Forma Consolidated Statement of Operations for
the year ended December 31, 1994, adjusted for the following effects of the
Merger: (i) increased interest expense related to the assumed borrowing of a
portion of the $8.8 million used to buy back 10 million shares of Tribune/Swab-
Fox in the Cash Alternative (the maximum number of shares to be bought), (ii)
increased amortization resulting from goodwill generated in the purchase
accounting treatment of the Merger, (iii) elimination of minority interest, and
(iv) the related tax effect of the Merger, as if the Merger had occurred on
January 1, 1994. The Post-Merger Communications Unaudited Pro Forma Consolidated
Balance Sheet as of December 31, 1994, presents the Tribune/Swab-Fox
Consolidated Balance Sheet as of December 31, 1994, adjusted for the following
effects of the Merger: (i) the borrowing of a portion of the $8.8 million
necessary to buy back 10 million shares (the maximum number of shares to be
bought in the Cash Alternative) of Tribune/Swab-Fox, (ii) the purchase
adjustment, including goodwill generated in the purchase accounting treatment of
the Merger, (iii) the elimination of minority interest, and (iv) the accrual of
the estimated costs of the Merger.
The Post-Merger Communications Unaudited Pro Forma Consolidated Financial
Statements do not purport to be indicative of the results of operations which
actually would have occurred had the Merger taken place on January 1, 1994, or
which may be expected to occur in the future. The Post-Merger Communications
Unaudited Pro Forma Consolidated Financial Statements should be read in
conjunction with the Tribune/Swab-Fox December 31, 1994, financial statements
included elsewhere in this Proxy Statement/Prospectus.
F-6
<PAGE>
Post-Merger Communications
Unaudited Pro Forma Consolidated
Statement of Operations
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
For the Year Ended
December 31, 1994
-------------------------------------------
Tribune/ Pro Forma
Swab-Fox Adjustments Assuming
Pro Forma for Merger Merger
--------- ----------- --------
(Unaudited)
<S> <C> <C> <C>
Revenues $ 45,027 $ (254)(1) $ 44,773
--------- --------- --------
Operating costs and expenses 26,904 0 26,904
General and administrative 10,058 0 10,058
Interest expense 736 574 (2) 1,310
Depreciation and amortization 2,372 63 (3) 2,435
--------- --------- --------
Total costs and expenses 40,070 637 40,707
--------- --------- --------
Income before income taxes 4,957 (891) 4,066
Provision for income taxes (2,213) 2,025 (4) (188)
Minority interest in earnings (771) 771 (5) 0
--------- --------- --------
Income from continuing operations $ 1,973 $ 1,905 $ 3,878
========= ========= ========
Per share amounts :
Earnings from continuing
operations per common and
and common equivalent shares $ 1.06
========
Weighted average number of common
and common equivalent shares
outstanding 3,666 (6)
========
</TABLE>
- --------------------
(1) Eliminates investment income on cash used to acquire Tribune/Swab-Fox Common
Stock in the Cash Alternative.
(2) Reflects interest expense on borrowings under lines of credit used to
complete the minority interest purchase and to acquire 10,000,000 shares of
Tribune/Swab-Fox Common Stock in the Cash Alternative.
(3) Reflects amortization of goodwill for the period resulting from the purchase
of the minority interest.
(4) Adjusts the tax provision for the effect of pro forma adjustments and the
effect of filing a consolidated federal income tax return rather than
separate federal income tax returns.
(5) Reflects elimination of minority interest through purchase by Tribune/Swab-
Fox.
(6) Reflects common shares outstanding after the Merger assuming that the
maximum number of shares were acquired in the Cash Alternative.
F-7
<PAGE>
Post-Merger Communications
Unaudited Pro Forma Consolidated
Balance Sheet
December 31, 1994
(in thousands)
<TABLE>
<CAPTION>
Pro Forma
Tribune/ Adjustments Assuming
Swab-Fox for Merger Merger
-------- ----------- ---------
(Unaudited)
<S> <C> <C> <C>
ASSETS
Current Assets $ 32,205 $ (6,433)(a) $ 25,772
Contract Receivable and Investments 3,019 0 3,019
Property, Plant and Equipment, net 4,585 0 4,585
Deferred Tax Assets 732 0 732
Intangibles and Other Assets, net 13,040 625 (b) 13,665
--------- --------- --------
$ 53,581 $ (5,808) $ 47,773
========= ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities $ 15,142 $ 4,082 (c) 19,224
Long-Term Debt 4,905 0 4,905
Deferred Contract Liabilities 2,456 0 2,456
Minority Interest 6,698 (6,698)(d) 0
Common Stock Subject to Put 525 0 525
Stockholders' Equity 23,855 (3,192)(e) 20,663
--------- --------- --------
$ 53,581 $ (5,808) $ 47,773
========= ========= ========
</TABLE>
- -------------
These adjustments consist of (i) payment of the Special Dividend of $0.0344 per
share by Tribune/Swab-Fox to Tribune/Swab-Fox stockholders prior to the
effective time of the Merger (excluding shares owned by Communications and
assumed retired), (ii) the purchase of the minority interest in Communications
by Tribune/Swab-Fox accounted for as an asset purchase through issuance of
Communications shares to Tribune/Swab-Fox stockholders based on 0.1255 of a
share of Communications for each Tribune/Swab-Fox share not purchased in the
Cash Alternative,(iii) the purchase of 10,000,000 shares of Tribune/Swab-Fox at
$0.88 per share in the Cash Alternative, (iv) borrowings under the lines of
credit used to partially fund the purchase of shares in the Cash Alternative,
(v) accrual of the estimated costs of the Merger.
F-8
<PAGE>
The following summarizes the adjustments necessary to give effect on a pro forma
basis to transactions described above:
<TABLE>
<CAPTION>
<S> <C>
(a) The adjustment to current assets relates to the -
Payment of the Special Dividend $ (1,090)
Purchase of 10,000,000 shares of Tribune/Swab-Fox
at $0.88 per share in the Cash Alternative (8,800)
Borrowings under lines of credit 3,500
Transfer of costs of the Merger incurred prior to
December 31, 1994, to intangibles and other assets (43)
---------
$ (6,433)
=========
(b) The adjustment to intangibles and other assets, relates to the -
Goodwill resulting from the purchase of the minority
interest in Communications $ 625
=========
(c) The adjustment to current liabilities relates to the -
Borrowings under lines of credit $ 3,500
Accrual of estimated costs of the Merger not incurred
prior to December 31, 1994 582
---------
$ 4,082
=========
(d) The adjustment to minority interest relates to the -
Purchase of the minority interest in Communications $ (6,698)
=========
(e) The adjustment to stockholders' equity relates to the -
Payment of the Special Dividend $ (1,090)
Purchase of the minority interest in Communications 6,698
Purchase of 10,000,000 shares of Tribune/Swab-Fox
at $0.88 per share in the Cash Alternative (8,800)
---------
$ (3,192)
=========
</TABLE>
F-9
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Tribune/Swab-Fox Companies, Inc.:
We have audited the accompanying consolidated balance sheets of Tribune/Swab-
Fox Companies, Inc. (a Delaware corporation) and subsidiaries as of December 31,
1994 and 1993, and the related consolidated statements of operations, changes in
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1994. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Tribune/Swab-Fox Companies,
Inc. and subsidiaries as of December 31, 1994 and 1993, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1994, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Tulsa, Oklahoma
March 15, 1995
F-10
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
December 31,
1994 1993
------ -------
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents $4,585 $2,808
Short-term investments 2,000 --
Accounts receivable, less reserve for doubtful accounts
of $506 in 1994 and $465 in 1993 8,847 6,541
Inventories (Note 1) 596 188
Deferred tax assets (Notes 1 and 8) -- 1,444
Current contract receivable and other current assets 7,481 5,661
Refundable income taxes 167 404
Assets held for sale (Note 4) 8,529 4,350
------- -------
Total current assets 32,205 21,396
------- -------
Investments (Note 5) 233 366
------- -------
Contract and Notes Receivable (Note 2) 2,786 7,090
------- -------
Property, Plant and Equipment, at cost
(Notes 1, 6 and 7):
Exposition equipment 2,712 --
Rental property and other real estate 255 13,337
Other 4,452 4,279
------- -------
7,419 17,616
Less - accumulated depreciation 2,834 3,650
------- -------
4,585 13,966
------- -------
Deferred Tax Assets (Note 8) 732 --
------- -------
Intangibles and Other Assets, net (Notes 1 and 3) 13,040 17,241
------- -------
$53,581 $60,059
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-11
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
December 31,
1994 1993
------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities:
Accounts payable $ 5,905 $ 3,635
Accrued liabilities (Note 13) 7,163 6,867
Deferred tax liabilities (Notes 1 and 8) 823 --
Current portion of long-term debt (Note 7) 1,251 1,880
------- -------
Total current liabilities 15,142 12,382
------- -------
Long-Term Debt (Note 7) 4,905 9,273
------- -------
Deferred Contract Liabilities and Credits 2,456 2,424
------- -------
Deferred Tax Liabilities (Notes 1 and 8) -- 1,531
------- -------
Minority Interests in Consolidated Subsidiaries (Note 1) 6,698 7,999
------- -------
Commitments and Contingencies (Notes 3 and 10)
Common Stock Subject to Put (Note 11) 525 --
------- -------
Stockholders' Equity, per accompanying statement
(Notes 1, 7, 9, and 11):
Preferred stocks, $10 par value, 81 shares
authorized, no shares 46 shares issued and
outstanding at December 31, 1994 and 1993,
respectively -- 459
Common stock, Class A, $.10 par value,
50,000 shares authorized, 27,289 and
26,802 shares issued and outstanding at
December 31, 1994 and 1993, respectively 2,729 2,680
Common stock, Class B, $.10 par value,
10,000 shares authorized, 3,704 shares issued
and outstanding at December 31, 1994 and 1993,
respectively 370 370
Additional paid-in capital 17,417 19,211
Retained earnings 3,904 4,295
------- -------
24,420 27,015
Less stock of parent company held by subsidiary (Note 11) ( 565) ( 565)
------- -------
Total stockholders' equity 23,855 26,450
------- -------
$53,581 $60,059
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-12
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Revenues (Notes 1 and 3):
Publishing $ 14,946 $ 39,010 $ 69,849
Exposition services 21,057 10,483 9,168
Information services 15,091 14,499 12,673
Other operating income and interest 5,825 4,183 3,543
-------- -------- --------
56,919 68,175 95,233
-------- -------- --------
Costs and Expenses (Notes 1, 3, 4 and 6):
Publishing 11,988 31,567 48,621
Exposition services 14,137 8,631 7,449
Information services 8,944 9,460 8,214
Other operating expenses -- 361 329
General and administrative 11,862 15,000 21,341
Interest 736 1,921 2,692
Depreciation and amortization 3,118 3,779 7,378
Loss on assets held for sale -- 9,224 --
-------- -------- --------
50,785 79,943 96,024
-------- -------- --------
Income (loss) before unusual gain, equity
earnings and income taxes 6,134 ( 11,768) ( 791)
Unusual gain (Note 2) -- -- 24,412
Earnings of equity investments (Note 5) -- 29 73
Income tax (provision) benefit (Notes 1 and 8) ( 2,589) 4,097 ( 10,569)
Minority interest in consolidated subsidiaries (Note 1) ( 981) 1,929 ( 3,983)
-------- -------- --------
Income (loss) from continuing operations 2,564 ( 5,713) 9,142
Discontinued operations (Note 6) ( 2,816) ( 4,800) ( 790)
Extraordinary loss, net of tax of $340 (Note 7) -- ( 560) --
-------- -------- --------
Net income (loss) ( 252) ( 11,073) 8,352
Dividends on preferred shares (Note 9) ( 139) ( 139) ( 139)
-------- -------- --------
Income (loss) applicable to common shares $( 391) $( 11,212) $ 8,213
========= ========= ========
Earnings (loss) per common and
common equivalent share (Note 1):
Primary --
Continuing operations $ 0.08 $( 0.19) $ 0.27
Discontinued operations ( 0.09) ( 0.16) ( 0.02)
Extraordinary loss -- ( 0.02) --
--------- --------- --------
$( 0.01) $( 0.37) $ 0.25
========= ========= ========
Fully Diluted --
Continuing operations $ N/A $ N/A $ 0.26
Discontinued operations N/A N/A ( 0.02)
Extraordinary loss N/A N/A --
--------- --------- --------
$ N/A $ N/A $ 0.24
========= ========= ========
Cash dividends per common share $ -- $ -- $ --
========= ========= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-13
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Preferred Stock:
Beginning balance $ 459 $ 459 $ 459
Conversion and redemption of preferred stock (459) -- --
-------- -------- --------
Balance at end of year -- 459 459
-------- -------- --------
Common Stock, Class A:
Beginning balance 2,680 2,690 2,722
Conversion of preferred stock 139 -- --
Retirement of common stock (20) (10) (32)
Reclassification to common stock subject to put (70) -- --
-------- -------- --------
Balance at end of year 2,729 2,680 2,690
-------- -------- --------
common Stock, Class B:
Balance at end of year 370 370 370
-------- -------- --------
Additional Paid-in Capital:
Beginning balance 19,211 19,262 19,390
Conversion and redemption of preferred stock (1,199) -- --
Retirement of common stock (140) (51) (128)
Reclassification to common stock subject to put (455) -- --
-------- -------- --------
Balance at end of year 17,417 19,211 19,262
-------- -------- --------
Retained Earnings:
Beginning balance 4,295 15,507 7,294
Net income (loss) (252) (11,073) 8,352
Cash dividends on preferred shares (139) (139) (139)
-------- -------- --------
Balance at end of year 3,904 4,295 15,507
-------- -------- --------
Less stock of parent company held by a subsidiary (565) (565) --
-------- -------- --------
$ 23,855 $ 26,450 $ 38,288
======== ======== ========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
F-14
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Continued
(In thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Preferred Shares:
Beginning balance 46 46 46
Conversion and redemption of preferred stock (46) -- --
------ ------ ------
Balance at end of year -- 46 46
====== ====== ======
Common Shares, Class A:
Beginning balance 26,802 26,903 27,223
Conversion of preferred stock 1,387 -- --
Retirement of common stock (200) (101) (320)
Reclassification to common stock subject to put (700) -- --
------ ------ ------
Balance at end of year 27,289 26,802 26,903
====== ====== ======
Common Shares, Class B:
Balance at end of year 3,704 3,704 3,704
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-15
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
------- -------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (252) $(11,073) $8,352
------- -------- ------
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 3,163 3,928 7,516
(Earnings) losses of equity investments 18 ( 3) ( 37)
Accretion of interest expense 47 228 270
Unusual gain -- -- (24,412)
Gain on sale of property,
plant and equipment, investments
and marketable securities ( 702) ( 41) ( 231)
Loss on assets held for sale -- 9,224 --
Reserves provided on venture capital
and real estate investments 2,812 4,815 691
Deferred compensation 7 1,856 37
Changes in assets and liabilities:
Accounts receivable and refundable
income taxes (1,907) ( 744) 3,189
Inventories ( 213) 184 535
Current contract receivable and
other current assets ( 399) ( 314) 53
Intangibles and other assets 77 ( 103) ( 33)
Accounts payable and accrued liabilities 2,136 ( 257) ( 797)
Deferred income taxes ( 343) ( 4,837) 4,809
Minority interests 981 ( 1,929) 3,983
------- ------- -------
Total adjustments 5,677 12,007 ( 4,427)
------- ------- -------
Net cash provided by operating activities 5,425 934 3,925
------- ------- -------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-16
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Continued
(In thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Cash flows from investing activities:
Net sales (purchases) of short-term investments (2,000) -- 905
Net receipt (advances) on notes receivable 319 (455) (558)
Investments, net of distributions (183) (164) (6)
Capital expenditures (3,254) (1,618) (1,402)
Net proceeds from early termination of Joint Operating Agreement -- -- 9,720
Proceeds from the sale of property, plant and equipment, investments
and marketable securities 8,983 4,616 1,921
Collections on contract receivable 4,714 4,354 1,039
Payments for acquisitions, net of cash acquired (1,114) -- --
Payments on deferred contract liabilities (502) (1,013) (1,304)
-------- -------- --------
Net cash provided by investing activities 6,963 5,720 10,315
-------- -------- --------
Cash flows from financing activities:
Payments of notes payable, net (151) (51) (140)
Principal payments of long-term debt (6,378) (13,319) (6,612)
Borrowings under bank lines-of-credit 3,300 -- 3,200
Payments under bank lines-of-credit (3,300) -- (5,075)
Issuance of common stock 347 -- --
Repurchase of common stock (2,770) (100) --
Redemption of preferred stock (1,520) -- --
Dividends paid (139) (139) (139)
-------- -------- --------
Net cash used in financing activities (10,611) (13,609) (8,766)
-------- -------- --------
Net increase (decrease) in cash and cash equivalents 1,777 (6,955) 5,474
Cash and cash equivalents at beginning of year 2,808 9,763 4,289
-------- -------- --------
Cash and cash equivalents at end of year $ 4,585 $ 2,808 $ 9,763
======== ======== ========
Supplemental disclosures of cash flow information:
Cash paid for:
Interest $ 1,039 $ 1,993 $ 2,765
Income taxes 2,783 1,485 5,344
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
F-17
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BUSINESS
Tribune/Swab-Fox Companies, Inc., and subsidiaries (collectively,
"Tribune/Swab-Fox", unless the context indicates otherwise) are engaged in
publishing several trade journals, newspapers and other publications for
conventions and trade shows, providing trade show registration services and
exhibitor information and marketing services, providing information services to
the insurance and trucking industries, real estate investments, publishing
shopper-newspapers (through October 31, 1993 - see Note 4) and, until October 1,
1992, publishing a daily newspaper.
T/SF Communications Corporation, a 78 percent-owned subsidiary
(Communications), conducts the publishing and information businesses of
Tribune/Swab-Fox.
On January 25, 1995, Communications entered into an Agreement and Plan of
Merger, as amended, with Tribune/Swab-Fox whereby, subject to approval of
Communications and Tribune/Swab-Fox stockholders, Tribune/Swab-Fox will be
merged with and into Communications. Tribune/Swab-Fox stockholders (other than
Communications) will receive 0.1255 of a share of Communications Common Stock
or, if elected, and subject to certain limitations, $0.88 in cash, for each
Tribune/Swab-Fox share.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Tribune/Swab-
Fox and its majority-owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated in consolidation. Minority interest
represents the minority stockholders' interest in certain majority-owned
subsidiaries.
INTEREST IN NEWSPAPER PRINTING CORPORATION (NPC)
Prior to an agreed-to dissolution and liquidation (see Note 2), NPC, a
joint operating agency, was owned 40 percent by Tulsa Tribune Company, a wholly-
owned subsidiary of Communications (Tribune), and 60 percent by Tulsa World
Company (World). Tribune, World and NPC entered into a Joint Operating
Agreement (JOA) in 1941 (amended in 1955 and 1981) which provided, among other
things, for the following:
(1) A common plan of operation under which NPC, as agent for Tribune and
World, sold advertising, printed, marketed and distributed the
newspapers published by Tribune and World, and collected revenues
attributable to such operations.
F-18
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
However, Tribune and World maintained control of their individual news
and editorial departments.
(2) Revenues and expenses of operating, selling and distributing the two
newspapers were shared 40 percent by Tribune and 60 percent by World,
without regard to whether generated by or attributable to Tribune or
World, except newsroom expenses as to which Tribune paid 100 percent of
such expenses incurred on its behalf in excess of 6/14ths of the total
newsroom costs of both newspapers.
Tribune and World reported their share of the revenues over expenses
generated through their joint operations managed by NPC in their respective tax
returns.
Prior to the termination of the JOA, Tribune/Swab-Fox used agency
accounting for its 40 percent ownership of NPC, whereby its share of NPC's
individual assets, liabilities, revenues and expenses are included in these
financial statements. Printing equipment utilized by NPC, as agent, was owned
directly by Tribune and World.
INVENTORIES
Inventories include newsprint and related printing supplies, computers and
computer-related equipment and exposition registration supplies. Inventories
are recorded at the lower of cost or market determined on first-in, first-out
and average cost methods. Inventories of newsprint and related printing
supplies were $404,000 and $128,000 and inventories of computers and computer-
related equipment were $81,000 and $60,000 at December 31, 1994, and 1993,
respectively, and inventories of exposition registration supplies were $111,000
at December 31, 1994.
DEPRECIATION
Depreciation of property, plant and equipment is provided using the
straight-line method based on estimated useful lives ranging from three to 25
years.
INTANGIBLES AND OTHER ASSETS
Intangibles and other assets include advertising lists, covenants-not-to-
compete and consulting agreements, goodwill related to acquisitions, and credits
granted for truck driver employment information files. These assets are being
amortized over periods of three to 30 years and consist of the following:
F-19
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
Amortization December 31,
Period 1994 1993
-------------- ---------- ------------
(In thousands)
<S> <C> <C> <C>
Advertising lists 3 1/2-11 years $ 70 $ 3,941
Covenants-not-to-compete and
consulting agreements 3-10 years 1,731 2,190
Goodwill 30 years 11,833 17,963
Other 4-9 years 3,757 1,754
-------- --------
17,391 25,848
Accumulated amortization ( 4,351) ( 8,607)
-------- --------
$ 13,040 $ 17,241
======== ========
</TABLE>
Goodwill impairment is assessed at each balance sheet date based upon a
review of the acquired entity's operations as to income, growth of income in
relation to the expected growth of income when acquired and, if the entity is
considered for sale, estimated realizable value. Valuation reserves are
provided if the carrying value of acquired goodwill is determined to be
permanently impaired.
CHANGE IN ACCOUNTING ESTIMATES
During the third quarter of 1992, Tribune/Swab-Fox revised the estimated
lives used to depreciate or amortize certain machinery and equipment,
advertising lists and covenants of Shopper's Guide, Inc. (Shopper's Guide),
Tribune/Swab-Fox's New Jersey free-distribution shopper-newspaper, and equipment
and advertising lists of Marks-Roiland Communications, Inc. (Marks-Roiland),
Tribune/Swab-Fox's Long Island free-distribution shopper-newspaper. Management
of Tribune/Swab-Fox made the change in estimates to reflect the effect of the
local economies of each operation on the useful lives of these assets. The
effect of this change in accounting estimates was to increase 1992 depreciation
and amortization by approximately $2,400,000 and to decrease 1992 net income by
approximately $1,540,000 or $0.05 per share.
REVENUE RECOGNITION
Revenues from information services are net of the cost of charges from
state motor vehicle record departments which are incurred by Tribune/Swab-Fox as
an agent for its customers. As provided in the agreements with customers,
Tribune/Swab-Fox charges a fee for its service and is also reimbursed for state
charges.
Exposition services revenues are recognized when the services are provided.
F-20
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
Advertising revenues from Tribune/Swab-Fox's publishing businesses are
recognized when each publication is published and distributed.
Commercial printing revenues are recognized when the material is printed
since the customer is generally obligated to accept printed matter when the
printing is complete. Commercial printing customers must exercise their right
of inspection, when such inspection right exists, while the printing is in
process.
INCOME TAXES
Effective January 1, 1993, Tribune/Swab-Fox adopted SFAS No. 109,
Accounting for Income Taxes, which requires an asset and liability approach to
financial accounting and reporting for income taxes. The difference between the
financial statement and tax bases of assets and liabilities is determined
annually. Deferred income tax assets and liabilities are computed for those
differences that have future tax consequences using the currently enacted tax
laws and rates that apply to the periods in which they are expected to affect
taxable income.
The effect of adopting SFAS No. 109 was not material to Tribune/Swab-Fox's
financial position or its results of operations.
POSTRETIREMENT BENEFITS
Tribune/Swab-Fox does not offer any postretirement medical or insurance
benefits for any employees.
STATEMENTS OF CASH FLOWS
For purposes of the statements of cash flows, Tribune/Swab-Fox considers
all highly liquid debt instruments purchased with a maturity of three months or
less to be cash equivalents.
EARNINGS (LOSS) PER COMMON SHARE
Earnings (loss) per common and common equivalent share are computed by
dividing net income (loss), adjusted for dividends on preferred stock and before
deduction of interest expense (net of tax) on certain subordinated convertible
debentures, by the weighted average number of common and common equivalent
shares, when dilutive, outstanding during the year. Outstanding incentive stock
options, warrants and common shares that would be issued assuming the 6 1/2
percent convertible preferred shares and the 11 percent subordinated convertible
debentures due in 1997 were converted into common stock are considered common
stock equivalents and, when dilutive, are included in the calculation of
earnings (loss) per common share.
F-21
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
The weighted average number of common and common equivalent shares
outstanding was 29,742,000 in 1994, 30,286,000 in 1993 and 33,531,000 in 1992.
Common shares that would be issued assuming conversion of the new senior
preferred shares and the 11 percent subordinated convertible debentures due in
1998 were not included in the calculations since the effect would have been
antidilutive.
2. TERMINATION OF JOINT OPERATING AGREEMENT:
On September 30, 1992, pursuant to the terms of an Amendment and
Termination Agreement, by and among Tribune, World and NPC, the following
occurred:
(1) The JOA among Tribune, World and NPC which otherwise would not have
terminated prior to March 31, 1996, was terminated.
(2) Tribune ceased publication of The Tulsa Tribune effective with the
September 30, 1992 edition.
(3) At closing, World paid Tribune $1,000,000 for certain newspaper related
assets of Tribune and paid an additional $10,500,000 in partial
consideration for the early termination of the JOA. World also
executed and delivered to Tribune a Covenant for Continued Payment
pursuant to which World agreed to pay to Tribune 41 consecutive monthly
payments of $450,000 commencing November 1, 1992 (total payments of
$18,450,000), in lieu of amounts that Tribune would have otherwise been
entitled to receive under the JOA contract. At December 31, 1994,
$5,996,000, representing the present value of remaining unpaid monthly
payments, is reflected in the accompanying balance sheets as a Contract
Receivable.
(4) The parties agreed to dissolve and liquidate NPC.
As part of this transaction, Tribune agreed to pay termination costs for
Tribune-related newsroom and editorial employees of NPC and certain executives
of Tribune, which approximated a present value of $2,200,000. The excess of
payments received at September 30, 1992, plus the present value of future
payments, over the book basis of assets sold and Tribune's cost of termination,
is reflected in the accompanying financial statements as Unusual Gain. The
provision for income taxes includes the income taxes related to the Unusual
Gain.
F-22
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
3. ACQUISITIONS:
ATWOOD CONVENTION PUBLISHING, INC. (ATWOOD)
In August, 1990, Communications acquired 100 percent of the outstanding
stock of Atwood. Atwood publishes daily newspapers and other publications for
conventions and trade shows and is part of the Exposition Services segment.
In addition to the original purchase price, Communications agreed to, and
has paid additional purchase price adjustments of $1,250,000, based upon
Atwood's operating income exceeding certain defined levels for each of the three
years in the period ended December 31, 1993. Also, incentive compensation
payments to the former owners of $750,000 were earned and expensed during the
same periods. The purchase price adjustments are included in the accompanying
financial statements as additional goodwill to be amortized over the remaining
goodwill life.
GALAXY REGISTRATION, INC. (GALAXY)
Effective March 1, 1994, Communications completed the acquisition of
Galaxy. Galaxy provides, on a national basis, registration, information and
marketing services to the convention/trade show industry and is included in the
Exposition Services segment. Communications acquired Galaxy with the payment of
$1,200,000 in cash plus a note payable for $900,000. If certain earnings
targets are achieved, the principal owner of Galaxy, who will be employed as
President and Chief Operating Officer of Galaxy, may receive additional payments
not to exceed $2,900,000 by 1997. The earnings target for 1994 was achieved.
Accordingly, Communications accrued $300,000 of purchase price adjustments
payable to the former owner. In addition, the former owner earned $100,000 of
incentive compensation in the period ended December 31, 1994, which
Communications expensed. In connection with this transaction, the former
principal owner of Galaxy purchased 75,000 shares of Communications' Common
Stock at $4.625 per share for a total purchase price of $346,875. In addition,
a covenant-not-to-compete and an employment agreement were entered into with the
former principal owner.
Unaudited pro forma results of operations, had the Galaxy acquisition
occurred on January 1, 1994, with respect to the 1994 information, and January
1, 1993, with respect to the 1993 information are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993
----------- -----------
<S> <C> <C>
(In thousands)
Revenues $58,469 $76,419
Income (loss) from continuing operations 2,726 (5,477)
Earnings (loss) per common from 0.09 (0.18)
continuing operations
</TABLE>
F-23
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
This unaudited pro forma information is presented in response to applicable
accounting rules. It is not necessarily indicative of the actual results that
would have been achieved had the Galaxy acquisition occurred on January 1, 1994,
with respect to the 1994 information, and January 1, 1993, with respect to the
1993 information.
4. ASSETS HELD FOR SALE:
On December 22, 1994, the Communications Board of Directors approved the
selling of three of Communications trade journals. Accordingly, the net assets
related to these trade journals are reflected as Assets held for sale in the
accompanying balance sheet at December 31, 1994. Managements opinion is that
the book value of the three trade journals is less than their estimated net
realizable value.
On April 30, 1994, Communications sold the assets of Shoppers Guide.
Communications received $1,750,000 in cash, $1,100,000 cash payment for post-
closing adjustments, and the buyer assumed certain liabilities totaling
$930,000. Communications also received the right to receive a maximum of
$3,450,000 out of future cash flow from the business conducted with the assets
sold, as defined, over the next five years and after the buyer receives a
certain sum. In addition, Communications entered into a five year covenant-not-
to-compete in exchange for $750,000 in cash. Communications recorded no gain or
loss on the sale or in connection with the covenant-not-to-compete. At December
31, 1994, the accompanying balance sheet includes $762,000 of net assets related
to the right to receive future cash flow payments. Communications will
recognize income for future cash flow payments in excess of such amount when
received.
During the third quarter of 1993, Communications' Board of Directors made
the decision to offer for sale all of Communications shopper-newspaper
operations. Accordingly, the book value of the shopper-newspapers was reduced
to estimated net realizable value and a pre-tax loss of $9,224,000 was
recognized. On November 1, 1993, Communications sold all of the operating
assets, except cash, of Marks-Roiland, one of the shopper-newspapers.
Communications received $4,675,000 in cash, and the buyer assumed certain
liabilities totaling approximately $1,560,000. In addition, Communications
entered into a three-year covenant-not-to-compete whereby Communications may not
compete with the buyer in the geographic area of the operations that were sold.
Communications received $1,425,000 in cash for the covenant which will be
recognized in income ratably over the term of the covenant.
F-24
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
5. INVESTMENTS:
Tribune/Swab-Fox is a general partner in several real estate partnerships
which own real estate assets. Tribune/Swab-Fox accounts for these investments
in real estate partnerships using the equity method (see Note 6).
In 1994, Tribune/Swab-Fox sold its venture capital investments in several
corporations which were in the form of common stocks, preferred stocks,
subordinated debentures and other debt instruments and as a partner in
businesses operating as partnerships. Management of Tribune/Swab-Fox was
represented on the Boards of Directors of certain of these investments. These
investments were accounted for at cost until Tribune/Swab-Fox's ownership
reached 20 percent or Tribune/Swab-Fox exercised significant influence, at which
time, Tribune/Swab-Fox accounted for the investment on the equity method. To
the extent such investments included goodwill, such goodwill was amortized over
periods up to 30 years. The carrying value of such investments was reduced by a
charge to income when, in the opinion of management, a permanent impairment in
value had occurred.
6. REAL ESTATE:
Effective November 30, 1994, Tribune/Swab-Foxs Board of Directors approved
a plan to dispose of the remaining real estate operations. As a result, the
real estate business has been reclassified as discontinued operations.
Tribune/Swab-Fox and Communications file separate income tax returns. Due to
Tribune/Swab-Foxs history of losses, no deferred tax asset is recognized related
to the net operating loss carryforward. Therefore, no income tax benefit is
recognized on the real estate business losses. The following summarizes the
components of the loss from discontinued operations.
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
(In thousands)
Revenues $ 589 $ 365 $ 406
Costs and expenses (3,405) (5,165) (1,196)
------- ------- -------
Loss from discontinued operations $(2,816) $(4,800) $( 790)
======= ======= =======
</TABLE>
On December 30, 1994, Tribune/Swab-Fox sold three significant parcels of
raw land to 1995 Land Company L.L.C. an Oklahoma limited liability company (1995
Land Company), for $1,386,650, including cash of $600,000 and a note receivable
of $786,350. The 1995 Land Company is owned 49.99 percent by Tribune/Swab-Fox,
but the funding for the purchase was provided through a loan from the owner of
the remaining 50.01 percent, who will oversee, manage and fund the development
and sale of these properties.
F-25
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
Subsequent to December 31, 1994, Tribune/Swab-Fox entered into an
Acquisition Agreement with Midwest Energy Companies, Inc. (MECI), which is
indirectly controlled by a Tribune/Swab-Fox director. The Acquisition Agreement
provides that Tribune/Swab-Fox will sell approximately 900 acres of raw land,
with a book value of $1,650,000 at December 31, 1994, for 7,422,773 shares of
MECI common stock.
During the third quarter of 1993, Tribune/Swab-Fox's Board of Directors
made the decision to accelerate the liquidation of real estate. The plan for
liquidation was implemented by offering the real estate assets for sale at
discounts from retail values that might otherwise be achieved if the assets were
held for sale in the normal course of business. As part of this plan,
Tribune/Swab-Fox acquired the interests of several partners in certain real
estate partnerships in exchange for notes receivable from such partners of
approximately $3,400,000, assumed partnership bank debt of approximately
$1,700,000 and made cash payments of $335,000. After these interests were
acquired, Tribune/Swab-Fox generally owned 100 percent of these partnerships and
properties. As a part of the liquidation plan, a review of the market value for
each property was made and a write-down of the real estate assets of
approximately $2,800,000 and $4,400,000 was recognized in 1994 and 1993,
respectively. These write-downs are reflected in "costs and expenses" in the
table above and included in discontinued operations.
F-26
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
7. LONG-TERM DEBT:
Long-term debt outstanding consists of the following:
<TABLE>
<CAPTION>
December 31,
1994 1993
------- -------
(In thousands)
<S> <C> <C>
Promissory notes secured by stock of a
subsidiary, payable $152,000
quarterly, plus interest, through
December, 2000, interest rate adjusts
semi-annually to the base rate of
Chase Manhattan Bank (8.5% at December
31, 1994). $ 3,640 $ 4,247
7.5% Promissory note, unsecured,
$100,000 payable annually, plus
interest, in August with final payment
in August, 1998. 365 465
11% convertible subordinated debenture
due August, 1998, interest payable
quarterly. 831 831
11% convertible subordinated debentures
paid in 1994. 1,265
Subordinated debenture, $200,000 annual
principal payment through 1997,
interest payable quarterly based upon
Chase Manhattan base rate plus 1%
(9.5% at December 31, 1994). 600 800
Real estate term notes paid in
December, 1994. -- 3,250
6% Promissory note, unsecured,
quarterly payments of $75,000, plus
interest, through March 31, 1997. 675 --
Other 45 295
-------- --------
6,156 11,153
Less portion due within one year ( 1,251) ( 1,880)
-------- --------
$ 4,905 $ 9,273
======== ========
</TABLE>
F-27
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
Installments due on long-term debt during each of the five years subsequent
to December 31, 1994, are as follows:
<TABLE>
<CAPTION>
(In thousands)
<S> <C>
1995 $1,251
1996 1,208
1997 982
1998 1,503
1999 607
Thereafter 605
------
$6,156
======
</TABLE>
The 11 percent convertible subordinated debenture due 1998 is convertible
into Common Stock of Tribune/Swab-Fox at any time, prior to maturity, at a rate
of $2.39 per share.
At December 31, 1994, assets with a net book value of approximately
$6,200,000 are pledged as collateral on long-term debt.
In connection with the sale of the Marks-Roiland assets (see Note 4),
Tribune/Swab-Fox agreed to a prepayment of the $8,889,000 remaining principal of
Senior Notes held by The Prudential Insurance Company of America (Prudential).
As provided by the Senior Notes agreement, a yield maintenance premium was
required to be paid as part of the prepayment. Through negotiations with
Prudential, Tribune/Swab-Fox obtained a reduction in the yield maintenance
premium to $802,000 which, along with the remaining unamortized loan fees
related to the Senior Notes, is reflected as an extraordinary loss in the
accompanying statements of operations.
At December 31, 1994, Tribune/Swab-Fox has two separate revolving credit
arrangements with a bank which together allow Tribune/Swab-Fox to borrow up to
$3,750,000. Interest on amounts borrowed is payable monthly at a rate of 1 1/2
percent above the Chase Manhattan base rate (10 percent at December 31, 1994).
Certain of the facilities are secured by accounts receivable. At December 31,
1994, no balance was outstanding under these arrangements, which require payment
of a 3/8 percent per annum fee on the unused portion of the credit facilities.
F-28
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
8. INCOME TAXES:
The provision for (benefit from) income taxes is comprised of the
following:
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Current:
Federal $2,600 $ 352 $ 4,948
State 332 48 1,003
------ ------- -------
$2,932 400 5,951
------ ------- -------
Deferred:
Federal ( 339) (4,137) 3,944
State ( 4) ( 700) 674
------ ------- -------
( 343) (4,837) 4,618
------ ------- -------
$2,589 $(4,437) $10,569
====== ======= =======
</TABLE>
The reconciliation of income tax computed at the federal statutory
rate (34%) to income tax expense (benefit) is as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
----------- ------------ --------------
<S> <C> <C> <C>
(In thousands)
Income tax provision (benefit) at $1,128 $ (5,956) $ 7,787
statutory rates
Amortization of acquired assets not
deductible for income tax purposes 224 302 1,092
Losses without tax benefit 1,061 2,042 594
Excess of tax basis of assets sold over
book basis which was not previously ( 36) ( 369) ---
tax effected
State income taxes 217 ( 444) 1,107
Other ( 5) ( 12) ( 11)
------ -------- -------
$2,589 ( 4,437) $10,569
====== ======== =======
</TABLE>
F-29
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
Significant components of deferred tax liabilities and assets are as
follows:
<TABLE>
<CAPTION>
December 31,
1994 1993
---------- ---------
<S> <C> <C>
(In thousands)
Deferred tax liabilities:
Fixed asset basis differences $( 330) $( 654)
Unusual gain recognized in different
accounting period for income tax (2,293) (4,136)
reporting purposes
Assigned acquisition basis -- ( 472)
Other, net -- ( 66)
------- -------
Deferred tax liabilities (2,623) (5,328)
------- -------
Deferred tax assets:
Income recognized in different
accounting period for income tax 1,045 508
purposes
Deferred severance benefits payable 938 993
Reserves on assets 260 5,338
Accrued expenses deductible when paid 319 553
Tax loss carryforwards 3,887 1,926
Other, net -- 188
------- -------
Total deferred tax assets 6,449 9,506
Valuation allowance for deferred (3,917) (4,265)
tax assets ------- -------
Net deferred tax assets 2,532 5,241
------- -------
Net deferred tax liabilities $( 91) $( 87)
======= =======
</TABLE>
F-30
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
Net deferred tax liabilities are reflected on the accompanying balance
sheets as follows:
<TABLE>
<CAPTION>
December 31,
1994 1993
---- ----
<S> <C> <C>
(In thousands)
Long-term - Deferred tax liabilities $ -- $(1,531)
Long-term - Deferred tax assets 732 --
Current liabilities - Deferred tax ( 823) --
liabilities
Current assets - Deferred tax assets -- 1,444
------ -------
$( 91) $( 87)
====== =======
</TABLE>
At December 31, 1994, Tribune/Swab-Fox has net operating loss carryforwards
of approximately $10,500,000 for income tax reporting purposes. If not offset
against future taxable income, the carryforwards will begin to expire in the
year 2006.
9. CAPITAL STOCK:
In December, 1994, the 6 1/2 percent Cumulative Convertible Preferred Stock
was converted and Tribune/Swab-Fox paid approximately $1,520,000 for the
redemption of the remaining outstanding preferred stock as follows:
The 30,815 shares of 6 1/2 percent Cumulative Convertible Preferred Stock,
were converted into 1,386,675 shares of Class A Common Stock.
The 1,400 shares of Class A Preferred Stock were redeemed by Tribune/Swab-
Fox at a price of $110 per share.
The 13,657 shares of New Senior Preferred Stock were redeemed by
Tribune/Swab-Fox at $100 per share.
In December 1994 and 1993 and in June, 1992, Tribune/Swab-Fox purchased and
retired 200,000 shares, 101,073 shares and 320,000 shares, respectively, of its
Class A Common Stock owned by certain officers and directors of Tribune/Swab-Fox
for a purchase price of $0.80, $0.60, and $0.50 per share in 1994, 1993 and
1992, respectively. As part of these transactions, Tribune/Swab-Fox received
payments on loans of $24,000 in 1994, $224,000 in 1993 and $450,000 in 1992.
The 1994 stock repurchase of 200,000 shares for $160,000 related to the
retirement of the former Chairman of the Executive Committee (Note 11).
F-31
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
Tribune/Swab-Fox has an incentive stock option plan whereby 747,500 shares
of Common Stock are reserved for issuance at December 31, 1994. Options may be
granted to key employees and are exercisable up to ten years from date of grant.
No options are outstanding under this plan and no options were exercised or
lapsed during 1994. Communications' incentive stock option plan authorizes an
aggregate of 150,000 shares of Communications' Common Stock which may be granted
to key employees. Communications options for 62,499 shares were outstanding and
exercisable at December 31, 1994, at option prices of $5.50, $8.00 and $12.00
per share. Communications options for 20,000 shares were granted during 1994
and no options were exercised during 1994. Communications options for 29,166
shares lapsed or were canceled in 1994. Options are granted at the discretion
of the Board of Directors Compensation Committee at a minimum exercise price of
100 percent of the market value of Communications' Common Stock at the date of
grant.
Communications has approved an Employee Stock Purchase Plan and 100,000
shares of Common Stock have been allocated for this plan. No shares have been
issued under this plan.
In January, 1994, Communications' Board of Directors approved the 1994
Incentive Stock Plan which permits Communications to grant stock options and
awards of restricted stock to executives and key employees. Tribune/Swab-Foxs
stockholders approved this plan at the 1994 Annual Meeting. Pursuant to various
bonus plans, Communications will award 22,733 shares of restricted stock at
$6.25 per share in April, 1995, plus additional shares equal to $31,874 based on
a per share price equal to the average of the closing price on the last 20
trading days in April, 1995, as part of 1994 incentives. These restricted
shares vest three years from the date of issuance. Communications granted
options for 202,500 shares in 1994 at an option price of $4.25 per share which
will expire in 2004 and vest 100 percent in 1997.
Class B Common Stock is nonvoting, holders are entitled to dividends on a
basis equal to that of Class A Common Stock and is convertible into Class A
Common Stock on a share-for-share basis at the option of the holder.
10. COMMITMENTS AND CONTINGENCIES:
Tribune/Swab-Fox, mainly through Communications, has operating lease
agreements, principally for office facilities and equipment, expiring at various
dates through 2000. Rent expense in 1994, 1993 and 1992 under operating leases
was approximately $924,000, $1,317,000, $1,995,000, respectively.
F-32
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
As of December 31, 1994, future minimum lease payments are as follows:
<TABLE>
<CAPTION>
Minimum Lease
Year Ending December 31 Payments
----------------------- --------------
(In thousands)
<S> <C>
1995 $ 887
1996 856
1997 780
1998 686
1999 511
Thereafter 189
------
$3,909
======
</TABLE>
Communications has employment agreements with three executives of
Communications and its subsidiaries. The agreements provide for individual
compensation ranging from $100,000 to $111,000 annually ($310,000 annually in
the aggregate) and expire at various dates through 1997.
Communications is a defendant in certain litigation arising out of
operations in the normal course of business. However, it is the opinion of
management that the ultimate liabilities relating thereto, if any, will not have
a material adverse effect on the financial position or results of operations of
Communications.
In February, 1993, Communications received notice of assessments of Federal
income tax for the years 1989 through 1991 of approximately $955,000, due
principally to the disallowance of certain deductions related to amortization of
intangible assets, specifically advertising lists and covenants-not-to-compete.
Communications settled the tax liability during 1994 with the Internal Revenue
Service, which did not materially affect Communications financial position or
results of operations. Currently, examination of Communications Federal income
tax returns for the years 1993 and 1992 are in progress. Management of
Communications believes that any tax liability which ultimately may result will
not have a material adverse effect on the financial position or results of
operations of Communications.
11. RELATED PARTY TRANSACTIONS:
Effective December 31, 1994, the Chairman of the Executive Committee of
Tribune/Swab-Fox retired. Tribune/Swab-Fox recorded deferred compensation
expense of approximately $277,000 in 1994 related to this retirement. In
addition, Tribune/Swab-Fox acquired 200,000 shares of Class A Common Stock for
$160,000 from the former employee. The former Chairman of the Executive
Committee has a promissory note payable to Tribune/Swab-
F-33
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
Fox of approximately $325,000 at an 8.5 percent interest rate at December 31,
1994. Upon completion of the merger with Communications, a new promissory note
at a 9 percent interest rate will be executed for the unpaid principal balance
plus accrued interest. A security interest in favor of Tribune/Swab-Fox covering
399,575 shares of Class A Common Stock secures this note. The former Chairman of
the Executive Committee has the right to put the 399,575 shares to Tribune/Swab-
Fox at $0.75 per share for three years. In addition, Tribune/Swab-Fox granted
the former Chairman of the Executive Committee the right to put 100,000
additional shares in each of 1995, 1996 and 1997 to Tribune/Swab-Fox at $0.75
per share. Tribune/Swab-Fox has the right to call all 699,575 shares at $1.10
per share. Accordingly, at December 31, 1994, the 699,575 shares are reflected
as Common Stock Subject to Put in the accompanying balance sheet.
Effective August 1, 1993, the Chairman and Chief Executive Officer of
Tribune/Swab-Fox and Communications resigned. Included in general and
administrative expenses for 1993 in the accompanying consolidated statements of
operations are retirement and deferred compensation expense of approximately
$1,800,000 related to this resignation. In addition, Communications acquired
748,734 shares of Tribune/Swab-Fox's Class A Common Stock and 111 shares of
Tribune/Swab-Fox's 6 1/2 percent Cumulative Convertible Preferred Stock for
$565,000, with a cash payment of $100,000 and the issuance of a promissory note
for the balance providing for payments over the period 1994 through 1998.
Communications also acquired an 11 percent Convertible Subordinated Debenture
due 1997 (which was called for early retirement in 1994) in the principal amount
of $141,000 held by the former Chairman and Chief Executive Officer. Subsequent
to December 31, 1994, upon exercise of an option, Communications acquired
389,000 shares of Tribune/Swab-Fox Class A Common Stock from the Profit Sharing
Plan and Trust of Tribune/Swab-Fox Companies, Inc., of which the former Chairman
and Chief Executive Officer is the trustee, for $291,750, with a cash payment of
$72,937 and a note payable for $218,813.
NPC paid approximately $170,000 to Green Country Distributors, Inc. (Green
Country), an affiliated company of Tribune, for transportation services in 1992.
NPC paid approximately $198,000 to a leasing company owned by certain
stockholders of Tribune/Swab-Fox, World and the General Manager of NPC for
vehicle leases in 1992. Green Country paid approximately $79,000 to this
leasing company for vehicle leases in 1992. In a separate but related
transaction, concurrent with the termination of the JOA, World acquired the
interests of such Tribune/Swab-Fox stockholders in this leasing company for
approximately $70,000.
Under the terms of a loan agreement, amended in June, 1992, a former
Tribune stockholder and current officer and director of Tribune/Swab-Fox has
borrowed approximately $235,000 from Tribune/Swab-Fox at an interest rate of 7.5
percent. The loan is secured by
F-34
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
695,000 shares of Class A Common Stock of Tribune/Swab-Fox. The borrower is
required to commence semi-annual payments in October, 1995 equal to one-
fifteenth of the outstanding loan principal with all of the remaining balance
due in October, 1999.
12. BUSINESS SEGMENT INFORMATION:
Tribune/Swab-Fox's operations are conducted primarily through three
business segments entirely within the continental United States. These segments
and the primary operations of each are as follows:
<TABLE>
<CAPTION>
Business Segment Operations
- ---------------- ----------
<S> <C>
Publishing Publication through September 30, 1992, of The
Tulsa Tribune, an evening newspaper published six
days per week in Tulsa, Oklahoma, publication of
weekly free-distribution shopper-newspapers by
Shopper's Guide and Marks-Roiland (through October
31, 1993) and publication of five trade journals
(four after August, 1994) by BMT Publications, Inc.
Exposition Publisher of various convention/trade show
Services publications and publisher of trade journal,
provider of registration services, exhibitor
marketing and information services, all to the
exposition industry. Prior to 1994, Atwood was
included in the Publishing segment. In connection
with the Galaxy acquisition, the Exposition
Services segment was added which also includes
Atwood. Atwood has been reclassified into the
Exposition Services segment for 1993 and 1992.
Information Provider of motor vehicle reports, truck driver
Services employment information, worker's compensation
information, credit reports, criminal record
reports and other pre-employment screening
information and services, and, until March , 1994,
reseller of long-distance telephone service to the
insurance and trucking industries.
Real Estate - Ownership and management of various rental
Discontinued properties, including commercial buildings,
Operations motels, residential units and warehouses and
investment in undeveloped real estate. This
segment was discontinued in 1994.
</TABLE>
F-35
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
Summarized financial information by industry segment is as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
-------- -------- -------
NET REVENUES FROM SALES TO UNAFFILIATED (In thousands)
CUSTOMERS:
<S> <C> <C> <C>
Publishing $ 18,608 $ 41,652 $71,475
Exposition services 21,057 10,483 9,168
Information services 15,091 14,499 13,643
Corporate and other 2,163 1,541 947
-------- -------- -------
$ 56,919 $ 68,175 $95,233
======== ======== ========
OPERATING PROFIT (LOSS):
Publishing $ 2,891 $ (9,509) $ 944
Exposition services 1,453 297 363
Information services 2,992 2,505 2,708
------- -------- --------
Operating profit (loss) from segments 7,336 ( 6,707) 4,015
Corporate expenses, net ( 466) ( 3,111) (2,041)
Interest expense ( 736) ( 1,921) (2,692)
------- -------- --------
Income (loss) from continuing
operations before unusual gain,
income taxes and extraordinary loss $ 6,134 $(11,739) $( 718)
======= ======== ========
IDENTIFIABLE ASSETS:
Publishing $14,871 $ 24,422 $ 46,852
Exposition services 11,534 4,714 4,196
Information services 12,101 12,387 11,460
Corporate 12,808 6,105 12,117
Discontinued operations 2,267 12,431 13,477
------- -------- --------
$53,581 $ 60,059 $ 88,102
======= ======== ========
</TABLE>
F-36
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
(In thousands)
DEPRECIATION AND AMORTIZATION:
Publishing $ 866 $2,563 $5,967
Exposition services 1,167 291 248
Information services 1,035 898 1,100
Corporate 50 27 63
Discontinued operations 45 149 138
------ ------ ------
$3,163 $3,928 $7,516
====== ====== ======
CAPITAL EXPENDITURES:
Publishing $ 109 $ 578 $ 418
Exposition services 3,175 180 201
Information services 935 800 702
Corporate 163 12 2
Discontinued operations 3,994 79
------ ------ ------
$4,382 $5,564 $1,402
====== ====== ======
</TABLE>
Corporate revenues consist principally of revenues from dividends, interest
and miscellaneous nonoperating income. Operating profit (loss) is net revenues,
less applicable operating expenses. Corporate general and administrative
expenses are allocated to each of the industry segments and to general corporate
expenses based on management's estimate of time devoted to each segment and
general corporate matters. Included in 1993 corporate general and administrative
expenses is the retirement expense related to the former Chairman of
the Board.
Included in the information services division 1992 operating profits is the
settlement of a major lawsuit with MCI that had been in process since late 1989.
Costs and expenses related to the lawsuit were expensed as incurred.
Identifiable assets by segment are those assets that are used in the
operations of each segment. Corporate assets consist principally of cash and
cash equivalents, notes receivable, prepaid expenses, furniture, fixtures and
Equipment and deferred finance charges. Capital expenditures include additions
to property, plant and equipment, investments in real estate partnerships and
joint ventures and additions to goodwill and advertising lists.
During 1994, 1993 and 1992, no customer represented ten percent or more of
Tribune/Swab-Fox's revenues.
F-37
<PAGE>
TRIBUNE/SWAB-FOX COMPANIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
13. ACCRUED LIABILITIES:
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
December 31,
1994 1993
---- ----
(In thousands)
<S> <C> <C>
Current portion of deferred contract
liabilities $ 533 $ 432
Accrued interest 117 204
Accrued vacation 249 413
Accrued payroll 1,528 767
Deferred revenue 2,750 2,607
Accrued other liabilities 1,986 2,444
------ ------
$7,163 $6,867
====== ======
</TABLE>
F-38
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
T/SF Communications Corporation:
We have audited the accompanying consolidated balance sheets of T/SF
Communications Corporation (a Delaware corporation) and subsidiaries as of
December 31, 1994 and 1993, and the related consolidated statements of
operations, changes in stockholders' equity and cash flows for each of the three
years in the period ended December 31, 1994. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of T/SF Communications
Corporation and subsidiaries as of December 31, 1994 and 1993, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1994, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Tulsa, Oklahoma
March 15, 1995
F-39
<PAGE>
T/SF COMMUNICATIONS CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
December 31,
1994 1993
-------- --------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 4,311 $ 2,633
Short-term investments 2,000 --
Accounts receivable, less reserve for doubtful accounts
of $506 in 1994 and $465 in 1993 8,535 6,300
Inventories (Note 1) 596 188
Deferred tax assets (Note 6) -- 1,444
Current contract receivable and other current assets 6,347 5,621
Refundable income taxes 167 404
Assets held for sale (Note 4) 6,287 4,350
Loan to Parent company (Note 9) 1,250 --
-------- --------
Total current assets 29,493 20,940
-------- --------
Contract Receivable and Investments (Notes 2 and 9) 2,419 6,702
-------- --------
Property, Plant and Equipment, at cost (Note 1):
Exposition equipment 2,712 --
Other 4,696 4,524
-------- --------
7,408 4,524
Less - accumulated depreciation 2,824 2,378
-------- --------
4,584 2,146
-------- --------
Deferred Tax Assets (Note 6) 732 --
-------- --------
Intangibles and Other Assets, net (Notes 1 and 3) 11,909 17,273
-------- --------
$ 49,137 $ 47,061
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-40
<PAGE>
T/SF COMMUNICATIONS CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
December 31,
1994 1993
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities:
Accounts payable $ 4,388 $ 3,451
Accrued liabilities (Note 10) 7,055 6,736
Deferred tax liabilities (Note 6) 823 --
Current portion of long-term debt (Note 5) 1,051 785
-------- --------
Total current liabilities 13,317 10,972
-------- --------
Long-term Debt (Note 5) 3,674 4,005
-------- --------
Deferred Contract Liabilities 2,179 2,360
-------- --------
Deferred Tax Liabilities (Note 6) -- 1,531
-------- --------
Stockholders' Equity, per accompanying statement
(Notes 1 and 7):
Preferred stock, $10 par value, 1,000 shares authorized,
no shares issued and outstanding -- --
Common stock, $.10 par value, 10,000 shares authorized,
4,865 and 5,274 shares issued and outstanding at
December 31, 1994 and 1993, respectively 486 527
Additional paid-in capital 20,242 22,277
Retained earnings 9,239 5,389
-------- --------
Total stockholders' equity 29,967 28,193
-------- --------
$ 49,137 $ 47,061
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-41
<PAGE>
T/SF COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Revenues (Notes 1, 2, 3 and 4):
Publishing $ 14,946 $ 39,010 $ 69,849
Exposition services 21,057 10,483 9,168
Information services 15,091 14,499 12,673
Other operating income and interest 5,195 3,985 3,141
-------- -------- --------
56,289 67,977 94,831
-------- -------- --------
Costs and Expenses (Notes 1, 3, 4 and 9):
Publishing 11,988 31,567 48,621
Exposition services 14,137 8,631 7,449
Information services 8,944 9,460 8,214
General and administrative 11,081 14,325 20,648
Interest 559 1,620 2,388
Depreciation and amortization 3,141 3,794 7,387
Loss on assets held for sale -- 9,224 --
-------- -------- --------
49,850 78,621 94,707
-------- -------- --------
Income (loss) before unusual gain,
equity earnings and income taxes 6,439 (10,644) 124
Unusual gain (Note 2) -- -- 24,412
Earnings of equity investments -- 29 73
(Provision for) benefit from income taxes (Note 6) (2,589) 4,097 (10,569)
-------- -------- --------
Income (loss) before extraordinary loss 3,850 (6,518) 14,040
Extraordinary loss, net of tax of $340 (Note 5) -- (560) --
-------- -------- --------
Net income (loss) $ 3,850 $ (7,078) $ 14,040
======== ======== ========
Per Share Amounts (Note 1):
Earnings (loss) per common and
common equivalent share:
Before extraordinary loss $ 0.75 $ (1.23) $ 2.66
Extraordinary loss -- (0.11) --
-------- -------- --------
Earnings (loss) per common share $ 0.75 $ (1.34) $ 2.66
======== ======== ========
Cash dividends per common share $ -- $ -- $ --
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-42
<PAGE>
T/SF COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Common Stock:
Balance at beginning of year $ 527 $ 527 $ 527
Issuance of common stock (Note 3) 8 -- --
Acquisition and retirement of common stock (Note 7) (49) -- --
-------- -------- --------
Balance at end of year $ 486 $ 527 $ 527
======== ======== ========
Additional Paid-in Capital:
Balance at beginning of year $ 22,277 $ 22,277 $ 22,277
Issuance of common stock (Note 3) 339 -- --
Acquisition and retirement of common stock (Note 7) (2,562) -- --
Issuance of restricted stock (Note 7) 188 -- --
-------- -------- --------
Balance at end of year $ 20,242 $ 22,277 $ 22,277
======== ======== ========
Retained Earnings (Deficit):
Balance at beginning of year $ 5,389 $ 12,467 $ (1,573)
Net income (loss) 3,850 (7,078) 14,040
-------- -------- --------
Balance at end of year $ 9,239 $ 5,389 $ 12,467
======== ======== ========
Stockholders' Equity:
Balance at beginning of year $ 28,193 $ 35,271 $ 21,231
Issuance of common stock (Note 3) 347 -- --
Acquisition and retirement of common stock (Note 7) (2,611) -- --
Issuance of restricted stock (Note 7) 188 -- --
Net income (loss) 3,850 (7,078) 14,040
-------- -------- --------
Balance at end of year $ 29,967 $ 28,193 $ 35,271
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-43
<PAGE>
T/SF COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 3,850 $ (7,078) $ 14,040
-------- -------- --------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 3,141 3,794 7,387
Earnings of equity investments -- (29) (73)
Accretion of interest expense 47 170 217
Unusual gain -- -- (24,412)
Loss (gain) on sale of
property, plant and equipment 204 (25) (22)
Loss on assets held for sale -- 9,224 --
Deferred compensation 7 1,856 37
Changes in assets and liabilities:
Accounts receivable and refundable
income taxes (1,900) (845) 2,800
Inventories (213) 184 564
Current contract receivable and
other current assets (276) (333) 14
Intangibles and other assets 142 (407) (34)
Accounts payable and accrued liabilities 511 193 (728)
Deferred income taxes (343) (4,837) 4,809
-------- -------- --------
Total adjustments 1,320 8,945 (9,441)
-------- -------- --------
Net cash provided by operating activities 5,170 1,867 4,599
-------- -------- --------
Cash flows from investing activities:
Purchases of short-term investments (2,000) -- --
Capital expenditures (3,233) (1,822) (1,323)
Collections on contract receivable 4,714 4,354 1,039
Payments on deferred contract liabilities (502) (1,013) (1,304)
Net (additions to) distributions from investments (201) (190) 34
Net proceeds from early termination
of Joint Operating Agreement -- -- 9,720
Proceeds from the sale of property,
plant and equipment 3,956 4,560 1,272
Payments for acquisitions, net of cash acquired (1,114) -- --
-------- -------- --------
Net cash provided by investing activities 1,620 5,889 9,438
-------- -------- --------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-44
<PAGE>
T/SF COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued
(In thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Cash flows from financing activities:
Borrowings under bank lines-of-credit 3,300 -- 3,200
Payments under bank lines-of-credit (3,300) -- (5,075)
Principal payments of long-term debt (1,598) (12,182) (6,137)
Loan to parent company (1,250) -- --
Issuance of common stock 347 -- --
Acquisition of common stock retired (2,611) -- --
-------- -------- --------
Net cash used in financing activities (5,112) (12,182) (8,012)
-------- -------- --------
Net increase (decrease) in cash
and cash equivalents 1,678 (4,426) 6,025
Cash and cash equivalents at beginning of year 2,633 7,059 1,034
-------- -------- --------
Cash and cash equivalents at end of year $ 4,311 $ 2,633 $ 7,059
======== ======== ========
Supplemental disclosures of cash
flow information:
Cash paid for:
Interest $ 690 $ 1,405 $ 2,195
Income taxes 2,783 1,485 5,344
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-45
<PAGE>
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
1. Summary of Significant Accounting Policies:
Relationship with Tribune/Swab-Fox Companies, Inc.
T/SF Communications Corporation (together with its subsidiaries referred
to as "Communications" unless the context indicates otherwise) is a 78 percent-
owned subsidiary of Tribune/Swab-Fox Companies, Inc. (Tribune/Swab-Fox).
Communications was incorporated on March 17, 1989, as a wholly-owned subsidiary
of Tribune/Swab-Fox, and succeeded to the publishing and information businesses
of Tribune/Swab-Fox. Through a public stock offering and certain subsequent
stock transactions, Tribune/Swab-Fox's ownership interest is presently 78
percent.
On January 25, 1995, Communications entered into an Agreement and Plan
of Merger, as amended, with Tribune/Swab-Fox whereby, subject to the approval
of Communications and Tribune/Swab-Fox stockholders, Tribune/Swab-Fox will be
merged with and into Communications. Tribune/Swab-Fox stockholders (other than
Communications) will receive 0.1255 of a share of Communications Common Stock
or, if elected, and subject to certain limitations, $0.88 in cash, for each
Tribune/Swab-Fox share.
Pursuant to a management agreement between Communications and
Tribune/Swab-Fox, Communications provides certain administrative services to
Tribune/Swab-Fox and charges a management fee. The management agreement
provides that the management fee be reviewed and agreed to annually by both
Communications and Tribune/Swab-Fox. Communications also leased office space
from Tribune/Swab-Fox and received property management services related to this
leased space. (See Note 9.)
Principles of Consolidation
The consolidated financial statements include the accounts of
Communications and its wholly-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation.
Interest in Newspaper Printing Corporation (NPC)
Prior to an agreed-to dissolution and liquidation (see Note 2), NPC, a
joint operating agency, was owned 40 percent by Tulsa Tribune Company, a
wholly-owned subsidiary of Communications (Tribune), and 60 percent by Tulsa
World Company (World). Tribune, World and NPC entered into a Joint Operating
Agreement (JOA) in 1941 (amended in 1955 and 1981) which provided, among other
things, for the following:
F-46
<PAGE>
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
(1) A common plan of operation under which NPC, as agent for
Tribune and World, sold advertising, printed, marketed and
distributed the newspapers published by Tribune and World, and
collected revenues attributable to such operations. However,
Tribune and World maintained control of their individual
news and editorial departments.
(2) Revenues and expenses of operating, selling and distributing
the two newspapers were shared 40 percent by Tribune and 60
percent by World, without regard to whether generated by or
attributable to Tribune or World, except newsroom expenses as
to which Tribune paid 100 percent of such expenses incurred on
its behalf in excess of 6/14ths of the total newsroom costs of
both newspapers.
Tribune and World reported their share of the revenues over expenses
generated through their joint operations managed by NPC in their respective tax
returns.
Prior to the termination of the JOA, Communications used agency
accounting for its 40 percent ownership of NPC, whereby its share of NPC's
individual assets, liabilities, revenues and expenses are included in these
financial statements. Printing equipment utilized by NPC, as agent, was owned
directly by Tribune and World.
Inventories
Inventories include newsprint, computers and computer-related
equipment and exposition registration supplies. Inventories are recorded at
the lower of cost or market determined on first-in, first-out and average cost
methods. Inventories of newsprint were $404,000 and $128,000 and inventories
of computers and computer-related equipment were $81,000 and $60,000 at
December 31, 1994 and 1993, respectively, and inventories of exposition
registration supplies were $111,000 at December 31, 1994.
Depreciation
Depreciation of property, plant and equipment is provided using the
straight-line method based on estimated useful lives ranging from three to 25
years.
Intangibles and Other Assets
Intangibles and other assets include advertising lists,
covenants-not-to-compete and consulting agreements, goodwill related to
acquisitions and credits granted for truck driver employment information files.
These assets are being amortized over periods of three to 30 years and consist
of the following:
F-47
<PAGE>
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
Amortization December 31,
Period 1994 1993
------------ ---- ----
(In thousands)
<S> <C> <C> <C>
Advertising lists 3 1/2-11 years $ 70 $ 3,941
Covenants-not-to-compete
and consulting agreements 3-10 years 1,731 2,190
Goodwill 30 years 11,882 17,779
Other 4-9 years 2,774 2,110
------- --------
16,457 26,020
Accumulated amortization (4,548) (8,747)
-------- --------
$ 11,909 $ 17,273
======== =========
</TABLE>
Goodwill impairment is assessed at each balance sheet date based upon a
review of the acquired entity's operations as to income, growth of income in
relation to the expected growth of income when acquired and, if the entity is
considered for sale, estimated realizable value. Valuation reserves are
provided if the carrying value of acquired goodwill is determined to be
permanently impaired.
Change in Accounting Estimates
During the third quarter of 1992, Communications revised the estimated
lives used to depreciate or amortize certain machinery and equipment,
advertising lists and covenants of Shopper's Guide, Inc. (Shopper's Guide),
Communications' then owned New Jersey free-distribution shopper-newspaper, and
equipment and advertising lists of Marks-Roiland Communications, Inc.
(Marks-Roiland), Communications' then owned Long Island free-distribution
shopper-newspaper. Management of Communications made the change in estimates
to reflect the effect of the local economies of each operation on the useful
lives of these assets. The effect of this change in accounting estimates was
to increase 1992 depreciation and amortization by approximately $2,400,000 and
to decrease 1992 net income by approximately $2,150,000 or $0.41 per share.
Revenue Recognition
Revenues from information services are net of the cost of charges from
state motor vehicle record departments which are incurred by Communications as
an agent for its customers. As provided in the agreements with customers,
Communications charges a fee for its service and is also reimbursed for state
charges.
Exposition services revenues are recognized when the services are
provided.
Advertising revenues from Communications' publishing businesses are
recognized when each publication is published and distributed.
F-48
<PAGE>
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
Commercial printing revenues are recognized when the material is printed
since the customer is generally obligated to accept printed matter when the
printing is complete. Commercial printing customers must exercise their right
of inspection, when such inspection right exists, while the printing is in
process.
Income Taxes
Effective January 1, 1993, Communications adopted SFAS No. 109,
Accounting for Income Taxes, which requires an asset and liability approach to
financial accounting and reporting for income taxes. The difference between the
financial statement and tax bases of assets and liabilities is determined
annually. Deferred income tax assets and liabilities are computed for those
differences that have future tax consequences using the currently enacted tax
laws and rates that apply to the periods in which they are expected to affect
taxable income.
The effect of adopting SFAS No. 109 was not material to Communications'
financial position or its results of operations.
Earnings per Common Share
Earnings per share computations are based upon the weighted average
number of shares of Common Stock and common stock equivalents outstanding during
the year. The weighted average number of common and common equivalent shares
outstanding was 5,135,000 in 1994 and 5,274,000 in 1993 and 1992.
Postretirement Benefits
Communications does not offer any postretirement medical or insurance
benefits for any employees.
Statements of Cash Flows
For purposes of the statements of cash flows, Communications considers
all highly liquid debt instruments purchased with a maturity of three months or
less to be cash equivalents.
2. Termination of Joint Operating Agreement:
On September 30, 1992, pursuant to the terms of an Amendment and
Termination Agreement, by and among Tribune, World and NPC, the following
occurred:
(1) The JOA among Tribune, World and NPC which otherwise would not
have terminated prior to March 31, 1996, was terminated.
F-49
<PAGE>
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
(2) Tribune ceased publication of The Tulsa Tribune effective
with the September 30, 1992, edition.
(3) At closing, World paid Tribune $1,000,000 for certain
newspaper related assets of Tribune and paid an additional
$10,500,000 in partial consideration for the early termination
of the JOA. World also executed and delivered to Tribune a
Covenant for Continued Payment pursuant to which World agreed
to pay to Tribune 41 consecutive monthly payments of $450,000
commencing November 1, 1992 (total payments of $18,450,000),
in lieu of amounts that Tribune would have otherwise been
entitled to receive under the JOA contract. At December
31, 1994, $5,996,000, representing the present value of
remaining unpaid monthly payments, is reflected in the
accompanying financial statements as a Contract Receivable.
(4) The parties agreed to dissolve and liquidate NPC.
As part of this transaction, Tribune agreed to pay termination costs for
Tribune-related newsroom and editorial employees of NPC and certain executives
of Tribune, which approximated a present value of $2,200,000. The excess
of payments received at September 30, 1992, plus the present value of future
payments, over the book basis of assets sold and Tribune's cost of termination,
is reflected in the accompanying financial statements as Unusual Gain. The
provision for income taxes for 1992 includes the income taxes related to the
Unusual Gain.
3. Acquisitions:
Atwood Convention Publishing (Atwood)
In August, 1990, Communications acquired 100 percent of the outstanding
stock of Atwood. Atwood publishes daily newspapers and other publications for
conventions and trade shows and is a part of Communications' Exposition
Services segment.
In addition to the original purchase price, Communications agreed to,
and has paid, additional purchase price adjustments of $1,250,000, based upon
Atwood's operating income exceeding certain defined levels for each of the
three years in the period ended December 31, 1993. Also, incentive
compensation payments to the former owners of $750,000 were earned and expensed
during the same period. The purchase price adjustments are included in the
accompanying financial statements as additional goodwill to be amortized over
the remaining goodwill life.
Galaxy Registration, Inc. (Galaxy)
Effective March 1, 1994, Communications completed the acquisition of
Galaxy. Galaxy provides, on a national basis, registration, information and
marketing services to the
F-50
<PAGE>
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
convention/trade show industry and is included in Communications' Exposition
Services segment. Communications acquired Galaxy with the payment of
$1,200,000 in cash plus a note payable for $900,000. If certain earnings
targets are achieved, the principal former owner of Galaxy, who is employed
as President and Chief Operating Officer of Galaxy, may receive additional
payments not to exceed $2,900,000 by 1997. The earnings target for
1994 was achieved. Accordingly, Communications accrued $300,000 of purchase
price adjustments payable to the former owner. In addition, the former owner
earned $100,000 of incentive compensation in the period ended December 31,
1994, which Communications expensed. In connection with this transaction, the
former principal owner of Galaxy purchased 75,000 shares of Communications'
Common Stock at $4.625 per share for a total purchase price of $346,875. In
addition, a covenant-not-to-compete and an employment agreement were entered
into with the former principal owner.
Unaudited pro forma results of operations, had the Galaxy acquisition
occurred on January 1, 1994, with respect to the 1994 information and January
1, 1993,with respect to the 1993 information are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993
---- ----
(In thousands)
<S> <C> <C>
Revenues $57,839 $76,221
Income (loss) before extraordinary loss 4,012 (6,282)
Earnings (loss) per common share before
extraordinary loss 0.78 (1.19)
</TABLE>
This unaudited pro forma information is presented in response to applicable
accounting rules. It is not necessarily indicative of the actual results that
would have been achieved had the Galaxy acquisition occurred on January 1,
1994, with respect to the 1994 information and January 1, 1993, with respect to
the 1993 information.
4. Assets Held for Sale:
On December 22, 1994, the Communications' Board of Directors approved
the selling of three of Communications' trade journals. Accordingly, the net
assets related to these trade journals are reflected as "Assets held for sale"
in the accompanying balance sheet at December 31, 1994. Management's opinion is
that the book value of the three trade journals is less than their estimated net
realizable value.
On April 30, 1994, Communications sold the assets of Shopper's Guide.
Communications received $1,750,000 in cash, $1,100,000 in post-closing
adjustments and the buyer assumed certain liabilities totaling $930,000.
Communications also received the right to receive a maximum of $3,450,000 out
of future cash flow, as defined, from the business conducted with the assets
sold, over the next five years after the Buyer receives a certain sum. In
addition, Communications entered into a five year covenant-not-to-compete in
exchange for $750,000 in cash. Communications recorded no gain or loss on the
sale or in connection with
F-51
<PAGE>
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
the covenant-not-to-compete. At December 31, 1994, the accompanying
balance sheet includes $762,000 of net assets related to the right to receive
future cash flow payments. Communications will recognize income for future cash
flow payments, if any, in excess of such amount, when received.
During the third quarter of 1993, Communications' Board of Directors
made the decision to offer for sale all of Communications' shopper-newspaper
operations. Accordingly, the book value of the shopper-newspapers was reduced
to estimated net realizable value and a pre-tax loss of $9,224,000 was
recognized. On November 1, 1993, Communications sold all of the operating
assets, except cash, of Marks-Roiland, one of the shopper-newspapers.
Communications received $4,675,000 in cash, and the buyer assumed certain
liabilities totaling approximately $1,560,000. In addition, Communications
entered into a three-year covenant-not-to-compete whereby Communications may not
compete with the buyer in the geographic area of the operations that were sold.
Communications received $1,425,000 in cash for the covenant which will be
recognized in income ratably over the term of the covenant.
5. Notes Payable and Long-Term Debt:
Long-term debt outstanding consists of the following:
<TABLE>
<CAPTION>
December 31,
1994 1993
---- ----
(In thousands)
<S> <C> <C>
Promissory notes secured by stock of a subsidiary, payable
$152,000 quarterly, plus interest, through December, 2000,
interest rate adjusts semi-annually to the base rate of Chase
Manhattan Bank (8.5% at December 31, 1994). $ 3,640 $4,247
7.5% Promissory note, unsecured, payable $100,000 annually,
plus accrued interest, each August with final payment on August,
1998. 365 465
6% Promissory note, unsecured, quarterly payments of $75,000,
plus accrued interest, through March 31, 1997. 675 --
Other 45 78
------- -------
4,725 4,790
Less portion due within one year (1,051) (785)
------- ------
$ 3,674 $4,005
======= ======
</TABLE>
F-52
<PAGE>
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
Installments due on long-term debt during each of the five years
subsequent to December 31, 1994, are as follows:
<TABLE>
<CAPTION>
(In thousands)
<S> <C>
1995 $ 1,051
1996 1,007
1997 782
1998 672
1999 607
Thereafter 606
-------
$ 4,725
=======
</TABLE>
In connection with the sale of the Marks-Roiland assets (see Note 4),
Communications agreed to a prepayment of the $8,889,000 remaining principal of
the Senior Notes held by The Prudential Insurance Company of America
(Prudential). As provided by the Senior Notes, a yield maintenance premium was
required to be paid as part of the prepayment. Through negotiations with
Prudential, Communications obtained a reduction in the yield maintenance
premium to $802,000 which, along with the remaining unamortized loan fees
related to the Senior Notes, is reflected as an extraordinary loss in the
accompanying statements of operations.
At December 31, 1994, Communications has two separate revolving credit
arrangements with a bank which together allow Communications to borrow up to
$3,750,000. Interest on amounts borrowed is payable monthly at a rate (10
percent at December 31, 1994) of 1 percent above the Chase Manhattan base
rate. Certain of the facilities are secured by accounts and contract
receivables. At December 31, 1994, no balance was outstanding under these
arrangements, which require payment of a 3/8 percent per annum fee on the
unused portion of the credit facilities.
6. Income Taxes:
The provision for (benefit from) income taxes is comprised of the
following:
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Current:
Federal $2,600 $ 352 $ 4,948
State 332 48 1,003
------ ------- --------
2,932 400 5,951
------ ------- --------
Deferred:
Federal (339) (4,137) 3,944
State (4) (700) 674
------ ------- --------
(343) (4,837) 4,618
------ ------- --------
$2,589 $(4,437) $ 10,569
====== ======= ========
</TABLE>
F-53
<PAGE>
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
The reconciliation of income tax computed at the federal statutory rate
(34%) to income tax expense (benefit) is as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Income tax provision (benefit) at statutory rates $2,189 $(3,915) $ 8,367
Amortization of acquired assets not
deductible for income tax purposes 224 313 1,103
Excess of tax basis of assets sold over book
basis which was not previously tax effected (36) (369) --
State income taxes 217 (444) 1,107
Other (5) (22) (8)
------ ------- -------
$2,589 $(4,437) $10,569
------ ------- -------
</TABLE>
Significant components of Communications' deferred tax liabilities and
assets are as follows:
<TABLE>
<CAPTION>
December 31,
1994 1993
---- ----
(In thousands)
<S> <C> <C>
Deferred tax liabilities:
Fixed asset basis differences $ (300) $ (516)
Unusual gain recognized in different accounting period
for income tax reporting purposes (2,293) (4,136)
------- -------
Deferred tax liabilities (2,593) (4,652)
------- -------
Deferred tax assets:
Income recognized in different accounting period for
income tax purposes 1,045 508
Deferred compensation and severance benefits payable 938 993
Reserves on assets 200 2,330
Accrued expenses deductible when paid 319 553
Other, net -- 181
------- -------
Deferred tax assets 2,502 4,565
------- -------
Net deferred tax liabilities $ (91) $ (87)
------- -------
</TABLE>
F-54
<PAGE>
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
Net deferred tax liabilities are reflected on the accompanying balance
sheets as follows:
<TABLE>
<CAPTION>
December 31,
1994 1993
---- ----
(In thousands)
<S> <C> <C>
Long-term - Deferred tax liability $ -- $(1,531)
Current liabilities - Deferred tax liability (823) --
Long-term - Deferred tax asset 732 --
Current assets - Deferred tax asset -- 1,444
----- -------
$ (91) $ (87)
----- -------
</TABLE>
7. Capital Stock:
Communications has authorized capital consisting of 10,000,000 shares of
$0.10 par value Common Stock and 1,000,000 shares of $10.00 par value Preferred
Stock. No shares of Preferred Stock have been issued.
Communications' incentive stock option plan authorizes an aggregate of
150,000 shares of Communications' Common Stock which may be granted to key
employees. Options for 79,064 shares were outstanding and exercisable at
December 31, 1994, at option prices of $5.50, $8.00 and $12.00 per share.
During 1994, options for 20,000 shares were granted and options for 29,166
shares lapsed or were canceled. No options were exercised during 1994. Options
are granted at the discretion of the Compensation Committee of the Board of
Directors at a minimum exercise price of 100 percent of the market value of
Communications' Common Stock at the date of grant.
Communications has approved an Employee Stock Purchase Plan and 100,000
shares of Common Stock have been allocated for this plan. No shares have been
issued under this plan.
In January, 1994, Communications' Board of Directors approved the 1994
Incentive Stock Plan which permits Communications to grant stock options and
awards of restricted stock to executives and key employees. Communications'
stockholders approved this plan at the 1994 Annual Meeting. Pursuant to
various bonus plans, Communications will award 22,733 shares of restricted
stock at $6.25 per share in April, 1995, plus additional shares equal to
$31,874 based on a per share price equal to the average of the closing price on
the last 20 trading days in April, 1995, as part of 1994 incentives. These
restricted shares vest three years from the date of issuance and are reflected
as additional paid-in capital in the accompanying balance sheet.
Communications granted options for 202,500 shares in 1994 under this plan at an
option price of $4.25 which will expire in 2004 and vest 100 percent in 1997.
F-55
<PAGE>
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
In August, 1994, Communications purchased and retired 483,900 shares of
its Common Stock from one stockholder for $5.375 per share.
8. Commitments and Contingencies:
Communications has operating lease agreements, principally for office
facilities and equipment, expiring at various dates through 2000. Rent expense
in 1994, 1993 and 1992 under operating leases was approximately $924,000,
$1,420,000 and $2,094,000, respectively.
As of December 31, 1994, Communications' future minimum lease payments
are as follows:
<TABLE>
<CAPTION>
Minimum Lease
Year Ending December 31, Payments
------------------------ -------------
(In thousands)
<S> <C>
1995 $ 887
1996 856
1997 780
1998 686
1999 511
Thereafter 189
------
$3,909
------
</TABLE>
Communications has employment agreements with three executives of
Communications and its subsidiaries. The agreements provide for individual
compensation ranging from $100,000 to $111,000 annually ($310,000 annually in
the aggregate) and expire at various dates through 1997.
Communications is a defendant in certain litigation arising out of
operations in the normal course of business. However, it is the opinion of
management that the ultimate liabilities relating thereto, if any, will not
have a material adverse effect on the financial position or results of
operations of Communications.
In February, 1993, Communications received notice of assessments of
Federal income tax for the years 1989 through 1991 of approximately $955,000,
due principally to the disallowance of certain deductions related to
amortization of intangible assets, specifically advertising lists and
covenants-not-to-compete. Communications settled the tax liability during 1994
with the Internal Revenue Service which did not materially affect
Communications' financial position or results of operations. Currently,
examination of Communications' federal income tax returns for the years 1993 and
1992 are in progress. Management of Communications believes that any tax
liability which ultimately may result will not have a material adverse effect on
the financial position or results of operations of Communications.
F-56
<PAGE>
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
9. Related Party Transactions:
Effective August 1, 1993, the Chairman and Chief Executive Officer of
Communications resigned. Included in general and administrative expenses for
1993 in the accompanying consolidated statements of operations are retirement
and deferred compensation expense of approximately $1,800,000 related to this
resignation. In addition, Communications acquired 748,734 shares of
Tribune/Swab-Fox Common Stock and 111 shares of 6 1/2 percent Cumulative
Convertible Preferred Stock of Tribune/Swab-Fox for $565,000, with a cash
payment of $100,000 and the issuance of a promissory note for the balance
providing for payments over the period 1994 through 1998. Communications also
acquired a Tribune/Swab-Fox 11 percent Convertible Subordinated Debenture due
1997 (which was called for early retirement in 1994) in the principal amount of
$141,000 held by the former Chairman and Chief Executive Officer. These
security acquisitions are reflected in investments on the accompanying balance
sheets. Subsequent to December 31, 1994, upon exercise of an option,
Communications acquired 389,000 shares of Tribune/Swab-Fox common stock from
the Profit Sharing Plan and Trust of Tribune/Swab-Fox of which the former
chairman and chief executive officer is the trustee, for $291,750, with a cash
payment of $72,937 and a note payable for $218,813.
Under a management agreement with Tribune/Swab-Fox, Communications
provides management and administrative services to Tribune/Swab-Fox. During
1994, 1993 and 1992, management fees charged to Tribune/Swab-Fox were $280,000,
$460,000 and $520,000, respectively. Pursuant to the management agreement, the
management fees are to be reviewed annually and approved by both Communications
and Tribune/Swab-Fox. The management fees approved for 1995 are a fixed $45,000
with a redetermination if the merger of Communications and Tribune/Swab-Fox is
not approved. Additionally, through December 31, 1993, Communications leased
office space from Tribune/Swab-Fox. In December, 1993, Communications acquired
from Tribune/Swab-Fox one of the previously leased office buildings for $255,000
or $47 per square foot, a price comparable to prices paid by independent third
parties for similar buildings in the immediate area. The lease on the remaining
office building was not renewed.
On December 30, 1994, Communications loaned $1,250,000 under a
$2,500,000 line-of-credit to Tribune/Swab-Fox which bears interest (10% at
December 31, 1994) at 1.5 percent above the Chase Manhattan prime rate and is
due July 1, 1995.
NPC paid approximately $170,000 to Green Country Distributors, Inc.
(Green Country), an affiliated company of Tribune, for transportation services
in 1992. NPC paid approximately $198,000 to a leasing company owned by certain
stockholders of Tribune/Swab-Fox, World and the General Manager of NPC for
vehicle leases in 1992. Green Country paid approximately $79,000 to this leasing
company for vehicle leases in 1992. In a separate but related transaction,
concurrent with the termination of the JOA, World acquired the interests of such
stockholders of Tribune/Swab-Fox in this leasing company for approximately
$70,000.
F-57
<PAGE>
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
10. Accrued Liabilities:
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
December 31,
1994 1993
---- ----
(In thousands)
<S> <C> <C>
Current portion of deferred contract
liabilities $ 533 $ 432
Accrued interest 112 197
Accrued vacation 249 413
Accrued payroll 1,522 763
Deferred revenue 2,750 2,607
Accrued other liabilities 1,889 2,324
------ ------
$7,055 $6,736
====== ======
</TABLE>
11. Business Segment Information:
Communications' operations are conducted primarily through three
business segments entirely within the continental United States. These segments
and the primary operations of each are as follows:
<TABLE>
<CAPTION>
Business Segment Operations
---------------- ----------
<C> <S>
Publishing Publication through September 30, 1992, of The Tulsa Tribune, an evening
newspaper published six days per week in Tulsa, Oklahoma, publication of weekly
free-distribution shopper-newspapers by Shopper's Guide and Marks-Roiland
(through September 30, 1993), and publication of five trade journals (four
after August, 1994) by BMT Communications, Inc.
Information Provider of motor vehicle reports, truck driver employment information,
Services worker's compensation information, credit reports, criminal records reports,
and other pre-employment screening information and services, and, until March,
1994, reseller of long-distance telephone service to the insurance and trucking
industries.
Exposition Publisher of various convention/trade show publications and publisher of trade
Services journal, provider of registration services, exhibitor marketing and information
services, all to the exposition industry. Prior to 1994, Communications included
Atwood in the Publishing segment. In connection with the Galaxy acquisition,
Communications added the Exposition Services segment which also includes Atwood.
Atwood has been reclassified into the Exposition Services segment for 1993 and 1992.
</TABLE>
Summarized financial information by industry segment is as follows:
F-58
<PAGE>
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Net revenues from sales to
unaffiliated customers:
Publishing $18,608 $ 41,652 $71,475
Exposition services 21,057 10,483 9,168
Information services 15,091 14,499 13,643
Corporate 1,533 1,343 545
------- -------- -------
$56,289 $ 67,977 $94,831
------- -------- -------
Operating profit (loss):
Publishing $ 2,891 $ (9,509) $ 944
Exposition services 1,453 297 363
Information services 2,992 2,505 2,708
------- -------- -------
Operating profit (loss) from segments 7,336 (6,707) 4,015
Corporate expenses, net (338) (2,288) (1,430)
Interest expense (559) (1,620) (2,388)
------- -------- -------
Income (loss) from operations before
unusual gain, income taxes and
extraordinary loss $ 6,439 $(10,615) $ 197
------- -------- -------
Identifiable assets:
Publishing $14,871 $ 24,422 $46,852
Exposition services 11,534 4,714 4,196
Information services 12,101 12,387 11,460
Corporate 10,631 5,538 7,310
------- -------- -------
$49,137 $ 47,061 $69,818
------- -------- -------
Depreciation and amortization:
Publishing $ 866 $ 2,563 $ 5,967
Exposition services 1,167 291 248
Information services 1,035 898 1,100
Corporate 73 42 72
------- -------- -------
$ 3,141 $ 3,794 $ 7,387
------- -------- -------
</TABLE>
F-59
<PAGE>
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
Summarized financial information by industry segment - continued:
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Capital expenditures:
Publishing $ 109 $ 578 $ 418
Exposition services 3,175 180 201
Information services 935 800 702
Corporate 128 264 2
------ ------ ------
$4,347 $1,822 $1,323
------ ------ ------
</TABLE>
Operating profit is net revenues less applicable operating expenses.
Corporate general and administrative expenses are allocated to each of the
industry segments and to general corporate expenses based on management's
estimates of time devoted to each segment and general corporate matters.
Included in 1993 corporate general and administrative expenses is the
retirement and deferred compensation expenses related to the former Chairman of
the Board.
Included in the information services division operating profit in 1992
is settlement of a major lawsuit with MCI that had been in process since late
1989. Costs and expenses related to the lawsuit were expensed by
Communications as incurred.
Identifiable assets by segment are those assets that are used in the
operations of each segment. Corporate assets consist of cash and cash
equivalents, prepaid expenses, other equipment, goodwill and deferred finance
charges.
Capital expenditures include additions to property, plant and equipment,
goodwill and advertising lists.
During 1994, 1993 and 1992, no customer represented ten percent or
more of Communications' revenues.
F-60
<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
A-1
<PAGE>
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
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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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(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
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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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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
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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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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.
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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
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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.
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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>
AMENDMENT NO. 1
TO
AGREEMENT AND PLAN OF MERGER
THIS AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF MERGER (this
"Amendment") is made and entered into this 3rd day of March, 1995, by and
between T/SF Communications Corporation, a Delaware corporation
("Communications"), and Tribune/Swab-Fox Companies, Inc., a Delaware corporation
("Tribune/Swab-Fox").
R E C I T A L S
- - - - - - - -
A. Communications and Tribune/Swab-Fox entered into a certain
Agreement and Plan of Merger dated January 25, 1995 (the "Merger Agreement"),
pursuant to which Tribune/Swab-Fox will be merged with and into Communications.
B. Communications and Tribune/Swab-Fox desire to amend certain
sections of the Merger Agreement to provide for an increase in the Cash
Consideration (as such term is defined in the Merger Agreement) and an increase
in the amount of cash to be paid in lieu of any fractional shares of Common
Stock, par value $.10 per share, of Communications.
NOW, THEREFORE, in consideration of the premises and the covenants and
agreements set forth herein, Communications and Tribune/Swab-Fox hereby agree as
follows:
1. Amendment. The Merger Agreement shall be amended as follows:
(a) In Section 1.2(b) of the Merger Agreement, the amount defined
as the Cash Consideration which is equal to "$.80" is hereby deleted
and the amount of "$0.88" is substituted therefor.
(b) In the last sentence of Section 1.5(d) of the Merger
Agreement, the amount of "$0.80" is hereby deleted and the amount of
"$0.88" is substituted therefor.
2. Effective Date. This Amendment shall be effective as of the day
and year first above written.
3. Full Force and Effect. Except as amended by this Amendment, all
terms and provisions of the Merger Agreement shall remain in full force and
effect in accordance with their terms.
4. Counterparts. This Amendment may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures were upon the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed by their respective authorized officers as of the day and year
first above written.
T/SF COMMUNICATIONS CORPORATION TRIBUNE/SWAB-FOX COMPANIES, INC.
By: /s/ Robert E. Craine, Jr. By: /s/ Howard G. Barnett, Jr.
---------------------------- -----------------------------
Robert E. Craine, Jr. Howard G. Barnett, Jr.
Executive Vice President President and Chief Executive
Officer
A-21
<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;
C-1
<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
D-1
<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
D-2
<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.
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"); and Amendment No. 1 to Agreement
and Plan of Merger, dated March 3, 1995, between Communications and
Tribune/Swab-Fox (attached as Appendix A to the Joint Proxy Statement
and Prospectus forming a part of this Registration Statement).
3.1 Certificate of Incorporation of Communications (incorporated by
reference to Exhibit 3.1 to Communications' Registration Statement on
Form S-1, No. 33-27811, effective June 8, 1989 (the "S-1 Registration
Statement")).
3.2 Bylaws of Communications (incorporated by reference to Exhibit 3.2 to
the S-1 Registration Statement).
*5.1 Opinion of Conner & Winters, A Professional Corporation, as to the
legality of the securities to be registered.
II-1
<PAGE>
*8.1 Opinion of Conner & Winters, A Professional Corporation, as to federal
income tax consequences.
10.1 Agreement for Purchase and Sale of Stock dated March 17, 1994, between
Communications, T/SF Investment Co., John R. Laughlin and the Galaxy
Registration, Inc. Employee Stock Ownership Plan and Trust
(incorporated by reference to Exhibit 2 to Communications' report on
Form 8-K dated March 17, 1994).
10.2 Asset Purchase Agreement dated November 1, 1993, by and among
Communications, Marks-Roiland Communications, Inc., and Dickson Media,
Inc., together with the material closing documents executed and
delivered therewith (incorporated by reference to Exhibit 10.1 to
Communications' report on Form 8-K dated November 1, 1993).
10.3 Asset Purchase Agreement, dated May 2, 1994, by and among
Communications, Shopper's Guide, Inc., and Dickson Media, Inc.
(incorporated by reference to Exhibit 10.1 to Communications' report
on Form 8-K dated May 2, 1994).
10.4 Management Agreement effective January 1, 1989, between Communications
and Tribune/Swab-Fox (incorporated by reference to Exhibit 10.11 to
the S-1 Registration Statement).
10.5 Retirement Agreement effective August 1, 1993, by and among G. Douglas
Fox, Communications and Tribune/Swab-Fox (incorporated by reference to
Communications' report on Form 10-Q for the quarter ended June 30,
1993).
10.6 Retirement Agreement dated December 14, 1994, by and among Robert J.
Swab, Communications and Tribune/Swab-Fox (incorporated by reference
to Exhibit 10.19 of Tribune/Swab-Fox's report on Form 10-K for the
year ended December 31, 1994).
10.7 Amendment and Termination Agreement dated July 31, 1992, and exhibits,
by and among Tulsa Tribune Company, World Publishing Company and
Newspaper Printing Corporation (incorporated by reference to Exhibit 1
to Communications' report on Form 8-K dated September 30, 1992).
10.8 Covenant for Continued Payments dated September 30, 1992, by World
Publishing Company in favor of Tulsa Tribune Company (incorporated by
referenced to Exhibit 2(vi) to Communications' report on Form 8-K
dated September 30, 1992).
10.9 Revolving Credit Loan Agreement dated as of July 14, 1993, between BMT
Publications, Inc. and BancFirst, together with exhibits, including
forms of various closing documents executed in connection therewith
(incorporated by reference to Exhibit 10.24 to Communications' report
on Form 10-Q for the quarter ended September 30, 1993).
10.10 Revolving Credit Loan Agreement dated as of July 14, 1993, between
Transportation Information Services, Inc. and BancFirst, together with
exhibits, including forms of various closing documents executed in
connection therewith (incorporated by reference to Exhibit 10.25 to
Communications' report on Form 10-Q for the quarter ended September
30, 1993).
10.11 Second Amendment to Revolving Credit Loan Agreement effective as of
June 30, 1994, between Transportation Information Services, Inc. and
BancFirst (incorporated by reference to Exhibit 10.2 to
Communications' report on Form 10-Q for the quarter ended September
30, 1994).
II-2
<PAGE>
10.12 Revolving Credit Loan Agreement dated as of July 14, 1993, between
Communications and BancFirst, together with exhibits, including forms
of various closing documents executed in connection therewith
(incorporated by reference to Exhibit 10.26 to Communications' report
on Form 10-Q for the quarter ended September 30, 1993).
10.13 Revolving Credit Loan Agreement dated as of June 30, 1994, between
Communications and BancFirst (incorporated by reference to Exhibit
10.1 to Communications' report on Form 10-Q for the quarter ended
September 30, 1994).
10.14 Revolving Credit Loan Agreement dated November 30, 1993, between Tulsa
Tribune Company and BancFirst (incorporated by reference to Exhibit
10(iii) to Communications' report on Form 10-K for the year ended
December 31, 1993).
10.15 T/SF Communications Corporation 1994 Incentive Stock Plan
(incorporated by reference to Exhibit A to Communications' Proxy
Statement for Annual Meeting of Stockholders dated May 23, 1994).
10.16 T/SF Communications Corporation Employee Stock Purchase Plan
(incorporated by reference to Exhibit 10.1 to the S-1 Registration
Statement).
10.17 T/SF Communications Corporation Incentive Stock Option Plan
(incorporated by reference to Exhibit 10.2 to the S-1 Registration
Statement).
*23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Conner & Winters, A Professional Corporation (included in
the opinion filed as Exhibit 5.1 to this Registration Statement).
23.3 Consent of Conner & Winters, A Professional Corporation (included in
the opinion filed as Exhibit 8.1 to this Registration Statement).
23.4 Consent of Oppenheimer & Co., Inc. (included in the opinion filed as
Exhibit 99.1 to this Registration Statement).
**23.5 Consent of Southwest Securities, Inc.
*23.6 Consent of Robert J. Swab.
**24.1 The power of attorney of officers and directors of Communications is
set forth on the signature page of this Registration Statement.
**99.1 Opinion of Oppenheimer & Co., Inc. as to the fairness of the
consideration to be paid in connection with the Merger (attached as
Appendix B to the Joint Proxy Statement and Prospectus forming a part
of this Registration Statement).
*99.2 Opinion of Southwest Securities, Inc. as to the fairness of the
consideration to be paid in connection with the Merger (attached as
Appendix C to the Joint Proxy Statement and Prospectus forming a part
of this Registration Statement).
*99.3 Form of Proxy for Special Meeting of Stockholders of Communications.
II-3
<PAGE>
*99.4 Form of Proxy for Special Meeting of Stockholders of Tribune/Swab-
Fox.
*99.5 Form of Cash Election Form.
________________
* Filed herewith.
** Filed with the Registrant's Registration Statement on Form S-4, No. 33-
57587, on February 3, 1995.
Item 22 -- Undertakings
(a) The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(1) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(2) To reflect in the prospectus any facts or events arising
after the effective date of this Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this
Registration Statement; and
(3) To include any material information with respect to the plan
of distribution not previously disclosed in this Registration Statement or
any material change to such information in this Registration Statement;
provided, however, that clauses (1) and (2) above do not apply if the
information required to be included in a post-effective amendment by those
clauses is contained in periodic reports filed by the registrant pursuant to
Section 13 or Section 15(d) of the Exchange Act that are incorporated by
reference into this Registration Statement;
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
II-4
<PAGE>
used in connection with an offering of securities subject to Rule 415, will be
filed as a part of an amendment to this Registration Statement and will not be
used until such amendment is effective, and that, for purposes of determining
any liability under the Securities Act, each such post-effective amendment shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(h) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers, and controlling persons of the
registrant pursuant to the provisions described in Item 20 above or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer, or
controlling person of the registrant in the successful defense of any action,
suit, or proceeding) is asserted by such director, officer, or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of this Registration Statement through
the date of responding to such request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in this Registration Statement when it became effective.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this Amendment No. 1 to Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Tulsa, State of Oklahoma, on the 31st day of March, 1995.
T/SF COMMUNICATIONS CORPORATION
By: /s/ Howard G. Barnett, Jr.
----------------------------
Howard G. Barnett, Jr.
Chairman, Chief Executive Officer
and President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Howard G. Barnett, Jr. Chairman, Chief Executive Officer, March 31, 1995
- --------------------------- President and Director
Howard G. Barnett, Jr. (principal executive officer)
/s/ Mark A. Leavitt* Director March 31, 1995
- ---------------------------
Mark A. Leavitt
/s/ Martin F. Beck* Director March 31, 1995
- ---------------------------
Martin F. Beck
/s/ William N. Griggs* Director March 31, 1995
- ---------------------------
William N. Griggs
/s/ J. Gary Mourton Senior Vice President, Chief March 31, 1995
- --------------------------- Financial Officer, Treasurer and
J. Gary Mourton Director (principal financial
officer and principal accounting
officer)
/s/ David Lloyd Jones* Director March 31, 1995
- ---------------------------
David Lloyd Jones
/s/ Robert E. Craine, Jr. Director and Executive Vice March 31, 1995
- --------------------------- President
Robert E. Craine, Jr.
</TABLE>
*By: /s/ Howard G. Barnett, Jr.
---------------------------
Howard G. Barnett, Jr.
Attorney-in-Fact
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Title Page
- ------- ----- ----
<C> <S> <C>
*2.1 Agreement and Plan of Merger, dated January 25, 1995, between
T/SF Communications Corporation ("Communications") and
Tribune/Swab-Fox Companies, Inc. ("Tribune/Swab-Fox"); and
Amendment No. 1 to Agreement and Plan of Merger, dated March 3,
1995, between Communications and Tribune/Swab-Fox (attached as
Appendix A to the Joint Proxy Statement and Prospectus forming a
part of this Registration Statement).
3.1 Certificate of Incorporation of Communications (incorporated by
reference to Exhibit 3.1 to Communications' Registration
Statement on Form S-1, No. 33-27811, effective June 8, 1989 (the
"S-1 Registration Statement")).
3.2 Bylaws of Communications (incorporated by reference to Exhibit
3.2 to the S-1 Registration Statement).
*5.1 Opinion of Conner & Winters, A Professional Corporation, as to
the legality of the securities to be registered.
*8.1 Opinion of Conner & Winters, A Professional Corporation, as to
federal income tax consequences.
10.1 Agreement for Purchase and Sale of Stock dated March 17, 1994,
between Communications, T/SF Investment Co., John R. Laughlin
and the Galaxy Registration, Inc. Employee Stock Ownership Plan
and Trust (incorporated by reference to Exhibit 2 to
Communications' report on Form 8-K dated March 17, 1994).
10.2 Asset Purchase Agreement dated November 1, 1993, by and among
Communications, Marks-Roiland Communications, Inc., and Dickson
Media, Inc., together with the material closing documents
executed and delivered therewith (incorporated by reference to
Exhibit 10.1 to Communications' report on Form 8-K dated
November 1, 1993).
10.3 Asset Purchase Agreement, dated May 2, 1994, by and among
Communications, Shopper's Guide, Inc., and Dickson Media, Inc.
(incorporated by reference to Exhibit 10.1 to Communications'
report on Form 8-K dated May 2, 1994).
10.4 Management Agreement effective January 1, 1989, between
Communications and Tribune/Swab-Fox (incorporated by reference
to Exhibit 10.11 to the S-1 Registration Statement).
10.5 Retirement Agreement effective August 1, 1993, by and among G.
Douglas Fox, Communications and Tribune/Swab-Fox (incorporated
by reference to Communications' report on Form 10-Q for the
quarter ended June 30, 1993).
10.6 Retirement Agreement dated December 14, 1994, by and among
Robert J. Swab, Communications and Tribune/Swab-Fox
(incorporated by reference to Exhibit 10.19 of
Tribune/Swab-Fox's report on Form 10-K for the year ended
December 31, 1994).
10.7 Amendment and Termination Agreement dated July 31, 1992, and
exhibits, by and among Tulsa Tribune Company, World Publishing
Company and Newspaper Printing Corporation (incorporated by
reference to Exhibit 1 to Communications' report on Form 8-K
dated September 30, 1992).
10.8 Covenant for Continued Payments dated September 30, 1992, by
World Publishing Company in favor of Tulsa Tribune Company
(incorporated by referenced to Exhibit 2(vi) to Communications'
report on Form 8-K dated September 30, 1992).
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C>
10.9 Revolving Credit Loan Agreement dated as of July 14, 1993,
between BMT Publications, Inc. and BancFirst, together with
exhibits, including forms of various closing documents executed
in connection therewith (incorporated by reference to Exhibit
10.24 to Communications' report on Form 10-Q for the quarter
ended September 30, 1993).
10.10 Revolving Credit Loan Agreement dated as of July 14, 1993,
between Transportation Information Services, Inc. and BancFirst,
together with exhibits, including forms of various closing
documents executed in connection therewith (incorporated by
reference to Exhibit 10.25 to Communications' report on Form
10-Q for the quarter ended September 30, 1993).
10.11 Second Amendment to Revolving Credit Loan Agreement effective as
of June 30, 1994, between Transportation Information Services,
Inc. and BancFirst (incorporated by reference to Exhibit 10.2 to
Communications' report on Form 10-Q for the quarter ended
September 30, 1994).
10.12 Revolving Credit Loan Agreement dated as of July 14, 1993,
between Communications and BancFirst, together with exhibits,
including forms of various closing documents executed in
connection therewith (incorporated by reference to Exhibit 10.26
to Communications' report on Form 10-Q for the quarter ended
September 30, 1993).
10.13 Revolving Credit Loan Agreement dated as of June 30, 1994,
between Communications and BancFirst (incorporated by reference
to Exhibit 10.1 to Communications' report on Form 10-Q for the
quarter ended September 30, 1994).
10.14 Revolving Credit Loan Agreement dated November 30, 1993, between
Tulsa Tribune Company and BancFirst (incorporated by reference
to Exhibit 10(iii) to Communications' report on Form 10-K for
the year ended December 31, 1993).
10.15 T/SF Communications Corporation 1994 Incentive Stock Plan
(incorporated by reference to Exhibit A to Communications' Proxy
Statement for Annual Meeting of Stockholders dated May 23, 1994).
10.16 T/SF Communications Corporation Employee Stock Purchase Plan
(incorporated by reference to Exhibit 10.1 to the S-1
Registration Statement).
10.17 T/SF Communications Corporation Incentive Stock Option Plan
(incorporated by reference to Exhibit 10.2 to the S-1
Registration Statement).
*23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Conner & Winters, A Professional Corporation
(included in the opinion filed as Exhibit 5.1 to this
Registration Statement).
23.3 Consent of Conner & Winters, A Professional Corporation
(included in the opinion filed as Exhibit 8.1 to this
Registration Statement).
23.4 Consent of Oppenheimer & Co., Inc. (included in the opinion
filed as Exhibit 99.1 to this Registration Statement).
**23.5 Consent of Southwest Securities, Inc.
*23.6 Consent of Robert J. Swab.
**24.1 The power of attorney of officers and directors of
Communications is set forth on the signature page of this
Registration Statement.
**99.1 Opinion of Oppenheimer & Co., Inc. as to the fairness of the
consideration to be paid in connection with the Merger (attached
as Appendix B to the Joint Proxy Statement and Prospectus
forming a part of this Registration Statement).
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C>
*99.2 Opinion of Southwest Securities, Inc. as to the fairness of the
consideration to be paid in connection with the Merger (attached
as Appendix C to the Joint Proxy Statement and Prospectus
forming a part of this Registration Statement).
*99.3 Form of Proxy for Special Meeting of Stockholders of
Communications.
*99.4 Form of Proxy for Special Meeting of Stockholders of
Tribune/Swab-Fox.
*99.5 Form of Cash Election Form.
</TABLE>
__________________
* Filed herewith.
** Filed with the Registrant's Registration Statement on Form S-4, No. 33-
57587, on February 3,
1995.
<PAGE>
EXHIBIT 5.1
CONNER & WINTERS
A PROFESSIONAL CORPORATION
LAWYERS
2400 FIRST PLACE TOWER
15 EAST FIFTH STREET
TULSA, OKLAHOMA 74103-4391
(918) 586-5711
FAX (918) 586-8982
March 31, 1995
T/SF Communications Corporation
2407 E. Skelly Drive
Tulsa, Oklahoma 74105
Re: T/SF Communications Corporation
Registration Statement on Form S-4
(File No. 33-57587) (the "Registration Statement")
--------------------------------------------------
Gentlemen:
We have acted as counsel for T/SF Communications Corporation, a Delaware
corporation ("Communications"), in connection with the registration under the
Securities Act of 1933, as amended, of three million eight hundred eighty two
thousand seven hundred ninety (3,882,790) shares of Communications' Common
Stock, $0.10 par value per share (the "Shares"), to be offered by Communications
to stockholders of Tribune/Swab-Fox Companies, Inc., a Delaware corporation
("Tribune/Swab-Fox"). As described in the Registration Statement, Communications
is offering the Shares pursuant to an Agreement and Plan of Merger dated January
25, 1995; as amended (the "Merger Agreement"), between Communications and
Tribune/Swab-Fox.
In reaching the conclusions expressed in this opinion, we have (a) examined
such certificates of public officials and of corporate officers and directors
and such other documents and matters as we have deemed necessary or appropriate,
(b) relied upon the accuracy of facts and information set forth in all such
documents, and (c) assumed the genuineness of all signatures, the authenticity
of all documents submitted to us as originals, the conformity to original
documents of all documents submitted to us as copies and the authenticity of the
originals from which such copies were made.
Based upon the foregoing, we are of the opinion that the Shares have been
duly authorized and, when issued and delivered in accordance with the terms and
conditions of the Merger Agreement, will be validly issued, fully paid and
nonassessable shares of Common Stock of Communications.
<PAGE>
T/SF Commissions Corporation
March 31, 1995
Page 2
We consent to the use of this opinion as an exhibit to the Registration
Statement and to the reference to our firm in the Registration Statement and the
Proxy Statement/Prospectus constituting a part thereof under the caption "Legal
Matters."
Very truly yours,
CONNER & WINTERS,
A Professional Corporation
/s/ Conner & Winters, A Professional Corporation
<PAGE>
EXHIBIT 8.1
CONNER & WINTERS
A PROFESSIONAL CORPORATION
LAWYERS
2400 FIRST PLACE TOWER
15 EAST FIFTH STREET
TULSA, OKLAHOMA 74103-4391
(918) 586-5711
FAX (918) 586-8982
March 31, 1995
T/SF Communications Corporation
Tribune/Swab-Fox Companies, Inc.
2407 E. Skelly Drive
Tulsa, Oklahoma 74105
Re: Federal Income Tax Consequences of Merger of Tribune/Swab-Fox
Companies, Inc. with and into T/SF Communications Corporation
-------------------------------------------------------------
Gentlemen:
We have acted and will act as counsel to T/SF Communications Corporation
("Communications") in connection with the merger (the "Merger") of
Tribune/Swab-Fox Companies, Inc. ("Tribune/Swab-Fox") with and into
Communications, pursuant to the Agreement and Plan of Merger dated January 25,
1995, as amended (the "Merger Agreement"), between Tribune/Swab-Fox and
Communications. In our capacity as counsel to Communications, Communications has
requested our opinion regarding certain of the federal income tax consequences
of the Merger pursuant to Section 8.1(d) of the Merger Agreement.
We understand that this letter will be submitted as an exhibit to the
Registration Statement No. 33-57587 on Form S-4 (as amended, the "Registration
Statement") which was filed by Communications on February 3, 1995, with the
Securities and Exchange Commission relating to the securities that will be
issued by Communications pursuant to the Merger Agreement. We further understand
that our opinion will be referred to in the Proxy Statement/Prospectus which
will be included in the Registration Statement under the caption "THE MERGER-
Federal Income Tax Consequences." We hereby consent to such use of our opinion.
All terms used herein without definition shall have the respective meanings
specified in the Merger Agreement and, unless otherwise indicated, all section
references herein are to the Internal Revenue Code of 1986, as amended (the
"Code").
INFORMATION RELIED UPON
-----------------------
In rendering the opinion expressed herein, we have examined such documents
as we have deemed appropriate, including the Merger Agreement and the
Registration Statement. In our examination of documents, we have assumed that
all documents submitted to us as photocopies
<PAGE>
T/SF Communications Corporation
Tribune/Swab-Fox Companies, Inc.
March 31, 1995
Page 2
or telecopies faithfully reproduce the originals thereof, that such originals
are authentic, that all such documents have been or will be duly executed to the
extent required, that all signatures are genuine and that all statements set
forth in such documents are accurate. We also have obtained such additional
information and representations as we have deemed relevant and necessary through
consultations with various representatives of Tribune/Swab-Fox and
Communications.
In view of the preliminary nature of this opinion, we have not obtained
written certificates from Tribune/Swab-Fox and Communications to verify certain
relevant facts that have been represented to us or that we have assumed in
rendering this preliminary opinion. We contemplate, however, that we will obtain
such written certificates as we deem appropriate before rendering our final
opinion on the matters discussed herein prior to the Effective Time. We expect
that our final opinion on these matters will be delivered on the Closing Date
and will be in substantially the same form as this preliminary opinion.
We have assumed that the following statements are true on the date hereof
and will be true at the Effective Time;
(1) The sum of the fair market value of the Communications Common Stock
and/or cash received by each Tribune/Swab-Fox stockholder will be approximately
equal to the fair market value of the Tribune/Swab-Fox Common Stock surrendered
in the exchange.
(2) There is no plan or intention on the part of the stockholders of
Tribune/Swab-Fox, and to the best knowledge of management of Tribune/Swab-Fox,
there is no plan or intention on the part of the stockholders of
Tribune/Swab-Fox, to sell, exchange, or otherwise dispose of a number of shares
of Communications Common Stock received in the Merger that would reduce the
Tribune/Swab-Fox stockholders' ownership (solely as a result of the Merger) of
Communications Common Stock to a number of shares having a value, as of the date
of the Merger, or less than 50 percent of the value of all of the formerly
outstanding Tribune/Swab-Fox Common Stock as of the same date. For purposes of
this assumption, shares of Tribune/Swab-Fox Common Stock held by
Tribune/Swab-Fox stockholders and otherwise sold, redeemed, or disposed of prior
or subsequent to the Merger, surrendered by dissenters, or exchanged for cash in
lieu of fractional shares will be considered as outstanding Tribune/Swab-Fox
Common Stock on the date of the Merger in making this assumption.
(3) Communications has no plan or intention to reacquire any of its stock
issued in the Merger other than pursuant to open market purchases effected by
Communications.
(4) Communications has no plan or intention to dispose of any of the
assets acquired from Tribune/Swab-Fox, except for (i) dispositions made in the
ordinary course of business, (ii) dispositions of real estate owned by
Tribune/Swab-Fox which Tribune/Swab-Fox has been in the
<PAGE>
T/SF Communications Corporation
Tribune/Swab-Fox Companies, Inc.
March 31, 1995
Page 3
process of disposing since at least one year before the Merger Agreement was
executed, and (iii) the cancellation of the shares of Communications Common
Stock owned by Tribune/Swab-Fox prior to the Effective Time.
(5) Any liabilities of Tribune/Swab-Fox assumed by Communications and any
liabilities to which the transferred assets of Tribune/Swab-Fox are subject were
incurred by Tribune/Swab-Fox in the ordinary course of its business.
(6) Communications, Tribune/Swab-Fox and the stockholders of
Tribune/Swab-Fox will pay their respective expenses, if any, incurred in
connection with the Merger.
(7) There is no indebtedness existing between Tribune/Swab-Fox and
Communications that was issued, acquired or will be settled at a discount.
(8) Neither Communications nor Tribune/Swab-Fox is a regulated investment
company, a real estate investment trust, or a corporation 50 percent or more of
the value of whose total assets (excluding cash, cash items, receivables and
U.S. government securities) are stock or securities and 80 percent or more of
the value of whose total assets are assets held for investment. For purposes of
the 50 percent and 80 percent determinations under the preceding sentence, stock
and securities in any subsidiary corporation shall be disregarded, and the
parent corporation shall be deemed to own its ratable share of the subsidiary's
assets. A corporation shall be considered a subsidiary if the parent owns 50
percent or more of the combined voting power of all classes of stock entitled to
vote, or 50 percent or more of the total value of shares of all classes of stock
outstanding.
(9) On the Closing Date, the fair market value of the assets of
Tribune/Swab-Fox will exceed the sum of its liabilities, including the
liabilities, if any, to which its assets are subject.
(10) Tribune/Swab-Fox is not under the jurisdiction of a court in a case
under Title 11 of the United States Code or a receivership, foreclosure, or
similar proceeding in a federal or state court.
(11) None of the compensation received by any stockholder-employees of
Tribune/Swab-Fox will be separate consideration for, or allocable to, any of
their shares of Tribune/Swab-Fox's Common Stock; none of the shares of
Communications Common Stock received by any Tribune/Swab-Fox
stockholder-employees will be separate consideration for entering into, or
allocable to, any employment agreement; and the compensation paid to any
stockholder-employees will be for services actually rendered and will be
commensurate with amounts paid to third parties bargaining at arm's length for
similar services.
<PAGE>
T/SF Communications Corporation
Tribune/Swab-Fox Companies, Inc.
March 31, 1995
Page 4
(12) The payment of cash in lieu of fractional shares of Communications
Common Stock is solely for the purpose of avoiding the expense and inconvenience
to Communications of issuing fractional shares and does not represent separately
bargained-for consideration. The total cash consideration that will be paid in
the Merger to Tribune/Swab-Fox stockholders instead of issuing fractional shares
of Communications Common Stock will not exceed 1 percent of the total
consideration that will be issued in the Merger to the Tribune/Swab-Fox
stockholders in exchange for their shares of Tribune/Swab-Fox Common Stock.
OPINION
-------
Based upon the foregoing, it is our opinion that, for federal income tax
purposes:
(1) The Merger will be treated as a "reorganization" within the meaning of
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.
(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.
(5) The tax basis of the Communications Common Stock received by a
Tribune/Swab-Fox stockholder in the Merger will be the same as the tax basis
such stockholder had in the Tribune/Swab-Fox Common Stock surrendered in
exchange therefor, decreased by the amount of cash received and increased by the
amount of gain recognized by such stockholder in the Merger.
(6) The holding period of the Communications Common Stock received by a
Tribune/Swab-Fox stockholder in the Merger will include the period that such
stockholder held the Tribune/Swab-Fox Common Stock surrendered in exchange
therefor.
(7) A Tribune/Swab-Fox stockholder who receives cash only in lieu of a
fractional share of Communications Common Stock in the Merger will recognize
capital gain or loss equal to the difference between the amount of cash received
and the tax basis allocable to the fractional share interest. Such capital gain
or loss will be long-term capital gain or loss if the holding
<PAGE>
T/SF Communications Corporation
Tribune/Swab-Fox Companies, Inc.
March 31, 1995
Page 5
period for the Tribune/Swab-Fox Common Stock attributable to such fractional
share interest exceeds one year.
(8) A Tribune/Swab-Fox stockholder who elects to receive and receives cash
for his or her shares of Tribune/Swab-Fox Common Stock will be treated as having
received such cash in a deemed redemption of the Communications Common Stock
such stockholder would have received if his or her shares of Tribune/Swab-Fox
Common Stock had been exchanged solely for shares of Communications Common
Stock, subject to Section 302 of the Code. It is likely that such
Tribune/Swab-Fox stockholder will recognize capital gain if the amount of cash
received exceeds such stockholder's basis in his or her Tribune/Swab-Fox Common
Stock, however, depending on such stockholder's particular circumstances, the
cash received by such stockholder in the Merger could be treated as ordinary
income.
CONCLUSION
----------
The opinion expressed herein (including the discussions in the Proxy
Statement/Prospectus under the captions "SUMMARY-Federal Income Tax
Consequences" and "THE MERGER-Federal Income Tax Consequences") addresses all of
the material federal income tax consequences to holders of Tribune/Swab-Fox
Common Stock who (i) 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 and (ii) are citizens or residents
of the United States and domestic corporations and partnerships which hold
Tribune/Swab-Fox Common Stock as a capital asset. Our opinion is based upon
existing statutory, regulatory, and judicial authority, any of which may be
changed at any time with retroactive effect. In addition, our opinion is based
solely on the documents that we have examined, the additional information that
we have obtained, and the statements set out herein that we have assumed to be
true on the day hereof and at the Effective Time. Our opinion cannot be relied
upon if any of the material facts contained in such documents or in any such
additional information are, or later become, inaccurate or if any of the
material statements set out herein are, or later become, inaccurate. Our opinion
is limited to the tax matters specifically covered hereby, and we have not been
asked to address herein, nor have we addressed herein, any other tax
consequences of the Merger.
Very truly yours,
CONNER & WINTERS,
A Professional Corporation
/s/ Conner & Winters, A Professional Corporation
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports and to all references to our Firm included in or made a part of this
T/SF Communications Corporation registration statement on Form S-4 (Registration
No. 33-57587).
ARTHUR ANDERSEN LLP
Tulsa, Oklahoma
March 31, 1995
<PAGE>
EXHIBIT 23.6
CONSENT OF ROBERT J. SWAB
In accordance with the requirements of Rule 438 promulgated by the
Securities and Exchange Commission under the Securities Act of 1933, as amended
(the "Securities Act"), I hereby consent to the references to my name appearing
in this Registration Statement on Form S-4 and in the accompanying Proxy
Statement/Prospectus forming a part thereof relating to the registration under
the Securities Act of up to 3,882,790 shares of common stock of T/SF
Communications Corporation ("Communications") to be issued to stockholders of
Tribune/Swab-Fox Companies, Inc. ("Tribune/Swab-Fox") in connection with the
proposed merger of Tribune/Swab-Fox with and into Communications.
/s/ Robert J. Swab
-------------------
Robert J. Swab
March 31, 1995
________________________________________________________________________________
<PAGE>
EXHIBIT 99.3
[FORM OF PROXY]
T/SF COMMUNICATIONS CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE SPECIAL MEETING OF STOCKHOLDERS TO BE HELD MAY ______, 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 May, 1995, at 2:00 p.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, as amended, between T/SF Communications Corporation
("Communications") and Tribune/Swab-Fox Companies, Inc. ("Tribune/Swab-
Fox") and to approve the merger of Tribune/Swab-Fox with and into
Communications pursuant thereto.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING AND AT ANY AND ALL
ADJOURNMENTS OR POSTPONEMENTS THEREOF.
Dated: ________________________ , 1995
_______________________________________
Signature
_______________________________________
Signature if held jointly
IMPORTANT: Please date this proxy
and sign exactly as your name appears
herein. If shares are held by joint
tenants, both must sign. When
signing as attorney, executor,
administrator, trustee or guardian,
please give full title as such. If a
corporation, please sign in full
corporate name by duly authorized
officer and give title of officer.
If a partnership, please sign in
partnership name by authorized
person.
<PAGE>
EXHIBIT 99.4
[FORM OF PROXY]
TRIBUNE/SWAB-FOX COMPANIES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE SPECIAL MEETING OF STOCKHOLDERS TO BE HELD MAY ______, 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 May, 1995, at 2:00 p.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, as amended, between T/SF Communications Corporation
("Communications") and Tribune/Swab-Fox Companies, Inc. ("Tribune/Swab-
Fox") and to approve the merger of Tribune/Swab-Fox with and into
Communications pursuant thereto.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING AND AT ANY AND ALL
ADJOURNMENTS OR POSTPONEMENTS THEREOF.
Dated: , 1995
-------------------------
--------------------------------------
Signature
--------------------------------------
Signature if held jointly
IMPORTANT: Please date this proxy
and sign exactly as your name appears
herein. If shares are held by joint
tenants, both must sign. When
signing as attorney, executor,
administrator, trustee or guardian,
please give full title as such. If a
corporation, please sign in full
corporate name by duly authorized
officer and give title of officer.
If a partnership, please sign in
partnership name by authorized
person.
<PAGE>
EXHIBIT 99.5
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 MAY ____, 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
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)
- -------------------------------------------------------------------------------
Certificate Number
Number of Shares
-------------------------------------------
<S> <C> <C>
-------------------------------------------
-------------------------------------------
-------------------------------------------
-------------------------------------------
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, as amended (as amended, 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 April ____, 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 $0.88 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 $0.88 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 May
___, 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
SIGN
HERE
-----------------------------------------
(Signature(s) of Stockholder(s) or Agent)
- -------------------------- ----------------------------------------------
(Social Security Number or (Print Name, and, if Applicable, Capacity)
other Taxpayer
Identification Number) (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
Telephone: herewith. If any certificate surrendered hereby
Number ( ) is owned of record by two or more joint owners,
---------------- all such owners must sign this Form. If
signature is by trustees, executors,
Dated: , 1995 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, (Firm - Please Print)
[ ] a member of the National Association
of Securities Dealers, Inc., or --------------------------------
(Authorized Signature)
[ ] 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 (Address)
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. (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 Social Security Number
Part 1--PLEASE | |
Form W-9 PROVIDE YOUR -----------------------------
Department of the TIN IN THE BOX OR
Treasury, Internal AT RIGHT AND -----------------------------
Revenue Service CERTIFY BY
SIGNING AND Employer Identification Number
Payer's Request for DATING BELOW |
Taxpayer Identification -----------------------------
Number (TIN)
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 May ___, 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
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Common Stock (and/or cash in lieu of fractional shares) in accordance with the
Merger Agreement as set forth in the Proxy Statement/Prospectus.
(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 May ___, 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
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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.
(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 $0.88 times the number of shares of
Tribune/Swab-Fox Common Stock which would otherwise be converted into a
fractional share of Communications Common Stock.
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.
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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 (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 an
eligible guarantor institution (Banks, Brokerage Firms, Savings & Loans, Credit
Unions, etc.), that is a member of an approved Signature Guarantee Medallion
Program. 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 by
telephone at (800) 777-3674. Additional copies of this Form also may be
obtained from the Exchange Agent by calling toll free at (800) 777-3674.
VIII. Substitute Form W-9.
See "IMPORTANT TAX INFORMATION" below for instructions on completing
Substitute Form W-9.
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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.
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