REGISTRATION NO. 333-41169
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
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 8732 73-1341805
(Primary Standard (I.R.S. Employer
(State or Other Industrial Identification Number)
Jurisdictionof Classification Code
Incorporation or Number)
Organization) -------------------------
888 SEVENTH AVENUE, 28TH FLOOR, NEW YORK, NEW YORK 10106 (212) 247-5160
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
-------------------------
BRIAN A. MEYER, ESQ.
GENERAL COUNSEL T/SF COMMUNICATIONS CORPORATION 888 SEVENTH AVENUE, 28TH FLOOR
NEW YORK, NEW YORK 10106 (212) 247-5160
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrants' Agent For Service)
-------------------------
WITH A COPY TO: BERTRAM A. ABRAMS, ESQ. PROSKAUER ROSE LLP 1585 BROADWAY NEW
YORK, NEW YORK 10036-8299
-------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
-------------------------
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
PROPOSED PROPOSED
TITLE OF EACH CLASS OF MAXIMUM MAXIMUM
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) REGISTRATION FEE
- -----------------------------------------------------------------------------------------
10 3/8% Series B Senior
Subordinated Notes Due
2007.................. $100,000,000 100% $100,000,000 $30,303.03(2)
- -----------------------------------------------------------------------------------------
Senior Subordinated
Guarantees(3)......... -- -- -- --
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 under the Securities Act of 1933.
(2) All of which was previously paid.
(3) The following subsidiaries of T/SF Communications Corporation are Co-
Registrants, organized in the state and having the IRS Employer
Identification Number indicated: T/SF Holdings, LLC, a Delaware limited
liability company (Application Pending), T/SF Operating, LLC, a Delaware
limited liability company (Application Pending), Galaxy Registration, LLC,
a Delaware limited liability company (Application Pending), Atwood
Publishing, LLC, a Delaware limited liability company (Application
Pending), GEM Gaming, LLC, a Delaware limited liability company
(Application Pending), GEM Nevada, LLC, a Nevada limited liability company
(Application Pending), Casino Executive, LLC, a Nevada limited liability
company (Application Pending), EXPO Magazine, LLC, a Delaware limited
liability company (Application Pending), Atwood Convention Publishing,
Inc., a Missouri corporation (43-1293631), Casino Publishing Company, a
Minnesota corporation (41-1843537), CORSEARCH, Inc., a Delaware
corporation (13-3170504), Crimesearch, Inc., an Oklahoma corporation (73-
1379996), EXPO Magazine, Inc., a Kansas corporation (48-1116767), Galaxy
Design & Printing, Inc., a Maryland corporation (52-1604593), Galaxy
Registration, Inc., a Maryland corporation (52-1233780), G.E.M.
Communications, Inc., an Oklahoma corporation (73-1288439), Transportation
Communications Services, Inc., an Oklahoma corporation (73-1290105), T/SF
Europe, Inc., an Oklahoma corporation (73-1282094, T/SF Investment Co., a
Delaware corporation (51-0331196), T/SF of Nevada, Inc., a Nevada
corporation (73-1483276), and Transportation Information Services, Inc.,
an Oklahoma corporation (73-1168954). The Co-Registrants unconditionally
guarantee, on an unsecured senior subordinated basis, the 10 3/8% Series B
Senior Subordinated Notes Due 2007. No additional consideration will be
paid in respect of these guarantees.
-------------------------
THE CO-REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE CO-REGISTRANTS
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 COMMISSION, ACTING PURSUANT TO
SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
OFFER TO EXCHANGE
ALL OUTSTANDING
10 3/8% SENIOR SUBORDINATED NOTES DUE 2007
($100,000,000 PRINCIPAL AMOUNT OUTSTANDING)
FOR
10 3/8% SERIES B SENIOR SUBORDINATED NOTES DUE 2007
OF
T/SF COMMUNICATIONS CORPORATION
----------------
THE EXCHANGE OFFER
WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON MARCH 10, 1998, UNLESS
EXTENDED
----------------
T/SF Communications Corporation, a Delaware corporation (the "Issuer"),
hereby offers, upon the terms and subject to the conditions set forth in this
Prospectus and the accompanying letter of transmittal (the "Letter of
Transmittal," and together with this Prospectus, the "Exchange Offer"), to
exchange $1,000 principal amount of 10 3/8% Series B Senior Subordinated Notes
Due 2007 of the Issuer (the "New Notes"), which have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), pursuant to a
Registration Statement (as defined herein) of which this Prospectus
constitutes a part, for each $1,000 principal amount of the outstanding 10
3/8% Senior Subordinated Notes Due 2007 of the Issuer (the "Old Notes"), of
which $100,000,000 principal amount is outstanding. The New Notes and the Old
Notes are collectively referred to herein as the "Notes."
The Issuer will accept for exchange any and all Old Notes that are validly
tendered on or prior to 5:00 p.m., New York City time, on the date the
Exchange Offer expires, which will be March 10, 1998, unless the Exchange
Offer is extended (the "Expiration Date"). Tenders of Old Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the business
day prior to the Expiration Date, unless previously accepted for payment. The
Exchange Offer is not conditioned upon any minimum principal amount of Old
Notes being tendered for exchange. However, the Exchange Offer is subject to
certain conditions which may be waived by the Issuer and to the terms and
provisions of the Registration Rights Agreement (as defined herein). See "The
Exchange Offer." Old Notes may be tendered only in denominations of $1,000 and
integral multiples thereof. The Issuer has agreed to pay the expenses of the
Exchange Offer.
The New Notes will be general unsecured obligations of the Issuer, entitled
to the benefits of the Indenture (as defined herein) relating to the Old
Notes, and ranking subordinate in right of payment to all existing and future
Senior Debt (as defined herein) of the Issuer and senior in right of payment
to any subordinated indebtedness of the Issuer. As of September 30, 1997,
after giving effect to the Transactions (as defined herein) and the issuance
of the Old Notes, the Issuer would have had approximately $3.7 million
aggregate principal amount of Senior Debt outstanding. In addition, the Issuer
would have had $25.0 million of additional borrowing availability under the
Senior Credit Facility (as defined herein). The Notes are unconditionally
guaranteed, on an unsecured senior subordinated basis, by certain Guarantors
(as defined herein). See "Description of the Transactions," "Capitalization"
and "Description of the New Notes--Subordination."
(continued on following page)
SEE "RISK FACTORS" BEGINNING ON PAGE 19 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN EVALUATING AN INVESTMENT IN THE NOTES.
----------------
THESE SECURITIES 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 PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------
The date of this Prospectus is February 9, 1998.
The indenture under which the Notes are issued (the "Indenture") permits the
Issuer and its subsidiaries to incur additional indebtedness, subject to
certain limitations. The form and terms of the New Notes are identical in all
material respects to the form and terms of the Old Notes except that the New
Notes have been registered under the Securities Act and will not contain terms
with respect to transfer restrictions or interest rate increases as described
herein. In addition, following the completion of the Exchange Offer, none of
the Notes will be entitled to the benefits of the provisions of the Exchange
Offer Registration Rights Agreement (as defined herein) relating to contingent
increases in the interest rates provided for pursuant thereto. See "The
Exchange Offer."
Interest on each New Note will accrue from the last Interest Payment Date
(as defined herein) on which interest was paid on the Old Note tendered in
exchange therefor or, if no interest has been paid on such tendered Old Note,
from October 29, 1997. Holders of Old Notes whose Old Notes are accepted for
exchange will be deemed to have waived the right to receive any payment in
respect of interest on the Old Notes accrued from the last Interest Payment
Date or October 29, 1997 (as the case may be) to the date of the issuance of
the New Notes. Interest on the New Notes is payable semi-annually on May 1 and
November 1 of each year, accruing from the last Interest Payment Date or
October 29, 1997 (as the case may be) at a rate of 10 3/8% per annum.
The New Notes will mature on November 1, 2007, unless previously redeemed,
and will not be subject to any sinking fund requirement. The New Notes will be
redeemable in cash at the option of the Issuer, in whole or in part, at any
time on or after November 1, 2002, at the redemption prices set forth herein,
plus accrued and unpaid interest thereon to the date of redemption. Prior to
November 1, 2000, the Issuer, at its option, may redeem in the aggregate up to
35% of the original principal amount of the Notes at 110.375% of the aggregate
principal amount so redeemed plus accrued and unpaid interest thereon to the
redemption date with the Net Proceeds (as defined herein) of one or more
Public Equity Offerings (as defined herein); provided that at least 65% of the
principal amount of the Notes originally issued remain outstanding immediately
after the occurrence of any such redemption and that any such redemption
occurs within 90 days following the closing of any such Public Equity
Offering. See "Description of the New Notes--Redemption--Optional Redemption."
In the event of a Change of Control (as defined herein), holders of the
Notes will have the right to require the Issuer to purchase their Notes at
101% of the aggregate principal amount thereof plus accrued and unpaid
interest thereon to the purchase date. See "Description of the Notes--Change
of Control." In addition, the Issuer is obligated in certain instances to make
offers to repurchase the Notes at a purchase price in cash equal to 100% of
the principal amount thereof plus accrued and unpaid interest thereon to the
date of repurchase with the net cash proceeds of certain asset sales. See
"Description of the New Notes--Certain Covenants--Limitation on Asset Sales."
Based on an interpretation of the Securities Act by the staff of the
Division of Corporate Finance (the "Staff") of the Securities and Exchange
Commission (the "Commission") set forth in several no-action letters to third
parties, and subject to the immediately following sentence, the Issuer
believes that the New Notes issued pursuant to the Exchange Offer may be
offered for resale, resold and otherwise transferred by holders thereof
without further compliance with the registration and prospectus delivery
provisions of the Securities Act. However, any purchaser of Notes who is an
"affiliate" of the Issuer or who intends to participate in the Exchange Offer
for the purpose of distributing the New Notes (i) will not be able to rely on
the interpretation by the staff of the Commission set forth in the above
referenced no-action letters, (ii) will not be able to tender Old Notes in the
Exchange Offer and (iii) must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any sale or
transfer of the New Notes, unless such sale or transfer is made pursuant to an
exemption from such requirements.
2
Each holder of the Old Notes who wishes to exchange Old Notes for New Notes
in the Exchange Offer will be required to make certain representations,
including that (i) any New Notes acquired pursuant to the Exchange Offer are
being obtained in the ordinary course of such holder's business, (ii) such
holder has no arrangements with any person to participate in the distribution
of such New Notes and (iii) such holder is not an "affiliate," as defined
under Rule 405 of the Securities Act, of the Issuer or, if such holder is an
affiliate, that such holder will comply with the registration and prospectus
delivery requirements of the Securities Act to the extent applicable. If the
holder is not a broker-dealer, it will be required to represent that it is not
engaged in, and does not intend to engage in, a distribution of New Notes. If
the holder is a broker-dealer (a "Participating Broker-Dealer") that will
receive New Notes for its own account in exchange for Old Notes that were
acquired as a result of market-making activities or other trading activities,
it will be required to acknowledge that it has no arrangements with any person
to participate in the distribution of the New Notes and that it will deliver a
prospectus in connection with any resale of such New Notes; however, by so
acknowledging and by delivering a prospectus, such holder will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
To date, the Staff has taken the position that Participating Broker-Dealers
may fulfill their prospectus delivery requirements with respect to New Notes
(other than a resale of an unsold allotment from the original sale of the Old
Notes) with this Prospectus. Under the Registration Rights Agreement, the
Issuer is required to allow Participating Broker-Dealers and other persons, if
any, subject to similar prospectus delivery requirements to use this
Prospectus in connection with the resale of such New Notes. A broker-dealer
which purchased Old Notes from the Issuer may not participate in the Exchange
Offer. The Issuer will not receive any proceeds from the Exchange, and no
underwriter is being utilized in connection with the Exchange Offer.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE ISSUER ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN
WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
The New Notes will be new securities for which there currently is no market.
Although First Union Capital Markets Corp. has informed the Issuer that it
currently intends to make a market in the New Notes, it is not obligated to do
so, and any such market making may be discontinued at any time without notice.
Accordingly, there can be no assurance as to the development or liquidity of
any market for the New Notes. The Issuer does not intend to apply for listing
of the New Notes on any securities exchange or for quotation through the
National Association of Securities Dealers Automated Quotation System. The
Notes have been designated for trading in the Private Offering, Resales and
Trading through Automated Linkages ("PORTAL") Market of the National
Association of Securities Dealers, Inc.
3
TABLE OF CONTENTS
PAGE
----
Available Information.................................................... i
Incorporation of Certain Documents by Reference.......................... ii
Cautionary Statement Regarding Industry Forecasts........................ iii
Cautionary Statement Regarding Forward-Looking Statements................ iii
Summary.................................................................. 1
Risk Factors............................................................. 19
Description of the Transactions.......................................... 25
Use of Proceeds.......................................................... 27
Capitalization........................................................... 27
Unaudited Pro Forma Consolidated Financial Information................... 28
Selected Historical Consolidated Financial Data.......................... 37
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 39
The Exchange Offer....................................................... 45
Business................................................................. 53
Management............................................................... 65
Certain Relationships and Related Transactions........................... 71
Security Ownership of Certain Beneficial Owners and Management........... 71
Description of the Senior Credit Facility................................ 72
Description of the New Notes............................................. 73
Certain U.S. Federal Income Tax Consequences............................. 98
Plan of Distribution..................................................... 100
Legal Matters............................................................ 100
Independent Public Accountants........................................... 100
Index to Financial Statements............................................ F-1
AVAILABLE INFORMATION
While any Notes remain outstanding, the Issuer will make available upon
request, to any holder and any prospective purchaser of Notes, the information
required pursuant to Rule 144A(d)(4) under the Securities Act during any
period in which the Issuer is not subject to Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). Any such
request should be directed to the Chief Financial Officer of the Issuer.
The Issuer is no longer subject to the informational requirements of the
Exchange Act and the rules and regulations thereunder, its application to the
Commission to deregister the Common Stock (as defined herein) under the
Exchange Act having become effective on January 7, 1998. In accordance with
the Exchange Act and the rules and regulations thereunder, the Issuer
previously filed reports and other information with the Commission via EDGAR
and will, upon the effectiveness of the Registration Statement (as defined
herein), again be obligated to file such reports and information and expects
to file with the Commission via EDGAR such annual reports and such
information, documents and other reports as are specified in Sections 13 and
15(d) of the Exchange Act while any Notes remain outstanding. Such reports and
other information can be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, as well as regional offices of the Commission at the
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and Seven World Trade Center, 13th Floor, New York, New York
10007. Copies of such material may also be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington D.C. 20549, at
prescribed rates. Materials filed electronically with the Commission via EDGAR
may also be accessed through the Commission's home page on the World Wide Web
at http://www.sec.gov. The Issuer has delisted the Common Stock from the
American Stock Exchange
i
(the "AMEX"), where the trading of shares of Common Stock previously was
reported. As of September 4, 1997, there were 1,611,472 shares of Common Stock
publicly held (for purposes of the AMEX) and 273 holders of record of the
shares of Common Stock outstanding. Following the consummation of the Tender
Offer (as defined herein), there were 101,969 shares of Common Stock publicly
held (for purposes of the AMEX) and approximately 113 holders of record of the
shares of Common Stock outstanding. Following the Second Step Transaction (as
defined herein), the only holders of record of the Common Stock will be the
Equity Investors (as defined herein). Pursuant to the AMEX's published
guidelines, shares of common stock are not eligible to be included for listing
if, among other things, the number of shares publicly held falls below
250,000, the number of record and beneficial holders of shares falls below 300
or the aggregate market value of such publicly held shares is $1,000,000.
Shares held directly or indirectly by an officer or director of the issuer or
by any beneficial owner of more than 5% of the shares of the issuer ordinarily
will not be considered as being publicly held for this purpose.
This Prospectus constitutes a part of a registration statement (the
"Registration Statement") filed via EDGAR by the Issuer with the Commission
under the Securities Act. As permitted by the rules and regulations of the
Commission, this Prospectus does not contain all of the information contained
in the Registration Statement and the exhibits and schedules thereto and
reference is hereby made to the Registration Statement and the exhibits and
schedules thereto for further information with respect to the Issuer and the
securities offered hereby. Statements contained herein concerning the
provisions of any documents filed as an exhibit to the Registration Statement
or otherwise filed with the Commission are not necessarily complete, and in
each instance reference is made to the copy of such document so filed. Each
such statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission pursuant to
the Exchange Act are incorporated in this Prospectus by reference as of their
respective dates: (i) Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, (ii) Report on Form 10-K/A filed with the Commission on or
about April 29, 1997, and (iii) Quarterly Reports on Form 10-Q for the three
months ended March 31, 1997 and the three months ended June 30, 1997. All
documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d)
of the Exchange Act subsequent to the date of this Prospectus and prior to the
termination of the offering of the Notes shall be deemed to be incorporated by
reference in this Prospectus and to be a part hereof from the date of filing
of such documents.
Any statement contained herein or in a document incorporated or deemed to be
incorporated herein by reference shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained
herein or in any subsequently filed document that is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The making of a modifying or superseding statement shall not be deemed an
admission for any purposes that the modified or superseded statement, when
made, constituted a misrepresentation, an untrue statement or a material fact
or an omission to state a material fact that is required to be stated or that
is necessary to make a statement not misleading in light of the circumstances
in which it was made.
The Company will provide, without charge, to each person to whom a copy of
this Prospectus is delivered, on the request of such person, a copy of any or
all of the documents incorporated herein by reference (other than exhibits
hereto, unless such exhibits are specifically incorporated by reference into
such documents). Written requests for such copies should be directed to
Corporate Secretary, T/SF Communications Corporation, 888 Seventh Avenue, 28th
Floor, New York, New York 10106. Telephone inquiries may be directed to
Corporate Secretary, at (212) 247-5160.
ii
CAUTIONARY STATEMENT REGARDING INDUSTRY FORECASTS
Market data and certain industry forecasts used throughout this Prospectus
were obtained from internal surveys, market research, publicly available
information and industry publications. Industry publications generally state
that the information contained therein has been obtained from sources believed
to be reliable, but that the accuracy and completeness of such information is
not guaranteed. Similarly, internal surveys, industry forecasts and market
research, while believed to be reliable, have not been independently verified
and the Issuer does not make any representation as to the accuracy of such
information.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus contains certain forward-looking statements. The Private
Securities Litigation Reform Act of 1995 provides a "safe harbor" for certain
forward-looking statements. When used in this Prospectus, the words
"estimate," "project," "anticipate," "expect," "intend," "believe," "seek,"
"plan," as well as variations of such words and similar expressions, are
intended to identify forward-looking statements. While management believes
these statements are reasonable, prospective purchasers of the Notes should be
aware that actual results could differ materially from those projected by such
forward-looking statements as a result of the risk factors set forth in this
Prospectus, including, without limitation, in "Risk Factors," "Business," and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," or other factors.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN
THIS PROSPECTUS AND THE ACCOMPANYING LETTER OF TRANSMITTAL AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE ISSUER OR THE EXCHANGE AGENT (AS DEFINED HEREIN).
NEITHER THE DELIVERY OF THIS PROSPECTUS OR THE ACCOMPANYING LETTER OF
TRANSMITTAL, OR BOTH TOGETHER, NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE ISSUER SINCE THE DATE HEREOF. NEITHER THIS PROSPECTUS NOR THE
ACCOMPANYING LETTER OF TRANSMITTAL, OR BOTH TOGETHER, CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY
BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION.
iii
SUMMARY
This summary is qualified in its entirety by the more detailed information
and financial statements, including the notes thereto, appearing elsewhere in
this Prospectus. Except as the context otherwise requires, as used in this
Prospectus, all references to the Company refer to T/SF Communications
Corporation, its subsidiaries and, following the Drop Down Restructuring, the
LLCs (as such terms are defined herein).
THE COMPANY
The Company is a diversified business media company which principally
operates two lines of business: (i) business and professional information
services ("Information Services") and (ii) business to business communications,
publishing and related services ("Business to Business Communications").
Information Services includes: (i) Transportation Information Services, Inc.
("TISI"), which, with its proprietary database, is the leading provider of pre-
employment screening information used by the trucking industry to facilitate
compliance with U.S. Government regulations and (ii) CORSEARCH(R), Inc.
("CORSEARCH"), the second largest provider in the United States of trademark
and trade name research to law firms and corporations. Business to Business
Communications is conducted through several individual businesses, each of
which is characterized by leading competitive positions within specialized
market niches. Business to Business Communications includes: (i) Atwood
Convention Publishing, Inc. (together with its subsidiary and affiliates,
"Atwood"), the largest domestic independent publisher of exposition and
association related publications and directories; (ii) Galaxy Registration,
Inc. ("Galaxy"), the largest independent provider of trade show and convention
registration, exhibitor information and "lead" management services in the
United States and (iii) G.E.M. Communications, Inc. (together with its
subsidiaries and affiliates, "GEM"), which owns and operates the World Gaming
Congress(R), the world's largest trade show catering to the legalized gaming
industry, and publishes trade magazines directed to the legalized gaming
industry, principally IGWB (formerly International Gaming and Wagering
Business), the leading publication catering to gaming industry executives. On a
pro forma basis, the Company's consolidated revenues and adjusted EBITDA (as
defined herein) for the twelve-month period ended September 30, 1997 were
approximately $78.9 million and $17.3 million, respectively. Of such pro forma
consolidated revenues, approximately 40% represented Information Services and
approximately 60% represented Business to Business Communications. Of such pro
forma adjusted EBITDA, 55% represented Information Services and 45% represented
Business to Business Communications.
INFORMATION SERVICES
Information Services provides specialized information and database management
services to precise market segments. From October 1, 1992 through September 30,
1997, Information Services' revenues have grown at a compounded annual growth
rate of 22% (without any pro forma adjustment).
TISI, which since 1983 has operated its transportation services business
under the trade name DAC Services ("DAC"), is the leading supplier of
comprehensive pre-employment screening information to the trucking industry and
a provider of driving record-related and other risk assessment and underwriting
information to the insurance industry. DAC, endorsed by the American Trucking
Associations since 1986 and the trucking associations of 41 states, currently
maintains a computer network providing on-line electronic access to a
proprietary employment history database of over 2.6 million job records
concerning over 1.4 million truck drivers. This proprietary database, which is
DAC's key asset, is operated as an information cooperative through which DAC's
approximately 2,000 transportation industry members contribute employment
records in return for an economic credit against DAC services and the ability
to access DAC's employment history database. The Company is not aware of any
comparable databases offered by competitors and believes its large cooperative
membership and proprietary database represent significant competitive
advantages which would take a potential competitor several years to replicate.
1
Management believes the demand for the information in its DAC database is
driven primarily by federal government regulation, the Company's ability to
provide the information on a timely basis and the Company's success in
marketing to the "truckload" segment of the trucking industry, which
historically exhibits high driver turnover.
DAC is an integral component of the U.S. trucking industry, providing
information services to over 5,600 transportation-related customers, including
its 2,000 members and 93 of the largest 100 U.S. "for hire" carriers. In
addition, 40 of the 41 largest U.S. "truckload" carriers and 30 of the 59
largest "route" carriers are contributing members to DAC's employment records
database. Non-member customers are precluded from accessing the cooperative
employment records database; however, they are provided access to DAC's other
services, including motor vehicles records ("MVRs") and criminal records.
DAC provides comprehensive information which is used by transportation
industry customers to satisfy current U.S. Department of Transportation ("DOT")
pre-employment screening requirements. Due to public safety concerns, DOT
regulations currently require trucking companies to investigate the driving
history, previous three-year employment history and, since 1995, previous drug
and alcohol test results of prospective drivers, but do not require previous
employers to respond to such inquiries. If certain proposed DOT regulations,
which would require previous employers to respond to such inquiries, are
adopted, management believes there could be greater demand for DAC's services.
In addition to providing MVRs to the transportation industry, TISI supplies
MVRs to the insurance industry for the screening of insurance applications.
TISI, endorsed by the Professional Insurance Agents' Association, provides over
5,000 insurance industry customers access to TISI's computer network to request
MVRs and other information. Approximately 85% of these customers are insurance
agents, with the remaining 15% representing branch offices, managing general
agents, brokers and a small number of regional and home office locations. These
customers primarily utilize TISI's data in assessing insurance underwriting
risk and also purchase TISI's workers' compensation and credit report
information.
CORSEARCH, acquired by the Company in 1996, is the second largest provider of
trademark and trade name search services in the United States. CORSEARCH
provides comprehensive trademark and trade name searches for over 1,100 law
firm and corporate clients. Management believes the increase in recent filings
of applications for new trademarks and trade names, a greater corporate
emphasis on protecting existing trademarks and trade names, growing Internet
usage and the increased international expansion of U.S. companies collectively
have created greater demand for CORSEARCH's services, and provide significant
opportunities to expand CORSEARCH's database operations. The U.S. Patent and
Trade Office ("PTO") estimates that the number of domestic trademark filings
will increase at a rate of 12% per annum through the year 2000. The number of
basic trademark and trade name searches executed by CORSEARCH grew from 13,795
in 1992 to 19,491 in 1996, a 41% increase.
CORSEARCH's highly trained, industry-focused researchers use CORSEARCH's
proprietary software, proprietary CORBASE(R) and CORSTATE(R) databases, third
party databases and, to a lesser extent, published resources for completing
customer searches. Although the majority of the information contained in
CORSEARCH's databases is publicly available from governmental authorities and
others, management believes that because of the cycle of intellectual property
registration renewals, it likely would take a new competitor several years to
compile a database containing the state registration information currently
maintained by CORSEARCH and its two primary competitors. New competitors may
purchase the federal database from the PTO, but significant computer
programming would be needed to make it usable. Management believes that
CORSEARCH, which competes primarily on the quality, accuracy and timeliness of
its data, provides a consistently high level of service to its clients.
BUSINESS TO BUSINESS COMMUNICATIONS
Business to Business Communications, through several individual businesses,
provides a wide range of business to business communications, publishing and
related services.
2
Atwood, founded in 1982, is the leading independent publisher of daily trade
show and convention newspapers, directories and related publishing products
that are directed to the attendees of U.S. trade shows and conventions. During
1996, Atwood provided publishing, communications or promotional services to
approximately 7,000 exhibitors at approximately 207 trade shows and
conventions, including 44 of the "Tradeshow 200" exhibitions as named by the
1997 Tradeshow Week Data Book. Of the 207 trade shows to which Atwood provided
services in 1996, 81% represented trade shows served by Atwood in 1995. Atwood
also publishes the trade journal EXPO(R), The Magazine for Exposition
Management ("EXPO"), the official publication of the International Association
for Exposition Management.
Galaxy, founded in 1982, markets its comprehensive registration services,
automated "lead" management products and information services on an exclusive
basis to trade associations, promoters, exhibitors and attendees of
expositions, trade shows and conventions. Multiple versions of Galaxy's
"ExpoCards" (magnetic stripe or "smartcards") are utilized in the registration
process to allow convention and trade show exhibitors to digitally capture and
manipulate attendee information for "lead" management and follow-up. Galaxy can
provide the attendee information collected by its proprietary systems either in
the form of customized reports or digitally, so that the data can be
manipulated by its customers to meet their individual requirements. In 1996,
Galaxy provided services to 41 of the "Tradeshow 200" exhibitions, including
four of the top five such exhibitions. Of the 211 trade shows to which Galaxy
provided services in 1996, 84% represented trade shows served by Galaxy in
1995. Management believes that Galaxy, from its experience servicing a wide
variety of expositions, has developed a unique set of organizational skills and
technical expertise which provides Galaxy with competitive advantages.
To date, Atwood and Galaxy have focused primarily on North American trade
shows, which during 1996 represented approximately 4,300 shows, in excess of
101 million attendees and 1.25 million exhibiting companies. According to the
Center for Exhibition Industry Research, the number of trade shows and
attendees in North America is forecasted to increase to approximately 4,500 and
approximately 140 million, respectively, by the year 2000.
GEM, founded in 1986 as BMT Publications, Inc., is the leading global
provider of business information and marketing resources for the legalized
gaming industry. GEM owns and operates the World Gaming Congress, the largest
legalized gaming industry trade show in the world and the only trade show
endorsed by the American Gaming Association as the organization's official
trade show. In 1996, the World Gaming Congress sold over 185,000 square feet of
exhibition space and included over 21,700 attendees, an increase from 117,000
square feet and 17,500 attendees in 1994. GEM also publishes IGWB, which, with
a controlled circulation of over 26,000, is the leading trade journal directed
to the worldwide legalized gaming industry.
BUSINESS AND OPERATING STRATEGIES
Management has significant experience in the information services, exposition
services and publishing businesses and has developed a business and operating
strategy to: (i) maximize the strengths of the Company's core businesses; (ii)
expand into new products, services and geographic markets; (iii) expand through
selective acquisitions to enhance the Company's established business platforms
and (iv) improve operating efficiencies.
INFORMATION SERVICES
Management believes that both TISI and CORSEARCH have been successful because
they target well defined market niches and possess competitive advantages
through their proprietary databases, value added information products and
superior customer service. Management's growth strategy for expanding upon
these existing business platforms consists of:
. Broadening TISI's Customer Focus into Additional Trucking and
Transportation Segments. TISI has historically enjoyed success with
"truckload" carriers due to the high employee turnover rates associated
with this segment of the trucking industry. Management intends to
continue capitalizing on
3
this success, but believes the employment history database can be more
aggressively marketed to the other segments of the U.S. trucking and
transportation industry. Specifically, management intends to expand
marketing of its database services to "private fleet" carriers, which
include approximately 14,000 trucking companies. Management believes
that, by expanding the number of employment records contained in the DAC
database, TISI will increase revenues and profits through higher
customer "hit rates" per search.
. Expanding DAC's Business Model to Other Industries. Management believes
that there are opportunities to expand the successful DAC pre-employment
screening business model and core competencies to other industries that
tend to raise public safety concerns, involve substantial financial
risks for employers or have high employee turnover rates. Management
plans to build employment history databases and market pre-employment
screening services to employers in industries possessing these
characteristics.
. Enhancing CORSEARCH's International Search Capabilities. CORSEARCH has
historically focused on providing domestic searches for U.S. and foreign
based clients. With the growing presence of global businesses and the
proliferation of Internet usage, there is a growing customer need for
international trademark database searches. As a result, CORSEARCH is in
the process of identifying international trademark and trade name
information sources and building databases similar to those used in its
domestic operations.
. Broadening CORSEARCH's On-Line Product Offering. Management believes
that by expanding CORSEARCH's on-line and Internet products to allow
customers to perform pre-screening searches, CORSEARCH can increase
revenues from existing customers who are currently utilizing these
products from competitors as well as attract new customers.
. Expanding into Patent Search Services. Management intends to expand its
product offering to include patent searches, likely through
acquisitions. Such acquisitions would provide the Company with greater
breadth of products for the intellectual property market and an
increased ability to serve its existing client base.
BUSINESS TO BUSINESS COMMUNICATIONS
Management believes that each of the business units comprising Business to
Business Communications is a leader in its respective markets and that there
are numerous opportunities to enhance the value of these existing franchises.
. Cross-Selling and Product Bundling Opportunities between Atwood and
Galaxy. Galaxy and Atwood have traditionally been operated as separate
entities and currently have only 13 mutual clients among the 75 clients
which Galaxy and Atwood collectively serve within the "Tradeshow 200."
Management intends to capitalize on the loyal customer base of both
Atwood and Galaxy by marketing both units' products on a packaged basis
to position Atwood and Galaxy as a comprehensive provider of multiple
media, information and exhibitor services to their customers.
. Expanding Atwood's Custom Publishing Customer Base. Atwood historically
has focused its custom publishing activities on the exposition and trade
association markets. Management has identified additional markets, such
as corporate publishing and corporate gatherings, where Atwood can
capitalize on its custom publishing capabilities.
. Augmenting Galaxy's Exhibitor Products and Services. Management intends
to expand the scope and level of information gathered with respect to
attendees to create additional value-added information products for
exhibitors and trade show managers. For example, Galaxy provided Sony
Electronics, Inc. ("Sony") with a series of sophisticated electronic
"lead" management tools at the 1997 National Association of Broadcasters
("NAB") trade show, which, according to TradeShow & Exhibit Manager
magazine, enabled Sony to increase the number of booth visitors it
"qualified" to 12,000 from 5,000 during the 1996 NAB show, representing
an increase of 140%.
4
. Expanding Galaxy's Services to the European Marketplace. According to
1996 M&A Exhibition Directory, the exposition and trade show marketplace
in Europe is approximately five times as large as that in the U.S.
(based on total square footage of exhibition space). Galaxy has
historically provided registration and "lead" management services to the
European exposition marketplace through a licensee, Galaxy Expocard
Europe. The Company acquired 73% of Galaxy Expocard Europe in 1997 and
management intends to enhance Galaxy's international capabilities by
more aggressively marketing products to European exposition managers
through Galaxy Expocard Europe.
. Pursuing Selective Acquisitions of Exposition Services
Companies. Management believes that the exposition services industry is
highly fragmented and plans to pursue opportunistic acquisitions to
enhance Galaxy's existing service offerings so that Galaxy, in concert
with Atwood, can become a comprehensive provider of exposition media
services.
. Leveraging Key GEM Franchises. GEM's leading position in the legalized
gaming market is a direct result of its strong brand names. IGWB and the
World Gaming Congress are widely recognized domestically and
internationally as the leading sources of business information regarding
the legalized gaming market. Management intends to utilize this position
to increase revenues through (i) launching or acquiring additional
gaming-related trade publications targeting specific high-growth gaming
markets (e.g., slot machines and bingo), (ii) exploring the acquisition
or launch of trade shows complementary to the World Gaming Congress and
(iii) working closer with the American Gaming Association to develop
ancillary revenue sources.
. Rationalizing GEM's Overhead Costs. IGWB, GEM's flagship publication,
was formerly part of a group of five trade magazines, four of which were
sold in 1994 and 1995. Following this sale, IGWB continued to occupy the
same office space, although the organization's publishing revenue had
been reduced by approximately 71%. Management has identified
opportunities for cost savings through integration with other
publications.
. Expanding GEM to New Gaming Markets. Management believes portions of the
world's gaming markets are relatively immature and underserved. As a
result, management plans to capitalize on trade show and publishing
opportunities in Europe, Latin America, Asia and Sub-Saharan Africa. As
a first step, the Company recently purchased a 49% ownership stake in
Gaming for Africa, the leading trade show and magazine targeting the
legalized gaming industry in South Africa, one of the world's growing
gaming markets. Management intends to seek other acquisitions and joint
venture opportunities for worldwide expansion.
THE EQUITY INVESTORS
After giving effect to the Recapitalization (as defined below), VS&A-T/SF,
L.L.C. ("VS&A-T/SF") and The Fir Tree Value Fund, L.P. and its affiliates
(collectively, "Fir Tree" and together with VS&A-T/SF, the "Equity Investors")
will own 64% and 36% of the Common Stock, respectively. VS&A-T/SF is controlled
by VS&A Communications Partners II, L.P. ("VS&A Fund II"), a private equity
fund affiliated with Veronis, Suhler & Associates, Inc. ("VS&A"), an investment
banking and research firm specializing in the media and communications
industry. Other investors in VS&A-T/SF include two institutional investors and
an affiliate of Ian L. M. Thomas, the new President and Chief Executive Officer
of the Issuer.
Since its founding in 1981, VS&A has provided investment banking services to
media and communications companies in over 360 completed transactions totaling
approximately $20.0 billion in aggregate transaction value. The objective of
VS&A's private equity funds is to capitalize on the industry knowledge and
transactional experience of VS&A's professionals in order to enhance the value
of acquisitions and generate substantial capital appreciation. VS&A's first
private equity fund, VS&A Communications Partners, L.P. ("VS&A Fund I"), was a
$57.0 million fund formed in 1987. VS&A Fund I invested in eight entities in
the consumer and trade magazine publishing, television and radio broadcasting
and cable television industries and sold its last investment in 1996.
5
According to Venture Economics, VS&A Fund I's performance placed it in the top
10% of peer equity funds during its time period. VS&A Fund II was formed in
1995 with a capital commitment of $330.0 million. As of September 30, 1997,
VS&A Fund II had invested or committed approximately $185.0 million in eight
entities in the trade magazine, exposition, cable television, information
services, radio broadcasting and advertising directories publishing industries.
Fir Tree has been an investor in the Issuer since 1994 and prior to the
Recapitalization owned 14.6% of the Issuer's common stock (the "Common Stock").
In connection with the Recapitalization, Fir Tree maintained its existing
ownership interest (the "Fir Tree Rollover") which, after the Recapitalization,
will constitute 36% of the Common Stock. Fir Tree is a private investment firm
formed in 1994 by Jeffrey D. Tannenbaum. Mr. Tannenbaum previously was an
investment professional with Kohlberg & Co.
The Equity Investors believe their collective transactional experience,
coupled with VS&A's specialized knowledge of media and communications and Fir
Tree's history with the Company, will provide the unique ability to identify
opportunities to grow the Company's core businesses.
THE TRANSACTIONS
The Recapitalization. Pursuant to a tender offer (the "Tender Offer")
completed on October 9, 1997 by the Issuer for its Common Stock, a purchase
consummated on October 9, 1997 (the "Stock Purchase") by a subsidiary of VS&A-
T/SF of 881,988 shares of Common Stock, the repurchase consummated on October
9, 1997 by the Issuer of certain employee stock options (the "Option
Repurchase"), the reverse stock split (which has not yet occurred) of the
shares of Common Stock that effectively will result in the elimination of all
shares of Common Stock other than those held by the Equity Investors (together
with certain related transactions, the "Second Step Transaction"), and the Drop
Down Restructuring (which has not yet occurred) described below, the Company
will be recapitalized and VS&A-T/SF and Fir Tree will own 64% and 36% of the
Common Stock, respectively. The Tender Offer, Stock Purchase, Option
Repurchase, Second Step Transaction and Drop Down Restructuring are
collectively referred to herein as the "Recapitalization." Unless otherwise
indicated, references herein to numbers of shares of Common Stock reflect the
capitalization of the Issuer before giving effect to the reverse stock split to
be effected as the Second Step Transaction. See "Description of the
Transactions."
As part of the Recapitalization, VS&A-T/SF and Fir Tree will cause the
Company, directly or indirectly, to contribute to T/SF Holdings, LLC ("Holdings
LLC") substantially all of the assets and liabilities of Atwood, Galaxy and GEM
in exchange for a $45.0 million preferred equity interest in Holdings LLC.
VS&A-T/SF and Fir Tree will contribute $4.5 million to acquire the common
equity interests in Holdings LLC and Operating LLC in the same proportion as
their ownership of the Common Stock immediately following the consummation of
the Recapitalization. The preferred equity interest to be held, directly or
indirectly, by the Issuer will carry an 11% annual distribution rate and give
the Issuer, directly or indirectly through its wholly-owned subsidiaries,
voting, operational and management control of Holdings LLC. Holdings LLC will
contribute substantially all of the assets of Galaxy, Atwood and GEM (together
with the Company's contribution of such assets to Holdings LLC, the "Drop Down
Restructuring") into several limited liability companies (the "Operating
LLCs"). 99% of the common equity interests of each Operating LLC will be owned
by Holdings LLC and will give Holdings LLC voting, operational and management
control of such entities and a 1% common equity interest of each Operating LLC
will be owned by T/SF Operating, LLC ("Operating LLC"). The preferred equity
interest in Operating LLC will be owned by Holdings LLC and give Holdings LLC
voting, operational and management control of Operating LLC and the common
equity interest of Operating LLC will be held by VS&A-T/SF and Fir Tree in the
same proportion as their ownership of the Common Stock immediately following
the consummation of the Recapitalization. Holdings LLC, Operating LLC and the
Operating LLCs are collectively referred to herein as the "LLCs." As a result
of the control, directly or indirectly, of the LLCs by the Issuer, the
financial results of the LLCs will be included in the consolidated financial
statements of the Company. Each of the LLCs has jointly and severally
unconditionally guaranteed, on an unsecured senior subordinated basis, the
payment of principal, premium, if any, and interest on the Notes, which
guarantees are subordinated to all Senior Debt of the LLCs and the other
Guarantors. After giving effect to the Recapitalization, the Company's
organizational structure will be as shown on the following chart:
6
LOGO
The Financing Plan. The Offering (as defined herein) was part of a plan
designed to enable the Issuer to finance the Recapitalization. In connection
with the Recapitalization, the Issuer: (i) borrowed or will borrow $20.0
million under a $25.0 million revolving senior credit facility (the "Senior
Credit Facility") with First Union National Bank ("FUNB"), an affiliate of the
Initial Purchaser (as defined herein); (ii) issued $80.0 million aggregate
principal amount of notes pursuant to a facility (the "Bridge Financing
Facility") provided by First Union Corporation, an affiliate of the Initial
Purchaser; (iii) maintained Fir Tree's ownership interest through the Fir Tree
Rollover valued at approximately $19.6 million and (iv) received or will
receive $40.0 million(/2/) of equity contributions (the "Equity Contributions")
from VS&A-T/SF and Fir Tree. The Recapitalization, the borrowings under the
Senior Credit Facility and the Bridge Financing Facility, the Fir Tree Rollover
and the Equity Contributions are collectively referred to herein as the
"Transactions." The net proceeds of the Notes sold pursuant to the Offering
were applied to repay indebtedness incurred in connection with the
Recapitalization under the Senior Credit Facility and the Bridge Financing
Facility.
The following table sets forth the sources and uses of funds in connection
with the Recapitalization (dollars in thousands).
SOURCES OF FUNDS:
- -----------------
Senior Credit Facility..... $ 20,000
Bridge Financing Facility.. 80,000
Equity Contributions (2)... 40,000
Fir Tree Rollover.......... 19,600
--------
Total sources............ $159,600
========
USES OF FUNDS:
- --------------
Share repurchase and other (1).................................... $130,067
Fir Tree Rollover................................................. 19,600
Fees and expenses (3)............................................. 8,250
Working capital................................................... 1,683
--------
Total uses...................................................... $159,600
========
- --------
(1) Reflects consideration paid or to be paid to repurchase shares pursuant to
the Tender Offer, Option Repurchase and Second Step Transaction, as well
as severance and bonus expenses associated with the Recapitalization.
(2) The Equity Contributions consist of $35.5 million contributed by VS&A-T/SF
to the Issuer and $4.5 million to be contributed to Holdings LLC and
Operating LLC as part of the Drop Down Restructuring. Of the $4.5 million
to be contributed to Holdings LLC and Operating LLC, VS&A-T/SF and Fir
Tree will contribute approximately $2.9 million and $1.6 million,
respectively.
(3) Includes fees and expenses related to the Transactions and the Offering
(including the Initial Purchaser's discount).
7
OFFERING OF THE OLD NOTES
On October 29, 1997, the Issuer completed the private sale to First Union
Capital Markets Corp. (the "Initial Purchaser") of $100.0 million principal
amount of the Old Notes at a price of 97% of the principal amount thereof. The
Initial Purchaser resold the Old Notes to a limited number of qualified
institutional buyers at an initial price to investors of 100% of the principal
amount thereof, with net proceeds to the Issuer of $97.0 million (the
"Offering"). The Offering was a private placement transaction exempt from the
registration requirements of the Securities Act pursuant to Rule 144A and
Section 4 thereof.
THE EXCHANGE OFFER
The Exchange Offer relates to the exchange of up to $100,000,000 aggregate
principal amount of Old Notes for up to an equal aggregate principal amount of
New Notes. The New Notes will be obligations of the Issuer entitled to the
benefits of the Indenture relating to the Old Notes. The form and terms of the
New Notes are identical in all material respects to the form and terms of the
Old Notes except that the New Notes have been registered under the Securities
Act and will not contain terms with respect to transfer restrictions or
interest rate increases as described herein. In addition, following the
completion of the Exchange Offer, the Notes will not be entitled, except in
certain limited circumstances, to the benefits of the provisions of the
Exchange Offer Registration Rights Agreement relating to contingent increases
in the interest rates provided for pursuant thereto. See "Description of the
New Notes."
The Exchange Offer...... $1,000 principal amount of New Notes will be issued
in exchange for each $1,000 principal amount of Old
Notes validly tendered pursuant to the Exchange
Offer. As of the date hereof, $100,000,000 in
aggregate principal amount of Old Notes are
outstanding. The Issuer will issue the New Notes to
tendering holders of Old Notes on or promptly after
the Expiration Date.
Resale.................. The Issuer believes that the New Notes issued
pursuant to the Exchange Offer generally will be
freely transferable by the holders thereof without
registration or any prospectus delivery requirement
under the Securities Act, except that any of its
"affiliates" or any "dealer," as such terms are
defined under the Securities Act, that exchanges Old
Notes held for its own account (a "Restricted
Holder") may be required to deliver copies of this
Prospectus in connection with any resale of the New
Notes issued in exchange for such Old Notes (the
"Prospectus Delivery Requirement"). A broker-dealer
will be required to acknowledge that it has no
arrangements with any person to participate in the
distribution of the New Notes. A broker-dealer which
purchased Old Notes from the Issuer may not
participate in the Exchange Offer. See "The Exchange
Offer--General" and "Plan of Distribution."
Expiration Date.........
5:00 p.m., New York City time, on March 10, 1998,
unless the Exchange Offer is extended, in which case
the term "Expiration Date" means the latest date and
time to which the Exchange Offer is extended See "The
Exchange Offer--Expiration Date; Extensions;
Amendments."
Accrued Interest on the
New Notes and the Old Interest on each New Note will accrue from the last
Notes.................. Interest Payment Date on which interest was paid on
the Old Note tendered in exchange therefor or, if no
interest has been paid on such tendered Old Note,
from October 29, 1997. Holders of Old Notes whose Old
Notes are accepted for exchange will be deemed to
have waived the right to receive any payment
in respect of interest on such Old Notes accrued from
the last Interest
8
Payment Date or October 29, 1997 (as the case may be)
to the date of the issuance of the New Notes.
Consequently, holders who exchange their Old Notes
for New Notes will receive the same interest payment
on the same Interest Payment Date that they would
have received had they not accepted the Exchange
Offer. See "The Exchange Offer--Interest on the New
Notes."
Termination of the
Exchange Offer......... The Issuer may terminate the Exchange Offer if it
determines that its ability to proceed with the
Exchange Offer could be materially impaired due to
any legal or governmental action, any new law,
statute, rule or regulation or any interpretation of
the staff of the Commission of any existing law,
statute, rule or regulation. Holders of Old Notes
will have certain rights against the Issuer under the
Registration Rights Agreement if the Issuer fails to
consummate the Exchange Offer. See "The Exchange
Offer--Termination." No federal or state regulatory
requirements must be complied with or approvals
obtained in connection with the Exchange Offer, other
than applicable requirements under federal and state
securities laws.
Procedures for
Tendering Old Notes.... Each holder of Old Notes wishing to accept the
Exchange Offer must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, in
accordance with the instructions contained herein and
therein, and mail or otherwise deliver such Letter of
Transmittal, or such facsimile, together with the Old
Notes to be exchanged and any other required
documentation to IBJ Schroder Bank & Trust Company,
as Exchange Agent, at the address set forth herein
and therein or effect a tender of Old Notes pursuant
to the procedures for book-entry transfer as provided
for herein. See "The Exchange Offer--Procedures for
Tendering. "
Special Procedures for
Beneficial Holders..... Any beneficial holder whose Old Notes are registered
in the name of his broker, dealer, commercial bank,
trust company or other nominee and who wishes to
tender in the Exchange Offer should contact such
registered holder promptly and instruct such
registered holder to tender on his behalf. If such
beneficial holder wishes to tender on his own behalf,
such beneficial holder must, prior to completing and
executing the Letter of Transmittal and delivering
his Old Notes, either make appropriate arrangements
to register ownership of the Old Notes in such
holder's name or obtain a properly completed bond
power from the registered holder. The transfer of
record ownership may take considerable time. See "The
Exchange Offer--Procedures for Tendering."
Guaranteed Delivery Holders of Old Notes who wish to tender their Old
Procedures.............. Notes and whose Old Notes are not immediately
available or who cannot deliver their Old Notes (or
who cannot complete the procedure for book-entry
transfer on a timely basis) and a properly completed
Letter of Transmittal or any other documents required
by the Letter of Transmittal to the Exchange Agent
prior to the Expiration Date may tender their Old
Notes according to the guaranteed delivery procedures
set forth in "The Exchange Offer--Guaranteed Delivery
Procedures."
9
Withdrawal Rights....... Tenders of Old Notes may be withdrawn at any time
prior to 5:00 p.m., New York City time, on the
business day prior to the Expiration Date, unless
previously accepted for exchange. See "The Exchange
Offer--
Withdrawal of Tenders."
Acceptance of Old Notes
and Delivery of New Subject to certain conditions (as summarized above in
Notes.................. "Termination of the Exchange Offer" and described
more fully in "The Exchange Offer--Termination"), the
Issuer will accept for exchange any and all Old Notes
which are properly tendered in the Exchange Offer
prior to 5:00 p.m., New York City time, on the
Expiration Date. The New Notes issued pursuant to the
Exchange Offer will be delivered promptly following
the Expiration Date. See "The Exchange Offer--
General."
Certain Tax
Consequences............ The exchange pursuant to the Exchange Offer will
generally not be a taxable event for federal income
tax purposes. See "Certain U.S. Federal Income Tax
Consequences."
Exchange Agent.......... IBJ Schroder Bank & Trust Company, the Trustee under
the Indenture, is serving as exchange agent (the
"Exchange Agent") in connection with the Exchange
Offer. The mailing address of the Exchange Agent is:
IBJ Schroder Bank & Trust Company of New York, P.O.
Box 84, Bowling Green Station, New York, NY 10274-
0084, Attention: Reorganization Operations
Department; and deliveries by hand or overnight
courier should be addressed to IBJ Schroder Bank &
Trust Company of New York, One State Street, New
York, NY 10004, Attention: Securities Processing
Window, Subcellar One (SC-1). For information with
respect to the Exchange Offer and confirmation of
facsimile transmissions, the telephone number for the
Exchange Agent is (212) 858-2103 and the facsimile
number for the Exchange Agent is (212) 858-2611.
Use of Proceeds.........
There will be no cash proceeds payable to the Issuer
from the issuance of the New Notes pursuant to the
Exchange Offer. The Company incurred $80.0 million of
indebtedness under the Bridge Financing Facility and
borrowed or will borrow $20.0 million pursuant to the
Senior Credit Facility pending the issuance and sale
of the Old Notes. The Company applied the net
proceeds from the sale of the Old Notes to repay the
indebtedness incurred under the Bridge Financing
Facility and the Senior Credit Facility in connection
with the Recapitalization. The Bridge Financing
Facility bore interest at the rate of 10.25% per
annum. An affiliate of the Initial Purchaser was the
lender under the Bridge Financing Facility.
10
THE NEW NOTES
Securities Offered...... $100.0 million principal amount of 10 3/8% Series B
Senior Subordinated Notes Due 2007.
Maturity Date........... November 1, 2007.
Interest Payment Each May 1 and November 1, commencing May 1, 1998.
Dates..................
Optional Redemption..... The Notes will be redeemable at the option of the
Issuer, in whole or in part, at any time on or after
November 1, 2002, at the redemption prices set forth
herein, plus accrued and unpaid interest thereon to
the date of redemption.
Prior to November 1, 2000, the Issuer, at its option,
may redeem in the aggregate up to 35% of the original
principal amount of the Notes at 110.375% of the
aggregate principal amount so redeemed, plus accrued
and unpaid interest thereon to the redemption date,
with the Net Proceeds of one or more Public Equity
Offerings; provided that at least 65% of the
principal amount of Notes originally issued remain
outstanding immediately after the occurrence of any
redemption and that any such redemption occurs within
90 days following the closing of any such Public
Equity Offering. See "Description of the New Notes--
Redemption--Optional Redemption."
Change of Control....... In the event of a Change of Control, holders of the
Notes will have the right to require the Issuer to
purchase the Notes at a purchase price equal to 101%
of the aggregate principal amount thereof, plus
accrued and unpaid interest thereon to the date of
purchase. See "Description of the New Notes--Change
of Control."
Ranking................. The New Notes will be general unsecured obligations
of the Issuer, subordinated in right of payment to
all existing and future Senior Debt of the Issuer and
senior in right of payment to any subordinated
indebtedness of the Issuer. As of September 30, 1997,
after giving effect to the Transactions and the
issuance of the Old Notes, the Issuer would have had
(i) approximately $3.7 million aggregate principal
amount of Senior Debt outstanding and (ii) $25.0
million of borrowing availability under the Senior
Credit Facility. See "Description of the New Notes--
Subordination."
Guarantees.............. The Notes are unconditionally guaranteed, on an
unsecured senior subordinated basis, as to the
payment of principal, premium, if any, and interest,
jointly and severally (collectively, the
"Guarantees"), by each of the Issuer's subsidiaries
and each of the LLCs (collectively, the
"Guarantors"). The Guarantees are subordinated to all
Senior Debt of the Guarantors. See "Description of
the New Notes--Guarantees."
Asset Sale Proceeds..... The Issuer is obligated in certain instances to make
offers to repurchase the Notes at a purchase price in
cash equal to 100% of the principal amount thereof,
plus accrued and unpaid interest thereon to the date
of repurchase, with the net cash proceeds of certain
asset sales. See "Description of the New Notes--
Certain Covenants--Limitation on Asset Sales."
11
Certain Covenants....... The Indenture (as defined herein), under which the
Notes will be issued, will contain covenants for the
benefit of the holders of the Notes that, among other
things, will restrict the ability of the Issuer and
the Guarantors to: (i) incur additional indebtedness;
(ii) pay dividends, distributions and other
restricted payments; (iii) issue stock of or other
interests in subsidiaries; (iv) make certain
investments; (v) repurchase stock; (vi) create
certain liens; (vii) enter into certain transactions
with affiliates; (viii) merge or consolidate the
Issuer or any Guarantor and (ix) transfer or sell
assets. These covenants are subject to a number of
important qualifications and exceptions, including
the permitting of Permitted Tax Distributions (as
defined therein) by the LLCs. See "Description of the
New Notes--Certain Covenants."
Registration Rights.....
Pursuant to a Registration Rights Agreement among the
Issuer, the Guarantors and the Initial Purchaser (the
"Exchange Offer Registration Rights Agreement"), the
Issuer and the Guarantors agreed to use their best
efforts to file within 30 days, and cause to become
effective within 150 days, of the date of the
original issuance of the Old Notes (the "Issue
Date"), an Exchange Offer Registration Statement (as
defined herein) with respect to an offer to exchange
the Old Notes for notes of the Issuer with terms
(other than those with respect to restrictions on
transfer) substantially identical to those of the Old
Notes. The Issuer, upon the Exchange Offer
Registration Statement becoming effective, will be
obligated to commence the Exchange Offer and to cause
the Exchange Offer to remain open for acceptance for
not less than 20 business days after the date of
commencement. In addition, under certain
circumstances the Issuer may be required to file a
Shelf Registration Statement (as defined herein).
Among other provisions, in the event that: (i) the
Exchange Offer Registration Statement or Shelf
Registration Statement has not been filed with the
Commission within 30 days after the Issue Date; (ii)
the Exchange Offer Registration Statement or Shelf
Registration Statement is not declared effective
within 150 days after the Issue Date or (iii) the
Exchange Offer is not consummated within 30 days
after the Exchange Offer Registration Statement is
declared effective (each such event referred to in
clauses (i) through (iii) above is a "Registration
Default"), the sole remedy available to holders of
the Notes will be immediate assessment of additional
interest ("Additional Interest") as follows: the per
annum interest rate on the Notes will increase by
0.5% and the per annum interest rate will increase by
an additional 0.25% for each subsequent 90-day period
during which the Registration Default remains
uncured, up to a maximum additional interest rate of
2% in excess of the initial 10 3/8% interest rate per
annum except that such Additional Interest shall not
be payable under certain circumstances. All
Additional Interest will be payable to holders of the
Notes in cash on each May 1 and November 1,
commencing with the first such date occurring after
any such Additional Interest commences to accrue, and
continuing until such Registration Default is cured.
After the date on which such Registration Default is
cured, the interest rate on the Notes will revert to
the interest rate originally borne by the Notes. See
"The Exchange Offer."
12
The Notes have been designated for trading on the
Trading................. Private Offerings, Resales and Tradings through
Automated Linkages ("PORTAL") Market.
THE ISSUER
T/SF Communications Corporation is a Delaware corporation. The Issuer's
principal executive offices currently are located at 888 Seventh Avenue, 28th
floor, New York, New York 10106 and its telephone number is (212) 247-5160.
RISK FACTORS
Prospective purchasers of the Notes should carefully consider the specific
matters set forth under "Risk Factors" as well as the other information and
data included in this Prospectus in evaluating an investment in the Notes.
13
SUMMARY UNAUDITED PRO FORMA FINANCIAL DATA
The following summary unaudited pro forma statement of operations data of the
Company give effect to, among other things, the Transactions and the Offering,
as if they had occurred at January 1, 1996. The following unaudited pro forma
condensed balance sheet data of the Company give effect to, among other things,
the Transactions and the Offering, as if they had occurred on September 30,
1997. Certain management assumptions and adjustments relating to the
Transactions and this Offering are described in the accompanying notes hereto
and elsewhere in this Prospectus. This pro forma information is not necessarily
indicative of the results that would have occurred had the Transactions and the
Offering been completed on the dates indicated or the Company's actual or
future results or financial position. The summary unaudited pro forma statement
of operations, balance sheet and other financial data should be read in
conjunction with the information contained in the financial statements of the
Company and the notes thereto, "Unaudited Pro Forma Consolidated Financial
Information," "Selected Historical Consolidated Financial Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere herein.
NINE MONTHS ENDED
SEPTEMBER 30,
YEAR ENDED ------------------ TWELVE MONTHS ENDED
DECEMBER 31, 1996 1996 1997 SEPTEMBER 30, 1997
----------------- -------- -------- -------------------
(DOLLARS IN THOUSANDS)
STATEMENT OF OPERATIONS
DATA:
Revenues
Business to Business
Communications........ $45,594 $28,464 $29,825 $46,955
Information Services... 28,838 21,629 24,388 31,597
Corporate and other in-
come.................. 23 438 749 334
------- -------- -------- -------
Total revenues........ 74,455 50,531 54,962 78,886
------- -------- -------- -------
Expenses
Operating costs........ 43,900 30,868 33,684 46,716
General and administra-
tive expenses......... 16,203 11,510 12,889 17,582
Depreciation and amor-
tization.............. 4,895 3,662 3,643 4,876
------- -------- -------- -------
Total expenses........ 64,998 46,040 50,216 69,174
------- -------- -------- -------
Operating income....... 9,457 4,491 4,746 9,712
Interest expense....... 11,498 8,630 8,477 11,345
------- -------- -------- -------
Loss before income tax-
es.................... (2,041) (4,139) (3,731) (1,633)
Income tax benefit..... 913 1,519 1,221 615
------- -------- -------- -------
Net loss............... $(1,128) $ (2,620) $ (2,510) $(1,018)
======= ======== ======== =======
OTHER FINANCIAL DATA:
Pro forma EBITDA (1)
(2)................... $14,352 $ 8,153 $ 8,389 $14,588
Pro forma EBITDA margin
(1) (2)............... 19.3% 16.1% 15.3% 18.5%
Adjusted pro forma
EBITDA (1) (3) ....... $17,171 $ 10,277 $10,377 $17,271
Adjusted pro forma
EBITDA margin (1) (3)
...................... 23.1% 20.3% 18.9% 21.9%
FINANCIAL RATIOS:
Ratio of net debt to adjusted pro forma EBITDA (4)........................ 5.5x
Ratio of adjusted pro forma EBITDA to cash interest expense (5) .......... 1.6x
AS OF
SEPTEMBER 30, 1997
------------------
BALANCE SHEET
DATA:
Cash and
equivalents.. $ 8,577
Total assets.. 74,612
Total long-
term debt.... 103,656
Stockholders'
deficit...... (53,088)
14
- --------
(1) Historical EBITDA, as shown below, represents operating income plus
depreciation and amortization. EBITDA is included because management
understands that such information is considered by certain investors to be
an additional basis on which to evaluate the Company's ability to pay
interest expense, repay debt and make capital expenditures. Excluded from
EBITDA are interest expense, income taxes, depreciation and amortization,
each of which can significantly affect the Company's results of operations
and liquidity and should be considered in evaluating the Company's
financial performance. EBITDA is not intended to represent and should not
be considered more meaningful than, or an alternative to, measures of
operating performance as determined in accordance with generally accepted
accounting principles.
(2) Pro forma EBITDA, as presented, reflects the following pro forma
adjustments and does not reflect additional anticipated cost savings
related to management's business and operating strategy, which is currently
planned. Pro forma EBITDA margin represents pro forma EBITDA as a
percentage of total pro forma revenues.
TWELVE MONTHS ENDED
SEPTEMBER 30, 1997
----------------------
(DOLLARS IN THOUSANDS)
Historical EBITDA (1)............................... $14,046
Pro forma adjustments:
Acquisitions of CORSEARCH, Casino Publishing and
Galaxy Expocard Europe (a)......................... (260)
Non-operating gain on sale of real estate (b)....... (316)
General and administrative expenses and other (c)... 1,118
-------
Total pro forma adjustments......................... 542
-------
Pro forma EBITDA.................................... $14,588
=======
--------
(a) This adjustment gives effect to the acquisition of Casino Publishing
Co. in February 1997 and Galaxy Expocard Europe B.V. in May 1997 as if
they occurred at the beginning of the period indicated.
(b) Represents the elimination of $316,000 gain on the sale of certain
Company assets, consisting mainly of real estate.
(c) Pro forma adjustments to general and administrative and other expenses
are as follows:
TWELVE MONTHS ENDED
SEPTEMBER 30, 1997
----------------------
(DOLLARS IN THOUSANDS)
VS&A management fee................................. $ (90)
Elimination of management position (i).............. 353
Nonrecurring write-down of investment (ii).......... 575
Other (iii)......................................... 280
------
$1,118
======
--------
(i) Represents the elimination of salary, bonus, payroll taxes and
employee benefits associated with one management position which was
principally devoted to nonoperational tasks including the
Transactions. Management eliminated this position as part of the
Transactions.
(ii) Represents a nonrecurring charge associated with the write-down of
Midwest Energy Companies, Inc. ("MECI") common stock received in
exchange for land sold to MECI in March 1995 and a write-off of an
investment in a vendor used by the Company who filed for
bankruptcy.
(iii) Represents (a) the elimination of certain general and
administrative costs, mainly transactional consulting fees, during
the year ended December 31, 1996 and the nine months ended
September 30, 1997 and (b) the elimination of amortization income
associated with covenants-not-to-compete arising from the sale of
the New York Shopper (as defined herein) and trade journal
operations.
15
(3) Management believes the following additional adjustments are relevant to
evaluating the future operating performance of the Company. The following
additional adjustments, which eliminate the impact of certain items which
management believes are nonrecurring and also reflects the estimated impact
of management's business and operating strategy, are based on estimates and
assumptions made and believed to be reasonable by management and are
inherently uncertain and subject to change. Pro forma adjusted EBITDA
margin represents pro forma adjusted EBITDA as a percentage of total pro
forma revenues. The following calculation should not, therefore, be viewed
as indicative of actual or future results. The following table reflects the
effect of these items:
TWELVE MONTHS ENDED
SEPTEMBER 30, 1997
----------------------
(DOLLARS IN THOUSANDS)
Pro forma EBITDA...................................... $14,588
Additional adjustments:
Net personnel costs (a)............................... 1,271
Reorganization of loss-producing magazines (b)........ 616
Excess information acquisition costs (c).............. 196
Shut down of business operations (d).................. 418
Other net savings (e)................................. 182
-------
Total additional adjustments.......................... 2,683
-------
Adjusted pro forma EBITDA............................. $17,271
=======
--------
(a) Represents the net reduction in personnel costs for: (i) elimination of
the Tulsa, Oklahoma corporate office and the related compensation and
benefits for 13 individuals; (ii) addition of new management team
located at a new corporate office in New York and the related
compensation, benefits, occupancy and administrative costs; (iii)
addition of short-term consulting agreement expenses with former
officers to aid the new management in the transition phase and (iv)
elimination of non-recurring costs related to the search for and hiring
of research oriented personnel at CORSEARCH.
(b) Represents losses incurred by the Company during the periods presented
in connection with two magazine operations: IGWB and Casino Executive.
While these publications are projected to be profitable in fiscal 1998,
in the event that such publications continue to generate losses,
management expects to take one or more of the following actions: (i)
reorganize the publications to reduce costs; (ii) merge the
publications with another party; (iii) enter into strategic alliances
or partnerships with a third party or (iv) other alternatives.
Management expects a decision regarding this segment will be made
during fiscal 1998.
(c) Effective for fiscal 1997, CORSEARCH changed the terms of a contract
with one of its database vendors. This adjustment reflects information
acquisition costs during the nine months ended September 30, 1997 under
a variable pricing structure consistent with an August 1, 1997
amendment to that agreement with that vendor.
(d) Represents losses in TISI's NESS division, a high-end employment
screening service which was abandoned by the Company in fiscal 1997.
(e) During fiscal 1996 and 1997, certain consulting costs were incurred in
connection with one-time acquisition searches and one-time executive
searches; a system evaluation project that was never completed; a
satellite office study that was not implemented and an option and study
of the feasibility of a new publication. In addition, severance costs
for the officer of a closed division were incurred.
(4) The ratio of net debt to adjusted pro forma EBITDA represents total pro
forma long-term debt, including current maturities, less pro forma cash and
cash equivalents divided by adjusted pro forma EBITDA.
(5) The ratio of adjusted pro forma EBITDA to cash interest expense represents
adjusted pro forma EBITDA divided by the sum of the cash interest expense
associated with the Notes plus actual cash interest paid by the Company.
16
SUMMARY HISTORICAL FINANCIAL DATA
The following table presents summary historical financial data for each of
the five years in the period ended December 31, 1996 that have been derived
from the audited consolidated financial statements of the Company. The
statements of operations and changes in stockholders' equity and statements of
cash flows for each of the three years in the period ended December 31, 1996
and the notes thereto appear elsewhere in this Prospectus. The summary
historical balance sheet data as of September 30, 1997 and the summary
historical statement of operations data for the nine months ended September 30,
1997 and 1996 of the Company have been derived from unaudited financial
statements, which, in the opinion of management, include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the results for the unaudited interim periods. Results for the
nine months ended September 30, 1997 and 1996 are not necessarily indicative of
results that may be expected for the entire year.
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------- ------------------
1992 1993 1994 1995 1996 1996 1997
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
(UNAUDITED)
STATEMENT OF OPERATIONS
DATA (1):
Revenues
Information Services
(a)................... $ 13,643 $ 14,499 $ 15,091 $ 17,950 $ 24,273 $ 17,064 $ 24,388
Business to Business
Communications (b).... 80,643 42,911 39,665 53,089 42,891 26,313 29,323
Corporate and other.... 1,020 1,570 2,163 1,039 1,478 1,728 955
-------- -------- -------- -------- -------- -------- --------
Total revenues........ 95,306 58,980 56,919 72,078 68,642 45,105 54,666
-------- -------- -------- -------- -------- -------- --------
Expenses
Operating costs........ 64,613 49,658 35,069 39,665 40,314 27,549 33,474
General and
administrative
expenses.............. 21,341 15,361 11,862 11,841 15,207 10,289 13,000
Depreciation and
amortization.......... 7,378 3,779 3,118 3,601 4,018 2,843 3,564
-------- -------- -------- -------- -------- -------- --------
Total expenses........ 93,332 68,798 50,049 55,107 59,539 40,681 50,038
-------- -------- -------- -------- -------- -------- --------
Operating income
(loss)................ 1,974 (9,818) 6,870 16,971 9,103 4,424 4,628
Interest expense....... 2,692 1,921 736 859 581 413 401
-------- -------- -------- -------- -------- -------- --------
Income (loss) before
income taxes and other
items................. (718) (11,739) 6,134 16,112 8,522 4,011 4,227
Unusual gain (2)....... 24,412 -- -- -- -- -- --
Income tax (provision)
benefit............... (10,569) 4,097 (2,589) (58) (3,101) (1,578) (1,803)
Minority interest in
consolidated
subsidiaries.......... (3,983) 1,929 (981) (266) -- -- --
Discontinued
operations, net (3)... (790) (4,800) (2,816) 37 -- -- --
Extraordinary loss, net
of tax of $340 (4).... -- (560) -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Net income (loss)...... $ 8,352 $(11,073) $ (252) $ 15,825 $ 5,421 $ 2,433 $ 2,424
======== ======== ======== ======== ======== ======== ========
Weighted average common
shares outstanding.... 4,208 3,801 3,733 3,766 3,543 3,537 3,564
EARNINGS (LOSS) PER
SHARE:
Continuing operations.. $ 2.17 $ (1.54) $ 0.65 $ 4.19 $ 1.53 $ 0.69 $ 0.68
Discontinued
operations............ (0.19) (1.26) (0.75) .01 -- -- --
Extraordinary loss..... -- (0.15) -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
$ 1.98 $ (2.95) $ (0.10) $ 4.20 $ 1.53 $ 0.69 $ 0.68
======== ======== ======== ======== ======== ======== ========
OTHER FINANCIAL DATA
(1):
Capital expenditures... $ 1,402 $ 5,564 $ 4,382 $ 2,589 $ 2,641 $ 1,955 $ 5,460
EBITDA (5)............. 9,352 (6,039) 9,988 20,572 13,121 7,267 8,192
EBITDA margin (5)...... 9.8% (10.2)% 17.5% 28.5% 19.1% 16.1% 15.0%
Ratio of earnings to
fixed charges (6)..... 9.8x -- 9.3x 19.8x 15.7x 10.7x 11.2x
AS OF
SEPTEMBER 30, 1997
------------------
BALANCE SHEET DATA:
Cash and equivalents........................................ $ 6,894
Total assets................................................ 62,828
Total debt.................................................. 4,862
Stockholders' equity........................................ 39,628
17
- --------
(1) In the merger of Tribune/Swab-Fox Companies, Inc. ("Tribune/Swab Fox"),
then the owner of 78% of the Common Stock, with and into the Issuer on May
25, 1995, the Issuer was the surviving entity, from a legal standpoint.
However, from an accounting standpoint, the transaction was treated as a
downstream merger. Thus, for financial reporting purposes, the transaction
was treated as a recapitalization of Tribune/Swab-Fox, with Tribune/Swab-
Fox as the survivor. Accordingly, the historical financial statements of
the Company, as the surviving legal entity, are those historical financial
statements of Tribune/Swab-Fox prior to the merger. In addition, the
Company was a party to several events/transactions which affect the
comparability of the historical information presented above. See the Notes
to Consolidated Financial Statements for additional information on certain
of these events/transactions.
--------
(a)With respect to Information Services, the Company acquired CORSEARCH in
August 1996.
(b) With respect to Business to Business Communications, the Company: (i)
ceased publishing "The Tulsa Tribune" in September 1992 as a result of
the termination of a joint operating agreement; (ii) sold the operating
assets of Marks-Roiland Communications, Inc. (the "New York Shopper"),
one of the Company's shopper-newspaper operations, in November 1993;
(iii) acquired the stock of Galaxy in March 1994; (iv) sold the assets
of Shopper's Guide, Inc. (the "New Jersey Shopper"), its other shopper-
newspaper operation, in April 1994; (v) sold three trade journals and
related assets in July 1995; (vi) acquired Casino Publishing Co.
effective February 1, 1997 and (vii) acquired Galaxy Expocard Europe,
B.V. in May 1997.
(2) Gain from early termination of newspaper joint operating agreement between
the Company's newspaper and World Publishing Company, net of termination
costs.
(3) Restated to reflect real estate as a discontinued operation as of November
30, 1994.
(4) Prepayment penalty on early retirement of long-term debt.
(5) EBITDA, as presented, represents operating income plus depreciation and
amortization. EBITDA is included because management understands that such
information is considered by certain investors to be an additional basis on
which to evaluate the Company's ability to pay interest expense, repay debt
and make capital expenditures. Excluded from EBITDA are interest expense,
income taxes, depreciation and amortization, unusual gain, minority
interest in consolidated subsidiaries, discontinued operations, net and
extraordinary loss, net of tax, each of which can significantly affect the
Company's results of operations and liquidity and should be considered in
evaluating the Company's financial performance. EBITDA is not intended to
represent and should not be considered more meaningful than, or an
alternative to, measures of operating performance as determined in
accordance with generally accepted accounting principles. EBITDA margin
represents EBITDA as a percentage of total revenues.
(6) In computing the ratio of earnings to fixed charges: (a) earnings have been
based on income from continuing operations before income taxes and fixed
charges and (b) fixed charges consist of interest and amortization of debt
discount and expense. The coverage deficiency for the year ended December
31, 1993 was approximately $11.7 million.
18
RISK FACTORS
CONSEQUENCES OF FAILURE TO EXCHANGE
Untendered Old Notes not exchanged for New Notes pursuant to the Exchange
Offer will remain subject to the existing restrictions upon transfer of such
Old Notes. Additionally, holders of any Old Notes not tendered in the Exchange
Offer prior to the Expiration Date will not be entitled to require the Issuer
to file the Shelf Registration Statement and the stated interest rate on such
Old Notes will remain at its initial level of 10 3/8%.
SUBSTANTIAL LEVERAGE
The Company incurred significant debt in connection with the Transactions
and the issuance of the Old Notes. As of September 30, 1997, after giving pro
forma effect to the Transactions and the issuance of the Old Notes, the
Company would have had outstanding indebtedness of $103.7 million. The
Company's leveraged financial position poses substantial consequences to
holders of the Notes, including the risks that: (i) a substantial portion of
the Company's cash flow from operations will be dedicated to the payment of
interest on the Notes and the payment of amounts due under the Senior Credit
Facility; (ii) the Company's leveraged position may impede its ability to
obtain financing in the future for working capital, capital expenditures and
general corporate purposes and (iii) the Company's highly leveraged financial
position may make it more vulnerable to economic downturns and may limit its
ability to withstand competitive pressures. Management believes that it will
have sufficient capital to carry on its business and will be able to meet its
scheduled debt service requirements. However, there can be no assurance that
the future cash flow of the Company will be sufficient to meet the Company's
obligations and commitments. In addition, the Senior Credit Facility
contemplates that all borrowings thereunder will become due by 2004. If the
Company is unable to generate sufficient cash flow from operations in the
future to service its indebtedness and to meet its other commitments, the
Company will be required to adopt one or more alternatives, such as
refinancing or restructuring its indebtedness, selling material assets or
operations or seeking to raise additional debt or equity capital. There can be
no assurance that any of these actions could be effected, or that if they are
effected, that they could be effected on a timely basis or on satisfactory
terms, or that these actions would enable the Company to continue to satisfy
its capital requirements. In addition, the terms of existing or future debt
agreements, including the Indenture and the Senior Credit Facility, may
prohibit the Company from adopting any of these alternatives. Management's
strategy contemplates strategic acquisitions, and a portion of the cost of
such acquisitions may be financed through the incurrence of additional
indebtedness. There can be no assurance that financing will continue to be
available on terms acceptable to the Company or at all. In the absence of such
financing, the Company's ability to respond to changing business and economic
conditions, to fund scheduled investments and capital expenditures, to make
future acquisitions and to absorb adverse operating results may be adversely
affected. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources," "Description of the
Senior Credit Facility," "Business--Business and Operating Strategies" and
"Description of the New Notes."
DEPENDENCE UPON DISTRIBUTIONS FROM SUBSIDIARIES AND LLCS
The ability of the Issuer to perform its obligations with respect to the
Notes will be dependent on several factors. The Issuer will be dependent on
its subsidiaries and the LLCs for funds with which to pay principal and
interest on the Notes. The terms of the Guarantees, the Indenture and the
Senior Credit Facility expressly permit the Issuer's subsidiaries and the LLCs
to make certain distributions to the Issuer in connection with the Issuer's
obligations with respect to the Notes. There can be no assurance, however,
that the Issuer's subsidiaries or the LLCs will be profitable such that such
entities are able to make distributions to the Issuer sufficient for the
payment of the Issuer's obligations with respect to the Notes. Subject to the
considerations described below under "Risk of Fraudulent Transfer," the
Guarantees will provide the holders of the Notes with a direct claim against
the Guarantors.
19
FULL IMPLEMENTATION OF BUSINESS AND OPERATING STRATEGY
Following the consummation of the Tender Offer and Stock Purchase, the
Company employed a new senior management team and adopted a refined business
and operating strategy. See "Business--Business and Operating Strategies" and
"Management." This business and operating strategy includes the implementation
of certain intended operating improvements and the adoption of new strategies.
There can be no assurance that the Company will be able to implement fully
this new business and operating strategy or that the anticipated results of
this strategy will be realized. In addition, after gaining experience with the
Company's operations under its new strategy, the Company and the new senior
management team may decide to alter or discontinue certain aspects of this
strategy. Implementation of this strategy could also be affected adversely by
a number of factors beyond the Company's control, such as operating
difficulties, increased operating costs, regulatory developments, general
economic conditions or increased competition. Any such failure to implement
this strategy could have a material adverse effect on the Company's ability to
service its indebtedness, including principal and interest payments on the
Notes.
The Company has reflected on a pro forma basis for the year ended December
31, 1996 and the nine-month periods ended September 30, 1996 and 1997 the
anticipated benefits from the operating improvements and cost reduction
measures included in management's business and operating strategy. These
adjustments are based on a number of estimates and assumptions that, while
considered reasonable by management, should not be viewed as indicative of the
results that would actually have occurred had the Company's business and
operating strategy been implemented on the dates indicated or of the Company's
actual or future results or financial position. Prospective purchasers of the
Notes are cautioned not to place undue reliance on these adjustments. See
"Unaudited Pro Forma Consolidated Financial Information."
SUBORDINATION OF NOTES
The Notes will be unsecured and subordinated to the prior right of payment
of all existing and future Senior Debt of the Issuer, including obligations
under the Senior Credit Facility. The indebtedness under the Senior Credit
Facility will also become due prior to the time the principal obligations
under the Notes become due. Subject to certain limitations, the Indenture will
permit the Issuer to incur additional Senior Debt. See "Description of the
Notes--Certain Covenants--Limitation on Incurrence of Additional
Indebtedness." As a result of the subordination provisions contained in the
Indenture, in the event of a liquidation or insolvency, the assets of the
Issuer will be available to pay obligations on the Notes only after all Senior
Debt has been paid in full, and there may not be sufficient assets remaining
to pay amounts due on any or all of the Notes then outstanding. In addition,
substantially all of the assets of the Issuer and its subsidiaries may in the
future be pledged to secure other indebtedness of the Company. See
"Description of the Senior Credit Facility" and "Description of the New
Notes."
RESTRICTIONS IMPOSED BY THE SENIOR CREDIT FACILITY AND THE INDENTURE
The Senior Credit Facility and the Indenture impose certain operating and
financial restrictions on the Company. The Senior Credit Facility requires the
Company to maintain specified financial ratios and tests, among other
obligations, including a maximum leverage ratio, a maximum senior leverage
ratio, a minimum interest coverage ratio and a minimum fixed charge coverage
ratio, each as defined in the Senior Credit Facility. In addition, the Senior
Credit Facility restricts, among other things, the Issuer's ability to: (i)
declare dividends or redeem or repurchase capital stock; (ii) prepay, redeem
or purchase debt; (iii) incur liens and engage in sale-leaseback transactions;
(iv) make loans and investments; (v) issue more debt; (vi) amend or otherwise
alter debt and other material agreements; (vii) make capital expenditures;
(viii) engage in mergers, acquisitions and asset sales; (ix) transact with
affiliates and (x) alter its lines of business. A failure to comply with the
restrictions contained in the Senior Credit Facility could lead to an event of
default thereunder which could result in an acceleration of such indebtedness.
Such an acceleration would constitute an event of default under the Indenture.
In addition, the Indenture restricts, among other things, the Company's
ability to: (i) incur additional indebtedness; (ii) pay dividends,
distributions and other restricted payments; (iii) issue stock of or other
interests
20
in subsidiaries; (iv) make certain investments; (v) repurchase stock; (vi)
create certain liens; (vii) enter into certain transactions with affiliates;
(viii) merge or consolidate the Issuer or any Guarantor and (ix) transfer or
sell assets. A failure to comply with the restrictions in the Indenture could
result in an event of default under the Indenture. See "Description of the
Senior Credit Facility" and "Description of the New Notes."
VARIABILITY OF OPERATING RESULTS
The Company's revenues and operating results may vary significantly from
quarter to quarter and from year to year as a result of a number of factors.
The Company's Business to Business Communications segment is affected by the
timing of conventions and trade shows, with most shows operating during March
to May and September to November. In addition, many conventions and trade
shows are held only in certain years (e.g., bi-annually, tri-annually, etc.),
which affects the comparability of the Company's revenues and other operating
results from year to year. World Gaming Congress, the Company's largest owned
trade show, traditionally is held in the fourth quarter of each year, and the
results of the Business to Business Communications segment are significantly
impacted by this timing. As a result of these variances, the Company's results
of operations are subject to significant fluctuations and its results of
operations for any particular quarter or year may not be indicative of results
of operations for future periods.
COMPETITION
Certain of the business lines in which the Company is engaged are highly
competitive and certain of the Company's competitors are larger and have
greater financial resources than the Company. There can be no assurance that
the Company will be able to continue to compete successfully or that such
competition will not have a material adverse effect on the Company's business
or financial results. See "Business--Competition."
CONTROLLING EQUITYHOLDER
The Common Stock currently is held approximately 60% by VS&A-T/SF and 33% by
Fir Tree. It is anticipated that the Common Stock will be held 64% by VS&A-
T/SF and 36% by Fir Tree following the consummation of the Second Step
Transaction. As a result, VS&A-T/SF currently has the ability to control the
policies and operations of the Company. Circumstances may occur in which the
interests of VS&A-T/SF, as the principal equity holder of the Issuer, could be
in conflict with the interests of the holders of the Notes. In addition, the
equity investors may have an interest in pursuing acquisitions, divestitures
or other transactions that, in their judgment, could enhance their equity
investment, even though such transactions might involve risks to the holders
of the Notes. See "Security Ownership of Certain Beneficial Owners and
Management."
LIMITATIONS ON CHANGE OF CONTROL
In the event of a Change of Control, the Issuer will be required to make an
offer for cash to repurchase the Notes at 101% of the principal amount
thereof, plus accrued and unpaid interest thereon and Additional Interest, if
any, thereon to the repurchase date. Certain events involving a Change of
Control may result in an event of default under the Senior Credit Facility or
other indebtedness of the Company that may be incurred in the future.
Moreover, the exercise by the holders of the Notes of their right to require
the Issuer to repurchase the Notes would cause an event of default under the
Senior Credit Facility (and may cause an event of default under such other
indebtedness), even if the Change of Control does not. The Issuer's
obligations under this provision of the Indenture could delay, deter or
prevent a sale of the Issuer or the Guarantors which might otherwise be
advantageous to the holders of the Notes. Finally, there can be no assurance
that the Issuer will have the financial resources necessary to repurchase the
Notes upon a Change of Control. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources" and "Description of the New Notes--Change of Control."
UNCERTAIN IMPACT OF ACQUISITION PLANS
The Company intends to implement its business and operating strategy of
targeted expansion through the acquisition of compatible businesses and
product lines and the formation of strategic alliances, joint ventures and
other business combinations. There can be no assurance that the Company can
successfully complete or finance any future acquisition. Should the Company
complete any material acquisition, the Company's success or failure in
integrating the operations of the acquired business may have a material impact
on the future growth or success of the Company.
21
DEPENDENCE ON KEY PERSONNEL
The success of the Company's operations will depend, in part, on the success
of the assimilation of Mr. Thomas, Steven J. Hunt, the new Chief Financial
Officer of the Company, Brian A. Meyer, the new General Counsel of the
Company, and the new management team (some of whom have limited experience in
certain of the specific businesses in which the Company is engaged) into the
Company's organization, the ability of the Company to retain other managers of
the Company's businesses and its ability to attract additional experienced
managers as its businesses expand and it pursues the implementation of its new
business and operating strategy. The Company currently is actively engaged in
a search for a new chief executive officer of CORSEARCH, having reached
agreement with Robert Frank, the current President and Chief Executive Officer
of CORSEARCH, for Mr. Frank's resignation from such positions in May 1998 and
his provision of consulting services thereafter through 1999. Following such
time as his U.S. Visa is transferred from VS&A to the Issuer, Mr. Thomas will
enter into an employment agreement which will provide for his employment as
President, Chief Executive Officer and a Director through October 2002.
Currently, Mr. Thomas' services are provided to the Company by VS&A, with whom
Mr. Thomas has an employment arrangement, and the Company reimburses VS&A for
such services at cost. Mr. Hunt and Mr. Meyer have each entered into
employment agreements which provide for their employment as Chief Financial
Officer and General Counsel, respectively, for five-year terms. On the closing
date of the Tender Offer, the Company entered into interim consulting
agreements with three senior executives of the Company. Although the Company
believes it could replace key employees in an orderly fashion should the need
arise, the loss of key personnel could have a material adverse effect on the
Company. The Company will not maintain key person insurance for any of its
officers, employees or directors. See "Management."
GOVERNMENT REGULATION
As a "consumer reporting agency," the Company's TISI subsidiary is subject
to the provisions of the Fair Credit Reporting Act (the "FCRA") and similar
acts existing in the states and is regulated by the Federal Trade Commission
(the "FTC") under the Federal Trade Commission Act. All TISI reports are
treated by TISI as consumer reports for purposes of the FCRA. The FCRA
provides for civil liabilities sanctions against a consumer reporting agency
by a consumer for willful or negligent noncompliance with the FCRA. The FCRA
was amended in 1997, effective October 1, 1997. Such amendments require DAC's
customers to increase their compliance activities and may limit, under certain
circumstances, their ability to access certain information sold by DAC, in
particular certain criminal records over seven years old. While the effect of
such amendments is not expected by DAC to impact materially its business or
prospects, primarily because further amendments to the FCRA are anticipated
(and draft legislation of such amendments has been submitted to the U.S.
Congress), the need for customers to revamp procedures and for the industry to
adjust to the new regulations thus far has had a negative impact on the use of
DAC's services and such negative impact may, if the foregoing further
amendments are not adopted, are adopted materially later than anticipated by
management, or are adopted in materially different form than previously
proposed, have a material and adverse effect on the use of DAC's services and
on its results of operations. It is not possible at this time to predict
accurately the extent of such effect.
The Americans with Disabilities Act (the "ADA") contains pre-employment
inquiry and confidentiality restrictions designed to prevent discrimination
against individuals in the hiring process. Although TISI's business is not
directly regulated by the ADA, the use by its customers of certain information
sold to them by TISI, such as workers' compensation histories or drug and
alcohol test results, is regulated, both with respect to the type of
information and the timing of its use. Similar state laws also affect TISI's
business. Some states have human rights laws that provide more protection than
the ADA. A large number of states also regulate the type of information which
can be made available to the public or to a third party or impose conditions
to the release of the information.
In the 14 years it has been in business, TISI has not been found liable for
any violations of the FCRA, the ADA or similar state laws. The Company did
settle one case out of court for a nominal amount to avoid litigation
expenses. There can be no assurance, however, that the Company will not be
found liable for any such violations
22
and that, if found so liable, the Company will not be subject to adverse
judgments in substantial amounts. Although management believes that TISI's
treatment of its reports as consumer reports for purposes of the FCRA is
appropriate and valid, there can be no assurance that such position would
withstand legal challenge. The 1997 amendments to the FCRA require TISI's
customers to increase their compliance activities and may, under certain
circumstances, limit their ability to access certain information sold by TISI,
in particular certain criminal records more than seven years old. In addition,
there can be no assurance that the FCRA, the ADA or similar state laws will
not be amended or subjected to different judicial or administrative
interpretation in the future. It is not possible at this time to predict the
impact that any such change might have on the Company's results of operations,
financial condition or liquidity.
The DOT is in the process of proposing and promulgating revised regulations
which, among other things, concern the requirements for pre-employment
screening of truck drivers. Although it is not possible at this time to
predict the impact that such regulations, if adopted, might have on the
Company's results of operations, financial condition or liquidity, management
believes that the regulations are not likely to have an adverse effect on the
foregoing. See "Business--Government Regulation" and "--Information Services--
TISI."
RISK OF FRAUDULENT TRANSFER
Under applicable provisions of the U.S. Bankruptcy Code or comparable
provisions of state fraudulent transfer or conveyance laws, if the Issuer, at
the time it issued the Notes, or any of the Guarantors, at the time it
incurred the indebtedness represented by the Guarantees: (i) incurred such
indebtedness with intent to hinder, delay or defraud creditors or (ii)(a)
received less than reasonably equivalent value or fair consideration for
incurring such indebtedness and (b)(1) was insolvent at the time of
incurrence, (2) was rendered insolvent by reason of such incurrence (and the
application of the proceeds thereof), (3) was engaged or was about to engage
in a business or transaction for which the assets remaining with such entity
constituted unreasonably small capital to carry on its businesses or (4)
intended to incur, or believed that it would incur, debts beyond its ability
to pay such debts as they mature, then, in each case, a court of competent
jurisdiction could void, in whole or in part, the Notes or the Guarantee, as
the case may be, or, in the alternative, subordinate the Notes or the
Guarantee, as the case may be, to existing and future indebtedness of the
Issuer or the applicable Guarantor, as the case may be. The measure of
insolvency for purposes of the foregoing will vary depending upon the law
applied in such case. Generally, however, an entity would be considered
insolvent if the sum of its debts, including contingent liabilities, was
greater than all of its assets at fair valuation or if the present fair
saleable value of its assets was less than the amount that would be required
to pay the probable liability on its existing debts, including contingent
liabilities, as they become absolute and mature.
Management believes that, for purposes of the U.S. Bankruptcy Code and state
fraudulent transfer or conveyance laws, the Notes are being issued, and the
Guarantees entered into, without the intent to hinder, delay or defraud
creditors and for proper purposes and in good faith and that each of the
Issuer and the Guarantors, after the issuance of the Notes and the application
of the proceeds thereof, will be solvent, will have sufficient capital for
carrying on its business and will be able to pay its debts as they mature.
There can be no assurance, however, that a court passing on such questions
would agree with management's view.
LACK OF PUBLIC MARKET
The New Notes will be a new issue of securities for which there is currently
no trading market. The New Notes have been designated for trading in the
PORTAL Market. The Company has been advised by the Initial Purchaser that it
currently intends to make a market in the New Notes, but that it is not
obligated to do so and, if such market making is commenced, it may be
discontinued at any time without notice. In addition, such market making
activity will be subject to the limits imposed by the Securities Act and the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and may be
limited during the Exchange Offer and the pendency of any Shelf Registration
Statement. Although the Notes have been designated for trading in the PORTAL
Market, there can be no assurance as to the development or liquidity of any
market for the Notes. If a market were to exist, the Notes could trade at
prices that may be lower than the initial offering price thereof, depending on
many
23
factors, including prevailing interest rates and the markets for similar
securities, general economic conditions and the financial condition and
performance of, and prospects for, the Company. The Company does not intend to
apply for listing or quotation of the Notes on any securities exchange or
stock market. Prospective investors in the Notes should be aware that they may
be required to bear the financial risks of such investment for an indefinite
period of time. See "Description of the New Notes."
STOCKHOLDER LITIGATION IN CONNECTION WITH THE SECOND STEP TRANSACTION
The effectuation of the Second Step Transaction as a reverse stock split of
the Common Stock may result in claims by stockholders of the Issuer that each
share of Common Stock had a value in excess of their right to receive $40.25
in cash for each pre-split whole share of Common Stock or that the Second Step
Transaction was effected in an improper manner. Although the Company believes
that the Second Step Transaction will be effected in a proper manner and that
$40.25 per share represents the fair value of such rights because, among other
things, the amount exceeds the trading price of the Common Stock on the AMEX
prior to the Tender Offer and is equal to the amount paid by the Issuer in the
Tender Offer, the amount paid by the Issuer in the Option Repurchase and the
amount paid by VS&A-T/SF in the Stock Purchase, due to the inherent
uncertainty of litigation there can be no assurance, in the event such claims
are raised, that the Company would not incur significant litigation or
settlement costs in connection with such claims or that there will not be a
determination adverse to the Company in connection with such claims.
24
DESCRIPTION OF THE TRANSACTIONS
THE RECAPITALIZATION
The Recapitalization will be effected by a series of transactions, including
the Tender Offer, Stock Purchase, Option Repurchase, Second Step Transaction
and Drop Down Restructuring, as described below.
The Tender Offer
On September 8, 1997, the Issuer commenced the Tender Offer to purchase all
of its outstanding shares of Common Stock for $40.25 in cash per share of
Common Stock. On October 9, 1997, the Issuer consummated the purchase of
2,742,092 shares of Common Stock pursuant to the Tender Offer. After the
consummation of the Tender Offer, shareholders of the Issuer other than VS&A-
T/SF and Fir Tree owned an aggregate of 101,969 shares of the Common Stock.
The Stock Purchase
Pursuant to a Stock Purchase Agreement, dated as of August 15, 1997 (the
"Stock Purchase Agreement"), among the Issuer, VS&A Fund II and VS&A-T/SF,
simultaneously with the consummation of the Tender Offer on October 9, 1997,
the Issuer consummated the Stock Purchase and sold to VS&A-T/SF 881,988 newly-
issued shares of Common Stock for $40.25 in cash per share (or an aggregate
purchase price of $35.5 million).
The Option Repurchase
As a result of the consummation of the Tender Offer, the holder of each
outstanding employee stock option to purchase Common Stock granted under the
Issuer's 1994 Incentive Stock Plan (other than Richard Wimbish with respect to
options to purchase 16,750 shares) and the Issuer's Incentive Stock Option
Plan, which in the aggregate total options with respect to 343,750 shares of
Common Stock, exercised such options and received an amount equal to (i) the
product of the number of shares of Common Stock issuable upon exercise of such
options, multiplied by $40.25, less (ii) the exercise price of such options.
Accordingly, no shares of Common Stock will be issued with respect to these
options. The Issuer's Incentive Stock Plan was terminated following the
closing of the Tender Offer; the Issuer's 1994 Incentive Stock Plan was not
terminated because of the survival of certain options held by Mr. Wimbish
issuable under such plan. The plan will survive solely with respect to such
options. No further options are outstanding, or will be granted, under such
plan. See "Management."
The Second Step Transaction
After giving effect to the consummation of the Tender Offer and the Stock
Purchase, VS&A-T/SF and Fir Tree beneficially owned approximately 60% and 33%
of the outstanding Common Stock, respectively.
VS&A-T/SF and Fir Tree have agreed to cause the Issuer, as soon as
practicable, to consummate the Second Step Transaction pursuant to which,
among other things, a reverse stock split of the Common Stock will be effected
such that each then outstanding share of Common Stock (other than treasury
shares and shares owned by the Equity Investors) will be converted into the
right to receive $40.25 in cash for each pre-split whole share of Common
Stock. Upon consummation of the Second Step Transaction, the Common Stock
outstanding will be held 64% by VS&A-T/SF and 36% by Fir Tree.
The Drop Down Restructuring
As part of the Recapitalization, VS&A-T/SF and Fir Tree will cause the
Issuer to effect the Drop Down Restructuring by causing the contribution of
substantially all of the assets and liabilities of Atwood, Galaxy and GEM to
Holdings LLC in exchange for a $45.0 million preferred equity interest in
Holdings LLC to be held, directly or indirectly, by the Issuer. The common
equity interests in Holdings LLC will be owned by VS&A-T/SF
25
and Fir Tree in the same proportion as their ownership of the Common Stock
immediately following the consummation of the Second Step Transaction. The
preferred interest to be held, directly or indirectly, by the Issuer will
carry an 11% annual distribution rate and give the Issuer, directly or
indirectly through its wholly-owned subsidiaries, voting, operational and
management control of Holdings LLC. Holdings LLC in turn will contribute
substantially all of the assets of Galaxy, Atwood and GEM into the Operating
LLCs. 99% of the common equity interests of each Operating LLC will be owned
by Holdings LLC and will give Holdings LLC voting, operational and management
control of such entities and a 1% common equity interest of each Operating LLC
will be owned by Operating LLC. The preferred equity interest of Operating LLC
will be owned by Holdings LLC and give Holdings LLC voting, operational and
management control of Operating LLC and the common equity interest of
Operating LLC will be held by VS&A-T/SF and Fir Tree in the same proportion as
their ownership of the Common Stock immediately following the consummation of
the Recapitalization. As a result of the control, directly or indirectly, of
the LLCs by the Issuer, the financial results of the LLCs will be included in
the consolidated financial statements of the Company. Each of the LLCs has
jointly and severally unconditionally guaranteed, on an unsecured senior
subordinated basis, the payment of principal, premium, if any, and interest on
the Notes, which guarantees are subordinated to all Senior Debt of the LLCs
and the other Guarantors. As part of the Drop Down Restructuring, VS&A-T/SF
and Fir Tree will contribute to Holdings LLC and Operating LLC $2.9 million
and $1.6 million, respectively, for their common interests in Holdings LLC and
Operating LLC.
THE FINANCING PLAN
The Offering was part of a plan designed to enable the Issuer to finance the
Recapitalization. In connection with the Recapitalization, the Issuer: (i)
borrowed or will borrow $20.0 million under the Senior Credit Facility; (ii)
issued $80.0 million aggregate principal amount of notes pursuant to the
Bridge Financing Facility; (iii) maintained Fir Tree's ownership interest
through the Fir Tree Rollover valued at approximately $19.6 million and (iv)
received or will receive $40.0 million(/2/) in Equity Contributions from VS&A-
T/SF and Fir Tree. The net proceeds of the Old Notes sold pursuant to the
Offering were applied to repay indebtedness incurred under the Senior Credit
Facility and the Bridge Financing Facility in connection with the
Recapitalization.
The following table sets forth the sources and uses of funds in connection
with the Recapitalization (dollars in thousands).
SOURCES OF FUNDS:
-----------------
Senior Credit Facility..... $ 20,000
Bridge Financing Facility.. 80,000
Equity Contributions (2)... 40,000
Fir Tree Rollover.......... 19,600
--------
Total sources............ $159,600
========
USES OF FUNDS:
--------------
Share repurchase and other (1).................................. $130,067
Fir Tree Rollover............................................... 19,600
Fees and expenses............................................... 8,250
Working capital................................................. 1,683
--------
Total uses.................................................... $159,600
========
- --------
(1) Reflects consideration paid or to be paid to repurchase shares pursuant to
the Tender Offer, Option Repurchase and Second Step Transaction as well as
severance and bonus expenses associated with the Recapitalization.
(2) The Equity Contributions consist of $35.5 million contributed by VS&A-T/SF
to the Issuer and $4.5 million to be contributed to Holdings LLC and
Operating LLC as part of the Drop Down Restructuring. Of the $4.5 million
to be contributed to Holdings LLC and Operating LLC, VS&A-T/SF and Fir
Tree will contribute approximately $2.9 million and $1.6 million,
respectively.
(3) Includes fees and expenses related to the Transactions and the Offering
(including the Initial Purchaser's discount).
26
USE OF PROCEEDS
The Issuer will not receive any cash proceeds from the issuance of the New
Notes offered hereby. In consideration for issuing the New Notes as
contemplated in this Prospectus, the Issuer will receive in exchange Old Notes
in like principal amount, the terms of which are identical in all material
respects to the New Notes (except that the New Notes have been registered
under the Securities Act and will not contain terms with respect to transfer
restrictions or interest rate increases as described herein). The Old Notes
surrendered in exchange for the New Notes will be retired and cancelled and
cannot be reissued. Accordingly, issuance of the New Notes will not result in
any increase in the indebtedness of the Issuer. The Company incurred $80.0
million of indebtedness under the Bridge Financing Facility and borrowed $20.0
million pursuant to the Senior Credit Facility pending the issuance and sale
of the Old Notes. The Company applied the net proceeds from the sale of the
Old Notes to repay the indebtedness incurred under the Bridge Financing
Facility and the Senior Credit Facility in connection with the
Recapitalization. The Bridge Financing Facility bore interest at the rate of
10.25% per year. An affiliate of the Initial Purchaser was the lender under
the Bridge Financing Facility.
CAPITALIZATION
The following table sets forth the capitalization of the Issuer as of
September 30, 1997: (i) on a historical basis, (ii) on a pro forma basis to
give effect to the Transactions and (iii) as adjusted to give pro forma effect
to both the Transactions and this Offering. The information in this table
should be read in conjunction with "Unaudited Pro Forma Consolidated Financial
Information," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the financial statements and related notes thereto
appearing elsewhere in this Prospectus.
SEPTEMBER 30, 1997
--------------------------------
PRO FORMA
FOR THE PRO FORMA
ACTUAL TRANSACTIONS AS ADJUSTED
------- ------------ -----------
(IN THOUSANDS)
LONG-TERM DEBT (INCLUDING CURRENT PORTION):
Senior Credit Facility (1).................. $ -- $ 20,000 $ --
Bridge Financing Facility................... -- 80,000 --
Notes....................................... -- -- 100,000
Other long-term debt........................ 4,862 3,656 3,656
------- --------- ---------
Total long-term debt...................... 4,862 103,656 103,656
------- --------- ---------
STOCKHOLDERS' EQUITY:
Preferred stock, $10.00 par value; 1,000
shares authorized; no shares outstanding at
September 30, 1997......................... -- -- --
Common Stock, $0.10 par value; 10,000 shares
authorized; 3,332 shares outstanding at
September 30, 1997 (2)..................... 331 421 421
Additional paid-in capital.................. 12,773 48,185 48,185
Retained earnings........................... 26,524 19,128 19,128
Less: Treasury shares at cost (2)........... -- (120,822) (120,822)
------- --------- ---------
Total stockholders' equity (deficit)...... 39,628 (53,088) (53,088)
------- --------- ---------
Total capitalization.................... $44,490 $ 50,568 $ 50,568
======= ========= =========
- --------
(1) The Senior Credit Facility provides for a $25.0 million revolving credit
facility. On a pro forma as adjusted basis, as of September 30, 1997, the
Company would have had $25.0 million of borrowing availability under the
Senior Credit Facility.
(2) Before giving effect to the reverse stock split, Common Stock and treasury
shares outstanding on a pro forma basis giving effect to the Transactions
(including the repurchase by the Company of fractional shares in the
Second Step Transaction) are 4,214 and 2,844, respectively.
27
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated financial
information of the Company (the "Pro Forma Financial Information") has been
prepared to give effect to the Transactions and the Offering. The pro forma
adjustments presented are based upon available information and certain
assumptions that management believes are reasonable under the circumstances.
The unaudited pro forma condensed consolidated balance sheet of the Company
as of September 30, 1997 (the "Pro Forma Balance Sheet") gives effect to the
Transactions and the Offering, assuming that the realization and application
of the net proceeds had occurred on September 30, 1997. The unaudited pro
forma condensed consolidated statements of operations of the Company for the
year ended December 31, 1996 and the nine months ended September 30, 1996 and
1997 (the "Pro Forma Statements of Operations") give effect to the
Transactions and the Offering as if they had occurred as of January 1, 1996,
and January 1, 1997, respectively.
The Transactions have been accounted for as leveraged recapitalization which
will have no impact on the historical basis of the Company's assets and
liabilities. The Pro Forma Financial Information should be read in conjunction
with "Use of Proceeds," "Selected Historical Consolidated Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the historical consolidated financial statements of the
Company and notes thereto all included elsewhere in this Prospectus. The Pro
Forma Financial Information and related notes are provided for informational
purposes only and do not purport to be indicative of the Company's financial
condition or results of operations that would have actually been obtained had
the Transactions and the Offering been consummated as of the assumed dates and
for the periods presented, nor are they indicative of the Company's financial
condition or results of operations for any future period.
28
T/SF COMMUNICATIONS CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1997
PRO FORMA
ADJUSTMENTS FOR THE
----------------------- PRO FORMA
HISTORICAL TRANSACTIONS OFFERING AS ADJUSTED
---------- ------------ -------- -----------
(DOLLARS IN THOUSANDS)
CURRENT ASSETS:
Cash and cash
equivalents.............. $ 6,894 $ 1,683 (a) $ -- (a) $ 8,577
Accounts receivable....... 11,275 -- -- 11,275
Deferred tax assets....... 674 6,476 (b) -- 7,150
Current contract
receivables and other
current assets........... 3,096 -- -- 3,096
------- -------- -------- --------
Total current assets.... 21,939 8,159 -- 30,098
------- -------- -------- --------
CONTRACT AND NOTES
RECEIVABLE AND
INVESTMENTS................ 1,116 -- -- 1,116
PROPERTY, PLANT AND
EQUIPMENT, net............. 7,414 -- -- 7,414
INTANGIBLES AND OTHER
ASSETS, net................ 32,359 3,625 (c) -- 35,984
------- -------- -------- --------
Total assets............ $62,828 $ 11,784 $ -- $ 74,612
======= ======== ======== ========
CURRENT LIABILITIES:
Notes payable............. $ 20 -- -- $ 20
Accounts payable.......... 4,903 -- -- 4,903
Accrued liabilities....... 3,081 -- -- 3,081
Deferred revenue.......... 9,010 -- -- 9,010
Current portion of long-
term debt................ 1,149 -- -- 1,149
------- -------- -------- --------
Total current
liabilities............ 18,163 -- -- 18,163
SENIOR CREDIT FACILITY...... -- 20,000 (d) (20,000)(d) --
BRIDGE FINANCING FACILITY... -- 80,000 (e) (80,000)(e) --
NOTES....................... -- -- 100,000 (f) 100,000
OTHER LONG-TERM DEBT........ 3,713 (1,206)(g) -- 2,507
DEFERRED CONTRACT
LIABILITIES AND CREDITS.... 1,324 1,206 (g) -- 2,530
------- -------- -------- --------
Total liabilities....... 23,200 100,000 -- 123,200
MINORITY INTEREST........... -- 4,500(h) -- 4,500
STOCKHOLDERS' EQUITY........ 39,628 (92,716)(i) -- (53,088)
------- -------- -------- --------
Total liabilities and
stockholders' equity... $62,828 $ 11,784 $ -- $ 74,612
======= ======== ======== ========
29
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED BALANCE SHEET
(a) The net increase in cash reflects the following (dollars in thousands):
TRANSACTIONS OFFERING
------------ --------
SOURCES:
Senior Credit Facility............................ $ 20,000 $ --
Bridge Financing Facility......................... 80,000 --
Notes offered hereby.............................. -- 100,000
Equity Contributions (1).......................... 40,000 --
Fir Tree Rollover................................. 19,600 --
-------- --------
$159,600 $100,000
======== ========
USES:
Senior Credit Facility............................ $ -- $ 20,000
Bridge Financing Facility......................... -- 80,000
Share repurchase and other........................ 130,067 --
Fir Tree Rollover................................. 19,600 --
Estimated fees and expenses (2)................... 8,250 --
-------- --------
$157,917 $100,000
======== ========
Net increase in cash............................ $ 1,683 $ --
======== ========
-------
(1) Includes $35.5 million contributed by VS&A-T/SF to the Issuer and $4.5
million to be contributed by VS&A-T/SF and Fir Tree to Holdings LLC and
Operating LLC as part of the Drop Down Restructuring.
(2) Includes fees and expenses related to the Transactions and the Offering
(including the Initial Purchaser's discount).
(b) Reflects deferred tax benefits related to tax deductible expenses
including severance, bonus and related payroll taxes, deferred stock
option expense, transaction structuring fees and deferred financing costs
at an effective corporate tax rate of 38%.
(c) Reflects deferred financing costs of $3.6 million associated with the
Company's financing of the Recapitalization.
(d) Reflects the indebtedness incurred under the Senior Credit Facility in
connection with the Recapitalization and the subsequent repayment of such
indebtedness from the net proceeds of the Offering. On a pro forma basis,
after giving effect to the Transactions and the Offering, at September 30,
1997, the Company would have no borrowings under the Senior Credit
Facility, and the Company's unused availability under the Senior Credit
Facility would have been $25.0 million.
(e) Reflects the indebtedness incurred under the Bridge Financing Facility in
connection with the Recapitalization and the subsequent repayment of such
indebtedness from the net proceeds of the Offering.
(f) Represents gross proceeds of $100.0 million from issuance of the Notes.
(g) Reflects the reclassification of certain acquisition contingent
consideration from other long-term debt to deferred contract liabilities
at September 30, 1997.
(h) Reflects the Company's distribution of certain net assets comprising its
Business to Business Communications segment to Holdings LLC. In exchange
for the net assets distributed, the Issuer will receive, directly or
indirectly, a $45.0 million preferred interest in Holdings LLC with a
cumulative annual distribution of 11%. The preferred interest includes
features which provide the Company with effective control of Holdings LLC
and, therefore, Holdings LLC is included in the consolidated financial
statements of the Company. The minority interest represents the $4.5
million of equity contributions from VS&A-T/SF and Fir Tree to Holdings
LLC and Operating LLC.
(i) The pro forma adjustment to stockholders' equity reflects the following
(dollars in thousands):
Share repurchase and other..................................... $(130,067)
Equity Contribution............................................ 35,500
Estimated transactional fees and expenses...................... (4,625)
Tax effect of certain fees and expenses........................ 6,476
---------
$ (92,716)
=========
30
T/SF COMMUNICATIONS CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
PRO FORMA PRO
HISTORICAL ADJUSTMENTS (A) FORMA
---------- --------------- -------
(DOLLARS IN THOUSANDS)
REVENUES:
Business to Business Communications..... $29,323 $ 74 (b) $29,825
428 (d)
Information Services.................... 24,388 -- 24,388
Corporate and other..................... 955 (206)(e) 749
------- ------- -------
Total revenues........................ 54,666 296 54,962
------- ------- -------
COSTS AND EXPENSES:
Operating costs......................... 33,474 47 (b) 33,684
163 (d)
General and administrative.............. 13,000 50 (b) 12,889
335 (d)
(496)(j)
Depreciation and amortization........... 3,564 7 (b) 3,643
72 (d)
------- ------- -------
Total expenses........................ 50,038 178 50,216
------- ------- -------
Operating income (loss)................. 4,628 118 4,746
Interest................................ 401 8,067 (k) 8,477
9 (d)
------- ------- -------
INCOME (LOSS) BEFORE INCOME TAXES......... 4,227 (7,958) (3,731)
INCOME TAX BENEFIT (PROVISION)............ (1,803) 3,024 (l) 1,221
------- ------- -------
NET INCOME (LOSS) (m)..................... $ 2,424 $(4,934) $(2,510)
======= ======= =======
NET INCOME (LOSS) PER SHARE............... $ 0.68 $ (1.83)
======= =======
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING.............................. 3,564 1,369
======= =======
OTHER DATA:
EBITDA (n).............................. $ 8,192 $ 8,389
EBITDA margin (o)....................... 15.0% 15.3%
Adjusted pro forma EBITDA (p)........... $10,377
Adjusted pro forma EBITDA margin (o).... 18.9%
31
T/SF COMMUNICATIONS CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
PRO FORMA PRO
HISTORICAL ADJUSTMENTS (A) FORMA
---------- --------------- -------
(DOLLARS IN THOUSANDS)
REVENUES:
Business to Business Communications..... $26,313 $ 679 (b) $28,464
1,472 (d)
Information Services.................... 17,064 4,565 (c) 21,629
Corporate and other..................... 1,728 (677)(e) 438
(240)(g)
(373)(h)
------- ------- -------
Total revenues........................ 45,105 5,426 50,531
------- ------- -------
COSTS AND EXPENSES:
Operating costs......................... 27,549 502 (b) 30,868
2,121 (c)
696 (d)
General and administrative.............. 10,289 487 (b) 11,510
680 (c)
565 (d)
(511)(j)
Depreciation and amortization........... 2,843 5 (b) 3,662
595 (c)
219 (d)
------- ------- -------
Total expenses........................ 40,681 5,359 46,040
------- ------- -------
Operating income (loss)................. 4,424 67 4,491
Interest................................ 413 36 (d) 8,630
114 (i)
8,067 (k)
------- ------- -------
INCOME (LOSS) BEFORE INCOME TAXES......... 4,011 (8,150) (4,139)
INCOME TAX BENEFIT (PROVISION)............ (1,578) 3,097 (l) 1,519
------- ------- -------
NET INCOME (LOSS) (m)..................... $ 2,433 $(5,053) $(2,620)
======= ======= =======
NET INCOME (LOSS) PER SHARE............... $ 0.69 $ (1.91)
======= =======
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING.............................. 3,537 1,369
======= =======
OTHER DATA:
EBITDA (n).............................. $ 7,267 $ 8,153
EBITDA margin (o)....................... 16.1% 16.1%
Adjusted pro forma EBITDA (p)........... $10,277
Adjusted pro forma EBITDA margin (o).... 20.3%
32
T/SF COMMUNICATIONS CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
PRO FORMA PRO
HISTORICAL ADJUSTMENTS (A) FORMA
---------- --------------- --------
(DOLLARS IN THOUSANDS)
REVENUES:
Business to Business Communications... $42,891 $ 996 (b) $ 45,594
1,707 (d)
Information Services.................. 24,273 4,565 (c) 28,838
Corporate and other................... 1,478 (526)(e) 23
(316)(f)
(240)(g)
(373)(h)
------- -------- --------
Total revenues...................... 68,642 5,813 74,455
------- -------- --------
COSTS AND EXPENSES:
Operating costs....................... 40,314 685 (b) 43,900
2,121 (c)
780 (d)
General and administrative............ 15,207 (1,188)(j) 16,203
656 (b)
680 (c)
848 (d)
Depreciation and amortization......... 4,018 14 (b) 4,895
595 (c)
268 (d)
------- -------- --------
Total expenses...................... 59,539 5,459 64,998
------- -------- --------
Operating income...................... 9,103 354 9,457
Interest.............................. 581 10,754 (k) 11,498
49 (d)
114 (i)
------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES....... 8,522 (10,563) (2,041)
INCOME TAX BENEFIT (PROVISION).......... (3,101) 4,014 (l) 913
------- -------- --------
NET INCOME (LOSS) (m)................... $ 5,421 $ (6,549) $ (1,128)
======= ======== ========
NET INCOME (LOSS) PER SHARE............. $ 1.53 $ (0.82)
======= ========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING............................ 3,543 1,369
======= ========
OTHER DATA:
EBITDA (n)............................ $13,121 $ 14,352
EBITDA margin (o)..................... 19.1% 19.3%
Adjusted pro forma EBITDA (p)......... $ 17,171
Adjusted pro forma EBITDA margin (o).. 23.1%
33
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
(a) The pro forma adjustments exclude approximately $10.1 million of estimated
transaction fees and expenses and other acquisition considerations
incurred in connection with the Transactions and the Offering. These fees
and expenses are non-recurring and will be recorded in the consolidated
statement of operations during the period in which the Transactions are
consummated.
(b) Reflects the consolidation of the Company's purchase of an additional 69%
of Casino Publishing's common stock in February 1997. Subsequent to this
purchase, the Company owned 100% of Casino Publishing. This adjustment
reflects the purchase as if it had occurred on January 1, 1996.
(c) Reflects the consolidation of the Company's acquisition of CORSEARCH in
August 1996. This adjustment reflects the acquisition as if it had
occurred on January 1, 1996.
(d) Reflects the consolidation of the Company's acquisition of Galaxy Expocard
Europe B.V. in May 1997. This adjustment reflects the purchase as if it
had occurred on January 1, 1996.
(e) Represents the elimination of amortization income associated with
covenants-not-to-compete arising from the sale of Marks-Roiland and trade
journal operations in 1993 and 1995, respectively.
(f) Represents the elimination of $316,000 gain on the sale of certain Company
assets, consisting mainly of real estate.
(g) Represents the elimination of other income associated with the elimination
of a reserve related to the 1995 sale of the operations of three trade
journals of GEM.
(h) Reflects the elimination of investment income on cash which was used in
the August 1996 acquisition of CORSEARCH as if such cash had been used
assuming CORSEARCH was acquired on January 1, 1996.
(i) Reflects the incremental interest expense in 1996 associated with the
August 1996 acquisition of CORSEARCH assuming CORSEARCH was acquired on
January 1, 1996. The Company incurred debt of $900,000 and $327,000 at
7.5% and 8.5%, respectively, in conjunction with the acquisition.
(j) Pro forma adjustments to general and administrative expenses are as
follows:
NINE MONTHS ENDED
SEPTEMBER 30,
------------------ YEAR ENDED
1997 1996 DECEMBER 31, 1996
-------- -------- -----------------
(DOLLARS IN THOUSANDS)
VS&A and Fir Tree management fee..... $ 68 $ 68 $ 90
Elimination of management position
(1)................................. (237) (174) (290)
Nonrecurring write-off of receivable
(2)................................. -- (405) (405)
Nonrecurring write-down of investment
(3)................................. -- -- (575)
Other adjustments (4)................ (327) -- (8)
-------- -------- -------
Total adjustments.................. $ (496) $ (511) $(1,188)
======== ======== =======
--------
(1) Represents the elimination of salary, bonus, payroll taxes and employee
benefits associated with one management position which was principally
devoted to nonoperational tasks including the Transactions. Management
intends to eliminate this position as part of the Transactions.
(2) Represents a nonrecurring charge associated with the write-off recorded
in 1996 of a receivable recorded in conjunction with the Company's sale
of the assets of Shopper's Guide, Inc. in April 1994.
(3) Represents a nonrecurring charge associated with the write-down of MECI
common stock received in exchange for land sold to MECI in March 1995
and a write-off of an investment in a vendor used by the Company who
filed for bankruptcy.
(4) Represents the elimination of certain general and administrative costs,
mainly transactional consulting fees, during the year ended December
31, 1996 and the nine months ended September 30, 1997. These costs are
considered by the Company to be directly attributable to the
Transactions and, therefore, nonrecurring in nature.
34
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS--(CONTINUED)
(k) Reflects the interest expense on indebtedness incurred by the Company in
connection with the Transactions and the Offering, as if the Transactions
and the Offering had been consummated as of the beginning of the periods
presented, based on the borrowings and their rates expected to be in
effect at the offering date, as follows:
NINE MONTHS ENDED
SEPTEMBER 30,
----------------- YEAR ENDED
RATE AMOUNT 1997 1996 DECEMBER 31, 1996
------ -------- -------- -------- -----------------
(DOLLARS IN THOUSANDS)
Notes................... 10.375% $100,000 $ 7,782 $ 7,782 $10,375
Amortization of financ-
ing costs.............. 285 285 379
-------- -------- -------
Interest expense...... $ 8,067 $ 8,067 $10,754
======== ======== =======
(1) Reflects the pro forma income tax benefit associated with the pro forma
adjustments at an assumed corporate tax rate of 38.0%.
(m) The net income of Holdings LLC was less than the amount of distributions
payable for the periods on the preferred interest held by the Company.
Accordingly, no minority interest in the net income of Holdings LLC has
been reflected.
(n) EBITDA, as presented, represents operating income plus depreciation and
amortization. EBITDA is included because management understands that such
information is considered by certain investors to be an additional basis
on which to evaluate the Company's ability to pay interest expense, repay
debt and make capital expenditures. Excluded from EBITDA are interest
expense, income taxes, and depreciation and amortization, each of which
can significantly affect the Company's results of operations and liquidity
and should be considered in evaluating the Company's financial
performance. EBITDA is not intended to represent and should not be
considered more meaningful than, or an alternative to, measures of
operating performance as determined in accordance with generally accepted
accounting principles.
(o) EBITDA margin and adjusted EBITDA margin represent EBITDA and adjusted
EBITDA as percentages of total revenues.
(p) Management believes the following additional adjustments to pro forma
EBITDA are relevant to evaluating the future operating performance of the
Company. The following additional adjustments, which eliminate the impact
of certain nonrecurring charges and reflect the estimated impact of
management's business and operating strategy, are based on estimates and
assumptions made and believed to be reasonable by management and are
inherently uncertain and subject to change. The following calculation
should not be viewed as indicative of actual or future results. The
following table reflects the effects of these items.
NINE MONTHS ENDED
SEPTEMBER 30,
----------------- YEAR ENDED
1997 1996 DECEMBER 31, 1996
-------- -------- -----------------
(DOLLARS IN THOUSANDS)
Pro forma EBITDA....................... $ 8,389 $ 8,153 $14,352
Additional adjustments:
Net personnel costs (1)................ 599 529 1,201
Reorganization of loss-producing
magazines (2)......................... 874 1,005 747
Excess information acquisition costs
(3)................................... 196 -- --
Shut down of business operations (4)... 156 234 496
Other net savings (5).................. 163 356 375
-------- -------- -------
Total additional adjustments........... 1,988 2,124 2,819
-------- -------- -------
Adjusted pro forma EBITDA.............. $ 10,377 $ 10,277 $17,171
======== ======== =======
35
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS--(CONTINUED)
--------
(1) Represents the net reduction in personnel costs for: (i) elimination of
the Tulsa, Oklahoma corporate office and the related compensation and
benefits for 13 individuals; (ii) addition of new management team
located at a new corporate office in New York and the related
compensation, benefits, occupancy and administrative costs; (iii)
addition of short-term consulting agreement expenses with former
officers to aid the new management in the transition phase and (iv)
elimination of non-recurring costs related to the search for and hiring
of research oriented personnel at CORSEARCH.
(2) Represents losses incurred by the Company during the periods presented
in connection with two magazine operations: IGWB and Casino Executive.
While these publications are projected to be profitable in fiscal 1998,
in the event that such publications continue to generate losses,
management expects to take one or more of the following actions: (a)
reorganize the publications to reduce costs; (b) merge the publications
with another party; (c) enter into strategic alliances or partnerships
with a third party or (d) other alternatives. Management expects a
decision regarding this segment will be made during fiscal 1998.
(3) Effective for fiscal 1997, CORSEARCH changed the terms of a contract
with one of its database vendors. This adjustment reflects information
acquisition costs during the nine months ended September 30, 1997 under
a variable pricing structure consistent with an August 1, 1997
amendment to that agreement with that vendor.
(4) Represents losses in TISI's NESS division, a high-end employment
screening service which was abandoned by the Company in fiscal 1997.
(5) During fiscal 1996 and 1997, certain consulting costs were incurred in
connection with one-time acquisition and executive searches; a system
evaluation project that was never completed; a satellite office study
that was not implemented and an option and study of the feasibility of
a new publication. In addition, severance costs for the officer of a
closed division were incurred.
36
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The following tables present selected consolidated historical financial data
for each of the five years in the period ended December 31, 1996 that have
been derived from the audited consolidated financial statements of the
Company. The statements of operations and changes in stockholders' equity and
statements of cash flows for each of the three years in the period ended
December 31, 1996 and the notes thereto appear elsewhere in this Prospectus.
The selected historical statement of operations and balance sheet data as of
and for the nine months ended September 30, 1997 and 1996 have been derived
from unaudited financial statements, which, in the opinion of management,
include all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the results for the unaudited interim
periods. Results for the nine months ended September 30, 1997 and 1996 are not
necessarily indicative of results that may be expected for the entire year.
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------- ------------------
1992 1993 1994 1995 1996 1996 1997
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
(UNAUDITED)
STATEMENT OF OPERATIONS
DATA (1):
Revenues
Information Services
(a)................... $ 13,643 $ 14,499 $ 15,091 $ 17,950 $ 24,273 $ 17,064 $ 24,388
Business to Business
Communications (b).... 80,643 42,911 39,665 53,089 42,891 26,313 29,323
Corporate and other.... 1,020 1,570 2,163 1,039 1,478 1,728 955
-------- -------- -------- -------- -------- -------- --------
Total revenues........ 95,306 58,980 56,919 72,078 68,642 45,105 54,666
-------- -------- -------- -------- -------- -------- --------
Expenses
Operating costs........ 64,613 49,658 35,069 39,665 40,314 27,549 33,474
General and
administrative
expenses.............. 21,341 15,361 11,862 11,841 15,207 10,289 13,000
Depreciation and
amortization.......... 7,378 3,779 3,118 3,601 4,018 2,843 3,564
-------- -------- -------- -------- -------- -------- --------
Total expenses........ 93,332 68,798 50,049 55,107 59,539 40,681 50,038
-------- -------- -------- -------- -------- -------- --------
Operating income
(loss)................ 1,974 (9,818) 6,870 16,971 9,103 4,424 4,628
Interest expense....... 2,692 1,921 736 859 581 413 401
-------- -------- -------- -------- -------- -------- --------
Income (loss) before
income taxes and other
items................. (718) (11,739) 6,134 16,112 8,522 4,011 4,227
Unusual gain (2)....... 24,412 -- -- -- -- -- --
Income tax (provision)
benefit............... (10,569) 4,097 (2,589) (58) (3,101) (1,578) (1,803)
Minority interest in
consolidated
subsidiaries.......... (3,983) 1,929 (981) (266) -- -- --
Discontinued
operations, net (3)... (790) (4,800) (2,816) 37 -- -- --
Extraordinary loss, net
of tax of $340 (4).... -- (560) -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Net income (loss)...... $ 8,352 $(11,073) $ (252) $ 15,825 $ 5,421 $ 2,433 $ 2,424
======== ======== ======== ======== ======== ======== ========
Weighted average common
shares outstanding.... 4,208 3,801 3,733 3,766 3,543 3,537 3,564
Earnings (loss) per
share:
Continuing
operations........... $ 2.17 $ (1.54) $ 0.65 $ 4.19 $ 1.53 $ 0.69 $ 0.68
Discontinued
operations........... (0.19) (1.26) (0.75) .01 -- -- --
Extraordinary loss.... -- (0.15) -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
$ 1.98 $ (2.95) $ (0.10) $ 4.20 $ 1.53 $ 0.69 $ 0.68
======== ======== ======== ======== ======== ======== ========
OTHER FINANCIAL DATA
(1):
Capital expenditures... $ 1,402 $ 5,564 $ 4,382 $ 2,589 $ 2,641 $ 1,955 $ 5,460
EBITDA (5)............. 9,352 (6,039) 9,988 20,572 13,121 7,267 8,192
EBITDA margin (5)...... 9.8% (10.2)% 17.5% 28.5% 19.1% 16.1% 15.0%
Ratio of earnings to
fixed charges (6)..... 9.8x -- 9.3x 19.8x 15.7x 10.7 11.1x
BALANCE SHEET DATA:
Cash and equivalents... $ 9,763 $ 2,808 $ 4,585 $ 13,383 $ 2,257 $ 5,236 $ 6,894
Total assets........... 88,102 60,059 53,581 53,444 55,982 59,354 62,828
Total debt............. 20,913 11,153 6,156 5,795 4,626 4,657 4,862
Stockholders' equity... 38,288 26,450 23,855 32,486 38,186 35,004 39,628
37
--------
(1) In the merger of Tribune/Swab-Fox then the owner of 78% of the Common
Stock, with and into the Issuer on May 25, 1995, the Issuer was the
surviving entity from a legal standpoint. However, from an accounting
standpoint, the transaction was treated as a downstream merger. Thus,
for financial reporting purposes, the transaction was treated as a
recapitalization of Tribune/Swab-Fox, with Tribune/Swab-Fox as the
survivor. Accordingly, the historical financial statements of the
Company, as the surviving legal entity, are those historical financial
statements of Tribune/Swab-Fox prior to the merger. In addition, the
Company was a party to several events/transactions which affect the
comparability of the historical information presented above. See the
Company's Notes to Consolidated Financial Statements for additional
information on certain of these events/transactions.
--------
(a) With respect to Information Services, the Company acquired
CORSEARCH in August 1996.
(b) With respect to Business to Business Communications, the Company:
(i) ceased publishing "The Tulsa Tribune" in September 1992 as a
result of the termination of a joint operating agreement; (ii) sold
the operating assets of the "New York Shopper," one of the
Company's shopper-newspaper operations, in November 1993; (iii)
acquired the stock of Galaxy in March 1994; (iv) sold the assets of
the "New Jersey Shopper", its other shopper-newspaper operation, in
April 1994; (v) sold three trade journals and related assets in
July 1995; (vi) acquired its majority interest in Casino Publishing
Co. effective February 1, 1997 and (vii) acquired additional shares
of Galaxy Expocard Europe, B.V. in May 1997.
(2) Gain from early termination of newspaper joint operating agreement
between the Company's newspaper and World Publishing Company, net of
termination costs.
(3) Restated to reflect real estate as a discontinued operation as of
November 30, 1994.
(4) Prepayment penalty on early retirement of long-term debt.
(5) EBITDA, as presented, represents operating income plus depreciation and
amortization. EBITDA is included because management understands that
such information is considered by certain investors to be an additional
basis on which to evaluate the Company's ability to pay interest
expense, repay debt and make capital expenditures. Excluded from EBITDA
are interest expense, income taxes, depreciation and amortization,
unusual gain, minority interest in consolidated subsidiaries,
discontinued operations, net and extraordinary loss, net of tax, each
of which can significantly affect the Company's results of operations
and liquidity and should be considered in evaluating the Company's
financial performance. EBITDA is not intended to represent and should
not be considered more meaningful than, or an alternative to, measures
of operating performance as determined in accordance with generally
accepted accounting principles. EBITDA margin represents EBITDA as a
percentage of total revenues.
(6) In computing the ratio of earnings to fixed charges: (a) earnings have
been based on income from continuing operations before income taxes and
fixed charges and (b) fixed charges consist of interest and
amortization of debt discount and expense. The coverage deficiency for
the year ended December 31, 1993 was approximately $11.7 million.
38
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
The Company is a diversified business media company which principally
operates two lines of business: (i) business and professional information
services and (ii) business to business communications, publishing and related
services. On May 25, 1995, Tribune/Swab-Fox, parent of the Issuer, merged with
and into the Issuer. Though the Issuer was the surviving legal entity in the
merger because Tribune/Swab-Fox owned 78% of the Issuer's Common Stock prior
to the merger, the transaction is accounted for as a recapitalization of
Tribune/Swab-Fox with Tribune/Swab-Fox as the survivor (i.e., a downstream
merger). Accordingly, the historical financial statements of the Company, as
the surviving legal entity, are those historical financial statements of
Tribune/Swab-Fox.
In February 1997, the Issuer increased its ownership in Casino Publishing
Company, publisher of the trade journal, Casino Executive, to 88%, which is
included in the Issuer's consolidated operations since that date. Effective
January 31, 1998, the Issuer acquired the remaining interests in Casino
Publishing Company. Effective May 1, 1997, the Issuer acquired a majority
ownership in Galaxy Expocard Europe B.V. and increased its ownership to 73%
effective July 1, 1997. On August 15, 1996, the Issuer acquired 100% of the
outstanding capital stock of CORSEARCH, which has been accounted for as a
purchase. CORSEARCH provides trademark and trade name research and is included
in the Issuer's consolidated operations since that date.
PROFITABILITY
The following table summarizes the Company's historical results of
operations as a percentage of revenue for the years ended December 31, 1994,
1995 and 1996 and for the nine month periods ended September 30, 1996 and
1997:
NINE
MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------- --------------
1994 1995 1996 1996 1997
-------- -------- -------- ------ ------
Revenues:
Information Services........... 26.5% 24.9% 35.4% 37.8% 44.6%
Business to Business
Communications................ 69.7 73.7 62.5 58.4 53.7
Corporate and other............ 3.8 1.4 2.1 3.8 1.7
-------- -------- -------- ------ ------
Total revenues............... 100.0 100.0 100.0 100.0 100.0
Expenses:
Operating costs................ 61.6 55.0 58.7 61.1 61.2
General and administrative
expenses...................... 20.8 16.4 22.2 22.8 23.8
Depreciation and amortization.. 5.5 5.0 5.8 6.3 6.5
-------- -------- -------- ------ ------
Total expenses............... 87.9 76.4 86.7 90.2 91.5
-------- -------- -------- ------ ------
Operating Income................. 12.1% 23.6% 13.3% 9.8% 8.5%
======== ======== ======== ====== ======
EBITDA........................... 17.5% 28.5% 19.1% 16.1% 15.0%
======== ======== ======== ====== ======
RESULTS OF OPERATIONS
Nine Months Ended September 30, 1997 Versus Nine Months Ended September 30,
1996
Revenues. Revenues of $54.7 million for the nine months ended September 30,
1997 were $9.6 million, or 21.2%, higher than the nine months ended September
30, 1996. Information Services revenue increased approximately $7.3 million,
or 42.9%, for the nine months ended September 30, 1997 as compared with the
nine months ended September 30, 1996, of which approximately $4.6 million is
attributable to CORSEARCH
39
and $2.7 million is attributable to continued growth in TISI's employment
histories volume and criminal record volume, and higher average prices from
MVRs attributable to a continued increase in the volume of TISI's premium
service, "MVR Express." Business to Business Communications revenue increased
$3.0 million, or 11.4%, for the nine months ended September 30, 1997 as
compared with the nine months ended September 30, 1996, consisting mainly of
an increase in trade show directories produced during the second quarter of
1997, the effect of higher fees effective in early 1996 for exhibitor
services, and Casino Executive trade journal revenue from the date that a
majority of Casino Publishing Company was acquired by the Issuer, reduced by
lower registration services due to a higher number of bi-annual trade shows in
1996, fewer pages of advertising in IGWB due to the loss of several large
advertisers in the lottery segment of the gaming industry and elimination of
two trade shows in 1997.
Interest and other income for the nine months ended September 30, 1997 was
approximately $0.8 million, or 44.7%, lower than the nine months ended
September 30, 1996, which is substantially all attributable to the reduction
in interest earned in 1997 since the cash and short-term investments in 1996
were used to acquire CORSEARCH, partially offset by equity earnings in 1997
from the Issuer's interest in Gaming for Africa and interest income related to
an income tax refund.
Operating Costs. Operating costs for the nine months ended September 30,
1997 were $5.9 million, or 21.5%, higher than the nine months ended September
30, 1996. Information Services costs increased approximately $3.3 million, or
34.0%, for the nine months ended September 30, 1997 as compared with the nine
months ended September 30, 1996, which consists of $2.2 million related to
CORSEARCH, with substantially all of the remainder related to the criminal
records volume increase and new product costs. Business to Business
Communications costs increased approximately $2.7 million, or 14.9%, during
the nine months ended September 30, 1997 as compared with the nine months
ended September 30, 1996, attributable to the direct costs of the increase in
directories published during the nine months ended September 30, 1997,
additional payroll costs in 1997 related to the increase in operating
personnel throughout 1996 and early 1997, and Casino Executive costs in 1997,
reduced by lower trade show costs due to the elimination in 1997 of two trade
shows.
General and Administrative Expenses. General and administrative expenses
were $2.7 million, or 26.3%, higher for the nine months ended September 30,
1997, as compared with the nine months ended September 30, 1996, substantially
all of which is attributable to CORSEARCH and Casino Executive. Information
Services expenses, exclusive of CORSEARCH, were approximately $0.3 million, or
16.0%, higher in the nine months ended September 30, 1997 as compared with the
nine months ended September 30, 1996, primarily attributable to growth.
Included in the nine months ended September 30, 1996 was a $0.3 million
provision for losses on prepaid production costs for Business to Business
Communications that had been paid to a digital information vendor during 1995
and early 1996 and a $0.4 million loss on the remaining receivables from the
sale of the Shopper's Guide assets in 1994.
Depreciation and Amortization. Depreciation and amortization were $0.7
million, or 25.4%, higher for the nine months ended September 30, 1997, as
compared with the nine months ended September 30, 1996, substantially all
related to CORSEARCH, including amortization of goodwill related to this
acquisition.
Interest Expense. Interest expense did not change significantly during the
nine months ended September 30, 1997, as compared with the nine months ended
September 30, 1996, because the decrease in interest expense attributable to a
reduction in debt from principal payments during the past year was offset by
interest on new debt incurred related to the acquisition of CORSEARCH.
Year Ended December 31, 1996 Versus Year Ended December 31, 1995
General. Operations for the year ended December 31, 1996 have two major
variations from the same period ended December 31, 1995. First, operations of
CORSEARCH, which was acquired on August 15, 1996, are included in Information
Services in 1996 from the acquisition date. Second, the sale of three trade
journals by GEM, effective July 1, 1995, resulted in a pre-tax gain of $11.7
million in 1995 and, as a result of such sale, GEM operations for the last
half of 1995 for the Business to Business Communications segment includes only
IGWB, the related conference and trade show, World Gaming Congress, and
related activities.
40
Revenues. Revenues of $68.6 million for 1996 were $3.4 million, or 4.7%,
lower than for 1995. If the $11.7 million pre-tax gain in 1995 is excluded,
revenues increased $8.3 million, or 13.8%, in 1996 as compared with 1995.
Information Services revenue increased $6.3 million, or 35.2%, in 1996 as
compared with 1995, consisting of $2.7 million of CORSEARCH revenue for the
four and one-half months in 1996 that it was owned by the Issuer and $1.0
million from increases in employment histories due to increased volumes; $1.6
million from criminal records due to increased volumes and a regional provider
of criminal records acquired in 1996; $0.5 million of motor vehicle reports
primarily from the higher revenue product MVR Express; and most other pre-
employment screening products also had higher volumes and revenues in 1996, as
compared with 1995. Business to Business Communications revenue increased
approximately $1.5 million, or 3.6%, in 1996 as compared with 1995, mainly
consisting of increases in registration services, data management services and
trade show publishing for several large bi-annual trade shows and conventions;
an increase in price for data management services in mid-1995 resulting in an
average increase in data management services revenue of approximately 30% in
1996 as compared with 1995; and an increase in the number of trade show
directories in 1996 as compared with 1995 from both bi-annual trade shows and
other new trade shows reduced by lower revenue of approximately $5.5 million
related to the sale of three trade journals effective July 1, 1995. An
increase in advertising pages and revenue for the remaining trade journal
partially offset the loss of revenue in 1996 as compared with 1995 from the
three trade journals sold.
Operating Costs. Operating costs were $0.6 million, or 1.5%, higher in 1996,
as compared with 1995. Information Services operating costs were $1.9 million,
or 17.3%, higher in 1996, as compared with 1995, consisting of $1.0 million of
CORSEARCH operating costs for the four and one-half months in 1996 that it was
owned by the Issuer, $0.7 million of cost increases attributable to criminal
record volume increases and cost increases attributable to higher volumes of
other pre-employment screening products. Business to Business Communications
costs were $1.2 million, or 4.3%, lower in 1996, as compared with 1995, since
the increase in number of trade shows (both bi-annual and annual) for
registration services, data management services, convention publishing
services and directory publishing were more than offset by the decrease in
costs of $3.6 million in 1996 related to the three publications sold in 1995.
General and Administrative Expenses. General and administrative expenses
were $3.4 million, or 28.8%, higher in 1996, as compared with 1995.
Information Services' general and administrative expenses increased $1.8
million, or 88.7%, as compared with 1995, which includes CORSEARCH expenses of
$1.0 million for the four and one-half months that it was owned by the Issuer
and an increase in expenses of pre-employment screening services of $0.8
million, which mainly represent a full year of personnel costs and related
expenses for employees added throughout 1995. Business to Business
Communications' general and administrative expenses increased $0.5 million, or
7.5%, in 1996 as compared with 1995, attributable to additional employee costs
(both full year costs for employees added in 1995 and new employees in 1996)
and related expenses required for the continued growth in number of trade
shows, conventions and services and products net of the decrease in costs
attributable to the three trade journals sold in 1995. Corporate general and
administrative expenses increased approximately $1.1 million in 1996 as
compared to 1995 resulting from the write-off of $0.5 million in connection
with the final settlement with the buyer of Shopper's Guide of future amounts
due the Issuer, compensation recorded related to stock options granted and
additional consulting costs related to investor relations, acquisition search,
and income tax examinations.
Depreciation and Amortization. Depreciation and amortization increased $0.4
million, or 11.1%, in 1996, as compared with 1995, of which $0.3 million
relates to equipment depreciation and goodwill amortization of CORSEARCH for
the four and one-half months that it was owned by the Issuer. The balance of
the increase is related to capital expenditures for each operation,
substantially offset by lower gaming media services depreciation and
amortization due to the sale of the three trade journals in 1995.
Interest Expense. Interest expense decreased $0.3 million, or 33.3%, in
1996, as compared with 1995, resulting from principal payments on debt during
1996 and lower average interest rates on variable debt, offset by increased
interest on new debt related to the CORSEARCH acquisition.
41
Year Ended December 31, 1995 Versus Year Ended December 31, 1994
General. Operations for the year ended December 31, 1995 have three major
variations from the same period ended December 31, 1994. First, the merger of
the Issuer and Tribune/Swab-Fox was completed in May 1995, which is treated as
a downstream merger for accounting, tax and financial reporting purposes.
Accordingly, the Issuer was able to utilize substantially all of the income
tax net operating loss carryforwards which Tribune/Swab-Fox had prior to the
merger, and this significantly reduced the 1995 income tax provision. Second,
the sale of three GEM trade journals, effective July 1, 1995, resulted in a
pre-tax gain of $11.7 million and as a result of such sale, the GEM operations
in the Business to Business Communications segment for the last half of 1995
only included IGWB and the related conference and trade show, World Gaming
Congress, and related activities. Third, operations of Galaxy, acquired
effective March 1, 1994, are included in Business to Business Communications
for twelve months in 1995 as compared with only ten months in 1994.
Revenues. Revenues of $72.1 million for 1995 were $15.2 million, or 26.7%,
higher than for 1994. The major revenue increase is the $11.7 million pre-tax
gain on the sale of the three GEM trade journals. Business to Business
Communications revenue increased $1.7 million, or 4.3%, in 1995 as compared
with 1994, exclusive of the gain on the sale of the three trade journals,
consisting of significant growth in the trade show registration and publishing
portion of this segment in 1995, including two more months of Galaxy's
operations, offset by a decrease of $5.2 million in revenues 1995, primarily
as a result of the sale of the three trade journals. Thus in the last half of
1995, as compared with 1994, the GEM portion of the operations included
revenue from only one trade journal. In addition, an increase in advertising
pages and two new executive seminars in 1995 as compared with 1994 partially
offset the decrease from the trade journals sold. Revenue from the World
Gaming Congress increased approximately $1.0 million in 1995 as compared with
1994. Information Services revenue increased $2.9 million, or 19.2%, in 1995
as compared with 1994 with most of the increase relating to an increase in the
volume of employment histories and criminal records sold. Long distance
telephone resale revenue was approximately $0.7 million lower in 1995 as a
result of the Issuer exiting this business during the latter part of the first
quarter of 1994 due to competitive and regulatory considerations. Other
revenue is mainly interest income related to the contract receivable from the
World Publishing Company ("World Publishing") which is approximately $0.4
million lower in 1995 as compared with 1994 because of continued payments
received on the contract receivable, although interest income on cash received
from the sale of the trade journals substantially offsets this reduction.
Operating Costs. Operating costs were $4.6 million, or 13.1%, higher in
1995, as compared with 1994. Business to Business Communications operating
costs were $2.2 million, or 8.3%, higher in 1995 as compared with 1994. The
decrease in Business to Business Communications operating costs related to the
three trade journals sold in 1995 reduced by the effect of the following cost
increases: costs related to the European executive seminar, the costs related
to the increase in advertising pages, the significant increase in the cost of
paper, a postal rate increase, direct cost increase related to the World
Gaming Congress which increased as a result of continued expansion of this
trade show in 1995, an increase in printing costs for the convention
publishing business of $1.0 million related to the higher cost of paper and an
increase in the number of conventions, directories and services provided, the
increase in the number of personnel at both Galaxy and Atwood (approximately
$2.0 million increase in combined personnel costs) in order to continue to
provide high quality service to their customers and to handle the increase in
the number of trade shows serviced and the inclusion of Galaxy for twelve
months of operations in 1995 versus ten months in 1994. Information Services
operating costs were $2.4 million, or 27.1%, higher for 1995, as compared with
1994. The increases in such costs were related primarily to approximately $0.7
million from the new employment screening service approximately $0.4 million
from the increase in criminal record volume and additional personnel related
to higher volumes and new product development costs. Netted against these
increases is a decrease of approximately $0.5 million in 1995 related to long
distance telephone resale costs because of exiting this business in the latter
part of the first quarter of 1994.
General and Administrative Expenses. General and administrative expenses
were approximately the same in 1995 as in 1994. The reduction in general and
administrative expenses from the Business to Business
42
Communications segment during the last half of 1995, and the reduction of
expenses in 1995 resulting from the merger, as compared with 1994, were
generally offset by Galaxy's general and administrative expenses for the
twelve months in 1995, as compared with ten months in 1994, and the accrual
for potential costs under the indemnity provisions of the Termination
Agreement among the Issuer, World Publishing and Newspaper Printing
Corporation ("NPC") as related to settlement of lawsuits against World
Publishing and NPC.
Depreciation and Amortization. Depreciation and amortization increased $0.5
million, or 16.1%, for 1995, as compared with 1994, substantially all related
to the depreciable assets of Galaxy, both the number of months Galaxy was
included in each year and depreciation related to Galaxy's 1994 and 1995
capital expenditures needed to handle Galaxy's growth in 1994 and 1995.
Interest Expense. Interest expense increased $0.1 million, or 14.3%, for
1995, as compared with 1994, resulting from higher average interest rates on
variable rate debt during 1995, partially reduced by principal payments on
debt during the past year. Also, in late May 1995, the Issuer borrowed $2.0
million under its bank lines of credit in connection with the merger and the
related acquisition of equivalent shares for cash, which borrowings were
repaid in early August 1995.
PROVISION FOR INCOME TAXES
Provision for income taxes as a percentage of income before income taxes for
all periods presented is lower than the statutory federal income tax rate
mainly because of the reduction in the valuation reserve related to net
operating loss carryforwards and higher tax basis in the trade journals sold
reduced by goodwill amortization related to acquisitions not being deductible
for federal and state income tax purposes.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity. The Company's principal sources of funds following the
Recapitalization are anticipated to be cash flows from operating activities
and borrowings under the Senior Credit Facility. Based upon the successful
implementation of management's business and operating strategy, the Company
believes that these funds will provide the Company with sufficient liquidity
and capital resources for the Company to meet its current and future financial
obligations, including the payment of principal and interest on the Notes, as
well as to provide funds for the Company's working capital, capital
expenditures and other needs. No assurance can be given, however, that this
will be the case. As of September 30, 1997, after giving effect to the
Transactions and the Offering, the Issuer would have had $25.0 million of
availability under the Senior Credit Facility. The Company's future operating
performance and ability to service or refinance the Notes and to repay, extend
or refinance the Senior Credit Facility will be subject to future economic
conditions and to financial, business and other factors, many of which are
beyond the Company's control. In addition, any future acquisitions by the
Company would likely require additional financing. See "Risk Factors--
Substantial Leverage," "--Dependence Upon Distributions from Subsidiaries and
LLCs" and "--Uncertain Impact of Acquisition Plans."
In the event of a Change of Control, the Company will be required to make an
offer for cash to repurchase the Notes at 101% of the principal amount
thereof, plus accrued and unpaid interest and Additional Interest, if any,
thereon to the repurchase date. Certain events involving a Change of Control
would result in an event of default under the Senior Credit Facility or other
indebtedness of the Company that may be incurred in the future. Moreover, the
exercise by the holders of the Notes of their right to require the Company to
repurchase the Notes may cause an event of default under the Senior Credit
Facility or such other indebtedness, even if the Change of Control does not.
Finally, there can be no assurance that the Company will have the financial
resources necessary to repurchase the Notes upon a Change of Control. See
"Risk Factors--Limitations on Change of Control" and "Description of the New
Notes--Change of Control."
Capital Expenditures. Management anticipates that capital expenditures in
1997 will be approximately $6.5 million. Other than the Information Services
division, the primary capital expenditures will be for computers, software,
furniture and office equipment and to acquire additional "reader boxes" at
Galaxy. With regard to the Information Services division, the Issuer will
incur capital expenditures to develop software
43
and purchase the computers for CORSEARCH to launch an on-line trademark and
trade name search business. TISI continues to offer its customers in the
trucking industry credits for providing employment information to be utilized
in its database, 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. In addition, the Company
invested approximately $1.1 million to acquire interests in Galaxy Expocard
Europe and Casino Executive. Any other acquisitions would require additional
investments. Management anticipates positive cash flow from operations in
1997, even after the anticipated capital expenditures for 1997. Thus, with the
Issuer's available cash reserves and cash flow, management does not anticipate
a need for capital during 1997 except for possible, and as yet unidentified,
acquisitions.
INFLATION
Management anticipates the effect of inflation on the Company's operations
during 1997 will be primarily limited to the effects which general inflation
will have on costs in most areas in which the Company operates.
44
THE EXCHANGE OFFER
GENERAL
The Issuer entered into the Exchange Offer Registration Rights Agreement
with the Initial Purchaser pursuant to which the Issuer and the Guarantors
agreed, for the benefit of the holders of the Old Notes, at the Issuer's cost,
(i) to use their best efforts to file with the Commission the Exchange Offer
Registration Statement within 30 days after the date of the original issuance
of the Old Notes with respect to the Exchange Offer for the New Notes, which
will have terms substantially identical to the Old Notes (except that the New
Notes will not contain terms with respect to transfer restrictions or interest
rate increases as described herein) and (ii) to use their best efforts to
cause the Exchange Offer Registration Statement to be declared effective under
the Securities Act within 150 days after the date of the original issuance of
the Old Notes. The Exchange Offer Registration Rights Agreement provides that
promptly after the Exchange Offer Registration Statement has been declared
effective, the Issuer will offer the New Notes in exchange for surrender of
the Old Notes and that the Issuer will keep the Exchange Offer open for not
less than 20 business days (or longer if required by applicable law) after the
date notice of the Exchange Offer is mailed to the holders of the Old Notes.
For each Old Note validly tendered to the Issuer pursuant to the Exchange
Offer and not withdrawn by the holder thereof, the holder of such Old Note
will receive a New Note having a principal amount equal to that of the
tendered Old Note. Interest on each New Note will accrue from the last
Interest Payment Date on which interest was paid on the Old Note tendered in
exchange therefor or, if no interest has been paid on such tendered Old Note,
from October 29, 1997.
Based on existing interpretation of the Securities Act by the Staff set
forth in several no-action letters to third parties, and subject to the
immediately following sentence, the Issuer believes that the New Notes issued
pursuant to the Exchange Offer may be offered for resale, resold and otherwise
transferred by holders thereof without further compliance with the
registration and prospectus delivery provisions of the Securities Act.
However, any holder of Old Notes who is an "affiliate" of the Issuer or who
intends to participate in the Exchange Offer for the purpose of distributing
the New Notes (i) will not be able to rely on the interpretation by the Staff
set forth in the above referenced no-action letters, (ii) will not be able to
tender Old Notes in the Exchange Offer and (iii) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any sale or transfer of the New Notes, unless such sale or
transfer is made pursuant to an exemption from such requirements.
Each holder of the Old Notes who wishes to exchange Old Notes for New Notes
in the Exchange Offer will be required to make certain representations,
including that (i) any New Notes acquired pursuant to the Exchange Offer are
being obtained in the ordinary course of such holder's business, (ii) such
holder has no arrangements with any person to participate in the distribution
of such New Notes and (iii) such holder is not an "affiliate," as defined
under Rule 405 of the Securities Act of the Issuer or, if such holder is an
affiliate, that such holder will comply with the registration and prospectus
delivery requirements of the Securities Act to the extent applicable. If the
holder is not a broker-dealer, it will be required to represent that it is not
engaged in, and does not intend to engage in, a distribution of New Notes. If
the holder is a Participating Broker-Dealer that will receive New Notes for
its own account in exchange for Old Notes that were acquired as a result of
market-making activities or other trading activities, it will be required to
acknowledge that it has no arrangements with any person to participate in the
distribution of the New Notes and that it will deliver a prospectus in
connection with any resale of such New Notes; however, by so acknowledging and
by delivering a prospectus, such holder will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
To date, the Staff has taken the position that Participating Broker--Dealers
may fulfill their prospectus delivery requirements with respect to
transactions involving an exchange of securities such as the exchange pursuant
to the Exchange Offer (other than a resale of an unsold allotment from the
original sale of the Old Notes) with this Prospectus. A Participating Broker--
Dealer which delivers this Prospectus to purchasers in connection with resales
of the Old Notes will be subject to certain of the civil liability provisions
under the Securities Act, and will be bound by the provisions of the Exchange
Offer Registration Rights Agreement (including certain indemnification rights
and obligations). Under the Exchange Offer Registration Rights Agreement, the
Issuer is required to allow Participating Broker-Dealers and other persons, if
any, subject to
45
similar prospectus delivery requirements to use this Prospectus in connection
with the resale of such New Notes. A broker-dealer which purchased Old Notes
from the Issuer may not participate in the Exchange Offer.
The Exchange Offer Registration Rights Agreement provides that, in the event
that any changes in law or the applicable interpretations of the Staff do not
permit the Issuer to effect the Exchange Offer or if for any other reason the
Exchange Offer Registration Statement is not declared effective within 150
days after the original issuance of the Old Notes or the Exchange Offer is not
consummated within 180 days after the original issue of the Old Notes or upon
the request of the Initial Purchaser under certain circumstances, the Issuer
and the Guarantors will, in lieu of effecting the registration of the New
Notes pursuant to the Exchange Offer Registration Statement and at the
Issuer's cost, (a) as promptly as practicable, file with the Commission the
Shelf Registration Statement covering resales of the Old Notes, (b) use their
best efforts to cause the Shelf Registration Statement to be declared
effective under the Securities Act by the 180th day after the original issue
of the Old Notes (or promptly in the event of a request by the Initial
Purchaser) and (c) use their best efforts to keep effective the Shelf
Registration Statement for a period of two years after its effective date (or
for a period of one year after such effective date if such Shelf Registration
Statement is filed at the request of the Initial Purchaser or, for such
shorter period, when all of the Old Notes covered by the Shelf Registration
Statement have been sold pursuant thereto). The Issuer will, in the event of
the filing of a Shelf Registration Statement, provide to each holder of the
Old Notes copies of the prospectus which is a part of the Shelf Registration
Statement, notify each such holder when the Shelf Registration Statement for
the Old Notes has become effective and take certain other actions as are
required to permit unrestricted resales of the Old Notes. A holder of Old
Notes who sells such Old Notes pursuant to the Shelf Registration Statement
generally will be required to be named as a selling securityholder in the
related prospectus and to deliver the prospectus to purchasers, will be
subject to certain of the civil liability provisions under the Securities Act
in connection with such sales and will be bound by the provisions of the
Exchange Offer Registration Rights Agreement which are applicable to such a
holder (including certain indemnification obligations). In addition, each
holder of the Old Notes will be required to deliver information to be used in
connection with the Shelf Registration Statement and to provide comments on
the Shelf Registration Statement within the time periods set forth in the
Exchange Offer Registration Rights Agreement in order to have their Old Notes
included in the Shelf Registration Statement and to benefit from the
provisions regarding the increase in interest rate set forth in the following
paragraph.
In the event that either (i) the Exchange Offer Registration Statement is
not filed with the Commission on or prior to the 30th day following the date
of original issue of the Old Notes, (ii) the Exchange Offer Registration
Statement is not declared effective on or prior to the 150th day following the
date of original issue of the Old Notes or (iii) either (A) the Issuer has not
exchanged New Notes for all Old Notes validly tendered in accordance with the
terms of the Exchange Offer on or prior to 30 days after the date on which the
Exchange Offer Registration Statement was declared effective or (B) the
Exchange Offer Registration Statement ceases to be effective at any time prior
to the time that the Exchange Offer is consummated for a period of 15
consecutive days without being succeeded immediately by an additional
Registration Statement, filed and declared effective or (C) if applicable, the
Shelf Registration Statement has been declared effective and such Shelf
Registration Statement ceases to be effective at any time prior to the second
anniversary of its effective date for a period of 15 consecutive days without
being succeeded immediately by an additional Shelf Registration Statement
filed and declared effective, then, as liquidated damages, the interest rate
stated on the Old Notes shall be increased by one-half of one percent per
annum, which rate will be increased by an additional one quarter of one
percent per annum for each subsequent 90-day period that any such additional
interest continues to accrue, up to a maximum additional interest rate of 2%
in excess of the original 10 3/8% interest rate per year. Upon (x) the filing
of the Exchange Offer Registration Statement in the case of clause (i) above,
(y) the effectiveness of the Exchange Offer Registration Statement in the case
of clause (ii) above or (z) the day before the date of the consummation of the
Exchange Offer or the effectiveness of a Shelf Registration Statement, as the
case may be, in the case of clause (iii) above, the interest rate stated on
the Old Notes from the date of such filing, effectiveness or day before the
date of the consummation, as the case may be, will be reduced to the original
interest rate of the Old Notes; provided, however, that, if after any such
reduction in interest rate, a different event specified in clause (i), (ii) or
(iii) above occurs, the interest rate may again be increased pursuant to the
foregoing provisions.
46
The summary herein of certain provisions of the Exchange Offer Registration
Rights Agreement does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, all the provisions of the
Registration Rights Agreement, a copy of which has been filed as an exhibit to
the Exchange Offer Registration Statement.
Notwithstanding the foregoing, to the extent applicable, there shall be
added to all time limitation periods that number of days representing delays
in the Issuer's filings with the Commission caused by events beyond the
Issuer's control despite its best efforts in either of the following
categories: (i) events affecting issuers generally, such as the temporary
closure of federal agencies; or (ii) events directly affecting the Issuer,
such as its inability to obtain all information of an acquisition entity
constituting a significant subsidiary within a time period that would permit
independent auditors to prepare required audited information on a timely
basis. In addition, if at any time counsel to the Issuer has determined in
good faith that it is reasonable to conclude that the filing of the Exchange
Offer Registration Statement or the Shelf Registration Statement or the
compliance by the Issuer with its disclosure obligations in connection with
the Exchange Offer Registration Statement or the Shelf Registration Statement
may require the disclosure of information which the Board of Directors of the
Issuer has identified as material and which the Board of Directors has
determined that the Issuer has a bona fide business purpose for preserving as
confidential, then the Issuer and the Guarantors may delay the filing or the
effectiveness of the Exchange Offer Registration Statement or Shelf
Registration Statement (if not then filed or effective, as applicable) and
shall not be required to maintain the effectiveness thereof or amend or
supplement the Exchange Offer Registration Statement or Shelf Registration
Statement for a period expiring upon the earlier to occur of (A) the date on
which such material information is disclosed to the public or ceases to be
material or the Issuer is able to so comply with its disclosure obligations
and Commission requirements or (B) 30 days after the Issuer notifies the
holders of such good faith determination.
As of the date of this Prospectus, $100,000,000 aggregate principal amount
of the Old Notes is outstanding. In connection with the issuance of the Old
Notes, the Issuer arranged for the Old Notes initially purchased by qualified
institutional buyers, as defined pursuant in Rule 144A under the Securities
Act ("Qualified Institutional Buyers"), to be issued and transferable in book-
entry form through the facilities of DTC, acting as depositary. The New Notes
also will be issuable and transferable in book-entry form through DTC.
This Prospectus, together with the accompanying Letter of Transmittal, is
being sent to all registered holders of Old Notes as of February 4, 1998 (the
"Record Date").
The Issuer shall be deemed to have accepted validly tendered Old Notes when,
as and if the Issuer has given oral or written notice thereof to the Exchange
Agent. See "Exchange Agent." The Exchange Agent will act as agent for the
tendering holders of Old Notes for the purpose of receiving New Notes from the
Issuer and delivering New Notes to such holders.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender or the occurrence of certain other events set forth herein,
certificates for any such unaccepted Old Notes will be returned, without
expense, to the tendering holder thereof as promptly as practicable after the
Expiration Date.
Holders of Old Notes who tender in the Exchange Offer will not be required
to pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Old
Notes pursuant to the Exchange Offer. The Issuer will pay all charges and
expenses, other than certain applicable taxes, in connection with the Exchange
Offer. See "Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean March 10, 1998, unless the Issuer, in
its sole discretion, extends the Exchange Offer, in which case the term
"Expiration Date" shall mean the latest date to which the Exchange Offer is
extended. In order to extend the Expiration Date, the Issuer will notify the
Exchange Agent of any extension by oral or written notice and will mail to the
record holders of Old Notes an announcement thereof, each prior to 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
Expiration Date. Such announcement may state that the Issuer is extending the
Exchange Offer for a specified period of time.
47
The Issuer reserves the right (i) to delay acceptance of any Old Notes, to
extend the Exchange Offer or to terminate the Exchange Offer and to refuse to
accept Old Notes not previously accepted, if any of the conditions set forth
herein under "Termination" shall have occurred and shall not have been waived
by the Issuer (if permitted to be waived by the Issuer), by giving oral or
written notice of such delay, extension or termination to the Exchange Agent
and (ii) to amend the terms of the Exchange Offer in any manner deemed by it
to be advantageous to the holders of the Old Notes. Any such delay in
acceptance, extension, termination or amendment will be followed as promptly
as practicable by oral or written notice thereof. If the Exchange Offer is
amended in a manner determined by the Issuer to constitute a material change,
the Issuer will promptly disclose such amendment in a manner reasonably
calculated to inform the holders of the Old Notes of such amendment.
Without limiting the manner in which the Issuer may choose to make public
announcements of any delay in acceptance, extension, termination or amendment
of the Exchange Offer, the Issuer shall have no obligation to publish,
advertise or otherwise communicate any such public announcement, other than by
making a timely release to the Dow Jones News Service.
INTEREST ON THE NEW NOTES
Interest on each New Note will accrue from the last Interest Payment Date on
which interest was paid on the Old Note tendered in exchange therefor or, if
no interest has been paid on such tendered Old Note, from October 29, 1997.
Holders of Old Notes whose Old Notes are accepted for exchange will be deemed
to have waived the right to receive any payment in respect of interest on the
Old Notes accrued from the last Interest Payment Date or October 29, 1997 (as
the case may be) to the date of the issuance of the New Notes. Consequently,
holders who exchange their Old Notes for New Notes will receive the same
interest payment on the same Interest Payment Date that they would have
received had they not accepted the Exchange Offer. Interest on the New Notes
is payable semi-annually on May 1 and November 1 of each year accruing from
the last Interest Payment Date or, in the case of the first payment, October
29, 1997, at a rate of 10 3/8% per annum.
PROCEDURES FOR TENDERING
To tender in the Exchange Offer, a holder must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal, and mail or otherwise
deliver such Letter of Transmittal or such facsimile, together with the Old
Notes (unless such tender is being effected pursuant to the procedure for
book-entry transfer described below) and any other required documents, to the
Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date.
Any financial institution that is a participant in DTC's Book-Entry Transfer
Facility system may make book-entry delivery of the Old Notes by causing DTC
to transfer such Old Notes into the Exchange Agent's account in accordance
with DTC's procedure for such transfer. Although delivery of Old Notes may be
effected through book-entry transfer into the Exchange Agent's account at DTC,
the Letter of Transmittal (or facsimile thereof), with any required signature
guarantees and any other required documents, must, in any case, be transmitted
to and received or confirmed by the Exchange Agent at its addresses set forth
herein under "Exchange Agent" prior to 5:00 p.m., New York City time, on the
Expiration Date. DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH ITS
PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
The tender by a holder of Old Notes will constitute an agreement between
such holder and the Issuer in accordance with the terms and subject to the
conditions set forth herein and in the Letter of Transmittal.
Delivery of all documents must be made to the Exchange Agent at its address
set forth herein. Holders may also request that their respective brokers,
dealers, commercial banks, trust companies or nominees effect such tender for
such holders.
The method of delivery of Old Notes and the Letter of Transmittal and all
other required documents to the Exchange Agent is at the election and risk of
the holders. Instead of delivery by mail, it is recommended that holders use
an overnight or hand delivery service. In all cases, sufficient time should be
allowed to assure timely delivery. No Letter of Transmittal or Old Notes
should be sent to the Issuer.
48
Only a holder of Old Notes may tender such Old Notes in the Exchange Offer.
The term "holder" with respect to the Exchange Offer means any person in whose
name Old Notes are registered on the books of the Issuer or any other person
who has obtained a properly completed bond power from the registered holder,
or any person whose Old Notes are held of record by DTC who desires to deliver
such Old Notes by book-entry transfer at DTC.
Any beneficial holder whose Old Notes are registered in the name of his
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact such registered holder promptly and instruct such
registered holder to tender on his behalf. If such beneficial holder wishes to
tender on his own behalf, such beneficial holder must, prior to completing and
executing the Letter of Transmittal and delivering his Old Notes, either make
appropriate arrangements to register ownership of the Old Notes in such
holder's name or obtain a properly completed bond power from the registered
holder. The transfer of record ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by a member firm of a registered national
securities exchange or of the National Association of Securities Dealers,
Inc., a commercial bank or trust company having an office or correspondent in
the United States or an "eligible guarantor institution" within the meaning of
Rule 17Ad-15 under the Exchange Act (an "Eligible Institution") unless the Old
Notes tendered pursuant thereto are tendered (i) by a registered holder
(including any participant in DTC whose name appears on a security position
listed as the owner of Old Notes) who has not completed the box entitled
"Special Issuance Instructions" or "Special Delivery Instructions" on the
Letter of Transmittal or (ii) for the account of an Eligible Institution.
If the Letter of Transmittal is signed by a person other than the registered
holder of any Old Notes listed therein, such Old Notes must be endorsed or
accompanied by appropriate bond powers which authorize such person to tender
the Old Notes on behalf of the registered holder, in either case signed as the
name of the registered holder or holders appears on the Old Notes.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Issuer,
evidence satisfactory to the Issuer of their authority to so act must be
submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of the tendered Old Notes will be
determined by the Issuer in its sole discretion, which determination will be
final and binding. The Issuer reserves the absolute right to reject any and
all Old Notes not properly tendered or any Old Notes the Issuer's acceptance
of which would, in the opinion of counsel for the Issuer, be unlawful. The
Issuer also reserves the absolute right to waive any irregularities or
conditions of tender as to particular Old Notes. The Issuer's interpretation
of the terms and conditions of the Exchange Offer (including the instructions
in the Letter of Transmittal) will be final and binding on all parties. Unless
waived, any defects or irregularities in connection with tenders of Old Notes
must be cured within such time as the Issuer shall determine. Neither the
Issuer, the Exchange Agent nor any other person shall be under any duty to
give notification of defects or irregularities with respect to tenders of Old
Notes nor shall any of them incur any liability for failure to give such
notification. Tenders of Old Notes will not be deemed to have been made until
such irregularities have been cured or waived. Any Old Notes received by the
Exchange Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned without cost by
the Exchange Agent to the tendering holder of such Old Notes unless otherwise
provided in the Letter of Transmittal, as soon as practicable following the
Expiration Date.
In addition, the Issuer reserves the right in its sole discretion to (a)
purchase or make offers for any Old Notes that remain outstanding subsequent
to the Expiration Date, or, as set forth under "Termination," to terminate the
Exchange Offer and (b) to the extent permitted by applicable law, purchase Old
Notes in the open market, in privately negotiated transactions or otherwise.
The terms of any such purchases or offers may differ from the terms of the
Exchange Offer.
49
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available, or (ii) who cannot deliver their Old Notes, the Letter
of Transmittal or any other required documents to the Exchange Agent prior to
the Expiration Date, or if such holder cannot complete the procedure for book-
entry transfer on a timely basis, may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery) setting
forth the name and address of the holder of the Old Notes, the certificate
number or numbers of such Old Notes and the principal amount of Old Notes
tendered, stating that the tender is being made thereby, and guaranteeing
that, within five business days after the Expiration Date, the Letter of
Transmittal (or facsimile thereof), together with the certificate(s)
representing the Old Notes to be tendered in prior form for transfer and any
other documents required by the Letter of Transmittal, will be deposited by
the Eligible Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (or facsimile
thereof), together with the certificate(s) representing all tendered Old Notes
in proper form for transfer (or confirmation of a book-entry transfer into the
Exchange Agent's account at DTC of Old Notes delivered electronically) and all
other documents required by the Letter of Transmittal are received by the
Exchange Agent within five business days after the Expiration Date.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the business day prior
to the Expiration Date, unless previously accepted for exchange.
To withdraw a tender of Old Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York City time,
on the business day prior to the Expiration Date and prior to acceptance for
exchange thereof by the Issuer. Any such notice of withdrawal must (i) specify
the name of the person having deposited the Old Notes to be withdrawn (the
"Depositor"), (ii) identify the Old Notes to be withdrawn (including the
certificate number or numbers and principal amount of such Old Notes), (iii)
be signed by the Depositor in the same manner as the original signature on the
Letter of Transmittal by which such Old Notes were tendered (including any
required signature guarantees) or be accompanied by documents of transfer
sufficient to permit the Trustee with respect to the Old Notes to register the
transfer of such Old Notes into the name of the Deposit or withdrawing the
tender and (iv) specify the name in which any such Old Notes are to be
registered, if different from that of the Depositor. All questions as to the
validity, form and eligibility (including time of receipt) of such withdrawal
notices will be determined by the Issuer, whose determination shall be final
and binding on all parties. Any Old Notes so withdrawn will be deemed not to
have been validly tendered for purposes of the Exchange Offer and no New Notes
will be issued with respect thereto unless the Old Notes so withdrawn are
validly retendered. Any Old Notes which have been tendered but which are not
accepted for exchange will be returned to the holder thereof without cost to
such holder as soon as practicable after withdrawal, rejection of tender or
termination of the Exchange Offer. Properly withdrawn Old Notes may be
retendered by following one of the procedures described above under
"Procedures for Tendering" at any time prior to the Expiration Date.
TERMINATION
Notwithstanding any other term of the Exchange Offer, the Issuer will not be
required to accept for exchange, or exchange New Notes for, any Old Notes not
theretofore accepted for exchange, and may terminate or amend the Exchange
Offer as provided herein before the acceptance of such Old Notes if: (i) any
action or proceeding is instituted or threatened in any court or by or before
any governmental agency with respect to the
50
Exchange Offer, which, in the Issuer's judgment, might materially impair the
Issuer's ability to proceed with the Exchange Offer or (ii) any law, statute,
rule or regulation is proposed, adopted or enacted, or any existing law,
statute, rule or regulation is interpreted by the staff of the Commission in a
manner, which, in the Issuer's judgment, might materially impair the Issuer's
ability to proceed with the Exchange Offer.
If the Issuer determines that it may terminate the Exchange Offer, as set
forth above, the Issuer may (i) refuse to accept any Old Notes and return any
Old Notes that have been tendered to the holders thereof, (ii) extend the
Exchange Offer and retain all Old Notes tendered prior to the Expiration Date
of the Exchange Offer, subject to the rights of such holders of tendered Old
Notes to withdraw their tendered Old Notes, (iii) waive such termination event
with respect to the Exchange Offer and accept all properly tendered Old Notes
that have not been withdrawn. If such waiver constitutes a material change in
the Exchange Offer, the Issuer will disclose such change by means of a
supplement to this Prospectus that will be distributed to each registered
holder of Old Notes, and the Issuer will extend the Exchange Offer for a
period of five to 10 business days, depending upon the significance of the
waiver and the manner of disclosure to the registered holders of the Old
Notes, if the Exchange Offer would otherwise expire during such period.
EXCHANGE AGENT
IBJ Schroder Bank& Trust Company of New York, the Trustee under the
Indenture, has been appointed as Exchange Agent for the Exchange Offer.
Questions and requests for assistance and requests for additional copies of
this Prospectus or of the Letter of Transmittal should be directed to the
Exchange Agent addressed as follows:
By Registered or Certified Mail:
IBJ Schroder Bank & Trust Company
P.O. Box 84
Bowling Green Station
New York, NY 10274-0084
Attention: Reorganization Operations Department
By Hand or Overnight Courier:
IBJ Schroder Bank & Trust Company
One State Street
New York, NY 10004
Attention: Securities Processing Window
Subcellar One (SC-1)
For Information, call:
Information and Facsimile Confirmation: (212) 858-2103
Facsimile (212) 858-2611 (Eligible Institutions Only)
FEES AND EXPENSES
The expenses of soliciting tenders pursuant to the Exchange Offer will be
borne by the Issuer. The principal solicitation for tenders pursuant to the
Exchange Offer is being made by mail. Additional solicitations may be made by
officers and regular employees of the Issuer and its affiliates in person, by
telegraph or telephone.
The Issuer will not make any payments to brokers, dealers or other persons
soliciting acceptances of the Exchange Offer. The Issuer, however, will pay
the Exchange Agent reasonable and customary fees for its services and will
reimburse the Exchange Agent for its reasonable out-of-pocket expenses in
connection therewith. The Issuer may also pay brokerage houses and other
custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding copies of this Prospectus, Letters of
Transmittal and related documents to the beneficial owners of the Old Notes
and in handling or forwarding tenders for exchange.
51
The expenses to be incurred in connection with the Exchange Offer, including
fees and expenses of the Exchange Agent and Trustee and accounting and legal
fees, will be paid by the Issuer.
The Issuer will pay all transfer taxes, if any, applicable to the exchange
of Old Notes pursuant to the Exchange Offer. If, however, certificates
representing New Notes or Old Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be registered or
issued in the name of, any person other than the registered holder of the Old
Notes tendered, or if tendered Old Notes are registered in the name of any
person other than the person signing the Letter of Transmittal, or if a
transfer tax is imposed for any reason other than the exchange of Old Notes
pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered holder or any other persons) will be
payable by the tendering holder. If satisfactory evidence of payment of such
taxes or exemption therefrom is not submitted with the Letter of Transmittal,
the amount of such transfer taxes will be billed directly to such tendering
holder.
ACCOUNTING TREATMENT
No gain or loss for accounting purposes will be recognized by the Issuer
upon the consummation of the Exchange Offer. The expenses of the Exchange
Offer will be amortized by the Issuer over the term of the New Notes under
generally accepted accounting principles. Unamortized expenses relating to the
Old Notes will be deferred and amortized over the life of the New Notes.
52
BUSINESS
GENERAL
The Company is a diversified business media company which principally
operates two lines of business: (i) Information Services and (ii) Business to
Business Communications. Information Services includes: (i) TISI, which, with
its proprietary database, is the leading provider of pre-employment screening
information used by the trucking industry to facilitate compliance with U.S.
Government regulations and (ii) CORSEARCH, the second largest provider in the
United States of trademark and trade name research to law firms and
corporations. Business to Business Communications are conducted through
several individual businesses, each of which is characterized by leading
competitive positions within specialized market niches. Business to Business
Communications includes: (i) Atwood, the largest domestic independent
publisher of exposition and association related publications and directories;
(ii) Galaxy, the largest independent provider of trade show and convention
registration, exhibitor information and "lead" management services in the
United States and (iii) GEM, which owns and operates the World Gaming
Congress, the world's largest trade show catering to the legalized gaming
industry, and publishes trade magazines directed to the legalized gaming
industry, principally IGWB, the leading publication catering to gaming
industry executives. On a pro forma basis, the Company's consolidated revenues
and adjusted EBITDA for the twelve month period ended September 30, 1997 were
approximately $78.9 million and $17.3 million, respectively. Of such pro forma
consolidated revenues, approximately 40% represented Information Services and
approximately 60% represented Business to Business Communications. Of such pro
forma adjusted EBITDA, 55% represented Information Services and 45%
represented Business to Business Communications.
INFORMATION SERVICES
Information Services provides specialized information and database
management services to precise market segments. TISI is a leading supplier of
pre-employment screening information to the trucking industry and a provider
of risk assessment and underwriting information to agents, underwriters and
others in the insurance industry. CORSEARCH, acquired by the Company in 1996,
is the second largest supplier in the United States of trademark and trade
name searches and information research.
TISI
Pre-Employment Screening Services
TISI, which since 1983 has operated its transportation services business
under the trade name DAC Services ("DAC"), is the leading supplier of
comprehensive pre-employment screening information to the trucking industry
and a provider of driving record-related and other risk assessment and
underwriting information to the insurance industry. DAC, endorsed by the
American Trucking Associations since 1986 and the trucking associations of 41
states, currently maintains a computer network providing on-line electronic
access to a proprietary employment history database of over 2.6 million job
records concerning over 1.4 million truck drivers. Management believes the
demand for the information in its DAC database is driven primarily by federal
government regulation, the Company's ability to provide the information on a
timely basis and the Company's success in marketing to the "truckload" segment
of the trucking industry, which historically exhibits high driver turnover.
"Truckload" carriers, such as J.B. Hunt and Schneider, typically are
differentiated from "route" carriers and "private fleet" carriers in that
"truckload" carriers are hired by third parties and do not have the steady,
predetermined routes of a "route" carrier, nor do they operate as an
individual corporation's captive "private fleet" (e.g., a retailer's "private
fleet" of delivery trucks). As a result, the Company believes the
unpredictable nature of a driver's job for a "truckload" carrier leads to
inherently high driver turnover, which can be more than 100% per year for some
trucking companies. As federal regulations require extensive screening of new
truck drivers, this high turnover rate creates demand for DAC's services.
DAC currently has over 5,600 transportation-related customers, including 93
of the largest 100 U.S. "for hire" carriers which consist of both "truckload"
and "route" carriers. DAC's key asset is its proprietary
53
database which is operated as an information cooperative through which DAC's
approximately 2,000 transportation industry members, including 40 of the 41
largest "truckload" carriers and 30 of the 59 largest "route" carriers,
contribute employment records in return for an economic credit against DAC
services and the ability to access DAC's employment history database. Members
pay for each employment record accessed and do not pay if no record is found.
Therefore, as the database grows, the "hit" rate increases and the Company's
revenues and profits are favorably impacted. The Company is not aware of any
comparable database offered by competitors and believes its large cooperative
membership and proprietary database represent significant competitive
advantages which would take a potential competitor several years to replicate.
Non-member customers are precluded from accessing the employment records
database; however, they are provided access to DAC's motor vehicle records as
well as criminal records and drug testing databases.
DAC's services provide comprehensive information which is used by
transportation industry customers to satisfy current DOT pre-employment
screening requirements. Due to public safety concerns, DOT regulations
currently require trucking companies to investigate the driving history,
previous three-year employment history and, since 1995, previous drug and
alcohol test results of prospective drivers. Current regulations require
employers to inquire of previous employers, but do not require previous
employers to respond to such inquiries. Under proposed DOT regulations,
trucking companies would be required to provide certain information concerning
the job histories of drivers in response to inquiries made by prospective
employers. If adopted in their current form, management believes such
regulations could provide greater demand for the Company's services, including
access to employment history and drug and alcohol test results of truck
drivers. There can be no assurance, however, that such regulations will be
adopted in their current form or at all, or if adopted that they will be
beneficial to DAC. Previous forms of such regulations, if they had been
adopted, would have been significantly burdensome to DAC's customers. While
DAC was successful in working with the American Trucking Associations in
modifying such regulations, there can be no assurance that new government
regulation will not be adopted which could have a significant adverse effect
on DAC or its customers' use of DAC services. See "Risk Factors--Government
Regulation."
DAC has virtually instantaneous computer access to MVRs maintained by 27
states and alternative methods to access the MVRs of the remaining 23 states.
In addition, DAC maintains a database which contains certain workers'
compensation records from 17 states, which may be used by prospective
employers either to detect employers that have been omitted by a prospective
employee in his or her employment application or to determine job suitability.
In 1998, DAC intends to implement manual searching capability for many of
those states of which the workers' compensation records are not in DAC's
database.
Criminal records are maintained by approximately 3,300 jurisdictions in the
U.S. and there is no single source for all such records. However, DAC can
access for its customers criminal records from any U.S. jurisdiction requested
by a customer. Management believes that the database of criminal records being
created by DAC will become an increasingly valuable asset, and may provide DAC
access to providing criminal records and other data to industries other than
trucking and insurance.
DAC obtains its MVRs, workers' compensation and criminal records information
from state or county archives, utilizing a nationwide network of agents and
representatives, direct computer connections and proprietary databases. The
information is resold at a mark-up over state and county fees for such
information. In 1996, the information was resold to more than 14,000
customers, including 89% of the customers who requested information in 1995.
54
The following table sets forth certain volume data for DAC for each of the
five years ended December 31, 1996 and for the nine months ended September 30,
1996 and 1997:
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------- -----------------
1992 1993 1994 1995 1996 1996 1997
----- ----- ----- ------ ------ -------- --------
(IN THOUSANDS)
Records sold (1)............ 8,857 9,530 9,946 10,322 10,975 8,430 8,635
Employment history records
maintained................. 1,196 1,414 1,693 1,940 2,251 2,179 2,478
- --------
(1)Includes employment records, MVRs and criminal records.
Employers who access DAC's services have the option to choose only those
records that meet their specific information needs. In addition, DAC offers a
"Total Applicant Screening Services" product which provides a customized
package of DAC's pre-employment screening products.
For customers that want to perform their own background checks, the Company
publishes The Guide, a publication available to the general public. The Guide
lists thousands of telephone numbers and addresses for criminal record
jurisdictions, state motor vehicle departments and colleges and universities,
among others, which may be found helpful to those conducting their own
background searches.
Insurance Industry Services
In addition to providing MVRs to the transportation industry, the Company is
also a leading supplier of MVRs to the insurance industry for the screening of
insurance applications. The Company, endorsed by the Professional Insurance
Agents' Association, provides over 5,000 insurance industry customers access
to the Company's computer network to request MVRs and other information.
Approximately 85% of these customers are insurance agents, with the remaining
15% representing branch offices, managing general agents, brokers and a small
number of regional and home office locations. These customers primarily
utilize the Company's data in assessing insurance underwriting risk and also
purchase the Company's workers' compensation and credit report information. In
its effort to provide more complete information to its insurance industry
customers, DAC recently became a licensed reseller of the CLUE(R) database, an
insurance company database of previous insurance claims which allows insurance
companies to access claims data for underwriting purposes.
Electronic Data Interchange Services
DAC also has begun to develop a product line called MessageXpress(R), which
provides electronic business communication services to transportation motor
carriers. Electronic Data Interchange ("EDI") automates manual paper-based
processes, reduces errors and reduces data transfer times. Transportation
companies are increasingly required by their customers to send and receive
documents via EDI. Because the installation and implementation of EDI
technology is expensive and time-consuming, this requirement has been
burdensome on smaller carriers. As a result, in the first quarter of 1996,
TISI introduced its EDI services, tailored to small and medium sized carriers,
which allow such carriers to choose among three different services to match
their technical abilities, volume requirements and budget. This service
handles technical details such as programming and establishing communication
links with one or more shippers, and a carrier need only provide MessageXpress
with the information otherwise provided on a paper document.
CORSEARCH
CORSEARCH, acquired by the Company in 1996, is the second largest provider
of trademark and trade name research services in the United States. CORSEARCH
provides comprehensive trademark and trade name searches for 1,100 law firm
and corporate clients. Management believes the increase in recent filings of
applications for new trademarks and trade names, a greater corporate emphasis
on protecting existing trademarks
55
and trade names, growing Internet usage and the increased international
expansion of U.S. companies collectively have created greater demand for
CORSEARCH's services, and provide significant opportunities to expand
CORSEARCH's database operations. The PTO estimates that the number of domestic
trademark filings will increase at a rate of 12% per annum through the year
2000. The number of basic trademark and trade name searches executed by
CORSEARCH grew from 13,795 in 1992 to 19,491 in 1996 (a 41% increase) and
CORSEARCH's revenues grew from $4.2 million in 1992 to $7.2 million in 1996 (a
69.1% increase).
CORSEARCH currently searches three major classifications of trademark
information for its customers: (i) through its proprietary database, CORBASE,
the Company searches all federal trademarks that have been filed with and
registered by the PTO; (ii) through its proprietary database CORSTATE, the
Company searches trademarks that have been filed with the Secretary of State
offices of the 50 states and Puerto Rico and (iii) through databases licensed
to the Company by third parties, the Company searches for common law usages of
company names, product names, trade names and brand names appearing in
thousands of magazines, monographs, journals, newspapers, press releases and
periodicals.
The prices for CORSEARCH's basic search services vary depending upon the
turn-around time requested by the client for the particular search performed.
CORSEARCH provides five levels of pricing of basic searches which increase
incrementally for the five levels of timing provided, from CORSEARCH's
"standard" three to four day service to "ultrarush" (two hour same day
service). As the costs for each search remains substantially constant,
CORSEARCH's profit margins on searches increase along with the prices charged
for such services when services are ordered on a "rush" basis. A typical
search may consist of a search of the federal, state and common law usage
databases of trade names and trademarks.
CORSEARCH's highly trained, industry-focused researchers use CORSEARCH's
proprietary software, proprietary CORBASE and CORSTATE databases, third party
databases and, to a lesser extent, published resources for completing customer
searches. Although the majority of the information contained in CORSEARCH's
state databases is publicly available from governmental authorities and
others, management believes that because of the cycle of intellectual property
registration renewals, it likely would take a new competitor several years to
compile a database containing the state registration information currently
maintained by CORSEARCH and its two primary competitors. New competitors may
purchase the federal database from the PTO but significant computer
programming would be needed to make it usable. Management believes that
CORSEARCH, which competes primarily on the quality, accuracy and timeliness of
its data, provides a consistently high level of service to its clients.
CORSEARCH's customers include small to mid-size law firms and corporations as
well as major companies.
CORSEARCH recently has added international search capabilities, primarily in
selected European countries, Canada and Mexico, and is in the process of
implementing an Internet online search service which began beta-testing in
December 1997 and is to become operational during 1998. The online service is
expected to serve as a quick and easy research tool for clients to "screen"
the availability of trademarks and trade names before undertaking more
expensive searches. Access to an international database of pharmaceutical
trademarks in use in 49 countries also recently has been added.
BUSINESS TO BUSINESS COMMUNICATIONS
The Company's Business to Business Communications operations are conducted
through several individual businesses, each of which is characterized by
leading competitive positions within specialized market niches. Business to
Business Communications includes: (i) Atwood, the largest domestic independent
publisher of exposition and association related publications and directories;
(ii) Galaxy, the largest independent provider of trade show and convention
registration, exhibitor information and "lead" management services in the
United States and (iii) GEM, the owner and operator of the World Gaming
Congress, the world's largest trade show catering to the legalized gaming
industry and the publisher of trade magazines directed to the legalized gaming
industry, principally IGWB, catering to gaming industry executives.
56
Atwood
Atwood, founded in 1982, is the leading independent publisher of daily trade
show and convention newspapers, directories, and related publishing products
that are directed to the attendees of U.S. trade shows and conventions. Atwood
competes primarily with trade magazines and the owners and operators of
expositions with in-house publishing capabilities who participate only in
their particular industry and do not have diverse markets or the capabilities
of Atwood. Atwood also publishes the trade journal EXPO, the official
publication of the International Association of Exposition Management, and
maintains an Internet website which is a database for trade show managers and
exhibitors.
Approximately 69% of Atwood's 1996 revenues were derived from its
publication of dailies and directories. During 1996, Atwood provided
publishing, communication or promotional services to approximately 7,000
exhibitors at approximately 207 trade shows and conventions, including 44 of
the "Tradeshow 200" exhibitions. Of the 207 trade shows to which Atwood
provided services in 1996, 81% represented trade shows served by Atwood in
1995. Related products provided by Atwood include pre- and post- convention
materials, literature kiosks and LeSack, a plastic bag filled with literature,
publications, product samples and other marketing information that is
distributed to attendees. Atwood also produces advertising and marketing
products such as Internet Guides, specialty products and restaurant and city
guides distributed to show attendees. Atwood provides magazine publishing
related services to trade associations, including editorial content, layout
and design of trade publications, advertising sales and circulation services.
Atwood's digital group provides CD ROMs, Internet applications, electronic
conference planners and buyer's guides.
Atwood has recently provided the rental of Marketing-oriented Interactive
Kiosks for Exhibitors ("MIKE"). MIKE permits exhibitors to create customized
interactive multimedia programs which are accessed by show attendees via
touchscreen technology on a kiosk that takes up minimal floor space. The
program can be customized to include survey questions that elicit information
from attendees, which allows exhibitors to qualify leads.
Galaxy
Galaxy, founded in 1982, markets its comprehensive registration services,
automated "lead" management products and information services on an exclusive
basis to trade associations, promoters, exhibitors and attendees of exposition
and trade shows and conventions. In 1996, Galaxy provided services to 41 of
the "Tradeshow 200" exhibitions, including four of the top five such
exhibitions. Of the 211 trade shows Galaxy provided services to in 1996, 84%
represented trade shows served by Galaxy in 1995. Management believes Galaxy,
from its experience servicing a wide variety of expositions, has developed a
unique set of organizational skills and technical expertise which provides
Galaxy with competitive advantages.
Multiple versions of Galaxy's "Expocards" (magnetic stripe or "smartcards")
are utilized in the registration process to allow convention and trade show
exhibitors to digitally capture and manipulate attendee information for "lead"
management and follow-up. Galaxy's Expocard technology encodes attendee
registration data on a magnetic stripe attached to a plastic card or on a
computer chip "smartcard" which can be read by trade show and convention
exhibitors renting Galaxy's Expocard readers. The Expocard provides lead data
to exhibitors in electronic form and allows for other product applications.
For example, attendees can leave and retrieve messages at a message center
kiosk established by the Company on site for a fee. The Expocard permits the
conference host (usually a trade association or a for-profit show manager) to
receive information including demographic data, attendance results and exhibit
visitation patterns.
"Smartcards," which have more data storage area, but are more expensive than
the magnetic stripe Expocards, can be utilized to store additional demographic
or other data and can give some "write-on" capability to Expocard. In
addition, the "smartcard" can provide the capability to store credits
redeemable at vending machines and is usable for the purchase of meals,
convention products and paper and media convention materials (outlines, taped
seminars, etc.), for attendance at pre-paid continuing education and other
seminars and
57
for collecting and disseminating seminar evaluations. Most customers prefer
the lower-cost magnetic stripe version of Expocard. Galaxy is currently
seeking to acquire a lower cost Smartcard that more customers would find
economically attractive.
Galaxy's "Expocard Connect" is a PC-based system that reads the Expocard's
magnetic strip, allows the exhibitor to add qualifying information to the data
file, saves the data to the PC hard drive in a format compatible with any data
management program and, when networked, can transfer data directly to a data
management program.
Galaxy's InfoStation product is a touchscreen kiosk which allows a show
attendee to insert an Expocard, request product information, record comments
and complete a questionnaire. The database is fully customized and can be
transmitted offsite for fulfillment. The InfoStation package includes
programming, software and hardware and on-site services. The Company's newest
product, still in the test marketing stage, is the iGoExpo, a portable lead
gathering tool, which can be custom designed as a combination card reader and
data input vehicle, a card reader and information service, etc. This hand-held
Personalized Digital Assistant product was used first by Sony at the NAB show
in Las Vegas in the spring of 1997 to make the lead qualification process more
user-friendly, streamline its literature distribution process, improve traffic
flow through its exhibit and more efficiently track buyer interest. According
to TradeShow & Exhibit Manager magazine, this enabled Sony to increase the
number of booth visitors it "qualified" during the show from 5,000 in 1996 to
12,000 in 1997, representing an increase of 140%.
Galaxy Classics provides graphic design and printing services to its and
Atwood's convention and trade show and trade association customers, as well as
to select customers in the geographic areas surrounding Galaxy's headquarters
in Frederick, Maryland. Services include customized graphic design for
multimedia use and printing services, primarily for promotional and marketing
purposes.
Several of Galaxy's customers hold trade shows on a bi-annual or tri-annual
basis. Consequently, Galaxy's revenues vary from year to year. The following
table sets forth, for the years ended December 31, 1994, 1995 and 1996, the
percentage of revenues of Galaxy generated from trade shows of varying
frequencies.
YEARS ENDED DECEMBER 31,
-------------------------
1994 1995 1996
------ ------ ------
Annual Shows.............................. 87% 97% 85%
Bi-Annual Shows........................... 13 2 11
Tri-Annual Shows.......................... -- -- 3
Other Shows............................... -- 1 1
---- ---- ----
100% 100% 100%
==== ==== ====
GEM
GEM, founded in 1986 as BMT Publications, Inc., is the leading global
provider of business information and marketing resources for the legalized
gaming industry. GEM owns and operates the World Gaming Congress, the largest
legalized gaming industry trade show in the world and the only trade show
endorsed by the American Gaming Association as the organization's official
trade show. The conference traditionally has been held annually in Las Vegas
during the fourth quarter of each year. Consequently, GEM's financial results
are heavily skewed towards the fourth quarter. In 1996, the World Gaming
Congress sold over 185,000 square feet of exhibition space and included over
21,700 attendees, an increase from 117,000 square feet and 17,500 attendees in
1994.
GEM publishes several trade magazines directed to the legalized gaming
industry, including IGWB. IGWB, with a qualified circulation of over 26,000,
is the leading trade journal directed to the worldwide legalized gaming
industry. In addition, the Company has a 100% interest in Casino Publishing
Company, the publisher of Casino Executive, a trade magazine directed to
casino management executives in North America.
58
The following table sets forth certain information with respect to World
Gaming Congress and IGWB:
YEARS ENDED DECEMBER 31,
----------------------------------
1993 1994 1995 1996
------- -------- -------- --------
World Gaming Congress:
Exhibitor companies......................... 360 454 540 609
Booths...................................... 640 1,162 1,540 1,850
Net square footage.......................... 64,000 117,100 154,000 185,000
Total attendance............................ 10,836 17,479 21,767 21,700
IGWB:
Advertising pages........................... 350 411 497 572
GEM has a 49% interest in Gaming for Africa Expo, a gaming trade show and
conference held in South Africa, and Gaming for Africa, the leading trade
magazine for gaming in Sub-Saharan Africa. GEM also has entered into a
partnership with a European publishing company. In 1997, the partnership, in
association with European Gaming Organization, a European gaming supplier
trade group, produced the European Casino Executive Congress, a conference
targeted at senior executives in the European casino industry. The optimal
frequency of this conference is currently being evaluated by management.
BUSINESS AND OPERATING STRATEGIES
Management has significant experience in the information services,
exposition services and publishing businesses and has developed a business and
operating strategy to: (i) maximize the strengths of the Company's core
businesses; (ii) expand into new products, services and geographic markets;
(iii) expand through selective acquisitions to enhance the Company's
established business platforms and (iv) improve operating efficiencies.
INFORMATION SERVICES
Management believes that both TISI and CORSEARCH have been successful
because they target well defined market niches and possess competitive
advantages through their proprietary databases, value added information
products and superior customer service. Management's growth strategy for
expanding upon these existing business platforms consists of:
. Broadening TISI's Customer Focus into Additional Trucking and
Transportation Segments. TISI has historically enjoyed success with
"truckload" carriers due to the high employee turnover rates associated
with this segment of the trucking industry. Management intends to
continue capitalizing on this success, but believes the employment
history database can be more aggressively marketed to the other segments
of the U.S. trucking and transportation industry. Specifically,
management intends to expand marketing of its database services to
"private fleet" carriers, which include approximately 14,000 trucking
companies. Management believes that, by expanding the number of
employment records contained in the DAC database, TISI will increase
revenues and profits through higher customer "hit rates" per search.
. Expanding DAC's Business Model to Other Industries. Management believes
that there are opportunities to expand the successful DAC pre-employment
screening business model and core competencies to other industries that
tend to raise public safety concerns, involve substantial financial
risks for employers or have high employee turnover rates. Management
plans to build employment history databases and market pre-employment
screening services to employers in industries possessing these
characteristics.
59
. Enhancing CORSEARCH's International Search Capabilities. CORSEARCH has
historically focused on providing domestic searches for U.S. and foreign
based clients. With the growing presence of global businesses and the
proliferation of Internet usage, there is a growing customer need for
international trademark database searches. As a result, CORSEARCH is in
the process of identifying international trademark and trade name
information sources and building databases similar to those used in its
domestic operations.
. Broadening CORSEARCH's On-Line Product Offering. Management believes
that by expanding CORSEARCH's on-line and Internet products to allow
customers to perform pre-screening searches, CORSEARCH can increase
revenues from existing customers who are currently utilizing these
products from competitors and attract new customers.
. Expanding into Patent Search Services. Management intends to expand its
product offering to include patent searches, likely through
acquisitions. Such acquisitions would provide the Company with greater
breadth of products for the intellectual property market and an
increased ability to serve its existing client base.
BUSINESS TO BUSINESS COMMUNICATIONS
Management believes that each of the business units comprising Business to
Business Communications is a leader in its respective markets and that there
are numerous opportunities to enhance the value of these existing franchises.
. Cross-Selling and Product Bundling Opportunities between Atwood and
Galaxy. Galaxy and Atwood have traditionally been operated as separate
entities and currently have only 13 mutual clients among the 75 clients
which Galaxy and Atwood collectively serve within the "Tradeshow 200."
Management intends to capitalize on the loyal customer base of both
Atwood and Galaxy by marketing both unit's products on a packaged basis
to position Atwood and Galaxy as a comprehensive provider of multiple
media, information and exhibitor services to their customers.
. Expanding Atwood's Custom Publishing Customer Base. Atwood historically
has focused its custom publishing activities on the exposition and trade
association markets. Management has identified additional markets, such
as corporate publishing and corporate gatherings, where Atwood can
capitalize on its custom publishing capabilities.
. Augmenting Galaxy's Exhibitor Products and Services. Management intends
to expand the scope and level of information gathered with respect to
attendees to create additional value-added information products for
exhibitors and trade show managers. For example, Galaxy provided Sony
Electronics, Inc. ("Sony") with a series of sophisticated electronic
"lead" management tools at the 1997 National Association of Broadcasters
("NAB") trade show, which, according to TradeShow & Exhibit Manager
magazine, enabled Sony to increase the number of booth visitors it
"qualified" to 12,000 from 5,000 during the 1996 NAB show, representing
an increase of 140%.
. Expanding Galaxy's Services to the European Marketplace. According to
1996 M&A Exhibition Directory, the exposition and trade show marketplace
in Europe is approximately five times as large as that in the U.S.
(based on total square footage of exhibition space). Galaxy has
historically provided registration and "lead" management services to the
European exposition marketplace through a licensee, Galaxy Expocard
Europe. The Company acquired 73% of Galaxy Expocard Europe in 1997 and
management intends to enhance Galaxy's international capabilities by
more aggressively marketing products to European exposition managers
through Galaxy Expocard Europe.
. Pursuing Selective Acquisitions of Exposition Services
Companies. Management believes that the exposition services industry is
highly fragmented and plans to pursue opportunistic acquisitions to
enhance Galaxy's existing service offerings so that Galaxy, in concert
with Atwood, can become a comprehensive provider of exposition media
services.
. Leveraging Key GEM Franchises. GEM's leading position in the legalized
gaming market is a direct result of its strong brand names. IGWB and the
World Gaming Congress are widely recognized
60
domestically and internationally as the leading sources of business
information regarding the legalized gaming market. Management intends to
utilize this position to increase revenues through (i) launching or
acquiring additional gaming related trade publications targeting
specific high-growth gaming markets (e.g., slot machines and bingo),
(ii) exploring the acquisition or launch of trade shows complementary to
the World Gaming Congress and (iii) working closer with the American
Gaming Association to develop ancillary revenue sources.
. Rationalizing GEM's Overhead Costs. IGWB, GEM's flagship publication,
was formerly part of a group of five trade magazines, four of which were
sold in 1994 and 1995. Following this sale, IGWB continued to occupy the
same office space, although the organization's publishing revenue had
been reduced by approximately 71%. Management has identified
opportunities for cost savings through integration with other
publications.
. Expanding GEM to New Gaming Markets. Management believes portions of the
world's gaming markets are relatively immature and underserved. As a
result, management plans to capitalize on trade show and publishing
opportunities in Europe, Latin America, Asia and Sub-Saharan Africa. As
a first step, the Company recently purchased a 49% ownership stake in
Gaming for Africa, the leading trade show and magazine targeting the
legalized gaming industry in South Africa, one of the world's growing
gaming markets. Management intends to seek other acquisitions and joint
venture opportunities for worldwide expansion.
COMPETITION
Each of the Company's businesses is in competition with other suppliers and
vendors of services or products similar to those provided by the Company and
many of such competitors are significantly larger and have greater resources
than the Company. The following is a brief description of the competitive
environment in which each of the Company's businesses operates.
TISI
TISI has a leading market position in the trucking industry. In the
insurance industry, there are two TISI competitors which are significantly
larger and sell significantly more MVRs than TISI, as well as many regional
providers. Management believes that TISI's ability to maintain and grow its
MVR business in the insurance industry is dependent upon its ability to
continue to resell Choice Point's CLUE(R) data, as described above. Choice
Point is the largest competitor selling MVRs to the insurance industry.
CORSEARCH
The trademark search business is dominated by Thomson & Thomson, which
CORSEARCH estimates controls 80% of the domestic market and an even higher
percentage of international searches done by domestic customers. Thomson &
Thomson is owned by a large international media/information conglomerate.
There is also one smaller competitor which, while doing fewer searches than
CORSEARCH, is owned by a large publishing/information company which
specializes in selling to law firms.
Galaxy
Galaxy has two significant competitors, both of which provide services to
fewer shows in any given year than Galaxy and management believes that they do
not possess the resources of the Company. There are also smaller and regional
competitors as well as some large companies which provide other exposition
services which will compete in certain aspects of Galaxy's business.
Atwood
As a custom publisher, Atwood competes primarily on price, quality and
service and has been successful by targeting the publishing needs of the trade
show, convention and trade association market. Outside of that
61
market there are many custom publishers, some with significantly greater
resources than the Company. In the trade show, convention and trade
association market, there are competitors which, while concentrating on
another set of services they perform for their customers, will also provide
publishing services as part of their package of services. While several of
these competitors are significantly larger than Atwood, management believes
that stronger competitors are trade shows or associations with "in house"
publishing capabilities and trade magazine publishers with specialized
knowledge in the industry that is the subject of the trade show or convention.
GEM
In the gaming trade show business, there is one other significant U.S. show
(which is smaller than World Gaming Congress), a large show held in London
each year, and a variety of smaller niche or regional shows and conferences
throughout the world. A few of these are owned or managed by competitors which
are significantly larger than GEM.
From a publishing standpoint, there is one other significant competitive
magazine serving the U.S. casino industry and several successful magazines and
newsletters serving vertical niches of the gaming industry in the U.S. and
worldwide industry, such as lotteries and pari-mutuals. Internationally, there
are several magazines, particularly in Europe, which successfully serve the
casino industry and compete with the Company. To management's knowledge, none
of such competitors are significantly larger than GEM. In addition, GEM must
compete with other media for advertising dollars, such as direct mail and
direct selling. The latter is particularly important for potential U.S. casino
advertisers as so much of the industry is concentrated in a few locations.
EMPLOYEES
As of October 31, 1997, the Company employed 599 persons on a full-time
basis including 252 in Information Services, 341 in Business to Business
Communications and 6 at the Company's corporate offices. None of the Company's
employees are subject to collective bargaining agreements. The Company
considers relations with its employees to be satisfactory. Most employees are
salaried, with sales personnel receiving commissions on sales. In connection
with the Recapitalization and the reorganization of the Company's management,
the corporate offices have been relocated to New York and the number of
employees in the corporate offices will be reduced to approximately five.
PROPERTIES
The Company conducts its principal operations at the facilities set forth
below:
LOCATION SQUARE FOOTAGE LEASED/OWNED
-------- -------------- ------------
Information Services:
Tulsa, Oklahoma (TISI) (1) 38,800 Leased (Expires June 1999)
New York, New York (CORSEARCH) 22,000 Leased (Expires February 2009)
Business to Business Communications:
Frederick, Maryland (Galaxy) 51,000 Leased (Expires January 2003)
Overland Park, Kansas (Atwood) 22,715 Leased (Expires May 2000)
New York, New York (GEM) (2) 10,400 Leased (Expires August 2000)
Corporate:
Tulsa, Oklahoma (3) 5,400 Owned
New York, New York 1,565 Sub-leased (Expires December
1998)
- --------
(1) TISI also leases office space in Chicago, Illinois.
(2) GEM also leases small offices in Chicago, Illinois and Las Vegas, Nevada.
(3) The Company is in the process of closing the sale of its office space in
Tulsa, Oklahoma.
62
Management believes that its facilities are suitable and adequate for its
immediate needs and that additional or substitute space is available if needed
to accommodate expansion.
As a result of the merger of Tribune/Swab-Fox with and into the Issuer, the
Company acquired a 49.99% membership interest in 1995 Land Company, L.L.C., an
Oklahoma limited liability company which owns undeveloped real estate in
Tulsa, Oklahoma. The majority member of this entity has sole management
responsibility for this property and the entity's business. The entity
purchased three significant parcels of raw land from the Company on December
30, 1994 for approximately $1.4 million in cash and notes.
GOVERNMENT REGULATION
As a "consumer reporting agency," TISI is subject to the provisions of the
FCRA and similar acts existing in the states and is regulated by the FTC under
the Federal Trade Commission Act. Under the FCRA, a consumer reporting agency
may furnish a "consumer report" to a customer only for a permissible purpose
allowed by the FCRA. Permissible purposes include extension or review of
credit, collecting an account, employment purposes, underwriting of insurance,
determining eligibility for a license or permit granted by a governmental
entity, or in connection with a business transaction involving the consumer.
All reports of TISI are treated by TISI as consumer reports for purposes of
the FCRA. In addition, TISI's Total Applicant Screening reports are treated by
TISI as "investigative consumer reports" within the meaning of that term under
the FCRA because they involve contacting third parties. Certain additional
restrictions apply to these reports.
The FCRA requires a consumer reporting agency to maintain reasonable
procedures designed to ensure that the restrictions on the use of certain
information are not violated. In addition, a consumer reporting agency must
follow reasonable procedures to assure maximum possible accuracy of the
information concerning the consumer about whom the report relates. The FCRA
also requires a consumer reporting agency, upon request from a consumer, to
disclose all information about that consumer in its file, together with the
source and the recipients of the information. In some cases, this information
must be delivered to the consumer at no cost, and in others the agency may
charge a reasonable fee. TISI does not charge a fee to a driver or other
individual or entity about whom or which data is provided to a customer if
that individual or entity has been turned down for a job or denied insurance
within the last 30 days. Otherwise, TISI may charge a $10.00 fee.
The ADA contains pre-employment inquiry and confidentiality restrictions
designed to prevent discrimination against individuals in the hiring process.
Although TISI's business is not directly regulated by the ADA, the use by its
customers of certain information sold to them, such as workers' compensation
histories or drug and alcohol test results, is regulated, both with respect to
the type of information and the timing of its use. Similar state laws also
affect TISI's business. Some states have human rights laws that provide more
protection than the ADA. A large number of states also regulate the type of
information which can be made available to the public or to a third party or
impose conditions to the release of the information.
While the FCRA provides for civil liability sanctions against a consumer
reporting agency by a consumer for willful or negligent noncompliance with the
FCRA, and, as a result of the 1997 amendments, criminal penalties for willful
violations, by complying in good faith with the FCRA, TISI is protected from
liability by the FCRA even if there are inadvertent errors in the information
provided. TISI has developed and implemented internal policies designed to
help ensure that background information retrieved by it concerning a consumer
is accurate and that it otherwise complies with the provisions of the FCRA and
applicable state laws. In addition, each customer of TISI is required to sign
a user agreement, in which the customer agrees to accept responsibility for
using information provided by TISI in accordance with the provisions of the
FCRA, the ADA and local laws. TISI also has internal checks in place regarding
access and release of such information. The Company currently maintains
liability insurance to cover claims by customers or the subjects of reports
for alleged inaccurate information or misuse of information.
The FCRA was amended in 1997, effective October 1, 1997. Such amendments
require DAC's customers to increase their compliance activities and may limit,
under certain circumstances, their ability to access certain information sold
by DAC, in particular certain criminal records over seven years old. While the
effect of such
63
amendments is not expected by DAC to impact materially its business or
prospects, primarily because further amendments to the FCRA are anticipated
(and draft legislation of such amendments has been submitted to the U.S.
Congress), the need for customers to revamp procedures and for the industry to
adjust to the new regulations thus far has had a negative impact on the use of
DAC's services and such negative impact may, if the foregoing further
amendments are not adopted, are adopted materially later than anticipated by
management, or are adopted in materially different form than previously
proposed, have a material and adverse effect on the use of DAC's services and
on its results of operations. It is not possible at this time to predict
accurately the extent of such effect.
In the 14 years it has been in business, TISI has not been found liable for
any violations of the FCRA, the ADA or similar state laws. The Company did
settle one case out of court for a nominal amount to avoid litigation
expenses. There can be no assurance, however, that the Company will not be
found liable for any such violations and that, if found so liable, the Company
will not be subject to adverse judgments in substantial amounts. In addition,
there can be no assurance that the FCRA, the ADA or similar state laws will
not be amended or subjected to different judicial or administrative
interpretation in the future. It is not possible at this time to predict the
impact that any such change might have on the Company's results of operations,
financial condition or liquidity.
The DOT is in the process of proposing and promulgating revised regulations
which, among other things, concern the requirements for pre-employment
screening of truck drivers. It is not possible at this time to predict the
impact that such regulations, if adopted, might have on the Company's results
of operations, financial condition or liquidity. If adopted in their current
form, such regulations would likely provide a greater demand for access to
employment history, MVRs and drug and alcohol test results of truck drivers,
such as the information provided by the Company.
LITIGATION AND GOVERNMENT PROCEEDINGS
The Company's 1992-1994 New York State income tax returns are in process of
a review. No assessments have been made to date. Management believes that the
tax positions taken by the Company were correct and that adjustments, if any,
for income taxes will not have a material effect on the Company's consolidated
financial statements. The income tax refund from the State of Oklahoma
included in "Refundable Income Taxes" in the Company's balance sheets as of
December 31, 1996 has been received by the Company.
In the ordinary course of its business, the Company and its subsidiaries
have been named as defendants in lawsuits and a party in various governmental
proceedings from time to time. While in the past, such matters have not had a
material adverse effect on the financial position, results of operation or
liquidity of the Company, and management does not anticipate that such matters
will have such an effect in the future, the outcome of suits and proceedings
cannot be predicted with certainty and, due to such inherent uncertainty of
litigation, there can be no assurance that the Company will not be subject to
adverse judgments in substantial amounts.
FOREIGN SALES
The Company's pro forma net revenues for 1996 and the nine months ended
September 30, 1997 to customers outside the U.S. and Canada were $2.4 million
and $1.1 million, respectively, representing 3.2% and 2.0% of net revenues,
respectively. All of such 1996 net revenues and 1997 revenues are attributable
to Business to Business Communications.
TRADEMARKS, LICENSES AND PATENTS
The Company has registered numerous trademarks, including DAC Services(R),
CORSEARCH(R), CORSTATE(R), CORBASE(R), EXPO(R), World Gaming Congress(R), IGWB
(pending) and MessageXpress(R), in the United States and, in certain cases, in
foreign countries in which the Company does business. The Company believes
that it owns or licenses all intellectual property rights necessary to conduct
its business.
64
MANAGEMENT
The following table sets forth information with respect to the current
Directors and executive officers of the Issuer and certain other key employees
of the Issuer and its subsidiaries. All Directors of the Issuer hold office
until the next Annual Meeting of Stockholders and until the election and
qualification of their successors. Each individual listed below is a citizen
of the United States, except for Ian L.M. Thomas who is a citizen of the
United Kingdom.
NAME AGE POSITION
---- --- --------
John S. Suhler.......... 54 Chairman of the Board and Director
Ian L. M. Thomas........ 60 President, Chief Executive Officer and Director
John J. Veronis......... 69 Director
Jeffrey T. Stevenson.... 37 Director
S. Gerard Benford....... 59 Director
Jeffrey Tannenbaum...... 35 Director
John Rolfe.............. 29 Director
Stefan M. Selig......... 34 Director
Steven J. Hunt.......... 53 Chief Financial Officer and Treasurer
Brian A. Meyer.......... 37 General Counsel and Secretary
Richard A. Wimbish...... 54 President and Chief Operating Officer of TISI
Robert Frank............ 46 President and Chief Operating Officer of
CORSEARCH
W. Michael Goodwin...... 47 President and Chief Executive Officer of Atwood,
Galaxy and Galaxy Registration, LLC
John S. Suhler co-founded VS&A in 1981 and VS&A Fund I in 1987 with Mr.
Veronis. Mr. Suhler currently is President and Co-Chief Executive of VS&A and
is a Founding General Partner of VS&A Fund I. Prior to forming VS&A, Mr.
Suhler was a Corporate Vice President of CBS and President of CBS Publishing
Group.
Ian L. M. Thomas was previously employed as a Managing Director at VS&A.
Currently, Mr. Thomas' services are provided to the Company by VS&A, with whom
Mr. Thomas has an employment arrangement, and the Company reimburses VS&A for
such services at cost. Following such time as his U.S. Visa is transferred
from VS&A to the Issuer, Mr. Thomas will enter into an employment agreement
which will provide for his employment as President, Chief Executive Officer
and a Director through October 2002. Prior to his employment at VS&A, Mr.
Thomas completed a 24-year career at Reed Elsevier plc, where he served as
Chairman and Chief Executive Officer of Reed Telepublishing Ltd. and as a
member of the Board of Directors of both Reed Elsevier plc and Reed
International plc. In late September 1997, Reed Elsevier announced that
"irregularities" had been uncovered in its circulation statements for certain
of the publications of one of the divisions in Reed Telepublishing Ltd. and
that it had launched a full investigation. The announcement stated that the
irregularities had been traced back to 1991 and that a charge to 1997 earnings
would be taken as a result of the company's commitment to recompense
advertisers in the affected publications and the board's intent to make a
substantial writedown of the division's intangible asset values. Mr. Thomas
has informed the Company that he has no knowledge of the circumstances
referred to in the Reed announcement and related press reports.
John J. Veronis co-founded VS&A in 1981 and VS&A Fund I in 1987 with Mr.
Suhler. Mr. Veronis currently is Chairman and Co-Chief Executive of VS&A and
is a Founding General Partner of VS&A Fund I. Prior to forming VS&A, Mr.
Veronis co-founded Psychology Today and its parent company, CRM; served as
President of Curtis Magazines and Publisher of its Ladies Home Journal and was
a general corporate executive at Interpublic Group of Companies.
Jeffrey T. Stevenson has served as President and General Partner of VS&A
Fund II since November 1994 and as President of VS&A Fund I since 1989. Mr.
Stevenson joined VS&A in 1982 and prior to joining VS&A Fund I was Executive
Vice President of VS&A in charge of corporate finance.
S. Gerard Benford has served as Executive Vice President and General Partner
of VS&A Fund II since November 1994 and as Executive Vice President of VS&A
Fund I since 1990. Prior to 1990, Mr. Benford was a Corporate Vice President
of Warner Communications Corporation and a principal at Arthur Young &
Company.
Jeffrey Tannenbaum founded Fir Tree Partners, a private investment firm, in
January 1994. From 1988 through 1993, Mr. Tannenbaum was an investment
professional at Kohlberg & Co., a corporate acquisition firm.
65
John Rolfe joined Fir Tree in February 1997. Prior to joining Fir Tree, Mr.
Rolfe was an investment banker with Donaldson, Lufkin & Jenrette specializing
in media and communications.
Stefan M. Selig has been a Managing Director in the Merger & Acquisition
Department of UBS Securities since August 1994. Prior to joining UBS, Mr.
Selig was an investment banker in the Mergers and Acquisitions Group at The
First Boston Corporation.
Steven J. Hunt was appointed Chief Financial Officer in November 1997. Prior
to joining the Company, he was the founder of Value Growth Partners,
International, a strategic and financial consulting firm, from 1995 to October
1997. Mr. Hunt previously served as Executive Vice President Business
Development and Planning and Chief Financial Officer of Patrick Media Group,
Inc., a subsidiary of GE Capital Corp. from 1991 to 1995.
Brian A. Meyer was appointed General Counsel in November 1997. Prior to
joining the Company, Mr. Meyer served as Senior Counsel at Revlon, Inc. from
May 1993 to October 1997. From January 1990 to April 1993, he was an attorney
at the law firm of Latham & Watkins.
Richard A. Wimbish joined TISI, a wholly-owned subsidiary of the Issuer, as
Controller in 1987 and became Executive Vice President in 1990. Mr. Wimbish
was made President and Chief Operating Officer of TISI in 1991. Prior to
joining TISI, Mr. Wimbish was Controller and Chief Financial Officer of
Carlson Reserve Corporation from 1981 through 1986.
Robert Frank founded CORSEARCH in 1983 and has been the President and Chief
Operating Officer of such company on a full time basis since such time
(CORSEARCH was acquired by the Issuer in August 1996).
W. Michael Goodwin joined the Company in December 1996, as President and
Chief Executive Officer of both Atwood and Galaxy. Prior to joining the
Company, Mr. Goodwin was founder and President of Falcon Sports Group, Inc., a
company which focused on developing and introducing new sports media
properties. Prior to this, Mr. Goodwin was Executive Vice President and Chief
Operating Officer of Professional Sports Publications, a publisher of sporting
event game day magazines (1992-1995).
EXECUTIVE COMPENSATION
COMPENSATION
Set forth below is certain information with respect to the compensation of
each of the five most highly compensated executive officers of the Issuer and
its subsidiaries, based on salary and bonus earned during 1996, for services
in all capacities to the Issuer and its subsidiaries during each of the
Issuer's last three fiscal years.
SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
------------------------------
ANNUAL
COMPENSATION(1) AWARDS PAYOUTS
----------------- ----------- ------------------
NUMBER OF
RESTRICTED SHARES
NAME AND PRINCIPAL STOCK UNDERLYING LTIP ALL OTHER
POSITION YEAR SALARY BONUS(2) AWARD(S)(3) OPTIONS(4) PAYOUTS COMPENSATION(5)
- ------------------ ---- -------- -------- ----------- ---------- ------- ---------------
Howard G. Barnett, 1996 $270,000 $189,000 $ -- 30,000 -- $7,600
Jr.(6) 1995 210,904 175,000 -- -- -- 5,575
Chairman, President and 1994 207,704 77,889 77,889 75,000 -- 5,544
Chief Executive Officer
J. Gary Mourton 1996 166,400 116,480 -- 21,000 -- 6,541
Senior Vice President & 1995 157,410 63,000 -- -- -- 5,047
Chief Financial Officer 1994 151,410 34,067 34,067 37,500 -- 4,620
Robert E. Craine, Jr. 1996 159,000 111,300 -- 21,000 -- 6,418
Executive Vice President 1995 150,000 55,000 -- -- -- 5,154
1994 133,900 30,127 30,127 37,500 -- 4,107
Richard A. Wimbish 1996 155,000 41,491 -- 10,000 -- 5,429
President, TISI 1995 140,000 36,083 -- -- -- 4,959
1994 125,000 36,192 -- 22,500 -- 3,960
Stuart P. Honeybone 1996 154,000 107,800 -- 21,000 -- 7,585
Vice President 1995 132,000 52,000 -- 15,000 -- 5,369
1994 120,150 27,500 -- 10,000 -- 4,064
66
- --------
(1) No cash compensation other than the annual amounts described was paid to
any of the named executives attributable to the periods shown. Certain
executives are also entitled to car allowances or are provided cars, and
club dues are paid for certain executives. The value of such perquisites
is not required to be disclosed because the aggregate amount of such
compensation does not exceed the lesser of $50,000 or 10 percent of the
total amount of annual salary and bonus for any named executive.
(2) Includes bonuses earned for the year, even if paid in another year.
(3) Under the T/SF Communications Corporation 1994 Incentive Stock Plan,
approved by the stockholders of the Company at the 1994 Annual Meeting of
Stockholders, one-half of the 1994 bonus paid to Howard G. Barnett, Jr.,
J. Gary Mourton and Robert E. Craine, Jr., was paid in the form of
restricted stock grants. The amount shown here represents the dollar
amount of such stock grants, which were granted at a rate of $6.25 per
share, being the closing price on the AMEX for Common Stock on December
30, 1994 (the last trading day of 1994). As of December 31, 1996, Mr.
Barnett, Mr. Mourton and Mr. Craine held the following number of shares
awarded as restricted stock grants: Mr. Barnett held 12,462 shares, valued
at $345,820 in the aggregate; Mr. Mourton held 5,451 shares, valued at
$151,265 in the aggregate; and Mr. Craine held 4,820 shares, valued at
$133,755 in the aggregate. Values as of December 31, 1996 are based on the
closing price on the AMEX for Common Stock on December 31, 1996 (the last
trading day of 1996).
(4) Consists solely of options to acquire shares of Common Stock.
(5) These amounts represent the total value of the Issuer's contributions made
or accrued to the Issuer's 401(k) plan. All such persons are 100 percent
vested in their accounts under the Issuer's plan.
(6) The cash compensation shown for Howard G. Barnett, Jr. in the table does
not include amounts paid to him as a director of Tribune/Swab-Fox in 1994
and 1995. Employees who are Directors of the Issuer do not receive fees
from the Issuer for their service as Directors.
OPTIONS
The following table sets forth certain information with respect to options
exercised by the named executive officers of the Company and its subsidiaries
during 1996, and the number and value of unexercised options held by such
persons at the end of 1996. The Company has never granted any stock
appreciation rights ("SAR").
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
NUMBER OF
SECURITIES
UNDERLYING VALUE OF
UNEXERCISED UNEXERCISED IN-THE-
OPTIONS AT MONEY OPTIONS AT
FISCAL YEAR- FISCAL YEAR-END
END ($)(1)(2)
------------- -------------------
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED ($)(1) UNEXERCISABLE UNEXERCISABLE
---- --------------- --------------- ------------- -------------------
Howard G. Barnett,
Jr. ................... -- -- 30,000/75,000 $382,500/$1,762,500
J. Gary Mourton......... -- -- 21,000/37,500 267,750/881,250
Robert E. Craine, Jr. .. -- -- 21,000/37,500 267,750/881,250
Richard A. Wimbish...... -- -- --/32,500 --/667,500
Stuart P. Honeybone..... -- -- 21,000/25,000 267,750/561,250
- --------
(1) Market value of the underlying securities at exercise date or fiscal year-
end, as the case may be, minus the option exercise price.
(2) Based on the closing price for the Common Stock on the American Stock
Exchange on December 31, 1996, the last trading day of fiscal 1996, which
was $27.75.
67
The following table sets forth certain information with respect to options
granted to the named executive officers of the Company and its subsidiaries
during 1996. The Company has never granted any stock appreciation rights.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
POTENTIAL
REALIZABLE VALUE
AT ASSUMED ANNUAL
INDIVIDUAL GRANTS RATES OF STOCK
-------------------------------------------------- PRICE
NUMBER OF % OF TOTAL APPRECIATION
SECURITIES OPTIONS FOR OPTION
UNDERLYING GRANTED TO EXERCISE TERM(2)
OPTIONS EMPLOYEES IN PRICE EXPIRATION -----------------
NAME GRANTED (#)(3) FISCAL YEAR (PER SHARE) DATE 5% 10%
---- -------------- ------------ ----------- ---------- -------- --------
Howard G. Barnett,
Jr. ................... 30,000(3) 19.61 $15.00 3/18/03 $135,700 $361,200
J. Gary Mourton......... 21,000(3) 13.73 15.00 3/18/03 95,000 252,800
Robert E. Craine, Jr. .. 21,000(3) 13.73 15.00 3/18/03 95,000 252,800
Richard A. Wimbish...... 10,000(4) 6.54 13.875 3/18/06 87,700 221,100
Stuart P. Honeybone..... 21,000(3) 13.73 15.00 3/18/03 95,000 252,800
- --------
(1) Consists solely of options to acquire shares of Common Stock. The option
exercise price may be paid in cash, by delivery of already-owned shares
and, in some instances, by offset of the underlying shares, or by a
combination of such methods. Tax withholding obligations, if any, related
to exercise may be paid by offset of the underlying shares, subject to
certain conditions.
(2) Potential realizable value illustrates the value that might be realized
upon exercise of the options immediately prior to the expiration of their
term (ten years from the date of grant as to the options granted Mr.
Wimbish and seven years from the date of grant as to all other options in
the table), assuming that the Common Stock appreciates in value from the
date of grant to the end of the option term at rates of 5% and 10%,
respectively, compounded annually.
(3) These options were granted for a term of seven years, subject to earlier
termination in certain events related to the termination of employment.
The exercise price of $15.00 was higher than the $13.88 per share market
price of the Common Stock on the date of grant. These options vested in
three tranches as the price of the Common Stock reached $18.00, $21.00 and
$24.00, all of which were achieved in 1996.
(4) The options were granted for a term of ten years, subject to earlier
termination in certain events related to the termination of employment.
The exercise price of the options is equal to the fair market value of the
Common Stock on the date of grant.
See "Description of the Transactions--The Option Repurchase" for information
on the effect of the Recapitalization on these options.
COMPENSATION OF DIRECTORS. Directors receive no additional compensation for
service on the Board of Directors or any committee thereof. Directors are
reimbursed by the Issuer for out-of-pocket expenses incurred by them in
connection with their service on the Board of Directors and any committee
thereof.
EMPLOYMENT AGREEMENTS. The Company is subject to employment agreements with
certain Directors, officers or key employees, as follows:
Ian L.M. Thomas is President and Chief Executive Officer and a Director of
the Issuer; currently his services are provided to the Company by VS&A, with
whom Mr. Thomas has an employment arrangement, and the Company reimburses VS&A
for such services at cost. Following such time as his U.S. Visa is transferred
from VS&A to the Issuer, Mr. Thomas will enter into an employment agreement
with the Issuer that will provide for his employment through October 2002 at a
base salary of $175,000 per year, with annual increases based upon the
Consumer Price Index, plus a bonus (of up to 100% of his base salary) based
upon certain performance targets. Mr. Thomas also will participate in the
Issuer's Chief Executive Officer Equity Appreciation Plan and Supplemental
Chief Executive Officer Equity Appreciation Plan. See "--Phantom Stock Plans."
Steven J. Hunt, hired by the Company in November 1997, is the Chief
Financial Officer of the Issuer. Mr. Hunt is party to an employment agreement
with the Issuer that provides for a five-year term at a base salary of
68
$175,000 per year, with annual increases based upon the Consumer Price Index,
plus a bonus (of up to 50% of his base salary) based upon certain performance
targets. Mr. Hunt also will participate in the Issuer's Chief Financial
Officer/General Counsel Equity Appreciation Plan. See "--Phantom Stock Plans."
Brian A. Meyer, hired by the Company in November 1997, is the General
Counsel of the Issuer. Mr. Meyer is party to an employment agreement with the
Issuer that provides for a five-year term at a base salary of $160,000 per
year, with annual increases based upon the Consumer Price Index, plus a bonus
(of up to 50% of his base salary) based upon certain performance targets. Mr.
Meyer also will participate in the Issuer's Chief Financial Officer/General
Counsel Equity Appreciation Plan. See "--Phantom Stock Plans."
W. Michael Goodwin was hired by the Company in December 1996, to serve as
President and Chief Executive Officer of both Atwood and Galaxy. Mr. Goodwin
previously was employed pursuant to an employment agreement which extended to
December 31, 1997 at a base salary of $165,000 annually. The employment
agreement provided for various incentives and bonus possibilities, with
$20,000 of such bonus guaranteed. To induce Mr. Goodwin to relocate his family
to Frederick, Maryland (Galaxy's location), Mr. Goodwin's employment agreement
was amended, in August 1997, to provide for a severance arrangement which
would pay him, if his employment is terminated other than "for cause," his
base salary until the later of (i) 12 months after such termination or (ii)
August 31, 1999. Pursuant to such Employment Agreement, Mr. Goodwin was
granted on January 16, 1997 options for 20,000 shares of Common Stock at an
exercise price of $28.00 per share, the closing price of the Common Stock on
the American Stock Exchange on such date of grant. Upon consummation of the
Tender Offer, Mr. Goodwin exercised the options and was paid $245,000. Mr.
Goodwin entered into a new employment agreement as of January 1, 1998 which
provides for his employment through December 31, 2000 as President and Chief
Executive Officer of Galaxy Registration, LLC and an executive officer of
Atwood Publishing, LLC at a base salary of $165,000 annually, with annual
increases based upon the Consumer Price Index, and various incentives and
bonus opportunities, including participation in the Issuer's Key Executive
Equity Appreciation Plan.
Richard A. Wimbish entered into an employment agreement with TISI, effective
January 1, 1997, which, among other things, provided for a salary in 1997 of
$165,000 and bonuses consistent with prior practices of TISI (reference is
made to the above compensation table for information concerning Mr. Wimbish's
historical bonus earnings). Upon consummation of the Tender Offer, Mr. Wimbish
received a bonus of $535,000 and was paid $567,000 upon the exercise of
certain options. Mr. Wimbish continues to hold options granted under the
Issuer's 1994 Incentive Stock Plan. 16,750 shares of Common Stock are issuable
upon exercise of such options, 10,000 of which have an exercise price of
$13.874 per share and 6,750 of which have an exercise price of $4.25 per
share. The Issuer's 1994 Incentive Stock Plan, under which such options were
granted, therefore will survive (solely with respect to such options). If Mr.
Wimbish is terminated at any time after the consummation of the Transactions,
he will receive a severance package equal to two years of his then base
salary. Mr. Wimbish entered into a new employment agreement with TISI as of
January 1, 1998 which provides for his employment through December 31, 2000 as
President and Chief Operating Officer of TISI at a base salary of $175,000
annually, with annual increases based upon the Consumer Price Index, and
various incentives and bonus opportunities, including participation in the
Issuer's Key Executive Equity Appreciation Plan.
In connection with the acquisition of CORSEARCH in August 1996, CORSEARCH
entered into an employment agreement with Mr. Frank employing him as its
President through December 31, 1999. Mr. Frank was employed at a salary of
$236,250 in 1997. Under his employment agreement, Mr. Frank was to receive
bonuses based on the net income of CORSEARCH exceeding certain thresholds each
year. Under the agreement by which CORSEARCH was acquired, in the years 2000
and 2001, Mr. Frank was to receive additional payments for his interest in
CORSEARCH sold to the Company based on the earnings of CORSEARCH in 1997, 1998
and 1999. Mr. Frank and the Company recently have agreed to terms by which Mr.
Frank will continue to serve in his current positions through May 1998, and
thereafter serve as a consultant to CORSEARCH through 1999. The terms of such
agreement provide that Mr. Frank will not receive any bonuses based on the net
income of CORSEARCH or any additional payments for his interest in CORSEARCH
sold to the Company based on the earnings of CORSEARCH.
69
In connection with his employment, Mr. Frank was granted options for 15,000
shares of Common Stock at an exercise price of $20.00 per share and 15,000
options at an exercise price of $24.00 per share, both of which were greater
than the closing price of the Common Stock on the AMEX on the date of such
grant. Upon consummation of the Tender Offer, Mr. Frank exercised the options
and was paid $547,500.
In addition, in connection with the Recapitalization, the Company entered
into consulting agreements on October 9, 1997 with Howard G. Barnett, Jr., J.
Gary Mourton and Robert E. Craine, Jr. Mr. Barnett's agreement has a term of
one year, extendable at the option of the Company for a second year; Mr.
Mourton's agreement has a term of one year; and Mr. Craine's agreement has a
term of 90 days. Each agreement pays the consultant compensation at a rate
equal to his base salary from the Company at the time of the Stock Purchase,
except that Mr. Mourton's compensation for the second six months of the year
is at a rate equal to 50% of his current base salary.
Messrs. Mourton, Craine and Stuart P. Honeybone also were parties to a
special bonus plan pursuant to which, upon consummation of the Tender Offer,
they shared, pro rata with their respective salaries, a bonus pool equal to
$1,637,500. Messrs. Barnett, Mourton, Craine and Honeybone are each entitled
to participate in a severance plan whereby each person will be paid one year's
salary for every 10 years of service with the Company, plus an amount equal to
all bonus and overtime wages paid for 1996.
PHANTOM STOCK PLANS
The Company has established a Key Executive Equity Appreciation Plan (the
"Key Executive Phantom Stock Plan") for executives of the Company. Pursuant to
the Key Executive Phantom Stock Plan, executives can be awarded Equity
Appreciation Units ("Units") which constitute a "phantom" equity interest in
any appreciation in the value of the equity of the Company above the $59.6
million originally invested by VS&A-T/SF and Fir Tree in the Company and
Holdings LLC (the "Equity Appreciation"). The Units vest 20% per year over
five years, provided that the executive remains an employee of the Company and
the annual EBITDA budget for the Company is achieved (or, if not achieved,
that 110% of the annual EBITDA budget for the next year is achieved). Messrs.
Wimbish and Goodwin each will be awarded Units equal to .3% and .2%,
respectively, of the Equity Appreciation under the Key Executive Phantom Stock
Plan.
Ian L.M. Thomas, President and Chief Executive Officer of the Issuer, will
be awarded Units equal to 2.5% of the Equity Appreciation under the Chief
Executive Officer Equity Appreciation Plan, which Units vest 20% per year over
five years, provided that Mr. Thomas remains an employee of the Company. Mr.
Thomas also will be awarded Units equal to an additional 2.5% of the Equity
Appreciation under the Supplemental Chief Executive Officer Equity
Appreciation Plan, which Units vest 100% upon a Change of Control (as defined
in the Supplemental Chief Executive Officer Equity Appreciation Plan), in the
event that VS&A-T/SF has received an internal rate of return on its investment
in the Common Stock of greater than 20% per annum.
Mr. Hunt, Chief Financial Officer of the Issuer, and Mr. Meyer, General
Counsel of the Issuer, will be awarded Units equal to 1.5% and 1%,
respectively, of the Equity Appreciation under the Chief Financial
Officer/General Counsel Equity Appreciation Plan (together with the Key
Executive Phantom Stock Plan, the Chief Executive Officer Equity Appreciation
Plan and the Supplemental Chief Executive Officer Equity Appreciation Plan,
the "Phantom Stock Plans"), which Units vest 20% per year over five years,
provided, in each case, that such individual remains an employee of the
Company.
Upon termination of an executive's employment by the Company for any reason
(other than Cause (as defined in the Key Executive Phantom Stock Plan) or
voluntary termination by the executive), the executive is entitled to receive
an amount equal to the value of his or her vested Units, payment of which can
be deferred until a Change in Control (as defined in the Key Executive Phantom
Stock Plan) of the Company. All Units awarded under the Chief Executive
Officer Equity Appreciation Plan and the Chief Financial Officer/General
Counsel Equity Appreciation Plan vest on a Change in Control (as defined in
each plan), and the executive is entitled to receive an amount equal to the
value of his or her Units (unless his or her employment terminated prior to
the Change in Control).
The maximum number of Units issuable under the Phantom Stock Plans would
constitute approximately 10% of the common equity interests of the Company.
70
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
STOCKHOLDERS AGREEMENT
VS&A-T/SF, Fir Tree (each, a "Stockholder") and the Issuer are parties to a
Stockholders Agreement (the "Stockholders Agreement"), dated as of October 9,
1997, with respect to the management of the Company and their ownership of
shares of the Common Stock.
The Stockholders Agreement provides each Stockholder the right to "tag"
along on any sale of shares by the other Stockholder, provides to VS&A-T/SF
the right to "drag" along Fir Tree on any sale of all of the Common Stock and
provides preemptive rights to each Stockholder.
The Stockholders Agreement provides that VS&A-T/SF and Fir Tree will vote
for a board consisting of a majority of members designated by VS&A-T/SF and a
number of Fir Tree designees in proportion to Fir Tree's ownership of Common
Stock. Accordingly, the board of directors of the Issuer consists of eight
members, five designated by VS&A-T/SF and three designated by Fir Tree. See
"Management."
The Stockholders Agreement provides that certain actions require approval by
a majority of the Fir Tree designees on the board, including an amendment of
the Certificate of Incorporation or By-Laws, a transaction with VS&A-T/SF or
an affiliate, certain borrowings or management equity plans pursuant to which
management receives more than 10% of the common equity interests of the
Company.
At any time after October 9, 2002, Fir Tree has the right to force a sale of
the Issuer or its assets and the Stockholders are required to sell their
shares or vote in favor of a sale. If a definitive agreement for the sale of
the Issuer is not executed within 18 months after the notice from Fir Tree,
the Stockholders will vote their shares to elect a board consisting of a
majority of members designated by Fir Tree.
The Stockholders Agreement terminates in 10 years or upon an earlier
underwritten initial public offering of Common Stock.
VS&A-T/SF, Fir Tree and the Issuer have also entered into a letter
agreement, dated as of February 6, 1998, with respect to the effectuation of
the Second Step Transaction. The Equity Investors have agreed to amend the
operating agreements of the LLCs to provide the members with similar "tag
along" and "drag along" rights with respect to their respective membership
interests in the LLCs as are found in the Stockholders Agreement.
Upon consummation of the Recapitalization, VS&A will be paid an investment
banking fee of $1.5 million by the Issuer, which will be shared with Fir Tree
pro rata (based on the ratio in which VS&A-T/SF and Fir Tree own shares of the
Common Stock).
CERTAIN FEES
VS&A will be paid an annual monitoring fee of $90,000 per year by the
Company and may be paid advisory fees (not to exceed 1% of the transaction
value) in connection with future acquisitions or dispositions by the Company;
Fir Tree will be entitled to receive from VS&A 50% of Fir Tree's pro rata
share of any such fee (based on the ratio in which VS&A-T/SF and Fir Tree own
shares of the Common Stock).
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Upon consummation of the Recapitalization, VS&A-T/SF will hold 881,988
shares (or 64%) and Fir Tree will hold 487,506 shares (or 36%) of the Common
Stock, constituting all of the outstanding Common Stock. Upon consummation of
the Tender Offer, Stock Purchase and Option Repurchase, pending the Second
Step Transaction, public shareholders held 101,969 shares of the Common Stock
(or 7%), and VS&A-T/SF's shares constituted approximately 60% and Fir Tree's
shares constituted approximately 33% of the outstanding shares of the Common
Stock. No directors or executive officers of the Company own any shares of the
Common Stock. An affiliate of Ian L. M. Thomas, President and Chief Executive
Officer of the Issuer, has invested $750,000 to purchase 1.95% of VS&A-T/SF.
71
DESCRIPTION OF THE SENIOR CREDIT FACILITY
In connection with the Recapitalization, FUNB provided $25.0 million of
borrowing availability to the Issuer pursuant to the Senior Credit Facility.
Repayment. The Senior Credit Facility is a revolving credit facility which
is due and payable at maturity in September, 2004.
Security; Guaranty. The Senior Credit Facility is secured by a first
priority lien on substantially all of the properties and assets of the Issuer
and its subsidiaries (which for all purposes includes the LLCs), owned now or
acquired later. The Senior Credit Facility is guaranteed by the Guarantors.
Interest. At the Issuer's option, the interest rate per annum applicable to
the Senior Credit Facility will be a fluctuating rate of interest measured by
reference either to: (i) LIBOR plus the applicable borrowing margin or (ii)
FUNB's base rate, which is the greater of the published prime rate of FUNB or
the overnight federal funds rate plus 0.5% (the "FUNB Rate") plus the
applicable borrowing margin. The applicable borrowing margin for the Senior
Credit Facility will range from 1.75% to 2.75% for LIBOR based borrowings and
0.5% to 1.5% for FUNB Rate based borrowings.
Fees. The Issuer has agreed to pay certain fees with respect to the Senior
Credit Facility including (i) upfront facility fees, (ii) agent and
arrangement fees and (iii) commitment fees of 0.5% per annum on the unused
portion of the Senior Credit Facility.
Use of Proceeds. The entire amount of the Senior Credit Facility was made
available to the Issuer concurrently with the closing of the Tender Offer.
Prepayments; Reduction of Commitments. The commitments under the Senior
Credit Facility are required to be permanently reduced with: (i) 100% of the
net cash proceeds of all non-ordinary-course asset sales or other dispositions
of the property by the Issuer and its subsidiaries, including insurance and
condemnation proceeds, subject to limited exceptions and (ii) 100% of the net
proceeds of issuances of equity or debt obligations of the Issuer and its
subsidiaries, subject to limited exceptions (including the Offering). The
Issuer may voluntarily reduce the commitment in amounts of $1.0 million or
more at any time without premium or penalty.
Covenants. The Senior Credit Facility contains covenants, among others,
restricting the ability of the Issuer and the Guarantors to: (i) declare
dividends or redeem or repurchase capital stock; (ii) prepay, redeem or
purchase debt; (iii) incur liens and engage in sale-leaseback transactions;
(iv) make loans and investments; (v) issue more debt; (vi) amend or otherwise
alter debt and other material agreements; (vii) make capital expenditures;
(viii) engage in mergers, acquisitions and asset sales; (ix) transact with
affiliates and (x) alter its lines of business. The Issuer must also make
certain customary indemnifications of the lenders and their agents and will
also be required to comply with financial covenants (based on adjusted pro
forma EBITDA) with respect to: (i) a maximum leverage ratio; (ii) a maximum
senior leverage ratio; (iii) a minimum interest coverage ratio and (iv) a
minimum fixed charge coverage ratio. The Senior Credit Facility also contains
certain customary affirmative covenants.
Events of Default. Events of default under the Senior Credit Facility
include: (i) the Issuer's failure to pay principal or interest when due; (ii)
the Issuer's material breach of any covenant, representation or warranty
contained in the loan documents; (iii) customary cross-default provisions;
(iv) events of bankruptcy, insolvency or dissolution of the Issuer or the
Guarantors; (v) the levy of certain judgments against the Issuer, any
Guarantor, or its assets; (vi) certain adverse events under ERISA plans of the
Issuer or the Guarantors; (vii) the actual or asserted invalidity of security
documents or guarantees of the Issuer or the Guarantors and (viii) a change of
control of the Issuer.
72
DESCRIPTION OF THE NEW NOTES
GENERAL
The New Notes will be issued under an indenture (the "Indenture"), dated as
of October 29, 1997, by and among the Company, the Guarantors and IBJ Schroder
Bank & Trust Company, as Trustee (the "Trustee"). As used in this "Description
of the New Notes" section, references to the Notes mean the New Notes.
The following summary of certain provisions of the Indenture does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, the Trust Indenture Act of 1939, as amended (the "TIA"), and to
all of the provisions of the Indenture, including the definitions of certain
terms therein and those terms made a part of the Indenture by reference to the
TIA as in effect on the date of the Indenture. A copy of the Indenture may be
obtained from the Company. The definitions of certain capitalized terms used
in the following summary are set forth below under "--Certain Definitions."
For purposes of this section, references to the "Company" include only the
Company and not its Subsidiaries.
The New Notes will be unsecured obligations of the Company, ranking
subordinate in right of payment to all Senior Debt of the Company.
All of the Company's Subsidiaries and the LLCs will be Restricted
Subsidiaries and each of the active Wholly Owned Restricted Subsidiaries
(including the LLCs) will be Guarantors.
PRINCIPAL, MATURITY AND INTEREST
The Notes are limited in aggregate principal amount to $100.0 million and
will mature on November 1, 2007. Interest on the Notes will accrue at the rate
of 10 3/8% per annum and will be payable semiannually in cash on each May 1
and November 1, commencing on May 1, 1998, to the persons who are registered
Holders at the close of business on the April 15 and October 15 immediately
preceding the applicable interest payment date. Interest on the Notes will
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from and including the date of issuance.
The Notes will not be entitled to the benefit of any mandatory sinking fund.
REDEMPTION
Optional Redemption. The Notes will be redeemable, at the Company's option,
in whole at any time or in part from time to time, on and after November 1,
2002, upon not less than 30 nor more than 60 days' notice, at the following
redemption prices (expressed as percentages of the principal amount thereof)
if redeemed during the twelve-month period commencing on November 1 of the
year set forth below, plus, in each case, accrued and unpaid interest thereon,
if any, to the date of redemption:
YEAR PERCENTAGE
---- ----------
2002............................................................ 105.188%
2003............................................................ 103.458%
2004............................................................ 101.729%
2005 and thereafter............................................. 100.000%
Optional Redemption upon Public Equity Offerings. At any time, or from time
to time, on or prior to November 1, 2000, the Company may, at its option, use
the net cash proceeds of one or more Public Equity Offerings (as defined) to
redeem the Notes at a redemption price equal to 110.375% of the principal
amount thereof plus accrued and unpaid interest thereon, if any, to the date
of redemption; provided that at least 65% of the principal amount of Notes
originally issued remains outstanding immediately after any such redemption.
In order to effect the foregoing redemption with the proceeds of any Public
Equity Offering, the Company shall make such redemption not more than 90 days
after the consummation of any such Public Equity Offering.
73
SELECTION AND NOTICE OF REDEMPTION
In the event that less than all of the Notes are to be redeemed at any time,
selection of such Notes for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities
exchange, if any, on which such Notes are listed or, if such Notes are not
then listed on a national securities exchange, on a pro rata basis, by lot or
by such method as the Trustee shall deem fair and appropriate; provided,
however, that no Notes of a principal amount of $1,000 or less shall be
redeemed in part; provided, further, that if a partial redemption is made with
the proceeds of a Public Equity Offering, selection of the Notes or portions
thereof for redemption shall be made by the Trustee only on a pro rata basis
or on as nearly a pro rata basis as is practicable (subject to DTC
procedures), unless such method is otherwise prohibited. Notice of redemption
shall be mailed by first-class mail at least 30 but not more than 60 days
before the redemption date to each Holder of Notes to be redeemed at its
registered address. If any Note is to be redeemed in part only, the notice of
redemption that relates to such Note shall state the portion of the principal
amount thereof to be redeemed. A new Note in a principal amount equal to the
unredeemed portion thereof will be issued in the name of the Holder thereof
upon cancellation of the original Note. On and after the redemption date,
interest will cease to accrue on Notes or portions thereof called for
redemption as long as the Company has deposited with the Paying Agent funds in
satisfaction of the applicable redemption price pursuant to the Indenture.
SUBORDINATION
The payment of all Obligations on the Notes is subordinated in right of
payment to the prior payment in full in cash of all Obligations on Senior
Debt. Upon any payment or distribution of assets of the Company of any kind or
character, whether in cash, property or securities, to creditors upon any
liquidation, dissolution, winding up, reorganization, assignment for the
benefit of creditors or marshaling of assets of the Company or in a
bankruptcy, reorganization, insolvency, receivership or other similar
proceeding relating to the Company or its property, whether voluntary or
involuntary, all Obligations due or to become due upon all Senior Debt shall
first be paid in full in cash, or such payment duly provided for to the
satisfaction of the holders of Senior Debt, before any payment or distribution
of any kind or character is made on account of any Obligations on the Notes,
or for the acquisition of any of the Notes for cash or property or otherwise.
If any default occurs and is continuing in the payment when due, whether at
maturity, upon any redemption, by declaration or otherwise, of any principal
of, interest on, unpaid drawings for letters of credit issued in respect of,
or regularly accruing fees with respect to, any Senior Debt, no payment of any
kind or character shall be made by or on behalf of the Company or any other
Person on its or their behalf with respect to any Obligations on the Notes or
to acquire any of the Notes for cash or property or otherwise.
In addition, if any other event of default occurs and is continuing with
respect to any Designated Senior Debt, as such event of default is defined in
the instrument creating or evidencing such Designated Senior Debt, permitting
the holders of such Designated Senior Debt then outstanding to accelerate the
maturity thereof and if the Representative for the respective issue of
Designated Senior Debt gives written notice of the event of default to the
Trustee (a "Default Notice"), then, unless and until all events of default
have been cured or waived or have ceased to exist or the Trustee receives
notice from the Representative for the respective issue of Designated Senior
Debt terminating the Blockage Period (as defined below), during the 180 days
after the delivery of such Default Notice (the "Blockage Period"), neither the
Company nor any other Person on its behalf shall (x) make any payment of any
kind or character with respect to any Obligations on the Notes or (y) acquire
any of the Notes for cash or property or otherwise. Notwithstanding anything
herein to the contrary, in no event will a Blockage Period extend beyond 180
days from the date the payment on the Notes was due and only one such Blockage
Period may be commenced within any 360 consecutive days. No event of default
which existed or was continuing on the date of the commencement of any
Blockage Period with respect to the Designated Senior Debt shall be, or be
made, the basis for commencement of a second Blockage Period by the
Representative of such Designated Senior Debt whether or not within a period
of 360 consecutive days, unless such event of default shall have been cured or
waived for a period of not less than 90 consecutive days (it being
acknowledged that any subsequent action, or any breach of any financial
covenants for a period commencing after the date of
74
commencement of such Blockage Period that, in either case, would give rise to
an event of default pursuant to any provisions under which an event of default
previously existed or was continuing shall constitute a new event of default
for this purpose).
By reason of such subordination, in the event of the insolvency of the
Company, creditors of the Company who are not holders of Senior Debt,
including the Holders of the Notes, may recover less, ratably, than holders of
Senior Debt.
After giving effect to the Offering of the Old Notes and the application of
the proceeds therefrom, the Recapitalization and the transactions contemplated
thereby, on a pro forma basis, at September 30, 1997, the aggregate amount of
Senior Debt would have been approximately $3.7 million. In addition, the
Company would have had $25.0 million of additional borrowing availability
under the Credit Agreement.
GUARANTEES
Each Guarantor unconditionally guarantees, on a senior subordinated basis,
jointly and severally, to each Holder and the Trustee, the full and prompt
performance of the Company's obligations under the Indenture and the Notes,
including the payment of principal of and interest on the Notes. The
Guarantees will be subordinated to Guarantor Senior Debt on the same basis as
the Notes are subordinated to Senior Debt. The obligations of each Guarantor
are limited to the maximum amount which, after giving effect to all other
contingent and fixed liabilities of such Guarantor and after giving effect to
any collections from or payments made by or on behalf of any other Guarantor
in respect of the obligations of such other Guarantor under its Guarantee or
pursuant to its contribution obligations under the Indenture, will result in
the obligations of such Guarantor under the Guarantee not constituting a
fraudulent conveyance or fraudulent transfer under federal or state law. Each
Guarantor that makes a payment or distribution under a Guarantee shall be
entitled to a contribution from each other Guarantor in an amount pro rata,
based on the net assets of each Guarantor, determined in accordance with GAAP.
Each Guarantor may consolidate with or merge into or sell its assets to the
Company or another Guarantor that is a Restricted Subsidiary of the Company
without limitation, or with other Persons upon the terms and conditions set
forth in the Indenture. See "--Certain Covenants--Merger, Consolidation and
Sale of Assets." In the event all of the Capital Stock of a Guarantor is sold
by the Company and the sale complies with the provisions set forth in "--
Certain Covenants--Limitation on Asset Sales," the Guarantor's Guarantee will
be released.
Separate financial statements of the Guarantors are not included herein
because such Guarantors are jointly and severally liable with respect to the
Company's obligations pursuant to the Notes, and the aggregate net assets,
earnings and equity of the Guarantors and the Company are substantially
equivalent to the net assets, earnings and equity of the Company on a
consolidated basis.
HOLDING COMPANY STRUCTURE
The Company is a holding company for its Subsidiaries, with no material
operations of its own and only limited assets. Accordingly, the Company is
dependent upon the distribution of the earnings of its Restricted Subsidiaries
(and distributions with respect to its preferred ownership interest in
Holdings LLC), whether in the form of dividends, advances or payments on
account of intercompany obligations, to service its debt obligations. In
addition, the claims of the Holders of Notes are subject to the prior payment
of all liabilities (whether or not for borrowed money) and to any preferred
stock interest of such Restricted Subsidiaries. There can be no assurance
that, after providing for all prior claims, there would be sufficient assets
available from the Company and its Restricted Subsidiaries to satisfy the
claims of the Holders of Notes. See "Risk Factors--Dependence Upon
Distributions from Subsidiaries and LLCs."
75
CHANGE OF CONTROL
The Indenture provides that upon the occurrence of a Change of Control, each
Holder will have the right to require that the Company purchase all or a
portion of such Holder's Notes pursuant to the offer described below (the
"Change of Control Offer"), at a purchase price equal to 101% of the principal
amount thereof plus accrued interest to the date of purchase.
The Indenture provides that, prior to the mailing of the notice referred to
below, but in any event within 30 days following any Change of Control, the
Company covenants to (i) repay in full and terminate all commitments under
Indebtedness under the Credit Agreement and all other Senior Debt the terms of
which require repayment upon a Change of Control or offer to repay in full and
terminate all commitments under all Indebtedness under the Credit Agreement
and all other such Senior Debt and to repay the Indebtedness owed to each
lender which has accepted such offer or (ii) obtain the requisite consents
under the Credit Agreement and all other Senior Debt to permit the repurchase
of the Notes as provided below. The Company shall first comply with the
covenant in the immediately preceding sentence before it shall be required to
repurchase Notes pursuant to the provisions described below. The Company's
failure to comply with the covenant described in the immediately preceding
sentence shall constitute an Event of Default described in clause (iii) and
not in clause (ii) under "Events of Default" below.
Within 30 days following the date upon which the Change of Control occurred,
the Company must send, by first class mail, a notice to each Holder, with a
copy to the Trustee, which notice shall govern the terms of the Change of
Control Offer. Such notice shall state, among other things, the purchase date,
which must be no earlier than 30 days nor later than 45 days from the date
such notice is mailed, other than as may be required by law (the "Change of
Control Payment Date"). Holders electing to have a Note purchased pursuant to
a Change of Control Offer will be required to surrender the Note, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of the Note
completed, to the Paying Agent at the address specified in the notice prior to
the close of business on the third business day prior to the Change of Control
Payment Date.
If a Change of Control Offer is made, there can be no assurance that the
Company will have available funds sufficient to pay the Change of Control
purchase price for all the Notes that might be delivered by Holders seeking to
accept the Change of Control Offer. In the event the Company is required to
purchase outstanding Notes pursuant to a Change of Control Offer, the Company
expects that it would seek third party financing to the extent it does not
have available funds to meet its purchase obligations. However, there can be
no assurance that the Company would be able to obtain such financing.
Neither the Board of Directors of the Company nor the Trustee may waive the
covenant relating to a Holder's right to redemption upon a Change of Control.
Restrictions in the Indenture described herein on the ability of the Company
and its Restricted Subsidiaries to incur additional Indebtedness, to grant
liens on its property, to make Restricted Payments and to make Asset Sales may
also make more difficult or discourage a takeover of the Company, whether
favored or opposed by the management of the Company. Consummation of any such
transaction in certain circumstances may require redemption or repurchase of
the Notes, and there can be no assurance that the Company or the acquiring
party will have sufficient financial resources to effect such redemption or
repurchase. Such restrictions and the restrictions on transactions with
Affiliates may, in certain circumstances, make more difficult or discourage
any leveraged buyout of the Company or any of its Subsidiaries by the
management of the Company. While such restrictions cover a wide variety of
arrangements which have traditionally been used to effect highly leveraged
transactions, the Indenture may not afford the Holders of Notes protection in
all circumstances from the adverse aspects of a highly leveraged transaction,
reorganization, restructuring, merger or similar transaction.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Change of Control Offer. To the extent that
the provisions of any securities laws or regulations conflict with the "Change
of Control" provisions of the Indenture, the Company
76
shall comply with the applicable securities laws and regulations and shall not
be deemed to have breached its obligations under the "Change of Control"
provisions of the Indenture by virtue thereof.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
Limitation on Incurrence of Additional Indebtedness. The Company will not,
and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, create, incur, assume, guarantee, acquire, become liable,
contingently or otherwise, with respect to, or otherwise become responsible
for payment of (collectively, "incur") any Indebtedness (other than Permitted
Indebtedness); provided, however, that if no Default or Event of Default shall
have occurred and be continuing at the time of or as a consequence of the
incurrence of any such Indebtedness, the Company or any of its Restricted
Subsidiaries may incur Indebtedness (including, without limitation, Acquired
Indebtedness) and Subsidiaries of the Company may incur Acquired Indebtedness,
in each case if on the date of the incurrence of such Indebtedness, after
giving effect to the incurrence thereof, the ratio of the total Indebtedness
of the Company and its Restricted Subsidiaries (excluding any Indebtedness
owed to a Restricted Subsidiary by any other Restricted Subsidiary or the
Company and any Indebtedness owed to the Company by any Restricted Subsidiary)
to the Company's Consolidated EBITDA (determined on a pro forma basis for the
last four fiscal quarters of the Company for which financial statements are
available at the date of determination) is less than 6.0 to 1; provided,
however, that if the Indebtedness which is the subject of a determination
under this provision is Acquired Indebtedness, or Indebtedness incurred in
connection with the simultaneous acquisition of any Person, business, property
or assets, then such ratio shall be determined by giving effect to (on a pro
forma basis, as if the transaction had occurred at the beginning of the four-
quarter period) both the incurrence or assumption of such Acquired
Indebtedness or such other Indebtedness by the Issuers and the inclusion in
the Company's Consolidated EBITDA of the Consolidated EBITDA of the acquired
Person, business, property or assets and any pro forma expense and cost
reductions calculated on a basis consistent with Regulation S-X under the
Securities Act as in effect and as applied as of the date hereof.
Limitation on Restricted Payments. The Company will not, and will not cause
or permit any of its Restricted Subsidiaries to, directly or indirectly, (a)
declare or pay any dividend or make any distribution on any Capital Stock of
the Company or Holdings LLC (other than, in the case of the Company, dividends
or distributions payable solely in Qualified Capital Stock of the Company or
in the case of Restricted Subsidiaries, dividends or distributions payable to
the Company or any Wholly Owned Restricted Subsidiary of the Company), (b)
purchase, redeem or otherwise acquire or retire for value any Capital Stock of
the Company or any warrants, rights or options to purchase or acquire shares
of any class of such Capital Stock, (c) make any principal payment on,
purchase, defease, redeem, prepay, decrease or otherwise acquire or retire for
value, prior to any scheduled final maturity, scheduled repayment or scheduled
sinking fund payment, any Indebtedness of the Company that is subordinate or
junior in right of payment to the Notes or (d) make any Investment (other than
Permitted Investments) (each of the foregoing actions set forth in clauses
(a), (b), (c) and (d) being referred to as a "Restricted Payment"), if at the
time of such Restricted Payment or immediately after giving effect thereto,
(i) a Default or an Event of Default shall have occurred and be continuing or
(ii) the Company is not able to incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in compliance with the
"Limitation on Incurrence of Additional Indebtedness" covenant or (iii) the
aggregate amount of Restricted Payments including such proposed Restricted
Payment made subsequent to the Issue Date (the amount expended for such
purposes, if other than in cash, being the fair market value of such property
as determined reasonably and in good faith by the Board of Directors of the
Company) shall exceed the sum of: (x) 50% of the cumulative Consolidated Net
Income (or if cumulative Consolidated Net Income shall be a loss, minus 100%
of such loss) of the Company earned subsequent to the Issue Date and on or
prior to the date the Restricted Payment occurs (the "Reference Date")
(treating such period as a single accounting period) minus the aggregate
amount of Permitted Tax Distributions paid subsequent to the Issue Date; plus
(y) 100% of the aggregate net cash proceeds received by the Company from any
Person (other than a Subsidiary of the Company) from the issuance and sale
subsequent to the Issue Date and on or prior to the Reference Date of
Qualified Capital Stock of the Company; plus (z) without duplication of any
amounts included in clause (iii) (y) above, 100% of the aggregate net cash
77
proceeds of any equity contribution received by the Company from a holder of
the Company's Capital Stock (excluding, in the case of clauses (iii )(y) and
(z), any net cash proceeds from a Public Equity Offering to the extent used to
redeem the Notes pursuant to the redemption provisions herein).
Notwithstanding the foregoing, the provisions set forth in the immediately
preceding paragraph do not prohibit: (1) the payment of any dividend within 60
days after the date of declaration of such dividend if the dividend would have
been permitted on the date of declaration; (2) if no Default or Event of
Default shall have occurred and be continuing, the acquisition of any shares
of Capital Stock of the Company, either (i) solely in exchange for shares of
Qualified Capital Stock of the Company or (ii) through the application of net
proceeds of a substantially concurrent sale for cash (other than to a
Subsidiary of the Company) of shares of Qualified Capital Stock of the
Company; (3) if no Default or Event of Default shall have occurred and be
continuing, the acquisition of any Indebtedness of the Company that is
subordinate or junior in right of payment to the Notes either (i) solely in
exchange for shares of Qualified Capital Stock of the Company, or (ii) through
the application of net proceeds of a substantially concurrent sale for cash
(other than to a Subsidiary of the Company) of (A) shares of Qualified Capital
Stock of the Company or (B) Refinancing Indebtedness; (4) so long as no
Default or Event of Default shall have occurred and be continuing, repurchases
by the Company of Common Stock of the Company or payments by the Company to
enable VS&A-T/SF to repurchase common Equity Interests of VS&A-T/SF, in either
case, without duplication, from employees of the Company or any of its
Subsidiaries or their authorized representatives upon the death, disability or
termination of employment of such employees, in an aggregate amount not to
exceed in any calendar year the sum of (A) $750,000 and (B) any amounts
permitted to have been paid in any preceding calendar years under subclause
(A) above to the extent such amounts were not so paid in any such prior
calendar years; provided that such payments shall not exceed $3.0 million in
the aggregate; (5) if no Default or Event of Default shall have occurred and
be continuing, or would result from any such distribution, Permitted Tax
Distributions and (6) payments in connection with the Recapitalization. In
determining the aggregate amount of Restricted Payments made subsequent to the
Issue Date in accordance with clause (iii) of the immediately preceding
paragraph, amounts expended pursuant to clauses (1), (2), (4) and (5) shall be
included in such calculation.
Not later than the date of making any Restricted Payment, the Company shall
deliver to the Trustee an officers' certificate stating that such Restricted
Payment complies with the Indenture and setting forth in reasonable detail the
basis upon which the required calculations were computed, which calculations
may be based upon the Company's latest available internal quarterly financial
statements.
Limitation on Asset Sales. The Company will not, and will not permit any of
its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the
Company or the applicable Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the fair market
value of the assets sold or otherwise disposed of (as determined in good faith
by the Company's Board of Directors); (ii) at least 75% of the consideration
received by the Company or the Restricted Subsidiary, as the case may be, from
such Asset Sale shall be in the form of cash or Cash Equivalents and is
received at the time of such disposition; and (iii) upon the consummation of
an Asset Sale, the Company shall apply, or cause such Restricted Subsidiary to
apply, the Net Cash Proceeds relating to such Asset Sale within 270 days of
receipt thereof either (A) to prepay any Senior Debt and, in the case of any
Senior Debt under any revolving credit facility, effect a permanent reduction
in the availability under such revolving credit facility, (B) to make an
investment in properties and assets that replace the properties and assets
that were the subject of such Asset Sale or in properties and assets that will
be used in the business of the Company and its Subsidiaries as existing on the
Issue Date or in businesses reasonably related thereto ("Replacement Assets"),
or (C) a combination of prepayment and investment permitted by the foregoing
clauses (iii)(A) and (iii)(B) or (iv) the Company makes the offer described in
the following sentence. On the 271st day after an Asset Sale or such earlier
date, if any, as the Board of Directors of the Company or of such Restricted
Subsidiary determines not to apply the Net Cash Proceeds relating to such
Asset Sale as set forth in clauses (iii)(A), (iii)(B) and (iii)(C) of the
preceding sentence (each, a "Net Proceeds Offer Trigger Date"), such aggregate
amount of Net Cash Proceeds which have not been applied on or before such Net
Proceeds Offer Trigger Date as permitted in clauses (iii)(A), (iii)(B) and
(iii)(C) of the preceding sentence (each a "Net Proceeds Offer Amount") shall
be applied by the Company or such Restricted Subsidiary to make an offer to
purchase
78
(the "Net Proceeds Offer") on a date (the "Net Proceeds Offer Payment Date")
not less than 30 nor more than 45 days following the applicable Net Proceeds
Offer Trigger Date, from all Holders on a pro rata basis, that amount of Notes
equal to the Net Proceeds Offer Amount at a price equal to 100% of the
principal amount of the Notes to be purchased, plus accrued and unpaid
interest thereon, if any, to the date of purchase; provided, however, that if
at any time any non-cash consideration received by the Company or any
Restricted Subsidiary of the Company, as the case may be, in connection with
any Asset Sale is converted into or sold or otherwise disposed of for cash
(other than interest received with respect to any such non-cash
consideration), then such conversion or disposition shall be deemed to
constitute an Asset Sale hereunder and the Net Cash Proceeds thereof shall be
applied in accordance with this covenant. The Company may defer the Net
Proceeds Offer until there is an aggregate unutilized Net Proceeds Offer
Amount equal to or in excess of $5.0 million resulting from one or more Asset
Sales (at which time, the entire unutilized Net Proceeds Offer Amount, and not
just the amount in excess of $5.0 million, shall be applied as required
pursuant to this paragraph).
In the event of the transfer of substantially all (but not all) of the
property and assets of the Company and its Restricted Subsidiaries as an
entirety to a Person in a transaction permitted under "--Merger, Consolidation
and Sale of Assets," the successor corporation shall be deemed to have sold
the properties and assets of the Company and its Restricted Subsidiaries not
so transferred for purposes of this covenant, and shall comply with the
provisions of this covenant with respect to such deemed sale as if it were an
Asset Sale. In addition, the fair market value of such properties and assets
of the Company or its Restricted Subsidiaries deemed to be sold shall be
deemed to be Net Cash Proceeds for purposes of this covenant.
Notwithstanding the two immediately preceding paragraphs, the Company and
its Restricted Subsidiaries will be permitted to consummate an Asset Sale
without complying with such paragraphs to the extent (i) at least 80% of the
consideration for such Asset Sale constitutes Replacement Assets and (ii) such
Asset Sale is for fair market value; provided that any consideration not
constituting Replacement Assets received by the Company or any of its
Restricted Subsidiaries in connection with any Asset Sale permitted to be
consummated under this paragraph shall constitute Net Cash Proceeds subject to
the provisions of the two preceding paragraphs.
Each Net Proceeds Offer will be mailed to the record Holders as shown on the
register of Holders within 25 days following the Net Proceeds Offer Trigger
Date, with a copy to the Trustee, and shall comply with the procedures set
forth in the Indenture. Upon receiving notice of the Net Proceeds Offer,
Holders may elect to tender their Notes in whole or in part in integral
multiples of $1,000 in exchange for cash. To the extent Holders properly
tender Notes in an amount exceeding the Net Proceeds Offer Amount, Notes of
tendering Holders will be purchased on a pro rata basis (based on amounts
tendered). A Net Proceeds Offer shall remain open for a period of 20 business
days or such longer period as may be required by law.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Net Proceeds Offer. To the extent that the
provisions of any securities laws or regulations conflict with the "Asset
Sale" provisions of the Indenture, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under the "Asset Sale" provisions of the Indenture by
virtue thereof.
Limitation on Dividend and Other Payment Restrictions Affecting
Subsidiaries. The Company will not, and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause
or permit to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary of the Company to (a) pay dividends or
make any other distributions on or in respect of its Capital Stock (other than
dividends or distributions in respect to the common Equity Interest in
Holdings LLC and Operating LLC); (b) make loans or advances or to pay any
Indebtedness or other obligation owed to the Company or any other Restricted
Subsidiary of the Company; or (c) transfer any of its property or assets to
the Company or any other Restricted Subsidiary of the Company, except for such
encumbrances or restrictions existing under or by reason of: (1) applicable
law; (2) the Indenture; (3) customary non-assignment provisions of any
contract or any lease
79
governing a leasehold interest of any Restricted Subsidiary of the Company;
(4) any instrument governing Acquired Indebtedness, which encumbrance or
restriction is not applicable to any Person, or the properties or assets of
any Person, other than the Person or the properties or assets of the Person so
acquired; (5) agreements existing on the Issue Date to the extent and in the
manner such agreements are in effect on the Issue Date; or (6) an agreement
governing Indebtedness incurred to Refinance the Indebtedness issued, assumed
or incurred pursuant to an agreement referred to in clause (2), (4) or (5)
above; provided, however, that the provisions relating to such encumbrance or
restriction contained in any such Indebtedness are no less favorable to the
Company in any material respect as determined by the Board of Directors of the
Company in their reasonable and good faith judgment than the provisions
relating to such encumbrance or restriction contained in agreements referred
to in such clause (2), (4) or (5).
Limitation on Preferred Stock of Restricted Subsidiaries. The Company will
not permit any of its Restricted Subsidiaries to issue any Preferred Stock
(other than to the Company or to a Wholly Owned Restricted Subsidiary of the
Company) or permit any Person (other than the Company or a Wholly Owned
Restricted Subsidiary of the Company) to own any Preferred Stock of any
Restricted Subsidiary of the Company.
Limitation on Liens. The Company will not, and will not cause or permit any
of its Restricted Subsidiaries to, directly or indirectly, create, incur,
assume or permit or suffer to exist any Liens of any kind against or upon any
property or assets of the Company or any of its Restricted Subsidiaries
whether owned on the Issue Date or acquired after the Issue Date, or any
proceeds therefrom, or assign or otherwise convey any right to receive income
or profits therefrom unless (i) in the case of Liens securing Indebtedness
that is expressly subordinate or junior in right of payment to the Notes, the
Notes are secured by a Lien on such property, assets or proceeds that is
senior in priority to such Liens and (ii) in all other cases, the Notes are
equally and ratably secured, except for (A) Liens existing as of the Issue
Date to the extent and in the manner such Liens are in effect on the Issue
Date; (B) Liens securing Senior Debt and Liens securing Guarantor Senior Debt;
(C) Liens securing the Notes and the Guarantees; (D) Liens of the Company or a
Wholly Owned Restricted Subsidiary of the Company on assets of any Subsidiary
of the Company; (E) Liens securing Refinancing Indebtedness which is incurred
to Refinance any Indebtedness which has been secured by a Lien permitted under
the Indenture and which has been incurred in accordance with the provisions of
the Indenture; provided, however, that such Liens (A) are no less favorable to
the Holders and are not more favorable to the lienholders with respect to such
Liens than the Liens in respect of the Indebtedness being Refinanced and (B)
do not extend to or cover any property or assets of the Company or any of its
Restricted Subsidiaries not securing the Indebtedness so Refinanced; and (F)
Permitted Liens.
Prohibition on Incurrence of Senior Subordinated Debt. Neither the Company
nor any Guarantor will incur, create, issue, assume, guarantee or otherwise
become liable for any Indebtedness that is expressly by its terms subordinate
or junior in right of payment to any Indebtedness of such person and senior in
any respect of payment to the Notes or the Guarantee of such Guarantor, as the
case may be.
Merger, Consolidation and Sale of Assets. The Company will not, in a single
transaction or series of related transactions, consolidate or merge with or
into any Person, or sell, assign, transfer, lease, convey or otherwise dispose
of (or cause or permit any Restricted Subsidiary of the Company to sell,
assign, transfer, lease, convey or otherwise dispose of) all or substantially
all of the Company's assets (determined on a consolidated basis for the
Company and the Company's Restricted Subsidiaries) whether as an entirety or
substantially as an entirety to any Person unless: (i) either (1) the Company
shall be the surviving or continuing corporation or (2) the Person (if other
than the Company) formed by such consolidation or into which the Company is
merged or the Person which acquires by sale, assignment, transfer, lease,
conveyance or other disposition the properties and assets of the Company and
of the Company's Restricted Subsidiaries substantially as an entirety (the
"Surviving Entity") (x) shall be a corporation organized and validly existing
under the laws of the United States or any State thereof or the District of
Columbia and (y) shall expressly assume, by supplemental indenture (in form
and substance satisfactory to the Trustee), executed and delivered to the
Trustee, the due and punctual payment of the principal of, and premium, if
any, and interest on all of the Notes and the performance of every covenant of
the Notes, the Indenture and the Registration Rights Agreement on the part of
the Company to be
80
performed or observed; (ii) immediately after giving effect to such
transaction and the assumption contemplated by clause (i)(2)(y) above
(including giving effect to any Indebtedness and Acquired Indebtedness
incurred or anticipated to be incurred in connection with or in respect of
such transaction), the Company or such Surviving Entity, as the case may be,
(1) shall have a Consolidated Net Worth equal to or greater than the
Consolidated Net Worth of the Company immediately prior to such transaction
and (2) shall be able to incur at least $1.00 of additional Indebtedness
(other than Permitted Indebtedness) pursuant to the "--Limitation on
Incurrence of Additional Indebtedness" covenant; (iii) immediately before and
immediately after giving effect to such transaction and the assumption
contemplated by clause (i)(2)(y) above (including, without limitation, giving
effect to any Indebtedness and Acquired Indebtedness incurred or anticipated
to be incurred and any Lien granted in connection with or in respect of the
transaction), no Default or Event of Default shall have occurred or be
continuing; and (iv) the Company or the Surviving Entity shall have delivered
to the Trustee an officers' certificate and an opinion of counsel, each
stating that such consolidation, merger, sale, assignment, transfer, lease,
conveyance or other disposition and, if a supplemental indenture is required
in connection with such transaction, such supplemental indenture comply with
the applicable provisions of the Indenture and that all conditions precedent
in the Indenture relating to such transaction have been satisfied.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Restricted
Subsidiaries of the Company the Capital Stock of which constitutes all or
substantially all of the properties and assets of the Company, shall be deemed
to be the transfer of all or substantially all of the properties and assets of
the Company.
The Indenture provides that upon any consolidation, combination or merger or
any transfer of all or substantially all of the assets of the Company in
accordance with the foregoing, in which the Company is not the continuing
corporation, the successor Person formed by such consolidation or into which
the Company is merged or to which such conveyance, lease or transfer is made
shall succeed to, and be substituted for, and may exercise every right and
power of, the Company under the Indenture and the Notes with the same effect
as if such surviving entity had been named as such.
Each Guarantor (other than any Guarantor whose Guarantee is to be released
in accordance with the terms of the Guarantee and the Indenture in connection
with any transaction complying with the provisions of "--Limitation on Asset
Sales") will not, and the Company will not cause or permit any Guarantor to,
consolidate with or merge with or into any Person other than the Company or
any other Guarantor unless: (i) the entity formed by or surviving any such
consolidation or merger (if other than the Guarantor) or to which such sale,
lease, conveyance or other disposition shall have been made is a corporation
organized and existing under the laws of the United States or any State
thereof or the District of Columbia; (ii) such entity assumes by supplemental
indenture all of the obligations of the Guarantor on the Guarantee; (iii)
immediately after giving effect to such transaction, no Default or Event of
Default shall have occurred and be continuing; and (iv) immediately after
giving effect to such transaction and the use of any net proceeds therefrom on
a pro forma basis, the Company could satisfy the provisions of clause (ii) of
the first paragraph of this covenant. Any merger or consolidation of a
Guarantor with and into the Company (with the Company being the surviving
entity) or another Guarantor that is a Wholly Owned Restricted Subsidiary of
the Company need only comply with clause (iv) of the first paragraph of this
covenant.
Limitations on Transactions with Affiliates. (a) The Company will not, and
will not permit any of the Restricted Subsidiaries to, directly or indirectly,
enter into or permit to exist any transaction or series of related
transactions (including, without limitation, the purchase, sale, lease or
exchange of any property or the rendering of any service) with, or for the
benefit of, any of its Affiliates (each an "Affiliate Transaction"), other
than (x) Affiliate Transactions permitted under paragraph (b) below and (y)
Affiliate Transactions on terms that are no less favorable than those that
might reasonably have been obtained in a comparable transaction at such time
on an arm's-length basis from a Person that is not an Affiliate of the Company
or such Restricted Subsidiary. All Affiliate Transactions (and each series of
related Affiliate Transactions which are similar or part of a common
81
plan) involving aggregate payments or other property with a fair market value
in excess of $250,000 shall be approved by the Board of Directors of the
Company or such Restricted Subsidiary, as the case may be, such approval to be
evidenced by a Board Resolution stating that such Board of Directors has
determined that such transaction complies with the foregoing provisions. If
the Company or any Restricted Subsidiary enters into an Affiliate Transaction
(or a series of related Affiliate Transactions related to a common plan) that
involves an aggregate payment or other property with a fair market value of
more than $3.0 million, the Company or such Restricted Subsidiary, as the case
may be, shall, prior to the consummation thereof, obtain a favorable opinion
as to the fairness of such transaction or series of related transactions to
the Company or the relevant Restricted Subsidiary, as the case may be, from a
financial point of view, from an Independent Financial Advisor and file the
same with the Trustee.
(b) The restrictions set forth in paragraph (a) shall not apply to (i)
reasonable fees and compensation paid to and indemnity provided on behalf of
officers, directors, employees or consultants of the Company or any Restricted
Subsidiary of the Company as determined in good faith by the Company's Board
of Directors or senior management; (ii) transactions exclusively between or
among the Company and any of its Restricted Subsidiaries or exclusively
between or among such Restricted Subsidiaries, provided such transactions are
not otherwise prohibited by the Indenture; (iii) any agreement as in effect as
of the Issue Date or any amendment thereto or any transaction contemplated
thereby (including pursuant to any amendment thereto) in any replacement
agreement thereto so long as any such amendment or replacement agreement is
not more disadvantageous to the Holders in any material respect than the
original agreement as in effect on the Issue Date; (iv) Restricted Payments
permitted by the Indenture; and (v) payments as contemplated by the
Stockholders Agreement.
Additional Subsidiary Guarantees. If the Company or any of its Restricted
Subsidiaries transfers or causes to be transferred, in one transaction or a
series of related transactions, any property to any Restricted Subsidiary that
is not a Guarantor, or if the Company or any of its Restricted Subsidiaries
shall organize, acquire or otherwise invest additional monies in (x) another
Restricted Subsidiary having total assets with a book value in excess of
$500,000 or (y) a Foreign Subsidiary designated as a Restricted Subsidiary
having total assets with a book value in excess of $3.0 million, then such
transferee or acquired or other Restricted Subsidiary shall (i) execute and
deliver to the Trustee a supplemental indenture in form reasonably
satisfactory to the Trustee pursuant to which such Restricted Subsidiary shall
unconditionally guarantee all of the Company's obligations under the Notes and
the Indenture on the terms set forth in the Indenture and (ii) deliver to the
Trustee an opinion of counsel that such supplemental indenture has been duly
authorized, executed and delivered by such Restricted Subsidiary and
constitutes a legal, valid, binding and enforceable obligation of such
Restricted Subsidiary. Thereafter, such Restricted Subsidiary shall be a
Guarantor for all purposes of the Indenture.
Modification of Holdings LLC Equity Interest. The Company will not and will
not permit any of the Guarantors to amend or modify in any material respect or
in any manner adverse to the Company or the Holders or permit such an
amendment or modification of any provisions of the Holdings LLC Preferred
Equity Interest, including but not limited to, the provisions granting voting
control of Holdings LLC to the Company or its Wholly Owned Restricted
Subsidiaries or its termination prior to the satisfaction and discharge of the
Indenture.
Conduct of Business. The Company and its Restricted Subsidiaries will not
engage in any businesses which are not the same, similar or related to the
businesses in which the Company and its Restricted Subsidiaries are engaged on
the Issue Date.
Reports to Holders. The Indenture provides that the Company will deliver to
the Trustee within 15 days after the filing of the same with the Commission,
copies of the quarterly and annual reports and of the information, documents
and other reports, if any, which the Company is required to file with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act. The Indenture
further provides that, notwithstanding that the Company may not be subject to
the reporting requirements of Section 13 or 15(d) of the Exchange Act, the
Company will file with the Commission, to the extent permitted, and provide
the Trustee and Holders with such annual reports and such information,
documents and other reports specified in Sections 13 and 15(d) of the Exchange
Act. The Company will also comply with the other provisions of TIA (S) 314(a).
82
Notwithstanding the foregoing covenants, nothing in the Indenture shall
prohibit the Company from the consummation of the Recapitalization and the
transactions contemplated thereby including the contribution of certain assets
and liabilities of Atwood Convention Publishing, Inc., Galaxy Registration
Inc. and G.E.M. Communications, Inc. to Holdings LLC in exchange for a $45.0
million Holdings LLC Preferred Equity Interest.
EVENTS OF DEFAULT
The following events are defined in the Indenture as "Events of Default":
(i) the failure to pay interest on any Notes when the same becomes due
and payable and the default continues for a period of 30 days (whether or
not such payment shall be prohibited by the subordination provisions of the
Indenture);
(ii) the failure to pay the principal on any Notes, when such principal
becomes due and payable, at maturity, upon redemption or otherwise
(including the failure to make a payment to purchase Notes tendered
pursuant to a Change of Control Offer or a Net Proceeds Offer) (whether or
not such payment shall be prohibited by the subordination provisions of the
Indenture);
(iii) a default in the observance or performance of any other covenant or
agreement contained in the Indenture which default continues for a period
of 30 days after the Company receives written notice specifying the default
(and demanding that such default be remedied) from the Trustee or the
Holders of at least 25% of the outstanding principal amount of the Notes
(except in the case of a default with respect to the "Merger, Consolidation
and Sale of Assets" covenant, which will constitute an Event of Default
with such notice requirement but without such passage of time requirement);
(iv) the failure to pay at final maturity (giving effect to any
applicable grace periods and any extensions thereof) the principal amount
of any Indebtedness of the Company or any Restricted Subsidiary of the
Company, or the acceleration of the final stated maturity of any such
Indebtedness if the aggregate principal amount of such Indebtedness,
together with the principal amount of any other such Indebtedness in
default for failure to pay principal at final maturity or which has been
accelerated, aggregates $5.0 million or more at any time;
(v) one or more judgments in an aggregate amount in excess of $2.0
million shall have been rendered against the Company or any of its
Restricted Subsidiaries and such judgments remain undischarged, unpaid or
unstayed for a period of 60 days after such judgment or judgments become
final and non-appealable;
(vi) certain events of bankruptcy affecting the Company or any of its
Significant Subsidiaries; or
(vii) any of the Guarantees ceases to be in full force and effect or any
of the Guarantees is declared to be null and void and unenforceable or any
of the Guarantees is found to be invalid or any of the Guarantors denies
its liability under its Guarantee (other than by reason of release of a
Guarantor in accordance with the terms of the Indenture).
If an Event of Default (other than an Event of Default specified in clause
(vi) above with respect to the Company) shall occur and be continuing, the
Trustee or the Holders of at least 25% in principal amount of outstanding
Notes may declare the principal of and accrued interest on all the Notes to be
due and payable by notice in writing to the Company and the Trustee specifying
the respective Event of Default and that it is a "notice of acceleration" (the
"Acceleration Notice"), and the same (i) shall become immediately due and
payable or (ii) if there are any amounts outstanding under the Credit
Agreement, shall become immediately due and payable upon the first to occur of
an acceleration under the Credit Agreement or 5 business days after receipt by
the Company and the Representative under the Credit Agreement of such
Acceleration Notice. If an Event of Default specified in clause (vi) above
with respect to the Company occurs and is continuing, then all unpaid
principal of, and premium, if any, and accrued and unpaid interest on all of
the outstanding Notes shall ipso facto become and be immediately due and
payable without any declaration or other act on the part of the Trustee or any
Holder.
The Indenture provides that, at any time after a declaration of acceleration
with respect to the Notes as described in the preceding paragraph, the Holders
of a majority in principal amount of the Notes may rescind
83
and cancel such declaration and its consequences (i) if the rescission would
not conflict with any judgment or decree, (ii) if all existing Events of
Default have been cured or waived except nonpayment of principal or interest
that has become due solely because of the acceleration, (iii) to the extent
the payment of such interest is lawful, interest on overdue installments of
interest and overdue principal, which has become due otherwise than by such
declaration of acceleration, has been paid, (iv) if the Company has paid the
Trustee its reasonable compensation and reimbursed the Trustee for its
expenses, disbursements and advances and (v) in the event of the cure or
waiver of an Event of Default of the type described in clause (vi) of the
description above of Events of Default, the Trustee shall have received an
officers' certificate and an opinion of counsel that such Event of Default has
been cured or waived. No such rescission shall affect any subsequent Default
or impair any right consequent thereto.
The Holders of a majority in principal amount of the Notes may waive any
existing Default or Event of Default under the Indenture, and its
consequences, except a default in the payment of the principal of or interest
on any Notes.
Holders of the Notes may not enforce the Indenture or the Notes except as
provided in the Indenture and under the TIA. Subject to the provisions of the
Indenture relating to the duties of the Trustee, the Trustee is under no
obligation to exercise any of its rights or powers under the Indenture at the
request, order or direction of any of the Holders, unless such Holders have
offered to the Trustee reasonable indemnity. Subject to all provisions of the
Indenture and applicable law, the Holders of a majority in aggregate principal
amount of the then outstanding Notes have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or exercising any trust or power conferred on the Trustee.
Under the Indenture, the Company is required to provide an officers'
certificate to the Trustee promptly upon any such officer obtaining knowledge
of any Default or Event of Default (provided that such officers shall provide
such certification at least annually whether or not they know of any Default
or Event of Default) that has occurred and, if applicable, describe such
Default or Event of Default and the status thereof.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have its
obligations and the obligations of the Guarantors discharged with respect to
the outstanding Notes ("Legal Defeasance"). Such Legal Defeasance means that
the Company shall be deemed to have paid and discharged the entire
indebtedness represented by the outstanding Notes, except for (i) the rights
of Holders to receive payments in respect of the principal of, premium, if
any, and interest on the Notes when such payments are due, (ii) the Company's
obligations with respect to the Notes concerning issuing temporary Notes,
registration of Notes, mutilated, destroyed, lost or stolen Notes and the
maintenance of an office or agency for payments, (iii) the rights, powers,
trust, duties and immunities of the Trustee and the Company's obligations in
connection therewith and (iv) the Legal Defeasance provisions of the
Indenture. In addition, the Company may, at its option and at any time, elect
to have the obligations of the Company released with respect to certain
covenants that are described in the Indenture ("Covenant Defeasance") and
thereafter any omission to comply with such obligations shall not constitute a
Default or Event of Default with respect to the Notes. In the event Covenant
Defeasance occurs, certain events (not including non-payment, bankruptcy,
receivership, reorganization and insolvency events) described under "Events of
Default" will no longer constitute an Event of Default with respect to the
Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders cash in U.S. dollars, non-callable U.S. government obligations,
or a combination thereof, in such amounts as will be sufficient, in the
opinion of a nationally recognized firm of independent public accountants, to
pay the principal of, premium, if any, and interest on the Notes on the stated
date for payment thereof or on the applicable redemption date, as the case may
be; (ii) in the case of Legal Defeasance, the Company shall have delivered to
the Trustee an opinion of counsel in the United States reasonably acceptable
to the Trustee confirming that (A) the Company has received from, or there has
been published by, the Internal Revenue Service a ruling or (B) since the date
of the Indenture, there has been a
84
change in the applicable federal income tax law, in either case to the effect
that, and based thereon such opinion of counsel shall confirm that, the
Holders will not recognize income, gain or loss for federal income tax
purposes as a result of such Legal Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Legal Defeasance had not occurred; (iii) in
the case of Covenant Defeasance, the Company shall have delivered to the
Trustee an opinion of counsel in the United States reasonably acceptable to
the Trustee confirming that the Holders will not recognize income, gain or
loss for federal income tax purposes as a result of such Covenant Defeasance
and will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such Covenant
Defeasance had not occurred; (iv) no Default or Event of Default shall have
occurred and be continuing on the date of such deposit or insofar as Events of
Default from bankruptcy or insolvency events are concerned, at any time in the
period ending on the 91st day after the date of deposit; (v) such Legal
Defeasance or Covenant Defeasance shall not result in a breach or violation
of, or constitute a default under the Indenture or any other material
agreement or instrument to which the Company or any of its Subsidiaries is a
party or by which the Company or any of its Subsidiaries is bound; (vi) the
Company shall have delivered to the Trustee an officers' certificate stating
that the deposit was not made by the Company with the intent of preferring the
Holders over any other creditors of the Company or with the intent of
defeating, hindering, delaying or defrauding any other creditors of the
Company or others; (vii) the Company shall have delivered to the Trustee an
officers' certificate and an opinion of counsel, each stating that all
conditions precedent provided for or relating to the Legal Defeasance or the
Covenant Defeasance have been complied with; (viii) the Company shall have
delivered to the Trustee an opinion of counsel to the effect that (A) the
trust funds will not be subject to any rights of holders of Senior Debt,
including, without limitation, those arising under the Indenture and (B) after
the 91st day following the deposit, the trust funds will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or similar
laws affecting creditors' rights generally; and (ix) certain other customary
conditions precedent are satisfied.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of the
Notes, as expressly provided for in the Indenture) as to all outstanding Notes
when (i) either (a) all the Notes theretofore authenticated and delivered
(except lost, stolen or destroyed Notes which have been replaced or paid and
Notes for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to the
Company or discharged from such trust) have been delivered to the Trustee for
cancellation or (b) all Notes not theretofore delivered to the Trustee for
cancellation have become due and payable and the Company has irrevocably
deposited or caused to be deposited with the Trustee funds in an amount
sufficient to pay and discharge the entire Indebtedness on the Notes not
theretofore delivered to the Trustee for cancellation, for principal of,
premium, if any, and interest on the Notes to the date of deposit together
with irrevocable instructions from the Company directing the Trustee to apply
such funds to the payment thereof at maturity or redemption, as the case may
be; (ii) the Company has paid all other sums payable under the Indenture by
the Company; and (iii) the Company has delivered to the Trustee an officers'
certificate and an opinion of counsel stating that all conditions precedent
under the Indenture relating to the satisfaction and discharge of the
Indenture have been complied with.
MODIFICATION OF THE INDENTURE
From time to time, the Company, the Guarantors and the Trustee, without the
consent of the Holders, may amend the Indenture for certain specified
purposes, including curing ambiguities, defects or inconsistencies, so long as
such change does not, in the opinion of the Trustee, adversely affect the
rights of any of the Holders in any material respect. In formulating its
opinion on such matters, the Trustee will be entitled to rely on such evidence
as it deems appropriate, including, without limitation, solely on an opinion
of counsel. Other modifications and amendments of the Indenture may be made
with the consent of the Holders of a majority in principal amount of the then
outstanding Notes issued under the Indenture, except that, without the consent
of each Holder affected thereby, no amendment may: (i) reduce the amount of
Notes whose Holders must consent to an amendment; (ii) reduce the rate of or
change or have the effect of changing the time for payment of interest,
85
including defaulted interest, on any Notes; (iii) reduce the principal of or
change or have the effect of changing the fixed maturity of any Notes, or
change the date on which any Notes may be subject to redemption or repurchase,
or reduce the redemption or repurchase price therefor; (iv) make any Notes
payable in money other than that stated in the Notes; (v) make any change in
provisions of the Indenture protecting the right of each Holder to receive
payment of principal of and interest on such Note on or after the due date
thereof or to bring suit to enforce such payment, or permitting Holders of a
majority in principal amount of Notes to waive Defaults or Events of Default;
(vi) amend, change or modify in any material respect the obligation of the
Company to make and consummate a Change of Control Offer in the event of a
Change of Control or make and consummate a Net Proceeds Offer with respect to
any Asset Sale that has been consummated or modify in any respect materially
adverse to Holders any of the provisions or definitions with respect thereto;
or (vii) modify or change any provision of the Indenture or the related
definitions affecting the subordination or ranking of the Notes or any
Guarantee in a manner which adversely affects the Holders; or (viii) release
any Guarantor from any of its obligations under its Guarantee or the Indenture
otherwise than in accordance with the terms of the Indenture.
GOVERNING LAW
The Indenture provides that it, the Notes and the Guarantees will be
governed by, and construed in accordance with, the laws of the State of New
York but without giving effect to applicable principles of conflicts of law to
the extent that the application of the law of another jurisdiction would be
required thereby.
THE TRUSTEE
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set
forth in the Indenture. During the existence of an Event of Default, the
Trustee will exercise such rights and powers vested in it by the Indenture,
and use the same degree of care and skill in its exercise as a prudent man
would exercise or use under the circumstances in the conduct of his own
affairs.
The Indenture and the provisions of the TIA contain certain limitations on
the rights of the Trustee, should it become a creditor of the Company, to
obtain payments of claims in certain cases or to realize on certain property
received in respect of any such claim as security or otherwise. Subject to the
TIA, the Trustee will be permitted to engage in other transactions; provided
that if the Trustee acquires any conflicting interest as described in the TIA,
it must eliminate such conflict or resign.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any other terms used herein for which no definition is
provided.
"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary
of the Company or at the time it merges or consolidates with the Company or
any of its Subsidiaries or assumed in connection with the acquisition of
assets from such Person and in each case not incurred by such Person in
connection with, or in anticipation or contemplation of, such Person becoming
a Restricted Subsidiary of the Company or such acquisition, merger or
consolidation.
"Affiliate" means, with respect to any specified Person, any other Person
who directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. The
term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative of the
foregoing.
"Asset Acquisition" means (a) an Investment by the Company or any Restricted
Subsidiary of the Company in any other Person pursuant to which such Person
shall become a Restricted Subsidiary of the Company or any
86
Restricted Subsidiary of the Company, or shall be merged with or into the
Company or any Restricted Subsidiary of the Company, or (b) the acquisition by
the Company or any Restricted Subsidiary of the Company of the assets of any
Person (other than a Restricted Subsidiary of the Company) which constitute
all or substantially all of the assets of such Person or comprises any
division or line of business of such Person or any other properties or assets
of such Person other than in the ordinary course of business.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary
course of business), assignment or other transfer for value by the Company or
any of its Restricted Subsidiaries (including any Sale and Leaseback
Transaction) to any Person other than the Company or a Wholly Owned Restricted
Subsidiary of the Company of (a) any Capital Stock of any Restricted
Subsidiary of the Company; or (b) any other property or assets of the Company
or any Restricted Subsidiary of the Company other than in the ordinary course
of business; provided, however, that Asset Sales shall not include (i) a
transaction or series of related transactions for which the Company or its
Restricted Subsidiaries receive aggregate consideration of less than $500,000
and (ii) the sale, lease, conveyance, disposition or other transfer of all or
substantially all of the assets of the Company as permitted under "--Certain
Covenants--Merger, Consolidation and Sale of Assets."
"Board of Directors" means, as to any Person, the board of directors of such
Person or any duly authorized committee thereof.
"Board Resolution" means, with respect to any Person, a copy of a resolution
certified by the Secretary or an Assistant Secretary of such Person to have
been duly adopted by the Board of Directors of such Person and to be in full
force and effect on the date of such certification, and delivered to the
Trustee.
"Capitalized Lease Obligation" means, as to any Person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP and, for purposes of this definition,
the amount of such obligations at any date shall be the capitalized amount of
such obligations at such date, determined in accordance with GAAP.
"Capital Stock" means (i) with respect to any Person that is a corporation,
any and all shares, interests, participations or other equivalents (however
designated and whether or not voting) of corporate stock, including each class
of Common Stock and Preferred Stock of such Person and (ii) with respect to
any Person that is not a corporation, any and all partnership or other equity
interests of such Person.
"Cash Equivalents" means (i) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States,
in each case maturing within one year from the date of acquisition thereof;
(ii) marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Corporation ("S&P") or Moody's
Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing no more
than one year from the date of creation thereof and, at the time of
acquisition, having a rating of at least A-1 from S&P or at least P-1 from
Moody's; (iv) certificates of deposit or bankers' acceptances maturing within
one year from the date of acquisition thereof issued by any bank organized
under the laws of the United States of America or any state thereof or the
District of Columbia or any U.S. branch of a foreign bank having at the date
of acquisition thereof combined capital and surplus of not less than $250.0
million; (v) repurchase obligations with a term of not more than seven days
for underlying securities of the types described in clause (i) above entered
into with any bank meeting the qualifications specified in clause (iv) above;
and (vi) investments in money market funds which invest substantially all
their assets in securities of the types described in clauses (i) through (v)
above.
"Change of Control" means the occurrence of one or more of the following
events: (i) any sale, lease, exchange or other transfer (in one transaction or
a series of related transactions) of all or substantially all of the assets of
the Company or Holdings LLC to any Person or group of related Persons for
purposes of Section 13(d)
87
of the Exchange Act (a "Group"), together with any Affiliates thereof (whether
or not otherwise in compliance with the provisions of the Indenture); (ii) the
approval by the holders of Capital Stock of the Company or common Equity
Interests of Holdings LLC of any plan or proposal for the liquidation or
dissolution of the Company or Holdings LLC, as the case may be (whether or not
otherwise in compliance with the provisions of the Indenture); (iii) any
Person or Group (other than the Permitted Holders) shall become the owner,
directly or indirectly, beneficially or of record, of shares representing more
than 25% of the aggregate ordinary voting power represented by the issued and
outstanding Capital Stock of the Company or common Equity Interests of
Holdings LLC, as the case may be, and the Permitted Holders shall own less
than 50% of the aggregate ordinary voting power represented by the issued and
outstanding Capital Stock of the Company or common Equity Interests of
Holdings LLC, as the case may be; and (iv) the replacement of a majority of
the Board of Directors of the Company over a two-year period from the
directors who constituted the Board of Directors of the Company, at the
beginning of such period, and such replacement shall not have been approved by
a vote of at least a majority of the Board of Directors of the Company then
still in office who either were members of such Board of Directors at the
beginning of such period or whose election as a member of such Board of
Directors was previously so approved.
"Common Stock" of any Person means any and all shares, interests or other
participations in, and other equivalents (however designated and whether
voting or non-voting) of such Person's common stock, whether outstanding on
the Issue Date or issued after the Issue Date, and includes, without
limitation, all series and classes of such common stock.
"Company" means T/SF Communications Corporation, a Delaware corporation.
"Consolidated EBITDA" means, with respect to any Person, for any period, the
sum (without duplication) of (i) Consolidated Net Income and (ii) to the
extent Consolidated Net Income has been reduced thereby, (A) all income taxes
of such Person and its Restricted Subsidiaries (including the LLCs) paid or
accrued in accordance with GAAP for such period (other than income taxes
attributable to extraordinary, unusual or nonrecurring gains or losses or
taxes attributable to sales or dispositions outside the ordinary course of
business), (B) Consolidated Interest Expense and (C) Consolidated Non-cash
Charges less any non-cash items increasing Consolidated Net Income for such
period, all as determined on a consolidated basis for such Person and its
Restricted Subsidiaries in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to any Person for any
period, the sum of, without duplication: (i) the aggregate of all cash and
non-cash interest expense (minus amortization or write-off of deferred
financing costs included in cash or non-cash interest expense) of such Person
and its Restricted Subsidiaries for such period determined on a consolidated
basis in accordance with GAAP, including without limitation, (a) any
amortization of debt discount, (b) the net costs under Interest Swap
Obligations, (c) all capitalized interest and (d) the interest portion of any
deferred payment obligation; and (ii) the interest component of Capitalized
Lease Obligations paid, accrued and/or scheduled to be paid or accrued by such
Person and its Restricted Subsidiaries during such period as determined on a
consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person, for any period,
the aggregate net income (or loss) of such Person and its Restricted
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; provided that there shall be excluded therefrom (a) after-tax gains
and losses from Asset Sales or abandonments or reserves relating thereto, (b)
items classified as extraordinary, nonrecurring or unusual gains, losses or
charges, and the related tax effects, each determined in accordance with GAAP,
(c) the net income of any Person acquired in a "pooling of interests"
transaction accrued prior to the date it becomes a Restricted Subsidiary of
the referent Person or is merged or consolidated with the referent Person or
any Restricted Subsidiary of the referent Person, (d) the net income (but not
loss) of any Restricted Subsidiary (other than Holdings LLC) of the referent
Person to the extent that the declaration of dividends or similar
distributions by that Restricted Subsidiary of that income is restricted by a
contract, operation of law or otherwise, (e) the net income of any Person,
other than a Restricted Subsidiary of the referent Person, except to the
extent of cash dividends or distributions paid to the referent Person or to a
Wholly Owned Restricted Subsidiary of the referent Person by such Person, (f)
any restoration to income of any contingency reserve, except to the extent
that
88
provision for such reserve was made out of Consolidated Net Income accrued at
any time following the Issue Date, (g) income or loss attributable to
discontinued operations (including, without limitation, operations disposed of
during such period whether or not such operations were classified as
discontinued), and (h) in the case of a successor to the referent Person by
consolidation or merger or as a transferee of the referent Person's assets,
any earnings of the successor corporation prior to such consolidation, merger
or transfer of assets.
"Consolidated Net Worth" of any Person means the consolidated stockholders'
equity of such Person, determined on a consolidated basis in accordance with
GAAP, less (without duplication) amounts attributable to Disqualified Capital
Stock of such Person.
"Consolidated Non-cash Charges" means, with respect to any Person, for any
period, the aggregate depreciation, amortization and other non-cash expenses
of such Person and its Restricted Subsidiaries reducing Consolidated Net
Income of such Person and its Restricted Subsidiaries for such period,
determined on a consolidated basis in accordance with GAAP (excluding any such
charges constituting an extraordinary item or loss or any such charge which
requires an accrual of or a reserve for cash charges for any future period).
"Credit Agreement" means the Credit Agreement dated as of October 9, 1997,
between the Company, the lenders party thereto in their capacities as lenders
thereunder and First Union National Bank, as agent, together with the related
documents thereto (including, without limitation, any guarantee agreements and
security documents), in each case as such agreements may be amended (including
any amendment and restatement thereof), supplemented or otherwise modified
from time to time, including any agreement extending the maturity of,
refinancing, replacing or otherwise restructuring (including increasing the
amount of available borrowings thereunder (provided that such increase in
borrowings is permitted by the "Limitation on Incurrence of Additional
Indebtedness" covenant above) or adding Restricted Subsidiaries of the Company
as additional borrowers or guarantors thereunder) all or any portion of the
Indebtedness under such agreement or any successor or replacement agreement
and whether by the same or any other agent, lender or group of lenders.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any Restricted Subsidiary of the Company against fluctuations in
currency values.
"Default" means an event or condition the occurrence of which is, or with
the lapse of time or the giving of notice or both would be, an Event of
Default.
"Designated Senior Debt" means (i) Indebtedness under or in respect of the
Credit Agreement and (ii) any other Indebtedness constituting Senior Debt
which, at the time of determination, has an aggregate principal amount of at
least $25.0 million and is specifically designated in the instrument
evidencing such Senior Debt as "Designated Senior Debt" by the Company.
"Disqualified Capital Stock" means that portion of any Capital Stock which,
by its terms (or by the terms of any security into which it is convertible or
for which it is exchangeable), or upon the happening of any event (other than
an event which would constitute a Change of Control), matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the sole option of the holder thereof (except upon the
occurrence of a Change of Control) on or prior to the final maturity date of
the Notes.
"Equity Interest" of any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) corporate stock or other equity
participations, including partnership interests, whether general or limited,
of such Person, including any Preferred Equity Interests.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or any
successor statute or statutes thereto.
"fair market value" means, with respect to any asset or property, the price
which could be negotiated in an arm's-length, free market transaction, for
cash, between a willing seller and a willing and able buyer, neither of
89
whom is under undue pressure or compulsion to complete the transaction. Fair
market value shall be determined by the Board of Directors of the Company
acting reasonably and in good faith and shall be evidenced by a Board
Resolution of the Board of Directors of the Company delivered to the Trustee.
"Fir Tree" means Fir Tree Value Fund L.P., Fir Tree Institutional Value Fund
L.P. and Fir Tree Partners L.D.C. and its Affiliates.
"Foreign Subsidiary" means any Subsidiary of the Company organized under the
laws of a country or jurisdiction other than the United States or any state or
territory thereof or the District of Columbia.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are in effect as of the Issue Date.
"Guarantor" means: (i) Atwood Convention Publishing, Inc., a Missouri
corporation, Casino Publishing Company, a Minnesota corporation, CORSEARCH,
Inc., a Delaware corporation, Crimesearch, Inc., an Oklahoma corporation, Expo
Magazine, Inc., a Kansas corporation, Galaxy Design & Printing, Inc., a
Maryland corporation, Galaxy Registration, Inc., a Maryland corporation,
G.E.M. Communications, Inc., an Oklahoma corporation, Transportation
Communications Services, Inc., an Oklahoma corporation, T/SF Europe, Inc., an
Oklahoma corporation, T/SF Investment Co., a Delaware corporation, T/SF of
Nevada, Inc., a Nevada corporation and Transportation Information Services,
Inc., an Oklahoma corporation; (ii) Holdings LLC, Operating LLC and each of
the Operating LLCs and (iii) each of the Company's Restricted Subsidiaries
that in the future executes a supplemental indenture in which such Restricted
Subsidiary agrees to be bound by the terms of the Indenture as a Guarantor;
provided that any Person constituting a Guarantor as described above shall
cease to constitute a Guarantor when its respective Guarantee is released in
accordance with the terms of the Indenture.
"Guarantor Senior Debt" means with respect to any Guarantor, (i) the
principal of, premium, if any, and interest (including any interest accruing
subsequent to the filing of a petition of bankruptcy at the rate provided for
in the documentation with respect thereto, whether or not such interest is an
allowed claim under applicable law) on any Indebtedness of a Guarantor,
whether outstanding on the Issue Date or thereafter created, incurred or
assumed, unless, in the case of any particular Indebtedness, the instrument
creating or evidencing the same or pursuant to which the same is outstanding
expressly provides that such Indebtedness shall not be senior in right of
payment to the Guarantee of such Guarantor. Without limiting the generality of
the foregoing, "Guarantor Senior Debt" shall also include the principal of,
premium, if any, interest (including any interest accruing subsequent to the
filing of a petition of bankruptcy at the rate provided for in the
documentation with respect thereto, whether or not/to the extent such interest
is an allowed claim under applicable law) on, and all other amounts owing in
respect of, (x) all monetary obligations of every nature of the Company under
the Credit Agreement, including, without limitation, obligations to pay
principal and interest, reimbursement obligations under letters of credit,
fees, expenses and indemnities, (y) all Interest Swap Obligations and (z) all
obligations under Currency Agreements, in each case whether outstanding on the
Issue Date or thereafter incurred. Notwithstanding the foregoing, "Guarantor
Senior Debt" shall not include (i) any Indebtedness of such Guarantor to a
Restricted Subsidiary of such Guarantor or any Affiliate of such Guarantor or
any of such Affiliate's Subsidiaries, (ii) Indebtedness to, or guaranteed on
behalf of, any shareholder, director, officer or employee of such Guarantor or
any Restricted Subsidiary of such Guarantor (including, without limitation,
amounts owed for compensation), (iii) Indebtedness to trade creditors and
other amounts incurred in connection with obtaining goods, materials or
services, (iv) Indebtedness represented by Disqualified Capital Stock, (v) any
liability for federal, state, local or other taxes owed or owing by such
Guarantor, (vi) Indebtedness incurred in violation of the Indenture provisions
set forth under the covenant "Limitation on Incurrence of Additional
Indebtedness," (vii) Indebtedness which, when incurred and without respect to
any election under Section 1111(b) of Title 11, United States Code, is without
recourse to the Company and (viii) any Indebtedness which is, by its express
terms, subordinated in right of payment to any other Indebtedness of such
Guarantor.
"Holdings LLC" means T/SF Holdings, LLC, a Delaware limited liability
company, whose Common Equity Interests shall be owned by VS&A-T/SF and Fir
Tree in the same proportion as their ownership interest
90
in the Common Stock of the Company pursuant to the Recapitalization and whose
preferred Equity Interests shall be owned, directly or indirectly, by the
Company. For purposes of the Indenture, Holdings LLC shall be treated as a
Wholly Owned Restricted Subsidiary.
"Holdings LLC Preferred Equity Interests" as applied to the Equity Interests
of Holdings LLC, means Equity Interests of any class or classes (however
designated) which is preferred as to the payment of dividends or
distributions, or as to the distribution of assets upon any voluntary or
involuntary liquidation or dissolution of Holdings LLC over Equity Interests
of any other class of such Person.
"Indebtedness" means with respect to any Person, without duplication, (i)
all Obligations of such Person for borrowed money, (ii) all Obligations of
such Person evidenced by bonds, debentures, notes or other similar
instruments, (iii) all Capitalized Lease Obligations of such Person, (iv) all
Obligations of such Person issued or assumed as the deferred purchase price of
property, all conditional sale obligations and all Obligations under any title
retention agreement (but excluding trade accounts payable and other accrued
liabilities arising in the ordinary course of business that are not overdue by
90 days or more or are being contested in good faith by appropriate
proceedings promptly instituted and diligently conducted), (v) all Obligations
for the reimbursement of any obligor on any letter of credit, banker's
acceptance or similar credit transaction, (vi) guarantees and other contingent
obligations in respect of Indebtedness referred to in clauses (i) through (v)
above and clause (viii) below, (vii) all Obligations of any other Person of
the type referred to in clauses (i) through (vi) which are secured by any lien
on any property or asset of such Person, the amount of such Obligation being
deemed to be the lesser of the fair market value of such property or asset or
the amount of the Obligation so secured, (viii) all Obligations under currency
agreements and interest swap agreements of such Person and (ix) all
Disqualified Capital Stock issued by such Person with the amount of
Indebtedness represented by such Disqualified Capital Stock being equal to the
greater of its voluntary or involuntary liquidation preference and its maximum
fixed repurchase price, but excluding accrued dividends, if any. For purposes
hereof, the "maximum fixed repurchase price" of any Disqualified Capital Stock
which does not have a fixed repurchase price shall be calculated in accordance
with the terms of such Disqualified Capital Stock as if such Disqualified
Capital Stock were purchased on any date on which Indebtedness shall be
required to be determined pursuant to the Indenture, and if such price is
based upon, or measured by, the fair market value of such Disqualified Capital
Stock, such fair market value shall be determined reasonably and in good faith
by the Board of Directors of the issuer of such Disqualified Capital Stock.
"Independent Financial Advisor" means a firm (i) which does not, and whose
directors, officers and employees or Affiliates do not, have a direct or
indirect financial interest in the Company and (ii) which, in the judgment of
the Board of Directors of the Company, is otherwise independent and qualified
to perform the task for which it is to be engaged.
"Interest Swap Obligations" means the obligations of any Person pursuant to
any arrangement with any other Person, whereby, directly or indirectly, such
Person is entitled to receive from time to time periodic payments calculated
by applying either a floating or a fixed rate of interest on a stated notional
amount in exchange for periodic payments made by such other Person calculated
by applying a fixed or a floating rate of interest on the same notional amount
and shall include, without limitation, interest rate swaps, caps, floors,
collars and similar agreements.
"Investment" means, with respect to any Person, any direct or indirect loan
or other extension of credit (including, without limitation, a guarantee) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition by such Person of any Capital Stock,
bonds, notes, debentures or other securities or evidences of Indebtedness
issued by, any Person. "Investment" shall exclude extensions of trade credit
by the Company and its Restricted Subsidiaries on commercially reasonable
terms in accordance with normal trade practices of the Company or such
Restricted Subsidiary, as the case may be. For the purposes of the "Limitation
on Restricted Payments" covenant, (i) "Investment" shall include and be valued
at the fair market value of the net assets of any Restricted Subsidiary at the
time that such Restricted Subsidiary is designated an Unrestricted Subsidiary
91
and shall exclude the fair market value of the net assets of any Unrestricted
Subsidiary at the time that such Unrestricted Subsidiary is designated a
Restricted Subsidiary and (ii) the amount of any Investment shall be the
original cost of such Investment plus the cost of all additional Investments
by the Company or any of its Restricted Subsidiaries, without any adjustments
for increases or decreases in value, or write-ups, write-downs or write-offs
with respect to such Investment, reduced by the payment of dividends or
distributions in connection with such Investment or any other amounts received
in respect of such Investment; provided that no such payment of dividends or
distributions or receipt of any such other amounts shall reduce the amount of
any Investment if such payment of dividends or distributions or receipt of any
such amounts would be included in Consolidated Net Income. If the Company or
any Restricted Subsidiary of the Company sells or otherwise disposes of any
Common Stock of any direct or indirect Restricted Subsidiary of the Company
such that, after giving effect to any such sale or disposition, the Company no
longer owns, directly or indirectly, greater than 50% of the outstanding
Common Stock of such Restricted Subsidiary, the Company shall be deemed to
have made an Investment on the date of any such sale or disposition equal to
the fair market value of the Common Stock of such Restricted Subsidiary not
sold or disposed of.
"Issue Date" means the date of original issuance of the Notes.
"Lien" means any lien, mortgage, deed of trust, pledge, security interest,
charge or encumbrance of any kind (including any conditional sale or other
title retention agreement, any lease in the nature thereof and any agreement
to give any security interest).
"LLCs" means Holdings LLC, Operating LLC and the Operating LLCs. For
purposes of the Indenture, the LLCs shall be treated as Wholly Owned
Restricted Subsidiaries.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds in
the form of cash or Cash Equivalents including payments in respect of deferred
payment obligations when received in the form of cash or Cash Equivalents
(other than the portion of any such deferred payment constituting interest)
received by the Company or any of its Restricted Subsidiaries from such Asset
Sale net of (a) reasonable out-of-pocket expenses and fees relating to such
Asset Sale (including, without limitation, legal, accounting and investment
banking fees and sales commissions), (b) taxes paid or payable after taking
into account any reduction in consolidated tax liability due to available tax
credits or deductions and any tax sharing arrangements, (c) repayment of
Indebtedness that is required to be repaid in connection with such Asset Sale
and (d) appropriate amounts to be provided by the Company or any Restricted
Subsidiary, as the case may be, as a reserve, in accordance with GAAP, against
any liabilities associated with such Asset Sale and retained by the Company or
any Restricted Subsidiary, as the case may be, after such Asset Sale,
including, without limitation, pension and other post-employment benefit
liabilities, liabilities related to environmental matters and liabilities
under any indemnification obligations associated with such Asset Sale.
"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness.
"Operating LLC" means T/SF Operating, LLC, a Delaware limited liability
company whose preferred Equity Interest is owned by Holdings LLC and whose
common Equity Interest is owned by VS&A-T/SF and Fir Tree in proportion to
their respective ownership of the Common Stock following the Recapitalization.
"Operating LLCs" means each of (i) Galaxy Registration LLC, a Delaware
limited liability company, (ii) Atwood Publishing LLC, a Delaware limited
liability company, (iii) GEM Gaming, LLC, a Delaware limited liability
company, (iv) GEM Nevada, LLC, a Nevada limited liability company, and (v)
Casino Executive, LLC, a Nevada limited liability company, each of whose
Equity Interests is owned 99% by Holdings LLC and 1% by Operating LLC, and
(vi) EXPO Magazine, LLC, a Delaware limited liability company whose Equity
Interests are owned 100% by Atwood Publishing, LLC. For purposes of the
Indenture, the Operating LLCs shall be treated as Wholly Owned Restricted
Subsidiaries.
"Permitted Holders" means Fir Tree and VS&A Fund II.
"Permitted Indebtedness" means, without duplication, each of the following:
(i) Indebtedness under the Notes, the Indenture and the Guarantees;
92
(ii) Indebtedness incurred pursuant to the Credit Agreement in an
aggregate principal amount at any time outstanding not to exceed $25.0
million in the aggregate, reduced by any required permanent repayments
pursuant to the provisions under "Certain Covenants--Limitation on Assets
Sales" (which are accompanied by a corresponding permanent commitment
reduction) thereunder;
(iii) other Indebtedness of the Company and its Restricted Subsidiaries
outstanding on the Issue Date reduced by the amount of any scheduled
amortization payments or mandatory prepayments when actually paid or
permanent reductions thereon;
(iv) Interest Swap Obligations of the Company covering Indebtedness of
the Company or any of its Restricted Subsidiaries and Interest Swap
Obligations of any Restricted Subsidiary of the Company covering
Indebtedness of such Restricted Subsidiary; provided, however, that such
Interest Swap Obligations are entered into to protect the Company and its
Restricted Subsidiaries from fluctuations in interest rates on Indebtedness
incurred in accordance with the Indenture to the extent the notional
principal amount of such Interest Swap Obligation does not exceed the
principal amount of the Indebtedness to which such Interest Swap Obligation
relates;
(v) Indebtedness under Currency Agreements; provided that in the case of
Currency Agreements which relate to Indebtedness, such Currency Agreements
do not increase the Indebtedness of the Company and its Restricted
Subsidiaries outstanding other than as a result of fluctuations in foreign
currency exchange rates or by reason of fees, indemnities and compensation
payable thereunder;
(vi) Indebtedness of a Restricted Subsidiary of the Company to the
Company or to a Guarantor of the Company for so long as such Indebtedness
is held by the Company or a Guarantor of the Company, in each case subject
to no Lien held by a Person other than the Company or a Guarantor of the
Company; provided that if as of any date any Person other than the Company
or a Guarantor of the Company owns or holds any such Indebtedness or holds
a Lien in respect of such Indebtedness, such date shall be deemed the
incurrence of Indebtedness not constituting Permitted Indebtedness by the
issuer of such Indebtedness;
(vii) Indebtedness of the Company to a Wholly Owned Restricted Subsidiary
of the Company for so long as such Indebtedness is held by a Wholly Owned
Restricted Subsidiary of the Company, in each case subject to no Lien;
provided that (a) any Indebtedness of the Company to any Wholly Owned
Restricted Subsidiary of the Company is unsecured and subordinated,
pursuant to a written agreement, to the Company's obligations under the
Indenture and the Notes and (b) if as of any date any Person other than a
Wholly Owned Restricted Subsidiary of the Company owns or holds any such
Indebtedness or any Person holds a Lien in respect of such Indebtedness,
such date shall be deemed the incurrence of Indebtedness not constituting
Permitted Indebtedness by the Company;
(viii) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts) drawn against insufficient
funds in the ordinary course of business; provided, however, that such
Indebtedness is extinguished within two business days of incurrence;
(ix) Indebtedness of the Company or any of its Restricted Subsidiaries
represented by letters of credit for the account of the Company or such
Restricted Subsidiary, as the case may be, in order to provide security for
workers' compensation claims, payment obligations in connection with self-
insurance or similar requirements in the ordinary course of business;
(x) Refinancing Indebtedness; and
(xi) additional Indebtedness of the Company and its Restricted
Subsidiaries in an aggregate principal amount not to exceed $5.0 million at
any one time outstanding.
"Permitted Investments" means each of the following:
(i) Investments by the Company or any Restricted Subsidiary of the
Company in any Person that is or will become immediately after such
Investment a Restricted Subsidiary of the Company or that will merge or
consolidate into the Company or a Restricted Subsidiary of the Company;
93
(ii) Investments in the Company by any Restricted Subsidiary of the
Company; provided that any Indebtedness evidencing such Investment is
unsecured and subordinated, pursuant to a written agreement, to the
Company's obligations under the Notes and the Indenture;
(iii) Investments in cash and Cash Equivalents;
(iv) loans and advances to employees and officers of the Company and its
Restricted Subsidiaries in the ordinary course of business for bona fide
business purposes not in excess of $500,000 at any one time outstanding;
(v) Currency Agreements and Interest Swap Obligations entered into in the
ordinary course of the Company's or its Restricted Subsidiaries' businesses
and otherwise in compliance with the Indenture;
(vi) Investments in Unrestricted Subsidiaries or other entities not to
exceed $4.0 million at any one time outstanding;
(vii) Investments in securities of trade creditors or customers received
pursuant to any plan of reorganization or similar arrangement upon the
bankruptcy or insolvency of such trade creditors or customers; and
(viii) Investments made by the Company or its Restricted Subsidiaries as
a result of consideration received in connection with an Asset Sale made in
compliance with the "Limitation on Asset Sales" covenant.
"Permitted Liens" means the following types of Liens:
(i) Liens for taxes, assessments or governmental charges or claims either
(a) not delinquent or (b) contested in good faith by appropriate
proceedings and as to which the Company or its Restricted Subsidiaries
shall have set aside on its books such reserves as may be required pursuant
to GAAP;
(ii) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent or
being contested in good faith, if such reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made in
respect thereof;
(iii) Liens incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other
types of social security, including any Lien securing letters of credit
issued in the ordinary course of business consistent with past practice in
connection therewith, or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, government contracts,
performance and return-of-money bonds and other similar obligations
(exclusive of obligations for the payment of borrowed money);
(iv) judgment Liens not giving rise to an Event of Default so long as
such Lien is adequately bonded and any appropriate legal proceedings which
may have been duly initiated for the review of such judgment shall not have
been finally terminated or the period within which such proceedings may be
initiated shall not have expired;
(v) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in any
material respect with the ordinary conduct of the business of the Company
or any of its Restricted Subsidiaries;
(vi) any interest or title of a lessor under any Capitalized Lease
Obligation; provided that such Liens do not extend to any property or
assets which is not leased property subject to such Capitalized Lease
Obligation;
(vii) purchase money Liens to finance property or assets of the Company
or any Restricted Subsidiary of the Company acquired in the ordinary course
of business; provided, however, that (A) the related purchase money
Indebtedness shall not exceed the cost of such property or assets and shall
not be secured
94
by any property or assets of the Company or any Restricted Subsidiary of
the Company other than the property and assets so acquired and (B) the Lien
securing such Indebtedness shall be created within 90 days of such
acquisition;
(viii) Liens upon specific items of inventory or other goods and proceeds
of any Person securing such Person's obligations in respect of bankers'
acceptances issued or created for the account of such Person to facilitate
the purchase, shipment or storage of such inventory or other goods;
(ix) Liens securing reimbursement obligations with respect to commercial
letters of credit which encumber documents and other property relating to
such letters of credit and products and proceeds thereof;
(x) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual, or warranty requirements of the Company
or any of its Restricted Subsidiaries, including rights of offset and set-
off;
(xi) Liens securing Interest Swap Obligations which Interest Swap
Obligations relate to Indebtedness that is otherwise permitted under the
Indenture;
(xii) Liens securing Indebtedness under Currency Agreements; and
(xiii) Liens securing Acquired Indebtedness incurred in accordance with
the "Limitation on Incurrence of Additional Indebtedness" covenant;
provided that (A) such Liens secured such Acquired Indebtedness at the time
of and prior to the incurrence of such Acquired Indebtedness by the Company
or a Restricted Subsidiary of the Company and were not granted in
connection with, or in anticipation of, the incurrence of such Acquired
Indebtedness by the Company or a Restricted Subsidiary of the Company and
(B) such Liens do not extend to or cover any property or assets of the
Company or of any of its Restricted Subsidiaries other than the property or
assets that secured the Acquired Indebtedness prior to the time such
Indebtedness became Acquired Indebtedness of the Company or a Restricted
Subsidiary of the Company and are no more favorable to the lienholders than
those securing the Acquired Indebtedness prior to the incurrence of such
Acquired Indebtedness by the Company or a Restricted Subsidiary of the
Company.
"Permitted Tax Distributions" means, subject to the "Limitation of
Restricted Payments" covenant, distributions by Holdings LLC and Operating LLC
to Fir Tree and VS&A-T/SF to the extent necessary to permit the direct or
indirect beneficial owners of the common Equity Interests of Holdings LLC and
Operating LLC to pay federal and state income tax liabilities arising from
income of Holdings LLC and Operating LLC irrespective of any other income or
loss such holders may have and attributable to them solely as a result of
Holdings LLC and Operating LLC (and any intermediate entity through which such
holder owns such Equity Interests) being a partnership or similar pass-through
entity for federal income tax purposes.
"Person" means an individual, partnership, corporation, unincorporated
organization, trust or joint venture, or a governmental agency or political
subdivision thereof.
"Preferred Stock" of any Person means any Capital Stock of such Person that
has preferential rights to any other Capital Stock of such Person with respect
to dividends or redemptions or upon liquidation.
"Public Equity Offering" means an underwritten public offering of Qualified
Capital Stock of the Company pursuant to a registration statement filed with
the Commission in accordance with the Securities Act.
"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.
"Recapitalization" means the recapitalization of the Company as contemplated
by the Stock Purchase Agreement.
"Refinance" means, in respect of any security or Indebtedness, to refinance,
extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue a
security or Indebtedness in exchange or replacement for, such security or
Indebtedness in whole or in part. "Refinanced" and "Refinancing" shall have
correlative meanings.
"Refinancing Indebtedness" means any Refinancing by the Company or any
Restricted Subsidiary of the Company of Indebtedness incurred in accordance
with the "Limitation on Incurrence of Additional
95
Indebtedness" covenant (other than pursuant to clause (ii), (iv), (v), (vi),
(vii), (viii), (ix) or (xi) of the definition of Permitted Indebtedness), in
each case that does not (1) result in an increase in the aggregate principal
amount of Indebtedness of such Person as of the date of such proposed
Refinancing (plus the amount of any premium required to be paid under the
terms of the instrument governing such Indebtedness and plus the amount of
reasonable expenses incurred by the Company in connection with such
Refinancing) or (2) create Indebtedness with (A) a Weighted Average Life to
Maturity that is less than the Weighted Average Life to Maturity of the
Indebtedness being Refinanced or (B) a final maturity earlier than the final
maturity of the Indebtedness being Refinanced; provided that (x) if such
Indebtedness being Refinanced is Indebtedness of the Company, then such
Refinancing Indebtedness shall be Indebtedness solely of the Company and (y)
if such Indebtedness being Refinanced is subordinate or junior to the Notes,
then such Refinancing Indebtedness shall be subordinate to the Notes at least
to the same extent and in the same manner as the Indebtedness being
Refinanced; provided, further that Indebtedness incurred currently with an
irrevocable offer to purchase on a date not more than 60 days from the date of
incurrence of such Indebtedness an amount of Notes equal to such Indebtedness
shall be deemed Refinancing Indebtedness.
"Representative" means the indenture trustee or other trustee, agent or
representative in respect of any Designated Senior Debt; provided that if, and
for so long as, any Designated Senior Debt lacks such a representative, then
the Representative for such Designated Senior Debt shall at all times
constitute the holders of a majority in outstanding principal amount of such
Designated Senior Debt in respect of any Designated Senior Debt.
"Restricted Subsidiary" of any Person means any Subsidiary of such Person
which at the time of determination is not an Unrestricted Subsidiary.
"Sale and Leaseback Transaction" means any direct or indirect arrangement
with any Person or to which any such Person is a party, providing for the
leasing to the Company or a Restricted Subsidiary of any property, whether
owned by the Company or any Restricted Subsidiary at the Issue Date or later
acquired, which has been or is to be sold or transferred by the Company or
such Restricted Subsidiary to such Person or to any other Person from whom
funds have been or are to be advanced by such Person on the security of such
Property.
"Senior Debt" means the principal of, premium, if any, and interest
(including any interest accruing subsequent to the filing of a petition of
bankruptcy at the rate provided for in the documentation with respect thereto,
whether or not such interest is an allowed claim under applicable law) on any
Indebtedness of the Company, whether outstanding on the Issue Date or
thereafter created, incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall
not be senior in right of payment to the Notes. Without limiting the
generality of the foregoing, "Senior Debt" shall also include the principal
of, premium, if any, interest (including any interest accruing subsequent to
the filing of a petition of bankruptcy at the rate provided for in the
documentation with respect thereto, to the extent such interest is an allowed
claim under applicable law) on, and all other amounts owing in respect of, (x)
all monetary obligations of every nature of the Company under the Credit
Agreement, including, without limitation, obligations to pay principal and
interest, reimbursement obligations under letters of credit, fees, expenses
and indemnities, (y) all Interest Swap Obligations and (z) all obligations
under Currency Agreements, in each case whether outstanding on the Issue Date
or thereafter incurred. Notwithstanding the foregoing, "Senior Debt" shall not
include (i) any Indebtedness of the Company to a Guarantor of the Company or
any Affiliate of the Company or any of such Affiliate's Subsidiaries, (ii)
Indebtedness to, or guaranteed on behalf of, any shareholder, director,
officer or employee of the Company or any Subsidiary of the Company
(including, without limitation, amounts owed for compensation), (iii)
Indebtedness to trade creditors and other amounts incurred in connection with
obtaining goods, materials or services, (iv) Indebtedness represented by
Disqualified Capital Stock, (v) any liability for federal, state, local or
other taxes owed or owing by the Company, (vi) Indebtedness incurred in
violation of the Indenture provisions set forth under "Limitation on
Incurrence of Additional Indebtedness," (vii) Indebtedness which, when
incurred and without respect to any election under Section 1111(b) of Title
11, United States Code, is without recourse to
96
the Company and (viii) any Indebtedness which is, by its express terms,
subordinated in right of payment to any other Indebtedness of the Company.
"Significant Subsidiary" shall have the meaning set forth in Rule 1.02(w) of
Regulation S-X under the Securities Act.
"Stock Purchase Agreement" means the stock purchase agreement dated as of
August 15, 1997, as amended, by and among VS&A-T/SF, VS&A Fund II and the
Company, relating to the Recapitalization.
"Stockholders Agreement" means the stockholders agreement dated as of
October 9, 1997 among VS&A-T/SF, Fir Tree and the Company.
"Subsidiary", with respect to any Person, means (i) any corporation of which
the outstanding Capital Stock having at least a majority of the votes entitled
to be cast in the election of directors under ordinary circumstances shall at
the time be owned, directly or indirectly, by such Person or (ii) any other
Person of which at least a majority of the voting interest under ordinary
circumstances is at the time, directly or indirectly, owned by such Person.
"Unrestricted Subsidiary" of any Person means (i) any Subsidiary of such
Person that at the time of determination shall be or continue to be designated
an Unrestricted Subsidiary by the Board of Directors of such Person in the
manner provided below and (ii) any Subsidiary of an Unrestricted Subsidiary.
The Board of Directors may designate any Subsidiary (including any newly
acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless
such Subsidiary owns any Capital Stock of, or owns or holds any Lien on any
property of, the Company or any other Subsidiary of the Company that is not a
Subsidiary of the Subsidiary to be so designated; provided that (x) the
Company certifies to the Trustee that such designation complies with the
"Limitation on Restricted Payments" covenant and (y) each Subsidiary to be so
designated and each of its Subsidiaries has not at the time of designation,
and does not thereafter, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable with respect to any Indebtedness pursuant
to which the lender has recourse to any of the assets of the Company or any of
its Restricted Subsidiaries. The Board of Directors may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary only if (x) immediately
after giving effect to such designation, the Company is able to incur at least
$1.00 of additional Indebtedness (other than Permitted Indebtedness) in
compliance with the "Limitation on Incurrence of Additional Indebtedness"
covenant and (y) immediately before and immediately after giving effect to
such designation, no Default or Event of Default shall have occurred and be
continuing. Any such designation by the Board of Directors shall be evidenced
to the Trustee by promptly filing with the Trustee a copy of the Board
Resolution giving effect to such designation and an officers' certificate
certifying that such designation complied with the foregoing provisions.
"VS&A Fund II" means VS&A Communications Partners II, L.P. a Delaware
limited partnership and its Affiliates.
"VS&A-T/SF" means VS&A-/T/SF Inc., a Delaware corporation and, after the
liquidation of VS&A-T/SF, Inc., if any, VS&A-T/SF, L.L.C.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the then outstanding
aggregate principal amount of such Indebtedness into (b) the sum of the total
of the products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (ii)
the number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"Wholly Owned Restricted Subsidiary" of any Person means any Restricted
Subsidiary of such Person of which all the outstanding voting securities
(other than in the case of a foreign Restricted Subsidiary, directors'
qualifying shares or an immaterial amount of shares required to be owned by
other Persons pursuant to applicable law) are owned by such Person or any
Wholly Owned Restricted Subsidiary of such Person.
97
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following summary presents the material U.S. federal income tax
consequences of the Exchange Offer and the ownership and disposition of the
New Notes. The summary is based upon the Internal Revenue Code of 1986, as
amended (the "Code"), Treasury regulations (including proposed Treasury
regulations) ("Regulations"), Internal Revenue Service ("IRS") rulings and
pronouncements and judicial decisions currently in effect, all of which are
subject to change, possibly on a retroactive basis.
This summary does not discuss all aspects of U.S. federal income taxation
that may be relevant to investors in light of their personal investment
circumstances, including any elections made by the investors under any
applicable tax law. This summary applies to beneficial owners of the Notes who
hold such Notes as capital assets and does not apply to certain types of
holders subject to special treatment under the U.S. federal income tax laws
(for example, dealers in securities, tax-exempt organizations, insurance
companies, persons other than the initial holders of the New Notes, persons
that will hold notes as a position in an integrated transaction (including a
"straddle") consisting of Notes and one or more other positions and persons
that have a "functional currency" other than the U.S. dollar) and does not
discuss the consequences to a holder under state, local or foreign tax laws.
The Issuer has not sought and will not seek any rulings from the IRS with
respect to the positions discussed below. There can be no assurance that the
IRS will not take a different position concerning the tax consequences of the
Exchange Offer and ownership or disposition of the Old Notes or New Notes or
that any such position would not be sustained.
As used herein, the term "U.S. Holder" means a beneficial owner of a Note
that is for U.S. federal income tax purposes (i) a citizen or resident of the
United States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or of any political
subdivision thereof, (iii) an estate or trust the income of which is subject
to United States federal income taxation regardless of its source or (iv) any
other person or entity whose income or gain in respect of a Note is
effectively connected with the conduct of a United States trade or business.
PROSPECTIVE INVESTORS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS
REGARDING THE FEDERAL, STATE, LOCAL AND OTHER TAX CONSIDERATIONS OF THE
EXCHANGE OFFER AND THE OWNERSHIP AND DISPOSITION OF THE NOTES.
(i) Exchange Offer. The exchange pursuant to the Exchange Offer of Old Notes
for New Notes will not be treated as a taxable exchange for U.S. federal
income tax purposes and the New Notes will be treated as a continuation of the
Old Notes, because the terms of the New Notes are identical in all material
respects to the terms of the Old Notes. Accordingly, a U.S. Holder will not
recognize gain or loss upon such exchange.
(ii) Interest. Interest on a Note generally will be taxable to a U.S. Holder
as ordinary interest income at the time it is paid or accrued in accordance
with the U.S. Holder's method of accounting for tax purposes.
(iii) Sales, Exchange or Retirement of Notes. Upon the sale, exchange
(except pursuant to the Exchange Offer as provided above), retirement or other
disposition of a Note, a U.S. Holder will recognize gain or loss equal to the
difference between the amount realized (except to the extent attributable to
accrued interest) and the U.S. Holder's adjusted tax basis in the Note. A U.S.
Holder's adjusted tax basis in a Note will be equal to the cost of the Note,
increased by accrued market discount, if any, if the U.S. Holder has included
such market discount in income (see "Market Discount" below), and decreased by
any amortized bond premium (defined below) and payments received. Generally,
and subject to the discussion under "Market Discount" below, any
98
gain or loss recognized by a U.S. Holder upon a sale, retirement or other
disposition of the Note will be long-term capital gain or loss if the Note has
been held for more than one year, generally subject to maximum tax rate of 28
percent. Pursuant to recently enacted legislation, with respect to any capital
asset held for more than 18 months, capital gains will be subject to tax at a
rate of 20 percent.
(iv) Acquisition at a Premium. If a subsequent U.S. Holder acquires a Note
for an amount (exclusive of accrued and unpaid interest through the
acquisition date) in excess of the Note's stated redemption price at maturity
("Bond Premium"), the U.S. Holder may elect, in accordance with applicable
Code provisions, to amortize the Bond Premium using a constant yield method.
The amount of Bond Premium amortized in any year will be treated as a
reduction of the U.S. Holder's interest income from the Note.
(v) Market Discount. If a U.S. Holder purchases a Note for an amount that is
less than its issue price (or, in the case of a subsequent purchaser, its
"revised issue price," as defined in the Code) as of the purchase date, the
amount of the difference will be treated as "market discount," unless such
difference is less than a specified de minimis amount. Market discount
generally will accrue ratably during the period from the date of acquisition
to the maturity date of the Note, unless the U.S. Holder elects to accrue such
discount on the basis of the constant interest method, in accordance with
applicable Code provisions.
A U.S. Holder of a Note with market discount generally will be required to
treat as ordinary income any gain recognized on the sale, exchange, retirement
or other disposition of the Note to the extent of accrued market discount
unless the U.S. Holder elects in accordance with the applicable Code
provisions to include market discount in income as it accrues. A U.S. Holder
of a Note acquired at market discount who does not make a current inclusion
election will be required to defer the deduction of all or a portion of the
interest on any indebtedness incurred or maintained to purchase or carry the
Note until the maturity of the Note or its earlier disposition in a taxable
transaction.
BACKUP WITHHOLDING AND INFORMATION REPORTING
The "backup" withholding and information reporting requirements may apply to
certain payments of principal, redemption or repurchase premium, if any, and
interest on a Note and to certain payments of proceeds of the sale or
retirement of a Note. The Issuer, its agent, a broker, or any paying agent, as
the case may be, will be required to withhold tax from any payment that is not
subject to backup withholding at a rate of 31 percent of such payment if the
U.S. Holder of the Note fails to furnish his taxpayer identification number
(social security number or employer identification number), to certify that
such U.S. Holder is not subject to backup withholding or to otherwise comply
with the applicable requirements of the backup withholding rules. Certain U.S.
Holders (including, among others, all corporations) are not subject to the
backup withholding and reporting requirements.
Any amount withheld under the backup withholding rules from a payment to a
U.S. Holder may be claimed as a credit against such U.S. Holder's United
States federal income tax liability.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S
PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT
TO THE TAX CONSEQUENCES TO THEM OF THE EXCHANGE OFFER AND THE OWNERSHIP AND
DISPOSITION OF THE NOTES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL,
FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR
OTHER TAX LAWS.
99
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired as a result of market-making activities or other
trading activities. The Issuer has agreed that for a period of 10 days after
the Expiration Date, it will make this Prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any such resale.
The Issuer will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the New Notes or a combination of such
methods of resale, at market rates prevailing at the time of resale, at prices
related to such prevailing market prices or negotiated prices. Any such resale
may be made directly to purchasers or to or through brokers or dealers who may
receive compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer
that resells New Notes that were received by it for its own account pursuant
to the Exchange Offer and any broker or dealer that participates in a
distribution of such New Notes may be deemed to be an "underwriter" within the
meaning of the Securities Act and any profit on any such resale of New Notes
and any commissions or concessions received by any such persons may be deemed
to be underwriting compensation under the Securities Act. The Letter of
Transmittal states that by acknowledging that it will deliver and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
LEGAL MATTERS
The legality of the New Notes offered hereby will be passed upon for the
Issuer by Proskauer Rose LLP, 1585 Broadway, New York, New York 10036.
Proskauer Rose LLP also represents VS&A, VS&A Fund I, VS&A Fund II and VS&A-
T/SF, including, without limitation, representation of such entities in
connection with the Tender Offer, Stock Purchase and Second Step Transaction.
INDEPENDENT PUBLIC ACCOUNTANTS
The consolidated financial statements of the Issuer and its subsidiaries as
of December 31, 1996 and 1995 and for each of the three years in the period
ended December 31, 1996, incorporated by reference in this Prospectus and
included elsewhere in the registration statement, have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their report
with respect thereto, and are included herein in reliance upon the authority
of said firm as experts in giving said reports.
100
INDEX TO FINANCIAL STATEMENTS
T/SF COMMUNICATIONS CORPORATION AND SUBSIDIARIES
PAGE
----
Report of independent public accountants.................................. F-2
Consolidated balance sheets as of September 30, 1997 (unaudited) and
December 31, 1996 and 1995............................................... F-3
Consolidated statements of operations for the nine months ended September
30, 1997 and 1996 (unaudited) and the years ended December 31, 1996, 1995
and 1994................................................................. F-4
Consolidated statements of changes in stockholders' equity for the nine
months ended September 30, 1997 and 1996 (unaudited) and the years ended
December 31, 1996, 1995 and 1994......................................... F-5
Consolidated statements of cash flows for the nine months ended September
30, 1997 and 1996 (unaudited) and the years ended December 31, 1996, 1995
and 1994................................................................. F-6
Notes to consolidated financial statements................................ F-7
F-1
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, 1996 and 1995, 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, 1996. 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, 1996 and 1995, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1996, in conformity with generally accepted
accounting principles.
Arthur Andersen LLP
Tulsa, Oklahoma
February 21, 1997
F-2
T/SF COMMUNICATIONS CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
DECEMBER 31,
SEPTEMBER 30, ---------------
1997 1996 1995
------------- ------- -------
(UNAUDITED)
CURRENT ASSETS:
Cash and cash equivalents...................... $ 6,894 $ 2,257 $13,383
Short-term investments......................... -- -- 1,000
Accounts receivable, less reserve for doubtful
accounts of $593 in 1997, $412 in 1996 and
$516 in 1995.................................. 11,275 10,194 8,209
Inventories (Note 1)........................... 224 193 181
Deferred tax assets (Notes 1 and 6)............ 674 896 494
Current contract receivable and other current
assets........................................ 2,872 2,604 3,050
Refundable income taxes........................ -- 2,102 3,239
------- ------- -------
Total current assets......................... 21,939 18,246 29,556
------- ------- -------
CONTRACT AND NOTES RECEIVABLE AND INVESTMENTS.... 1,116 1,203 2,721
------- ------- -------
PROPERTY, PLANT AND EQUIPMENT, at cost (Notes 1
and 4):
Exposition equipment........................... 3,761 3,107 2,987
Data processing and office furniture and
equipment..................................... 12,739 8,635 6,653
------- ------- -------
16,500 11,742 9,640
Less--accumulated depreciation................. 9,086 7,182 4,739
------- ------- -------
7,414 4,560 4,901
------- ------- -------
DEFERRED TAX ASSETS (Note 6)..................... 326 578 1,456
------- ------- -------
INTANGIBLES AND OTHER ASSETS, net (Notes 1 and
2).............................................. 32,033 31,395 14,810
------- ------- -------
$62,828 $55,982 $53,444
======= ======= =======
CURRENT LIABILITIES:
Notes payable (Note 5)......................... $ 20 $ 500 $ --
Accounts payable............................... 4,903 3,496 4,200
Accrued liabilities (Note 11).................. 3,081 5,028 5,509
Deferred revenue............................... 9,010 2,343 3,255
Current portion of long-term debt (Note 5)..... 1,149 1,133 1,266
------- ------- -------
Total current liabilities.................... 18,163 12,500 14,230
------- ------- -------
LONG-TERM DEBT (Note 5).......................... 3,713 3,493 4,529
------- ------- -------
DEFERRED CONTRACT LIABILITIES AND CREDITS........ 1,324 1,803 2,199
------- ------- -------
COMMITMENTS AND CONTINGENCIES (Note 8)
STOCKHOLDERS' EQUITY, per accompanying statement
(Notes 1, 7 and 9):
Preferred stock, $10 par value, 1,000 shares
authorized......................................... -- -- --
Common stock, $.10 par value, 10,000 shares
authorized......................................... 331 332 332
Additional paid-in capital.......................... 12,773 13,754 13,475
Retained earnings................................... 26,524 24,100 18,679
------- ------- -------
Total stockholders' equity........................ 39,628 38,186 32,486
------- ------- -------
$62,828 $55,982 $53,444
======= ======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
T/SF COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
----------------------- -------------------------
1997 1996 1996 1995 1994
----------- ----------- ------- ------- -------
(UNAUDITED) (UNAUDITED)
REVENUES (Notes 1, 2 and
3):
Operating revenues....... $53,711 $43,377 $66,816 $59,805 $54,054
Interest and other
income.................. 1,165 1,400 1,478 1,039 2,163
(Loss) gain on sale of
assets, net............. (210) 328 348 11,234 702
------- ------- ------- ------- -------
54,666 45,105 68,642 72,078 56,919
------- ------- ------- ------- -------
COSTS AND EXPENSES (Notes
1, 2, 3 and 4):
Operating costs.......... 33,474 27,549 40,314 39,665 35,069
General and
administrative.......... 13,000 10,289 15,207 11,841 11,862
Interest................. 401 413 581 859 736
Depreciation and
amortization............ 3,564 2,843 4,018 3,601 3,118
------- ------- ------- ------- -------
50,439 41,094 60,120 55,966 50,785
------- ------- ------- ------- -------
INCOME BEFORE INCOME
TAXES..................... 4,227 4,011 8,522 16,112 6,134
INCOME TAX PROVISION (Notes
1 and 6).................. (1,803) (1,578) (3,101) (58) (2,589)
MINORITY INTEREST IN
CONSOLIDATED SUBSIDIARIES
(Note 1).................. -- -- -- (266) (981)
------- ------- ------- ------- -------
INCOME FROM CONTINUING
OPERATIONS................ 2,424 2,433 5,421 15,788 2,564
DISCONTINUED OPERATIONS,
net (Note 4).............. -- -- -- 37 (2,816)
------- ------- ------- ------- -------
NET INCOME (LOSS).......... 2,424 2,433 5,421 15,825 (252)
DIVIDENDS ON PREFERRED
SHARES.................... -- -- -- -- (139)
------- ------- ------- ------- -------
INCOME (LOSS) APPLICABLE TO
COMMON SHARES............. $ 2,424 $ 2,433 $ 5,421 $15,825 $ (391)
======= ======= ======= ======= =======
EARNINGS (LOSS) PER COMMON
AND COMMON EQUIVALENT
SHARE (Note 1):
Continuing operations.... $ 0.68 $ 0.69 $ 1.53 $ 4.19 $ 0.65
Discontinued operations.. -- -- -- 0.01 (0.75)
------- ------- ------- ------- -------
$ 0.68 $ 0.69 $ 1.53 $ 4.20 $ (0.10)
======= ======= ======= ======= =======
CASH DIVIDENDS PER COMMON
SHARE..................... $ -- $ -- $ -- $ 0.27 $ --
======= ======= ======= ======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
T/SF COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS)
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
----------------------- -------------------------
1997 1996 1996 1995 1994
----------- ----------- ------- ------- -------
(UNAUDITED) (UNAUDITED)
PREFERRED STOCK:
Beginning balance.......... $ -- $ -- $ -- $ -- $ 459
Conversion and redemption
of preferred stock........ -- -- -- -- (459)
------- ------- ------- ------- -------
Balance at end of period... -- -- -- -- --
------- ------- ------- ------- -------
COMMON STOCK:
Beginning balance.......... 332 332 332 342 336
Conversion of preferred
stock..................... -- -- -- -- 17
Conversion of Class B
common stock.............. -- -- -- 46 --
Issuance of common stock... 4 1 1 -- --
Retirement of common
stock..................... (5) -- (1) (165) (2)
Retirement of stock held by
subsidiary................ -- -- -- (9) --
Acquisition of outside
minority interest through
merger.................... -- -- -- 109 --
Reclassification of common
stock subject to put...... -- -- -- 9 (9)
------- ------- ------- ------- -------
Balance at end of period... 331 333 332 332 342
------- ------- ------- ------- -------
COMMON STOCK, CLASS B:
Balance at end of period... -- -- -- -- 46
------- ------- ------- ------- -------
ADDITIONAL PAID-IN CAPITAL:
Beginning balance.......... 13,754 13,475 13,475 20,128 21,879
Conversion and redemption
of preferred stock........ -- -- -- -- (1,077)
Issuance of common stock... 55 84 111 43 --
Retirement of common
stock..................... (1,372) -- (196) (13,342) (158)
Retirement of stock held by
subsidiary................ -- -- -- (556) --
Acquisition of outside
minority interest through
merger.................... -- -- -- 6,686 --
Compensation recognized on
stock option grants....... -- -- 364 -- --
Income tax benefit for
stock options exercised... 336 -- -- -- --
Reclassification of common
stock subject to put...... -- -- -- 516 (516)
------- ------- ------- ------- -------
Balance at end of period... 12,773 13,559 13,754 13,475 20,128
------- ------- ------- ------- -------
RETAINED EARNINGS:
Beginning balance.......... 24,100 18,679 18,679 3,904 4,295
Net income (loss).......... 2,424 2,433 5,421 15,825 (252)
Dividends paid............. -- -- -- (1,050) (139)
------- ------- ------- ------- -------
26,524 21,112 24,100 18,679 3,904
Less stock of parent com-
pany held by subsidiary... -- -- -- -- (565)
------- ------- ------- ------- -------
$39,628 $35,004 $38,186 $32,486 $23,855
======= ======= ======= ======= =======
PREFERRED SHARES:
Beginning balance.......... -- -- -- -- 46
Conversion and redemption
of preferred stock........ -- -- -- -- (46)
------- ------- ------- ------- -------
Balance at end of period... -- -- -- -- --
======= ======= ======= ======= =======
COMMON SHARES:
Beginning balance.......... 3,318 3,318 3,318 3,424 3,363
Conversion of preferred
stock..................... -- -- -- -- 174
Conversion of Class B
common stock.............. -- -- -- 464 --
Issuance of common stock... 41 10 1 4 --
Retirement of common
stock..................... (50) -- (1) (1,654) (25)
Retirement of stock held by
subsidiary................ -- -- -- (95) --
Acquisition of outside
minority interest through
merger.................... -- -- -- 1,087 --
Reclassification of common
stock subject to put...... -- -- -- 88 (88)
------- ------- ------- ------- -------
Balance at end of period... 3,309 3,328 3,318 3,318 3,424
======= ======= ======= ======= =======
COMMON SHARES, CLASS B:
Balance at end of period... -- -- -- -- 464
======= ======= ======= ======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
T/SF COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
----------------------- ----------------------------
1997 1996 1996 1995 1994
----------- ----------- -------- -------- --------
(UNAUDITED) (UNAUDITED)
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss)....... $ 2,424 $ 2,433 $ 5,421 $ 15,825 $ (252)
------- ------- -------- -------- --------
Adjustments to reconcile
net income (loss) to
net cash provided by
operating activities:
Depreciation and
amortization.......... 3,564 2,843 4,018 3,601 3,163
Accretion of interest
expense............... 150 177 282 133 47
Loss (gain) on sale of
assets................ 210 (328) (348) (11,234) (702)
Reserves provided on
investments........... -- -- 425 8 2,812
Compensation recognized
on stock option
grants................ -- -- 364 -- --
Changes in assets and
liabilities:
Accounts receivable
and refundable income
taxes................ 1,238 (178) (483) (3,686) (1,907)
Inventories........... 71 (11) (12) 187 (213)
Current contract
receivable and other
current assets....... (848) (645) 390 (816) (399)
Intangibles and other
assets............... (166) (150) (160) (282) 77
Accounts payable and
accrued liabilities.. (1,117) 465 (1,389) (1,006) 1,877
Deferred revenue...... 6,667 4,863 (912) 383 266
Deferred income
taxes................ 474 766 309 (641) (343)
Minority interests.... -- -- -- 266 981
------- ------- -------- -------- --------
Total adjustments.... 10,243 7,802 2,484 (13,087) 5,659
------- ------- -------- -------- --------
Net cash provided by
operating activities.... 12,667 10,235 7,905 2,738 5,407
------- ------- -------- -------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Net sales (purchases) of
short-term
investments............ -- 1,000 1,000 1,000 (2,000)
Collections on contract
and notes receivables.. 643 1,305 1,372 6,538 5,033
Investments, net of
distributions.......... (132) (27) (212) (315) (165)
Capital expenditures.... (5,460) (1,955) (2,641) (2,589) (3,254)
Proceeds from the sale
of assets.............. 35 770 772 18,816 8,983
Payments for
acquisitions, net of
cash acquired.......... (939) (15,691) (15,691) -- (1,114)
Payments on deferred
contract liabilities... (482) (603) (685) (616) (502)
------- ------- -------- -------- --------
Net cash (used in)
provided by investing
activities.............. (6,335) (15,201) (16,085) 22,834 6,981
------- ------- -------- -------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Payments of notes
payable, net........... -- -- -- -- (151)
Principal payments of
long-term debt......... (1,410) (3,265) (3,361) (2,477) (6,378)
Issuance of long-term
debt................... 1,267 -- -- -- --
Borrowings under bank
lines-of-credit........ -- -- 3,500 2,900 3,300
Payments under bank
lines-of-credit........ (500) -- (3,000) (2,900) (3,300)
Issuance of common
stock.................. 63 84 111 43 347
Repurchase of common
stock.................. (1,381) -- (196) (13,290) (2,770)
Redemption of preferred
stock.................. -- -- -- -- (1,520)
Dividends paid.......... -- -- -- (1,050) (139)
Compensation of stock
options................ 336 -- -- -- --
------- ------- -------- -------- --------
Net cash used in
financing activities.... (1,625) (3,181) (2,946) (16,774) (10,611)
------- ------- -------- -------- --------
NET INCREASE (DECREASE)
IN CASH AND CASH
EQUIVALENTS............. 4,707 (8,147) (11,126) 8,798 1,777
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD.. 2,257 13,383 13,383 4,585 2,808
------- ------- -------- -------- --------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD........ $ 6,964 $ 5,236 $ 2,257 $ 13,383 $ 4,585
======= ======= ======== ======== ========
SUPPLEMENTAL DISCLOSURES
OF CASH FLOW
INFORMATION:
Cash paid for:
Interest............... $ 214 $ 256 $ 294 $ 642 $ 1,039
Income taxes........... 1,211 2,046 3,845 3,168 2,783
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 (UNAUDITED) AND
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(ALL REFERENCES TO ACTIVITY OR AMOUNTS SUBSEQUENT TO FEBRUARY 21, 1997ARE
UNAUDITED EVENTS AND ARE SUBSEQUENT TO THE DATE OF THE REPORT OF INDEPENDENT
PUBLIC ACCOUNTANTS)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Business
T/SF Communications Corporation and subsidiaries (collectively, the
"Company," unless the context indicates otherwise) are engaged in providing
media services to the gaming industry with trade magazines, newsletters,
conferences and a trade show; providing exposition services, primarily
registration, lead management and publication (primarily convention/trade show
newspapers and directories) services; and providing information services in
the form of pre-employment information, primarily for the insurance and
trucking industries, and trademark/trade name research.
On January 25, 1995, the Company entered into an Agreement and Plan of
Merger, as amended with Tribune/Swab-Fox Companies, Inc. ("Tribune/Swab-Fox")
whereby, subject to approval of the Company and Tribune/Swab-Fox stockholders
(the Company as a 78% owned subsidiary of Tribune/Swab-Fox), Tribune/Swab-Fox
would be merged with and into the Company. On May 25, 1995, Tribune/Swab-Fox
was merged (the "Merger") with and into the Company. In the Merger, each share
of Tribune/Swab-Fox stock was converted into 0.1255 of a share of the Company
or, at the election of the holder, $0.88 in cash. While the Merger was
structured for legal purposes as a merger of Tribune/Swab-Fox with and into
the Company, for accounting purposes the Merger has been treated as a
recapitalization of Tribune/Swab-Fox, with Tribune/Swab-Fox as the survivor
(downstream merger). Thus, for financial reporting purposes, Tribune/Swab-Fox
is the acquiring and surviving entity. Accordingly, the historical financial
statements of the Company, as the surviving entity, are those historical
financial statements of Tribune/Swab-Fox. Earnings per share for the periods
prior to the Merger are restated to reflect the number of equivalent shares
giving effect to the recapitalization. The Company acquired 1,110,675
equivalent shares (8,850,000 Tribune/Swab-Fox shares) for cash in the Merger,
the effect of which is taken into account as of the date of the Merger. In
connection with the Merger, the Board of Directors of Tribune/Swab-Fox
declared a one-time dividend of $0.0344 per share ($0.27 per equivalent share)
which was paid on May 24, 1995.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its majority-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation. Minority interest
represents the minority stockholders' interest in the Company prior to the
Merger.
Inventories
Inventories are recorded at the lower of cost or market determined on first-
in, first-out and average cost methods.
Depreciation
Depreciation of property, plant and equipment is provided using the
straight-line method based on estimated useful lives ranging from 3 to 25
years.
F-7
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Intangibles and Other Assets
Intangibles and other assets include mainly goodwill related to acquisitions
and credits granted for truck driver employment information files. These
assets are being amortized over periods of 3 1/2 to 30 years and consist of
the following:
DECEMBER 31,
AMORTIZATION SEPTEMBER 30 ----------------
PERIOD 1997 1996 1995
----------------- ------------ ------- -------
(UNAUDITED)
Goodwill..................... 30 years $31,982 $30,857 $13,663
Employment information costs
and other................... 3 1/2 to 11 years 5,697 5,192 4,046
Covenants-not-to-compete and
consulting agreements....... 5-10 years 895 895 1,273
------- ------- -------
38,574 36,944 18,982
Accumulated amortization..... (6,541) (5,549) (4,172)
------- ------- -------
$32,033 $31,395 $14,810
======= ======= =======
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.
Revenue Recognition
Revenues from information services are net of the cost of charges from state
motor vehicle record departments which are incurred by the Company as an agent
for its customers. As provided in the agreements with customers, the Company
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 publishing are recognized when each publication is
published and distributed. Subscription revenue is recognized ratably over the
subscription period. Trademark research revenues are recognized when the
research is completed and reports transmitted to the client.
Income Taxes
The Company accounts for income taxes under SFAS No. 109 which requires an
asset and liability approach to financial accounting and reporting. 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
currently enacted tax laws and rates that apply to the periods in which they
are expected to affect taxable income.
Postretirement Benefits
No postretirement medical or insurance benefits are offered to any
employees.
Statements of Cash Flows
For purposes of the statements of cash flows, all highly liquid debt
instruments purchased with a maturity of three months or less are considered
to be cash equivalents.
F-8
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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 previously
outstanding Tribune/Swab-Fox 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 previously outstanding
Tribune/Swab-Fox 6 1/2% convertible preferred shares and the 11% subordinated
convertible debentures due in 1997 were converted into common stock are
considered common stock equivalents and, when dilutive, are included in the
calculation of earnings (loss) per common share.
The weighted average number of common and common equivalent shares
outstanding was 3,543 in 1996, 3,766 in 1995, 3,733 in 1994 and 3,564 and
3,537 for the nine months ended September 30, 1997 and 1996, respectively.
Common shares that would be issued assuming conversion of the previously
outstanding Tribune/Swab-Fox new senior preferred shares and the 11%
subordinated convertible debentures due in 1998 were not included in the
calculations of the applicable years since the effect would have been
antidilutive. The above shares for 1995 and 1994 are as if converted into the
Company's shares at 0.1255 of a share for each previous outstanding share of
Tribune/Swab-Fox.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(2) ACQUISITIONS:
CORSEARCH, Inc. ("CORSEARCH")
On August 15, 1996, the Company acquired all of the issued and outstanding
capital stock of CORSEARCH, a leading provider of trademark and tradename
research and information services, using both proprietary and public
databases. The Company paid $14,400 in cash, $900 in notes and assumed
approximately $1,300 in additional nonoperating liabilities. In addition, the
Company agreed to pay additional consideration in 2000 and 2001 to the two
senior managers/stockholders of CORSEARCH predicated upon CORSEARCH achieving
certain pretax income levels in the years 1997, 1998 and 1999. The minimum
additional consideration to be paid in 2000 and 2001 is $1,500 which has been
discounted at a rate of 8 1/2% and recorded in long-term debt. Costs in excess
of assets acquired were approximately $16,750 and are recorded in "Other
Assets."
In connection with the closing of the transaction, the two senior managers
entered into employment agreements with CORSEARCH through December 31, 1999,
which provide for base salaries, bonuses based on achieving escalating income
targets and covenants-not-to-compete.
Unaudited pro forma results of operations, had the CORSEARCH acquisition
occurred on January 1, 1996, with respect to 1996 are revenues of $72,834;
income from continuing operations of $5,529; and earnings (loss) per common
share from continuing operations of $1.56. This unaudited pro forma
information is presented in response to applicable accounting rules and is not
necessarily indicative of the actual results that would have been achieved had
the CORSEARCH acquisition occurred on January 1, 1996.
F-9
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Galaxy Registration, Inc. ("Galaxy")
Effective March 1, 1994, the Company completed the acquisition of Galaxy, a
provider, on a national basis, of registration, information and marketing
services to the convention/trade show industry. The Company acquired Galaxy
with the payment of $1,200 in cash plus a note payable for $900. If certain
earnings targets were achieved, the former principal owner of Galaxy, who was
employed as President and Chief Operating Officer of Galaxy, would receive
additional payments not to exceed $2,900 by 1997. In connection with this
transaction, on March 17, 1994, the former principal owner of Galaxy purchased
75,000 shares of the Company's Common Stock at $4.625 per share for a total
purchase price of $347. A covenant-not-to-compete and an employment agreement
were also entered into with the former principal owner. The earnings target
for 1994 was achieved and the Company accrued $300 of purchase price
adjustments payable to the former owner. In 1995, the agreement with the
former principal owner was amended to provide that substantially all of the
additional purchase price would be paid over the period set forth in the
acquisition agreement. The additional purchase price was discounted and
recorded as additional goodwill in 1995. In addition, the former owner earned
$100 of incentive compensation in both of the periods ended December 31, 1995
and 1994, which was expensed each year.
Unaudited pro forma results of operations, had the Galaxy acquisition
occurred on January 1, 1994, with respect to 1994, are revenues of $58,469;
income from continuing operations of $2,726 and earnings (loss) per common
share from continuing operations of $0.73. This unaudited pro forma
information is presented in response to applicable accounting rules and 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.
(3) DISPOSITION OF ASSETS:
In 1994, the Company's Board of Directors authorized the sale of three of
the Company's trade journals. An Asset Purchase Agreement was signed June 16,
1995, and the sale of these trade journals was closed on August 2, 1995, for
$21,000 cash. The "Gain on sale of assets" in 1995 in the statement of
operations includes the $11,739 pretax gain from this transaction.
On April 30, 1994, the Company sold the assets of Shopper's Guide, Inc. The
Company received $1,750 in cash, a $1,100 cash payment for post-closing
adjustments, and the buyer assumed certain liabilities totaling $930. The
Company also received the right to receive a maximum of $3,450 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,
the Company entered into a five-year covenant-not-to-compete in exchange for
$750 in cash. No gain or loss was recorded on the sale or in connection with
the covenant-not-to-compete. In 1996, the Company received $200 from the buyer
as final settlement of the future payments. A loss of approximately $500 was
recognized in 1996 related to this final settlement.
(4) REAL ESTATE:
Effective November 30, 1994, Tribune/Swab-Fox's Board of Directors approved
a plan to dispose of the remaining real estate operations. As a result, the
real estate business was reclassified as discontinued operations and the sale
of these discontinued assets in 1995 resulted in a nominal net gain. Prior to
the Merger, Tribune/Swab-Fox and the Company filed separate income tax
returns. Due to Tribune/Swab-Fox's history of losses, no deferred tax asset
was recognized related to net operating loss carryforwards. Therefore, no
income tax benefit was recognized on the real estate business losses. The
following summarizes the components of the loss from discontinued operations:
F-10
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEAR ENDED DECEMBER 31,
-------------------------
1995 1994
----------- -------------
Revenues....................................... $ 100 $ 589
Costs and expenses............................. (63) (3,405)
---------- -------------
Income (loss) from discontinued operations..... $ 37 $ (2,816)
========== =============
On December 30, 1994, significant parcels of raw land were sold to 1995 Land
Company L.L.C., an Oklahoma limited liability company ("1995 Land Company"),
for $1,387, including cash of $600 and a note receivable of $786 which was
paid in early 1995. 1995 Land Company is owned 49.99% by the Company, but the
funding for the purchase was provided through a loan from the owner of the
remaining 50.01%, who oversees, manages and funds the development and sale of
these properties.
In March 1995, the Company entered into an Acquisition Agreement with
Midwest Energy Companies, Inc. ("MECI"), which is indirectly controlled by a
director of the Company. Under the agreement approximately 900 acres of raw
land, with a book value of $1,650 at December 31, 1994, was exchanged for
7,422,773 shares of MECI common stock.
As a part of the liquidation plan, periodical reviews of the market value
for each property were made and a write-down of the real estate assets of
approximately $2,800 was recognized in 1994. This write-down is reflected in
"costs and expenses" in the table above and included in discontinued
operations.
(5) LONG-TERM DEBT:
Long-term debt outstanding consists of the following:
DECEMBER 31,
SEPTEMBER 30, ----------------
1997 1996 1995
------------- ------- -------
(UNAUDITED)
Note payable under Galaxy Purchase Agreement,
discounted at 8.5%, annual payments per
agreement with final payment in April 2000,
effective April 1, 1997, the discount period
ended and the note now accrues interest at
7%............................................ $1,219 $ 1,859 $ 1,898
Payable under CORSEARCH Purchase Agreement,
discounted at 8.5%, payable in equal annual
payments in 2000 and 2001..................... 1,206 1,130 --
Promissory Notes, unsecured, payable
semiannually, plus interest through August 15,
1999, interest rate adjusts 1% below the base
rate of Citibank, N.A. (8.5% at September 30,
1997)......................................... 600 900 --
Promissory Note, unsecured, payable quarterly,
plus interest, through December 2000, interest
rate adjusts semiannually to the base rate of
Chase Manhattan Bank (8.5% at September 30,
1997)......................................... 270 332 3,034
7.5% Promissory Notes, unsecured, annual
payments of $155, plus interest, with final
payments in August 1998 and March 1999........ 175 330 484
Capital lease agreement, monthly payments of
$38 including interest, through June 2000..... 1,175 -- --
Other.......................................... 217 75 379
------ ------- -------
Total long-term debt........................... 4,862 4,626 5,795
Less portion due within one year............... (1,149) (1,133) (1,266)
------ ------- -------
$3,713 $ 3,493 $ 4,529
====== ======= =======
F-11
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Installments due on long-term debt during each of the five years subsequent
to December 31, 1996, are as follows:
YEAR
----
1997.................................. $1,133
1998.................................. 963
1999.................................. 898
2000.................................. 1,252
2001.................................. 380
------
$4,626
======
At December 31, 1996, the Company had a revolving credit arrangement with a
bank which allows the Company to borrow up to $16,000 and at the Company's
election can be converted into a four-year term loan. A balance of $500 was
outstanding under this arrangement at December 31, 1996. Common stock of the
Company's operating subsidiaries, except CORSEARCH, is pledged as collateral
under this revolving credit arrangement, which also provides for various
covenants including restricting the payment of dividends in any fiscal year to
a maximum of $2,000. Interest on amounts borrowed is payable monthly at the
Chase Manhattan base rate (8.5% at December 31, 1996). The revolving credit
arrangement expired June 30, 1997. Management elected not to renew the
arrangement. A one-quarter (.25)% annum fee is payable to the bank on the
unused portion of the credit facility.
(6) INCOME TAXES:
The provision for income taxes is comprised of the following:
YEAR ENDED DECEMBER 31,
------------------------
1996 1995 1994
------- ------- -------
CURRENT:
Federal.......................................... $ 2,487 $ (679) $ 2,600
State............................................ 305 1,378 332
------- ------- -------
2,792 699 2,932
------- ------- -------
DEFERRED:
Federal.......................................... 266 (521) (339)
State............................................ 43 (120) (4)
------- ------- -------
309 (641) (343)
------- ------- -------
$ 3,101 $ 58 $ 2,589
======= ======= =======
F-12
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The reconciliation of income tax computed at the federal statutory rate (34%)
to income tax expense is as follows:
YEAR ENDED DECEMBER 31,
--------------------------
1996 1995 1994
------- -------- -------
Income tax provision at statutory rates........ $ 2,897 $ 5,478 $ 1,128
Amortization of acquired assets not deductible
for income tax purposes....................... 262 193 224
Losses without tax benefit..................... -- -- 1,061
Utilization of losses previously subject to
valuation allowance........................... -- (3,570) --
Excess of tax basis of assets sold over book
basis, not previously tax effected............ -- (1,591) (36)
State income taxes............................. 232 (428) 217
Reduction in previously provided taxes related
to settlement of tax examinations............. (300) -- --
Other.......................................... 10 (24) (5)
------- -------- -------
$ 3,101 $ 58 $ 2,589
======= ======== =======
Significant components of deferred tax assets and liabilities are as follows:
DECEMBER 31,
--------------
1996 1995
------ ------
DEFERRED TAX ASSETS:
Income recognized in different accounting period for income
tax purposes.............................................. $ 236 $1,028
Deferred severance benefits payable........................ 686 805
Reserves on assets......................................... 343 293
Accrued expenses deductible when paid...................... 606 304
Fixed asset basis differences.............................. 100 --
------ ------
Deferred tax assets...................................... 1,971 2,430
------ ------
DEFERRED TAX LIABILITIES:
Fixed asset basis difference............................... -- (144)
Unusual gain recognized in different accounting period for
income tax reporting purposes............................. -- (336)
Other asset basis difference............................... (497) --
------ ------
Deferred tax liabilities................................. (497) (480)
------ ------
NET DEFERRED TAX ASSETS.................................... $1,474 $1,950
====== ======
Net deferred tax assets are reflected on the accompanying balance sheets as
follows:
DECEMBER 31,
-------------
1996 1995
------ ------
CURRENT ASSETS--Deferred tax assets........................... $ 896 $ 494
LONG-TERM--Deferred tax assets................................ 578 1456
------ ------
$1,474 $1,950
====== ======
F-13
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Subsequent to December 31, 1996, the Company was notified by the taxing
authority of a state that the income tax refund receivable from the state
would be contested and was also notified by the taxing authority of a second
state of proposed adjustments to certain prior years' income taxes paid.
Management believes that the tax positions taken by the Company were correct
and that the amounts included in "refundable income taxes" in the consolidated
balance sheet as of December 31, 1996, will ultimately be received and that
adjustments, if any, for income taxes will not be material to the consolidated
financial statements.
(7) CAPITAL STOCK:
The Company has authorized 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. (Reference is made to Note 1 for the capital
stock transactions in connection with the Merger.)
In 1996, 1995 and 1994, the Company purchased and retired 7,900 shares
($24.94 per share), 78,819 shares ($10.50 and $5.48 per share), and 25,000
shares ($6.37 per share), respectively, of its Common Stock owned by certain
officers and directors. As part of these transactions, the Company received
payments on loans of $300 in 1995 and $24 in 1994.
Capital stock transactions prior to the Merger included conversion, in
December 1994, of the 6 1/2% Cumulative Convertible Preferred Stock of
Tribune/Swab-Fox into 1,386,675 common shares (174,027 equivalent shares) and
redemption of the remaining outstanding preferred stocks for approximately
$1,520 which were the 1,400 shares of Class A Preferred Stock redeemed at a
price of $110 per share and the 13,657 shares of New Senior Preferred Stock
redeemed at $100 per share.
The Tribune/Swab-Fox incentive stock option plan was terminated as part of
the Merger. No options were outstanding under this plan.
The Company's incentive stock option plan authorizes an aggregate of 150,000
shares of the Company's Common Stock which may be granted to key employees.
Options for 118,000 shares were outstanding at December 31, 1996, at option
prices ranging from $5.50 to $15.00 per share. During 1996, options for
103,000 shares were granted. No options were exercised and options for 5,000
shares were canceled. Options are granted at the discretion of the Board of
Directors' Compensation Committee at a minimum exercise price of 100% of the
market value of the Company's Common Stock at the date of grant.
In January 1994, the Company's Board of Directors approved the 1994
Incentive Stock Plan which permits the grant of stock options and awards of
restricted stock to executives and key employees. Pursuant to various bonus
and incentive plans, the Company awarded 29,186 shares of restricted stock at
$6.25 and $4.94 per share in April 1995 and May 1995, as part of incentives
which were accrued in 1994. These restricted shares vest three years from the
effective date of the grant. Options of 20,000 shares were granted during the
nine months ended September 30, 1997 at an option price of $28.00 per share,
options for 50,000 shares were granted in 1996 at option prices ranging from
$13.88 to $24.00 per share, options for 15,000 shares were granted in 1995 at
an option price of $6.00 per share and options for 202,500 shares were granted
in 1994 at an option price of $4.25 per share. The options were granted at the
market price of the Company's Common Stock at the effective date of the grant,
expire in 2001 through 2007 and vest 100% in 1997 through 2000. Options for
30,000 shares were exercised for a total price of $153 during the nine months
ended September 30, 1997.
An Employee Stock Purchase Plan has been approved and 100,000 shares of
Common Stock have been allocated for this plan. No shares have been issued
under this plan. In 1995, the Company's Board of Directors approved the
matching of 20% of each employee's contributions (limited to 5% maximum
employee contribution) to the qualified 401(k) defined contribution plan with
the Company's Common Stock and 50,000 shares of Common Stock have been
allocated for this plan. During 1997, 1996 and 1995, 2,273 shares, 6,247
F-14
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
shares and 3,852 shares were issued to the 401(k) plan as matching
contributions. As of June 1, 1997, the matching of 20% of each employee's
contribution with Company Common Stock was ceased and additional cash
contributions in the same amounts will be made.
The Company has adopted the disclosure-only provision of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock--Based
Compensation" (SFAS No. 123). SFAS No. 123 established financial accounting
and reporting standards for stock-based compensation plans and to transactions
in which an entity issues its equity instruments to acquire goods and services
from nonemployees. Since the effect of SFAS No. 123 is not material, the
Company has made no disclosure of pro forma net income and earnings per share
as if SFAS No. 123 had been adopted.
(8) COMMITMENTS AND CONTINGENCIES:
Operating lease agreements of the Company are principally for office
facilities and equipment and expire at various dates through 2009. Rent
expense in 1996, 1995 and 1994 under operating leases was approximately
$1,190, $1,080 and $924, respectively.
As of December 31, 1996, future minimum lease payment are as follows:
MINIMUM LEASE
YEAR ENDING DECEMBER 31, PAYMENTS
------------------------ --------------
(IN THOUSANDS)
1997.......................... $1,344
1998.......................... 1,290
1999.......................... 982
2000.......................... 644
2001.......................... 407
Thereafter.................... 3,018
------
$7,685
======
The Company has employment agreements with five key employees of the Company
and its subsidiaries which provide for individual compensation ranging from
$43 to $225 annually ($605 annually in the aggregate) and expire at various
dates through 1999.
The Company 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
the Company.
(9) RELATED PARTY TRANSACTIONS:
Effective December 31, 1994, the Chairman of the Executive Committee of
Tribune/Swab-Fox retired. Deferred compensation expense of approximately $277
was recorded in 1994 related to this retirement. In addition, the Company
acquired 25,100 shares of Common Stock for $160 from the former employee. In
connection with an amendment to the Retirement Agreement in December 1995, the
Company purchased an additional 30,000 shares of Common Stock at $10.50 per
share, a note payable to the Company of approximately $300 was paid and the
puts and calls for shares of Common Stock owned by the former Chairman of the
Executive Committee were canceled.
In March 1995, upon exercise of an option, the Company acquired 48,819
equivalent shares of the Company's Common Stock from the Profit Sharing Plan
and Trust of Tribune/Swab-Fox Companies, Inc., of
F-15
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
which the former Chairman and Chief Executive Officer of the Company is the
trustee, for $292, with a cash payment of $73 and a note for $219 payable in
equal annual installments over four years.
Under the terms of a loan agreement, amended in June 1992, a current officer
and director of the Company borrowed approximately $250 (outstanding balance
of $200 at December 31, 1996) from the Company at an interest rate of 8.5%,
secured by 87,333 shares of Common Stock of the Company and payable in
semiannual payments of $17, plus interest, with all of the remaining balance
due in October 1999.
(10) BUSINESS SEGMENT INFORMATION:
Operations of the Company are conducted primarily through two business
segments entirely within the continental United States. These segments and the
primary operations of each are as follows:
Business to Business Communications
Publisher (Atwood) of various convention/trade show publications and a trade
journal, provider (Galaxy) of registration services, exhibitor marketing and
information services all to the exposition industry and owner (G.E.M.) of the
World Gaming Congress, the world's largest trade show catering to the
legalized gaming industry, and the publisher of several trade magazines and
newsletters.
Information Services
Provider (TISI) of pre-employment screening information including motor
vehicle reports, truck driver employment information, worker's compensation
information, credit reports, criminal record reports and other pre-employment
screening information and services to the trucking and other industries and
motor vehicle reports to the insurance industry. Provider (CORSEARCH) of
trademark research and information services, using both proprietary and public
databases.
F-16
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Summarized financial information by industry segment is as follows:
NINE MONTHS ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31,
---------------------------------- -------------------------
1997 1996 1996 1995 1994
--------------- --------------- ------- ------- -------
(UNAUDITED) (UNAUDITED)
NET REVENUES FROM SALES
TO UNAFFILIATED CUSTOM-
ERS:
Business to Business
Communications....... $ 29,323 $ 26,313 $42,891 $53,089 $39,665
Information Services.. 24,388 17,064 24,273 17,950 15,091
Corporate and other... 955 1,728 1,478 1,039 2,163
--------------- --------------- ------- ------- -------
$ 54,666 $ 45,105 $68,642 $72,078 $56,919
=============== =============== ======= ======= =======
OPERATING PROFIT:
Business to Business
Communications....... $ 755 $ 1,216 $ 6,018 $14,789 $ 4,344
Information Services.. 5,057 4,194 5,612 3,435 2,992
--------------- --------------- ------- ------- -------
Operating profit from
segments............. 5,812 5,410 11,630 18,224 7,336
Corporate expenses,
net.................. (1,184) (986) (2,527) (1,253) (466)
Interest expense...... (401) (413) (581) (859) (736)
--------------- --------------- ------- ------- -------
Income before income
taxes................ $ 4,227 $ 4,011 $ 8,522 $16,112 $ 6,134
=============== =============== ======= ======= =======
IDENTIFIABLE ASSETS:
Business to Business
Communications....... $ 17,298 $ 15,189 $14,629 $15,525 $26,405
Information Services.. 34,215 32,016 32,035 12,640 12,101
Corporate............. 11,315 12,149 9,318 25,279 12,808
Discontinued
operations........... -- -- -- -- 2,267
--------------- --------------- ------- ------- -------
$ 62,828 $ 59,354 $55,982 $53,444 $53,581
=============== =============== ======= ======= =======
DEPRECIATION AND AMORTI-
ZATION:
Business to Business
Communications....... $ 1,618 $ 1,647 $ 2,192 $ 2,365 $ 2,033
Information Services.. 1,872 1,122 1,723 1,175 1,035
Corporate............. 74 74 103 61 50
Discontinued
operations........... -- -- -- -- 45
--------------- --------------- ------- ------- -------
$ 3,564 $ 2,843 $ 4,018 $ 3,601 $ 3,163
=============== =============== ======= ======= =======
CAPITAL EXPENDITURES:
Business to Business
Communications....... $ 2,282 $ 890 $ 1,097 $ 1,296 $ 3,284
Information Services.. 3,173 1,055 1,533 1,285 935
Corporate............. 5 10 11 8 163
--------------- --------------- ------- ------- -------
$ 5,460 $ 1,955 $ 2,641 $ 2,589 $ 4,382
=============== =============== ======= ======= =======
Corporate revenues consist principally of revenues from interest, covenants-
not-to-compete and miscellaneous nonoperating income. Operating profit is net
revenues less applicable operating expenses and segment general and
administrative expenses. Corporate general and administrative expenses are
generally not allocated to each segment.
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 and corporate furniture,
fixtures and equipment. Capital expenditures include additions to property,
plant and equipment, goodwill and truck driver employment information files.
F-17
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
During 1997, 1996, 1995 and 1994, no customer represented 10% or more of the
Company's revenue or operating profit.
(11)ACCRUED LIABILITIES:
Accrued liabilities consist of the following:
DECEMBER 31,
SEPTEMBER 30, -------------
1997 1996 1995
------------- ------ ------
(UNAUDITED)
Current portion of deferred contract
liabilities.................................. $ 430 $ 419 $ 482
Accrued interest.............................. 99 52 47
Accrued payroll and employee benefits......... 1,010 1,763 902
Accrued income taxes.......................... 1,031 311 2,073
Accrued other liabilities..................... 511 2,483 2,005
------ ------ ------
$3,081 $5,028 $5,509
====== ====== ======
F-18
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH IN-
FORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR A SOLICITATION
IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE
SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS NOT BEEN ANY CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE
DATE HEREOF OR THAT THE INFORMATION SET FORTH HEREIN IS CORRECT AS OF ANY DATE
SUBSEQUENT TO THE DATE HEREOF.
----------------
TABLE OF CONTENTS
PAGE
----
Available Information.................................................... i
Incorporation of Certain Documents by Reference.......................... ii
Cautionary Statement Regarding Industry Forecasts........................ iii
Cautionary Statement Regarding Forward-Looking Statement................. iii
Summary.................................................................. 1
Risk Factors............................................................. 19
Description of the Transactions.......................................... 25
Use of Proceeds.......................................................... 27
Capitalization........................................................... 27
Unaudited Pro Forma Consolidated Financial Information................... 28
Selected Historical Consolidated Financial Data.......................... 37
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 39
The Exchange Offer....................................................... 45
Business................................................................. 53
Management............................................................... 65
Certain Relationships and Related
Transactions............................................................ 71
Security Ownership of Certain Beneficial Owners and Management........... 71
Description of the Senior Credit Facility................................ 72
Description of the New Notes............................................. 73
Certain U.S. Federal Income Tax Consequences............................. 98
Plan of Distribution..................................................... 100
Legal Matters............................................................ 100
Independent Public Accountants........................................... 100
Index to Financial Statements............................................ F-1
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
---------------------
PROSPECTUS
---------------------
[LOGO] TSF COMMUNICATIONS
CORPORATION
OFFER TO EXCHANGE ALL OUTSTANDING 10 3/8% SENIOR SUBORDINATED NOTES
DUE 2007 ($100,000,000 PRINCIPAL AMOUNT OUTSTANDING) FOR 10 3/8% SERIES B
SENIOR SUBORDINATED NOTES DUE 2007
February 6, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of Delaware empowers a
corporation to indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that he or she is or was a director, officer, employee or
agent of the corporation or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation
or enterprise. Depending on the character of the proceeding, a corporation may
indemnify against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred in connection with
such action, suit or proceeding if the person indemnified acted in good faith
and in a manner he or she reasonably believed to be in or not opposed to the
best interests of the corporation, and with respect to any criminal action by
or in the right of the corporation, no indemnification may be made in respect
to any claim, issue or matter as to which such person shall have been adjudged
to be liable to the corporation unless and only to the extent that the Court
of Chancery or the court in which such action or suit was brought shall
determine that despite the adjudication of liability such person is fairly and
reasonably entitled to indemnify for such expenses which the court shall deem
proper.
Section 145 further provides that to the extent a director or officer of a
corporation has been successful in the defense of any action, suit or
proceeding referred to above or in the defense of any claim, issue or matter
therein, he or she shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him or her in connection therewith.
However, if the director or officer is not successful in the defense of any
action, suit or proceeding as referred to above or in the defense of any
claim, issue or matter therein, he shall only be indemnified by the
corporation as authorized in the specific case upon a determination that
indemnification is proper because he or she met the applicable standard set
forth above as determined by a majority of the disinterested Board of
Directors or by the stockholders.
Article SIXTH of the Registrant's Certificate of Incorporation provides that
the Registrant shall indemnify to the fullest extent permitted by law every
director or officer of the Registrant and such person's heirs, executors,
administrators and personal representatives against all judgments, penalties,
fines, settlements and reasonable expenses actually incurred by the person in
connection with any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative.
The Registrant carries a standard form of directors' and officers' liability
insurance policy covering losses up to $3,000,000 (subject to a $150,000
deductible).
The Purchase Agreement provides for reciprocal indemnification between the
Registrant and its controlling persons, on the one hand, and the Initial
Purchaser and its controlling persons, on the other hand, against certain
liabilities in connection with the Offering, including liabilities under the
Securities Act.
The foregoing summaries are necessarily subject to the complete text of the
General Corporation Law of Delaware, the Registrant's Certificate of
Incorporation, the Purchase Agreement and the agreement related to the
directors' and officers' liability insurance referred to above and are
qualified in their entirety by reference thereto.
II-1
ITEM 21. EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------- -----------
1.1** Purchase Agreement, dated October 24, 1997, by and between First
Union Capital Markets Corp. and T/SF Communications Corporation
2.1** Stock Purchase Agreement, dated as of August 15, 1997, among VS&A
Communications Partners II, L.P., VS&A-T/SF Inc. and T/SF
Communications Corporation
3.1** Amended and Restated Certificate of Incorporation of T/SF
Communications Corporation
3.2** Amended and Restated By-laws of T/SF Communications Corporation
3.3** Certificate of Incorporation of Casino Publishing Company
3.4** By-laws of Casino Publishing Company
3.5** Certificate of Incorporate of Expo Magazine, Inc.
3.6** By-laws of Expo Magazine, Inc.
3.7** Certificate of Incorporation of G.E.M. Communications, Inc.
3.8** By-laws of G.E.M. Communications, Inc.
3.9** Certificate of Incorporation of T/SF of Nevada, Inc.
3.10** By-laws of T/SF of Nevada, Inc.
3.11** Certificate of Incorporation of Atwood Convention Publishing, Inc.
3.12** By-laws of Atwood Convention Publishing, Inc.
3.13** Certificate of Incorporation of Galaxy Registration, Inc.
3.14** By-laws of Galaxy Registration, Inc.
3.15** Certificate of Incorporation of Galaxy Design & Printing, Inc.
3.16** By-laws of Galaxy Design & Printing, Inc.
3.17** Certificate of Incorporation of CORSEARCH, Inc
3.18** By-laws of CORSEARCH, Inc
3.19** Certificate of Incorporation of Crimesearch, Inc.
3.20** By-laws of Crimesearch, Inc.
3.21** Certificate of Incorporation of T/SF Europe, Inc.
3.22** By-laws of T/SF Europe, Inc.
3.23** Certificate of Incorporation of Transportation Communications
Services, Inc.
3.24** By-laws of Transportation Communications Services, Inc.
3.25** Certificate of Incorporation of T/SF Investment Co.
3.26** By-laws of T/SF Investment Co.
3.27** Certificate of Incorporation of Transportation Information
Services, Inc.
3.28** By-laws of Transportation Information Services, Inc.
3.29** Certificate of Formation of T/SF Holdings, LLC
3.30** Amended and Restated Operating Agreement of T/SF Holdings, LLC
3.31** Certificate of Formation of T/SF Operating, LLC
3.32** Operating Agreement of T/SF Operating, LLC
3.33** Certificate of Formation of Galaxy Registration, LLC
II-2
EXHIBIT
NUMBER DESCRIPTION
------- -----------
3.34** Amended and Restated Operating Agreement of Galaxy Registration,
LLC
3.35** Certificate of Formation of Atwood Publishing, LLC
3.35(a)** Certificate of Amendment to Certificate of Formation of Atwood
Publishing, LLC
3.36** Amended and Restated Operating Agreement of Atwood Publishing, LLC
3.37** Certificate of Formation of GEM Gaming, LLC
3.38** Amended and Restated Operating Agreement of GEM Gaming, LLC
3.39** Certificate of Formation of GEM Nevada, LLC
3.40** Operating Agreement of GEM Nevada, LLC
3.41** Certificate of Formation of Casino Executive, LLC
3.42** Operating Agreement of Casino Executive, LLC
3.43** Certificate of Formation of EXPO Magazine, LLC
3.44** Operating Agreement of EXPO Magazine, LLC
4.1* Indenture, dated as of October 29, 1997, by and among T/SF
Communications Corporation, the Guarantors named therein and IBJ
Schroder Bank & Trust Company, as Trustee
4.1(a)** Form of Supplemental Indenture, by and among T/SF Communications
Corporation, the Guarantors named therein and IBJ Schroder Bank &
Trust Company, as Trustee
4.2* Registration Rights Agreement, dated as of October 29, 1997, by
and among T/SF Communications Corporation, the Guarantors (named
therein) and First Union Capital Markets Corp.
4.3 Form of Old Note (included in Indenture filed as Exhibit 4.1)
4.4 Form of New Note (included in Indenture filed as Exhibit 4.1)
4.5** Form of Letter of Transmittal to be used by tendering holders of
Old Notes in the Exchange Offer
5* Opinion of Proskauer Rose LLP
10.1* Senior Subordinated Credit Agreement, dated as of October 9, 1997,
among T/SF Communications Corporation, the Guarantors (named
therein) and First Union Corporation (as Lender and Agent)
10.2* Credit Agreement, dated as of October 9, 1997, among T/SF
Communications Corporation and First Union Corporation (as Lender
and Agent)
10.3** Security Agreement, dated as of October 9, 1997, among T/SF
Communications Corporation, the Guarantors (as defined therein)
and First Union National Bank
10.4** Stock Pledge Agreement, dated as of October 9, 1997, made by VS&A-
T/SF, Inc. and Fir Tree Value Fund, L.P., Fir Tree Institutional
Value Fund, L.P., and Fir Tree Value Partners, LDC, in favor of
First Union National Bank
10.5** Stock Pledge Agreement, dated as of October 9, 1997, made by T/SF
Communications Corporation in favor of First Union National Bank
10.6** Stock Pledge Agreement, dated as of October 9, 1997, made by T/SF
Holdings, LLC, in favor of First Union National Bank
10.7** Stock Pledge Agreement, dated as of October 9, 1997, made by
Atwood Convention Publishing, Inc., Galaxy Registration, Inc.,
G.E.M. Communications, Inc., Transportation Information Services,
Inc., T/SF Investment Co. and T/SF of Nevada, Inc., in favor of
First Union National Bank
10.8** Employment Agreement by and between Richard A. Wimbish and
Transportation Information Services, Inc., dated as of January 1,
1998
10.9** Form of Employment Agreement by and between Ian L.M. Thomas and
T/SF Communications Corporation
10.9(a)** Letter Agreement, dated October 9, 1997, by and between VS&A
Communications Partners, II, L.P., Veronis, Suhler & Associates,
Inc. and Ian L.M. Thomas
II-3
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.10** Employment Agreement by and between Steven J. Hunt and T/SF
Communications Corporation, dated as of November 10, 1997
10.11** Employment Agreement by and between Brian A. Meyer and T/SF
Communications Corporation, dated as of November 10, 1997
10.12** Employment Agreement by and between Michael Goodwin and Galaxy
Registration, LLC, dated as of January 1, 1998
10.13 Employment Agreement, dated August 15, 1996, by and between
CORSEARCH, Inc. and Robert Frank (incorporated herein by reference
to Exhibit 99.1 to the Form 8-K)
10.14** T/SF Communications Corporation Chief Executive Officer Equity
Appreciation Plan
10.15** T/SF Communications Corporation Supplemental Chief Executive
Officer Equity Appreciation Plan
10.16** T/SF Communications Corporation Chief Financial Officer/General
Counsel Equity Appreciation Plan
10.17** T/SF Communications Corporation Key Executive Equity Appreciation
Plan
10.18** Stockholders' Agreement, dated as of October 9, 1997, among T/SF
Communications Corporation, VS&A-T/SF, L.L.C. and Fir Tree Value
Fund, L.P., Fir Tree Institutional Value Fund, L.P. and Fir Tree
Value Partners, LDC
10.19* Consulting Agreement by and between Howard G. Barnett, Jr. and T/SF
Communications Corporation, dated October 9, 1997
10.20* Consulting Agreement by and between Robert F. Craine, Jr. and T/SF
Communications Corporation, dated October 9, 1997
10.21* Consulting Agreement by and between J. Gary Mourton and T/SF
Communications Corporation, dated October 9, 1997
10.22 T/SF Communications Corporation 1991 Incentive Stock Plan
(incorporated herein by reference to Exhibit A to the Registrant's
Proxy Statement for Annual Meeting of Stockholders dated May 23,
1994)
10.23 Settlement Agreement, dated and effective as of December 12, 1995,
by and between T/SF Communications Corporation and Robert J. Swab
(incorporated herein by reference to Exhibit 10.18 to the
Registrant's Annual Report on Form 10-K for the year ended December
31, 1995)
10.24 Operating Agreement for 1995 Land Company, L.L.C., dated December
20, 1994, by and between John C. Bumgarner, Jr. and Tribune/Swab-
Fox (incorporated herein by reference to Exhibit 10.20 of
Tribune/Swab-Fox's Annual Report on Form 10-K for the year ended
December 31, 1994)
10.25 Revolving Credit Agreement, dated as of June 30, 1996, by and among
T/SF Communications Corporation, T/SF Investment Co., and BancFirst
(incorporated herein by reference to Exhibit 10.1 to the
Registrant's Quarterly Report on Form 10-Q for the Quarter Ended
June 30, 1996 ("Form 10-Q"))
10.26 Pledge Agreement, dated as of June 30, 1996, between T/SF
Communications Corporation and BancFirst (incorporated herein by
reference to Exhibit 10.2 to the Form 10-Q)
10.27 Pledge Agreement, dated as of June 30, 1996, between T/SF
Investment Co. and BancFirst (incorporated herein by reference to
Exhibit 10.3 to the Form 10-Q)
10.28 Stock Purchase Agreement, dated as of August 15, 1996, by and among
T/SF Investment Co. and the shareholders of CORSEARCH, Inc.
(incorporated herein by reference to Exhibit 2.1 to the
Registrant's Current Report on Form 8-K, dated August 30, 1996,
with respect to events occurring on August 15, 1996, amended
October 29, 1996 (the "Form 8-K"))
II-4
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.29** T/SF Communications Corporation and T/SF Holdings, LLC Key Employee
Bonus Plan
12* Statement re: computation of ratios
21** Subsidiaries of the Issuer
23.1** Consent of Arthur Andersen, LLP
23.2 Consent of Proskauer Rose LLP (contained in opinion filed as
Exhibit 5)
24* Issuer Power of Attorney
25* Statement of eligibility of trustee (Form T-1)
27* Financial Data Schedule
- ----------------
* Previously filed.
** Filed herewith.
ITEM 22. UNDERTAKINGS
Each of the undersigned registrant hereby undertakes that:
(1) To file, during any period in which officers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) 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. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high and of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, 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.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
(4) 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 or party 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.
II-5
(5) That every prospectus (i) that is filed pursuant to paragraph (4)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Securities Act of 1933 and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to this registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, 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.
(6) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
a registrant pursuant to the provisions described in Item 15, or otherwise,
each 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 of 1933 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, each
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 of 1933 and will be governed by the
final adjudication of such issue.
(7) That, for purposes of determining any liability under the Securities Act
of 1933, each filing of a registrant's annual report pursuant to Section 13(a)
or Section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report pursuant
to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated
by reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(8) To respond to requests for information that is incorporated by reference
into the prospectus pursuant to Items 4, 10(b), 11, or 13 of Form S-4, 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
the registration statement through the date of responding to the request.
(9) To supply by means of post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when it
became effective.
II-6
SIGNATURES AND POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on the 6th day of February, 1998.
Date: February 6, 1998
T/SF COMMUNICATIONS CORPORATION
/s/ Ian L. M. Thomas
By___________________________________
IAN L. M. THOMAS,
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to Registration Statement has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
Chairman of the
/s/ John S. Suhler* Board February 6,
- ------------------------------------- 1998
JOHN S. SUHLER
/s/ Ian L.M. Thomas President, Chief
- ------------------------------------- Executive Officer, February 6,
IAN L.M. THOMAS and Director 1998
/s/ Steven J. Hunt* Chief Financial February 6,
- ------------------------------------- Officer and 1998
STEVEN J. HUNT Treasurer
Director
/s/ John J. Veronis* February 6,
- ------------------------------------- 1998
JOHN J. VERONIS
/s/ Jeffrey T. Stevenson* Director February 6,
- ------------------------------------- 1998
JEFFREY T. STEVENSON
/s/ S. Gerard Benford* Director February 6,
- ------------------------------------- 1998
S. GERARD BENFORD
Director
/s/ Jeffrey Tannenbaum* February 6,
- ------------------------------------- 1998
JEFFREY TANNENBAUM
Director
/s/ John Rolfe* February 6,
- ------------------------------------- 1998
JOHN ROLFE
Director
/s/ Stefan M. Selig February 6,
- ------------------------------------- 1998
STEFAN M. SELIG
/s/ Ian L. M. Thomas
*By ____________________________
IAN L. M. THOMAS ATTORNEY-IN-FACT
II-7
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on the 6th day of February, 1998.
ATWOOD CONVENTION PUBLISHING, INC.
/s/ Ian L. M. Thomas
By______________________________
IAN L. M. THOMAS,
CHAIRMAN OF THE BOARD
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to Registration Statement has been signed by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Ian L. M. Thomas Chairman of the February 6,
- ------------------------------------- Board (principal 1998
IAN L. M. THOMAS executive officer)
/s/ Steven J. Hunt Treasurer and February 6,
- ------------------------------------- Director (principal 1998
STEVEN J. HUNT accounting officer
and principal
financial officer)
/s/ Brian A. Meyer Director February 6,
- ------------------------------------- 1998
BRIAN A. MEYER
II-8
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on the 6th day of February, 1998.
CASINO PUBLISHING COMPANY
/s/ Ian L. M. Thomas
By______________________________
IAN L. M. THOMAS
CHAIRMAN OF THE BOARD
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to Registration Statement has been signed by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Ian L. M. Thomas Chairman of the February 6,
- ------------------------------------- Board (principal 1998
IAN L. M. THOMAS executive officer)
/s/ Steven J. Hunt Treasurer and February 6,
- ------------------------------------- Director (principal 1998
STEVEN J. HUNT accounting officer
and principal
financial officer)
/s/ Brian A. Meyer Director February 6,
- ------------------------------------- 1998
BRIAN A. MEYER
II-9
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on the 6th day of February, 1998.
CORSEARCH, INC.
/s/ Ian L. M. Thomas
By______________________________
IAN L. M. THOMAS,
CHAIRMAN OF THE BOARD
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to Registration Statement has been signed by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Ian L. M. Thomas Chairman of the February 6,
- ------------------------------------- Board (principal 1998
executive officer)
IAN L. M. THOMAS
/s/ Steven J. Hunt Treasurer and February 6,
- ------------------------------------- Director (principal 1998
accounting officer
STEVEN J. HUNT and principal
financial officer)
/s/ Brian A. Meyer Director February 6,
- ------------------------------------- 1998
BRIAN A. MEYER
/s/ John Prunier Director February 6,
- ------------------------------------- 1998
JOHN PRUNIER
/s/ Howard G. Barnett, Jr. Director February 6,
- ------------------------------------- 1998
HOWARD G. BARNETT, JR.
/s/ John Rolfe Director February 6,
- ------------------------------------- 1998
JOHN ROLFE
Director
- -------------------------------------
ROBERT CAPSHAW
Director
- -------------------------------------
ROBERT FRANK
/s/ John S. Suhler Director February 6,
- ------------------------------------- 1998
JOHN S. SUHLER
/s/ Jeffrey T. Stevenson Director February 6,
- ------------------------------------- 1998
JEFFREY T. STEVENSON
/s/ S. Gerard Benford Director February 6,
- ------------------------------------- 1998
S. GERARD BENFORD
II-10
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on the 6th day of February, 1998.
CRIMESEARCH, INC.
/s/ Ian L. M. Thomas
By______________________________
IAN L. M. THOMAS
CHAIRMAN OF THE BOARD
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to Registration Statement has been signed by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Ian L. M. Thomas Chairman of the February 6,
- ------------------------------------- Board (principal 1998
executive officer)
IAN L. M. THOMAS
/s/ Steven J. Hunt Treasurer and February 6,
- ------------------------------------- Director (principal 1998
STEVEN J. HUNT accounting officer
and principal
financial officer)
/s/ Brian A. Meyer Director February 6,
- ------------------------------------- 1998
BRIAN A. MEYER
II-11
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on the 6th day of February, 1998.
EXPO MAGAZINE, INC.
/s/ Ian L. M. Thomas
By______________________________
IAN L. M. THOMAS
CHAIRMAN OF THE BOARD
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to Registration Statement has been signed by the following persons on behalf
of the Registrant in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Ian L. M. Thomas Chairman of the February 6,
- ------------------------------------- Board (principal 1998
executive officer)
IAN L. M. THOMAS
/s/ Steven J. Hunt Treasurer and February 6,
Director (principal 1998
accounting officer
and principal
financial officer)
- -------------------------------------
STEVEN J. HUNT
/s/ Brian A. Meyer Director February 6,
1998
- -------------------------------------
BRIAN A. MEYER
II-12
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on the 6th day of February, 1998.
GALAXY DESIGN & PRINTING, INC.
/s/ Ian L. M. Thomas
By______________________________
IAN L. M. THOMAS
CHAIRMAN OF THE BOARD
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to Registration Statement has been signed by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Ian L. M. Thomas Chairman of the February 6,
- ------------------------------------- Board (principal 1998
executive officer)
IAN L. M. THOMAS
/s/ Steven J. Hunt Treasurer and February 6,
Director (principal 1998
accounting officer
and principal
financial officer)
- -------------------------------------
STEVEN J. HUNT
/s/ Brian A. Meyer Director February 6,
1998
- -------------------------------------
BRIAN A. MEYER
II-13
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on the 6th day of February, 1998.
GALAXY REGISTRATION, INC.
/s/ Ian L. M. Thomas
By______________________________
IAN L. M. THOMAS
CHAIRMAN OF THE BOARD
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to Registration Statement has been signed by the following persons on behalf
of the Registrant in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Ian L. M. Thomas Chairman of the February 6,
- ------------------------------------- Board (principal 1998
executive officer)
IAN L. M. THOMAS
/s/ Steven J. Hunt Treasurer and February 6,
Director (principal 1998
accounting officer
and principal
financial officer)
- -------------------------------------
STEVEN J. HUNT
/s/ Brian A. Meyer Director February 6,
1998
- -------------------------------------
BRIAN A. MEYER
II-14
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on the 6th day of February, 1998.
G.E.M. COMMUNICATIONS, INC.
/s/ Ian L. M. Thomas
By______________________________
IAN L. M. THOMAS
CHAIRMAN OF THE BOARD
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to Registration Statement has been signed by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Ian L. M. Thomas Chairman of the February 6,
- ------------------------------------- Board (principal 1998
executive officer)
IAN L. M. THOMAS
/s/ Steven J. Hunt Treasurer and February 6,
Director (principal 1998
accounting officer
and principal
financial officer)
- -------------------------------------
STEVEN J. HUNT
/s/ Brian A. Meyer Director February 6,
1998
- -------------------------------------
BRIAN A. MEYER
II-15
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on the 6th day of February, 1998.
TRANSPORTATION COMMUNICATIONS
SERVICES, INC.
/s/ Ian L. M. Thomas
By______________________________
IAN L. M. THOMAS
CHAIRMAN OF THE BOARD
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to Registration Statement has been signed by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Ian L. M. Thomas Chairman of the February 6,
- ------------------------------------- Board (principal 1998
executive officer)
IAN L. M. THOMAS
/s/ Steven J. Hunt Treasurer and February 6,
Director (principal 1998
accounting officer
and principal
financial officer)
- -------------------------------------
STEVEN J. HUNT
/s/ Brian A. Meyer Director February 6,
1998
- -------------------------------------
BRIAN A. MEYER
II-16
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on the 6th day of February, 1998.
T/SF EUROPE, INC.
/s/ Ian L. M. Thomas
By______________________________
IAN L. M. THOMAS
CHAIRMAN OF THE BOARD
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to Registration Statement has been signed by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Ian L. M. Thomas Chairman of the February 6,
- ------------------------------------- Board (principal 1998
executive officer)
IAN L. M. THOMAS
/s/ Steven J. Hunt Treasurer and February 6,
Director (principal 1998
accounting officer
and principal
financial officer)
- -------------------------------------
STEVEN J. HUNT
/s/ Brian A. Meyer Director February 6,
1998
- -------------------------------------
BRIAN A. MEYER
II-17
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on the 6th day of February, 1998.
T/SF INVESTMENT CO.
/s/ Ian L. M. Thomas
By______________________________
IAN L. M. THOMAS
CHAIRMAN OF THE BOARD
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to Registration Statement has been signed by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Ian L. M. Thomas Chairman of the February 6,
- ------------------------------------- Board (principal 1998
executive officer)
IAN L. M. THOMAS
/s/ Steven J. Hunt Treasurer and February 6,
Director (principal 1998
accounting officer
and principal
financial officer)
- -------------------------------------
STEVEN J. HUNT
/s/ Brian A. Meyer Director February 6,
1998
- -------------------------------------
BRIAN A. MEYER
II-18
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on the 6th day of February, 1998.
T/SF OF NEVADA, INC.
/s/ Ian L. M. Thomas
By______________________________
IAN L. M. THOMAS
CHAIRMAN OF THE BOARD
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to Registration Statement has been signed by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Ian L. M. Thomas Chairman of the February 6,
- ------------------------------------- Board (principal 1998
executive officer)
IAN L. M. THOMAS
/s/ Steven J. Hunt Treasurer and February 6,
Director (principal 1998
accounting officer
and principal
financial officer)
- -------------------------------------
STEVEN J. HUNT
/s/ Brian A. Meyer Director February 6,
1998
- -------------------------------------
BRIAN A. MEYER
II-19
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on the 6th day of February, 1998.
TRANSPORTATION INFORMATION SERVICES,
INC.
/s/ Ian L. M. Thomas
By______________________________
IAN L. M. THOMAS
CHAIRMAN OF THE BOARD
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to Registration Statement has been signed by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Ian L. M. Thomas Chairman of the February 6,
- ------------------------------------- Board (principal 1998
executive officer)
IAN L. M. THOMAS
/s/ Steven J. Hunt Treasurer and February 6,
Director (principal 1998
accounting officer
and principal
financial officer)
- -------------------------------------
STEVEN J. HUNT
/s/ Brian A. Meyer Director February 6,
1998
- -------------------------------------
BRIAN A. MEYER
II-20
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on the 6th day of February, 1998.
T/SF HOLDINGS, LLC
/s/ Ian L. M. Thomas
By______________________________
IAN L. M. THOMAS
CHAIRMAN OF THE BOARD
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to Registration Statement has been signed by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Ian L. M. Thomas Chairman of the February 6,
- ------------------------------------- Board (principal 1998
executive officer)
IAN L. M. THOMAS and Manager
/s/ Jeffrey T. Stevenson Manager February 6,
- ------------------------------------- 1998
JEFFREY T. STEVENSON
/s/ Jeffrey Tannenbaum Manager February 6,
- ------------------------------------- 1998
JEFFREY TANNENBAUM
/s/ S. Gerard Benford Manager February 6,
- ------------------------------------- 1998
S. GERARD BENFORD
/s/ Steven J. Hunt Treasurer (principal February 6,
- ------------------------------------- accounting officer 1998
and principal
STEVEN J. HUNT financial officer)
II-21
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on the 6th day of February, 1998.
GALAXY REGISTRATION, LLC
/s/ Ian L. M. Thomas
By______________________________
IAN L. M. THOMAS
CHAIRMAN OF THE BOARD
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to Registration Statement has been signed by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Ian L. M. Thomas Chairman of the February 6,
- ------------------------------------- Board (principal 1998
executive officer)
IAN L. M. THOMAS and Manager
/s/ Steven J. Hunt Treasurer (principal February 6,
accounting officer 1998
and principal
financial officer)
and Manager
- -------------------------------------
STEVEN J. HUNT
/s/ Brian A. Meyer Manager February 6,
1998
- -------------------------------------
BRIAN A. MEYER
II-22
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on the 6th day of February, 1998.
ATWOOD PUBLISHING, LLC
/s/ Ian L. M. Thomas
By______________________________
IAN L. M. THOMAS
CHAIRMAN OF THE BOARD
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to Registration Statement has been signed by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Ian L. M. Thomas Chairman of the February 6,
- ------------------------------------- Board (principal 1998
executive officer)
IAN L. M. THOMAS and Manager
/s/ Steven J. Hunt Treasurer (principal February 6,
accounting officer 1998
and principal
financial officer)
and Manager
- -------------------------------------
STEVEN J. HUNT
/s/ Brian A. Meyer Manager February 6,
1998
- -------------------------------------
BRIAN A. MEYER
II-23
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on the 6th day of February, 1998.
GEM GAMING, LLC
/s/ Ian L. M. Thomas
By______________________________
IAN L. M. THOMAS
CHAIRMAN OF THE BOARD
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to Registration Statement has been signed by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Ian L. M. Thomas Chairman of the February 6,
- ------------------------------------- Board (principal 1998
executive officer)
IAN L. M. THOMAS and Manager
/s/ Steven J. Hunt Treasurer (principal February 6,
accounting officer 1998
and principal
financial officer)
and Manager
- -------------------------------------
STEVEN J. HUNT
/s/ Brian A. Meyer Manager February 6,
1998
- -------------------------------------
BRIAN A. MEYER
II-24
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on the 6th day of February, 1998.
GEM NEVADA, LLC
/s/ Ian L. M. Thomas
By______________________________
IAN L. M. THOMAS
CHAIRMAN OF THE BOARD
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to Registration Statement has been signed by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Ian L. M. Thomas Chairman of the February 6,
- ------------------------------------- Board (principal 1998
executive officer)
IAN L. M. THOMAS and Manager
/s/ Steven J. Hunt Treasurer (principal February 6,
accounting officer 1998
and principal
financial officer)
and Manager
- -------------------------------------
STEVEN J. HUNT
/s/ Brian A. Meyer Manager February 6,
1998
- -------------------------------------
BRIAN A. MEYER
II-25
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on the 6th day of February, 1998.
CASINO EXECUTIVE, LLC
/s/ Ian L. M. Thomas
By______________________________
IAN L. M. THOMAS
CHAIRMAN OF THE BOARD
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to Registration Statement has been signed by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Ian L. M. Thomas Chairman of the February 6,
- ------------------------------------- Board (principal 1998
executive officer)
IAN L. M. THOMAS and Manager
/s/ Steven J. Hunt Treasurer (principal February 6,
accounting officer 1998
and principal
financial officer)
and Manager
- -------------------------------------
STEVEN J. HUNT
/s/ Brian A. Meyer Manager February 6,
1998
- -------------------------------------
BRIAN A. MEYER
II-26
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on the 6th day of February, 1998.
EXPO MAGAZINE, LLC
/s/ Ian L. M. Thomas
By______________________________
IAN L. M. THOMAS
CHAIRMAN OF THE BOARD
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to Registration Statement has been signed by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Ian L. M. Thomas Chairman of the February 6,
- ------------------------------------- Board (principal 1998
executive officer)
IAN L. M. THOMAS and Manager
/s/ Steven J. Hunt Treasurer (principal February 6,
accounting officer 1998
and principal
financial officer)
and Manager
- -------------------------------------
STEVEN J. HUNT
/s/ Brian A. Meyer Manager February 6,
1998
- -------------------------------------
BRIAN A. MEYER
II-27
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on the 6th day of February, 1998.
T/SF OPERATING, LLC
/s/ Ian L. M. Thomas
By______________________________
IAN L. M. THOMAS
CHAIRMAN OF THE BOARD
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to Registration Statement has been signed by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Ian L. M. Thomas Chairman of the February 6,
- ------------------------------------- Board (principal 1998
executive officer)
IAN L. M. THOMAS and Manager
/s/ Steven J. Hunt Treasurer (principal February 6,
accounting officer 1998
and principal
financial officer)
and Manager
- -------------------------------------
STEVEN J. HUNT
/s/ Brian A. Meyer Manager February 6,
1998
- -------------------------------------
BRIAN A. MEYER
II-28
EXHIBIT 25
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
----------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(B)(2)
----------------
IBJ SCHRODER BANK & TRUST COMPANY
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
NEW YORK 13-5375195
(JURISDICTION OF (I.R.S.
INCORPORATION EMPLOYER
OR ORGANIZATION IF NOT A IDENTIFICATION
U.S. NATIONAL BANK) NO.)
ONE STATE STREET, NEW YORK, 10004
NEW YORK (ZIP CODE)
(ADDRESS OF PRINCIPAL
EXECUTIVE OFFICES)
LUIS PEREZ, ASSISTANT VICE PRESIDENT
IBJ SCHRODER BANK & TRUST COMPANY
ONE STATE STREET
NEW YORK, NEW YORK 10004
(212) 858-2000
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
T/SF COMMUNICATIONS CORPORATION
(EXACT NAMES OF OBLIGOR AS SPECIFIED IN ITS CHARTER)
DELAWARE
(STATE OR OTHER JURISDICTION 73-1341805
OF (I.R.S.
INCORPORATION OR EMPLOYER
ORGANIZATION) IDENTIFICATION
NO.)
888 SEVENTH AVENUE, 28TH
FLOOR 10106
NEW YORK, NEW YORK (ZIP CODE)
(ADDRESS OF PRINCIPAL
EXECUTIVE OFFICES)
$100,000,000 10 3/8% SENIOR SUBORDINATED NOTES DUE 2007
----------------
(TITLE OF INDENTURE SECURITIES)
ITEM 1.GENERAL INFORMATION
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which it
is subject.
New York State Banking Department
Two Rector Street
New York, New York
Federal Deposit Insurance Corporation
Washington, D.C.
Federal Reserve Bank of New York
Second District,
33 Liberty Street
New York, New York
(b) Whether it is authorized to exercise corporate trust powers.
Yes
ITEM 2.AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
The obligor is not an affiliate of the trustee.
ITEM 13.DEFAULTS BY THE OBLIGOR.
(a) State whether there is or has been a default with respect to the
securities under this indenture. Explain the nature of any such
default.
None
(b) If the trustee is a trustee under another indenture under which any
other securities, or certificates of interest or participation in any
other securities, of the obligors are outstanding, or is trustee for
more than one outstanding series of securities under the indenture,
state whether there has been a default under any such indenture or
series, identify the indenture or series affected, and explain the
nature of any such default.
None
ITEM 16.LIST OF EXHIBITS.
List below all exhibits filed as part of this statement of eligibility.
*1. A copy of the Charter of IBJ Schroder Bank & Trust Company as amended
to date. (See Exhibit 1A to Form T-1, Securities and Exchange
Commission File No. 22-18460).
*2. A copy of the Certificate of Authority of the trustee to Commence
Business (Included in Exhibit 1 above).
*3. A copy of the Authorization of the trustee to exercise corporate trust
powers, as amended to date (See Exhibit 4 to Form T-1, Securities and
Exchange Commission File No. 22-19146).
*4. A copy of the existing By-Laws of the trustee, as amended to date (See
Exhibit 4 to Form T-1, Securities and Exchange Commission File No. 22-
19146).
2
5. Not Applicable
6. The consent of United States institutional trustee required by Section
321(b) of the Act.
7. A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining
authority.
- --------
* The Exhibits thus designated are incorporated herein by reference as
exhibits hereto. Following the description of such Exhibits is a reference
to the copy of the Exhibit heretofore filed with the Securities and Exchange
Commission, to which there have been no amendments or changes.
3
NOTE
In answering any item in this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor and its directors or
officers, the trustee has relied upon information furnished to it by the
obligor.
Inasmuch as this Form T-1 is filed prior to the ascertainment by the trustee
of all facts on which to base responsive answers to Item 2, the answer to said
Item is based on incomplete information.
Item 2, may, however, be considered as correct unless amended by an
amendment to this Form T-1.
Pursuant to General Instruction B, the trustee has responded to Items 1, 2
and 16 of this form since to the best knowledge of the trustee as indicated in
Item 13, the obligor is not in default under any indenture under which the
applicant is trustee.
4
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
trustee, IBJ Schroder Bank & Trust Company, a corporation organized and
existing under the laws of the State of New York, has duly caused this
statement of eligibility & qualification to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of New York, and State
of New York, on the 13th day of November, 1997.
IBJ SCHRODER BANK & TRUST COMPANY
/s/ Luis Perez
By___________________________________
Luis Perez
Assistant Vice President
5
EXHIBIT 6
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of
1939, as amended, in connection with the issuance by T/SF Communications
Corporation, of its $100,000,000 10 3/8% Senior Subordinated Notes Due 2007,
we hereby consent that reports of examinations by Federal, State, Territorial,
or District authorities may be furnished by such authorities to the Securities
and Exchange Commission upon request therefor.
IBJ SCHRODER BANK & TRUST COMPANY
/s/ Luis Perez
By___________________________________
Luis Perez
Assistant Vice President
Dated: November 13, 1997
6
EXHIBIT 7
CONSOLIDATED REPORT OF CONDITION OF
IBJ SCHRODER BANK & TRUST COMPANY
OF NEW YORK, NEW YORK
AND FOREIGN AND DOMESTIC SUBSIDIARIES
REPORT AS OF JUNE 30, 1997
DOLLAR AMOUNTS
IN THOUSANDS
--------------
ASSETS
Cash and balance due from depository institutions:
Noninterest-bearing balances and currency and coin........... $ 41,319
Interest-bearing balances.................................... 314,579
Securities: Held-to-maturity securities....................... 180,111
Available-for-sale securities................................. 47,600
Federal Funds sold and Securities purchased under agreements
to resell................................................... 694,859
Loans and lease financing receivables:
Loans and leases, net of unearned income......... $ 1,955,686
LESS: Allowance for loan and lease losses........ 62,876
LESS: Allocated transfer risk reserve............ --
Loans and leases, net of unearned income, allowance, and
reserve..................................................... 1,892,810
Trading assets held in trading accounts....................... 603
Premises and fixed assets (including capitalized leases)...... 3,709
Other real estate owned....................................... 202
Investments in unconsolidated subsidiaries and associated
companies.................................................... --
Customers' liability to this bank on acceptances outstanding.. 81
Intangible assets............................................. --
Other assets.................................................. 67,092
TOTAL ASSETS.................................................. $3,242,965
LIABILITIES
Deposits:
In domestic offices.......................................... $1,694,675
Noninterest-bearing............................. $ 263,641
Interest-bearing................................ 1,431,034
In foreign offices, Edge and Agreement subsidiaries, and
IBFs....................................................... 1,121,075
Noninterest-bearing............................. 17,535
Interest-bearing................................ 1,103,540
Federal funds purchased and securities sold under agreements
to repurchase in domestic offices of the bank and of its Edge
and Agreement subsidiaries, and in IBFs:
Federal Funds purchased and Securities sold under agreements
to repurchase............................................... 25,000
Demand notes issued to the U.S. Treasury...................... 60,000
Trading Liabilities........................................... 140
Other borrowed money:
a) With a remaining maturity of one year or less............. 38,369
b) With a remaining maturity of more than one year........... 1,763
c) With a remaining maturity of more than three years........ 2,242
Bank's liability on acceptances executed and outstanding...... 81
Subordinated notes and debentures............................. --
Other liabilities............................................. 69,908
TOTAL LIABILITIES............................................. 3,013,253
Limited-life preferred stock and related surplus.............. $ --
EQUITY CAPITAL
Perpetual preferred stock and related surplus................. $ --
Common stock.................................................. 29,649
Surplus (exclude all surplus related to preferred stock)...... 217,008
Undivided profits and capital reserves........................ (17,000)
Net unrealized gains (losses) on available-for-sale
securities................................................... 55
Cumulative foreign currency translation adjustments........... --
TOTAL EQUITY CAPITAL.......................................... 229,712
TOTAL LIABILITIES AND EQUITY CAPITAL.......................... $3,242,965
7
EXHIBITS INDEX
EXHIBIT PAGE
NUMBER DESCRIPTION NO.
------- ----------- ----
1.1** Purchase Agreement, dated October 24, 1997, by and between
First Union Capital Markets Corp. and T/SF Communications
Corporation
2.1** Stock Purchase Agreement, dated as of August 15, 1997, among
VS&A Communications Partners II, L.P., VS&A-T/SF Inc. and
T/SF Communications Corporation
3.1** Amended and Restated Certificate of Incorporation of T/SF
Communications Corporation
3.2** Amended and Restated By-laws of T/SF Communications
Corporation
3.3** Certificate of Incorporation of Casino Publishing Company
3.4** By-laws of Casino Publishing Company
3.5** Certificate of Incorporate of Expo Magazine, Inc.
3.6** By-laws of Expo Magazine, Inc.
3.7** Certificate of Incorporation of G.E.M. Communications, Inc.
3.8** By-laws of G.E.M. Communications, Inc.
3.9** Certificate of Incorporation of T/SF of Nevada, Inc.
3.10** By-laws of T/SF of Nevada, Inc.
3.11** Certificate of Incorporation of Atwood Convention Publishing,
Inc.
3.12** By-laws of Atwood Convention Publishing, Inc.
3.13** Certificate of Incorporation of Galaxy Registration, Inc.
3.14** By-laws of Galaxy Registration, Inc.
3.15** Certificate of Incorporation of Galaxy Design & Printing,
Inc.
3.16** By-laws of Galaxy Design & Printing, Inc.
3.17** Certificate of Incorporation of CORSEARCH, Inc
3.18** By-laws of CORSEARCH, Inc
3.19** Certificate of Incorporation of Crimesearch, Inc.
3.20** By-laws of Crimesearch, Inc.
3.21** Certificate of Incorporation of T/SF Europe, Inc.
3.22** By-laws of T/SF Europe, Inc.
3.23** Certificate of Incorporation of Transportation Communications
Services, Inc.
3.24** By-laws of Transportation Communications Services, Inc.
3.25** Certificate of Incorporation of T/SF Investment Co.
3.26** By-laws of T/SF Investment Co.
3.27** Certificate of Incorporation of Transportation Information
Services, Inc.
3.28** By-laws of Transportation Information Services, Inc.
3.29** Certificate of Formation of T/SF Holdings, LLC
3.30** Operating Agreement of T/SF Holdings, LLC
3.31** Certificate of Formation of T/SF Operating, LLC
3.32** Operating Agreement of T/SF Operating, LLC
3.33** Certificate of Formation of Galaxy Registration, LLC
EXHIBIT PAGE
NUMBER DESCRIPTION NO.
------- ----------- ----
3.34** Operating Agreement of Galaxy Registration, LLC
3.35** Certificate of Formation of Atwood Publishing, LLC
3.35(a)** Certificate of Amendment to Certificate of Formation of
Atwood Publishing, LLC
3.36** Operating Agreement of Atwood Publishing, LLC
3.37** Certificate of Formation of GEM Gaming, LLC
3.38** Operating Agreement of GEM Gaming, LLC
3.39** Certificate of Formation of GEM Nevada, LLC
3.40** Operating Agreement of GEM Nevada, LLC
3.41** Certificate of Formation of Casino Executive, LLC
3.42** Operating Agreement of Casino Executive, LLC
3.43** Certificate of Formation of EXPO Magazine, LLC
3.44** Operating Agreement of EXPO Magazine, LLC
4.1* Indenture, dated as of October 29, 1997, by and among T/SF
Communications Corporation, the Guarantors named therein
and IBJ Schroder Bank & Trust Company, as Trustee
4.1(a)** Form of Supplemental Indenture, by and among T/SF
Communications Corporation, the Guarantors named therein
and IBJ Schroder Bank & Trust Company, as Trustee
4.2* Registration Rights Agreement, dated as of October 29,
1997, by and among T/SF Communications Corporation, the
Guarantors (named therein) and First Union Capital Markets
Corp.
4.3 Form of Old Note (included in Indenture filed as Exhibit
4.1)
4.4 Form of New Note (included in Indenture filed as Exhibit
4.1)
4.5** Form of Letter of Transmittal to be used by tendering
holders of Old Notes in the Exchange Offer
5* Opinion of Proskauer Rose LLP
10.1* Senior Subordinated Credit Agreement, dated as of October
9, 1997, among T/SF Communications Corporation, the
Guarantors (named therein) and First Union Corporation (as
Lender and Agent)
10.2* Credit Agreement, dated as of October 9, 1997, among T/SF
Communications Corporation and First Union Corporation (as
Lender and Agent)
10.3** Security Agreement, dated as of October 9, 1997, among T/SF
Communications Corporation, the Guarantors (as defined
therein) and First Union National Bank
10.4** Stock Pledge Agreement, dated as of October 9, 1997, made
by VS&A-T/SF, Inc. and Fir Tree Value Fund, L.P., Fir Tree
Institutional Value Fund, L.P., and Fir Tree Value
Partners, LDC, in favor of First Union National Bank
10.5** Stock Pledge Agreement, dated as of October 9, 1997, made
by T/SF Communications Corporation in favor of First Union
National Bank
10.6** Stock Pledge Agreement, dated as of October 9, 1997, made
by T/SF Holdings, LLC, in favor of First Union National
Bank
10.7** Stock Pledge Agreement, dated as of October 9, 1997, made
by Atwood Convention Publishing, Inc., Galaxy Registration,
Inc., G.E.M. Communications, Inc., Transportation
Information Services, Inc., T/SF Investment Co. and T/SF of
Nevada, Inc., in favor of First Union National Bank
10.8** Employment Agreement by and between Richard A. Wimbish and
Transportation Information Services, Inc., dated as of
January 1, 1998
10.9** Form of Employment Agreement by and between Ian L.M. Thomas
and T/SF Communications Corporation
10.9(a)** Letter Agreement, dated October 9, 1997, by and between
VS&A Communications Partners, II, L.P., Veronis, Suhler &
Associates, Inc. and Ian L.M. Thomas
EXHIBIT PAGE
NUMBER DESCRIPTION NO.
------- ----------- ----
10.10** Employment Agreement by and between Steven J. Hunt and T/SF
Communications Corporation, dated as of November 10, 1997
10.11** Employment Agreement by and between Brian A. Meyer and T/SF
Communications Corporation, dated as of November 10, 1997
10.12** Employment Agreement by and between Michael Goodwin and
Galaxy Registration, LLC, dated as of January 1, 1998
10.13 Employment Agreement, dated August 15, 1996, by and between
CORSEARCH, Inc. and Robert Frank (incorporated herein by
reference to Exhibit 99.1 to the Form 8-K)
10.14** T/SF Communications Corporation Chief Executive Officer
Equity Appreciation Plan
10.15** T/SF Communications Corporation Supplemental Chief Executive
Officer Equity Appreciation Plan
10.16** T/SF Communications Corporation Chief Financial
Officer/General Counsel Equity Appreciation Plan
10.17** T/SF Communications Corporation Key Executive Equity
Appreciation Plan
10.18** Stockholders' Agreement, dated as of October 9, 1997, among
T/SF Communications Corporation, VS&A-T/SF, L.L.C. and Fir
Tree Value Fund, L.P., Fir Tree Institutional Value Fund,
L.P. and Fir Tree Value Partners, LDC
10.19* Consulting Agreement by and between Howard G. Barnett, Jr.
and T/SF Communications Corporation, dated October 9, 1997
10.20* Consulting Agreement by and between Robert F. Craine, Jr. and
T/SF Communications Corporation, dated October 9, 1997
10.21* Consulting Agreement by and between J. Gary Mourton and T/SF
Communications Corporation, dated October 9, 1997
10.22 T/SF Communications Corporation 1991 Incentive Stock Plan
(incorporated herein by reference to Exhibit A to the
Registrant's Proxy Statement for Annual Meeting of
Stockholders dated May 23, 1994)
10.23 Settlement Agreement, dated and effective as of December 12,
1995, by and between T/SF Communications Corporation and
Robert J. Swab (incorporated herein by reference to Exhibit
10.18 to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1995)
10.24 Operating Agreement for 1995 Land Company, L.L.C., dated
December 20, 1994, by and between John C. Bumgarner, Jr. and
Tribune/Swab-Fox (incorporated herein by reference to Exhibit
10.20 of Tribune/Swab-Fox's Annual Report on Form 10-K for
the year ended December 31, 1994)
10.25 Revolving Credit Agreement, dated as of June 30, 1996, by and
among T/SF Communications Corporation, T/SF Investment Co.,
and BancFirst (incorporated herein by reference to Exhibit
10.1 to the Registrant's Quarterly Report on Form 10-Q for
the Quarter Ended June 30, 1996 ("Form 10-Q"))
10.26 Pledge Agreement, dated as of June 30, 1996, between T/SF
Communications Corporation and BancFirst (incorporated herein
by reference to Exhibit 10.2 to the Form 10-Q)
10.27 Pledge Agreement, dated as of June 30, 1996, between T/SF
Investment Co. and BancFirst (incorporated herein by
reference to Exhibit 10.3 to the Form 10-Q)
10.28 Stock Purchase Agreement, dated as of August 15, 1996, by and
among T/SF Investment Co. and the shareholders of CORSEARCH,
Inc. (incorporated herein by reference to Exhibit 2.1 to the
Registrant's Current Report on Form 8-K, dated August 30,
1996, with respect to events occurring on August 15, 1996,
amended October 29, 1996 (the "Form 8-K"))
EXHIBIT PAGE
NUMBER DESCRIPTION NO.
------- ----------- ----
10.29** T/SF Communications Corporation and T/SF Holdings, LLC Key
Employee Bonus Plan
12* Statement re: computation of ratios
21** Subsidiaries of the Issuer
23.1** Consent of Arthur Andersen, LLP
23.2 Consent of Proskauer Rose LLP (contained in opinion filed as
Exhibit 5)
24* Issuer Power of Attorney
25* Statement of eligibility of trustee (Form T-1)
27* Financial Data Schedule
- ----------------
* Previously filed.
** Filed herewith.