<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 13E-3
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RULE 13E-3 TRANSACTION STATEMENT
(PURSUANT TO SECTION 13(E) OF THE
SECURITIES EXCHANGE ACT OF 1934
AMENDMENT NO. 2)
MICKELBERRY COMMUNICATIONS INCORPORATED
(NAME OF THE ISSUER)
MICKELBERRY COMMUNICATIONS INCORPORATED
MR. JAMES C. MARLAS
MICKELBERRY ACQUISITION CORPORATION
UNION CAPITAL CORPORATION
(NAME OF PERSONS FILING STATEMENT)
COMMON STOCK, $1.00 PAR VALUE
(TITLE OF CLASS OF SECURITIES)
594780 10 8
(CUSIP NUMBER OF CLASS OF SECURITIES)
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MR. GEORGE KANE
MICKELBERRY COMMUNICATIONS INCORPORATED
405 PARK AVENUE
NEW YORK, NEW YORK 10022
(212) 832-0303
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSONS AUTHORIZED TO RECEIVE
NOTICE AND COMMUNICATIONS ON BEHALF OF PERSON FILING STATEMENT)
----------------
This statement is filed in connection with (check the appropriate box):
a.[X] The filing of solicitation materials or an information statement subject
to Regulation 14A [17 CFR 240.14a-1 to 240.14a-103], Regulation 14C [17
CFR 240.14c-1 to 240.14c-101] or Rule 13e-3(c) [(S) 240.13e(c)] under
the Securities Exchange Act of 1934.
b.[_] The filing of a registration statement under the Securities Act of 1933.
c.[_] A tender offer.
d.[_] None of the above.
Check the following box if the soliciting materials or information statement
referred to in checking box (a) are preliminary copies: [X].
CALCULATION OF FILING FEE
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<TABLE>
<CAPTION>
TRANSACTION VALUATION: AMOUNT OF FILING FEE:
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<S> <C>
$15,022,000 $3,004.40
</TABLE>
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* The transaction was valued by determining the cost of purchasing 3,534,588
shares of Mickelberry Communications Incorporated common stock, par value
$1.00 per share ("Shares"), at a price of $4.25 per share.
[_]Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
Form or Registration No.: Filing Party:
Registration No. Date Filed:
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<PAGE>
ITEMS 1 THROUGH 15
This Rule 13e-3 Transaction Statement is being filed by Mickelberry
Communications Incorporated, a Delaware corporation ("MCI" or the "Company"),
James C. Marlas ("Marlas"), Mickelberry Acquisition Corporation, a Delaware
corporation ("Acquisition"), and Union Capital Corporation, a Nevada
Corporation ("Union Capital"), in connection with a merger between Acquisition
and MCI. The information contained in the proxy statement dated August ,
1995 (the "Proxy Statement"), filed concurrently herewith with the Securities
and Exchange Commission (the "Commission") in connection with such
transaction, a copy of which is annexed hereto as Exhibit (d), is incorporated
herein by reference in answer to Items 1 through 15 of this Rule 13e-3
Transaction Statement as set forth in the Cross Reference Sheet on the
following pages. Capitalized terms used but not defined herein shall have the
respective meanings ascribed to them in such Proxy Statement.
ITEM 16. ADDITIONAL INFORMATION
The information contained in the Proxy Statement filed concurrently herewith
with the Commission in connection with this Rule 13e-3 transaction is
incorporated herein by reference in its entirety.
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS
<TABLE>
<C> <S>
Exhibit (a) Letter Agreement dated November 23, 1994, by and among the
Major Shareholder, The Argosy Group L.P. and The Argosy
Securities Group L.P. is incorporated from Annex D to the Proxy
Statement filed as Exhibit (d) hereto.
Exhibit (b)(1) Opinion of Schroder Wertheim & Co. Incorporated (formerly known
as Wertheim Schroder & Co. Incorporated, "Schroder Wertheim")
dated August , 1995 is incorporated by reference from Annex B
to the Proxy Statement filed as Exhibit (d) hereto.
Exhibit (b)(2) Report of Schroder Wertheim to the Special Committee of
Mickelberry Communications Incorporated dated March 8, 1995.
Exhibit (b)(3) Written information handed out to the Special Committee during
the oral response to the Special Committee by Schroder Wertheim
during February 1995.
Exhibit (c) The Agreement and Plan of Merger, dated as of March 21, 1995 by
and among Marlas, Acquisition, Union Capital and the Company is
incorporated by reference from Annex A to Proxy Statement filed
as Exhibit (d) hereto.
Exhibit (d) Proxy Statement of the Company for the Special Meeting of
Shareholders of the Company.
Exhibit (e) The appraisal rights and the procedure for exercising such
appraisal rights are described in (1) "Special Factors--
Appraisal Rights" and (2) Annex C, in each case of the Proxy
Statement filed as Exhibit (d) hereto.
Exhibit (f) Not Applicable.
</TABLE>
1
<PAGE>
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
CAPTION IN PROXY STATEMENT/
SCHEDULE 13E-3 PROSPECTUS OR NOTICE OF
ITEM NUMBER SPECIAL MEETING
-------------- ---------------------------
<S> <C> <C>
1. Issuer and Class of Security Subject
to the Transaction
(a)................................... "Notice of Special Meeting of
Stockholders;" front cover page of the
Proxy Statement.
(b)................................... "Description of Company Capital Stock."
(c)................................... "Summary--Recent Market Prices"; and
"Recent Market Prices; Dividend History."
(d)................................... "Summary--Dividends during past two years;"
and "Recent Market Prices; Dividend
History."
(e)................................... Not Applicable.
(f)................................... "Beneficial Ownership of Shares of the
Company."
2. Identity and Background
(a)-(d)............................... "Introduction--Matters to be Considered at
the Meeting;" and "Certain Information
Regarding Newco, Union Capital and the
Major Shareholder."
(e)-(f)............................... To the best of the knowledge of MCI,
Acquisition, Union Capital and James C.
Marlas, during the past five years, no
executive officer, director or controlling
person of MCI, Acquisition or Union
Capital, including James C. Marlas: (i)
has been convicted in a criminal
proceeding (excluding traffic violations
or similar misdemeanors); or (ii) has been
a party to a civil proceeding of a
judicial or administrative body of
competent jurisdiction and as a result of
such proceeding was or is subject to a
judgment, decree or final order enjoining
further violations of, or prohibiting
activities subject to, federal or state
securities laws or finding any violation
with respect to such laws.
(g)................................... James C. Marlas is a citizen of the United
States.
3. Past Contracts, Transactions or
Negotiations
(a)(1)................................ Not Applicable.
(a)(2)-(b)............................ "Summary--The Merger," "--Purpose and
Reasons for the Merger"; "Special
Factors--Background of the Merger" and "--
Interests of Certain Persons in the
Merger; Conflicts of Interest;" and "The
Merger."
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
CAPTION IN PROXY STATEMENT/
SCHEDULE 13E-3 PROSPECTUS OR NOTICE OF
ITEM NUMBER SPECIAL MEETING
-------------- ---------------------------
<S> <C> <C>
4. Terms of Transaction
(a)................................... "Introduction--Matters to be Considered at
the Meeting;" "Summary--The Merger;"
"Special Factors--Structure and Purpose of
the Merger;" "The Merger--General;" and
"--Conditions to the Merger, Waiver."
(b)................................... "Notice of Special Meeting of
Shareholders;" "Introduction--Matters to
be Considered at the Meeting;" "Summary--
The Merger" and "Special Factors--
Interests of Certain Persons in the
Merger; Conflicts of Interest."
5. Plans or Proposals of the Issuer or
Affiliate
(a)-(e)............................... "Introduction--Matters to be Considered at
the Meeting;" "Summary--The Merger," "--
Purpose and Reasons for the Merger;"
"Special Factors--Background of the
Merger," "--Structure and Purpose of the
Merger;" "--Certain Effects of the
Merger," "The Merger--General," and "--
Conditions to the Merger, Waiver."
(f)-(g)............................... "Special Factors--Background of the
Merger," and "Structure and Purpose of the
Merger;" "--Certain Effects of the
Merger;" and "Current Information:
Delisting and Deregistration."
6. Source and Amounts of Funds or Other
Consideration
(a)................................... "Special Factors--Financing of the Merger."
(b)................................... "Summary--Expenses of the Merger"; and
"Special Factors--Expenses of the Merger."
(c) and (d)........................... "Special Factors--Financing of the Merger."
7. Purpose(s), Alternatives, Reasons and
Effects
(a)-(c)............................... "Introduction--Purpose and Reasons for the
Merger;" "Special Factors--Background of
the Merger;" "--Proceedings and
Recommendation of the Special Committee
and the Board, Fairness of the
Transaction;" "--Structure and Purpose of
the Merger;" and "--Certain Effects of the
Merger."
(d)................................... "Special Factors--Background of the
Merger;" "--Structure and Purpose of the
Merger;" "--Certain Effects of the
Merger;" "--Certain Federal Income Tax
Consequences of the Merger" and "The
Merger."
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
CAPTION IN PROXY STATEMENT/
SCHEDULE 13E-3 PROSPECTUS OR NOTICE OF
ITEM NUMBER SPECIAL MEETING
-------------- ---------------------------
<S> <C> <C>
8. Fairness of the Transaction
(a)................................... "Summary--Recommendation of the Special
Committee and the Board, Fairness of the
Transaction;" and "Special Factors--
Background of the Merger," and "--
Proceedings and Recommendation of the
Special Committee and the Board, Fairness
of the Transaction."
(b)................................... "Summary--Recommendation of the Special
Committee and the Board, Fairness of the
Transaction;" "Special Factors--
Proceedings and Recommendation of the
Special Committee and the Board, Fairness
of the Transaction" and "--Opinion of the
Financial Advisor."
(c)................................... "Summary--Required Vote", and "The Merger--
Required Vote."
(d)................................... "Special Factors--Background of the
Merger;" "--Proceedings and Recommendation
of the Special Committee and the Board,
Fairness of the Transaction", and "--
Opinion of Financial Advisor."
(e)................................... "Special Factors--Background of the
Merger," "--Proceedings and Recommendation
of the Special Committee and the Board,
Fairness of the Transaction."
(f)................................... Not applicable.
9. Reports, Opinions, Appraisals and
Certain Negotiations
(a)-(c)............................... "Special Factors--Background of the
Merger;" "--Opinion of Financial Advisor;"
opinion of Schroder Wertheim attached as
Annex B to the Proxy Statement; report of
Schroder Wertheim to the Special Committee
of Mickelberry Communications Incorporated
and written information handed out to the
Special Committee during the oral response
to the Special Committee by Schroder
Wertheim, filed hereto as Exhibits (d),
(b)(2) and (b)(3), respectively, are
incorporated herein by reference.
10. Interest in Securities of the Issuer
(a)................................... "Beneficial Ownership of Shares of the
Company."
(b)................................... "Beneficial Ownership of Shares of the
Company" and "Certain Transactions in
Company Stock."
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
CAPTION IN PROXY STATEMENT/
SCHEDULE 13E-3 PROSPECTUS OR NOTICE OF
ITEM NUMBER SPECIAL MEETING
-------------- ---------------------------
<S> <C> <C>
11. Contracts, Arrangements or
Understandings with Respect to the "Summary--The Merger;" "The Merger--
Issuer's Securities.................. General;" "--Conditions to the Merger,
Waiver" and The Agreement and Plan of
Merger in Annex A to the Proxy Statement,
filed as Exhibit (d) hereto, is
incorporated herein by reference.
12. Present Intention and Recommendation
of Certain Persons with Regard to the
Transaction
(a)-(b)............................... "Introduction--Voting at the Meeting;" "--
Proxies;" "Summary--Required Vote", "--
Recommendation of the Special Committee
and the Board, Fairness of the
Transaction;" "Special Factors--
Proceedings and Recommendation of the
Special Committee and the Board, Fairness
of the Transaction;" "--Structure and
Purpose of the Merger" and "The Merger--
Required Vote."
13. Other Provisions of the Transaction
(a)................................... "Special Factors--Appraisal Rights."
(b)................................... "Summary--Expenses of The Merger", and
"Special Factors--Expenses of the Merger."
(c)................................... Not Applicable.
14. Financial Statements
(a)................................... "Selected Consolidated Financial Data" and
"Financial Statements."
(b)................................... "Financial Statements--Pro Forma Financial
Data."
15. Persons and Assets Employed, Retained
or Utilized
(a)-(b)............................... "Introduction--Proxies" and "Proxy
Solicitation."
</TABLE>
5
<PAGE>
ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE TRANSACTION.
(a) The name of the Issuer of the class of equity security which is the
subject of the Rule 13e-3 transaction is Mickelberry Communications
Incorporated and the address of its principal executive offices is 405 Park
Avenue New York, New York 10022. All cross references in this Statement refer
to captions in the Proxy Statement.
(b) The relevant information set forth on the Cover Page of the Proxy
Statement and under the caption "Description of Company Capital Stock" is
incorporated herein by reference.
(c) The relevant information set forth under the caption "Summary--Recent
Market Prices" and "Recent Market Prices--Dividend History" is incorporated
herein by reference.
(d) The relevant information set forth under the caption "Summary--Dividends
during past two years" and "Recent Market Prices--Dividend History" is
incorporated herein by reference.
(e) Not applicable.
(f) The relevant information set forth under the caption "Beneficial
Ownership of Shares of the Company" is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d) This Statement is being filed by Marlas, Acquisition, Union Capital
and the Company (the last being the issuer of the subject security). The
relevant information set forth on the Cover Page of the Proxy Statement and set
forth under the captions "Introduction--Matters to be Considered at the
Meeting;" and "Certain Information Regarding Newco, Union Capital and the Major
Shareholder" is incorporated herein by reference.
(e) and (f) To the best knowledge of Marlas, Acquisition, Union Capital and
the Company during the past five years no executive officer, director or
controlling person of Marlas, Acquisition, Union Capital or the Company
including James C. Marlas (i) has been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) or (ii) was a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
and, as a result of such proceeding, was or is subject to a judgment, decree or
final order enjoining future violations of, or prohibiting activities subject
to, federal or state securities laws or finding any violation of such laws.
(g) James C. Marlas is a citizen of the United States.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS.
(a)(1) Not Applicable.
(a)(2) and (b) The relevant information set forth under the captions
"Summary--The Merger," "Special Factors--Background of the Merger," and "--
Interests of Certain Persons in the Merger; Conflicts of Interest" and "The
Merger" is incorporated herein by reference.
ITEM 4. TERMS OF THE TRANSACTION.
(a) The relevant information set forth under the captions "Introduction--
Matters to be Considered at the Meeting," "Summary--The Merger," "Special
Factors--Structure and Purpose of the Merger" and "The Merger --General"; and
"--Conditions to the Merger, Waiver" is incorporated herein by reference.
(b) The relevant information set forth under the captions "Notice of Special
Meeting of Shareholders;" "Introduction--Matters to be Considered at the
Meeting," "Summary--The Merger," and "Special Factors--Interests of Certain
Persons in the Merger; Conflicts of Interest."
6
<PAGE>
ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE.
(a)-(e) The relevant information set forth under the captions
"Introduction--Matters to be Considered at the Meeting," "Summary--The
Merger," "--Purpose and Reasons for the Merger," "Special Factors--Background
of the Merger," and "Structure and Purpose of the Merger," "--Certain Effects
of the Merger," "The Merger--General," and "--Conditions to the Merger,
Waiver" is incorporated herein by reference.
(f)-(g) The relevant information set forth under the captions "Special
Factors--Background of the Merger," "--Structure and Purpose of the Merger,"
"--Certain Effects of the Merger," and "Current Information: Delisting and
Deregistration" is incorporated herein by reference.
ITEM 6. SOURCE AND AMOUNTS OF FUNDS OR OTHER CONSIDERATION.
(a) The relevant information set forth under the caption "Special Factors--
Financing of the Merger" is incorporated herein by reference.
(b) The relevant information set forth under the caption "Summary--Expenses
of the Merger" and "Special Factors--Expenses of the Merger," is incorporated
herein by reference.
(c) and (d) The relevant information set forth under the caption "Special
Factors--Financing of the Merger" is incorporated herein by reference.
ITEM 7. PURPOSE(S), ALTERNATIVES, REASONS AND EFFECTS.
(a)-(c) The relevant information set forth under the captions
"Introduction--Purpose and Reasons for the Merger," "Special Factors--
Background of the Merger," "--Structure and Purpose of the Merger" "--Certain
Effects of the Merger," and "--Proceedings and Recommendation of the Special
Committee and the Board, Fairness of the Transaction" is incorporated herein
by reference.
(d) The relevant information set forth under the captions "Special Factors--
Background of the Merger," "--Structure and Purpose of the Merger," "--Certain
Effects of the Merger" and "--Certain Federal Income Tax Consequences of the
Merger" and "The Merger" is incorporated herein by reference.
ITEM 8. FAIRNESS OF THE TRANSACTION.
(a) The relevant information set forth under the captions "Summary--
Recommendation of the Special Committee and the Board, Fairness of the
Transaction," "Special Factors--Background of the Merger," and "--Proceedings
and Recommendation of the Special Committee and the Board, Fairness of the
Transaction" is incorporated herein by reference.
(b) The relevant information set forth under the captions "Summary--
Recommendation of the Special Committee and the Board, Fairness of the
Transaction," "Special Factors--Proceedings and Recommendation of the Special
Committee and the Board, Fairness of the Transaction" and "--Opinion of
Financial Advisor" is incorporated herein by reference.
(c) The relevant information set forth under the captions "Summary--Required
Vote," and "The Merger--Required Vote" is incorporated herein by reference.
(d) The relevant information set forth under the captions "Special Factors--
Background of the Merger," "--Proceedings and Recommendation of the Special
Committee and the Board, Fairness of the Transaction" and "--Opinion of
Financial Advisor" is incorporated herein by reference.
(e) The relevant information set forth under the captions "Special Factors--
Background of the Merger" and "--Proceedings and Recommendation of the Special
Committee and the Board, Fairness of the Transaction" is incorporated herein
by reference.
(f) Not applicable.
7
<PAGE>
ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS.
(a)-(c) The relevant information set forth under the captions "Special
Factors--Background of the Merger," "--Opinion of Financial Advisor;" and in
the Opinion of Schroder Wertheim attached as Annex B to the Proxy Statement
and the report of Schroder Wertheim to the Special Committee of Mickelberry
Communications Incorporated and written information handed out to the Special
Committee during the oral response to the Special Committee by Schroder
Wertheim, filed hereto as Exhibits (d), (b)(2) and (b)(3), respectively, are
incorporated herein by reference.
ITEM 10. INTEREST IN SECURITIES OF THE ISSUER.
(a) The relevant information set forth under the caption "Beneficial
Ownership of Shares of the Company" is incorporated herein by reference.
(b) The relevant information set forth under the captions "Beneficial
Ownership of Shares of the Company" and "Certain Transactions in Company
Stock" is incorporated herein by reference.
ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT TO THE
ISSUER'S SECURITIES.
The relevant information set forth under the captions "Summary--The Merger,"
"The Merger--General," "--Conditions to the Merger, Waiver," "Beneficial
Ownership of Shares of the Company" and in The Agreement and Plan of Merger in
Annex A to the Proxy Statement, filed as Exhibit (a) hereto, is incorporated
herein by reference.
ITEM 12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN PERSONS WITH REGARD
TO THE TRANSACTION.
(a)--(b) The relevant information set forth under the captions
"Introduction--Voting at the Meeting" and "--Proxies," "Summary--Required
Vote," and "--Recommendation of the Special Committee and the Board, Fairness
of the Transaction," "Special Factors--Proceedings and Recommendation of the
Special Committee and the Board, Fairness of the Transaction," "--Structure
and Purpose of the Merger," and "The Merger--Required Vote" is incorporated
herein by reference.
ITEM 13. OTHER PROVISIONS OF THE TRANSACTION.
(a) The relevant information set forth under the caption "Special Factors--
Appraisal Rights" is incorporated herein by reference.
(b) The relevant information set forth under the captions "Summary--Expenses
of the Merger," and "Special Factors--Expenses of the Merger" is incorporated
herein by reference.
(c) Not applicable.
ITEM 14. FINANCIAL INFORMATION.
(a) The relevant information set forth under the captions "Selected
Consolidated Financial Data" and "Financial Statements" is incorporated by
reference herein.
(b) The relevant information set forth under the caption "Financial
Statements--Pro Forma Financial Data" is incorporated herein by reference.
ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED.
(a) and (b) The relevant information set forth under the captions
"Introduction--Proxies" and "Proxy Solicitation" is incorporated herein by
reference in its entirety.
8
<PAGE>
ITEM 16. ADDITIONAL INFORMATION.
The information contained in the Proxy Statement filed concurrently herewith
with the Commission in connection with this Rule 13e-3 Transaction is
incorporated herein by reference in its entirety.
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS.
(a) Letter Agreement dated November 23, 1994, by and among the Major
Shareholder, The Argosy Group L.P. and The Argosy Securities Group L.P.
is incorporated from Annex D to the Proxy Statement filed as Exhibit
(d) hereto.
(b)(1) Opinion of Schroder Wertheim dated August , 1995 is incorporated
by reference from Annex B to the Proxy Statement filed as Exhibit
(d) hereto.
(b)(2) Report of Schroder Wertheim to the Special Committee of Mickelberry
Communications Incorporated dated March 8, 1995.
(b)(3) Written information handed out to the Special Committee during the
oral response to the Special Committee by Schroder Wertheim during
February 1995.
(c) Agreement and Plan of Merger, dated as of March 21, 1995 by and among
Marlas, Acquisition, Union Capital and the Company, is incorporated by
reference from Annex A to the Proxy Statement filed as Exhibit (d)
hereto.
(d) Proxy Statement of the Company for the Special Meeting of Shareholders
of the Company.
(e) The appraisal rights and the procedure for exercising such appraisal
rights are described in (1) "Special Factors--Appraisal Rights" and (2)
Annex C, in each case of the Proxy Statement filed as Exhibit (d)
hereto.
(f) Not Applicable.
9
<PAGE>
SIGNATURE
After due inquiry and to the best of its knowledge and belief, Mickelberry
Communications Incorporated certifies that the information set forth in this
statement is true, complete and correct and has duly caused this Rule 13E-3
Transaction Statement to be signed on its behalf by the undersigned thereto
duly authorized.
MICKELBERRY COMMUNICATIONS
INCORPORATED
/s/ James C. Marlas
By: _________________________________
Name:James C. Marlas
Title:President
Dated: August 4, 1995
10
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
/s/ James C. Marlas
By: _________________________________
James C. Marlas
Dated: August 4, 1995
11
<PAGE>
SIGNATURE
After due inquiry and to the best of its knowledge and belief, Union Capital
Corporation certifies that the information set forth in this statement is
true, complete and correct and has duly caused this Rule 13E-3 Transaction
Statement to be signed on its behalf by the undersigned thereto duly
authorized.
UNION CAPITAL CORPORATION
/s/ James C. Marlas
By: _________________________________
Name:James C. Marlas
Title:President
Dated: August 4, 1995
12
<PAGE>
SIGNATURE
After due inquiry and to the best of its knowledge and belief, Mickelberry
Acquisition Corporation certifies that the information set forth in this
statement is true, complete and correct and has duly caused this Rule 13E-3
Transaction Statement to be signed on its behalf by the undersigned thereto
duly authorized.
MICKELBERRY ACQUISITION CORPORATION
/s/ James C. Marlas
By: _________________________________
Name:James C. Marlas
Title:President
Dated: August 4, 1995
13
<PAGE>
EXHIBIT 99.B.2
--------------------------------------------------------------------------------
Report To
The Special Committee Of
The Board of Directors
of
Mickelberry Communications Incorporated
[LOGO OF WERTHEIM SCHRODER & CO.APPEARS HERE]
WERTHEIM SCHRODER & CO.
----------------------
Incorporated
March 8, 1995
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<PAGE>
Report to the Special Committee
--------------------------------------------------------------------------------
Table of Contents
I. Proposed Transaction Summary................................... 1
- Purchase Price Analysis
- Stock Price Trading History
II. Business Description........................................... 8
III. Valuation Summary.............................................. 17
Exhibits
--------
Selected Comparable Publicly Traded Companies................ Exhibit 1
- Comparison of Selected Publicly Traded
Printing Companies
- Comparison of Selected Publicly Traded
Advertising Companies
Selected Mergers and Acquisitions Transactions.............. Exhibit 2
- Selected Printing Company Mergers and Acquisitions
Transactions
Discounted Cash Flow Analysis................................ Exhibit 3
Breakup Analysis............................................. Exhibit 4
Mickelberry Financial Projections............................ Exhibit 5
Acquisition Premium Analysis................................. Exhibit 6
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[LOGO OF WERTHEIM SCHRODER & CO. APPEARS HERE]
2
<PAGE>
Report to the Special Committee
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Preface
James C. Marlas has proposed to acquire all of the shares he does not own of
Mickelberry Communications Incorporated ("Mickelberry" or the "Company"). This
report has been prepared by Wertheim Schroder & Co. Incorporated ("Wertheim
Schroder") in connection with Wertheim Schroder's role as financial advisor to
the Special Committee of the Board of Directors of Mickelberry. The material in
this report and all analyses contained herein are confidential and are solely
for the use of the Special Committee of the Board of Directors and its advisors.
Any publication or use of this material or the analyses contained herein without
the express written consent of Wertheim Schroder is strictly prohibited.
In the course of our activities as financial advisor, Wertheim Schroder received
and reviewed business and financial information of Mickelberry developed by
Mickelberry and held discussions with the management of the Company regarding
this information. In connection with the analyses contained herein, we have not
independently verified any such information and have relied on all such
information as being complete and accurate in all material respects. In
addition, we have not obtained any independent appraisal of the properties or
assets of the Company.
Several analytical methodologies have been employed herein and no one method of
analysis should be regarded as critical to the overall conclusion we have
reached. Each analytical technique has inherent strengths and weaknesses, and
the nature of the available information may further affect the value of
particular techniques. Our conclusion is based on all the analyses and factors
presented herein taken as a whole and also on application of our experience and
judgment. Such conclusion may involve significant elements of subjective
judgment and qualitative analysis. We therefore give no opinion as to the value
or merit standing alone of any one or more parts of the material that follows.
Our only opinion is the formal written opinion that we have expressed or will
express as to the fairness from a financial point of view of the consideration
being paid in a transaction. The opinion, the analyses contained herein and all
conclusions drawn from such analyses are necessarily based upon market, economic
and other conditions that exist and can be evaluated as of the date of this
book, and on information available to us as of the date hereof.
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[LOGO OF WERTHEIM SCHRODER & CO. APPEARS HERE]
3
<PAGE>
Report to the Special Committee
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Proposed Transaction Summary
[_] James C. Marlas has offered to acquire all of the shares of Mickelberry
Communications Incorporated's ("Mickelberry" or the "Company") common stock
not owned by Mr. Marlas for $4.25 per share in cash (the "Acquisition"). Mr.
Marlas, Chairman, Chief Executive Officer and President of the Company, owns
approximately 48% of Mickelberry's outstanding common stock. Marlas'
original proposal to acquire shares at $3.25 per share in cash was announced
publicly on November 1, 1994. The $4.25 per share offer has not been
announced publicly.
[_] Based on the $4.25 per share offer, the implied value of the common stock
of the Company is $25.0 million (not including outstanding options,
preferred stock or convertible debt).
[_] The proposal is subject to a number of conditions, including:
* execution of a definitive agreement
* agreement for early retirement of the Company's 8% Convertible
Subordinated Debentures
* receipt of necessary consents and governmental approvals
* financing
[_] Marlas has not finalized his arrangements to finance the acquisition,
though he has represented that he intends to keep his common stock in the
Company.
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Purchase Price Analysis
($000, except per share data)
<TABLE>
<CAPTION>
<S> <C>
Proposed Purchase Price per Share $4.25
Aggregate Equity Purchase Price(1) $ 38,258
</TABLE>
<TABLE>
<CAPTION>
Amount Multiple
------ --------
<S> <C> <C>
Multiple to Revenues (2)
Actual 1994 127,632 0.4x
Projected 1995 133,847 0.4x
Multiple to EBIT (2)
Actual 1994(3) 4,157 12.0x
Projected 1995 3,888 12.8x
Multiple to EBITDA (2)
Actual 1994(3) 8,743 5.7x
Projected 1995 9,812 5.1x
Multiple to Net Earnings
Actual 1994(3) 2,224 17.2x
Projected 1995 1,772 21.6x
Multiple to Book Value(4) $ 44,506 0.8x(5)
Multiple to Tangible Book Value(4) $ 33,354 1.1x(5)
</TABLE>
1 Based on 9,001,946 shares, after exercise of in-the-money
options, conversion of convertible debt, and consideration of
preferred stock.
2 Based on Enterprise value of $49.9M ($11.6M net debt after
conversion of convertible debt and cash from options, as of 12/31/94).
3 Excludes $3.0M ($1.8M after tax) of inventory write-offs at Excel.
4 Assumes conversion of convertible subordinated debentures.
5 Includes assumed proceeds from in-the-money options.
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Purchase Price Analysis
<TABLE>
<CAPTION>
Price
-------
<S> <C>
Proposed Purchase Price per Share $ 4.25
Proposed Purchase Price Premiums
Announcement of Transaction (11/1/94)
1 Day Prior Share Price $2.875
Premium % 47.8%
1 Month Prior Share Price $ 2.50
Premium % 70.0%
</TABLE>
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Mickelberry Communications Incorporated Price/Volume History
(1/1/90 to 3/3/95)
Graph indicating the daily closing price and sales volume for the Common
Stock between 1/1/90 and 2/24/95.
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Mickelberry Communications Incorporated Stock Price vs. Industry Indices
Graph comparing the price of the Common Stock, the S&P 400 Industrial Index
and an Advertising Index comprised of Greenstone Roberts Advertising, Grey
Advertising, The Interpublic Group of Companies, Omnicom Group, Saatchi &
Saatchi Company PLC (adjusted for stock split on 6/1/92), True North
Communications and WPP Group PLC.
Graph comparing the price of the Common Stock, the S&P 400 Industrial Index
and a Printing Index comprised of Banta Corporation, Cadmus Communications
Corporation, Consolidated Graphics, R.R. Donnelley & Sons Company and Graphic
Industries.
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Mickelberry Communications Incorporated Shares Traded By Price Range
(1/1/92 to 11/1/94)
Bar chart indicating that, out of a total of 2,410,200 shares of Common
Stock which traded between 1/1/92 and 11/1/94, 41.3% of such shares traded at
less than $3.00 per share, 18.3% of such shares traded between $3.13 and $3.25
per share, 15.6% of such shares traded between $3.38 and $3.50 per share, 16.9%
of such shares traded between $3.63 and $3.75 per share, 7.8% of such shares
traded between $3.88 and $4.00 per share and no shares trades at a price greater
than $4.00 per share.
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<TABLE>
<CAPTION>
Purchase Price Analysis
(dollars in thousands, except per share data)
Price Per Share
--------------------------------------------------------------------------
$3.25 $3.50 $3.75 $4.00 $4.25 $4.50
---------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Fully Diluted Shares (1) 6,556 6,621 6,676 6,676 9,002 (2) 9,009 (2)
Aggregate Equity Value $21,309 $23,175 $25,037 $26,706 $38,258 $40,543
Aggregate Enterprise Value (4) $43,241 $44,893 $46,561 $48,230 $49,900 $52,151
Marlas' Cost of Acquisition (3) $17,964 $19,140 $20,187 $21,157 $22,183 $23,522
Cash & Temporary Investments (4) $10,592 $10,807 $11,001 $11,001 $11,056 $11,088
</TABLE>
(1) Includes preferred shares and in-the-money options at respective prices.
(2) Includes assumed conversion of 8% Convertible Subordinated Debentures.
(3) Excludes all transaction fees.
(4) Includes cash from options exercised.
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Business Description
[_] Mickelberry operates in three general areas of the marketing services
industry:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
Industry Segment Company 1994 Revenues
----------------------- -------------- ------------------
($mm)
<S> <C> <C> <C>
$ %
------- ------
Commercial Printing Sandy Alexander $ 70.6 55.3%
Modern Graphic Arts 10.6 8.3%
------ -----
81.2 63.6%
Advertising & Promotion Partners & Shevack 11.7 9.2%
Bender, Browning, Dolby & Sanderson 6.0 4.7%
Ventura Associates 3.3 2.6%
------ -----
21.0 16.5%
Other Excel Marketing 25.4 19.9%
------ -----
$127.6 100.0%
====== =====
-----------------------------------------------------------------------------
</TABLE>
In addition, the Company owns a 50% joint venture interest in Excel Plus
Ltd., a company engaged in the supermarket promotions business in Europe.
[_] Each subsidiary operates autonomously, drawing on the parent company for
strategic and financial support.
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Consolidated Financial Data
(dollars in thousands)
<TABLE>
<CAPTION>
Fiscal Year Ended December 31, * 5-Yr.
-------------------------------------------------------------------------------------- Growth
1990 1991 1992 1993 1994 Rate
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Revenue $83,100 (b) $89,400 (b) $101,600 (b) $118,944 $127,623 12.1%
EBIT 1,600 (c) 2,727 (c) 2,433 (c) 2,698 4,157 (a) 20.9%
Pre-Tax Income 1,141 (c)(j)(k) 2,148 (c)(g) 1,175 (c)(d)(f) 1,220 (d)(e) 2,921 (a) 14.0%
Net Income Available
To Common 612 (c)(j)(k) 1,216 (c)(g) 632 (c)(d)(f)(i) 660 (d)(e) 1,680 (a) 15.1%
EPS 0.10 (c)(j)(k) 0.21 (c)(g) 0.10 (c)(d)(f)(i) 0.11 (d)(e) 0.29 (a) 15.7%
EBITDA 4,728 6,150 6,169 6,962 8,743 (a) 14.5%
</TABLE>
(a) Excludes $3.0 million ($1.8 million after taxes, $0.31 per common share) of
inventory write-offs at Excel.
(b) Revenue excludes $7.6M in 1992, $16.2M in 1991 and $17.4M in 1990, from
Caribiner, Inc., which was sold in 1992.
(c) EXBIT excludes $0.3M ($0.2M after tax, $0.03/share) in 1992, $0.00M in 1991
and $(0.1)M in 1990 income (loss) from Caribiner.
(d) 1993 & 1992 pretax income exclude gains on sales of temporary investments
of $35K ($21K after tax) & $1.0M ($0.6M after tax, $0.10/share).
(e) 1993 pretax income excludes the write-off of an investment of $1.0M ($0.6M
after tax, $0.10/share).
(f) 1992 pretax income excludes $3.2M ($1.9M after tax, $0.32/share) gain on
sale of business.
(g) 1991 pretax income excludes $0.5M ($0.3M after tax, $0.05/share) write-off
of investment in limited partnership.
(h) 1993 net income excludes $0.2M ($0.03/share) credit for cumulative effect
of change in accounting principle.
(i) 1992 net income excludes $1.1M ($0.19/share) extraordinary loss on early
extinguishment of debt.
(j) 1990 pretax income excludes $2.8 million write-off of investment in limited
partnership.
(k) Taxes assumed at 40% rate.
* Financial data adjusted pro forma for the sale of Caribiner, Inc. and one
time items.
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Capitalization Table At December 31, 1994
(dollars in thousands)
<TABLE>
<S> <C>
Debt:
Notes Payable $ 9,180
Long-Term Debt 13,517 (a)
Convertible Subordinated Debentures 9,733 (b)
-------
Total Debt $32,430
-------
Equity:
Preferred Stock $727
Common Stock 34,046
-------
Total Equity $34,773
-------
Total Capitalization $67,203
=======
Cash & Temporary Investments $ 9,355
=======
</TABLE>
(a) Includes current portion.
(b) Principal amount of $9,828.
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Consolidated Financial Data
(dollars in thousands)
<TABLE>
<CAPTION>
Actual Management Projected Growth Growth
-------------------------------------------------------------------------------------- Rate Rate
1991 1992 1993 1994 (a) 1995 1996 1997 1998 1999 1991-1994 1995-1999
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues
Sandy Alexander $54,382 $66,894 $69,301 $70,629 $79,500 $86,500 $89,095 $91,768 $94,521 8.5% 4.1%
Modern Graphic Arts 13,909 14,379 11,277 10,564 11,100 11,433 11,776 12,129 12,493 (10.1%) 3.0%
Bender, Browning, Dolby
& Sanderson 4,562 5,097 5,379 5,963 6,071 6,375 6,693 7,028 7,379 9.0% 5.0%
Partners & Shevack 12,895 10,578 10,268 11,713 11,676 12,260 12,873 13,516 14,192 (3.1%) 5.0%
Ventura Associates 3,693 4,656 3,202 3,309 4,300 4,494 4,696 4,907 5,128 (6.8%) 4.5%
Excel Marketing 0 0 19,516 25,445 21,200 22,260 23,373 24,542 25,769 NM 5.0%
Caribiner 16,153 7,639 0 0 0 0 0 0 0 NM NM
-------- -------- -------- -------- -------- -------- -------- -------- -------- ----- ----
Total revenues $105,594 $109,243 $118,943 $127,623 $133,847 $143,322 $148,506 $153,890 $159,482 6.8% 4.3%
======== ======== ======== ======== ========= ======== ======== ======== ======== ===== ====
Operating income before
corporate overhead
Sandy Alexander 2,260 4,145 3,785 4,406 3,587 4,414 4,547 4,683 4,824 21.1% 6.7%
Modern Graphic Arts 385 (314) 180 803 628 647 667 686 707 NM 3.0%
Bender, Browning, Dolby
& Sanderson (132) 229 210 240 174 221 250 283 316 NM 15.5%
Partners & Shevack 2,156 297 188 1,047 924 1,049 1,189 1,318 1,444 (23.1%) 11.9%
Ventura Associates 58 48 140 178 237 278 322 368 419 55.8% 15.3%
Excel Marketing 0 0 8 (608) 401 438 469 509 554 NM 8.3%
Caribiner 46 249 0 0 0 0 0 0 0 NM NM
-------- -------- -------- -------- -------- -------- -------- -------- -------- ----- ----
Total operating income
before corporate $4,773 $4,654 $4,511 $6,066 $5,951 $7,047 $7,444 $7,847 $8,264 7.1% 7.9%
Corp overhead (2,046) (1,972) (1,814) (1,909) (2,063) (2,146) (2,231) (2,321) (2,414) NM NM
as a percent of total
revenues (1.9%) (1.8%) (1.5%) (1.5%) (1.5%) (1.5%) (1.5%) (1.5%) (1.5%)
-------- -------- -------- -------- -------- -------- -------- -------- -------- ----- ----
Total operating income $2,727 $2,682 $2,697 $4,157 $3,888 $4,901 $5,213 $5,526 $5,850 13.5% 9.8%
======== ======== ======== ======== ======== ======== ======== ======== ======== ===== ====
</TABLE>
(a) Includes $3.0 million ($1.8 million after taxes) of inventory
write-offs at Excel.
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Printing: Sandy Alexander, Inc./Modern Graphic Arts
[_] High quality commercial printing. Products include full-color
advertising and promotion materials, catalogs, and annual reports.
[_] Two companies coordinate operations. Two production facilities:
Clifton, NJ and St. Petersburg, FL.
* Web and sheet fed presses
* New web fed press on-line January 1995
[_] Key customer segments: cosmetics, pharmaceuticals and automobile
industry promotional materials. Also, annual reports and corporate
brochures.
[_] Competitive strengths:
* quality reputation
* good equipment, technology
* talented salesforce
* management
[_] Risk factors:
* breakdown of geographic barriers to entry, as a result of
technological advances
* high cost labor in NJ plant
* industry consolidation
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[_] Management Outlook:
. Revenues +11.6% in 1995, 8.1% in 1996, 3.0% thereafter
- growing auto business
- rebounding pharmaceuticals business
- capacity, capabilities of new web press
- competitor problems reducing industry capacity
- longer-term: relatively slow growth business
. Margin drop in 1995
- new press coming up to speed - full year of costs
- increasing paper, postal costs
. Continuing capital expenditures forecast to maintain
technology/equipment
- $4.0mm in 1995; $2.0mm in 1996; $4.5mm annually thereafter
- $19.0mm of capital expenditures were made from 1992-1994
. Net cash flow of ($1.2)mm in 1995, cash flow positive
thereafter
. Forecasted improvement of working capital will benefit future
cash flows
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Advertising: Partners & Shevack, Inc. and Bender, Browning, Dolby & Sanderson
Advertising, Inc.
[_] Full service advertising agencies.
[_] Dependent on people, rather than capital, assets.
[_] Partners & Shevack (1994 revenues: $11.7 million)
. Consolidation of four separate acquired agencies; based in New York
. Major clients include: American Home Products, Church & Dwight,
National Westminster, Pfizer, Reckitt & Colman and Dutch Boy
Paints.
[_] Bender, Browning, Dolby & Sanderson (1994 revenues: $6.0 million)
. Acquired in 1985; based in Chicago, with Milwaukee satellite office
. Major clients include: Amoco Chemical Corp., Aurora Health,
Midwest Express Airlines, Country Companies Insurance, Prime
Option (Dean Witter).
. Looking for internal and external growth possibilities
[_] Considerations
. Agencies generally too small to be economically sensitive; greater
sensitivity to business plans of individual clients and success in
winning and retaining business.
. No long-term contracts
. Remains highly competitive, highly fragmented industry
. Highly dependent on creative and account management professionals
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[_] Management Outlook
. Difficult business to forecast, because of reliance on individual
clients
. Forecasting approximately 5% annual revenue growth
. Partners & Shevack and BBDS margins dropping slightly in 1995,
then increasing gradually.
. Looking to spend more on new business development
. Minimal capital investment required
Promotion: Ventura Associates International, Inc.
[_] 1994 revenues: $3.3 million
[_] Designs and administers sales promotion programs
. Consumer promotions
. Employee and sales incentives
[_] Becoming a fee-based business for ad hoc assignments
. competition with ad agencies, which also administer these
programs
[_] Management Outlook
. Strong revenue growth in 1995 to return toward 1992 revenue
levels; 4.5% annual growth thereafter
. Continued operating margin improvement from 5.4% in 1994 to 8.2% in
1999, as business becomes more fee based
. No capital investment required
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Excel Marketing Group
[_] Historically engaged in supermarket promotions and flatware
wholesaling.
. supermarket promotions: primarily dishes and cookware (25% of 1994
revenues)
. flatware wholesaling: designs, imports and markets stainless steel
flatware under the Retroneu and Farberware (licensed) names (75% of
1994 revenues). Farberware license held through 2001, with
potential to renew. License transferable with sale of Company.
[_] Purchased for $9.25 million in March 1993.
[_] Supermarkets significantly curtailing their use of traffic building
promotions.
[_] $3.0 million write-off of inventory at 12/31/94: $2.5 million U.S., 50%
of $1 million in U.K., representing mark-down of existing inventory to
estimated market value.
. current plan is slow liquidation of excess inventory
[_] There is $8.1 million of debt at Excel, of which 50% is guaranteed. In
addition, Mickelberry has guaranteed 50% of the debt of Excel Plus
Ltd., up to approximately $2.0 million.
[_] Management Outlook
. Future of the business is based on sales of flatware to non-
supermarket outlets
- forecast to grow at approximately 5% annually
- approximately 2% operating margins
. Supermarket promotion business in the U.S. is being curtailed
. Plan to sell excess inventory to retailers at significantly
reduced prices.
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Valuation Summary
Introduction
[ ] In order to determine the value of Mickelberry, we have used four valuation
methodologies:
. Analysis of comparable publicly traded companies;
. Analysis of mergers and acquisitions of comparable companies;
. Analysis of discounted projected future cash flows;
. Analysis of the breakup value of the Company.
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Comparison to Comparable Publicly Traded Companies
[ ] As detailed in Exhibit 1, we selected publicly-traded Advertising and
Printing Companies which we believe are most comparable to Mickelberry.
The key operating and financial data for these companies is summarized in
Exhibit 1, highlighting valuation multiples of Revenues, EBIT, EBITDA and
Net Income.
[ ] Acquisition targets have historically commanded a "control premium" from
public market valuations. Control premiums vary significantly depending on
the circumstances under which the transaction takes place and the strategic
importance of the transaction for the acquirer. Recent control premiums
over pre-acquisition trading prices paid for publicly-traded companies of
similar size to Mickelberry have been, on average, approximately 30% to
40%. Recent control premiums paid for publicly traded companies in which
the acquirer owned a significant minority block prior to the transaction
also have been, on average, approximately 30% to 40%. See Exhibit 6.
[ ] The Companies used for comparable analysis are:
<TABLE>
<CAPTION>
Printing Companies Advertising Companies
------------------------------- ------------------------------
<S> <C>
Banta Corporation Grey Advertising Inc.
Cadmus Communications Corporation The Interpublic Group of
Companies, Inc.
Consolidated Graphics, Inc. Omnicom Group, Inc.
R.R. Donnelley & Sons Company Saatchi & Saatchi Company PLC
Graphic Industries, Inc. True North Communications
WPP Group plc
</TABLE>
See Exhibit 1 for details on these companies.
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Analysis of Comparable M&A Transactions
[ ] Exhibit 2 contains a summary of selected recent acquisition transactions
involving Printing Companies.
[ ] Though there have been a number of recent acquisitions of advertising
companies, the targets are typically private and little, if any,
confirmable information regarding historical financial performance is
disclosed publicly. An acquisition multiple of 1.0x revenues is an
industry benchmark for valuation. The valuation multiple paid for any
particular advertising company is influenced by factors such as the quality
of its clients, growth potential and its operating margins.
[ ] In using this methodology, it is important to consider that valuation
multiples from M&A transactions, based on historical financial data, often
mask the effects of significant synergies which can be realized when
combining companies in the same industry under a single corporate overhead
structure. These synergies, which can result in substantial cost savings,
effectively can reduce the multiples paid.
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Discounted Cash Flow Analysis
[ ] Using the Company's projections for the fiscal years 1995 through 1999
detailed in Exhibit 5, we analyzed the "free cash flow" of the Company,
defined as after-tax EBIT plus depreciation/amortization, less capital
expenditures and changes in working capital. This stream of cash flows is
discounted to present.
[ ] A terminal exit value is determined by applying a range of multiples to the
projected EBITDA in 1999 and is also discounted to the present. The
terminal multiples are consistent with current public market valuations.
[ ] Discount rates employed ranged from 10% to 14% for the printing segment and
12% to 16% for the advertising and promotion companies, reflecting the
capitalization and degree of risk attendant to achieving the projected
results.
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Breakup Analysis
[ ] A break-up analysis assumes the separate sales of the individual operating
subsidiaries of the Company. Sales are assumed to be conducted in an
orderly fashion, at values determined by the Discounted Cash Flow Analysis.
[ ] Individual arrangements at each of the subsidiaries provide for management
bonuses, depending on the proceeds received from the sale of each
respective subsidiary.
[ ] In a liquidation of the corporate entity, it is assumed that corporate
taxes are paid on the respective net gains on sales of the individual
subsidiaries. It also is assumed that there is a cost to liquidation of
approximately one year of corporate expenses and $1.0 million of fees and
expenses.
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<TABLE>
<CAPTION>
VALUATION SUMMARY
(dollars in thousands, except per share data)
Per Share Valuation Range
-----------------------------
Methodology Low High
-------------- --------- ----------
<S> <C> <C>
Comparable Publicly Traded Companies $3.22 $6.86
Comparable Acquisitions 3.97 6.47
Discounted Cash Flow 3.27 4.96
Breakup Analysis 3.71 4.93
--------------------------------------------------------------------------
Average $3.54 $5.81
--------------------------------------------------------------------------
</TABLE>
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EXHIBIT 1
VALUATION BASED ON COMPARABLE PUBLICLY TRADED COMPANIES
Going Concern Analysis
(Dollars in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Valuation Range
-----------------------------
Low High
-------------- -------------
<S> <C> <C>
Enterprise Values
Print Division $35,000 $50,000
Advertising & Promotions Divisions 9,200 14,900
Corporate Overhead (9,500) (12,500)
Excel Marketing Group Value (1) 3,000 5,000
-------------- -------------
Total Enterprise Value $37,700 $57,400
============== =============
Plus: Cash & Temporary Investments as of (12/31/94) 9,355 9,355
Less: Straight Debt as of (12/31/94) (22,697) (22,697)
-------------- -------------
Equity Value Pre - (Convertible Debt, Preferred Stock & Cash From Options) $24,358 $44,058
Plus: Cash From Options 750 2,068
Less: Convertible Debt (9,828) 0
Less: Preferred Stock 0 0
-------------- -------------
Equity Value $15,280 $46,126
Number of Shares 6,406 9,078
-------------- -------------
Per Share Equity Value Range Before Premium $2.39 $5.08
Acquisition Premium 35.0% 35.0%
-------------- -------------
Per Share Equity Value Range $3.22 $6.86
============== =============
</TABLE>
(1) Based on discounted cash flow analysis
26
<PAGE>
VALUATION BASED ON COMPARABLE
PUBLICLY TRADED COMPANIES
(Dollars in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Print Division
-----------------------
Multiple Range Enterprise Value Range
---------------------- -----------------------------
Amount Low High Low High
------------ --------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
1994 Actual Data:
Revenue $81,193 0.6x 0.8x 48,716 64,954
EBIT 5,209 8.0x 10.0x 41,672 52,090
EBITDA 8,494 5.0x 6.5x 42,470 55,211
Net Income 2,288 12.5x 16.0x 41,252 (1) 49,260 (1)
1995 Projected Data:
Revenue $90,600 0.5x 0.7x 45,300 63,420
EBIT 4,215 7.0x 9.0x 29,505 37,935
EBITDA 8,257 4.5x 6.0x 37,157 49,542
Net Income 1,625 11.0x 12.5x 30,527 (1) 32,965 (1)
----------------------------------------------------------------------------------------------------------
Valuation Range $35,000 $50,000
----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes net debt of $12,652.
27
<PAGE>
VALUATION BASED ON COMPARABLE
PUBLICLY TRADED COMPANIES
(Dollars in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Advertising & Promotions
--------------------------------
Multiple Range Enterprise Value Range
------------------ ---------------------------
Amount Low High Low High
------------ --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
Bender, Browning, Dolby & Sanderson
1994 Actual Data:
Revenue $5,963 0.5x 0.9x 2,982 5,367
EBIT 240 6.0x 10.0x 1,440 2,400
EBITDA 377 5.0x 7.0x 1,885 2,639
Net Income 187 12.0x 16.0x 2,186 (1) 2,934 (1)
1995 Projected Data:
Revenue $6,071 0.4x 0.8x 2,428 4,857
EBIT 174 5.0x 9.0x 870 1,566
EBITDA 325 4.5x 6.5x 1,463 2,113
Net Income 104 10.0x 14.0x 982 (1) 1,398 (1)
------------------------------------------------------------------------------------------------------------------------------------
Valuation Range $1,400 $2,500
------------------------------------------------------------------------------------------------------------------------------------
Partners & Shevack, Inc.
1994 Actual Data:
Revenue $11,713 0.5x 0.9x 5,857 10,542
EBIT 1,047 6.0x 10.0x 6,282 10,470
EBITDA 1,512 5.0x 7.0x 7,560 10,584
Net Income 740 12.0x 16.0x 7,757 (2) 10,717 (2)
1995 Projected Data:
Revenue $11,676 0.4x 0.8x 4,670 9,341
EBIT 924 5.0x 9.0x 4,620 8,316
EBITDA 1,257 4.5x 6.5x 5,657 8,171
Net Income 554 10.0x 14.0x 4,417 (2) 6,633 (2)
-----------------------------------------------------------------------------------------------------------------------------------
Valuation Range $6,500 $10,500
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes net debt of ($58).
(2) Includes net debt of ($1,123).
28
<PAGE>
VALUATION BASED ON COMPARABLE
PUBLICLY TRADED COMPANIES
(Dollars in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Advertising & Promotions
-------------------------------
Multiple Range Enterprise Value Range
--------------------------- ----------------------------
Amount Low High Low High
------------ --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
Ventura Associates International, Inc
1994 Actual Data:
Revenue $3,309 0.5x 0.9x 1,655 2,978
EBIT 178 6.0x 10.0x 1,068 1,780
EBITDA 248 5.0x 7.0x 1,240 1,736
Net Income 111 12.0x 16.0x 1,332 1,776
1995 Projected Data:
Revenue $4,300 0.4x 0.8x 1,720 3,440
EBIT 237 5.0x 9.0x 1,185 2,133
EBITDA 307 4.5x 6.5x 1,382 1,996
Net Income 142 10.0x 14.0x 1,420 1,988
-------------------------------------------------------------------------------------------------------------------------------
Valuation Range $1,300 $1,900
-------------------------------------------------------------------------------------------------------------------------------
Total Advertising & Promotions
Bender, Browning, Dolby & Sanderson $1,400 $2,500
Partners & Shevack, Inc. 6,500 10,500
Ventura Associates International, Inc 1,300 1,900
---------- ----------
-------------------------------------------------------------------------------------------------------------------------------
Valuation Range $9,200 $14,900
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
VALUATION BASED ON COMPARABLE
Multiple Range Enterprise Value Range
------------------------ --------------------------
Corporate Overhead Amount Low High Low High
------------------ ---------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
1994 Data ($1,909) 5.0x 6.5x (9,545) (12,409)
1995 Data (2,063) 4.5x 6.0x (9,284) (12,378)
--------------------------------------------------------------------------------------------------
Valuation Range ($9,500) ($12,500)
--------------------------------------------------------------------------------------------------
</TABLE>
30
<PAGE>
Mickelberry Communications Incorporated
Comparison of Selected Publicly Traded Printing Companies
(in thousands, except share data)
<TABLE>
<CAPTION>
Mickelberry Mickelberry Banta Cadmus Communications
Communications Inc Printing Segment Corporation Corporation
------------------ ---------------- ---------------------- -----------------------
<S> <C> <C> <C> <C>
BUSINESS Marketing Provides a broad Graphics communications
DESCRIPTION services range of printing & company which provides
businesses. graphic arts services. printing, marketing &
VALUATION RATIOS publishing services.
Current P/E 10.5x 13.5x 16.6x
Price/Projected 1995 EPS 10.0x 12.2x 11.6x
Price/Projected 1996 EPS 14.3x 10.8x NM
EV/Revenues 0.3x 0.9x 0.6x
EV/EBIT 10.0x 9.3x 10.2x
EV/EBITDA 4.7x 6.4x 5.8x
MARKET DATA
Symbol/Exchange MBC/NYSE BNTA/NASDAQ CDMS/NASDAQ
Price 3/3/95 $3.00 $31.50 $17.25
52 Week Price Range 2.25-3.50 27.00-38.50 13.75-19.50
Annualized Current Dividend 0.06 0.56 0.20
Indicated Yield 2.0% 1.8% 1.2%
Shares Outstanding 5,876 20,079 6,013
Market Value $17,628 $632,489 $103,720
Enterprise Value 41,430 746,315 160,995
LTM INCOME DATA
LTM Ending 31-Dec-94 31-Dec-94 1-Oct-94 31-Dec-94
Fiscal Year Ending 31-Dec-93 31-Dec-93 1-Jan-94 30-Jun-94
Net Revenues $127,623 $81,193 $811,330 (c) $264,776
Gross Profit 0 15,541 175,527 (a) 69,855
EBIT 4,157 5,209 80,242 (a)(b) 15,764 (a)
Pretax Income 2,921 0 76,439 (a)(b) 10,463 (a)
Net Income (1) 1,680 47,228 (c) 6,319 (a)
EBITDA 8,743 8,494 116,841 (a)(b) 27,717 (a)
Primary EPS 0.29 2.33 (c) 1.04 (a)
Proj. 1995 EPS {# analysts} (2) 0.30 2.59 {4} 1.49 {2}
Proj. 1996 EPS {# analysts} (2) 0.21 2.92 {3} NA
LTM BALANCE SHEET DATA
Total Assets 100,456 58,788 555,244 163,017
Cash & Equivalents 9,355 0 110 1,695
Long-Term Debt 20,703 0 70,987 55,115
Total Debt 32,430 0 113,936 58,970
Common Shareholders' Equity 34,046 320,959 57,339
OPERATING RATIOS
Total Debt/Cap. incl. ST Debt 48.3% NM 26.2% 50.7%
EBIT/Ending Assets 4.1% 8.9% 14.5% 9.7%
Gross Margin 0.0% 19.1% 23.1% (a) 26.4%
EBIT Margin 3.3% 6.4% 10.6% (a)(b) 6.0% (a)
Pretax Margin 2.3% 0.0% 10.1% (a)(b) 4.0% (a)
Net Margin 1.3% 6.0% (a)(b) 2.4% (a)
EBITDA Margin 6.9% 10.5% 15.4% (a)(b) 10.5% (a)
</TABLE>
<TABLE>
<CAPTION>
Consolidated R.R. Donnelley &
Graphics, Inc. Sons Company (a)
------------------- ---------------------
Provider of general Provides a broad
commercial printing range of services in
services. print & digital media.
<S> <C> <C>
BUSINESS
DESCRIPTION
VALUATION RATIOS
Current P/E 13.6x 19.5x
Price/Projected 1995 EPS 11.3x 16.9x
Price/Projected 1996 EPS NM 14.9x
EV/Revenues 1.0x 1.3x
EV/EBIT 8.2x 13.3x
EV/EBITDA 6.3x 8.0x
MARKET DATA
Symbol/Exchange COGI/NASDAQ DNY/NYSE
Price 3/3/95 $12.25 $34.13
52 Week Price Range 9.50-22.50 26.88-34.63
Annualized Current Dividend 0.00 0.64
Indicated Yield 0.0% 1.9%
Shares Outstanding 5,467 153,085
Market Value $66,965 $5,224,026
Enterprise Value 75,535 6,116,355
LTM INCOME DATA
LTM Ending 31-Dec-94 31-Dec-94(a)
Fiscal Year Ending 31-Mar-94 31-Dec-93
Net Revenues $ 79,064 $4,888,786
Gross Profit 21,756 950,292
EBIT 9,161 459,431
Pretax Income 9,322 395,004
Net Income (1) 6,345 268,603
EBITDA 11,979 762,953
Primary EPS 0.90 1.75
Proj. 1995 EPS (# analysts) (2) 1.08 (3) 2.02 (10)
Proj. 1996 EPS (# analysts) (2) NA 2.29 (5)
LTM BALANCE SHEET DATA
Total Assets 58,086 4,111,943
Cash & Equivalents 1,898 21,460
Long-Term Debt 9,347 876,389
Total Debt 10,468 913,789
Common Shareholders' Equity 36,755 1,945,069
OPERATING RATIOS
Total Debt/Cap. incl. ST Debt 22.2% 32.0%
EBIT/Ending Assets 15.8% 11.2%
Gross Margin 28.9% 19.4%
EBIT Margin 11.6% 9.4%
Pretax Margin 11.8% 8.1%
Net Margin 8.0% 5.5%
EBITDA Margin 15.2% 15.6%
</TABLE>
<TABLE>
<CAPTION>
Graphic
Industries Inc.
--------------------------
Printing, repographic
services & other graphic
communications. Average Excluding
Avg. High/Low
<S> <C> <C> <C>
BUSINESS
DESCRIPTION
VALUATION RATIOS
Current P/E 12.7x 15.6x 15.1x
Price/Projected 1995 EPS 12.3x 13.0x 12.0x
Price/Projected 1996 EPS 10.5x 12.7x #DIV/01
EV/Revenues 0.6x 0.9x 0.8x
EV/EBIT 10.1x 10.5x 10.2x
EV/EBITDA 6.2x 6.6x 6.3x
MARKET DATA
Symbol/Exchange GRPH/NASDAQ
Price 3/3/95 $10.00
52 Week Price Range 8.13-12.50
Annualized Current Dividend 0.07
Indicated Yield 0.7%
Shares Outstanding 10,594
Market Value $105,940
Enterprise Value 206,656
LTM INCOME DATA
LTM Ending 31-Oct-94
Fiscal Year Ending 31-Jan-94
Net Revenues $344,846
Gross Profit 83,249
EBIT 20,423
Pretax Income 12,826
Net Income (1) 8,175
EBITDA 33,273
Primary EPS 0.79
Proj. 1995 EPS (# analysts) (2) 0.81 (1)
Proj. 1996 EPS (# analysts) (2) 0.95 (1)
LTM BALANCE SHEET DATA
Total Assets 245,280
Cash & Equivalents 22,883
Long-Term Debt 87,226
Total Debt 123,598
Common Shareholders' Equity 72,449
OPERATING RATIOS
Total Debt/Cap. incl. ST Debt 63.0%
EBIT/Ending Assets 8.3%
Gross Margin 24.1%
EBIT Margin 5.9%
Pretax Margin 3.7%
Net Margin 2.4%
EBITDA Margin 9.6%
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
------------------------------
Wertheim Schroder & Co. Mickelberry Communications Incorporated
------------------------------ Comparison of Selected Publicly Traded Printing Companies
Incorporated (in thousands, except share data)
Corporate Finance Department
------------------------------
Mickelberry Mickelberry Banta Cadmus Communications Consolidated
Communications Inc Printing Segment Corporation Corporation Graphics, Inc.
------------------ ---------------- ----------- --------------------- --------------
INCOME STATEMENT DATA
<S> <C> <C> <C> <C> <C>
Net Revenues
---------------------
LTM $127,623 $81,193 $759,940 $264,776 $79,064
1993 118,944 80,578 691,244 247,730 76,910
1992 101,600 (b) 81,273 637,416 198,126 NM
1991 89,400 (b) 68,291 565,473 188,006 NM
1990 83,100 (b) 64,719 577,614 170,375 NM
1989 NA 44,062 517,235 160,671 NM
Growth Rate 12.7% 16.3% 7.5% 11.4% NM
Gross Profit
---------------------
LTM $15,541 175,527 (a) $69,855 $22,882
1993 14,091 160,226 (a) 67,194 21,756
1992 14,482 146,330 55,333 NM
1991 11,762 125,506 48,915 NM
1990 NA 124,612 44,746 NM
1989 NA 111,396 40,685 NM
Growth Rate 9.5% 9.5% 13.4% NM
EBIT
---------------------
LTM $4,157 (a) $5,209 $80,242 (a)(b) $15,764 (a) $9,161
1993 2,698 3,965 73,315 (a)(b) 14,818 (a) 8,520
1992 2,433 (c) 3,831 63,197 11,342 NM
1991 2,727 2,645 51,551 10,405 NM
1990 1,600 NA 53,616 10,323 NM
1989 NA NA 47,191 9,475 NM
Growth Rate 19.0% 22.4% 11.6% 11.8% NM
Pretax Income
---------------------
LTM $2,921 (a) $76,439 (a)(b) $10,463 (a) $9,322
1993 1,220 (d)(e) 69,321 (a)(b) 9,833 (a) 8,167
1992 1,175 (c)(d)(f) 58,462 7,480 NM
1991 2,148 (g) 46,219 6,448 NM
1990 1,141 (j) 48,452 7,151 NM
1989 NA 42,638 6,004 NM
Growth Rate 2.3% 12.9% 13.1% NM
Net Income (1)
---------------------
LTM $1,680 (a) $45,887 (a)(b) $6,319 (a) $6,345
1993 660 (d)(e) 41,369 (a)(b) 5,907 (a)(b) 5,392
1992 632 (c)(d)(f)(i) 35,662 4,533 NM
1991 1,216 (g) 28,219 3,901 NM
1990 612 (j)(k) 29,352 4,362 NM
1989 NA 25,688 3,373 NM
Growth Rate 2.5% 12.7% 15.0% NM
Primary EPS
---------------------
LTM $0.29 (a) $2.26 (a)(b) $1.04 (a) $0.90
1993 0.11 (d)(e) 2.05 (a)(b) 0.98 (a)(b) 0.99
1992 0.10 (c)(d)(f)(i) 2.68 0.76 NM
1991 0.21 (g) 2.16 0.65 NM
1990 0.10 2.29 0.72 NM
1989 NA 2.02 0.56 NM
Growth Rate 3.7% 0.4% 15.0% NM
EBITDA
---------------------
LTM $8,743 (a) $8,494 $116,841 (a)(b) $27,717 (a) $11,979
1993 6,962 7,007 107,016 (a)(b) 26,292 (a) 10,848
1992 6,169 (c) 6,278 94,036 20,968 NM
1991 6,150 4,351 80,109 19,446 NM
1990 4,728 NA 80,097 18,659 NM
1989 NA NA 70,156 17,369 NM
Growth Rate 13.8% 26.9% 15.6% 10.9% NM
<CAPTION>
R.R. Donnelley & Graphic
Sons Company (a) Industries, Inc.
---------------- ----------------
INCOME STATEMENT DATA
<S> <C> <C>
Net Revenues
---------------------
LTM $4,888,786 $344,846
1993 4,387,761 335,468
1992 4,193,072 316,881
1991 3,914,828 310,736
1990 3,497,943 310,330
1989 3,122,331 270,212
Growth Rate 8.9% 5.6%
Gross Profit
---------------------
LTM $950,292 $83,249
1993 869,593 77,918
1992 817,858 73,771
1991 726,903 73,335
1990 688,550 76,451
1989 625,696 67,071
Growth Rate 8.6% 3.8%
EBIT
---------------------
LTM $459,431 $20,423
1993 415,607 (b) 16,658
1992 405,501 13,809
1991 363,128 11,819 (a)
1990 361,836 19,690
1989 332,701 20,747
Growth Rate 5.7% (5.3%)
Pretax Income
---------------------
LTM $395,004 $12,826
1993 366,562 (b) 10,700
1992 361,014 7,160
1991 320,186 2,227 (a)
1990 340,197 8,216
1989 352,154 13,957
Growth Rate 1.0% (6.4%)
Net Income (1)
---------------------
LTM $268,603 $8,175
1993 245,620 (b)(c)(d) 6,500
1992 234,659 3,719
1991 204,919 816 (a)
1990 225,846 4,916
1989 221,857 9,004
Growth Rate 2.6% (7.8%)
Primary EPS
---------------------
LTM $1.75 $0.79
1993 1.59 (b)(c)(d) 0.65
1992 1.51 0.38
1991 1.32 0.09 (a)
1990 1.46 0.51
1989 1.43 0.93
Growth Rate 2.8% (8.6%)
EBITDA
---------------------
LTM $762,953 $33,273 (b)
1993 690,411 (b) 29,508
1992 663,670 26,128
1991 604,294 24,443 (a)
1990 556,781 30,524
1989 499,833 29,512
Growth Rate 8.4% (0.0%)
</TABLE>
32
<PAGE>
Mickelberry Communications Incorporated
Comparison of Selected Publicly Traded Printing Companies
(in thousands, except share data)
<TABLE>
<CAPTION>
Mickelberry Mickelberry Banta Cadmus Communications Consolidated
Communications Inc Printing Segment Corporation Corporation Graphics, Inc.
------------------ ---------------- ----------- -------------------- ---------------
<S> <C> <C> <C> <C> <C>
MARGIN ANALYSIS
Gross Margin
LTM 19.1% 23.1% (a) 26.4% 28.9%
1993 17.5% 23.2% (a) 27.1% 28.3%
1992 17.8% 23.0% 27.9% NM
1991 17.2% 22.2% 26.0% NM
1990 NM 21.6% 26.3% NM
1989 NM 21.5% 25.3% NM
EBIT Margin
LTM 3.3% 6.4% 10.6% (a)(b) 6.0% (a) 11.6%
1993 2.3% 4.9% 10.6% (a)(b) 6.0% (a) 11.1%
1992 2.4% (c) 4.7% 9.9% 5.7% NM
1991 3.1% 3.9% 9.1% 5.5% NM
1990 NM NM 9.3% 6.1% NM
1989 NM NM 9.1% 5.9% NM
Pretax Margin
LTM 2.3% 10.1% (a)(b) 4.0% (a) 11.8%
1993 1.0% 10.0% (a)(b) 4.0% (a) 10.6%
1992 1.2% (c)(d)(f) 9.2% 3.8% NM
1991 2.4% (g) 8.2% 3.4% NM
1990 1.4% 8.4% 4.2% NM
1989 NM 8.2% 3.7% NM
Net Margin
LTM 1.3% (a) 6.0% (a)(b) 2.4% (a) 8.0%
1993 0.6% (d)(e) 6.0% (a)(b) 2.4% (a)(b) 7.0%
1992 0.6% (c)(d)(f)(i) 5.6% 2.3% NM
1991 1.4% (g) 5.0% 2.1% NM
1990 0.7% 5.1% 2.6% NM
1989 NM 5.0% 2.1% NM
EBITDA Margin
LTM 6.9% 10.5% 15.4% (a)(b) 10.5% (a) 15.2%
1993 5.9% 8.7% 15.5% (a)(b) 10.6% (a) 14.1%
1992 6.1% (c) 7.7% 14.8% 10.6% NM
1991 6.9% 6.4% 14.2% 10.3% NM
1990 5.7% NM 13.9% 11.0% NM
1989 NM NM 13.6% 10.8% NM
</TABLE>
<TABLE>
<CAPTION>
R.R. Donnelley & Graphic
Sons Company (a) Industries, Inc.
----------------- ----------------
<S> <C> <C>
MARGIN ANALYSIS
Gross Margin
LTM 19.4% 24.1%
1993 19.8% 23.2%
1992 19.5% 23.3%
1991 18.6% 23.6%
1990 19.7% 24.6%
1989 20.0% 24.8%
EBIT Margin
LTM 9.4% 5.9%
1993 9.5% 5.0%
1992 9.7% 4.4%
1991 9.3% 3.8% (a)
1990 10.3% 6.3%
1989 10.7% 7.7%
Pretax Margin
LTM 8.1% 0 3.7%
1993 8.4% (b) 3.2%
1992 8.6% 2.3%
1991 8.2% 0.7% (a)
1990 9.7% 2.6%
1989 11.3% 5.2%
Net Margin
LTM 5.5% 0 2.4%
1993 5.6% (b)(c)(d) 1.9%
1992 5.6% 1.2%
1991 5.2% 0.3% (a)
1990 6.5% 1.6%
1989 7.1% 3.3%
EBITDA Margin
LTM 15.6% 0 9.6% (b)
1993 15.7% (b) 8.8%
1992 15.8% 8.2%
1991 15.4% 7.9% (a)
1990 15.9% 9.8%
1989 16.0% 10.9%
</TABLE>
33
<PAGE>
Mickelberry Communications Incorporated
Comparison of Selected Publicly Traded Printing Companies
(in thousands, except share data)
<TABLE>
<CAPTION>
Mickelberry Mickelberry Banta Cadmus Communications
Communications Inc Printing Segment Corporation Corporation
------------------ ---------------- ----------- ---------------------
HISTORICAL BALANCE SHEET DATA
<S> <C> <C> <C> <C>
Total Assets
------------
LTM $100,456 $58,788 $555,244 $163,017
1993 97,242 50,239 457,433 160,129
1992 88,631 49,661 410,182 134,189
1991 85,378 397,464 123,054
1990 79,528 397,580 108,905
1989 92,162 378,884 98,808
Growth Rate 1.4% NM 2.0% 12.8%
Common Shareholders' Equity
---------------------------
LTM $34,046 $320,959 $57,339
1993 34,772 292,428 54,929
1992 34,878 258,237 50,693
1991 33,076 226,967 47,571
1990 33,214 206,585 43,935
1989 32,991 194,677 40,333
Growth Rate 1.3% 13.5% 8.0%
CAPITALIZATION
As of: 31-Dec-94 1-Oct-94 31-Dec-94
Short-Term Debt $11,727 $42,949 $3,855
========= ========= ==========
Long-Term Debt $20,703 $70,987 $55,115
Preferred Stock, Minority Int. 727 0 0
Common Equity 34,046 320,959 57,339
========= ========= ==========
TOTAL CAPITALIZATION $55,476 $391,946 $112,454
========= ========= ==========
Cash & Equivalents $9,355 $110 $1,695
========= ========= ==========
</TABLE>
<TABLE>
<CAPTION>
Consolidated R.R. Donnelley & Graphic
Graphics, Inc. Sons Company (a) Industries, Inc.
-------------- ----------------- ----------------
<S> <C> <C> <C>
Total Assets
------------
LTM $58,086 $4,111,943 $245,280
1993 NM 3,654,026 237,405
1992 NM 3,410,247 220,389
1991 NM 3,206,826 217,141
1990 NM 3,343,090 248,859
1989 NM 2,507,251 210,961
Growth Rate NM 9.9% 3.0%
Common Shareholders' Equity
---------------------------
LTM 36,755 $1,945,069 $72,449
1993 NM 1,843,991 66,432
1992 NM 1,848,977 58,277
1991 NM 1,730,386 54,910
1990 NM 1,595,616 50,410
1989 NM 1,445,787 46,084
Growth Rate NM 6.3% 9.6%
CAPITALIZATION
As of: 31-Dec-94 30-Sep-94 31-Oct-94
Short-Term Debt $1,121 $37,400 $36,372
========= ========== ========
Long-Term Debt $9,347 $876,389 $87,226
Preferred Stock, Minority Int. 0 0 0
Common Equity 36,755 1,945,069 72,449
========= ========== =======
TOTAL CAPITALIZATION $46,102 $2,821,458 $159,675
========= ========== ========
$1,898 $21,460 $22,883
========= ========== ========
</TABLE>
34
<PAGE>
Mickelberry Communications Incorporated
Comparison of Selected Publicly Traded Printing Companies
Notes
General
(1) Net income available to common shareholders before extraordinary items
& changes in accounting principle.
(2) Earnings estimates from First Call database as of 3/6/95.
Mickelberry Communications Incorporated
(a) Excludes $3.0 million ($1.8 million after taxes, $0.31 per common share)
of inventory write-offs at Excel.
(b) Revenue excludes $7.6M in 1992, $16.2M in 1991 and $17.4M in 1990, from
Carabiner, Inc., which was sold in 1992.
(c) EBIT excludes $0.3M ($0.2M after tax, $0.03/share) in 1992, $0.00M in
1991 and $(0.1)M in 1990 income (loss) from Carabiner.
(d) 1993 & 1992 pretax income exclude gains on sales of temporary investments
of $35K ($21K after tax) & $1.0M ($0.6M after tax, $0.10/share).
(e) 1993 pretax income excludes the write-off of an investment of $1.0M
($0.6M after tax, $0.10/share).
(f) 1992 pretax income excludes $3.2M ($1.9M after tax, $0.32/share) gain on
sale of business.
(g) 1991 pretax income excludes $0.5M ($0.3M after tax, $0.05/share) write-off
of investment in limited partnership.
(h) 1993 net income excludes $0.2M ($0.03/share) credit for cumulative effect
of change in accounting principle.
(i) 1992 net income excludes $1.1M ($0.19/share) extraordinary loss on early
extinguishment of debt.
(j) 1990 pretax income excludes $2.8 million write-off of investment in
limited partnership.
(k) Taxes assumed at 40% rate.
Cadmus Communications Corporation
(a) Excludes restructuring charge of $1.9M ($1.1M after tax, $0.19/share).
(b) Excludes charge for cumulative effect of change in accounting principle and
associated credit to income taxes of $0.5M & $0.9M ($0.7/share).
Consolidated Graphics, Inc.
(a) Excludes discontinued operations: sales of $1.2M, net loss of $0.3M
($.11/share).
R. R. Donnelley & Sons Company
(a) Income statement data (excluding D&A) updated for LTM 12/31/94 from press
release dated 1/26/95.
(b) Excludes $90.0M ($60.5M after tax, $0.39/share) restructuring charge.
(c) Excludes $6.2M ($0.04/share) charge for one-time change in statutory tax
rate.
(d) Excludes cumulative effects of changes in accounting principles of
$127.7M ($0.82/share) & $58.2M ($0.37/share).
Graphic Industries, Inc.
(a) Excludes litigation settlement of $1.3M ($0.8M after tax, $0.08/share).
(b) LTM D&A N/A; 1993 amount used as a proxy.
Banta Corporation
(a) Excludes credit to gross profit for LIFO adjustment of $0.3M ($0.2M after
tax, $0.01/share).
(b) Excludes charge to EBIT for accounting change of $0.9M ($0.5M after tax,
$0.03/share).
(c) Summary revenues & net income data for year ended 12/94 from press release
dated 1/31/95.
35
<PAGE>
Mickelberry Communications Incorporated
Comparison of Selected Publicly Traded Advertising Companies
(in thousands, except share data)
<TABLE>
<CAPTION>
Mickelberry Commun- Mickelberry Grey
ications Inc. Advertising Segment Advertising Inc.
------------------- ------------------- ----------------
BUSINESS Marketing Advertising & Provider of
DESCRIPTION services promotion advertising
businesses. agencies. services. Avg. excl.
VALUATION RATIOS Avg. Hi / Lo
-------------------------------------------------------------------------------------------------- --------- --------------
<S> <C> <C> <C> <C> <C>
Current P/E 10.5x 12.7x 14.8x 14.7x
Price/Projected 1995 EPS 11.5x NM 11.0x 11.6x
Price/Projected 1996 EPS 14.3x NM 9.4x 10.0x
EV/Revenues 0.3x 0.3x 0.8x 0.8x
EV/EBIT 10.0x 4.8x 8.1x 8.0x
EV/EBITDA 4.7x 3.1x 5.9x 5.8x
-------------------------------------------------------------------------------------------------- --------- --------------
MARKET DATA
Symbol/Exchange MBC/NYSE GREY/NASDAQ
Price 3/3/95 $3.00 $172.00
52 Week Price Range 2.25-3.50 144.00-196.00
Annualized Current Dividend 0.06 3.50
Indicated Yield 2.0% 2.0%
Shares Outstanding 5,876 1,242
Market Value $17,628 $213,624
Enterprise Value 41,430 196,716
LTM INCOME DATA
LTM Ending 31-Dec-94 31-Dec-94 30-Sep-94
Fiscal Year Ending 31-Dec-93 31-Dec-93 31-Dec-93
Net Revenues $127,623 $20,985 $593,317 (a)
EBIT 4,157 1,465 41,183
Pretax Income 2,921 0 41,554 (a)(b)
Net Income (1) 1,680 18,566 (a)(b)
EBITDA 8,743 2,137 62,656
Primary EPS 0.29 13.50 (a)(b)
Proj. 1995 EPS [# analysts] (2) 0.26 n/a
Proj. 1996 EPS [# analysts] (2) 0.21 n/a
LTM BALANCE SHEET DATA
Total Assets 100,456 13,878 824,675
Cash & Equivalents 9,355 1,181 132,748
Long-Term Debt 20,703 n/a 33,025
Total Debt 32,430 NM 100,394
Common Shareholders' Equity 34,046 139,339
OPERATING RATIOS
Total Debt/Cap. incl. ST Debt 48.3% NM 39.3%
EBIT/Ending Assets 4.1% 10.6% 5.0%
EBIT Margin 3.3% 7.0% 7.0%
Pretax Margin 2.3% 0.0% 7.1%
Net Margin 1.3% 2.9%
EBITDA Margin 6.9% 10.2% 10.6%
<CAPTION>
The Interpublic Group Omnicom Saatchi & Saatchi
of Companies, Inc. Group Inc. Company PLC
--------------------- --------------- -----------------
BUSINESS Advertising Operator of Operator of world-
DESCRIPTION agency advertising wide advertising &
business. agencies. marketing services
VALUATION RATIOS businesses.
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current P/E 18.1x 16.3x 16.0x
Price/Projected 1995 EPS 15.8x 14.6x 4.6x
Price/Projected 1996 EPS 13.8x 12.8x 3.5x
EV/Revenues 1.4x 1.3x 0.5x
EV/EBIT 9.7x 11.6x 10.6x
EV/EBITDA 7.6x 8.8x 6.1x
--------------------------------------------------------------------------------------------------
MARKET DATA
Symbol/Exchange IPG/NYSE OMC/NYSE SAA/LSE
Price 3/3/95 $33.88 $51.50 (Pounds)0.90
52 Week Price Range 27.50-35.88 44.88-54.50 .94-1.81
Annualized Current Dividend 0.56 1.24 0.00
Indicated Yield 1.7% 2.4% 0.0%
Shares Outstanding 76,956 36,454 220,122
Market Value $2,606,885 $1,877,381 (Pounds)198,110
Enterprise Value 2,727,879 2,236,490 391,010
LTM INCOME DATA
LTM Ending 30-Sep-94 30-Sep-94 30-Jun-94
Fiscal Year Ending 31-Dec-93 31-Dec-93 31-Dec-93
Net Revenues $1,984,255 (a) $1,756,205 (a) (Pounds)785,800
EBIT 282,438 (a) 192,976 36,900
Pretax Income 249,514 (a)(b) 181,756 (a) 28,600
Net Income (1) 141,000 (a)(b) 108,134 (a) 11,900
EBITDA 358,719 (c) 252,790 64,500
Primary EPS 1.87 (a)(b) 3.15 (a) 5.6p
Proj. 1995 EPS [# analysts] (2) 2.15 [8] 3.52 [7] 19.7p [7]
Proj. 1996 EPS [# analysts] (2) 2.45 [6] 4.01 [4] 25.8p [7]
LTM BALANCE SHEET DATA
Total Assets 3,032,710 2,458,900 892,000
Cash & Equivalents 272,660 118,281 93,800
Long-Term Debt 241,262 348,240 221,300
Total Debt 382,461 441,419 274,100
Common Shareholders' Equity 648,231 537,513 (351,800)
OPERATING RATIOS
Total Debt/Cap. incl. ST Debt 36.7% 43.5% (421.0%)
EBIT/Ending Assets 9.3% 7.8% 4.1%
EBIT Margin 14.2% (a) 11.5% 4.7%
Pretax Margin 12.6% (a)(b) 10.0% 3.6%
Net Margin 7.1% (a)(b) 6.0% 1.5%
EBITDA Margin 18.1% (c) 15.0% 8.2%
<CAPTION>
True North (a) WWP
Communications Group plc (a)
---------------- -------------------
BUSINESS Global marketing Multinational
DESCRIPTION communications marketing
company. services
VALUATION RATIOS organization.
----------------------------------------------------------------------------
<S> <C> <C>
Current P/E 13.6x 12.2x
Price/Projected 1995 EPS 10.7x 9.4x
Price/Projected 1996 EPS 9.6x 7.4x
EV/Revenues 0.9x 0.5x
EV/EBIT 6.3x 5.6x
EV/EBITDA 5.0x 4.6x
----------------------------------------------------------------------------
MARKET DATA
Symbol/Exchange TNO/NYSE WPP/LSE
Price 3/3/95 $16.00 (Pounds)1.10
52 Week Price Range 15.75-23.31 .98-1.32
Annualized Current Dividend 0.60 0.77
Indicated Yield 3.8% 70.0%
Shares Outstanding 23,428 585,980 (e)
Market Value $374,848 (Pounds)644,578
Enterprise Value 349,478 694,578
LTM INCOME DATA
LTM Ending 30-Sep-94 31-Dec-94
Fiscal Year Ending 31-Dec-93 31-Dec-94
Net Revenues $394,328 (b) (Pounds)1,426,900
EBIT 55,264 (c)(d) 123,600 (b)
Pretax Income 30,887 (c)(d)(e) 96,800 (b)
Net Income (1) 26,646 (c)(d)(e) 53,200 (b)
EBITDA 70,299 (c)(d) 150,600 (b)
Primary EPS 1.18 (c)(d)(e) 9.0p (b)
Proj. 1995 EPS [# analysts] (2) 1.50 [7] 11.7p [5]
Proj. 1996 EPS [# analysts] (2) 1.67 [4] 14.8p [5]
LTM BALANCE SHEET DATA
Total Assets 728,545 1,685,000
Cash & Equivalents 76,251 314,000
Long-Term Debt 10,701 291,000
Total Debt 50,881 353,000
Common Shareholders' Equity 209,816 (117,000)
OPERATING RATIOS
Total Debt/Cap. incl. ST Debt 19.5% 142.9%
EBIT/Ending Assets 7.6% 7.3%
EBIT Margin 14.0% (c)(d) 8.7% (b)
Pretax Margin 7.8% (c)(d)(e) 6.8% (b)
Net Margin 6.8% (c)(d)(e) 3.7% (b)
EBITDA Margin 17.8% (c)(d) 10.6% (b)
</TABLE>
36
<PAGE>
MICKELBERRY COMMUNICATIONS INCORPORATED
COMPARISON OF SELECTED PUBLICLY TRADED ADVERTISING COMPANIES
(in thousands, except share data)
<TABLE>
<CAPTION>
Mickelberry Commun- Mickelberry Grey The Interpublic Group Omnicom
ications Inc. Advertising Segment Advertising Inc of Companies, Inc. Group Inc.
------------------- ------------------- --------------- --------------------- ----------
INCOME STATEMENT DATA
<S> <C> <C> <C> <C> <C>
Net Revenues
----------------------
LTM $127,623 $20,985 $588,790 $1,984,255 (a) $1,680,057
1993 118,944 18,849 567,243 1,793,856 1,516,475
1992 101,600 (b) 20,331 (a) 564,468 1,855,971 1,385,161
1991 89,400 (b) 21,150 (a) 528,299 1,677,498 1,236,158
1990 83,100 NM 481,282 1,368,169 1,178,233
1989 NA NM 411,083 1,256,854 1,007,173
Growth Rate 12.7% (5.6%) 8.4% 9.3% 10.8%
EBIT
----------------------
LTM $4,157 (a) $ 1,465 $ 41,183 $282,438 (a) $ 192,976
1993 2,698 538 40,788 258,205 169,199
1992 2,433 (c) 574 (a) 41,958 240,379 153,088 (b)
1991 2,727 2,082 (a) 37,729 (c) 218,782 135,117
1990 1,600 NM 35,082 168,410 126,788
1989 NA NM 28,439 152,643 102,505
Growth Rate 19.0% (49.2%) 9.4% 14.0% 13.3%
Pretax Income
----------------------
LTM $2,921 (a) $ 41,756 $249,514 (a)(b) $ 168,705
1993 1,220 (d)(e) 42,705 231,760 142,624
1992 1,175 (c)(d)(f) 42,588 207,158 129,010 (b)
1991 2,148 (g) 38,471 (c) 185,283 111,924
1990 1,141 (j) 31,975 149,538 102,100
1989 NA 30,728 137,648 90,413
Growth Rate 2.3% 8.6% 13.9% 12.1%
Net Income (1)
----------------------
LTM $1,680 (a) $ 17,192 $141,000 (a)(b) $ 101,349
1993 660 (d)(e)(h) 17,681 125,279 (d) 85,345
1992 632 (c)(d)(f)(i) 15,904 111,913 (e) 69,526 (b)(c)
1991 1,216 (g) 15,613 (c)(d) 94,557 57,052
1990 612 (j)(k) 14,558 80,064 52,009
1989 NA 13,920 70,600 46,794
Growth Rate 2.5% 6.2% 15.4% 16.2%
Primary EPS
----------------------
LTM $0.29 (a) $ 12.67 $1.87 (a)(b) $3.05
1993 0.11 (d)(e)(h) 13.46 1.67 (d) 2.79
1992 0.10 (c)(d)(f)(i) 12.68 1.50 (e) 2.45
1991 0.21 (g) 12.67 (c)(d) 1.30 2.08
1990 0.10 10.97 2.38 2.01
1989 NA 10.44 2.10 1.81
Growth Rate 3.7% 6.6% (5.6%) 11.4%
EBITDA
----------------------
LTM $8,743 (a) $ 2,137 $ 62,656 $358,719 (c) $ 252,790
1993 6,962 1,733 59,865 328,309 222,723
1992 6,169 (c) 1,721 (a) 62,811 306,939 202,896
1991 6,150 3,508 (a) 56,445 282,483 181,295
1990 4,728 NM 52,458 217,165 173,141
1989 NA NM 41,265 193,171 138,162
Growth Rate 13.8% (29.7%) 9.7% 14.2% 12.7%
<CAPTION>
Saatchi & Saatchi True North (a) WPP
Company PLC Communications Group plc (a)
----------------- -------------- -------------
<S> <C> <C> <C>
Net Revenues
----------------------
LTM (Pound)785,800 $394,328 (b) (Pounds)1,426,900
1993 806,000 372,666 (b) 1,430,704
1992 731,200 353,340 1,273,448
1991 718,300 341,987 1,204,418
1990 808,100 338,138 1,264,100
1989 973,500 326,075 1,005,453
Growth Rate (4.6%) 3.4% 9.2%
EBIT
----------------------
LTM (Pound)36,900 (a)(b) $ 55,264 (c)(d) (Pounds)123,600 (b)
1993 34,100 (b) 41,395 (c)(d) 109,211 (c)
1992 34,600 (c)(e) 26,177 87,841 (d)
1991 22,100 (d) 20,610 84,170 (e)
1990 64,100 29,344 132,971
1989 83,600 29,285 102,482
Growth Rate (20.1%) 9.0% 1.6%
Pretax Income
----------------------
LTM (Pound)28,600 (a)(b) $30,887 (c)(d)(e) (Pounds)96,800 (b)
1993 19,200 (b) 34,913 (c)(d)(e) 79,457 (c)(f)
1992 16,900 (c)(e)(f) 20,297 (f) 53,751 (d)(g)
1991 (1,900)(d)(g)(h) 15,884 (g) 38,363 (e)
1990 35,600 23,063 90,040
1989 21,800 25,599 75,039
Growth Rate (3.1%) 8.1% 1.4%
Net Income (1)
----------------------
LTM (Pound)11,900 (a)(b) $26,646 (c)(d)(e) (Pounds)53,200 (b)
1993 7,300 (b) 29,396 (c)(d)(e) 37,844 (c)(f)
1992 (7,700)(c)(e)(f) 21,694 (f)(h) 24,998 (d)(g)
1991 (44,350)(d)(g)(h) 16,833 (g) 22,278 (e)
1990 (21,300) 21,347 (i) 50,568
1989 (36,500) 19,289 (j) 38,201
Growth Rate NM 11.1% (0.2%)
Primary EPS
----------------------
LTM 5.6p (a)(b) $1.18 (c)(d)(e) 9.0p (b)
1993 3.7p (b) 1.31 (c)(d)(e) 8.9p (c)(f)
1992 (4.6p)(c)(e)(f) 1.00 (f)(h) 16.7p (d)(g)
1991 (36.3p)(d)(g)(h) 0.80 (g) 18.5p (e)
1990 (15.3p) 1.04 (i) 39.1p
1989 (23.1p) 0.95 (j) 36.5p
Growth Rate NM 8.3% (29.6%)
EBITDA
---------------------
LTM (Pound)64,500 (a)(b) $70,299 (c)(d) 150,600 (b)
1993 63,800 (b) 56,323 (c)(d) 135,211 (c)
1992 60,700 (c)(e) 39,869 110,759 (d)
1991 49,900 (d) 35,389 110,076 (e)
1990 93,000 42,782 135,515
1989 115,500 41,384 122,311
Growth Rate (13.8%) 8.0% 2.5%
</TABLE>
37
<PAGE>
Mickelberry Communications Incorporated
Comparison of Selected Publicly Traded Advertising Companies
(in thousands, except share data)
<TABLE>
<CAPTION>
Mickelberry Commun- Mickelberry Grey The Interpublic Group Omnicorn
ications Inc. Advertising Segment Advertising Inc. of Companies, Inc. Group Inc.
--------------- ------------------- ---------------- ------------------ ----------
<S> <C> <C> <C> <C> <C>
MARGIN ANALYSIS
EBIT Margin
---------------------
LTM 3.3% 7.0% 7.0% 14.2% (a) 11.5%
1993 2.3% 2.9% 7.2% 14.4% 11.2%
1992 2.4% (c) 2.8% (a) 7.4% 13.0% 11.1%
1991 3.1% 9.8% (a) 7.1% (c) 13.0% 10.9%
1990 1.9% 7.3% 12.3% 10.8%
1989 NM 6.9% 12.1% 10.2%
Pretax Margin
---------------------
LTM 2.3% 0.0% 7.1% 12.6% (a)(b) 10.0%
1993 1.0% 0.0% 7.5% 12.9% 9.4%
1992 1.2% (c)(d)(f) 0.0% 7.5% 11.2% 9.3%
1991 2.4% (g) 0.0% 7.3% (c) 11.0% 9.1%
1990 1.4% 6.6% 10.9% 8.7%
1989 NM 7.5% 11.0% 9.0%
Net Margin
---------------------
LTM 1.3% (a) 2.9% 7.1% (a)(b) 6.0%
1993 0.6% (d)(e)(h) 3.1% 7.0% (d) 5.6%
1992 0.6% (c)(d)(f)(i) 2.8% 6.0% (e) 5.0%
1991 1.4% (g) 3.0% (c)(d) 5.6% 4.6%
1990 0.7% 3.0% 5.9% 4.4%
1989 NM 3.4% 5.6% 4.6%
EBITDA Margin
---------------------
LTM 6.9% 10.2% 10.6% 18.1% (c) 15.0%
1993 5.9% 9.2% 10.6% 18.3% 14.7%
1992 6.1% (c) 8.5% 11.1% 16.5% 14.6%
1991 6.9% 16.6% 10.7% 16.8% 14.7%
1990 5.7% 10.9% 15.9% 14.7%
1989 NM 10.0% 15.4% 13.7%
<CAPTION>
Saatchi & Saatchi True North (a) WPP
Company PLC Communications Group plc (a)
----------------- -------------- -------------
<S> <C> <C> <C>
MARGIN ANALYSIS
EBIT Margin
---------------------
LTM 4.7% (a)(b) 14.0% (c)(d) 8.7% (b)
1993 4.2% (b) 11.1% (c)(d) 7.6% (c)
1992 4.7% (c)(e) 7.4% 6.9% (d)
1991 3.1% (d) 6.0% 7.0% (e)
1990 7.9% 8.7% 10.5%
1989 8.6% 9.0% 10.2%
Pretax Margin
---------------------
LTM 3.6% (a)(b) 7.8% (c)(d)(e) 6.8% (b)
1993 2.4% (b) 9.4% (c)(d)(e) 5.6% (c)(f)
1992 2.3% (c)(e)(f) 5.7% (f) 4.2% (d)(g)
1991 (0.3%)(d)(g)(h) 4.6% (g) 3.2% (e)
1990 4.4% 6.8% 7.1%
1989 2.2% 7.9% 7.5%
Net Margin
---------------------
LTM 1.5% (a)(b) 6.8% (c)(d)(e) 3.7% (b)
1993 0.9% (b) 7.9% (c)(d)(e) 2.6% (c)(f)
1992 (1.1%)(c)(e)(f) 6.1% (f)(h) 2.0% (d)(g)
1991 (6.2%)(d)(g)(h) 4.9% (g) 1.8% (e)
1990 (2.6%) 6.3% 4.0%
1989 (3.7%) 5.9% 3.8%
EBITDA Margin
---------------------
LTM 8.2% (a)(b) 17.8% (c)(d) 10.6% (b)
1993 7.9% (b) 15.1% (c)(d) 9.5% (c)
1992 8.3% (c)(e) 11.3% 8.7% (d)
1991 6.9% (d) 10.3% 9.1% (e)
1990 11.5% 12.7% 10.7%
1989 11.9% 12.7% 12.2%
</TABLE>
38
<PAGE>
Mickelberry Communications Incorporated
Comparison of Selected Publicly Traded Advertising Companies
(in thousands, except share data)
<TABLE>
<CAPTION>
Mickelberry Commun- Mickelberry Grey The Interpublic Group
ications Inc. Advertising Segment Advertising Inc. of Companies, Inc.
------------------- ------------------- ---------------- ---------------------
<S> <C> <C> <C> <C>
HISTORICAL BALANCE SHEET DATA
Total Assets
---------------------------
LTM $100,456 $13,878 $824,675 $3,032,710
1993 97,242 14,833 820,633 2,869,817
1992 88,631 14,860 752,364 2,623,345
1991 85,378 27,376 735,831 2,784,300
1990 79,528 NM 626,522 2,584,111
1989 92,162 NM 527,413 1,740,729
Growth Rate 1.4% (26.4%) 11.7% 13.3%
Common Shareholders' Equity
---------------------------
LTM $ 34,046 $139,339 $648,231
1993 34,772 129,077 564,015
1992 34,878 118,741 511,170
1991 33,076 105,653 586,796
1990 33,214 104,000 509,705
1989 32,991 89,523 367,638
Growth Rate 1.3% 9.6% 11.3%
CAPITALIZATION
As of: 31-Dec-94 31-Dec-94 30-Sep-94 30-Sep-94
Short-Term Debt $11,727 n/a $67,369 $141,199
========== ========== ========== ==========
Long-Term Debt 20,703 n/a $33,025 $241,262
Preferred Stock, Minority Int. 727 15,446 11,193
Common Equity 34,046 139,339 648,231
---------- ---------- ---------- ----------
TOTAL CAPITALIZATION $55,476 n/a $187,810 $900,686
========== ========== ========== ==========
Cash & Equivalents $9,355 $1,181 $132,748 $272,660
========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Omnicom Saatchi & Saatchi True North (a) WPP
Group, Inc. Company PLC Communications Group plc (a)
----------- ----------------- -------------- -------------
<S> <C> <C> <C> <C>
HISTORICAL BALANCE SHEET DATA
Total Assets
---------------------------
LTM 2,458,900 (Pounds)892,000 $728,545 (Pounds)1,685,000
1993 2,289,863 916,100 637,887 1,580,000
1992 1,951,950 952,800 589,359 1,588,000
1991 1,885,894 852,100 591,442 1,399,443
1990 1,748,529 952,700 647,865 1,405,089
1989 1,547,599 991,400 658,335 1,506,515
Growth Rate 10.3% (2.0%) (0.8%) 1.2%
Common Shareholders' Equity
---------------------------
LTM $537,513 (Pounds)(351,800) $209,816 (Pounds)(117,000)
1993 402,186 (383,300) 200,030 (162,000)
1992 308,892 (443,700) 183,327 (265,511)
1991 366,218 (381,300) 163,041 (289,372)
1990 298,330 (391,600) 191,223 (243,629)
1989 238,116 (378,300) 178,466
Growth Rate 14.0% 0.3% 2.9% NM
CAPITALIZATION
As of: 30-Sep-94 30-Jun-94 30-Sep-94 31-Dec-94
Short-Term Debt $93,179 (Pounds)52,800 $40,180 (Pounds)62,000
========== ========== ========== ==========
Long-Term Debt $348,240 (Pounds)221,300 $10,701 (Pounds)291,000
Preferred Stock, Minority Int. 35,971 12,600 0 11,000
Common Equity 537,513 (351,800) 209,816 (117,000)
---------- ---------- ---------- ----------
TOTAL CAPITALIZATION $921,724 (Pounds)(117,900) $220,517 (Pounds)185,000
========== ========== ========== ==========
Cash & Equivalents $118,281 (Pounds)93,800 $76,251 (Pounds)314,000
========== ========== ========== ==========
</TABLE>
39
<PAGE>
Mickelberry Communications Incorporated
Comparison of Selected Publicly Traded Advertising Companies
Notes
<TABLE>
<CAPTION>
General
<S> <C>
(1) Net income available to common shareholders before extraordinary items & changes in accounting principle.
(2) Earnings estimates from First Call database as of 3/6/95.
</TABLE>
<TABLE>
<CAPTION>
Mickelberry Communications Incorporated
<S> <C>
(a) Excludes $3.0 million ($1.8 million after taxes, $0.31 per common share) of inventory write-offs at Excel.
(b) Revenue excludes $7.6M in 1992, $16.2M in 1991 and $17.4M in 1990, from Carabiner, Inc., which was sold in 1992.
(c) EBIT excludes $0.3M ($0.2M after tax, $0.03/share) in 1992, $0.00M in 1991 and $(0.1)M in 1990 income (loss) from Carabiner.
(d) 1993 & 1992 pretax income exclude gains on sales of temporary investments of $35K ($21K after tax) & $1.0M ($0.6M after
tax, $0.10/share).
(e) 1993 pretax income excludes the write-off of an investment of $1.0M ($0.6M after tax, $0.10/share).
(f) 1992 pretax income excludes $3.2M ($1.9M after tax, $0.32/share) gain on sale of business.
(g) 1991 pretax income excludes $0.5M ($0.3M after tax, $0.05/share) write-off of investment in limited partnership.
(h) 1993 net income excludes $0.2M ($0.03/share) credit for cumulative effect of change in accounting principle.
(i) 1992 net income excludes $1.1M ($0.19/share) extraordinary loss on early extinguishment of debt.
(j) 1990 pretax income excludes $2.8 million write-off of investment in limited partnership.
(k) Taxes assumed at 40% rate.
</TABLE>
<TABLE>
<CAPTION>
Mickelberry Advertising Segment
<S> <C>
(a) Revenue excludes Carabiner (discontinued operation) results of $7.6M in 1992 & $16.2M in 1991. EBIT excludes $0.3M in 1992
& $0.0M in 1991.
</TABLE>
<TABLE>
<CAPTION>
Grey Advertising Inc.
<S> <C>
(a) Summary income data updated for LTM 12/31/94 from press release dated 3/1/95.
(b) Excludes write-off of goodwill of $39.9M ($31.01/share).
(c) 1991 pretax income excludes $23.9M ($11.0M after tax, $8.93/share) restructuring charge.
(d) 1991 pretax income excludes $1.3M ($0.8M after tax, $0.65/share) ofwritedown of investment.
</TABLE>
<TABLE>
<CAPTION>
The Interpublic Group of Companies, Inc.
<S> <C>
(a) 1994 income data from press release dated 2/21/95.
(b) Excludes restructuring charge of $48.7M ($25.8M after tax, $0.34/share).
(c) 1994 D&A n/a; LTM 9/94 used as a proxy.
(d) 1993 net income excludes charge for cumulative effect of change in accounting principle of $0.5M ($0.01/share).
(e) 1992 net income excludes charge for cumulative effect of change in accounting principle of $25.6M ($0.33/share).
</TABLE>
<TABLE>
<CAPTION>
Omnicom Group Inc.
<S> <C>
(a) Summary income data for year ended 12/94 from press release dated 2/23/95.
(b) 1992 EBIT excludes a $6.7M ($4.0M after tax, $0.22/share) reorganization charge.
(c) 1992 net income excludes credit for cumulative effect of change in accounting principle of $3.8M ($0.14/share).
</TABLE>
40
<PAGE>
Mickelberry Communications Incorporated
Comparison of Selected Publicly Traded Advertising Companies
Notes
Saatchi & Saatchi Company PLC
(a) Excludes (Pounds)0.3M ((Pounds)0.2M after tax, 0.1p/share) charge to EBIT
for discontinued operations.
(b) Excludes losses & profits applicable to EBIT from discontinued operations
which net out.
(c) Excludes (Pounds)13.8M ((Pounds)6.9M after tax, 4.1p/share) charge to
EBIT for discontinued operations.
(d) Excludes (Pounds)156.8M ((Pounds)78.4M after tax, 64.2p/share)
reorganization charge to EBIT.
(e) Excludes (Pounds)600.0M (354.7p/share) charge to EBIT for writedown of
goodwill reserves.
(f) Pretax income excludes (Pounds)1.8M ((Pounds)0.9M after tax, 0.5p/share)
gain on sale of art.
(g) Excludes (Pounds)2.5M ((Pounds)1.3M after tax, 1.0p/share) gain
applicable to pretax income on sale of art.
(h) Excludes gain on reorganization applicable to pretax income of
(Pounds)113.5M ((Pounds)56.8M after tax, 46.5p/share).
True North Communications
(a) Pro forma for 2/15/95 2-for-1 stock split.
(b) Includes revenues from discontinued operation.
(c) 1993 EBIT excludes loss of $8.4M ($4.9M after tax, $0.44/share) from
Krupp/Taylor, a production facility sold in 1993.
(d) 1993 EBIT excludes loss on sale of discontinued operation of $6.3M ($0.6M
after tax, $0.05/share).
(e) 1993 pretax income excludes gains of $3.0M ($1.8M after tax, $0.16/share)
from life insurance & deferred compensation adjustments related to the
death of a former officer.
(f) 1992 pretax income excludes charges of $3.6M ($3.6M after tax,
$0.34/share) for investment write-down, partially offset by gain on lease
renegotiation.
(g) 1991 pretax income excludes restructuring charges of $41.6M ($36.0M after
tax, $3.41/share)
(h) 1992 net income excludes cumulative effect of change in accounting
principle of $3.7M ($0.34/share).
(i) 1990 net income excludes after tax gains of $.3M ($0.03/share).
(j) 1989 net income excludes after tax gains of $.4M ($0.03/share).
WPP Group plc
(a) Year ended 12/31/94 data from 2/28/95 press release.
(b) 1994 EBIT excludes exceptional expenses of (Pounds)11.5M ((Pounds)6.9M
after tax, 1.17p/share).
(c) 1993 EBIT excludes (Pounds)14.2M ((Pounds)7.8M after tax,
1.8p/share) for exceptional severance payments.
(d) 1992 EBIT excludes charge of (Pounds)17.1M ((Pounds)9.1M after tax,
6.1p/share) for exceptional severance payments & provisions for excess
property.
(e) 1991 EBIT excludes (Pounds)17.7M ((Pounds)8.9M after tax, 18.5p/share)
exceptional item credit.
(f) 1993 pretax income excludes exceptional loss on sale or closure of
companies of (Pounds)10.9M ((Pounds)10.9M after tax, 3p/share).
(g) 1992 pretax income excludes exceptional charges of (Pounds)28.9M
((Pounds)28.9M after tax, 20p/share) for loss on closure of companies &
costs of captial restructuring.
41
<PAGE>
EXHIBIT 2
VALUATION BASED ON COMPARABLE ACQUISITIONS
Going Concern Analysis
(Dollars in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Valuation Range
------------------
Low High
------- -------
<S> <C> <C>
Enterprise Values
Print Division $40,000 $60,000
Advertising & Promotions Divisions 16,000 20,000
Corporate Overhead (11,000) (15,000)
Excel Marketing Group Value /1/ 3,000 5,000
------- -------
Total Enterprise Value $48,000 $70,000
======= =======
Plus: Cash & Temporary Investments as of (12/31/94) 9,355 9,355
Less: Straight Debt as of (12/31/94) (22,697) (22,697)
------- -------
Equity Value Pre - (Convertible Debt, Preferred Stock & Cash From Options) $34,658 $56,658
Plus: Cash From Options 1,646 2,068
Less: Convertible Debt (9,828) 0
Less: Preferred Stock 0 0
------- -------
Equity Value $26,476 $58,726
Number of Shares 6,676 9,078
------- -------
Per Share Equity Value Range $3.97 $6.47
======= =======
</TABLE>
/1/ Based on discounted cash flow analysis
42
<PAGE>
VALUATION BASED ON COMPARABLE ACQUISITIONS
(Dollars in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Print Division
-------------------
Multiple Range Enterprise Value Range
------------------ ----------------------
Amount Low High Low High
---------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
1994 Actual Data:
Revenue $81,193 0.6x 0.8x 48,716 64,954
EBIT 5,209 9.0x 12.0x 46,881 62,508
EBITDA 8,494 6.0x 8.0x 50,964 67,952
Net Income 2,288 15.0x 20.0x 46,972/(1)/ 58,412/(1)/
1995 Projected Data:
Revenue $90,600 0.5x 0.7x 45,300 63,420
EBIT 4,215 8.0x 11.0x 33,720 46,365
EBITDA 8,257 5.0x 7.0x 41,285 57,799
Net Income 1,625 13.0x 18.0x 33,777/(1)/ 41,902/(1)/
--------------------------------------------------------------------------------
Valuation Range $40,000 $60,000
--------------------------------------------------------------------------------
</TABLE>
(1) Includes net debt of $12,652.
43
<PAGE>
VALUATION BASED ON COMPARABLE ACQUISITIONS
(Dollars in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Advertising & Promotions
-----------------------------
Multiple Range Enterprise Value Range
-------------------- ------------------------
Amount Low High Low High
---------- ------- -------- --------- ----------
<S> <C> <C> <C> <C> <C>
1994 Revenues:
Bender, Browning, Dolby & Sanderson $5,963 0.8x 1.0x $4,770 $5,963
Partners & Shevack, Inc. $11,713 0.8x 1.0x 9,370 11,713
Ventura Associates International, Inc $3,309 0.8x 1.0x 2,647 3,309
------- ------- -------
Total Revenues $20,985 $16,788 $20,985
======= ======= =======
---------------------------------------------------------------------------------------------------------
Valuation Range $16,000 $20,000
---------------------------------------------------------------------------------------------------------
</TABLE>
44
<PAGE>
VALUATION BASED ON COMPARABLE ACQUISITIONS
<TABLE>
<CAPTION>
Multiple Range Enterprise Value Range
------------------ ----------------------
Corporate Overhead Amount Low High Low High
------------------- -------- ----- ------ ------- --------
<S> <C> <C> <C> <C> <C>
1994 Data ($1,909) 6.0x 8.0x (11,454) (15,272)
1995 Data (2,063) 5.0x 7.0x (10,315) (14,441)
--------------------------------------------------------------------------------
Valuation Range ($11,000) ($15,000)
--------------------------------------------------------------------------------
</TABLE>
45
<PAGE>
WERTHEIM SCHRODER & CO.
-----------------------
INCORPORATED
CORPORATE FINANCE DEPARTMENT
Selected Merger And Acquisition Transactions Of Printing Companies
(dollars in thousands)
<TABLE>
<CAPTION>
Announcement/ Purchase Adjusted LTM
Effective Price Purchase Revenues
Date Target / Acquiror Target Description (PP) Price (APP) APP / Rev.
----------- ------------------------------------- -------------------------------- -------- ----------- ----------
<S> <C> <C> <C> <C> <C>
24-Jan-94 Retail Graphics Holding Prints advertising material $45,100 $99,900 $124,875
24-Jan-94 Big Flower Press for newspapers and mail 0.8 x
8-Mar-94 Danbury Printing & Litho, Inc. Commercial printer of 16,331 NA 35,000
8-Mar-94 Banta Corporation ad/promotional pieces NM
16-Mar-94 KLB Associates, Inc. Provide commercial 40,431 47,055 73,628
27-Apr-94 Big Flower Press Inc. lithographic printing services 0.6 x
22-Nov-93 George Rice & Sons Provide commercial 33,212 91,078 122,246
22-Nov-93 World Color Press, Inc. printing services 0.7 x
5-Oct-93 May Printing Company Printer of corporate 19,900 24,400 27,111
5-Oct-93 Merrill Corp identity documents 0.9 x
30-Sep-93 Waverly Press Printer of scientific 20,000 20,000 50,427
30-Sep-93 Cadmus Communications Corp. and medical journals 0.4 x
15-Jul-93 Treasure Chest Advertising Prints advertising circulars 150,000 199,300 498,250
15-Jul-93 Big Flowers Press and Sunday comics 0.4 x
7-Jun-93 Bourque Printing, Inc. Provide commercial 1,664 1,668 1,809
7-Jun-93 Champion Industries, Inc. printing services 0.9 x
8-Apr-93 Sullivan Holdings, Inc. Provides commercial 44,400 282,700 403,857
8-Apr-93 Investor Group printing services 0.7 x
28-Jan-93 Standard Packaging and Printing Corp. Provide commercial 12,214 15,163 16,026
28-Jan-93 Gibralter Packaging Group, Inc. printing services 0.9 x
18-Jan-93 The Alden Press Company Provide web printing services 110,586 164,949 172,955
31-Mar-93 APC Holding, Inc. 1.0 x
------------------------------------------------------------------------
Average: 0.7 x
Average excluding high/low: 0.8 x
------------------------------------------------------------------------
<CAPTION>
Announcement/ LTM
Effective LTM EBIT LTM EBITDA Net Income Book Value LTM Cash
Date APP / EBIT APP / EBITDA PP / Net Inc. PP / BV Debt
----------- ---------- ------------ ------------- ---------- --------
<S> <C> <C> <C> <C> <C>
24-Jan-94 $2,664 $9,165 NA NA $0
24-Jan-94 37.5 x 10.9 x NM NM 54,800
8-Mar-94 NA NA NA NA NA
8-Mar-94 NM NM NM NM NA
16-Mar-94 3,790 4,755 3,927 13,695 771
27-Apr-94 12.4 x 9.9 x 10.3 x 3.0 x 7,395
22-Nov-93 6,109 13,646 (1,610) (8,336) 7
22-Nov-93 14.9 x 6.7 x NM NM 56,795
5-Oct-93 2,568 3,389 1,554 5,304 0
5-Oct-93 9.5 x 7.2 x 15.7 x 4.6 x 4,500
30-Sep-93 2,253 5,044 1,397 14,398 0
30-Sep-93 8.9 x 4.0 x 14.3 x 1.4 x 0
15-Jul-93 23,174 37,604 3,811 40,673 0
15-Jul-93 8.6 x 5.3 x 52.3 x 4.9 x 49,300
7-Jun-93 175 324 79 522 121
7-Jun-93 9.5 x 5.1 x 21.1 x 3.2 x 125
8-Apr-93 NA 23,756 NA 565,400 0
8-Apr-93 NM 11.9 x NM 0.5 x 238,300
28-Jan-93 1,140 2,036 521 5,399 314
28-Jan-93 13.3 x 7.4 x 23.4 x 2.3 x 3,263
18-Jan-93 13,421 23,453 4,727 33,790 22
31-Mar-93 12.3 x 7.0 x 23.4 x 3.3 x 54,385
------------------------------------------------------------------------------------
Average: 14.1 x 7.5 x 22.9 x 2.9 x
Average excluding high/low: 11.5 x 7.4 x 19.6 x 2.9 x
------------------------------------------------------------------------------------
</TABLE>
46
<PAGE>
EXHIBIT 3
VALUATION BASED ON DISCOUNTED CASH FLOW ANALYSIS
Going Concern Analysis
(Dollars in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Valuation Range
-------------------
Low High
------- -------
<S> <C> <C>
Enterprise Values
Print Division $40,000 $50,000
Bender, Browning, Dolby & Sanderson 1,400 1,800
Partners & Shevack, Inc. 7,500 9,500
Ventura Associates International, Inc 2,000 2,500
Corporate (10,500) (12,500)
Excel Marketing Group Value (1) 3,000 5,000
------- -------
Total Enterprise Value $43,400 $56,300
======= =======
Plus: Cash & Temporary Investments as of (12/31/94) 9,355 9,355
Less: Straight Debt as of (12/31/94) (22,697) (22,697)
------- -------
Equity Value Pre - (Convertible Debt, Preferred Stock & Cash From Options) $30,058 $42,958
Plus: Cash From Options 1,237 1,977
Less: Convertible Debt (9,828) 0
Less: Preferred Stock 0 0
------- -------
Equity Value $21,467 $44,935
Number of Shares 6,556 9,061
------- -------
Per Share Equity Value Range $3.27 $4.96
======= =======
</TABLE>
(1) Based on discounted cash flow analysis
47
<PAGE>
MICKELBERRY COMMUNICATIONS INCORPORATED
Discounted Cash Flow - Printing
(dollars in thousands)
<TABLE>
<CAPTION>
Discount Rate
-----------------------------------------
10.0% 12.0% 14.0%
------- ------- -------
<S> <C> <C> <C>
Terminal EBITDA $11,214 $11,214 $11,214
Terminal Value
Terminal Multiple *
5.0 x 56,070 56,070 56,070
6.0 x 67,284 67,284 67,284
7.0 x 78,498 78,498 78,498
Present Value of Terminal Value
Terminal Multiple
5.0 x 34,815 31,816 29,121
6.0 x 41,778 38,179 34,945
7.0 x 48,741 44,542 40,769
Present Value of Free Cash Flows 8,393 7,889 7,427
Present Value of Total
Terminal Multiple
5.0 x 43,208 39,705 36,548
6.0 x 50,171 46,068 42,372
7.0 x 57,134 52,431 48,196
</TABLE>
* Multiple of 1999 EBITDA.
--------------------------
48
<PAGE>
MICKELBERRY COMMUNICATIONS INCORPORATED
Bender, Browning, Dolby & Sanderson Advertising, Inc.
(dollars in thousands)
<TABLE>
<CAPTION>
Discount Rate
-----------------------------------------
12.0% 14.0% 16.0%
------- ------- -------
<S> <C> <C> <C>
Terminal EBITDA $467 $467 $467
Terminal Value
Terminal Multiple *
5.0 x 2,335 2,335 2,335
6.0 x 2,802 2,802 2,802
7.0 x 3,269 3,269 3,269
Present Value of Terminal Value
Terminal Multiple
5.0 x 1,325 1,213 1,112
6.0 x 1,590 1,455 1,334
7.0 x 1,855 1,698 1,556
Present Value of Free Cash Flows 205 173 144
Present Value of Total
Terminal Multiple
5.0 x 1,530 1,385 1,255
6.0 x 1,795 1,628 1,478
7.0 x 2,060 1,870 1,700
</TABLE>
* Multiple of 1999 EBITDA.
49
<PAGE>
MICKELBERRY COMMUNICATIONS INCORPORATED
Partners & Shevack, Inc.
(dollars in thousands)
<TABLE>
<CAPTION>
Discount Rate
----------------------------------------
12.0% 14.0% 16.0%
------- ------- -------
<S> <C> <C> <C>
Terminal EBITDA $1,777 $1,777 $1,777
Terminal Value
Terminal Multiple *
5.0 x 8,885 8,885 8,885
6.0 x 10,662 10,662 10,662
7.0 x 12,439 12,439 12,439
Present Value of Terminal Value
Terminal Multiple
5.0 x 5,042 4,615 4,230
6.0 x 6,050 5,538 5,076
7.0 x 7,058 6,460 5,922
Present Value of Free Cash Flows 3,191 3,028 2,877
Present Value of Total
Terminal Multiple
5.0 x 8,232 7,642 7,107
6.0 x 9,241 8,565 7,953
7.0 x 10,249 9,488 8,799
</TABLE>
* Multiple of 1999 EBITDA.
50
<PAGE>
MICKELBERRY COMMUNICATIONS INCORPORATED
Ventura Associates International, Inc.
(dollars in thousands)
<TABLE>
<CAPTION>
Discount Rate
---------------------------------------
12.0% 14.0% 16.0%
------- ------- -------
<S> <C> <C> <C>
Terminal EBITDA $482 $482 $482
Terminal Value
Terminal Multiple *
5.0 x 2,410 2,410 2,410
6.0 x 2,892 2,892 2,892
7.0 x 3,374 3,374 3,374
Present Value of Terminal Value
Terminal Multiple
5.0 x 1,367 1,252 1,147
6.0 x 1,641 1,502 1,377
7.0 x 1,914 1,752 1,606
Present Value of Free Cash Flows 759 717 679
Present Value of Total
Terminal Multiple
5.0 x 2,127 1,969 1,826
6.0 x 2,400 2,219 2,056
7.0 x 2,674 2,470 2,285
</TABLE>
* Multiple of 1999 EBITDA.
51
<PAGE>
MICKELBERRY COMMUNICATIONS INCORPORATED
Excel Marketing Group
(dollars in thousands)
<TABLE>
<CAPTION>
Discount Rate
------------------------------------------
16.0% 18.0% 20.0%
------- ------- -------
<S> <C> <C> <C>
Terminal EBITDA $1,056 $1,056 $1,056
Terminal Value
Terminal Multiple *
4.0 x 4,224 4,224 4,224
5.0 x 5,280 5,280 5,280
6.0 x 6,336 6,336 6,336
Present Value of Terminal Value
Terminal Multiple
4.0 x 2,011 1,846 1,698
5.0 x 2,514 2,308 2,122
6.0 x 3,017 2,770 2,546
Present Value of Free Cash Flows 2,478 2,433 2,390
Present Value of Total
Terminal Multiple
4.0 x 4,489 4,280 4,087
5.0 x 4,992 4,741 4,512
6.0 x 5,495 5,203 4,936
</TABLE>
* Multiple of 1999 EBITDA.
52
<PAGE>
MICKELBERRY COMMUNICATIONS INCORPORATED
Discounted Cash Flow - Corporate
(dollars in thousands)
<TABLE>
<CAPTION>
Discount Rate
------------------------------------------
10.0% 12.0% 14.0%
------- ------- -------
<S> <C> <C> <C>
Terminal EBITDA ($2,389) ($2,389) ($2,389)
Terminal Value
Terminal Multiple *
4.0 x (9,556) (9,556) (9,556)
5.0 x (11,945) (11,945) (11,945)
6.0 x (14,334) (14,334) (14,334)
Present Value of Terminal Value
Terminal Multiple
4.0 x (5,934) (5,422) (4,963)
5.0 x (7,417) (6,778) (6,204)
6.0 x (8,900) (8,133) (7,445)
Present Value of Free Cash Flows (5,017) (4,763) (4,529)
Present Value of Total
Terminal Multiple
4.0 x (10,950) (10,185) (9,492)
5.0 x (12,433) (11,541) (10,733)
6.0 x (13,917) (12,896) (11,973)
</TABLE>
* Multiple of 1999 EBITDA.
-------------------------
53
<PAGE>
EXHIBIT 4
VALUATION BASED ON DISCOUNTED CASH FLOW ANALYSIS
Breakup Analysis
(Dollars in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Valuation Range
-----------------------------
Low High
------------ ------------
<S> <C> <C>
Enterprise Values
Print Division $40,000 $50,000
Bender, Browning, Dolby & Sanderson 1,400 1,800
Partners & Shevack, Inc. 7,500 9,500
Ventura Associates International, Inc. 2,000 2,500
Excel Marketing Group Value/(1)/ 3,000 5,000
------------ ------------
Total Enterprise Value $53,900 $68,800
============ ============
Plus: Cash & Temporary Investments as of (12/31/94) 9,355 9,355
Less: Straight Debt as of (12/31/94) (22,697) (22,697)
Less: Printing Management bonus upon a sale 0 (370)
Less: B. Shevack Portion of Partners & Shevack bonus upon a sale (2,230) (3,130)
Less: B. Shevack & K. Feshkens Portion of Ventura bonus upon a sale (200) (250)
Less: Taxes on gains on sales @ 34.0% tax rate (3,174) (6,975)
Less: Liquidation Costs (2,000) (2,000)
------------ ------------
Equity Value Pre-(Convertible Debt, Preferred Stock & Cash From Options) $32,954 $42,733
Plus: Cash From Options 1,646 1,977
Less: Convertible Debt (9,828) 0
Less: Preferred Stock 0 0
------------ ------------
Equity Value $24,771 $44,709
Number of Shares 6,676 9,061
------------ ------------
Per Share Equity Value Range $3.71 $4.93
============ ============
</TABLE>
(1) Based on discounted cash flow analysis
54
<PAGE>
EXHIBIT 5
MICKELBERRY COMMUNICATIONS INCORPORATED
Income Statement
(dollars in thousands)
<TABLE>
<CAPTION>
Actual
----------------------------------------------------------------
1991 1992 1993 1994 (a)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues $105,594 $109,243 $118,943 $127,623
Equity in Affiliates 0 0 124 (407)
Cost of sales 68,154 73,921 80,888 84,001
---------- ---------- ---------- ----------
Gross profit 37,440 35,322 38,179 43,215
Selling, general & admin 34,713 32,640 35,482 39,058
---------- ---------- ---------- ----------
Operating income 2,727 2,682 2,697 4,157
Interest income (exp.) (2,235) (2,043) (2,172) (1,990)
Other income (exp.) 1,182 1,773 (270) 754
---------- ---------- ---------- ----------
Pretax income 1,674 5,583 255 2,921
Income tax expense 669 2,233 101 1,168
---------- ---------- ---------- ----------
Net income $1,005 $3,350 $154 $1,753
========== ========== ========== ==========
Growth Rates
Revenue 3.5% 8.9% 7.3%
Operating Income (1.7%) 0.6% 54.1%
Margins
Gross 35.5% 32.3% 32.1% 33.9%
Operating 2.6% 2.5% 2.3% 3.3%
Tax Rate 40.0% 40.0% 39.6% 40.0%
-----------------------------------
Operating income $4,157
Plus: depreciation & amortization 4,586
----------
EBITDA $8,743
==========
<CAPTION>
Management Projected
--------------------------------------------------------------------------------
1995 1996 1997 1998 1999
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Revenues $133,847 $143,322 $148,506 $153,890 $159,482
Equity in Affiliates 200 200 200 200 200
Cost of sales 91,443 98,114 101,385 104,772 108,276
---------- ---------- ---------- ---------- ----------
Gross profit 42,604 45,408 47,321 49,318 51,406
Selling, general & admin 38,716 40,507 42,108 43,792 45,556
---------- ---------- ---------- ---------- ----------
Operating income 3,888 4,901 5,213 5,526 5,850
Interest income (exp.) (2,424) (2,190) (1,909) (1,645) (1,373)
Other income (exp.) 708 654 615 589 583
---------- ---------- ---------- ---------- ----------
Pretax income 2,172 3,365 3,919 4,470 5,060
Income tax expense 871 1,346 1,568 1,787 2,024
---------- ---------- ---------- ---------- ----------
Net income $1,301 $2,019 $2,351 $2,683 $3,036
========== ========== ========== ========== ==========
Growth Rates
Revenue 4.9% 7.1% 3.6% 3.6% 3.6%
Operating Income (6.5%) 26.1% 6.4% 6.0% 5.9%
Margins
Gross 31.8% 31.7% 31.9% 32.0% 32.2%
Operating 2.9% 3.4% 3.5% 3.6% 3.7%
Tax Rate 40.1% 40.0% 40.0% 40.0% 40.0%
---------------------------------
Operating income $3,888 $4,901 $5,213 $5,526 $5,850
Plus: depreciation & amortization 5,216 5,498 5,920 6,381 6,850
---------- ---------- ---------- ---------- ----------
EBITDA $9,104 $10,399 $11,133 $11,907 $12,700
========== ========== ========== ========== ==========
</TABLE>
(a) Excludes $3.0 million ($1.8 million after taxes) of inventory write-offs at
Excel.
55
<PAGE>
MICKELBERRY COMMUNICATIONS INCORPORATED
Printing Division Income Statement
(dollars in thousands)
<TABLE>
<CAPTION>
Actual
----------------------------------------------------------------
1991 1992 1993 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues $68,291 $81,273 $80,578 $81,193
Cost of sales 56,529 66,791 66,487 65,652
---------- ---------- ---------- ----------
Gross profit 11,762 14,482 14,091 15,541
Selling, general & admin 9,117 10,651 10,126 10,332
---------- ---------- ---------- ----------
Operating income 2,645 3,831 3,965 5,209
Interest income (exp.) (864) (1,232) (1,391) (1,458)
Other income (exp.) 58 (10) (2) 62
---------- ---------- ---------- ----------
Pretax income 1,839 2,589 2,572 3,813
Income tax expense 735 1,035 1,029 1,525
---------- ---------- ---------- ----------
Net income $1,104 $1,554 $1,543 $2,288
========== ========== ========== ==========
Growth Rates
Revenue 19.0% (0.9%) 0.8%
Operating Income 44.8% 3.5% 31.4%
Margins
Gross 17.2% 17.8% 17.5% 19.1%
Operating 3.9% 4.7% 4.9% 6.4%
Tax Rate 40.0% 40.0% 40.0% 40.00%
<CAPTION>
Management Projected
-------------------------------------------------------------------------------
1995 1996 1997 1998 1999
---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Revenues $90,600 $97,933 $100,871 $103,897 $107,014
Cost of sales 75,254 81,126 83,559 86,066 88,648
---------- ---------- ---------- ---------- ---------
Gross profit 15,346 16,807 17,312 17,831 18,366
Selling, general & admin 11,131 11,746 12,098 12,462 12,835
---------- ---------- ---------- ---------- ---------
Operating income 4,215 5,061 5,214 5,369 5,531
Interest income (exp.) (1,506) (1,278) (1,030) (766) (494)
Other income (exp.) 0 0 0 0 0
---------- ---------- ---------- ---------- ---------
Pretax income 2,709 3,783 4,184 4,603 5,037
Income tax expense 1,084 1,513 1,674 1,841 2,015
---------- ---------- ---------- ---------- ---------
Net income $1,625 $2,270 $2,510 $2,762 $3,022
========== ========== ========== ========== =========
Growth Rates
Revenue 11.6% 8.1% 3.0% 3.0% 3.0%
Operating Income (19.1%) 20.1% 3.0% 3.0% 3.0%
Margins
Gross 16.9% 17.2% 17.2% 17.2% 17.2%
Operating 4.7% 5.2% 5.2% 5.2% 5.2%
Tax Rate 40.0% 40.0% 40.0% 40.0% 40.0%
</TABLE>
56
<PAGE>
MICKELBERRY COMMUNICATIONS INCORPORATED
Printing Division Cash Flow
(dollars in thousands)
<TABLE>
<CAPTION>
Actual
----------------------------------------------------------------
1991 1992 1993 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Operating income $5,209
Plus: depreciation & amortization 3,285
----------
EBITDA 8,494
Depreciation 3,230
----------
Taxable EBIT 5,264
Taxes (40%) 2,106
----------
EBITA after taxes 3,158
Capital expenditures 7,450
Change in working capital (2,590)
Plus: depreciation 3,230
----------
Free cash flow ($3,652)
==========
<CAPTION>
Management Projected
-------------------------------------------------------------------------------
1995 1996 1997 1998 1999
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Operating income $4,215 $5,061 $5,214 $5,369 $5,531
Plus: depreciation & amortization 4,042 4,324 4,746 5,214 5,683
---------- ---------- ---------- ---------- ----------
EBITDA 8,257 9,385 9,960 10,583 11,214
Depreciation 3,985 4,267 4,689 5,157 5,626
---------- ---------- ---------- ---------- ----------
Taxable EBIT 4,272 5,118 5,271 5,426 5,588
Taxes (40%) 1,709 2,047 2,108 2,170 2,235
---------- ---------- ---------- ---------- ----------
EBITA after taxes 2,563 3,071 3,163 3,256 3,353
Capital expenditures 4,000 3,000 4,500 5,000 5,000
Change in working capital (2,516) (1,583) (584) (601) (617)
Plus: depreciation 3,985 4,267 4,689 5,157 5,626
---------- ---------- ---------- ---------- ----------
Free cash flow $32 $2,755 $2,768 $2,812 $3,362
========== ========== ========== ========== ==========
<CAPTION>
Other Information
------------------------------------------
In a sale management receives 26% of Purchase price less Base Amount
<S> <C>
Base Amount ((Book Value-Tax Value)/2 + Book Value)
1994 Actual Debt
---------
$12,786
---------
Book Value $32,026
Tax Value $24,227 1994 Actual Cash
---------
$134
---------
Base Amount $35,926
Management Amount $9,341
% to Management 26.0%
</TABLE>
57
<PAGE>
MICKELBERRY COMMUNICATIONS INCORPORATED
Sandy Alexander, Inc. - Income Statement
(dollars in thousands)
<TABLE>
<CAPTION>
Actual
--------------------------------------------
1991 1992 1993 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues $54,382 $66,894 $69,301 $70,629
Cost of sales 44,790 53,761 56,468 57,015
-------- -------- -------- --------
Gross profit 9,592 13,133 12,833 13,614
Selling, general & admin 7,332 8,988 9,048 9,208
-------- -------- -------- --------
Operating income 2,260 4,145 3,785 4,406
Interest income (exp.) (485) (863) (835) (834)
Other income (exp.) 43 59 (87) 38
-------- -------- -------- --------
Pretax income 1,818 3,341 2,863 3,610
Income tax expense 727 1,336 1,145 1,444
-------- -------- -------- --------
Net income $1,091 $2,005 $1,718 $2,166
======== ======== ======== ========
Growth Rates
Revenue 23.0% 3.6% 1.9%
Operating Income 83.4% (8.7%) 16.4%
Margins
Gross 17.6% 19.6% 18.5% 19.3%
Operating 4.2% 6.2% 5.5% 6.2%
Tax Rate 40.0% 40.0% 40.0% 40.0%
<CAPTION>
Management Projected
----------------------------------------------------------
1995 1996 1997 1998 1999
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Revenues $79,500 $86,500 $89,095 $91,768 $94,521
Cost of sales 65,985 71,579 73,726 75,938 78,216
---------- ---------- ---------- ---------- ----------
Gross profit 13,515 14,921 15,369 15,830 16,305
Selling, general & admin 9,928 10,507 10,822 11,147 11,481
---------- ---------- ---------- ---------- ----------
Operating income 3,587 4,414 4,547 4,683 4,824
Interest income (exp.) (1,125) (959) (780) (590) (397)
Other income (exp.) 0 0 0 0 0
---------- ---------- ---------- ---------- ----------
Pretax income 2,462 3,455 3,767 4,093 4,427
Income tax expense 985 1,382 1,507 1,637 1,771
---------- ---------- ---------- ---------- ----------
Net income $1,477 $2,073 $2,260 $2,456 $2,656
========== ========== ========== ========== ==========
Growth Rates
Revenue 12.6% 8.8% 3.0% 3.0% 3.0%
Operating Income (18.6%) 23.1% 3.0% 3.0% 3.0%
Margins
Gross 17.0% 17.2% 17.3% 17.3% 17.3%
Operating 4.5% 5.1% 5.1% 5.1% 5.1%
Tax Rate 40.0% 40.0% 40.0% 40.0% 40.0%
</TABLE>
58
<PAGE>
MICKELBERRY COMMUNICATIONS INCORPORATED
Sandy Alexander, Inc. - Cash Flow
(dollars in thousands)
<TABLE>
<CAPTION>
Actual
----------------------------------------------------
1991 1992 1993 1994
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Operating income $4,406
Plus: depreciation & amortization 1,939
---------
EBITDA 6,345
Depreciation 1,901
---------
Taxable EBIT 4,444
Taxes (40%) 1,778
---------
EBITA after taxes 2,666
Capital expenditures 6,007
Change in working capital (2,514)
Plus: depreciation 1,901
---------
Free cash flow ($3,954)
=========
Printing
(Inc)/dec in accounts receivable ($1,485)
(Inc)/dec in inventory (2,977)
(Inc)/dec in other current assets 458
(Dec)/inc in accounts payable 662
(Dec)/inc in accruals 828
(Dec)/inc in advanced payments 0
---------
Change in working capital ($2,514)
=========
<CAPTION>
Management Projected
----------------------------------------------------------
1995 1996 1997 1998 1999
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Operating income $3,587 $4,414 $4,547 $4,683 $4,824
Plus: depreciation & amortization 2,649 2,884 3,259 3,634 4,009
---------- ---------- ---------- ---------- ----------
EBITDA 6,236 7,298 7,806 8,317 8,833
Depreciation 2,609 2,844 3,219 3,594 3,969
---------- ---------- ---------- ---------- ----------
Taxable EBIT 3,627 4,454 4,587 4,723 4,864
Taxes (40%) 1,451 1,782 1,835 1,889 1,946
---------- ---------- ---------- ---------- ----------
EBITA after taxes 2,176 2,672 2,752 2,834 2,918
Capital expenditures 3,500 2,500 4,000 4,000 4,000
Change in working capital (2,452) (1,539) (538) (553) (567)
Plus: depreciation 2,609 2,844 3,219 3,594 3,969
---------- ---------- ---------- ---------- ----------
Free cash flow ($1,167) $1,477 $1,433 $1,875 $2,320
========== ========== ========== ========== ==========
--------------------------------------
Printing
--------------------------------------
(Inc)/dec in accounts receivable ($582) ($1,534) ($569) ($586) ($603)
(Inc)/dec in inventory (1,327) (799) (307) (316) (325)
(Inc)/dec in other current assets 0 0 0 0 0
(Dec)/inc in accounts payable 69 453 174 179 185
(Dec)/inc in accruals (112) 291 112 115 118
(Dec)/inc in advanced payments (500) 50 52 55 58
---------- ---------- ---------- ---------- ----------
Change in working capital ($2,452) ($1,539) ($538) ($553) ($567)
========== ========== ========== ========== ==========
</TABLE>
Other Information
________________________
In a sale management receives 26% of Base Amount
<TABLE>
<CAPTION>
Base Amount ((Book Value-Tax Value)/2 + Book Value) 1994 Actual Debt
<S> <C> <C>
------------
$7,436
------------
Book Value $26,453
Tax Value $21,566
<CAPTION>
1994 Actual Cash
<S> <C> <C>
------------
$68
------------
Base Amount $28,897
</TABLE>
59
<PAGE>
MICKELBERRY COMMUNICATIONS INCORPORATED
Modern Graphic Arts - Income Statement
(dollars in thousands)
<TABLE>
<CAPTION>
Actual Management Projected
----------------------------------------- ----------------------------------------------------
1991 1992 1993 1994 1995 1996 1997 1998 1999
-------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $13,909 $14,379 $11,277 $10,564 $11,100 $11,433 $11,776 $12,129 $12,493
Cost of sales 11,739 13,030 10,019 8,637 9,269 9,547 9,833 10,128 10,432
-------- -------- -------- -------- -------- -------- -------- -------- --------
Gross profit 2,170 1,349 1,258 1,927 1,831 1,886 1,943 2,001 2,061
Selling, general & admin 1,785 1,663 1,078 1,124 1,203 1,239 1,276 1,315 1,354
-------- -------- -------- -------- -------- -------- -------- -------- --------
Operating income 385 (314) 180 803 628 647 667 686 707
Interest income (exp.) (379) (369) (556) (624) (381) (319) (250) (176) (97)
Other income (exp.) 15 (69) 85 24 0 0 0 0 0
-------- -------- -------- -------- -------- -------- -------- -------- --------
Pretax income 21 (752) (291) 203 247 328 417 510 610
Income tax expense 8 (301) (116) 81 99 131 167 204 244
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net income $13 ($451) ($175) $122 $148 $197 $250 $306 $366
======== ======== ======== ======== ======== ======== ======== ======== ========
Growth Rates
Revenue 3.4% (21.6%) (6.3%) 5.1% 3.0% 3.0% 3.0% 3.0%
Operating Income (181.6%) (157.2%) 346.1% (21.8%) 3.0% 3.1% 2.8% 3.1%
Margins
Gross 15.6% 9.4% 11.2% 18.2% 16.5% 16.5% 16.5% 16.5% 16.5%
Operating 2.8% NM 1.6% 7.6% 5.7% 5.7% 5.7% 5.7% 5.7%
Tax Rate 38.1% 40.0% 39.9% 39.9% 40.1% 39.9% 40.0% 40.0% 40.0%
</TABLE>
60
<PAGE>
MICKELBERRY COMMUNICATIONS INCORPORATED
Modern Graphic Arts - Cash Flow
(dollars in thousands)
<TABLE>
<CAPTION>
Actual Management Projected
----------------------------------------- ----------------------------------------------------
1991 1992 1993 1994 1995 1996 1997 1998 1999
-------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Operating income $803 $628 $647 $667 $686 $707
Plus: depreciation &
amortization 1,346 1,393 1,440 1,487 1,580 1,674
-------- -------- -------- -------- -------- --------
EBITDA 2,149 2,021 2,087 2,154 2,266 2,381
Depreciation 1,329 1,376 1,423 1,470 1,563 1,657
-------- -------- -------- -------- -------- --------
Taxable EBIT 820 645 664 684 703 724
Taxes (40%) 328 258 266 274 281 290
-------- -------- -------- -------- -------- --------
EBITA after taxes 492 387 398 410 422 434
Capital expenditures 1,443 500 500 500 1,000 1,000
Change in working capital (76) (64) (44) (46) (48) (50)
Plus: depreciation 1,329 1,376 1,423 1,470 1,563 1,657
-------- -------- -------- -------- -------- --------
Free cash flow $302 $1,199 $1,277 $1,334 $937 $1,041
======== ======== ======== ======== ======== ========
Printing
(Inc)/dec in accounts receivable ($567) ($103) ($73) ($75) ($77) ($80)
(Inc)/dec in inventory (128) (29) (21) (21) (22) (23)
(Inc)/dec in other current assets 17 0 0 0 0 0
(Dec)/inc in accounts payable 300 38 27 27 28 29
(Dec)/inc in accruals 302 11 9 9 9 9
(Dec)/inc in advanced payments 0 19 14 14 14 15
-------- -------- -------- -------- -------- --------
Change in working capital ($76) ($64) ($44) ($46) ($48) ($50)
======== ======== ======== ======== ======== ========
<CAPTION>
Other Information
---------------------------------------
In a sale management receives 26% of Base Amount
<S> <C>
Base Amount ((Book Value-Tax Value)/2 + Book Value) 1994 Actual Debt
----------------
Book Value $5,573 $5,350
Tax Value $2,661 ----------------
1994 Actual Cash
Base Amount $7,029 ----------------
$66
----------------
</TABLE>
61
<PAGE>
MICKELBERRY COMMUNICATIONS INCORPORATED
Advertising & Promotion Income Statement
(dollars in thousands)
<TABLE>
<CAPTION>
Actual
---------------------------------------------------------------
1991 1992 1993 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues $21,150 $20,331 $18,849 $20,985
Cost of sales 2,090 2,983 1,445 1,418
--------- --------- --------- ---------
Gross profit 19,060 17,348 17,404 19,567
Selling, general & admin 16,978 16,774 16,866 18,102
--------- --------- --------- ---------
Operating income 2,082 574 538 1,465
Interest income (exp.) (20) (13) (17) (18)
Other income (exp.) 260 174 146 283
--------- --------- --------- ---------
Pretax income 2,322 735 667 1,730
Income tax expense 929 295 266 692
--------- --------- --------- ---------
Net income $1,393 $440 $401 $1,038
========= ========= ========= =========
-----------------------------------
Growth Rates
Revenue (3.9%) (7.3%) 11.3%
Operating Income NM (6.3%) 172.3%
Margins
Gross 90.1% 85.3% 92.3% 93.2%
Operating 9.8% 2.8% 2.9% 7.0%
Tax Rate 40.0% 40.1% 39.9% 40.0%
<CAPTION>
Management Projected
---------------------------------------------------------------------------------
1995 1996 1997 1998 1999
--------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Revenues $22,047 $23,129 $24,262 $25,451 $26,699
Cost of sales 2,150 2,247 2,348 2,454 2,564
--------- --------- --------- --------- ----------
Gross profit 19,897 20,882 21,914 22,997 24,135
Selling, general & admin 18,562 19,334 20,153 21,028 21,956
--------- --------- --------- --------- ----------
Operating income 1,335 1,548 1,761 1,969 2,179
Interest income (exp.) 0 0 0 0 0
Other income (exp.) 0 0 0 0 0
--------- --------- --------- --------- ----------
Pretax income 1,335 1,548 1,761 1,969 2,179
Income tax expense 535 619 705 787 872
--------- --------- --------- --------- ----------
Net income $800 $929 $1,056 $1,182 $1,307
========= ========= ========= ========= ==========
-----------------------------------
Growth Rates
Revenue 5.1% 4.9% 4.9% 4.9% 4.9%
Operating Income (8.9%) 16.0% 13.8% 11.8% 10.7%
Margins
Gross 90.2% 90.3% 90.3% 90.4% 90.4%
Operating 6.1% 6.7% 7.3% 7.7% 8.2%
Tax Rate 40.1% 40.0% 40.0% 40.0% 40.0%
</TABLE>
62
<PAGE>
MICKELBERRY COMMUNICATIONS INCORPORATED
Advertising & Promotion Cash Flow
(dollars in thousands)
<TABLE>
<CAPTION>
Actual
---------------------------------------------------------------
1991 1992 1993 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Operating income $1,465
Plus: depreciation & amortization 672
---------
EBITDA 2,137
Depreciation 422
---------
Taxable EBIT 1,715
Taxes (40%) 686
---------
EBITA after taxes 1,029
Capital expenditures 197
Change in working capital 959
Plus: depreciation 422
---------
Free cash flow $2,213
=========
<CAPTION>
Management Projected
--------------------------------------------------------------------------------
1995 1996 1997 1998 1999
--------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Operating income $1,335 $1,548 $1,761 $1,969 $2,179
Plus: depreciation & amortization 554 554 554 547 547
--------- --------- --------- --------- --------
EBITDA 1,889 2,102 2,315 2,516 2,726
Depreciation 316 316 316 309 309
--------- --------- --------- --------- --------
Taxable EBIT 1,573 1,786 1,999 2,207 2,417
Taxes (40%) 629 714 800 883 967
--------- --------- --------- --------- --------
EBITA after taxes 944 1,072 1,199 1,324 1,450
Capital expenditures 309 309 309 309 309
Change in working capital (690) 184 195 205 217
Plus: depreciation 316 316 316 309 309
--------- --------- --------- --------- --------
Free cash flow $261 $1,263 $1,401 $1,529 $1,667
========= ========= ========= ========= ========
</TABLE>
63
<PAGE>
MICKELBERRY COMMUNICATIONS INCORPORATED
Bender, Browning, Dolby & Sanderson Advertising, Inc. - Income Statement
(dollars in thousands)
<TABLE>
<CAPTION>
Actual
---------------------------------------------------------------
1991 1992 1993 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues $4,562 $5,097 $5,379 $5,963
Cost of sales 0 0 0 0
--------- --------- --------- ---------
Gross profit 4,562 5,097 5,379 5,963
Selling, general & admin 4,694 4,868 5,169 5,723
--------- --------- --------- ---------
Operating income (132) 229 210 240
Interest income (exp.) 0 0 0 0
Other income (exp.) 59 40 26 72
--------- --------- --------- ---------
Pretax income (73) 269 236 312
Income tax expense (29) 108 94 125
--------- --------- --------- ---------
Net income ($44) $161 $142 $187
========= ========= ========= =========
Growth Rates
Revenue 11.7% 5.5% 10.9%
Operating Income NM (8.3%) 14.3%
Margins
Gross 100.0% 100.0% 100.0% 100.0%
Operating NM 4.5% 3.9% 4.0%
Tax Rate 39.7% 40.1% 39.8% 40.1%
<CAPTION>
Management Projected
---------------------------------------------------------------------------------
1995 1996 1997 1998 1999
--------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Revenues $6,071 $6,375 $6,693 $7,028 $7,379
Cost of sales 0 0 0 0 0
--------- --------- --------- --------- ----------
Gross profit 6,071 6,375 6,693 7,028 7,379
Selling, general & admin 5,897 6,154 6,443 6,745 7,063
--------- --------- --------- --------- ----------
Operating income 174 221 250 283 316
Interest income (exp.) 0 0 0 0 0
Other income (exp.) 0 0 0 0 0
--------- --------- --------- --------- ----------
Pretax income 174 221 250 283 316
Income tax expense 70 88 100 113 126
--------- --------- --------- --------- ----------
Net income $104 $133 $150 $170 $190
========= ========= ========= ========= ==========
Growth Rates
Revenue 1.8% 5.0% 5.0% 5.0% 5.0%
Operating Income (27.5%) 27.0% 13.1% 13.2% 11.7%
Margins
Gross 100.0% 100.0% 100.0% 100.0% 100.0%
Operating 2.9% 3.5% 3.7% 4.0% 4.3%
Tax Rate 40.2% 39.8% 40.0% 39.9% 39.9%
</TABLE>
64
<PAGE>
MICKELBERRY COMMUNICATIONS INCORPORATED
Bender, Browning, Dolby & Sanderson, Inc. - Cash Flow
(dollars in thousands)
<TABLE>
<CAPTION>
Actual Management Projected
-------------------------------------- -----------------------------------------------
1991 1992 1993 1994 1995 1996 1997 1998 1999
-------- -------- -------- -------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Operating income $240 $174 $221 $250 $283 $316
Plus: depreciation & amortization 137 151 151 151 151 151
-------- -------- -------- -------- -------- -------
EBITDA 377 325 372 401 434 467
Depreciation 95 109 109 109 109 109
-------- -------- -------- -------- -------- -------
Taxable EBIT 282 216 263 292 325 358
Taxes (40%) 113 86 105 117 130 143
-------- -------- -------- -------- -------- --------
EBITA after taxes 169 130 158 175 195 215
Capital expenditures 83 109 109 109 109 109
Change in working capital 813 (662) 63 66 70 74
Plus: depreciation 95 109 109 109 109 109
-------- -------- -------- -------- -------- --------
Free cash flow $994 ($532) $221 $241 $265 $289
======== ======== ======== ======== ======== ========
Printing
(Inc)/dec in accounts receivable $537 ($192) ($180) ($189) ($198) ($208)
(Inc)/dec in inventory 0 0 0 0 0 0
(Inc)/dec in other current assets 84 0 0 0 0 0
(Dec)/inc in accounts payable 86 (496) 219 230 242 254
(Dec)/inc in accruals 106 26 24 25 26 28
(Dec)/inc in advanced payments 0 0 0 0 0 0
-------- -------- -------- -------- -------- --------
Change in working capital $813 ($662) $63 $66 $70 $74
======== ======== ======== ======== ======== ========
</TABLE>
Other Information
---------------------------------
1994 Actual Debt
-----------
$0
-----------
1994 Actual Cash
-----------
$58
-----------
65
<PAGE>
MICKELBERRY COMMUNICATIONS INCORPORATED
Partners & Shevack, Inc. - Income Statement
(dollars in thousands)
<TABLE>
<CAPTION>
Actual Management Projected
-------------------------------------- ------------------------------------------------
1991 1992 1993 1994 1995 1996 1997 1998 1999
-------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $12,895 $10,578 $10,268 $11,713 $11,676 $12,260 $12,873 $13,516 $14,192
Cost of sales 0 0 0 0 0 0 0 0 0
-------- -------- -------- -------- -------- -------- -------- -------- --------
Gross profit 12,895 10,578 10,268 11,713 11,676 12,260 12,873 13,516 14,192
Selling, general & admin 10,739 10,281 10,080 10,666 10,752 11,211 11,684 12,198 12,748
-------- -------- -------- -------- -------- -------- -------- -------- --------
Operating income 2,156 297 188 1,047 924 1,049 1,189 1,318 1,444
Interest income (exp.) (3) (9) (12) (14) 0 0 0 0 0
Other income (exp.) 201 126 117 200 0 0 0 0 0
-------- -------- -------- -------- -------- -------- -------- -------- --------
Pretax income 2,354 414 293 1,233 924 1,049 1,189 1,318 1,444
Income tax expense 942 166 117 493 370 420 476 527 578
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net income $1,412 $248 $176 $740 $554 $629 $713 $791 $866
======== ======== ======== ======== ======== ======== ======== ======== ========
Growth Rates
Revenue (18.0%) (2.9%) 14.1% (0.3%) 5.0% 5.0% 5.0% 5.0%
Operating Income (86.2%) (36.7%) 456.9% (11.7%) 13.5% 13.3% 10.8% 9.6%
Margins
Gross 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Operating 16.7% 2.8% 1.8% 8.9% 7.9% 8.6% 9.2% 9.8% 10.2%
Tax Rate 40.0% 40.1% 39.9% 40.0% 40.0% 40.0% 40.0% 40.0% 40.0%
</TABLE>
66
<PAGE>
MICKELBERRY COMMUNICATIONS INCORPORATED
Partners & Shevack, Inc. - Cash Flow
(dollars in thousands)
<TABLE>
<CAPTION>
Actual Management Projected
-------------------------------------- ------------------------------------------------
1991 1992 1993 1994 1995 1996 1997 1998 1999
-------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Operating income $1,047 $924 $1,049 $1,189 $1,318 1,444
Plus: depreciation & amortization 465 333 333 333 333 333
-------- -------- -------- -------- -------- --------
EBITDA 1,512 1,257 1,382 1,522 1,651 1,777
Depreciation 320 200 200 200 200 200
-------- -------- -------- -------- -------- --------
Taxable EBIT 1,192 1,057 1,182 1,322 1,451 1,577
Taxes (40%) 477 423 473 529 580 631
-------- -------- -------- -------- -------- --------
EBITA after taxes 715 634 709 793 871 946
Capital expenditures 114 200 200 200 200 200
Change in working capital (71) 72 117 123 129 136
Plus: depreciation 320 200 200 200 200 200
-------- -------- -------- -------- -------- --------
Free cash flow $850 $706 $826 $916 $1,000 $1,082
======== ======== ======== ======== ======== ========
Partners & Shevack, Inc.
(Inc)/dec in accounts receivable ($236) ($130) ($210) ($221) ($232) ($243)
(Inc)/dec in inventory 0 0 0 0 0 0
(Inc)/dec in other current assets 256 0 0 0 0 0
(Dec)/inc in accounts payable (558) 166 269 282 296 311
(Dec)/inc in accruals 467 22 35 37 39 41
(Dec)/inc in advanced payments 0 14 23 25 26 27
-------- -------- -------- -------- -------- -------
Change in working capital ($71) $72 $117 $123 $129 $136
======== ======== ======== ======== ======== =======
<CAPTION>
Other Information:
------------------------------------------------------------------------------------------
B. Shevack Compensation on a sale
<S> <C> <C>
1994 Actual Debt Book Value
Sale Price Shevack ---------- ----------
------------------------ ------------- $0 $2,379
Greater than $5,000 45.0% ---------- ----------
Less than $5,000 $600
1994 Actual Cash Tax Basis
---------- ----------
$1,123 $1,868
---------- ----------
</TABLE>
67
<PAGE>
MICKELBERRY COMMUNICATIONS INCORPORATED
Ventura Associates International, Inc. - Income Statement
(dollars in thousands)
<TABLE>
<CAPTION>
Actual Management Projected
-------------------------------------- ------------------------------------------------
1991 1992 1993 1994 1995 1996 1997 1998 1999
-------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $3,693 $4,656 $3,202 $3,309 $4,300 $4,494 $4,696 $4,907 $5,128
Cost of sales 2,090 2,983 1,445 1,418 2,150 2,247 2,348 2,454 2,564
-------- -------- -------- -------- -------- -------- -------- -------- --------
Gross profit 1,603 1,673 1,757 1,891 2,150 2,247 2,348 2,453 2,564
Selling, general & admin 1,545 1,625 1,617 1,713 1,913 1,969 2,026 2,085 2,145
-------- -------- -------- -------- -------- -------- -------- -------- --------
Operating income 58 48 140 178 237 278 322 368 419
Interest income (exp.) (17) (4) (5) (4) 0 0 0 0 0
Other income (exp.) 0 8 3 11 0 0 0 0 0
-------- -------- -------- -------- -------- -------- -------- -------- --------
Pretax income 41 52 138 185 237 278 322 368 419
Income tax expense 16 21 55 74 95 111 129 147 168
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net income $25 $31 $83 $111 $142 $167 $193 $221 $251
======== ======== ======== ======== ======== ======== ======== ======== ========
Growth Rates
Revenue 26.1% (31.2%) 3.3% 29.9% 4.5% 4.5% 4.5% 4.5%
Operating Income (17.2%) 191.7% 27.1% 33.1% 17.3% 15.8% 14.3% 13.9%
Margins
Gross 43.4% 35.9% 54.9% 57.1% 50.0% 50.0% 50.0% 50.0% 50.0%
Operating 1.6% 1.0% 4.4% 5.4% 5.5% 6.2% 6.9% 7.5% 8.2%
Tax Rate 39.0% 40.4% 39.9% 40.0% 40.1% 39.9% 40.1% 39.9% 40.1%
</TABLE>
68
<PAGE>
MICKELBERRY COMMUNICATIONS INCORPORATED
Ventura Associates International, Inc. - Cash Flow
(dollars in thousands)
<TABLE>
<CAPTION>
Actual Management Projected
-------------------------------------- ------------------------------------------------
1991 1992 1993 1994 1995 1996 1997 1998 1999
-------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Operating income $178 $237 $278 $322 $368 $419
Plus: depreciation & amortization 70 70 70 70 63 63
-------- -------- -------- -------- -------- --------
EBITDA 248 307 348 392 431 482
Depreciation 7 7 7 7 0 0
-------- -------- -------- -------- -------- --------
Taxable EBIT 241 300 341 385 431 482
Taxes (40%) 96 120 136 154 172 193
-------- -------- -------- -------- -------- --------
EBITA after taxes 145 180 205 231 259 289
Capital expenditures 0 0 0 0 0 0
Change in working capital 217 (100) 4 6 6 7
Plus: depreciation 7 7 7 7 0 0
-------- -------- -------- -------- -------- --------
Free cash flow $369 $87 $216 $244 $265 $296
======== ======== ======== ======== ======== ========
(Inc)/dec in accounts receivable ($45) ($100) ($39) ($40) ($42) ($44)
(Inc)/dec in inventory 0 0 0 0 0 0
(Inc)/dec in other current assets 56 0 0 0 0 0
(Dec)/inc in accounts payable (60) 40 15 16 17 18
(Dec)/inc in accruals 266 27 28 30 31 33
(Dec)/inc in advanced payments 0 (67) 0 0 0 0
-------- -------- -------- -------- -------- --------
Change in working capital $217 ($100) $4 $6 $6 $7
======== ======== ======== ======== ======== ========
<CAPTION>
Other Information:
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Compensation on a sale
Sale Price Shevack 1994 Actual Debt Book Value
---------------------- ----------- ---------- ----------
Shevack: Greater than $1,000 10.0% $0 $113
---------- ----------
Feshkens: Any price $100
1994 Actual Cash Tax Value
---------- ----------
$0 $111
---------- ----------
</TABLE>
69
<PAGE>
MICKELBERRY COMMUNICATIONS INCORPORATED
Excel Marketing Group - Income Stateme
(dollars in thousands)
<TABLE>
<CAPTION>
Actual Management Projected
------------------------------------------- --------------------------------------------------------
1991 1992 1993 1994/(a)/ 1995 1996 1997 1998 1999
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $0 $0 $19,516 $25,445 $21,200 $22,260 $23,373 $24,542 $25,769
Equity in Affiliates 0 0 124 (407) 200 200 200 200 200
Cost of sales 0 0 12,956 16,931 14,039 14,741 15,478 16,252 17,064
------- ------- ------- ------- ------- ------- ------- ------- -------
Gross profit 0 0 6,684 8,107 7,361 7,719 8,095 8,490 8,905
Selling, general & admin 0 0 6,676 8,715 6,960 7,281 7,626 7,981 8,351
------- ------- ------- ------- ------- ------- ------- ------- -------
Operating income 0 0 8 (608) 401 438 469 509 554
Interest income (exp.) 0 0 (259) (259) (132) (126) (93) (93) (93)
Other income (exp.) 0 0 44 82 0 0 0 0 0
------- ------- ------- ------- ------- ------- ------- ------- -------
Pretax income 0 0 (207) (785) 269 312 376 416 461
Income tax expense (83) (314) 108 125 150 166 184
------- ------- ------- ------- ------- ------- ------- ------- -------
Net income $0 $0 ($124) ($471) $161 $187 $226 $250 $277
======= ======= ======= ======= ======= ======= ======= ======= =======
Growth Rates
Revenue NM NM 30.4% (16.7%) 5.0% 5.0% 5.0% 5.0%
Operating Income NM NM NM (166.0%) 9.2% 7.1% 8.5% 8.8%
Margins
Gross NM NM 34.2% 31.9% 34.7% 34.7% 34.6% 34.6% 34.6%
Operating NM NM 0.0% (2.4%) 1.9% 2.0% 2.0% 2.1% 2.1%
Tax Rate NM NM 40.1% 39.9% 40.1% 40.1% 39.9% 39.9% 39.9%
</TABLE>
(a) Excludes $3.0 million ($1.8 million after taxes) of inventory write-offs
at Excel.
70
<PAGE>
MICKELBERRY COMMUNICATIONS INCORPORATED
Excel Marketing Group - Cash Flow
(dollars in thousands)
<TABLE>
<CAPTION>
Actual Management Projected
------------------------------------------- --------------------------------------------------------
1991 1992 1993 1994 1995 1996 1997 1998 1999
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Operating income ($608) $269 $312 $376 $416 $461
Depreciation & Amortization 600 595 595 595 595 595
------- ------- ------- ------- ------- -------
EBITDA (8) 864 907 971 1,011 1,056
Depreciation 71 65 65 65 65 65
------- ------- ------- ------- ------- -------
Taxable EBIT (79) 799 842 906 946 991
Taxes (40%) (32) 320 337 362 378 396
------- ------- ------- ------- ------- -------
EBITA after taxes (47) 479 505 544 568 595
Capital expenditures 337 65 65 65 65 65
Change in working capital (547) 2,310 (484) (508) (534) (560)
Plus: depreciation 71 65 65 65 65 65
------- ------- ------- ------- ------- -------
Free cash flow ($860) $2,789 $21 $36 $34 $35
======= ======= ======= ======= ======= =======
(Inc)/dec in accounts receivable ($1,219) $621 ($170) ($178) ($187) ($196)
(Inc)/dec in inventory (10) 2,000 (399) (419) (440) (462)
(Inc)/dec in other current assets 318 0 0 0 0 0
(Dec)/inc in accounts payable 646 0 0 0 0 0
(Dec)/inc in accruals (538) (311) 85 89 93 98
(Dec)/inc in advanced payments 256 0 0 0 0 0
------- ------- ------- ------- ------- -------
Change in working capital ($547) $2,310 ($484) ($508) ($534) ($560)
======= ======= ======= ======= ======= =======
</TABLE>
71
<PAGE>
MICKELBERRY COMMUNICATIONS INCORPORATED
Caribiner - Income Statement
(dollars in thousands)
<TABLE>
<CAPTION>
Actual Management Projected
------------------------------------------- --------------------------------------------------------
1991 1992 1993 1994 1995 1996 1997 1998 1999
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $16,153 $7,639 $0 $0 $0 $0 $0 $0 $0
Cost of sales 9,535 4,147 0 0 0 0 0 0 0
------- ------- ------- ------- ------- ------- ------- ------- -------
Gross profit 6,618 3,492 0 0 0 0 0 0 0
Selling, general & admin 6,572 3,243 0 0 0 0 0 0 0
------- ------- ------- ------- ------- ------- ------- ------- -------
Operating income 46 249 0 0 0 0 0 0 0
Interest income (exp.) (1) 0 0 0 0 0 0 0 0
Other income (exp.) 103 67 0 0 0 0 0 0 0
------- ------- ------- ------- ------- ------- ------- ------- -------
Pretax income 148 316 0 0 0 0 0 0 0
Income tax expense 59 126 0 0 0 0 0 0 0
------- ------- ------- ------- ------- ------- ------- ------- -------
Net income $89 $190 $0 $0 $0 $0 $0 $0 $0
======= ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
72
<PAGE>
MICKELBERRY COMMUNICATIONS INCORPORATED
Corporate - Income Statement
(dollars in thousands)
<TABLE>
<CAPTION>
Actual Management Projected
------------------------------------------- --------------------------------------------------------
1991 1992 1993 1994 1995 1996 1997 1998 1999
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $0 $0 $0 $0 $0 $0 $0 $0 $0
Cost of sales 0 0 0 0 0 0 0 0 0
------- ------- ------- ------- ------- ------- ------- ------- -------
Gross profit 0 0 0 0 0 0 0 0 0
Selling, general & admin 2,046 1,972 1,814 1,909 2,063 2,146 2,231 2,321 2,414
------- ------- ------- ------- ------- ------- ------- ------- -------
Operating income (2,046) (1,972) (1,814) (1,909) (2,063) (2,146) (2,231) (2,321) (2,414)
Interest income (exp.) (1,350) (798) (505) (255) (786) (786) (786) (786) (786)
Other income (exp.) 761 1,542 (458) 327 708 654 615 589 583
------- ------- ------- ------- ------- ------- ------- ------- -------
Pretax income (2,635) (1,228) (2,777) (1,837) (2,141) (2,278) (2,402) (2,518) (2,617)
Income tax expense (1,054) (491) (1,111) (735) (856) (911) (961) (1,007) (1,047)
------- ------- ------- ------- ------- ------- ------- ------- -------
Net income ($1,581) ($737) ($1,666) ($1,102) ($1,285) ($1,367) ($1,441) ($1,511) ($1,570)
======= ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
73
<PAGE>
MICKELBERRY COMMUNICATIONS INCORPORATED
Corporate - Cash Flow
(dollars in thousands)
<TABLE>
<CAPTION>
Actual Management Projected
------------------------------------------- --------------------------------------------------------
1991 1992 1993 1994 1995 1996 1997 1998 1999
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Operating income ($1,909) ($2,063) ($2,146) ($2,231) ($2,321) ($2,414)
Plus: depreciation &
amortization 29 25 25 25 25 25
------- ------- ------- ------- ------- -------
EBITDA (1,880) (2,038) (2,121) (2,206) (2,296) (2,389)
Depreciation 16 25 25 25 25 25
------- ------- ------- ------- ------- -------
Taxable EBIT (1,896) (2,063) (2,146) (2,231) (2,321) (2,414)
Taxes (40%) (758) (825) (858) (892) (928) (966)
------- ------- ------- ------- ------- -------
EBITA after taxes (1,138) (1,238) (1,288) (1,339) (1,393) (1,448)
Capital expenditures 337 25 25 25 25 25
Change in working capital 0 32 0 0 0 0
Plus: depreciation 16 25 25 25 25 25
------- ------- ------- ------- ------- -------
Free cash flow ($1,459) ($1,206) ($1,288) ($1,339) ($1,393) ($1,448)
======= ======= ======= ======= ======= =======
</TABLE>
74
<PAGE>
EXHIBIT 6
MERGER AND ACQUISITIONS PREMIUM ANALYSIS
Transactions Between $10 and $50 Million
January 1, 1994 to March 2, 1995
<TABLE>
<CAPTION>
Deal Price
Date Date Value per
Announced Effective Target Acquiror ($mil) Share Consideration Offered
---------- --------- --------------------------- ------------------------- ------- ------ -------------------------------
<S> <C> <C> <C> <C> <C> <C>
09/27/94 12/21/94 Revell-Monogram Hallmark Cards Inc $29.8 $6.38 Cash
09/02/94 12/09/94 Samson Energy Co LP Samson Properties Inc 41.3 11.50 Cash
08/29/94 12/30/94 Soricon Corp International Verifact Inc 15.2 3.80 Common Stock, Warrants and Units
06/27/94 11/04/94 Kirschner Medical Corp Biomet Inc 40.9 10.75 Cash, Com. Stock & Promissory
Note
06/15/94 09/30/94 TSI Corp Genzyme Transgenics Corp 27.1 1.25 Common Stock
05/23/94 09/01/94 H&H Oil Tool Co Weatherford International Inc 27.6 8.38 Common Stock
05/23/94 12/16/94 Loewenstein Furniture Group Winston Furniture Co Inc 46.2 8.40 Common Stock
05/13/94 09/13/94 Serving Software Inc HBO & Co 46.5 9.53 Common Stock
04/28/94 12/12/94 Ketema Inc Investor Group 41.3 15.00 Cash
04/26/94 07/26/94 Diamond Shamrock Offshore Burlington Resources Inc 42.6 4.48 Cash
03/10/94 07/19/94 American Natural Energy Corp Alexander Energy Corp 27.9 8.50 Common Stock
03/07/94 11/29/94 Datasouth Computer Corp Bull Run Corp 12.0 3.75 Common Stock
02/23/94 08/11/94 Turf Paradise Inc Hollywood Park Inc 33.8 13.00 Common Stock
02/10/94 05/17/94 Interspec Inc Advanced Technology Labs 41.9 6.70 Common Stock
01/24/94 05/18/94 On The Border Cafes Inc Brinker International Inc 33.0 8.75 Common Stock
<CAPTION>
1 Month Prior 1 Day Prior
---------------- -----------------
Date % % Tender Market Offer Market Offer
Announced Held Sought Offer Price Prem % Price Prem %
----------- ----- ------- ------- -------- ------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
09/27/94 - 100.0 No $5.75 10.9 $5.75 10.9
09/02/94 23.1 76.9 Yes 9.25 24.3 8.88 29.6
08/29/94 - 100.0 No 4.00 (5.0) 3.31 14.7
06/27/94 19.9 80.1 No 5.75 87.0 6.00 79.2
06/15/94 - 100.0 No 0.72 73.9 0.88 42.9
05/23/94 - 100.0 No 4.75 76.4 5.00 67.6
05/23/94 - 100.0 No 8.88 (5.4) 8.13 3.4
05/13/94 - 100.0 No 7.38 29.2 9.00 5.9
04/28/94 21.2 78.8 No 10.88 37.9 11.00 36.4
04/26/94 87.1 12.9 No 4.25 5.4 4.63 (3.1)
03/10/94 - 100.0 No 6.25 36.0 6.38 33.3
03/07/94 43.6 56.4 No 3.00 25.0 3.25 15.4
02/23/94 - 100.0 No 9.00 44.4 9.50 36.8
02/10/94 - 100.0 No 4.13 62.4 3.75 78.7
01/24/94 - 100.0 No 5.13 70.7 6.75 29.6
-----------------------------------------------------
Average 38.2% 32.1%
Average Excl. Hi/Lo 37.8% 31.2%
-----------------------------------------------------
</TABLE>
--------------------------
Screening Criteria: Completed Domestic M&A Transactions between $10 and $50
million with the Target companies being public. 100% Control post transaction.
Financial Institution and Agency Transactions have been excluded. Deals with
missing premium info have also been excluded.
75
<PAGE>
Merger and Acquisition Premium Analysis
Acquiror Owned 20% to 50% Before Transaction
January 1, 1992 to March 2, 1995
WERTHEIM SCHRODER & CO.
-----------------------
INCORPORATED
Corporate Finance Department
<TABLE>
<CAPTION>
Deal Price
Date Date Value per
Announce Effective Target Acquiror ($mil) Share Consideration Offered
-------- --------- ------------------------- ----------------------------- ------- -------- ----------------------------
<S> <C> <C> <C> <C> <C> <C>
09/02/94 12/09/94 Samson Energy Co LP Samson Properties Inc $41.3 $11.50 Cash
04/28/94 12/12/94 Ketema Inc Investor Group 41.3 15.00 Cash
03/14/94 08/09/94 Orient-Express Hotels Inc Sea Containers Ltd 75.2 2.68 Common Stock Type A & Liab.
03/07/94 11/29/94 Datasouth Computer Corp Bull Run Corp 12.0 3.75 Common Stock
09/22/93 12/31/93 Travelers Corp Primerica Corp 3,955.9 36.99 Common Stock
09/30/92 06/17/93 Security Tag Systems Inc Sensormatic Electronics Corp 40.4 3.95 Common Stock
09/21/92 06/10/93 MidSouth Corp Kansas City Southern Inds Inc 197.3 20.50 Cash
09/09/92 02/26/93 American Fructose Corp American Maize-Products Co 130.3 25.50 Cash and Common Stock
09/04/92 03/12/93 Carriage Industries Inc Dixie Yarns Inc 59.5 13.25 Cash, Option & Common Stock
05/01/92 03/30/93 Imagine Films
Entertainment Investor Group 41.3 9.00 Cash and Liab.
<CAPTION>
1 Month Prior 1 Day Prior
--------------- --------------
Date % % Tender Market Offer Market Offer
Announce Held Sought Offer Price Prem % Price Prem %
-------- ----- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
09/02/94 23.1 76.9 Yes $9.25 24.3 $8.88 29.6
04/28/94 21.2 78.8 No 10.88 37.9 11.00 36.4
03/14/94 41.9 58.1 Yes 1.75 53.0 1.50 78.5
03/07/94 43.6 56.4 No 3.00 25.0 3.25 15.4
09/22/93 24.1 75.9 No 34.50 7.2 36.00 2.8
09/30/92 30.1 69.9 No 2.25 75.6 2.38 66.3
09/21/92 38.4 56.7 No 11.00 86.4 11.00 86.4
09/09/92 42.7 55.9 No 19.75 29.1 21.00 21.4
09/04/92 44.1 55.9 No 10.00 32.5 10.00 32.5
05/01/92 35.9 64.1 Yes 11.50 (21.7) 9.75 (7.7)
-------------------------------------------------------
Average 34.9% 36.2%
Average Excl.Hi/Lo 35.6% 35.4%
-------------------------------------------------------
</TABLE>
-------------------
Screening Criteria: Completed Domestic M&A Transctions over $10 million with the
Target companies being public. Acquiror owned 90% or over after transaction.
Transactions with missing premium information have been excluded.
76
<PAGE>
Exhibit (b)(3)
MICKELBERRY COMMUNICATIONS INCORPORATED
BUDGET VS. ACTUAL FINANCIAL DATA
(in thousands)
WERTHEIM SCHRODER & CO.
-----------------------
INCORPORATED
Corporate Finance Department
<TABLE>
<CAPTION>
1994
---------------------------------------------------------
Mid-Year Original
Actual Budget % Difference Budget % Difference
--------- -------- ------------ -------- ------------
<S> <C> <C> <C> <C> <C>
Revenues
Printing Segment $ 81,193 $ 85,629 (5.2%) $ 88,336 (8.1%)
BBDS 5,963 5,747 3.8% 5,379 10.9%
Partners & Shevack 11,713 11,315 3.5% 10,268 14.1%
Ventura 3,309 3,740 (11.5%) 3,202 3.3%
Excel 25,445 23,000 10.6% 19,516 30.4%
-------- -------- ------ -------- ------
Total $127,623 $129,431 (1.4%) $126,701 0.7%
======== ======== ====== ======== ======
Operating Income
Printing Segment $ 5,209 $ 4,402 18.3% $ 4,915 6.0%
BBDS 240 204 17.6% 378 (36.5%)
Partners & Shevack 1,047 1,208 (13.3%) 1,093 (4.2%)
Ventura 178 182 (2.2%) 177 0.6%
Excel (608) 300 (302.7%) 1,505 (140.4%)
-------- -------- ------ -------- ------
Total $ 6,066 $ 6,296 (3.7%) $ 8,068 (24.8%)
======== ======== ====== ======== ======
<CAPTION>
1993
---------------------------------------------------------
Mid-Year Original
Actual Budget % Difference Budget % Difference
--------- --------- ------------ -------- ------------
<S> <C> <C> <C> <C> <C>
Revenues
Printing Segment $ 80,578 $ 80,037 0.7% $ 90,000 (10.5%)
BBDS 5,379 5,057 6.4% 5,186 3.7%
Partners & Shevack 10,268 9,972 3.0% 9,891 3.8%
Ventura 3,202 3,500 (8.5%) 4,000 (20.0%)
Excel 19,516 18,330 6.5% 0 NM
-------- -------- ------ -------- -------
Total $118,943 $116,896 1.8% $109,077 9.0%
======== ======== ====== ======== =======
Operating Income
Printing Segment $ 3,965 $ 3,328 19.1% $ 5,446 (27.2%)
BBDS 210 53 296.2% 132 59.1%
Partners & Shevack 188 165 13.9% 92 104.3%
Ventura 140 137 2.2% 138 1.4%
Excel 8 281 (97.2%) 0 NM
-------- -------- ------ -------- -------
Total $ 4,511 $ 3,964 13.8% $ 5,808 (22.3%)
======== ======== ====== ======== =======
<CAPTION>
1992
-------------------------------------------------------
Mid-Year Original
Actual Budget % Difference Budget % Difference
-------- -------- ------------ -------- ------------
<S> <C> <C> <C> <C> <C>
Revenues
Printing Segment $81,273 $80,210 1.3% $80,949 0.4%
BBDS 5,097 4,700 8.4% 4,753 7.2%
Partners & Shevack 10,578 10,134 4.4% 9,529 11.0%
Caribiner 7,639 7,639 0.0% 16,130 (52.6%)
Ventura 4,656 4,685 (0.6%) 3,650 27.6%
-------- -------- ------ -------- ------
Total $109,243 $107,368 1.7% $115,011 (5.0%)
======== ======== ====== ======== ======
Operating Income
Printing Segment $ 3,831 $ 3,842 (0.3%) $ 3,447 11.1%
BBDS 229 36 536.1% 100 129.0%
Partners & Shevack 297 266 11.7% 491 (39.5%)
Caribiner 249 317 (21.5%) 168 48.2%
Ventura 48 62 (22.6%) 63 (23.8%)
-------- -------- ------ -------- ------
Total $ 4,654 $ 4,523 2.9% $ 4,269 9.0%
======== ======== ====== ======== ======
<CAPTION>
1991
--------------------------------------------------------
Mid-Year Original
Actual Budget % Difference Budget % Difference
-------- -------- ------------ -------- ------------
<S> <C> <C> <C> <C> <C>
Revenues
Printing Segment $68,291 $65,925 3.6% $69,971 (2.4%)
BBDS 4,562 4,445 2.6% 5,400 (15.5%)
Partners & Shevack 12,895 11,441 12.7% 10,383 24.2%
Caribiner 16,153 14,605 10.6% 14,209 13.7%
Ventura 3,693 3,669 0.7% 3,500 5.5%
-------- -------- ------ -------- -------
Total $105,594 $100,085 5.5% $103,463 2.1%
======== ======== ====== ======== =======
Operating Income
Printing Segment $ 2,645 $ 2,398 10.3% $ 3,353 (21.1%)
BBDS (132) (130) 1.5% 140 (194.3%)
Partners & Shevack 2,156 1,581 36.4% 827 160.7%
Caribiner 46 (88) (152.3%) 4 1,050.0%
Ventura 58 47 23.4% 43 34.9%
-------- -------- ------ -------- -------
Total $ 4,773 $ 3,808 25.3% $ 4,367 9.3%
======== ======== ====== ======== =======
</TABLE>
<PAGE>
MICKELBERRY COMMUNICATIONS INCORPORATED
BUDGET VS. ACTUAL FINANCIAL DATA
(in thousands)
WERTHEIM SCHRODER & CO.
-----------------------
INCORPORATED
Corporate Finance Department
<TABLE>
<CAPTION>
1990
----------------------------------------------------------
Mid-Year Original
Actual Budget % Difference Budget % Difference
--------- --------- ------------ -------- ------------
<S> <C> <C> <C> <C> <C>
Revenues
Printing Segment $ 64,719 $61,815 4.7% $60,850 6.4%
BBDS 5,245 5,141 2.0% 4,705 11.5%
Partners & Shevack 9,969 9,353 6.6% 9,409 6.0%
Caribiner 17,383 17,354 0.2% 17,191 1.1%
Ventura 3,217 3,060 5.1% 4,050 (20.6%)
-------- ------- ----- ------- ------
Total $100,533 $96,723 3.9% $96,205 4.5%
======== ======= ===== ======= ======
Operating Income
Printing Segment $ 3,221 $ 2,862 12.5% $ 2,798 15.1%
BBDS 254 179 41.9% 141 80.1%
Partners & Shevack 778 410 89.8% 432 80.1%
Caribiner 130 143 (9.1%) 183 (29.0%)
Ventura (7) (18) (61.1%) 7 (200.0%)
-------- ------- ----- ------- ------
Total $ 4,376 $ 3,576 22.4% $ 3,561 22.9%
======== ======= ===== ======= ======
<CAPTION>
1989
---------------------------------------------------------
Mid-Year Original
Actual Budget % Difference Budget % Difference
-------- --------- ------------ --------- ------------
<S> <C> <C> <C> <C> <C>
Revenues
Printing Segment $44,062 $44,267 (0.5%) $45,700 (3.6%)
BBDS 4,390 4,194 4.7% 4,400 (0.2%)
Partners & Shevack 7,615 7,390 3.0% 3,769 102.0%
Caribiner 21,018 21,110 (0.4%) 21,069 (0.2%)
Ventura 7,004 7,797 (10.2%) 8,125 (13.8%)
------- ------- ----- ------- -----
Total $84,089 $84,758 (0.8%) $83,063 1.2%
======= ======= ===== ======= =====
Operating Income
Printing Segment $ 2,007 $ 2,083 (3.6%) $ 3,335 (39.8%)
BBDS 91 11 727.3% 193 (52.8%)
Partners & Shevack (17) (64) (73.4%) (816) (97.9%)
Caribiner 615 174 253.4% 769 (20.0%)
Ventura (14) (6) 133.3% (5) 180.0%
------- ------- ----- ------- -----
Total $ 2,682 $ 2,198 22.0% $ 3,476 (22.8%)
======= ======= ===== ======= =====
</TABLE>
<PAGE>
PRELIMINARY COPY
MICKELBERRY COMMUNICATIONS INCORPORATED
405 PARK AVENUE
NEW YORK, NEW YORK 10022
August , 1995
Dear Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders of
Mickelberry Communications Incorporated (the "Company") to be held on
September 12, 1995 at 9:00 a.m., local time, at 405 Park Avenue, New York, New
York 10022. The purpose of the Special Meeting is to consider the approval of
the Agreement and Plan of Merger, dated as of March 21, 1995 (the "Merger
Agreement"), providing for the acquisition by the Company of all of its
outstanding shares of Common Stock and Preferred Stock (collectively, the
"Company Stock"), other than most of the shares owned directly or indirectly
by Mr. James C. Marlas (the "Major Shareholder"), for a consideration of $4.25
in cash for each outstanding share. Pursuant to the Merger Agreement, this
acquisition would be effected by means of a merger of Mickelberry Acquisition
Corporation ("Newco"), a newly formed Delaware corporation wholly owned by the
Major Shareholder, into the Company (the "Merger"), as a result of which the
Company will become wholly owned by the Major Shareholder. The Major
Shareholder owns directly or indirectly approximately 48% of the Company's
outstanding Common Stock, and is the Chairman of the Board, President and
Chief Executive Officer of the Company.
A special committee of the Company's Board of Directors (the "Special
Committee") comprised of four independent members of the Board of Directors,
together with its financial advisor, Schroder Wertheim & Co. Incorporated
(formerly known as Wertheim Schroder & Co. Incorporated, "Schroder Wertheim"),
has reviewed the Merger Agreement and Schroder Wertheim has delivered its
written opinion that the $4.25 cash consideration to be received pursuant to
the Merger Agreement by holders of the Company's Common Stock and of the
Company's Preferred Stock other than the Major Shareholder and its affiliates
(collectively, the "Public Shareholders") is fair from a financial point of
view. The written opinion of Schroder Wertheim, which is attached to the
accompanying Proxy Statement as Annex B, should be read carefully by
shareholders in its entirety. You are also urged to read carefully the
accompanying Proxy Statement in its entirety, including the section entitled
"Special Factors," for important information regarding the Merger.
Your Company's Board of Directors, which numbers eight, has reviewed the
terms and conditions of the Merger Agreement. It has considered the
recommendation of the Special Committee, the opinion of Schroder Wertheim and
other factors. After consideration of each of these factors, your Company's
Board of Directors (with the Major Shareholder and Mr. Robert Garrett
abstaining) has unanimously determined that the terms of the Merger are fair
to Public Shareholders, has approved the Merger Agreement and now RECOMMENDS
THAT PUBLIC SHAREHOLDERS VOTE FOR APPROVAL OF THE MERGER AGREEMENT. The
affirmative vote of holders of a majority of the outstanding Company Stock
entitled to vote at the Special Meeting is required for the approval of the
Merger Agreement, among other things. In addition, the Merger Agreement itself
conditions the obligations of the Company and Newco under the Merger Agreement
to an affirmative vote of at least (1) the holders of a majority of shares of
Company Stock outstanding on the record date of such Special Meeting or (2) 66
2/3% of the votes cast by the holders of shares of Company Stock voting at the
meeting, whichever is greater. The Major Shareholder, who owns directly or
indirectly 48% of the outstanding Company Common Stock has agreed to vote for
the Merger. A condition to consummation of the Merger is that Newco obtain
third party financing on terms satisfactory to the Company and Newco for the
funds required to be paid pursuant to the Merger.
Promptly after the Merger is consummated, a Letter of Transmittal with
instructions will be mailed to all shareholders of record to use in
surrendering their Company stock certificates. PLEASE DO NOT SEND YOUR
CERTIFICATES UNTIL YOU RECEIVE THE LETTER OF TRANSMITTAL.
A form of proxy solicited by the Company's Board of Directors is enclosed
for your convenience. Please mark, sign, date and return it promptly. If you
attend the Special Meeting, you may vote your shares personally whether or not
you have previously submitted a proxy; however, please complete, sign, date
and promptly return the enclosed proxy. All properly executed proxies received
prior to or at the Special Meeting, unless revoked, will be voted at the
Special Meeting in accordance with the instructions on the proxies. Your vote
is important regardless of the number of shares you own.
Sincerely yours,
Fred T. Pugliese
Secretary
<PAGE>
MICKELBERRY COMMUNICATIONS INCORPORATED
405 PARK AVENUE
NEW YORK, NEW YORK 10022
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 12, 1995
A Special Meeting of shareholders of Mickelberry Communications Incorporated
(the "Company") will be held at 405 Park Avenue, New York, New York 10022 on
September 12, 1995, at 9:00 a.m., local time, for the following purposes:
1. To consider and vote upon approval of the Agreement and Plan of Merger
(the "Merger Agreement"), dated as of March 21, 1995, which provides for
the merger of Mickelberry Acquisition Corporation ("Newco"), a Delaware
corporation, into the Company. If the Merger Agreement is approved all
shares of the Company's Common Stock and all shares of the Company's
Preferred Stock, other than most of the shares of Company's Common Stock
owned directly or indirectly by Mr. James C. Marlas (who is a controlling
shareholder, Chairman of the Board, President and Chief Executive Officer
of the Company), will be converted into the right to receive $4.25 cash
per share, and thereafter the Company will be owned solely by Mr. Marlas.
2. To transact such other business as may properly come before the meeting
and any adjournment thereof.
The Board of Directors of the Company has fixed the close of business on
August 7, 1995 as the record date for determining the shareholders entitled to
notice of and to vote at the Special Meeting and any adjournment thereof.
PLEASE SIGN AND RETURN THE ENCLOSED PROXY CARD PROMPTLY TO ENSURE YOUR
REPRESENTATION AT THE MEETING, WHETHER OR NOT YOU PLAN TO ATTEND. YOUR PROXY
MAY BE REVOKED BY YOU AT ANY TIME BEFORE IT IS VOTED.
Fred T. Pugliese
Secretary
New York, New York
August , 1995
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY PROMPTLY, WHETHER OR NOT
YOU INTEND TO BE PRESENT AT THE SPECIAL MEETING.
PLEASE DO NOT SEND IN ANY CERTIFICATES
FOR YOUR SHARES AT THIS TIME.
<PAGE>
August , 1995
MICKELBERRY COMMUNICATIONS INCORPORATED
405 PARK AVENUE
NEW YORK, NEW YORK 10022
(212) 832-0303
----------------
PROXY STATEMENT FOR SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 12, 1995
----------------
INTRODUCTION
This Proxy Statement is being furnished to shareholders of Mickelberry
Communications Incorporated, a Delaware corporation (the "Company"), in
connection with the solicitation of proxies by the Board of Directors of the
Company (the "Board") for use at the Company's Special Meeting of Shareholders
to be held on September 12, 1995 and at any adjournment or postponement
thereof (the "Special Meeting").
MATTERS TO BE CONSIDERED AT THE MEETING
At the Special Meeting, shareholders will be asked to consider and vote upon
the approval of the Agreement and Plan of Merger, dated as of March 21, 1995
(the "Merger Agreement") by and among the Company, Mickelberry Acquisition
Corporation, a Delaware corporation which is wholly owned by Mr. James C.
Marlas ("Newco"), Mr. James C. Marlas (the "Major Shareholder") and Union
Capital Corporation, a Nevada corporation which is wholly owned by the Major
Shareholder ("Union Capital"). The Merger Agreement provides, by means of a
merger ("Merger") of Newco with and into the Company, for the acquisition by
the Company, for a consideration of $4.25 in cash per share to be paid by the
Company, without interest (the "Merger Consideration"), of each share of the
(i) Company's common stock (the "Company Common Stock") and (ii) the Company's
preferred stock (the "Company Preferred Stock", and together with the Company
Common Stock, the "Company Stock") outstanding at the effective time of the
Merger (the "Effective Time") other than shares of the Company Common Stock
held by the Major Shareholder and Union Capital (except for 59,400 shares of
Company Common Stock owned by the Major Shareholder in a Keogh Plan (the
"Covered Shares")). In the event that any of the conditions of the offer are
altered or waived, or the offer is terminated, the Company will issue a press
release describing such changes and stating the period of time during which
consents and proxies will be revocable. The Major Shareholder, who owns all of
Newco's outstanding capital stock, owns directly (or indirectly through Union
Capital) approximately 48% of the Company Common Stock and is the Chairman of
the Board, President and Chief Executive Officer of the Company. In connection
with, and only in connection with, the consummation of the Merger, each of the
Major Shareholder and Union Capital has agreed to cancel, simultaneously with
the consummation of the Merger, the shares of Company Common Stock owned by
him or it, as the case may be, and has waived its right to receive the Merger
Consideration, except with respect to the Covered Shares owned by the Major
Shareholder in a Keogh Plan. As a result of the Merger the Company will become
wholly owned by the Major Shareholder. A copy of the Merger Agreement is
attached to this Proxy Statement as Annex A. The surviving corporation in the
merger will be the Company (the "Surviving Corporation"). At the Effective
Time of the Merger, each share of Company Stock outstanding immediately prior
to the Effective Time of the Merger (other than shares of Common Stock held
directly or indirectly by the Major Shareholder, except for the Covered
Shares) will be converted into the right to receive the Merger Consideration
in cash, without interest. See "Special Factors" and "The Merger."
VOTING AT THE MEETING
The Board has fixed the close of business on August 7, 1995 as the record
date (the "Record Date") for determination of holders of Company Stock
entitled to notice of, and to vote at, the Special Meeting. As of the Record
Date, there were (i) [5,877,948] shares of Company Common Stock outstanding
and entitled to vote and
i
<PAGE>
approximately [1,250] holders of record of Company Common Stock and (ii)
[242,334] shares of Company Preferred Stock outstanding and entitled to vote
and approximately [125] holders of record of Company Preferred Stock. The
presence, in person or by properly executed proxy, of holders of a majority of
the outstanding shares of Company Stock is necessary to constitute a quorum at
the Special Meeting. Each shareholder is entitled to (a) one vote for each
share of Company Common Stock held by such shareholder and (b) 1/10 of a vote
for each share of Company Preferred Stock held by such shareholder.
Under Delaware law and the Company's Certificate of Incorporation, as
amended, and By-laws, the affirmative vote of holders of a majority of the
outstanding shares of Company Stock entitled to vote at the Special Meeting is
required to approve the Merger. In addition, the Merger Agreement itself
conditions the obligations of the Company and Newco under the Merger Agreement
to an affirmative vote of at least (1) the holders of a majority of the shares
of Company Stock outstanding on the record date of such Special Meeting or (2)
66 2/3% of the votes cast by the holders of the shares of Company Stock voting
at the meeting, whichever is greater. The Major Shareholder, who owns directly
or indirectly approximately 48% of the Company Common Stock, has already
agreed to vote his shares in favor of the Merger.
PROXIES
All shares of Company Stock represented at the Special Meeting by properly
executed proxies received prior to or at the Special Meeting, unless such
proxies previously have been revoked, will be voted at the Special Meeting in
accordance with the instructions on the proxies. If no such instructions are
indicated, proxies will be voted FOR the approval of the Merger Agreement,
unless the Board determines otherwise, due to its assessment of the best
interests of shareholders. The Board does not know of any other matters which
are to come before the Special Meeting. If any other matters are properly
presented at the Special Meeting for action, the persons named in the enclosed
form of proxy and acting thereunder will have the discretion to vote on such
matters in accordance with their best judgment.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by filing
with the Secretary of the Company written notice of revocation bearing a later
date than the proxy, by duly executing and delivering to the Secretary of the
Company, at or prior to the Special Meeting, a subsequent proxy relating to
the same shares of Company Stock, or by attending the Special Meeting and
voting in person (although attendance at the Special Meeting will not, by
itself, constitute revocation of proxy). Any written notice revoking a proxy
should be sent to Mickelberry Communications Incorporated, 405 Park Avenue,
New York, New York 10022, Fred T. Pugliese.
Proxies are being solicited by and on behalf of the Board. The Company will
bear the cost of preparing and mailing the proxy material furnished to the
Company's shareholders in connection with the Special Meeting. Proxies will be
solicited by mail. Directors, officers and employees of the Company may also
solicit proxies by telephone, telegram or personal contact. Such persons will
receive no additional compensation for such services but may be reimbursed for
out-of-pocket expenses in connection with such solicitation. Copies of
solicitation materials will be furnished to fiduciaries, custodians and
brokerage houses for forwarding to beneficial owners of Company Stock held in
the names of such fiduciaries, custodians and brokerage houses. MacKenzie
Partners, Inc. has been engaged to solicit proxies on behalf of the Company
for a fee of $4,000 plus reasonable out-of-pocket expenses.
All information contained in this Proxy Statement concerning Newco, the
Major Shareholder, Union Capital, and the plans for Newco and the Company
after the Merger, has been supplied by Newco. All other information contained
in this Proxy Statement has been supplied by the Company.
THE BOARD, BASED ON THE REPORT OF A SPECIAL COMMITTEE OF INDEPENDENT
DIRECTORS THAT THE MERGER CONSIDERATION WAS FAIR TO THE HOLDERS OF THE COMPANY
COMMON STOCK (OTHER THAN THE MAJOR SHAREHOLDER) AND THE OPINION OF SCHRODER
WERTHEIM & CO. INCORPORATED (FORMERLY KNOWN AS WERTHEIM SCHRODER
ii
<PAGE>
& CO. INCORPORATED, "SCHRODER WERTHEIM") THAT THE MERGER CONSIDERATION WAS
FAIR, FROM A FINANCIAL POINT OF VIEW, TO THE HOLDERS OF THE COMPANY STOCK
(OTHER THAN THE MAJOR SHAREHOLDER), HAS DETERMINED THAT THE ACQUISITION OF THE
COMPANY STOCK PURSUANT TO THE MERGER AGREEMENT IS FAIR AND IN THE BEST
INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS. THE BOARD HAS APPROVED THE
MERGER AGREEMENT AND RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL OF THE
MERGER AGREEMENT.
The date of this Proxy Statement, and the approximate date it will first be
mailed to shareholders, is August , 1995.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS
OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION
CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION
NOT CONTAINED IN THIS PROXY STATEMENT, AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THE
DELIVERY OF THIS PROXY STATEMENT SHALL NOT, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE INFORMATION SET FORTH
HEREIN OR IN THE AFFAIRS OF THE COMPANY OR NEWCO SINCE THE DATE HEREOF.
ADDITIONAL INFORMATION
Pursuant to the requirements of Section 13(e) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and Rule 13e-3 promulgated
thereunder, the Company, as issuer of the Common Stock, $1.00 par value per
share, which is the subject of the Rule 13e-3 transaction, together with
Newco, Union Capital and the Major Shareholder has filed with the Securities
and Exchange Commission (the "Commission") a Transaction Statement on Schedule
13E-3 (the "Schedule 13E-3") relating to the transactions contemplated by the
Merger Agreement. As permitted by the rules and regulations of the Commission,
this Proxy Statement omits certain information, exhibits and undertakings
contained in Schedule 13E-3. Such additional information can be inspected at
and obtained from the Commission and the New York Stock Exchange (the "NYSE")
in the manner set forth below under "Available Information."
Statements contained herein concerning any documents are not necessarily
complete and, in each instance, reference is made to the copy of such document
filed as an exhibit to the Schedule 13E-3. Each such statement is qualified in
its entirety by such reference.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith is required to file periodic reports, proxy
statements and other information with the Commission relating to its business,
financial statements and other matters. Such reports, proxy statements and
other information, as well as the aforementioned Schedule 13E-3, may be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington D.C. 20549, and at
the Regional Offices of the Commission located at Room 3190 Kuczynsky Federal
Building, 230 South Dearborn Street, Chicago, Illinois 60604, and Seven World
Trade Center, New York, New York 10048. Copies of such material can also be
obtained from the Commission at prescribed rates by addressing written
requests for such copies to the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549.
THIS PROXY STATEMENT INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE
iii
<PAGE>
WITHOUT CHARGE UPON REQUEST FROM THE CORPORATE SECRETARY'S OFFICE, MICKELBERRY
COMMUNICATIONS INCORPORATED, 405 PARK AVENUE, NEW YORK, NEW YORK 10022;
TELEPHONE NUMBER (212) 832-0303. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS, ANY REQUEST SHOULD BE MADE NO LATER THAN SEPTEMBER 5, 1995.
INFORMATION INCORPORATED BY REFERENCE
The following documents are incorporated by reference herein:
The Company's Annual Report on Form 10-K for the year ended December
31, 1994.
The Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1995.
All other documents filed by the Company pursuant to Section 13(a) or 15(d)
of the Exchange Act after the date of this Proxy Statement, and prior to the
date of the Special Meeting, shall be deemed to be incorporated by reference
herein.
Any statement contained in a document filed with the Commission prior to the
date hereof and incorporated by reference herein shall be deemed to be
modified or superseded for purposes hereof to the extent that a statement
contained herein (or in any other subsequently filed document which also is
incorporated by reference herein) modifies or supersedes such statement. The
modifying or superseding statement may, but need not, state that it has
modified or superseded a prior statement or include any other information set
forth in the document that is not so modified or superseded. The making of a
modifying or superseding statement shall not be deemed an admission that the
modified or superseded statement, when made, constituted an untrue statement
of a material fact, an omission to state a material fact necessary to make a
statement not misleading, or the employment of a manipulative, deceptive or
fraudulent device, contrivance, scheme, transaction, act, practice, course of
business or artifice to defraud, as those terms are used in the Securities Act
of 1933, as amended (the "Securities Act"), the Exchange Act or the rules and
regulations thereunder. Any statement so modified shall not be deemed in its
unmodified form to constitute a part hereof for purposes of the Exchange Act.
Any statement so superseded shall not be deemed to constitute a part hereof
for purposes of the Exchange Act.
iv
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<S> <C>
Advertising and Promotion Businesses........................................ 19
Appraisal Stockholders...................................................... 27
Argosy...................................................................... 4
Banks....................................................................... 4
Board....................................................................... i
Client...................................................................... 4
Commission.................................................................. iii
Company Stock............................................................... i
Company Preferred Stock..................................................... i
Company..................................................................... i
Company Common Stock........................................................ i
Convertible Debentures...................................................... 4
Covered Shares.............................................................. i
Delaware Court.............................................................. 27
Dissenting Shares........................................................... 28
Dissenting Stockholders..................................................... 28
EBIT........................................................................ 18
EBITDA...................................................................... 18
Effective Time.............................................................. i
Engagement Letter........................................................... 22
Equity Value................................................................ 18
Excel....................................................................... 19
Exchange Agent.............................................................. 5
Exchange Act................................................................ iii
Financing Proposal.......................................................... 4
Five Year Projections....................................................... 11
Hart-Scott-Rodino Act....................................................... 31
Indemnification Letter...................................................... 22
Letter Agreement............................................................ 4
LTM......................................................................... 18
Major Shareholder........................................................... i
Merger...................................................................... i
Merger Agreement............................................................ i
Merger Consideration........................................................ i
NASD........................................................................ 9
Newco....................................................................... i
NYSE........................................................................ iii
120-Day Period.............................................................. 28
Original Proposal........................................................... 10
Petition.................................................................... 28
Printing Businesses......................................................... 19
Printing Segment or Segment................................................. 36
Proposal.................................................................... 12
Public Shareholders......................................................... 1
Public Common Shareholders.................................................. 2
Record Date................................................................. i
Schedule 13E-3.............................................................. iii
Schroder Wertheim .......................................................... iii
Schroder Wertheim Presentation.............................................. 14
Securities Act.............................................................. iv
SFAS 115.................................................................... 43
Shares...................................................................... 27
Special Committee........................................................... 2
Special Meeting............................................................. i
Stock Options............................................................... 3
Surviving Corporation....................................................... i
Union Capital............................................................... i
</TABLE>
v
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Introduction............................................................... i
Additional Information..................................................... iii
Available Information...................................................... iii
Information Incorporated by Reference...................................... iv
Index of Defined Terms..................................................... v
Summary.................................................................... 1
Special Factors
Background of the Merger................................................. 10
Proceedings and Recommendation of the Special Committee and the Board,
Fairness of the Transaction............................................. 11
Opinion of Financial Advisor............................................. 16
Projected Operating and Financial Results of the Company................. 22
Reports and Appraisals................................................... 23
Structure and Purpose of the Merger...................................... 23
Certain Effects of the Merger............................................ 24
Interests of Certain Persons in the Merger; Conflicts of Interest........ 25
Certain Federal Income Tax Consequences of the Merger.................... 26
Appraisal Rights......................................................... 27
Financing of the Merger.................................................. 29
Expenses of the Merger................................................... 29
Certain Litigation....................................................... 30
The Merger
General.................................................................. 30
Required Vote............................................................ 30
Effective Time........................................................... 31
Payment for Shares....................................................... 31
Conditions to the Merger, Waiver......................................... 31
Certain Covenants of the Company and Newco............................... 32
Termination, Amendments.................................................. 33
Certain Information Regarding Newco, Union Capital and the Major
Shareholder............................................................... 33
Description of Company Capital Stock....................................... 34
Recent Market Prices; Dividend History..................................... 34
Business of the Company
Overview................................................................. 35
Printing................................................................. 36
Advertising and Promotion................................................ 36
General.................................................................. 38
Selected Consolidated Financial Data....................................... 39
Management's Discussion and Analysis of Results of Operations and Financial
Condition................................................................. 41
Beneficial Ownership of Shares of the Company.............................. 46
Certain Transactions in Company Stock...................................... 47
Proxy Solicitation......................................................... 47
Current Information: Delisting and Deregistration.......................... 48
Independent Auditors....................................................... 48
Future Shareholder Proposals............................................... 48
Other Business............................................................. 48
Financial Statements....................................................... F-1
ANNEX A: Agreement and Plan of Merger...................................... A-1
ANNEX B: Opinion of Schroder Wertheim...................................... B-1
ANNEX C: Section 262 of the Delaware General Corporation Law............... C-1
ANNEX D: Letter Agreement dated November 23, 1994 by and among the Major
Shareholder, The Argosy Group L.P. and The Argosy Securities
Group L.P. ...................................................... D-1
</TABLE>
vi
<PAGE>
SUMMARY
The following is a summary of certain information contained in this Proxy
Statement. This summary is not intended to be a complete statement of all
material features of the Merger and is qualified in its entirety by reference
to the more detailed information appearing elsewhere in this Proxy Statement.
Terms used but not defined in this summary have the meanings ascribed to them
elsewhere in this Proxy Statement, and an index to defined terms is located at
page v (see Index to Defined Terms). Shareholders are urged to read this Proxy
Statement and the Annexes hereto in their entirety.
THE SPECIAL MEETING
A Special Meeting of Shareholders of the Company will be held on Tuesday,
September 12, 1995 at 9:00 a.m., local time, at 405 Park Avenue, New York, New
York 10022, to consider and vote upon a proposal recommended by the Board to
approve the Merger Agreement, by and among the Company, Newco, the Major
Shareholder and Union Capital which provides for the merger of Newco with and
into the Company. A copy of the Merger Agreement is attached hereto as Annex
A. See "Introduction."
THE MERGER
The Merger Agreement provides that, subject to the approval of the Merger
Agreement by the shareholders of the Company and satisfaction of certain other
conditions, Newco will be merged with and into the Company, and the Company
will be the Surviving Corporation and will become wholly owned by the Major
Shareholder. The Major Shareholder, who owns all of Newco's outstanding
capital stock, owns directly or indirectly approximately 48% of the Company's
Common Stock and is the Chairman of the Board, President and Chief Executive
Officer of the Company. Pursuant to the Merger Agreement, at the Effective
Time of the Merger, each share of the Company's Stock outstanding, other than
shares held directly or indirectly by the Major Shareholder (except Covered
Shares), will be automatically converted into the right to receive the Merger
Consideration. The holders of such shares are referred to throughout this
Proxy Statement as the "Public Shareholders." In connection with, and only in
connection with, the consummation of the Merger, each of the Major Shareholder
and Union Capital has agreed to cancel, simultaneously with the consummation
of the Merger, the shares of Company Common Stock owned by him or it, as the
case may be, and has waived its right to receive the Merger Consideration,
except with respect to the Covered Shares. After consummation of the Merger,
the entire equity interest in the Company will be beneficially owned by the
Major Shareholder. See "Special Factors--Interests of Certain Persons in the
Merger; Conflicts of Interest" and "Special Factors--Certain Effects of the
Merger."
REQUIRED VOTE
Under Delaware law, the Company's Certificate of Incorporation, as amended,
and By-laws, the affirmative vote of the holders of a majority of the shares
of Company Stock voting at the Special Meeting is required for approval of the
Merger Agreement. In addition, the Merger Agreement itself conditions the
obligations of the Company and Newco under the Merger Agreement to an
affirmative vote of at least (1) the holders of a majority of shares of
Company Stock outstanding on the record date of such Special Meeting or (2) 66
2/3% of the votes cast by the holders of shares of Company Stock voting at the
meeting, whichever is greater. The Major Shareholder, who owns directly or
indirectly approximately 48% of the outstanding Company Common Stock has
agreed to vote for the Merger. The approval of the Merger by at least a
majority of unaffiliated security holders is not required by the Merger
Agreement.
THE EFFECTIVE TIME
The Merger will become effective by filing a Certificate of Merger,
consistent with the Merger Agreement, with the Secretary of State of Delaware.
The Merger will be consummated only upon satisfaction or waiver, where
permissible, of the terms and conditions contained in the Merger Agreement and
provided that the Merger Agreement has not been terminated. If the Merger has
not been consummated by September 30, 1995, either the
1
<PAGE>
Company or Newco may terminate the Merger Agreement so long as the reason that
the Merger has not been consummated is not due to the failure of the party
choosing to terminate to fulfill any of its obligations thereunder. No such
waiver or termination will require the vote or consent of the holders of
Company Stock.
BACKGROUND OF THE MERGER
For a description of the events leading up to the approval of the Merger
Agreement, see "Special Factors--Background of the Merger."
RECOMMENDATION OF THE SPECIAL COMMITTEE AND THE BOARD, FAIRNESS OF THE
TRANSACTION
At a meeting held on March 21, 1995, the Board received a report from the
special committee of independent directors of the Company (the "Special
Committee") that it was of the unanimous opinion that the Merger is advisable
and fair to the holders of the Company Common Stock, other than the shares
held directly or indirectly by the Major Shareholder, except the Covered
Shares (the "Public Common Shareholders") and to recommend that the Board
approve the Merger and the Merger Agreement. The entire Board considered the
Special Committee's recommendation and based on the independence of the
Special Committee, the independence of Schroder Wertheim as financial advisor
to the Special Committee, the fairness opinion of Schroder Wertheim and the
recommendation of the Special Committee the Board adopted the conclusion and
analyses of Schroder Wertheim as its own and unanimously (with Mr. Marlas and
Mr. Garrett (who is Mr. Marlas' brother-in-law) abstaining) concluded that the
Merger is fair to and in the best interests of the Public Shareholders,
approved and adopted the Merger Agreement subject to the Board's receipt of
Schroder Wertheim's written opinion that the consideration payable to the
holders of the Company Preferred Stock is fair to such holders, from a
financial point of view and directed that a proposal to approve and adopt the
Merger and the Merger Agreement be submitted to a vote of the Company's
shareholders. Schroder Wertheim undertook an analysis of the fairness of the
Merger Consideration to holders of the Company Preferred Stock and reexecuted
and delivered its written opinion of March 21, 1995 that the Merger
Consideration was fair to the Public Shareholders from a financial point of
view. For a discussion of the factors considered by the Board and the Special
Committee in reaching their determination, see "Special Factors--Proceedings
and Recommendation of the Special Committee and the Board, Fairness of the
Transaction."
THE BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND UNANIMOUSLY
RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL OF THE MERGER AGREEMENT.
CERTAIN MEMBERS OF THE BOARD HAVE CERTAIN INTERESTS WHICH MAY PRESENT THEM
WITH CONFLICTS OF INTEREST IN CONNECTION WITH THE MERGER. See "Special
Factors--Interests of Certain Persons in the Merger; Conflicts of Interest."
OPINION OF FINANCIAL ADVISOR
Schroder Wertheim has given its opinion that the $4.25 cash per share
consideration to be received by the Public Shareholders is fair from a
financial point of view, based upon the various considerations set forth in
its opinion.
For further information regarding the opinion of, and the fees paid or
payable by the Company to, Schroder Wertheim, see "Special Factors--Opinion of
Financial Advisor" and the full text of the Schroder Wertheim opinion, a copy
of which is attached to this Proxy Statement as Annex B, which should be read
in its entirety.
PURPOSE AND REASONS FOR THE MERGER
The Company entered into the Merger Agreement because, based upon the
recommendation of the Special Committee, the Board concluded that the terms of
the Merger are fair to and in the best interests of the Public Shareholders.
See "Special Factors--Proceedings and Recommendation of the Special Committee
and the Board, Fairness of the Transaction."
2
<PAGE>
The Major Shareholder, by engaging in the transaction contemplated by the
Merger Agreement, will acquire the entire equity interest in the Company, and,
as a result of the Merger, the Company will become wholly-owned by the Major
Shareholder. The Major Shareholder has been concerned that the performance of
the Company Common Stock in the market has been negatively impacted by the
Company's small size and resulting relative lack of attention provided to the
stock by professional investment advisors and money managers, the diversity
and nature of its various business units, and the Company's traditional focus
on a strong balance sheet as opposed to consistent quarterly earnings. The
Major Shareholder believes that by being private the Company would be aided by
the flexibility inherent in a closely held corporation to implement a long-
term business strategy, without concentrating on short-term performance. The
purpose of the Merger is to provide the Public Shareholders the opportunity to
receive a fair consideration for their shares in excess of the market price of
the stock preceding the announcement of the Merger, while at the same time
providing the Major Shareholder what he views both as an attractive investment
opportunity and as an opportunity to manage the Company with the flexibility
inherent in a closely-held enterprise. See "Special Factors--Background of the
Merger."
The structure of the acquisition as a merger was determined by Newco. The
Merger has been structured as a merger of Newco and the Company in order to
effectuate the acquisition of all the outstanding shares of the Company Stock
other than shares owned directly or indirectly by the Major Shareholder
(except for Covered Shares), thereby transferring the entire beneficial equity
interest in the Company to the Major Shareholder. The Merger has been
structured as a merger of Newco into the Company, with the Company as the
Surviving Corporation, in order to preserve the Company's corporate entity and
existing contractual arrangements with third parties. See "Special Factors--
Structure and Purpose of the Merger."
INTERESTS OF CERTAIN PERSONS IN THE MERGER; CONFLICTS OF INTEREST
In considering the recommendation of the Board with respect to the Merger,
shareholders should be aware that certain members of the Company's management
and the Board have certain interests summarized below which present them with
conflicts of interest in connection with the Merger Agreement. The Special
Committee was aware of these conflicts and considered them among the other
matters described under "Special Factors--Background of the Merger" and "--
Proceedings and Recommendation of the Special Committee and the Board,
Fairness of the Transaction." See "Special Factors--Interests of Certain
Persons in the Merger, Conflicts of Interest."
Ownership of the Company after the Merger. After the Merger, the Major
Shareholder will beneficially own all of the Company's outstanding capital
stock. See "Certain Information Regarding Newco and the Major Shareholder."
Directors of the Company after the Merger. The Merger Agreement provides
that after the Merger, the current directors of the Company (Mr. Robert
Garrett, Mr. John C. Mickle, Mr. Bernard S. White, Mr. George Kane, Mr. James
C. Marlas, Mr. Mel Gordon, Mr. C. Gordon Murphy and Mr. Frank Stillo) will
remain in such capacities with the Surviving Corporation until successors are
duly elected or appointed in accordance with applicable law.
Employment of Company's Employees. Newco has indicated that, subsequent to
the Merger, the current officers and employees of the Company will remain in
such capacities with the Surviving Corporation. However, no new employment
agreements are currently contemplated.
Cash Payments to be Received in Merger. Various members of management and
the Board will receive cash payments in the Merger for cancellation of all
outstanding and exercisable options other than options held by the Major
Shareholder (the "Stock Options"). Such payments will be equal to the
difference between the Merger Consideration and the per share exercise price
of each Stock Option. The table below summarizes the total amount each
director and executive officer of the Company will receive upon cancellation
of the Stock Options.
3
<PAGE>
<TABLE>
<CAPTION>
NAME AMOUNT
---- -------
<S> <C>
Robert Garrett.................................................... $ 9,375
John C. Mickle.................................................... 9,375
Bernard S. White.................................................. 9,375
George Kane....................................................... 35,937
James C. Marlas................................................... 0
Mel Gordon........................................................ 9,375
C. Gordon Murphy.................................................. 9,375
Frank Stillo...................................................... 20,000
Gregory J. Garville............................................... 28,125
Fred T. Pugliese.................................................. 8,062
</TABLE>
Indemnification of Directors and Officers. The Merger Agreement provides
that the Company as the Surviving Corporation (i) for three years after the
Effective Time shall not change the provisions of its certificate of
incorporation relating to indemnification of present or former directors or
officers of the Company in a manner which adversely affects their rights to
indemnification, and (ii) for three years after the Effective Time will use
its best efforts to maintain specified officers' and directors' liability
insurance indemnifying them, or if the specified insurance is unavailable for
the current premium, the Surviving Corporation shall obtain as much insurance
as can be obtained for 125% of the current premium. In addition, pursuant to
an agreement entered into with the Company, the members of the Special
Committee are indemnified with respect to their activities as members of the
Special Committee.
Under the Company's existing Certificate of Incorporation, By-laws and
certain indemnification arrangements and under currently effective officers'
and directors' liability insurance, the Company's officers and directors may
have certain rights to indemnification with respect to litigation relating to
the Merger. See "Special Factors--Proceedings and Recommendation of the
Special Committee and the Board, Fairness of the Transaction," and "The
Merger--Certain Covenants of the Company and Newco."
FINANCING OF THE MERGER
Approximately $22,876,000 will be required in order to pay (i) the holders
of all outstanding shares of Company Stock, other than shares of Company
Common Stock held directly or indirectly by the Major Shareholder (except for
Covered Shares), for their shares, (ii) the value of the Stock Options, (iii)
the repayment and/or cancellation of the Company's 8% Convertible Debentures
due 2002 ("Convertible Debentures") other than those held directly or
indirectly by the Major Shareholder, and (iv) the expenses in connection with
the Merger. See "Special Factors--Financing of the Merger." A condition to
consummation of the Merger is that Newco obtain third party financing on terms
satisfactory to the Company and Newco for the funds required to be paid
pursuant to the Merger.
The Company has obtained a proposal (the "Financing Proposal") from Harris
Trust and Saving Bank and American National Bank and Trust Company of Chicago
(collectively, the "Banks") to provide financing for the Merger and for
working capital and capital expenditures of the Company and its subsidiaries,
subject to customary conditions and acceptable documentation. The financing
described in the Financing Proposal is currently in documentation and due
diligence review. Under the Financing Proposal, the Banks would provide
certain wholly owned subsidiaries of the Company with a credit facility in an
aggregate principal amount of $50,000,000.
EXPENSES OF THE MERGER
Whether or not the Merger is consummated, the Company has agreed to (i)
assume all of the obligations of the Major Shareholder and any entity formed
by him for purposes of completing the Merger, including Newco (collectively,
the "Client") under that certain Letter Agreement dated November 23, 1994 (the
"Letter Agreement"), by and among the Client, The Argosy Group L.P. and The
Argosy Securities Group L.P. (collectively "Argosy"), including without
limitation, indemnities, contribution, compensation and expense
4
<PAGE>
reimbursements all in accordance with Section 15 of such Letter Agreement, and
(ii) pay all reasonable attorneys' fees, expenses and disbursements incurred
in connection with the transactions contemplated by the Merger Agreement. A
copy of the Letter Agreement is attached to this Proxy Statement as Annex D.
Notwithstanding the foregoing, the Company shall not assume any obligation or
pay any fees and expenses if the Merger Agreement is terminated because of a
material breach of the Merger Agreement by Newco, Union Capital or the Major
Shareholder.
CONDITIONS TO THE MERGER
The obligations of the parties to consummate the Merger are subject to the
approval of the Merger Agreement by the shareholders of the Company, and
compliance with certain other covenants and conditions. See "The Merger--
Conditions to the Merger, Waiver" and "--Certain Covenants of the Company and
Newco."
EXCHANGE OF CERTIFICATES
As soon as practicable following the Effective Time, a letter of transmittal
and instructions for use in surrendering certificates for Company Stock in
exchange for the consideration to be received in the Merger will be mailed to
all shareholders. Shareholders must return the completed letters of
transmittal and their certificates in accordance with the instructions in
order to exchange their certificates for the Merger Consideration to be
received by such shareholder.
At or promptly after the Effective Time, cash in an amount sufficient to pay
all shareholders the amounts to which they will become entitled as a result of
the Merger will be deposited with Continental Stock Transfer and Trust Company
(the "Exchange Agent"). As soon as practicable after the Merger, the Exchange
Agent will commence distributing cash to each shareholder (other than the
Major Shareholder, except for Covered Shares, and Union Capital) upon the
surrender by such shareholder of stock certificates for Company Stock
accompanied by a duly executed letter of transmittal. After the Merger, each
outstanding certificate which prior thereto represented issued and outstanding
shares of Company Stock shall be deemed for all purposes to represent only the
right of the holder to receive $4.25 in cash, without interest, per share of
Company Stock (other than shares of Company Common Stock held directly or
indirectly by the Major Shareholder, except for Covered Shares).
HOLDERS OF COMPANY STOCK SHOULD NOT FORWARD THEIR STOCK CERTIFICATES WITH
THE ENCLOSED PROXY CARD. TRANSMITTAL MATERIALS AND INSTRUCTIONS RELATING TO
STOCK CERTIFICATES WILL BE MAILED TO SHAREHOLDERS AS SOON AS PRACTICABLE AFTER
THE EFFECTIVE TIME OF THE MERGER. SEE "THE MERGER."
FEDERAL INCOME TAX CONSEQUENCES
Generally, if the Merger is consummated, each shareholder of record at the
Effective Time other than the Major Shareholder (except for Covered Shares)
and Union Capital will be entitled to receive cash for their shares and will
recognize taxable gain or loss for federal income tax purposes equal to the
difference, if any, between the amount of such cash received and the tax basis
of the stock surrendered. Each shareholder should consult such shareholder's
tax adviser as to the particular consequences of the Merger to such
shareholder, including the application of state, local and foreign tax laws.
See "Special Factors--Certain Federal Income Tax Consequences of the Merger."
CERTAIN LITIGATION
On November 8, 1994, a class action complaint was filed in the Court of
Chancery of the State of Delaware in and for New Castle County. The complaint
was filed by Frank De Marco on his own behalf and on behalf of all security
holders of the Company except the defendants. Complaint was filed against the
Company and the Major Shareholder, George Kane, Robert Sperling, Mel Gordon
and Frank Stillo, officers and/or directors of the Company. The lawsuit seeks
to enjoin the consummation of the original offer made by the Major Shareholder
to
5
<PAGE>
acquire, through a merger transaction, all of the shares of the Company's
Common Stock not owned directly or indirectly by the Major Shareholder for a
cash purchase price of $3.25 per share. The suit also seeks, in the
alternative, rescission and damages as well as reimbursement of costs and
disbursements in unspecified amounts.
On June 21, 1995, the parties executed a Stipulation And Agreement of
Compromise Settlement And Release providing for the settlement of the lawsuit.
Consummation of the settlement is subject to certain conditions, including
approval by the Court.
BUSINESS OF THE COMPANY
The Company is a holding company, incorporated in Delaware in 1926, with
marketing services businesses consisting of advertising agencies, sales
promotion businesses, and commercial printers. Each subsidiary operates
autonomously, drawing on the parent company for strategic and financial
support. Strong emphasis is placed on individual initiative and enterprise.
The Company conducts an active acquisition and corporate development program.
See "Business of Company." The Company is incorporated in Delaware and its
principal executive offices are located at 405 Park Avenue, New York, New York
10022; telephone number (212) 832-0303.
RECENT DEVELOPMENTS
On July 26, 1995, the Company released the results of its operations for the
second quarter and six months ended June 30, 1995. The Company lost $52,000 in
the second quarter as compared with income of $109,000 last year. For the six
month period the Company earned $293,000 in 1995 as compared with a loss of
$175,000 last year. The second quarter loss was attributable to the
supermarket promotions business of the Excel Marketing Group. The Company is
discontinuing this operation and has incurred losses in the process of closing
it.
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected historical financial information for
the Company and its subsidiaries for each of the five years in the period
ended December 31, 1994. The following information should be read in
conjunction with "Management's Discussion and Analysis of Results of
Operations and Financial Condition" and the Consolidated Financial Statements
and related Notes included elsewhere in this Proxy Statement.
6
<PAGE>
MICKELBERRY COMMUNICATIONS INCORPORATED
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, AS OF AND FOR THE FISCAL YEARS ENDED DECEMBER 31,
----------------- -----------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
-------- ------- --------- --------- --------- --------- ---------
IN THOUSANDS (EXCEPT PER SHARE)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues
Tangible products....... $ 25,720 $23,064 $ 106,637 $ 100,095 $ 81,273 $ 68,291 $ 64,719
Services................ 5,465 4,497 20,986 18,849 27,971 37,301 35,814
-------- ------- --------- --------- --------- --------- ---------
$ 31,185 $27,561 $ 127,623 $ 118,944 $ 109,244 $ 105,592 $ 100,533
======== ======= ========= ========= ========= ========= =========
Income
Tangible products....... 1,248 488 $ 1,739 $ 3,891 $ 3,822 $ 2,703 $ 3,221
Services................ 273 (62) 1,748 684 1,065 2,491 1,155
-------- ------- --------- --------- --------- --------- ---------
1,521 426 3,487 4,575 4,887 5,194 4,376
Unallocated amounts..... (463) (426) (1,582) (2,148) 2,779 (1,285) (3,546)
Interest expense........ (483) (492) (1,990) (2,172) (2,083) (2,235) (2,629)
-------- ------- --------- --------- --------- --------- ---------
Income (loss) before
taxes.................. 575 (492) (85) 255 5,583 1,674 (1,799)
Income taxes (benefits). 230 (197) (34) 101 2,233 670 (2,447)
-------- ------- --------- --------- --------- --------- ---------
Income (loss) before
extraordinary item and
cumulative effect of
change in accounting... 345 (295) (51) 154 3,350 1,004 648
Extraordinary item...... -- -- -- (1,134) -- --
Cumulative effect of
change in accounting... -- -- -- 200 -- -- --
-------- ------- --------- --------- --------- --------- ---------
Net income (loss)....... $ 345 $ 295 $ (51) $ 354 $ 2,216 $ 1,004 $ 648
======== ======= ========= ========= ========= ========= =========
Income (loss) per share
Primary
Income (loss) before
extraordinary item and
cumulative effect of
change in accounting.. $ .06 $ (.05) $ (.02) $ .02 $ .55 $ .16 $ .10
Extraordinary item...... -- -- -- -- (.19) -- --
Cumulative effect of
change in accounting... -- -- -- .03 -- -- --
-------- ------- --------- --------- --------- --------- ---------
Net income (loss)....... $ .06 $ (.05) $ (.02) $ .05 $ .36 $ .16 $ .10
======== ======= ========= ========= ========= ========= =========
Fully diluted
Income (loss) before
extraordinary item and
cumulative effect of
change in accounting.. $ .05 $ (.05) $ (.02) $ .02 $ .49 $ .16 $ .10
Extraordinary item...... -- -- -- -- (.16) -- --
Cumulative effect of
change in accounting... -- -- -- .03 -- -- --
-------- ------- --------- --------- --------- --------- ---------
Net income (loss)....... $ .05 $ (.05) $ (.02) $ .05 $ .33 $ .16 $ .10
======== ======= ========= ========= ========= ========= =========
Cash dividends per
common share........... $ .015 $ .015 $ .06 $ .06 $ .06 $ .06 $ .06
Cash dividends per
preferred share........ $ .075 $ .075 $ .30 $ .30 $ .30 $ .30 $ .30
Total assets............ $104,693 $97,995 $ 100,456 $ 97,242 $ 88,631 $ 85,378 $ 79,528
Long term obligations... $ 20,113 $21,276 $ 20,703 $ 21,528 $ 22,511 $ 17,325 $ 14,736
Total Equity............ $ 35,056 $35,081 $ 34,773 $ 35,499 $ 35,605 $ 33,803 $ 33,214
Ratio of earnings to
fixed charges(1)....... 219.05% 0% 96.17% 117.11%
Book value per share.... $ 5.32 $ 5.33 $ 5.28 $ 5.36 $ 5.38 $ 5.53 $ 5.44
</TABLE>
--------
(1) For purposes of computing the ratio of earnings to fixed charges, earnings
coverage represents the sum of income from continuing operations before
income taxes plus fixed charges. Fixed charges represent interest paid or
accrued on indebtedness of the Company.
During 1994 the Company recorded a $2.5 million charge to reduce certain
inventory of the Excel Marketing Group to net realizable values. Also in 1994,
a $1.0 million charge (of which the Company's share is $500,000) was recorded
to adjust the inventory and allowance for returns of Excel Plus, Ltd. a
company in which the Excel Group owns 50%. (See Note 2 of the Notes to
Consolidated Financial Statements.)
7
<PAGE>
In 1993, the Company acquired the Excel Group of companies. (See Note 2.)
During 1992, the Company sold Caribiner, Inc. (See Note 3.) Operating results
for these businesses are included only for the periods during which the
Company owned them. Effective January 1, 1993, the Company changed its method
of accounting for income taxes and recorded a $200,000 effect on income. (See
Note 1.)
Included in unallocated amounts are: for 1993, loss on an investment; for
1992, gain on sale of a business; and for 1991 adjustment to an investment.
(See Notes 3 and 5.) In 1990, the Company recorded a $2.8 million loss on an
investment which is included in unallocated amounts. Income for 1990 also
includes a $2 million adjustment to tax liabilities.
In 1992, as a result of retiring an issue of subordinated debentures, the
Company recorded an extraordinary loss of $1,134,000. (See Note 4.)
Total equity reflects asset values at historic cost or amortized historic
cost where appropriate (e.g. for property, plant and equipment) (see
Consolidated Balance Sheets and accompanying notes in the financial statements
included elsewhere in this proxy statement). Book values per share are
calculated based on total equity adjusted to include the conversion of the
Convertible Debentures divided by the sum of outstanding Company Stock and the
Company Common Stock deemed to have been issued upon conversion of the
Convertible Debentures. Total equity and book value per share would change if
the fair values of the Company's property, plant and equipment were different
from amortized historic cost and such fair values were substituted for
amortized historic cost in the Company's balance sheets. The Company did not
have its property, plant and equipment appraised to determine what change, if
any, in total equity and book value per share might result from such
substitution of values. Nevertheless, the Company's management does not
believe that the fair values of the Company's property, plant and equipment
would exceed amortized historic cost. The reasons for management's belief are
described below.
The Company's property, plant and equipment at March 31, 1995 and December
31, 1994 are summarized as follows:
<TABLE>
<CAPTION>
MARCH 31, 1995 DECEMBER 31, 1994
-------------- -----------------
(IN THOUSANDS)
<S> <C> <C>
Leasehold improvements..................... $ 3,749 $ 3,497
Machinery and equipment.................... 42,736 42,337
-------- --------
Total historic cost........................ 46,485 45,834
Less accumulated depreciation and
amortization.............................. (20,349) (19,154)
-------- --------
Amortized historic cost.................... $ 26,136 $ 26,680
======== ========
</TABLE>
The balances of machinery and equipment at historic cost can be identified
as printing and non-printing as follows:
<TABLE>
<CAPTION>
MARCH 31, 1995 DECEMBER 31, 1994
-------------- -----------------
(IN THOUSANDS)
<S> <C> <C>
Printing.................................... $37,710 $37,501
Non-printing................................ 5,026 4,836
------- -------
$42,736 $42,337
======= =======
</TABLE>
As disclosed above, the Company's property, plant and equipment consists of
leasehold improvements, printing equipment and equipment for non-printing
businesses. The Company does not own any real property.
The Company's management has determined in its reasonable judgment that, as
a general rule, the fair value of leasehold improvements and non-printing
equipment would not exceed amortized historic cost. Leasehold improvements are
attached to the leased property and cannot be sold separate and apart from the
leased property. In most instances any value of the improvements becomes the
property of the landlord.
8
<PAGE>
Non-printing equipment consists of furniture and office equipment including
computer and other electronic data processing and communication devices.
Although valuable to the ongoing businesses, these assets have limited demand
on the resale market.
The Company's printing machinery and equipment is of high quality and well
maintained. However, the market for used printing equipment has been and
remains soft. The printing industry is experiencing a consolidation which has
resulted in a surplus of equipment available for sale. Accordingly, the
Company's management does not believe that the fair value of the Company's
printing machinery and equipment would exceed amortized cost.
RECENT MARKET PRICES
The Company Common Stock is traded principally on the NYSE. The following
table sets forth, for the fiscal periods indicated, the high and low sales
prices per share of Company Common Stock on the NYSE:
<TABLE>
<CAPTION>
HIGH LOW
----- -----
<S> <C> <C>
1993:
First Quarter.................................................. 3 3/4 3
Second Quarter................................................. 3 1/2 2
Third Quarter.................................................. 3 1/4 2 1/4
Fourth Quarter................................................. 2 7/8 2 3/8
1994:
First Quarter.................................................. 3 3/8 2 3/8
Second Quarter................................................. 3 2 3/8
Third Quarter.................................................. 2 5/8 2 1/4
Fourth Quarter................................................. 3 1/2 2 3/8
1995:
First Quarter.................................................. 4 2 3/4
Second Quarter ................................................ 3 7/8 3 1/2
Third Quarter (to date)........................................ 3 3/4 3 1/2
</TABLE>
On October 31, 1994, the last trading day prior to the public announcement
of the Major Shareholder's proposal to purchase Company Common Stock held by
Public Common Shareholders for $3.25 per share, the closing sales price for
the Company Common Stock was $2.875. On March 20, 1995, the last trading day
prior to the public announcement of (i) the approval by the Board of the
Merger Agreement and (ii) the increase by the Major Shareholder of the offered
price to $4.25 per share, the closing sales price for the Company Common Stock
was $3.00. On March 28, 1995, the last trading day prior to the public
announcement of the signing of the Merger Agreement, the closing sales price
for the Company Common Stock was $3.875. Shareholders are advised to obtain
current market quotations for the Company Common Stock.
The Company Preferred Stock trades, on a limited and sporadic basis, in the
over-the-counter market. The Company contacted the National Association of
Securities Dealers ("NASD") regarding trading in the Company Preferred Stock.
The Company was unable to obtain any information concerning trading in the
Company Preferred Stock for fiscal year 1993 but was provided with the
following information, for the fiscal periods indicated:
<TABLE>
<CAPTION>
HIGH BID LOW BID
-------- -------
<S> <C> <C>
1994:
First Quarter.......................................... -- --
Second Quarter......................................... 3 --
Third Quarter.......................................... 3 2 3/4
Fourth Quarter......................................... 3 2 3/4
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
HIGH BID LOW BID
-------- -------
<S> <C> <C>
1995:
First Quarter.......................................... 3 2 3/4
Second Quarter ........................................ 3 3
Third Quarter (to date)................................ 3 3
</TABLE>
On March 27, 1995, the last trading day prior to the public announcement of
the signing of the Merger Agreement for which a bid price was reported, the
Company Preferred Stock was quoted at a bid of $3.00.
Dividends During Past Two Years:
The Company pays dividends on a quarterly basis and currently there are no
restrictions on the payment of such dividends. The Company declared and paid
dividends on each share of Company Stock as follows for the years ended 1994
and 1993 and for the first two quarters of 1995:
<TABLE>
<CAPTION>
FIRST TWO QUARTERS
1994 1993 OF 1995
---- ---- ------------------
<S> <C> <C> <C>
Common Stock................................. $.06 $.06 $.0015
Preferred Stock.............................. $.30 $.30 $ .075
</TABLE>
Newco is a newly formed Delaware corporation organized by the Major
Shareholder on March 17, 1995, in connection with the Merger and the Major
Shareholder owns all of the capital stock of Newco. Prior to the Merger, Newco
will not have any significant assets or liabilities (other than rights and
obligations related to the Merger).
UNION CAPITAL
Union Capital was formed in Nevada on June 28, 1976. The Major Shareholder
owns all of the capital stock of Union Capital. Union Capital has no
significant assets or liabilities, other than the Company Common Stock.
SPECIAL FACTORS
BACKGROUND OF THE MERGER
At the Board meeting held on November 1, 1994, the Major Shareholder made a
formal proposal to the Board to buy all of the Common Stock not owned directly
or indirectly by him for a consideration of $3.25 in cash for each outstanding
share (the "Original Proposal"). The Board determined that it would be
appropriate to establish a Special Committee to review the Original Proposal
and make a recommendation to the Board as to the advisability and fairness to
the Public Common Shareholders of such proposal. Accordingly, the Board
appointed a Special Committee composed of Mr. John C. Mickle (the chairman of
the Special Committee), Mr. Mel Gordon, Mr. C. Gordon Murphy and Mr. Bernard
S. White. Each of the Special Committee members is an outside director of the
Company and is not employed by or affiliated with the Company other than in
his capacity as a director. Except for Mr. Garrett who is one of the Company's
non-employee directors but is Mr. Marlas' brother-in-law, the members of the
Special Committee constitute all of the Company's non-employee directors. The
Board authorized the Special Committee to take all appropriate steps to
consider the proposal and the Special Committee was specifically authorized to
retain special legal counsel and an independent financial advisor, and to
incur other appropriate fees and expenses. The Special Committee held several
meetings throughout late 1994 and the first quarter of 1995, in which among
other things the Special Committee (1) retained the law firm of Kirkland &
Ellis, to act as its special, independent legal advisor, (2) retained the
investment banking firm of Schroder Wertheim as its financial advisor, and (3)
negotiated with the Major Shareholder the terms of his proposal. As a result
of such negotiations (subject to the resolution of several issues on the
merger agreement to the satisfaction of the Major Shareholder) the Major
Shareholder expressed its willingness to increase the consideration to $4.25
per share and at a meeting on March 13, 1995 the Special Committee determined
to
10
<PAGE>
recommend approval of the revised proposal to the Board. See "--Proceedings
and Recommendation of the Special Committee and the Board, Fairness of the
Transaction."
At the Board meeting held on March 21, 1995, the Major Shareholder confirmed
his proposal to increase the consideration from $3.25 in cash for each
outstanding share of Company Common Stock to $4.25 in cash for each
outstanding share of Company Common Stock. The Major Shareholder also informed
the Special Committee and the Board that he was contemplating offering to
purchase shares of Company Preferred Stock for $4.25 per share. Based on the
recommendation of the Special Committee and the opinion of Schroder Wertheim
that the Merger Consideration was fair to the Public Common Shareholders, and
considering also the independence of the Special Committee and Schroder
Wertheim, the Board adopted the conclusion and analyses of Schroder Wertheim
as its own, and approved the Merger Agreement subject to the Board's receipt
of Schroder Wertheim's written opinion that the consideration payable to the
holders of the Company Preferred Stock is fair to such holders, from a
financial point of view. On March 28, 1995, Schroder Wertheim undertook an
analysis of the fairness of the Merger Consideration to holders of the Company
Preferred Stock and reexecuted and delivered its written opinion of March 21,
1995 that the Merger Consideration was fair to the Public Shareholders from a
financial point of view, and the Merger Agreement was subsequently executed
and delivered on March 29, 1995. See "--Opinion of Financial Advisor."
PROCEEDINGS AND RECOMMENDATION OF THE SPECIAL COMMITTEE AND THE BOARD,
FAIRNESS OF THE TRANSACTION
Proceedings of the Special Committee
The Special Committee was established by the Board to review the Original
Proposal and to make a recommendation to the Board as to the advisability and
fairness of such Original Proposal to the Public Common Shareholders.
To assist it in carrying out its responsibilities the Special Committee,
after interviewing several investment banking firms and law firms experienced
with transactions of the type proposed by the Major Shareholder, retained
Schroder Wertheim as its financial advisor and Kirkland & Ellis as its legal
advisor. See "Opinion of Financial Advisor." The Special Committee directed
Schroder Wertheim to obtain all financial and other information regarding the
Company's businesses and assets that were necessary for Schroder Wertheim to
evaluate the Company and render an opinion, from a financial point of view, as
to the fairness of the Original Proposal to the Public Common Shareholders.
The Special Committee also directed its legal advisor to discuss with the
Major Shareholder's legal counsel the structure of, and other legal issues
relating to, the Original Proposal. The Company's management was directed by
the Board to cooperate fully with the Special Committee's financial and legal
advisors and to provide any information they requested and the advisors
reported to the Special Committee that the Company's management was fully
cooperative and provided all requested information.
The Special Committee held five formal meetings and various informal
conferences among its members and/or financial and legal advisors. During the
period following its appointment and the retention of advisors, the Special
Committee (i) familiarized itself with the legal obligations and various
structures involving transactions such as the Original Proposal, and the
related legal and tax considerations, (ii) met with senior managers of the
Company's principal business groups to discuss developments affecting, and
prospects for, each such business group, (iii) reviewed the management
forecasts of the operating and financial results for the Company for the
fiscal years ending December 31, 1995 through December 31, 1999 (the "Five
Year Projections") (see "--Projected Operating and Financial Results of the
Company"), (iv) reviewed the Company's audited financial statements for the
fiscal year ended December 31, 1994, (v) received reports from the Special
Committee's financial and legal advisors regarding discussions and
negotiations with the Major Shareholder and his financial and legal advisors,
(vi) met with the Major Shareholder to discuss his reasons for
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the proposal and his plans with respect to the proposal and the Company, and
(vii) considered the opportunities and risks facing the Company and its Public
Common Shareholders in view of the Special Committee members' knowledge of the
Company, the reports of the Special Committee's legal and financial advisors
and the Five Year Projections. Such opportunities considered by the Special
Committee include the opportunity of the Company's printing business to take
advantage of the increased capacity of its printing facilities, as well as its
reputation for excellent service. Such risks considered by the Special
Committee include the continuing need for capital expenditures by the
Company's printing business in order to maintain the technical level of the
printing facilities, the challenge of generating a return sufficient to
support such capital expenditures and the dependence of the Company's
advertising business upon a few key individuals and a relatively small number
of important client accounts.
On January 17, 1995, the Special Committee met with Schroder Wertheim and
discussed the Original Proposal. Schroder Wertheim reviewed with the Special
Committee the Five Year Projections (see "--Projected Operating and Financial
Results of the Company") and the Company's principal business groups on an
operational and financial basis, discussed current financial market
conditions, reviewed the business valuations involved in various acquisitions
of comparable companies, and reviewed the trading history of the Company
Common Stock. After discussion, the Special Committee asked Schroder Wertheim
for its preliminary opinion with respect to the fairness, from a financial
point of view, of the Original Proposal to the Public Common Shareholders.
Schroder Wertheim responded that, based on the then current state of its
review, the Original Proposal by the Major Shareholder was not fair, from a
financial point of view to the Public Common Shareholders. The Special
Committee then instructed Schroder Wertheim to advise the Major Shareholder's
financial advisor that the Special Committee would not recommend the Original
Proposal and to discuss the valuation issues with such advisor.
In February 1995 Schroder Wertheim responded orally to the Special Committee
regarding certain questions raised in the January 17, 1995 meeting and handed
out a written comparison, for the years 1989 through 1994, of the budgeted
revenues and operating income prepared by management for each of the Company's
business units against the actual results achieved and reported that it had
discussed valuation issues with the Major Shareholder's financial advisor and
had informed them that the Original Proposal would not be acceptable to the
Special Committee. Schroder Wertheim also reported to the Special Committee
that the Major Shareholder's financial advisor had indicated that there was a
possibility of increasing the merger consideration if a mutually acceptable
merger agreement was negotiated. The Special Committee authorized Schroder
Wertheim to continue discussions and to attempt to negotiate on behalf of the
Special Committee an increased merger consideration for the Public Common
Shareholders. The Special Committee also authorized its legal advisor,
Kirkland & Ellis, to continue negotiations with the Major Shareholder's legal
counsel concerning certain non-financial terms and conditions of a draft
merger agreement which the Major Shareholder's legal counsel had prepared to
effect the Original Proposal.
During the week of February 20, 1995, Schroder Wertheim reported to the
Special Committee that its negotiations with the Major Shareholder and his
financial advisors had resulted in an expression by the Major Shareholder
that, (subject to the resolution of several issues on the merger agreement to
the satisfaction of the Major Shareholder) he would be willing to increase the
merger consideration to as high as $4.25 per share. The Special Committee also
received a report from Kirkland & Ellis on various issues relating to the
draft merger agreement. The Special Committee instructed Schroder Wertheim to
determine whether, assuming that the Major Shareholder was willing to increase
the merger consideration to $4.25 per share, such consideration was fair from
a financial point of view to the Public Common Shareholders.
The Special Committee met on March 8, 1995, and received and discussed a
written presentation, including financial analysis, from Schroder Wertheim
evaluating a transaction in which the Major Shareholder or his affiliates
would acquire all shares of the Company Common Stock held by the Public Common
Shareholders for an assumed consideration of $4.25 in cash per share
("Proposal"). Schroder Wertheim stated it was prepared to render its opinion
that such a Proposal was fair to the Public Common Shareholders from a
financial point of
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view. See "--Opinion of Financial Advisor." The Special Committee also
discussed certain unresolved issues relating to the draft merger agreement,
including the shareholder vote required to approve the transaction.
In early March 1995, Kirkland & Ellis initiated discussions with plaintiff's
counsel in the Delaware class action (see "--Certain Litigation") concerning
the status of the Proposal and the Special Committee's actions. The Special
Committee authorized Kirkland & Ellis to provide plaintiff's counsel with a
copy of (i) the Schroder Wertheim March 8, 1995 written presentation, (ii) the
minutes of the Special Committee's proceedings and (iii) other documentation
related to the Proposal. The Special Committee discussed various matters
raised by plaintiff's counsel and its expert.
On March 14, 1995 the Special Committee met, reviewed a draft of the
Schroder Wertheim written opinion, a revised draft of the merger agreement,
and received a report from Kirkland & Ellis regarding discussions with
plaintiff's counsel in the Delaware class action. After discussion, the
Special Committee resolved to recommend the Proposal for adoption by the Board
as advisable and fair to the Public Common Shareholders, subject to receipt of
a final written opinion of Schroder Wertheim in substance the same as the
draft opinion reviewed at the meeting and written confirmation from the Major
Shareholder of his present intention not to sell substantial assets of the
Company.
On March 21, 1995, the Special Committee reviewed the final written opinion
of Schroder Wertheim and received a letter from the Major Shareholder
confirming that his present intention with respect to the Company after the
Merger was to continue the investments that the Company had made in its
existing businesses and that he currently contemplated no sales of any
significant assets of the Company or other material changes in regard to the
business, other than changes in capital structure resulting from the Merger.
The Special Committee then authorized the delivery of its report to the Board.
On March 21, 1995 at a meeting of the Board, Mr. John C. Mickle delivered the
report of the Special Committee, including that the Special Committee had
unanimously concluded that the Proposal, as reviewed by the Special Committee,
was advisable and fair to the Public Common Shareholders and that the Special
Committee recommended that the Proposal be approved by the Board.
BOARD OF DIRECTORS RECOMMENDATION
As noted above, on March 21, 1995, based on the Major Shareholder's offer to
pay $4.25 per share, the recommendation of the Special Committee and the
opinion of Schroder Wertheim that the Merger Consideration was fair to the
Public Common Shareholders and considering the independence of the Special
Committee and Schroder Wertheim, the Board adopted the conclusion and analyses
of Schroder Wertheim as its own, and, subject to the Board's receipt of a
written opinion from Schroder Wertheim that the consideration payable to the
holders of the Company Preferred Stock is fair to such holders, unanimously
(with Mr. Marlas and Mr. Garrett (who is Mr. Marlas' brother-in-law)
abstaining) approved the Merger Agreement. Schroder Wertheim undertook an
analysis of the fairness of the Merger Consideration to holders of the Company
Preferred Stock and reexecuted and delivered to the Board its written opinion
of March 21, 1995, that the Merger Consideration was fair to the Public
Shareholders, from a financial point of view. This condition having been
satisfied, the Board unanimously recommends a vote FOR approval and adoption
of the Merger Agreement.
Although the Merger Consideration is within the per share equity value
ranges which resulted from financial analysis performed by Schroder Wertheim
and described under "--Opinion of Financial Advisor," the Merger Consideration
is less than the high-end of each such equity value range; however, based on
the independence of the Special Committee, the designation by the Special
Committee of Schroder Wertheim as an independent financial advisor, the
fairness opinion of Schroder Wertheim and the recommendation of the Special
Committee, the Board has determined that the Merger Consideration is
nonetheless fair to the Public Shareholders.
FAIRNESS OF THE MERGER
The Special Committee concluded that the Merger is advisable and fair to the
Public Common Shareholders and recommended approval of the Merger to the
Board. This conclusion and recommendation was adopted by the Board. In
reaching this conclusion, the Special Committee considered a number of factors
in light of the Special Committee's knowledge of and familiarity with, and
senior management's presentation and the Special
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Committee's advisor's advice regarding, the business, financial condition,
results of operations and prospects of the Company, as well as the industries
it serves, the risks associated with achieving its prospective operating
results and general economic and market conditions. The Special Committee
discussed the financial analysis of Schroder Wertheim and found it to be
reasonable and adopted the conclusion of Schroder Wertheim as its own. In view
of the wide variety of factors considered in connection with its evaluation of
the Merger, the Special Committee did not find it practicable to, and did not,
quantify or otherwise attempt to assign relative weights to the specific
factors considered in reaching its determination. The Special Committee
considered each of the factors to be an integral basis of its determination to
recommend the Merger and was not able to assign relative importance to any one
factor over another factor.
In particular, the factors considered by the Special Committee included:
(a) The written opinion of Schroder Wertheim, dated March 21, 1995, to the
effect that, as of the date of such opinion, the Merger Consideration
is fair to the Public Common Shareholders from a financial point of
view, and the analysis and information previously presented to the
Special Committee orally and in writing by Schroder Wertheim (the
"Schroder Wertheim Presentation").
(b) The relationship of the valuations of the Company implied by the Merger
Consideration to the actual and projected financial results of the
Company for 1994 and 1995, respectively (see "--Projected Operating and
Financial Results of the Company", "--Opinion of Financial Advisor--
Purchase Price Analysis," and "--Opinion of Financial Advisor--
Discounted Cash Flow Analysis").
(c) The relationship of the Merger Consideration to both the market price
of the Company Common Stock prior to the announcement of the Original
Proposal and the historical trading range for the Company Common Stock
and the general lack of liquidity provided by the market for the
Company Common Stock. This lack of liquidity is evidenced by the fact
that for the six month period prior to the public announcement of the
Original Proposal on November 1, 1994, of 128 trading days, on 46 of
those days (36%), no trading of the shares of the Company Common Stock
was recorded, and during the same period, on average, approximately
1,800 shares of the Company Common Stock traded daily, well below the
approximately 132,000 share average daily trading volume for a New York
Stock Exchange listed company.
(d) The valuations of the Company implied by the Merger Consideration being
within the range of the liquidation and going concern values for the
Company as described in the Schroder Wertheim Presentation (see "--
Opinion of Financial Advisor").
(e) The fact that the value of the Company implied by the Merger
Consideration was lower than the book value of the Company as of
December 31, 1994 was not significant because such book value is not a
true measure of value but rather is an accounting concept based on
historical prices paid for the assets whereas the Merger Consideration
is a market concept based on the earning capacity of the Company's
businesses.
(f) The process by which the Merger Consideration and Merger Agreement were
negotiated.
The Special Committee considered the valuations of the Company implied by
the Merger Consideration as a multiple of historical net income of the Company
for 1994 (before deduction of certain non-recurring expenses related to the
Excel Marketing Group) and management's projected net income for 1995. See "--
Opinion of Financial Advisor--Purchase Price Analysis." The Special Committee
considered that $4.25 cash per share to be paid to the Public Common
Shareholders pursuant to the Merger represents a premium of 47.8% over the
$2.875 closing price quotation for the Company Common Stock as reported by the
New York Stock Exchange on October 31, 1994, the last trading date prior to
the public announcement of the Original Proposal. The Special Committee also
considered that $4.25 per share exceeded the range of trading prices of the
Common Stock as reported by the New York Stock Exchange during the last four
years. See "Recent Market Prices; Dividend History." The Special Committee
reviewed the various valuation ranges arrived at by the Schroder Wertheim
Presentation, and noted that the Merger Consideration was within the range of
values suggested by each of the various methodologies described under "--
Opinion of Financial Advisor," below, and included in the Schroder Wertheim
Presentation. The Special Committee noted that the companies selected for
Schroder Wertheim's Comparable Publicly Traded Company Analysis were
considerably larger and, in most cases, more diversified
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<PAGE>
than the Company. The Special Committee considered that this would tend to
make the range of values suggested by the Comparable Publicly Traded Analysis
less accurate than the values suggested by the other valuation methods used by
Schroder Wertheim. See "Opinion of Financial Advisor." The Special Committee
also noted that to seek a potentially higher value for the Public Common
Shareholders through a liquidation involved substantial uncertainty, expense
and delay.
Due to the position of the Major Shareholder, who owns directly or
indirectly an aggregate of approximately 48% of the Company Common Stock
outstanding, and based on discussions with Schroder Wertheim and legal
counsel, the Special Committee believed that it was impracticable to solicit
effectively acquisition offers for the Company from third parties. The Major
Shareholder, who effectively could prevent any sale of the Company or its
assets, had stated he would not agree to such a sale. The Special Committee
was advised that in 1994 a group of investors indicated to the Major
Shareholder some interest in acquiring the Company's printing business, but
that based on the perceived low price suggested by such group of investors and
the group's apparent lack of a source of financing for the transaction, this
inquiry was not considered serious and was not pursued by management. The
Special Committee was advised that no other formal expressions of interest in
acquiring the Company or any substantial assets of the Company have been
received recently by the Company or the Major Shareholder.
The Special Committee also considered the process by which the Merger
Consideration and the Merger Agreement were negotiated, noting that the Merger
Agreement was the result of more than four months of consideration and
negotiation by the Special Committee and its legal and financial advisors, and
that as a result of the negotiations the Major Shareholder had increased his
offered price by 30.8% from $3.25 to $4.25.
The Special Committee took into consideration that following the Merger the
Public Common Shareholders would not participate in any future growth of the
Company, and that the Major Shareholder would benefit from any increase or
suffer the detriment of any decrease in the value of the Company. The Major
Shareholder's Original Proposal provided that the Merger should require the
vote of a majority of the shareholders. The Special Committee discussed
whether approval of the Merger should require the affirmative vote of a
majority of the Public Common Shareholders and negotiated the issue with the
representatives of the Major Shareholder. The representatives advised the
Special Committee that the Major Shareholder would not accept such a
requirement because he felt it could give a small minority of the Company's
shareholders the power to veto the Merger. However, as a result of these
negotiations, the Major Shareholder expressed his willingness to modify his
Original Proposal to require that the Merger be subject to the vote of two-
thirds of the votes cast at the Special Meeting. Consequently, the Special
Committee determined that, in view of the perceived economic benefit of the
Merger to the Public Common Shareholders, the Public Common Shareholders
should not be deprived of the opportunity to receive the Merger Consideration
and the Special Committee recommended approval of the Merger with the special
voting requirements set forth in "The Merger--Required Vote." The Special
Committee considered that such special voting requirements, which condition
the Merger on two-thirds of the votes cast at the Special Meeting of
shareholders being voted to approve the transaction, enable Public Common
Shareholders holding between 25 and 33 1/3% of the outstanding shares of
Company Common Stock (depending upon how many such shares are voted in favor
of the Merger) to prevent the occurrence of the Merger by voting against the
Merger.
The Special Committee, based upon information provided by the Company and
discussions with officials of the Company, as of the date of this Proxy
Statement, has been advised by the Company's management that there have not
been any significant changes in the Company's financial projections or other
information provided by the Company to the Special Committee or Schroder
Wertheim which would alter its fairness determination. It is a condition to
the Merger that the fairness opinion of Schroder Wertheim, dated March 21,
1995, shall not have been withdrawn. In addition, Schroder Wertheim has
confirmed its fairness opinion as of the date of this Proxy Statement.
The Special Committee reviewed the complaint filed in the litigation and
considered comments by counsel for the plaintiff in the class action that the
merger consideration offered in the Original Proposal should be
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<PAGE>
increased and that the Merger should be subject to a separate vote by the
Public Common Shareholders. The Special Committee noted that the complaint as
filed was based on the Original Proposal and not the $4.25 per share
consideration recommended by the Special Committee.
No member of the Special Committee is employed by or affiliated with the
Company or the Major Shareholder except as a director of the Company. No such
member is or is expected to become an affiliate of, or has or is expected to
acquire any equity interest in, Newco or the Surviving Corporation; except
that after the Merger, the current directors of the Company, including members
of the Special Committee, will remain in such capacities with the Surviving
Corporation until successors are duly elected or appointed in accordance with
the applicable law. In light of the amount of time that was expected to be
devoted by the members of the Special Committee in connection with their
consideration of the Merger, the Special Committee received compensation in
addition to their regular compensation as members of the Board of $5,000 per
member ($7,500 for Mr. John C. Mickle, chairman of the Special Committee) for
each month or portion thereof, commencing with November 1, 1994, that such
member is serving on the Special Committee. This fee has been paid to the
members of the Special Committee for serving on the Special Committee through
March 31, 1995. Pursuant to an agreement entered into with the Company, the
members of the Special Committee are indemnified by the Company with respect
to their activities as members of the Special Committee. The members of the
Special Committee and the other members of the Board are also indemnified by
the Company under the Company's charter documents and the applicable sections
of the Delaware General Corporation Law with respect to their actions in
connection with the Merger. In addition, the members of the Special Committee
and the other members of the Board are entitled to the benefits of a
directors', and officers' liability insurance policy maintained by the
Company.
OPINION OF FINANCIAL ADVISOR
The Special Committee retained Schroder Wertheim to act as its financial
advisor in connection with its consideration of the Merger Agreement based on
Schroder Wertheim's experience in valuations of companies and their securities
in general. Schroder Wertheim is a nationally recognized investment banking
firm and, as part of its business, is engaged in the valuation of businesses
and their securities in connection with mergers and acquisitions, negotiated
underwritings, secondary distributions of securities, private placements and
valuations for estate, corporate and other purposes. No limitations were
imposed by the Special Committee or the Company on the scope of the
investigations by Schroder Wertheim or the procedures followed by Schroder
Wertheim in connection with the rendering of its opinion. Schroder Wertheim
was not authorized to, and did not, solicit any indications of interest from
any other party in connection with a possible sale of the Company or any
assets of the Company.
On March 8, 1995, Schroder Wertheim orally advised the Special Committee
that, based on various considerations and assumptions, it was of the opinion
as investment bankers that, as of such date, the Merger Consideration of $4.25
cash per share was fair, from a financial point of view, to the Public Common
Shareholders and reviewed with the Special Committee a written analysis on
which such opinion was based. A copy of such written analysis is available for
inspection and copying at the Company's offices at 405 Park Avenue, New York,
New York 10022, by any interested equity security holder of the Company or his
representative who has been so designated in writing. Schroder Wertheim
subsequently confirmed its oral opinion by delivering to the Special Committee
its written opinion dated March 21, 1995, that the Merger Consideration is
fair from a financial point of view to the Public Common Shareholders. On
March 28, 1995, Schroder Wertheim reexecuted and delivered its written opinion
of March 21, 1995, that the Merger Consideration was fair to the Public
Shareholders from a financial point of view. A subsequent written opinion,
dated the date of this Proxy Statement, was also delivered to the Special
Committee which opinion is substantially similar to the March 21 opinion. The
full text of Schroder Wertheim's written opinion, dated the date of this Proxy
Statement, which has set forth the assumptions made, procedures followed,
matters considered and limits of its review, is attached hereto as Annex B and
is incorporated by reference herein. The following summary is qualified in its
entirety by reference to the full text of such opinion. Stockholders are urged
to and should read such opinion in its entirety for a complete description of
the assumptions made, matters considered and limits of the review
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<PAGE>
conducted by Schroder Wertheim in rendering its opinion. Schroder Wertheim's
opinion does not constitute a recommendation to the stockholders as to how to
vote on the Merger Agreement at the Special Meeting.
In connection with its opinion dated March 21, 1995, Schroder Wertheim,
among other things has: (a) reviewed the draft dated March 20, 1995 Annual
Report on Form 10-K of the Company for the fiscal year ended December 31,
1994; the Annual Reports on Form 10-K and the audited financial statements of
the Company for the three fiscal years ended December 31, 1993; its Quarterly
Report on Form 10-Q for the quarter ended September 30, 1994; its Proxy
Statement dated April 11, 1994, and reports issued by the Company on Form 8-K
dated March 3, 1993 and June 30, 1992; and all amendments thereto; (b)
reviewed certain internal, unaudited financial analyses prepared by management
of the Company which relate primarily to the Company's historical and
projected financial information; (c) reviewed the management forecasts dated
December 16, 1994 of the operating and financial results for the Company for
the fiscal years ending December 31, 1995 through December 31, 1999 and
discussed with management any subsequent adjustments to those forecasts
through March 20, 1995 (as previously defined, the Five Year Projections) (see
"Projected Operating and Financial Results of the Company"); (d) visited the
principal operating divisions of the Company, including Sandy Alexander, Inc.
and Partners & Shevack, Inc.; (e) conducted discussions with the senior
management of the Company concerning its historical and forecasted financial
and operating results as presented and described in (a), (b) and (c) above;
(f) performed various valuation analyses, as deemed appropriate, of the
Company using generally accepted analytical methodologies, including (1)
discounted cash flow valuation analyses; (2) the application of the multiples
reflected in recent mergers and acquisitions for comparable businesses to the
financial results of the Company; and (3) the application of the public
trading multiples of comparable companies to the financial results of the
Company; (g) reviewed the trading history of the Company Common Stock and the
Company Preferred Stock in the public marketplace from January 1, 1990 to
March 20, 1995; (h) reviewed the trading prices and yields of selected
publicly traded preferred stocks; (i) reviewed the Statement of Resolution
Establishing Series of Shares, Series A Preferred Stock of the Company, dated
September 3, 1982; (j) reviewed the draft of the Merger Agreement dated March
17, 1995; (k) discussed with the financial advisor to the Major Shareholder
plans for financing the Merger; and (l) performed such other financial
studies, analyses, inquiries and investigations as Schroder Wertheim deemed
appropriate.
In connection with its subsequent written opinion, dated the date of this
Proxy Statement, Schroder Wertheim updated as needed its review of the items
set forth in the previous paragraph and reviewed the following documents and
information which was not available at the time Schroder Wertheim delivered
its March 21, 1995 opinion: the Annual Report on Form 10-K and the audited
financial statements of the Company for the fiscal year ended December 31,
1994; the Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1995; the unaudited financial results of the Company for the three month
and six month periods ended June 30, 1995; and the final form of the Merger
Agreement, dated as of March 21, 1995.
In rendering its opinion, Schroder Wertheim relied, with the permission of
the Special Committee, upon the accuracy and completeness of all information
supplied or otherwise made available to it by the Company, and Schroder
Wertheim did not assume any responsibility to independently verify such
information, or undertake an independent appraisal of the assets or
liabilities (contingent or otherwise) of the Company and was not furnished
with any such appraisals. Schroder Wertheim and the Special Committee were
advised by senior officers of the Company, and assumed without any
responsibility to verify, that the financial projections provided by
management and used in Schroder Wertheim's analyses were reasonably prepared
and reflected the best currently available estimates and judgment of senior
management of the Company as to the expected future financial performance of
the Company. Schroder Wertheim also reviewed and discussed with management of
the Company various competitive and other factors, risks, and opportunities
affecting the different business groups of the Company.
The following is a summary of certain financial analyses presented by
Schroder Wertheim in the Schroder Wertheim Presentation, and utilized in
connection with its written opinion to the Special Committee. It does not
purport to be a complete description of the Schroder Wertheim Presentation. It
does, however, summarize the principal financial analyses performed by and
relied upon by Schroder Wertheim in arriving at its opinion. The preparation
of a fairness opinion is a complex project and is not necessarily susceptible
to partial analysis or
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<PAGE>
summary description. No single analytical methodology used by Schroder
Wertheim was critical to its overall conclusion as each analytical technique
has its inherent strengths and weaknesses. No company or transaction used in
any comparable analysis as a comparison is identical to the Company or the
proposed Merger. Accordingly, an analysis of the results is not mathematical,
rather it involves complex considerations and judgments concerning differences
in financial and operating characteristics of the comparable companies and
other factors that could affect the public trading value of the comparable
companies to which they are being compared. The nature of available
information may further affect the value of any particular methodology or
technique. Schroder Wertheim's conclusion was based upon all the analyses and
factors that it considered taken as a whole and also on the application of
Schroder Wertheim's experience and judgment. Its conclusion involved
significant elements of subjective judgment and qualitative analysis. No
value, merit or weight of any single technique or factor was assigned by
Schroder Wertheim. Accordingly, Schroder Wertheim believes that its analyses
must be considered as a whole and that to focus upon specific portions of such
analyses and factors would create an incomplete and misleading view of the
processes underlying the preparation of the opinion. Schroder Wertheim's
analyses and opinion were based upon management's forecasts and projections of
future results which are not necessarily indicative of actual future results.
Actual results may be significantly more or less favorable than the projected
results. In performing its analyses, Schroder Wertheim made numerous
assumptions with respect to industry performance, general business and
economic conditions and other matters, many of which are beyond the Company's
control. Any estimates contained therein are not necessarily indicative of
actual value, which may be significantly more or less favorable than as set
forth therein. Estimates of value for the companies do not purport to be
appraisals or necessarily reflect the prices at which companies may actually
be sold. Because such estimates are inherently subject to uncertainty,
Schroder Wertheim assumes no responsibility for their accuracy.
PURCHASE PRICE ANALYSIS. In conducting its analysis, Schroder Wertheim
reviewed the Merger Consideration and calculated that the aggregate value of
the equity of the Company implied by the Merger Consideration is $38.3
million, taking into consideration the number of shares of Company Common
Stock outstanding, the outstanding Stock Options with an exercise price lower
than the Merger Consideration, the Convertible Debentures and the Company
Preferred Stock (the "Equity Value"). Similarly, Schroder Wertheim calculated
that the Aggregate Enterprise Value of the Company (defined as the aggregate
Equity Value of the Company, plus outstanding debt, less cash and temporary
investments) implied by the Merger Consideration is $49.9 million. Based on
these calculations, Schroder Wertheim determined that the Aggregate Enterprise
Value as a multiple to revenues for the twelve months ended December 31, 1994
("LTM") is .4x; to LTM earnings before interest and taxes ("EBIT"), 12.0x; to
LTM earnings before interest, taxes, depreciation and amortization ("EBITDA"),
5.7x; to management's projected 1995 revenues, .4x; to management's projected
1995 EBIT, 12.8x; to management's projected 1995 EBITDA, 5.1x. Schroder
Wertheim also determined that the Equity Value as a multiple to LTM net income
was 17.2x; to management's projected 1995 net income, 21.6x; to the book
equity ($45.5 million) and tangible book equity ($33.4 million) of the Company
at December 31, 1994 (taking into consideration the outstanding Stock Options
with an exercise price lower than the Merger Consideration, the Convertible
Debentures and the Company Preferred Stock), 0.8x and 1.1x respectively. For
purposes of calculating these multiples, certain nonrecurring expenses
recorded in 1994 were added back to income. In addition, for both 1994 and
1995 the Convertible Debentures were assumed to have been converted and
certain Stock Options were assumed to have been exercised.
Schroder Wertheim noted that the Merger Consideration represents a 47.8%
premium over the trading price of the Company Common Stock one day before the
Original Proposal was announced, and represents a 70.0% premium over the
trading price of the Company Common Stock one month before the Original
Proposal was announced. Schroder Wertheim reviewed the history of trading
prices of the Company Common Stock, and noted that, since January 1, 1990, the
Company Common Stock had not traded above the Merger Consideration.
Schroder Wertheim reviewed the historical income statements and current
capitalization of the Company and noted that their analysis and presentation
of the Company's financial statements, and calculations of associated ratios
and multiples, reflect an adjustment to exclude the $3.0 million aggregate
expense in 1994
18
<PAGE>
related to the write-down of inventory value of the Excel Marketing Group and
Excel Plus Ltd. Schroder Wertheim discussed with the Special Committee each
business of the Company, its historical financial results, the Five Year
Projections for each respective business and important operating
characteristics of each business. Because the Company operates businesses in
distinct business segments--printing and advertising and promotion--Schroder
Wertheim generally performed its valuation analysis on a business-by-business
basis.
COMPARABLE PUBLICLY TRADED COMPANY ANALYSIS. Schroder Wertheim reviewed a
number of publicly held companies that operate businesses generally comparable
to the Company's business. With respect to the Company's printing businesses
(the "Printing Businesses"), Schroder Wertheim considered Banta Corporation,
Cadmus Communications Corporation, Consolidated Graphics, Inc., R.R. Donnelley
& Sons Company and Graphic Industries, Inc. With respect to the Company's
advertising and promotion business (the "Advertising and Promotion
Businesses"), Schroder Wertheim considered Grey Advertising Inc., The
Interpublic Group of Companies Inc., Omnicom Group, Inc., Saatchi & Saatchi
Company PLC, True North Communications and WPP Group plc.
Schroder Wertheim reviewed historical financial information for each of
these companies and identified a range of multiples of public market value to
LTM net revenues, LTM EBIT, LTM EBITDA, LTM net income, and management's
projected fiscal year 1995 net income and management's projected fiscal year
1996 net income, respectively, at which businesses similar to the Company
traded in the public markets. Schroder Wertheim did not review a range of
multiples to projected revenue, EBIT and EBITDA for the comparable companies
because of the lack of reliable market data with regard to those projections.
Based on this review, Schroder Wertheim then applied ranges of multiples
consistent with the multiples reflected by the selected comparable publicly
traded printing companies to the historical LTM and management's projected
1995 financial results of the Printing Businesses. Because of the lack of
reliable market data for projected revenues, EBIT and EBITDA with respect to
the projections of comparable publicly traded companies and the inherent
uncertainty of projected financial data vis a vis LTM data, the multiple
ranges applied to management's projected 1995 revenues, EBIT and EBITDA,
generally are based on discounts to the multiple ranges applied to the LTM
financial data. For LTM net revenues, the range of multiples applied was 0.6x
to 0.8x; for LTM EBIT, 8.0x to 10.0x; for LTM EBITDA, 5.0x to 6.5x; for LTM
net income, 12.5x to 16.0x; for management's projected 1995 revenues, 0.5x to
0.7x; for management's projected 1995 EBIT, 7.0x to 9.0x; for management's
projected 1995 EBITDA, 4.5x to 6.0x; and, for management projected 1995 net
income, 11.0x to 12.5x. Based on these ranges, Schroder Wertheim arrived at an
Enterprise Value (representing the value of the operations of the business,
before consideration of debt, equity or cash used to finance that business)
range of the Printing Businesses of $35.0 million to $50.0 million.
Schroder Wertheim then applied ranges of multiples consistent with the
multiples reflected by the selected publicly traded advertising companies to
the historical LTM and management's projected 1995 financial results of the
Advertising and Promotion Businesses. Similar to the valuation of the Printing
Businesses, multiple ranges applied to management's projected 1995 revenues,
EBIT, and EBITDA are based on discounts to multiple ranges applied to LTM
financial data. For LTM net revenues, the range of multiples was 0.5x to 0.9x;
for LTM EBIT, 6.0x to 10.0x; for LTM EBITDA, 5.0x to 7.0x; for LTM net income,
12.0x to 16.0x; for management's projected 1995 revenues, 0.4x to 0.8x; for
management's projected 1995 EBIT, 5.0x to 9.0x; for management's projected
1995 EBITDA, 4.5x to 6.5x; and, for management's projected 1995 net income,
10.0x to 14.0x. Based on these ranges, Schroder Wertheim arrived at an
Enterprise Value range of the Advertising and Promotion Businesses of $9.2
million to $14.9 million.
As the business of the Excel Marketing Group ("Excel") is in the midst of a
change, Schroder Wertheim applied a valuation based on a discounted cash flow
of the Excel segment of the Five Year Projections (see "--Discounted Cash Flow
Analysis"), rather than use a multiple of historical LTM or projected 1995
financial data. Based on a discounted cash flow analysis, Schroder Wertheim
arrived at an Enterprise Value range of Excel of $3.0 million to $5.0 million.
Schroder Wertheim considered corporate overhead as a reduction to Enterprise
Value. Based on EBITDA multiples consistent with those applied with respect to
the Printing Businesses and the
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<PAGE>
Advertising and Promotion Businesses applied to historical LTM and projected
1995 corporate overhead expense, Schroder Wertheim reduced the aggregate
Enterprise Value of the Company's businesses by a range of $9.5 million to
$12.5 million. Schroder Wertheim then added Enterprise Value ranges for the
Printing Businesses, the Advertising and Promotion Businesses and Excel, less
corporate overhead, to arrive at an aggregate Enterprise Value range of the
Company of $37.7 million to $57.4 million.
Based on the foregoing analysis and taking into account (i) the Company's
cash and temporary investments balance of $9.4 million; (ii) the Company's
aggregate debt balance of $32.5 million ($22.7 million pro forma assuming
conversion of the Company's outstanding convertible debt); (iii) the number of
shares of Company Common Stock currently outstanding; (iv) outstanding Stock
Options exercisable at various exercise prices; (v) the value of the Company
Preferred Stock; and, (vi) an assumed control premium of 35%, based on an
analysis of control premiums paid in 15 recent transactions with a value
between $10 million and $50 million and 10 recent transactions in which the
acquiror owned between 20% and 50% of the target company prior to the
transaction, Schroder Wertheim arrived at a per share equity value range for
the Company Common Stock of between $3.22 and $6.86 per share.
COMPARABLE ACQUISITION TRANSACTIONS ANALYSIS. Schroder Wertheim prepared a
valuation based on selected merger and acquisition transactions involving
companies comparable to the Company. In valuing the Printing Businesses,
Schroder Wertheim reviewed eleven transactions completed in 1993 and 1994 to
identify ranges of multiples of net revenues, EBIT, EBITDA, and net income at
which businesses similar to the Printing Businesses have been acquired in
recent years. Because of the lack of reliable market data for projected
revenues, EBIT and EBITDA with respect to the projections of companies
involved in comparable acquisition transactions and the inherent uncertainty
of projected financial data vis a vis LTM data, the multiple ranges applied to
management's projected 1995 revenues, EBIT and EBITDA, generally are based on
discounts to the multiple ranges applied to the LTM financial data. The range
of multiples to LTM net revenues was 0.6x to 0.8x; to LTM EBIT, 9.0x to 12.0x;
to LTM EBITDA, 6.0x to 8.0x; to LTM net income, 15.0x to 20.0 x; to
management's projected 1995 revenues, 0.5x to 0.7x; to management's projected
1995 EBIT, 8.0x to 11.0x; to management's projected 1995 EBITDA, 5.0x to 7.0x;
to management's projected 1995 net income, 13.0x to 18.0x. Based on applying
these ranges of multiples, Schroder Wertheim derived an Enterprise Value range
of $40 million to $60 million for the Printing Businesses.
Schroder Wertheim noted that although there have been a number of recent
acquisitions of advertising companies, the targets are typically privately
held and, therefore, little, if any, confirmable information regarding
historical financial performance is disclosed publicly. As a result, Schroder
Wertheim determined it would not be possible to value the Advertising and
Promotion businesses based on published financial data from comparable
acquisition transactions. Instead, based on its experience in valuing
comparable businesses, Schroder Wertheim believed that .8x to 1.0x net
revenues represented an industry benchmark for valuing advertising companies.
Schroder Wertheim noted that the actual valuation multiple paid for any
particular advertising company is influenced by factors such as the quality of
its clients and its dependence upon several clients, its growth potential and
its operating margins. Applying this range of multiples to the LTM revenues of
the Advertising and Promotion Businesses implied an Enterprise Value range of
$16.0 million to $20.0 million for the Advertising and Promotion Businesses.
Similar to its methodology employed as to the Comparable Publicly Traded
Companies Analysis, Schroder Wertheim applied an Enterprise Value range to
Excel of $3.0 million to $5.0 million, based on a discounted cash flow
analysis. Schroder Wertheim considered corporate overhead as a reduction to
Enterprise Value. Based on EBITDA multiples consistent with those applied with
respect to the Printing Businesses and the Advertising and Promotion
Businesses applied to historical LTM and projected 1995 corporate overhead
expense, Schroder Wertheim reduced the aggregate Enterprise Value of the
Company's businesses by a range of $11.0 million to $15.0 million. Schroder
Wertheim then added the Enterprise Value range for the Printing Businesses,
the Advertising and Promotion Businesses and Excel, less corporate overhead,
to arrive at an aggregate Enterprise Value range for the Company of $48.0
million to $70.0 million.
20
<PAGE>
Based on the foregoing analysis and taking into account (i) the Company's
cash and temporary investments balance of $9.4 million; (ii) the Company's
aggregate debt balance of $32.5 million ($22.7 million pro forma assuming
conversion of the Company's outstanding convertible debt); (iii) the number of
shares of Company Common Stock currently outstanding; (iv) outstanding Stock
Options exercisable at various exercise prices; and (v) the value of the
Company Preferred Stock; Schroder Wertheim arrived at a per share equity value
range for Company Common Stock of between $3.97 to $6.47 per share.
DISCOUNTED CASH FLOW ANALYSIS. Using the Five Year Projections and other
financial information supplied by the Company, Schroder Wertheim analyzed the
Company's projected tax-effected operating cash flow for the years 1995 to
1999 and calculated the present value of these amounts, applying discount
rates which it believed to be appropriate for various businesses of the
Company. With respect to the Printing Businesses, Schroder Wertheim applied
discount rates ranging from 10% to 14%; with respect to the Company's
Advertising and Promotion Businesses, Schroder Wertheim applied discount rates
ranging from 12% to 16%; and with respect to Excel, Schroder Wertheim applied
discount rates ranging from 16% to 20%, reflecting the capitalization and the
relative risk and variability of cash flows inherent in each respective
business. It then estimated the "terminal value," i.e., the value of cash flow
in years after 1999, by applying multiples Schroder Wertheim believed to be
appropriate to management's projected EBITDA for 1999 and discounting this
value to the present. Schroder Wertheim determined, based on its experience in
the valuation of companies in the industries in which the Company competes and
comparison with comparable companies, that for the Printing Businesses,
multiples of 5.0x to 7.0x were appropriate; for the Advertising and Promotion
Businesses, multiples of 5.0x to 7.0x were appropriate; and for Excel,
multiples of 4.0x to 6.0x were appropriate. These ranges of multiples are
consistent with the ranges of multiples derived from each of the Comparable
Publicly Traded Company Analysis and the Comparable Acquisitions Transactions
Analysis.
Schroder Wertheim considered corporate overhead as a reduction to Enterprise
Value. Based on the present value of management's projected corporate overhead
expenses, Schroder Wertheim reduced the aggregate Enterprise Value of the
Company's businesses by a range of $10.5 million to $12.5 million. The present
value of management's projected tax-effected operating cash flows for the
years 1995 through 1999 were then added to the present value of the projected
terminal value in 1999 to arrive at a total Enterprise Value range for the
Company of between $43.4 million and $56.3 million. Based on the foregoing
analysis and taking into account (i) the Company's cash and temporary
investments balance of $9.4 million; (ii) the Company's aggregate debt balance
of $32.5 million ($22.7 million pro forma assuming conversion of the Company's
outstanding convertible debt); (iii) the number of shares of Company Common
Stock currently outstanding; (iv) outstanding Stock Options exercisable at
various exercise prices; and (v) the value of the Company Preferred Stock,
Schroder Wertheim arrived at a per share equity value range for the Company
Common Stock of between $3.27 to $4.96.
BREAK-UP (LIQUIDATION) ANALYSIS. In valuing the Company using a Break-up
Analysis, Schroder Wertheim assumed the separate sales of the individual
operating subsidiaries of the Company, conducted in an orderly fashion, at
values determined by the Discounted Cash Flow Analysis. Using such
assumptions, Schroder Wertheim arrived at a total Enterprise Value range of
the Company of $53.9 million to $68.8 million. Schroder Wertheim then deducted
contractual management bonuses that would have been required to be paid to the
Company's and its subsidiaries management upon the occurrence of such sales,
estimated corporate taxes on the respective net gains in sales of the
individual subsidiaries, and an assumed cost of liquidation of approximately
one year of corporate expenses and $1.0 million of fees and expenses. Based on
the foregoing analysis and taking into account (i) the Company's cash and
temporary investments balance of $9.4 million; (ii) the Company's aggregate
debt balance of $32.5 million ($22.7 million pro forma assuming conversion of
the Company's outstanding convertible debt); (iii) the number of Shares of
Company Common Stock currently outstanding; (iv) outstanding Stock Options
exercisable at various exercise prices; and (v) the value of the Company
Preferred Stock, Schroder Wertheim arrived at a per share equity value range
for the Company Common Stock of between $3.71 to $4.93.
21
<PAGE>
With respect to the Company Preferred Stock, Schroder Wertheim reviewed its
terms and noted that in the event of any liquidation, dissolution or winding
up of the business, each share of the Company Preferred Stock would receive a
pro rata share of the net assets of the Company, based on its proportion of
the total number of shares of Company Preferred Stock and Company Common Stock
outstanding, subject to a minimum liquidation preference of $3.00 per share
and a maximum liquidation payment of $7.50 per share. Schroder Wertheim noted
that the Company Preferred Stock was not subject to mandatory redemption in
the event of a change of control or otherwise, nor was it convertible into
Company Common Stock or exchangeable into other securities of the Company.
Although the Company Preferred Stock is registered under the Securities Act
and the Exchange Act, there has developed no liquid trading market for the
Company Preferred Stock. The Company Preferred Stock pays an annual dividend
of $0.30 per share, which would imply an effective yield for the Company
Preferred Stock of 7.1%, assuming a purchase price equal to $4.25 per share.
Schroder Wertheim noted that a review of trading prices and current yields of
selected comparable preferred stock issues revealed average yields
consistently above 7.1%. Based on its review of the Company Preferred Stock,
Schroder Wertheim determined that the Merger Consideration was within the per
share valuation range for the Company Preferred Stock.
The terms of the engagement of Schroder Wertheim by the Special Committee
are set forth in a letter agreement dated December 7, 1994, among Schroder
Wertheim, the Company and the Special Committee (the "Engagement Letter").
Schroder Wertheim also received from the Company an indemnification letter of
the same date (the "Indemnification Letter"). Pursuant to the terms of the
Engagement Letter, the Company agreed to pay Schroder Wertheim an initial
advisory fee of $50,000, a fee of $75,000 on January 15, 1995 and a fee of
$50,000 due at the earlier of (a) when Schroder Wertheim was prepared to
deliver a written or oral opinion with respect to the fairness, from a
financial point of view, of such transaction or (b) when the Merger is
consummated. Schroder Wertheim received an additional fee of $25,000 for
expanding its opinion to include the Company Preferred Stock. Each of these
fees has become payable to Schroder Wertheim and all fees have been paid. The
Company also agreed to reimburse Schroder Wertheim upon request from time to
time for its necessary and reasonable out-of-pocket expenses (estimated at
$20,000), including the reasonable fees and expenses of its legal counsel,
incurred in connection with the services performed under the Engagement
Letter, provided the Special Committee has approved the retention of such
counsel. Pursuant to the Indemnification Letter, the Company agreed to
indemnify Schroder Wertheim against certain liabilities relating to or arising
out of its engagement, including liabilities under Federal securities laws.
PROJECTED OPERATING AND FINANCIAL RESULTS OF THE COMPANY
The Company does not as a matter of course make public forecasts or
projections as to future revenues or results of operations. However, during
discussions regarding the Merger the Company provided Schroder Wertheim and
the Special Committee with Five Year Projections not available to the public.
The Five Year Projections were not prepared with a view toward public
disclosure or compliance with either the published guidelines of the
Commission regarding projections or forecasts or the American Institute of
Certified Public Accountants' Guide for Prospective Financial Statements. The
Five Year Projections were not prepared in accordance with generally accepted
accounting principles and were not audited or reviewed by independent
accountants. Independent accountants performed no services, and do not assume
any responsibility, with respect thereto.
The Five Year Projections, while presented with apparent numerical
specificity, were based upon numerous estimates and other assumptions (some of
which are referred to in the following paragraphs) which are inherently
subject to significant business, economic and competitive uncertainties,
contingencies and risks, all of which are difficult to quantify and many of
which are beyond the control of the Company. However, the Major Shareholder
and the Company's management confirmed to the Special Committee and Schroder
Wertheim that the Five Year Projections were based on assumptions believed to
be reasonable by the Company's management. Nevertheless, there can be no
assurances that the Five Year Projections will be realized, and it is likely
that future results will
22
<PAGE>
vary from those set forth below, possibly by material amounts. The Five Year
Projections included the information set forth below.
<TABLE>
<CAPTION>
YEAR ENDING INCOME
DECEMBER 31 REVENUES BEFORE TAXES NET INCOME
----------- -------- ------------ ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
1995....................................... $133,847 $2,172 $1,303
1996....................................... 143,322 3,365 2,019
1997....................................... 148,506 3,919 2,351
1998....................................... 153,890 4,470 2,682
1999....................................... 159,482 5,060 3,036
</TABLE>
The Five Year Projections were prepared by the Company's management during
the fourth quarter of 1994, solely for planning and analysis purposes. The
Five Year Projections were based on management's judgment at the time
utilizing a number of internal sources, including historical financial
information, annual plans and other business plans. The most significant
assumptions made in preparing the Five Year Projections were as follows:
1. Revenues will increase annually, with increases ranging from 3.62% to
7.07%. The greatest percentage increase is expected to occur in 1996 when a
full year's benefit of expanded printing capacity is expected to be
realized.
2. Cost of revenues will increase each year with increases ranging from
3.33% to 7.30%.
3. Selling and administrative expenses will increase each year with
increases ranging from 3.95% to 4.63%.
4. Operating margins will range from a high of 3.67% to a low of 2.90%.
Margins will be affected by the contribution of each industry segment.
Printing margins are expected to be low in 1995 because of costs associated
with the start up of new equipment.
In addition to these specific assumptions, management assumed that the
competitive positions of its operating subsidiaries will not change and that
raw material costs will not change substantially.
The Company does not intend to update or otherwise publicly revise the Five
Year Projections presented herein to reflect circumstances existing or
developments occurring after the preparation of such information or to reflect
the occurrence of unanticipated events. The Five Year Projections are included
in the Proxy Statement solely because such information was available to the
Major Shareholder and provided to Schroder Wertheim and the Special Committee.
Inclusion of the Five Year Projections should not be regarded as a
representation by any person that the results will be achieved.
REPORTS AND APPRAISALS
None.
STRUCTURE AND PURPOSE OF THE MERGER
The structure of the acquisition as a merger was determined by Newco. The
Merger has been structured as a merger of Newco and the Company in order to
effectuate the acquisition of all the outstanding shares of the Company Stock
other than shares owned directly or indirectly by the Major Shareholder
(except for Covered Shares), thereby transferring the entire beneficial equity
interest in the Company to the Major Shareholder. The Merger has also been
structured as a merger of Newco into the Company, with the Company as the
Surviving Corporation, in order to preserve the Company's corporate entity and
existing contractual arrangements with third parties.
The Major Shareholder has been concerned that the performance of the Company
Common Stock in the market has been negatively impacted by the Company's small
size and resulting relative lack of attention provided to the stock by
professional investment advisors and money managers, the diversity and nature
of its
23
<PAGE>
various business units, and the Company's traditional focus on a strong
balance sheet as opposed to consistent quarterly earnings. The Major
Shareholder believes that by being private the Company would be aided by the
flexibility inherent in a closely held corporation to implement a long-term
business strategy, without concentrating on short-term performance. There have
been no disagreements between the Major Shareholder and the Board relative to
the Company's direction. The purpose of the Merger is to provide the Public
Shareholders the opportunity to receive a fair consideration for their shares
in excess of the market price of the stock preceding the announcement of the
Merger, while at the same time providing the Major Shareholder what he views
both as an attractive investment opportunity and an opportunity to manage the
Company with the flexibility inherent in a closely-held enterprise. See "--
Background of the Merger." The Major Shareholder chooses to propose the Merger
at this time because he became convinced that the efforts of the Company to
achieve greater market acceptance of the Company Common Stock had not
achieved, and was unlikely to achieve in the foreseeable future, the desired
level of success. Further, it was not until this time that the Major
Shareholder was willing to accept the added risk inherent in the more highly
leveraged nature of the Company after consummation of the Merger and the
payment of the Merger Consideration to the Public Shareholders.
Each of Newco and the Major Shareholder believes that the Merger is fair to
the Public Shareholders. In arriving at this conclusion, they considered (i)
the historical and current market prices of the Company Common Stock; (ii) the
fact that the $4.25 price to be paid to Public Shareholders and other terms
and conditions of the Merger resulted from active arm's-length negotiations
between Newco and the independent Special Committee; (iii) the fact that the
Special Committee approved the Merger after consulting with independent
advisors; and (iv) the fact that the Special Committee at the time it approved
the Merger had received the opinion of Schroder Wertheim to the effect that as
of the date of such opinion the $4.25 cash per share consideration to be
received by the Public Common Shareholders is fair from a financial point of
view. Newco and the Major Shareholder did not attach relative weights to the
factors considered in reaching their conclusions. See "--Proceedings and
Recommendation of the Special Committee and the Board, Fairness of the
Transaction."
CERTAIN EFFECTS OF THE MERGER
If the proposed Merger is consummated, the present holders of the Company
Stock (other than the Major Shareholder and its affiliates) will no longer
have an equity interest in the Company and, therefore, will not share in its
future earnings and growth. Instead, each holder of Company Stock will have
the right to receive $4.25 in cash, without interest, for each such share held
(other than shares held directly or indirectly by the Major Shareholder,
except for Covered Shares).
The Company would, as a result of the Merger, become a privately held
company. Company Common Stock would be delisted from the New York Stock
Exchange, the registration of Company Common Stock under the Exchange Act
would terminate and the Company would cease filing reports with the
Commission. Moreover, the Company would be relieved of the obligation to
comply with the proxy rules of Regulation 14A under Section 14 of the Exchange
Act and its officers, directors and 10% shareholders would be relieved of the
reporting requirements and restrictions on insider trading under Section 16 of
the Exchange Act. Accordingly, less information would be required to be made
publicly available than presently is the case.
If the Merger is consummated, the Major Shareholder's strategy for the
forseeable future is to continue to focus in the printing, advertising and
tableware businesses. The Major Shareholder intends to closely monitor each
business segment and to timely supply their capital requirements in order to
achieve the continued growth of each business segment through prudent
oversight and careful analysis of business conditions.
If the Merger is not consummated, the Company intends to continue to operate
the business in accordance with its past and present practice.
The Company's net book value at December 31, 1994 was $34,773,000 and its
net loss for 1994 was $51,000. Through his approximate 48% ownership of the
outstanding Company Common Stock, the Major Shareholder's interest in such net
book value and net loss was, as of December 31, 1994, approximately
24
<PAGE>
$16,671,840 and $24,000, respectively. Immediately after the Merger, all of
the then outstanding Company Common Stock of the Surviving Corporation would
be owned by the Major Shareholder. See "--Interests of Certain Persons in the
Merger, Conflicts of Interest," "Certain Information Regarding Newco and the
Major Shareholder," and "Financial Statements--Pro Forma Financial Data."
INTERESTS OF CERTAIN PERSONS IN THE MERGER; CONFLICTS OF INTEREST
In considering the recommendation of the Board with respect to the Merger,
shareholders should be aware that certain members of the Company's management
and members of the Board have certain interests which are described below and
which present them with conflicts of interest in connection with the Merger
Agreement. The Special Committee was aware of those conflicts and considered
them among the other matters described under "--Background; --Proceedings and
Recommendation of the Special Committee and the Board, Fairness of the
Transaction; --Structure and Purpose of the Merger." The executive officers,
directors and affiliates of the Company have stated that they will vote the
Company Common Stock held by them in favor of the Merger.
Ownership of the Company after the Merger. After the Merger, the Major
Shareholder will beneficially own all of the Company's outstanding capital
stock.
Directors of the Company after the Merger. The Merger Agreement provides
that after the Merger, the current directors of the Company (Mr. Robert
Garrett, Mr. John C. Mickle, Mr. Bernard S. White, Mr. George Kane, Mr. James
C. Marlas, Mr. Mel Gordon, Mr. C. Gordon Murphy and Mr. Frank Stillo) will
remain in such capacities with the Surviving Corporation until successors are
duly elected or appointed in accordance with applicable law.
Employment of Company's Employees. Newco has indicated that, subsequent to
the Merger, the current officers and employees of the Company will remain in
such capacities with the Surviving Corporation. However, no new employment
agreements are currently contemplated.
Cash Payments to be Received in Merger. Various members of management will
receive cash payments in the Merger for cancellation of Stock Options. Such
payments will be equal to the difference between the Merger Consideration and
the per share exercise price of each Stock Option. The table below summarizes
the total amount each director and executive officer of the Company will
receive upon cancellation of the Stock Options.
<TABLE>
<CAPTION>
NAME AMOUNT
---- -------
<S> <C>
Robert Garrett.................................................... $ 9,375
John C. Mickle.................................................... 9,375
Bernard S. White.................................................. 9,375
George Kane....................................................... 35,937
James C. Marlas................................................... 0
Mel Gordon........................................................ 9,375
C. Gordon Murphy.................................................. 9,375
Frank Stillo...................................................... 20,000
Gregory J. Garville............................................... 28,125
Fred T. Pugliese.................................................. 8,062
</TABLE>
Indemnification of Directors and Officers. The Merger Agreement provides
that the Company as the Surviving Corporation (i) for three years after the
Effective Time shall not change the provisions of its certificate of
incorporation relating to indemnification of present or former directors or
officers of the Company in a manner which adversely affects their rights to
indemnification, and (ii) for three years after the Effective Time to maintain
specified officers' and directors' liability insurance indemnifying them or if
the specified insurance is unavailable for the current premium, the Surviving
Corporation shall obtain as much insurance as can be obtained for 125% of the
current premium. In addition, pursuant to an agreement entered into with the
Company, the
25
<PAGE>
members of the Special Committee are indemnified with respect to their
activities as members of the Special Committee.
Under the Company's existing Certificate of Incorporation, By-laws and
certain indemnification arrangements and under currently effective officers'
and directors' liability insurance, the Company's officers and directors may
have certain rights to indemnification with respect to litigation relating to
the Merger. See "--Proceedings and Recommendation of the Special Committee and
the Board, Fairness of the Transaction," and "The Merger--Certain Covenants of
the Company and Newco."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following is a brief description of the material federal income tax
consequences of the Merger. This summary is for general information only. It
does not address tax consequences that may be relevant to certain types of
investors subject to special treatment under the federal income tax laws (such
as dealers in securities, banks, insurance companies and foreign individuals
and entities), or any state, local or foreign income tax laws. SHAREHOLDERS
SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO ANY FEDERAL, STATE, LOCAL, FOREIGN
OR OTHER TAX CONSIDERATIONS RELEVANT TO THEM.
The exchange of shares of Company Stock for $4.25 per share in the Merger
will be a taxable transaction to Public Shareholders. A Public Shareholder
will recognize gain or loss under federal income tax laws in an amount by
which the proceeds received in exchange for such shares exceed or are less
than the holder's tax basis in the shares. If the shares were a capital asset
in the hands of the Public Shareholder, such gain or loss will be capital
rather than ordinary and, in such instances, will be long term if the shares
are considered to have been held more than one year and short term if they are
considered to have been held one year or less on the date of the Merger.
Currently, the maximum federal income tax rate on net long-term capital gains
is 28% as opposed to rates of up to 39.6% for ordinary income. Capital losses
may be used to offset capital gains. For individuals, any capital losses in
excess of capital gains may be used to offset income from other sources of up
to $3,000 per year. Any remaining capital losses carry forward to future
years, subject to the same annual limits. For corporations, capital losses may
only be used to offset capital gains. Any unused capital losses may generally
be carried back for three years and carried forward five years.
Cash received by holders of Stock Options for the cancellation of such Stock
Options will be taxable to them as ordinary income, the Company may be
entitled to a corresponding deduction and the Company may be required to
withhold tax on such payments. If holders of Stock Options have acquired
shares of Company Common Stock upon the exercise of Stock Options or otherwise
as compensation, such stockholders should consult with their tax advisors to
determine the particular tax consequences to them of the Merger.
The waiver by each of the Major Shareholder and Union Capital, in connection
with, and only in connection with, the consummation of the Merger, of his or
its, as the case may be, right to receive any consideration for the Company
Common Stock (other than with respect to the Converted Shares) will not result
in the recognition by him or it of taxable gain.
The consummation of the Merger will not result in the recognition by the
Company of taxable gain.
Under the backup withholding rules, unless an exemption applies under the
applicable law and regulations, the Exchange Agent will be required to
withhold, and will withhold, 31% of all cash payments made in exchange for
shares of Company Stock unless the stockholder or other payee provides his tax
identification number (social security number, in the case of an individual,
or employer identification number, in the case of a corporation) and certifies
that such number is correct. Each shareholder of the Company and, if
applicable, each other payee should complete and sign the substitute Form W-9
to be included in the transmittal materials and instructions relating to stock
certificates to be mailed to shareholders as soon as practicable after the
Effective Time, so as to provide the information and certification necessary
to avoid backup withholding, unless an applicable exemption exists and is
proved in a manner satisfactory to the Company and the Exchange Agent.
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<PAGE>
APPRAISAL RIGHTS
The following is a summary of the provisions of Section 262 of the DGCL
relating to appraisal rights. Section 262 of the DGCL is reproduced in its
entirety as Annex C to this Proxy Statement, and this summary is qualified in
its entirety by reference to Annex C. Stockholders should read carefully Annex
C and, if they wish to exercise their rights to an appraisal, follow carefully
the procedures set forth therein. Any stockholder considering demanding an
appraisal is advised to consult legal counsel.
Under Section 262 of the DGCL, holders of record of shares of Company Stock
(the "Shares") who do not wish to accept the Merger Consideration and who have
neither voted in favor of the merger nor consented thereto in writing have the
right to seek an appraisal of the fair value of their Shares in the Delaware
Court of Chancery (the "Delaware Court"). Each stockholder is urged to read
carefully the materials contained in this Proxy Statement and the other
materials incorporated herein in making a determination whether to accept the
Merger Consideration or to seek an appraisal pursuant to the DGCL.
Stockholders desiring to exercise their appraisal rights under the DGCL are
referred to herein as "Appraisal Stockholders."
Under Section 262 of the DGCL, a vote against the Merger does not constitute
a demand for appraisal rights. Each Appraisal Stockholder wishing to assert a
right to such appraisal must, on or before September 12, 1995, make a written
demand for the appraisal of his or her Shares to the Company at the address
set forth below. Failure to make such demand on or before September 12, 1995
will foreclose an Appraisal Stockholder's right to an appraisal. The demand
must reasonably inform the Company of the identity of the Appraisal
Stockholder making the demand as well as the intention of such Appraisal
Stockholder to demand an appraisal of the fair value of the Shares held by
such stockholder.
For purposes of making an appraisal demand, the address of the Company is:
Mickelberry Communications Incorporated, 405 Park Avenue, New York, New York
10022, Attention: Fred T. Pugliese.
Only a holder of record of Shares, or a person duly authorized and
explicitly purporting to act on the record holder's behalf, is entitled to
assert an appraisal right with respect to the Shares registered in the record
holder's name. Beneficial owners who are not record holders and who wish to
exercise appraisal rights are advised to consult promptly with the appropriate
record holders as to the timely exercise of appraisal rights. A record holder,
such as a broker, who holds Shares as a nominee for others may exercise
appraisal rights with respect to the Shares held for one or more beneficial
owners, while not exercising such rights for other beneficial owners. In such
a case, the written demand should set forth the number of shares as to which
the demand is made. Where no Shares are expressly mentioned, the demand will
be presumed to cover all Shares held in the name of such record holder.
A holder of Shares held in "street name" who desires an appraisal must take
such actions as may be necessary to ensure that a timely and proper demand for
an appraisal is made by the record holder of such Shares. Shares held through
brokerage firms, banks and other financial institutions are frequently
deposited with and held of record in the name of a nominee of a central
security depository, such as Cede & Co. Any holder of Shares desiring an
appraisal who held his or her Shares through a brokerage firm, bank or other
financial institution is responsible for ensuring that the demand for an
appraisal is made by the record holder. The Appraisal Stockholder should
instruct such firm, bank or institution that the demand for an appraisal must
be made by the record holder of the Shares, which might be the nominee of a
central security depository if the Shares have been so deposited. As required
by Section 262 of the DGCL, a demand for an appraisal must reasonably inform
the Company of the identity of the record holder (which might be a nominee as
described above) and of such holder's intention to seek an appraisal of such
Shares.
A demand for an appraisal of Shares owned of record by two or more joint
holders must identify and be signed by or for all of the holders. A demand for
an appraisal signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity must so identify the persons signing the demand.
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<PAGE>
An appraisal demand may be withdrawn by an Appraisal Stockholder within 60
days after the Effective Time, but thereafter the written approval of the
Company is needed for any such withdrawal. Upon withdrawal of an appraisal
demand, a holder of Shares will be entitled to receive the Merger
Consideration. No interest will be paid on this amount.
Within 120 days after the Effective Time (the "120-Day Period"), any
Appraisal Stockholder who has properly demanded an appraisal and who has not
withdrawn his or her demand as provided above (such Appraisal Stockholders
being hereinafter referred to collectively as the "Dissenting Stockholders")
and the Company each has the right to file in the Delaware Court a petition
(the "Petition") demanding a determination of the fair value of the dissenting
Shares (the "Dissenting Shares") held by all of the Dissenting Stockholders.
If, within the 120-Day Period, no Petition shall have been filed as provided
above, all rights to an appraisal will cease and all of the Dissenting
Stockholders will become entitled to receive the Merger Consideration, without
interest thereon after the Effective Time, with respect to such Dissenting
Shares. The Company is not obligated and does not intend to file such a
Petition. Any Dissenting Stockholder is entitled, pursuant to a written
request to the Company made within the 120-Day Period, to receive from the
Company a statement setting forth the aggregate number of Shares with respect
to which demands for appraisal have been received and the aggregate number of
Dissenting Stockholders.
Upon the filing of the Petition, service of a copy thereof is required to be
made upon the Surviving Corporation, which, within 20 days after such service
must be filed in the office of the Register in Chancery in which the Petition
was filed a duly verified list containing the names and addresses of all
Appraisal Stockholders. The Delaware Court may order that notice of the time
and place fixed for the hearing on the Petition be sent by registered or
certified mail to the Surviving Corporation and all of the Dissenting
Stockholders, and be published at least one week before the day of the hearing
in a newspaper of general circulation published in the City of Wilmington,
Delaware or in another publication determined by the Delaware Court. The
Delaware Court will approve the form of notice by mail and by publication. The
costs relating to these notices will be borne by the Company. If a hearing on
the Petition is held, the Delaware Court is empowered to determine which
Appraisal Stockholders have complied with the provisions of Section 262 of the
DGCL and are entitled to an appraisal of their Shares. The Delaware Court may
require that Dissenting Stockholders submit their stock certificates which had
represented Shares for notation thereon of the pendency of the appraisal
proceedings. The Delaware Court is empowered to dismiss the proceedings as to
any Dissenting Stockholder who does not comply with such requirement.
Accordingly, Dissenting Stockholders are cautioned to retain their stock
certificates pending resolution of the appraisal proceedings.
Dissenting Shares will be appraised by the Delaware Court at their fair
value as of the Effective Time, exclusive of any element of value arising from
the accomplishment or expectation of the Merger. The value so determined for
the Shares could be equal to, more than or less than the Merger Consideration,
and could be based upon considerations other than, or in addition to, the
Merger Consideration, the market value of the Shares, asset values and earning
capacity. The Company reserves the right to assert in any appraisal proceeding
that the fair value of the Shares as of the Effective Time is less than the
Merger Consideration.
In Weinberger v. UOP, Inc., et al. (decided February 1, 1983), the Delaware
Supreme Court stated, among other things, that "proof of value by any
techniques or methods which are generally considered acceptable in the
financial community and otherwise admissible in court" should be considered in
an appraisal proceeding, and that "fair price obviously requires consideration
of all relevant factors involving the value of a company........'' The Delaware
Supreme Court stated that in making this determination of fair value the court
must consider market value, asset value, dividends, earnings prospects, the
nature of the enterprise and any other factors which could be ascertained as
of the date of the merger that throw any light on future prospects of the
merged corporation. The Delaware Supreme Court also held that ""elements of
future value, including the nature of the enterprise, which are known or
susceptible of proof as of the date of the merger and not the product of
speculation, may be considered.'' In addition, the Delaware Supreme Court
stated in Weinberger that while ordinarily a stockholder's only monetary
remedy would be an appraisal, such remedy may not be adequate ""in certain
cases, particularly where fraud, misrepresentation, self-dealing, deliberate
waste of corporate assets, or
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<PAGE>
gross and palpable overreaching are involved," and that in such cases the
Delaware Court would be free to fashion any form of appropriate relief.
The Delaware Court may also, on application, (i) determine a fair rate of
interest, simple or compound, if any, to be paid to Dissenting Stockholders in
addition to the value of the Dissenting Shares for the period from the
Effective Time to the date of payment, (ii) assess costs among the parties as
the Delaware Court deems equitable and (iii) order all or a portion of the
expenses incurred by any Dissenting Stockholder in connection with the
appraisal proceeding, including, without limitation, reasonable attorney's
fees and fees and expenses of experts, to be charged pro rata against the
value of all Dissenting Shares. Determinations by the Delaware Court are
subject to appellate review by the Delaware Supreme Court.
Dissenting Stockholders are generally permitted to participate in the
appraisal proceedings. No appraisal proceeding in the Delaware Court shall be
dismissed as to any Dissenting Stockholder without the approval of the
Delaware Court, and this approval may be conditioned upon terms which the
Delaware Court deems just.
From and after the Effective Time, Dissenting Stockholders will not be
entitled to vote their Shares for any purpose and will not be entitled to
receive payment of dividends or other distributions in respect of such Shares
payable to stockholders of record thereafter.
FINANCING OF THE MERGER
Approximately $22,876,000 will be required in order to pay (i) the holders
of all of the outstanding shares of Company Stock, other than shares of
Company Common Stock held directly or indirectly by the Major Shareholder
(except for Covered Shares), for their shares, (ii) the value of the Stock
Options, (iii) for repayment and/or cancellation of the Convertible
Debentures, other than those held directly or indirectly by the Major
Shareholder, and (iv) the expenses in connection with the Merger. The Major
Shareholder has engaged Argosy as its financial advisor to arrange for the
financing of the Merger. A condition to consummation of the Merger is that
Newco obtain third party financing on terms satisfactory to the Company and
Newco for the funds required to be paid pursuant to the Merger.
The Company has obtained a Financing Proposal from the Banks to provide
financing for the Merger and for working capital and capital expenditures of
the Company and its subsidiaries, subject to customary conditions and
acceptable documentation. The financing described in the Financing Proposal is
currently in documentation and due diligence review. Under the Financing
Proposal, the Banks would provide certain wholly owned subsidiaries of the
Company with a credit facility in an aggregate principal amount of
$50,000,000.
EXPENSES OF THE MERGER
Whether or not the Merger is consummated, the Company has agreed to (i)
assume all of the obligations of the Major Shareholder and any entity formed
by him for purposes of completing the Merger, including Newco under that
certain Letter Agreement, including without limitation, indemnities,
contribution, compensation and expense reimbursements all in accordance with
Section 15 of such Letter Agreement, and (ii) pay all reasonable attorneys'
fees, expenses and disbursements incurred in connection with the transactions
contemplated by the Merger Agreement. Notwithstanding the foregoing, the
Company shall not assume any obligation or pay any fees and expenses if the
Merger Agreement is terminated because of a material breach by Newco, Union
Capital or the Major Shareholder of any of their respective representations,
warranties or covenants under the Merger Agreement. The total estimated
expenses resulting from the Merger are $1,645,000. This figure is comprised of
the following:
<TABLE>
<S> <C>
Accounting..................................................... $ 7,000
Legal.......................................................... 510,000
Financing Fees................................................. 281,800
Prepayment..................................................... 0
Investment Banking............................................. 707,000
Printing Costs................................................. 33,000
Filing Fees.................................................... 3,200
Special Committee Fees......................................... 99,000
Solicitation Expenses.......................................... 4,000
----------
$1,645,000
==========
</TABLE>
29
<PAGE>
CERTAIN LITIGATION
On November 8, 1994, a class action complaint was filed in the Court of
Chancery of the State of Delaware in and for New Castle County. The complaint
was filed by Frank De Marco on his own behalf and on behalf of all security
holders of the Company except the defendants. Complaint was filed against the
Company, and the Major Shareholder, George Kane, Robert Sperling, Mel Gordon
and Frank Stillo, officers and/or directors of the Company. The lawsuit seeks
to enjoin the consummation of the original offer made by the Major Shareholder
to acquire, through a merger transaction, all the shares of the Company's
Common Stock not owned directly or indirectly by the Major Shareholder for a
cash purchase price of $3.25 per share. The suit also seeks, in the
alternative, rescission and damages as well as reimbursement of costs and
disbursements in unspecified amounts.
On June 21, 1995, the parties executed a Stipulation And Agreement of
Compromise Settlement And Release providing for the settlement of the lawsuit.
Consummation of the settlement is subject to certain conditions, including
approval by the Court. Under the settlement, Mr. DeMarco will receive the same
consideration (i.e. the Merger Consideration) for his shares as that being
offered to the Public Common Shareholders pursuant to the Merger.
THE MERGER
GENERAL
The Merger Agreement provides that, subject to the adoption of the Merger
Agreement by the shareholders of the Company and compliance with certain other
covenants and conditions, Newco will be merged with and into the Company and
the Company will be the Surviving Corporation, with the Major Shareholder
constituting its sole shareholder. All material terms of the Merger Agreement
have been disclosed in the body of this Proxy Statement. All references to the
terms and conditions of the Merger Agreement in this Proxy Statement are
qualified in their entirety by reference to the Merger Agreement, a copy of
which is attached hereto as Annex A.
At the Effective Time of the Merger, each outstanding share of Company Stock
(other than shares held directly or indirectly by the Major Shareholder,
except Covered Shares) will be converted into the right to receive $4.25 in
cash, without interest. In connection with, and only in connection with, the
consummation of the Merger, each of the Major Shareholder and Union Capital is
waiving its right to receive any consideration in exchange for the Company
Stock owned by him or it, as the case may be (except the Covered Shares).
REQUIRED VOTE
The presence, in person or by properly executed proxy, of the holders of a
majority of the outstanding shares of Company Stock is necessary to constitute
a quorum at the Special Meeting. Each shareholder is entitled to (a) one vote
for each share of Company Common Stock held by such shareholder and (b) 1/10
of a vote for each share of Company Preferred Stock held by such shareholder.
Under Delaware law and the Company's Certificate of Incorporation, as amended,
and By-laws, the affirmative vote of holders of a majority of the outstanding
shares entitled to vote at the Special Meeting is required to approve the
Merger Agreement. In addition, the Merger Agreement itself conditions the
obligations of the Company and Newco under the Merger Agreement to an
affirmative vote of at least (1) the holders of a majority of shares of
Company Stock outstanding on the record date of such Special Meeting or (2) 66
2/3% of the votes cast by the holders of shares voting of Company Stock at the
meeting, whichever is greater. The Major Shareholder, who owns directly or
indirectly approximately 48% of the Company Stock, has already agreed to vote
his shares in favor of the Merger. Upon reasonable inquiry the Company was
informed that all directors, executive officers and affiliates of the Company
and any person controlling such executive officer, director or affiliate (i)
presently intend to tender their shares pursuant to the Merger Agreement and
to vote for the Merger and (ii) have not made any recommendation in support of
or opposed to the Merger. For purposes of this vote, abstentions will be
counted as shares voted, while broker non-votes will not be so counted. The
approval of the Merger by at least a majority of unaffiliated security holders
is not required by the Merger Agreement.
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<PAGE>
EFFECTIVE TIME
The Merger will become effective by filing a Certificate of Merger,
consistent with the Merger Agreement, with the Secretary of State of Delaware.
The Merger will be consummated only upon satisfaction or waiver, where
permissible, of the terms and conditions of the Merger Agreement and provided
that the Merger Agreement has not been terminated. If the Merger has not been
consummated by September 30, 1995, either the Company or Newco may terminate
the Merger Agreement so long as the reason that the Merger has not been
consummated is not due to the failure of the party choosing to terminate to
fulfill any of its obligations thereunder. No such waiver or termination will
require the vote or consent of the holders of Company Stock.
PAYMENT FOR SHARES
In order to receive the cash to which Company shareholders will be entitled
as a result of the Merger, each holder of certificates representing shares of
Company Stock will be required to surrender such holder's stock certificate or
certificates, together with a duly executed letter of transmittal, to the
Exchange Agent. Upon receipt of such certificate or certificates together with
a duly executed letter of transmittal, the Exchange Agent will issue a check
or draft to the person or persons entitled thereto in an amount equal to $4.25
for each share of Company Stock represented by such stock certificate or
certificates. If any payment for shares of Company Stock is to be made in a
name other than that in which the certificates for such shares surrendered for
payment are registered on the stock transfer books of the Company as of the
Effective Time, certificates so surrendered must be properly endorsed or
otherwise in proper form for transfer and the person requesting such payment
must pay to the Exchange Agent any transfer or other taxes required by reason
of the payment to a person other than the registered owner of the certificate
or certificates surrendered or shall establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not applicable. No interest
will be paid or accrued on amounts payable upon the surrender of any stock
certificate.
Instructions with regard to the surrender of certificates, together with a
letter of transmittal to be used for this purpose, will be mailed to
shareholders as promptly as practicable after the Effective Time. It also is
expected that letters of transmittal will be available at the office of the
Exchange Agent no later than the first business day following the Effective
Time. Shareholders should surrender certificates for shares of Company Stock
only with a letter of transmittal. SHAREHOLDERS SHOULD NOT SEND ANY STOCK
CERTIFICATES WITH THE ENCLOSED PROXY CARD.
CONDITIONS TO THE MERGER, WAIVER
The respective obligations of Newco and the Company to consummate the Merger
are subject to the satisfaction or waiver, on or before the Effective Time, of
the conditions that (a) the approval of the Merger and the Merger Agreement at
the Special Meeting by the affirmative vote of at least (1) the holders of a
majority of shares of Company Stock outstanding on the record date of such
Special Meeting or (2) 66 2/3% of the votes cast by the holders of shares of
Company Stock voting at the Special Meeting, whichever is greater, (b) the
opinion of Schroder Wertheim not being withdrawn, (c) any waiting period
applicable to the Merger under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 (the "Hart-Scott-Rodino Act") shall have terminated or expired,
(d) the absence of any statute, rule or regulation which makes consummation of
the Merger illegal or otherwise prohibited or any order, decree, injunction or
judgment enjoining the consummation of the Merger and (e) the receipt of an
opinion of counsel of the Company, in form and substance reasonably
satisfactory to the Company and Newco, as to the validity of the Merger under
Delaware Law.
The obligations of Newco to consummate the Merger are subject to the
satisfaction or waiver, on or before the Effective Time, of the additional
conditions that (a) the representations and warranties of the Company
contained in the Merger Agreement and in any certificate or other writing
delivered by the Company pursuant hereto shall be true and correct in all
material respects at and as of the Effective Time as if made at and as of such
time; (b) the Company shall have performed and complied in all material
respects with each obligation, agreement and covenant to be performed by and
complied with by it under the Merger Agreement at or prior to the Effective
Time; (c) consummation on terms satisfactory to Newco of third party financing
for (1) the Merger
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<PAGE>
Consideration, (2) the value of the Stock Options and (3) the repayment of the
Convertible Debentures not held by the Major Shareholder or its affiliates;
(d) the holders of not more than 5% of the outstanding shares of Company
Preferred Stock and Company Common Stock shall have exercised their appraisal
rights in the Merger in accordance with Delaware Law; (e) the prepayment and
cancellation of all Convertible Debentures; (f) holders of Stock Options
constituting at least 95% of the shares represented thereby shall have entered
into termination agreements with respect thereto in form and substance
satisfactory to Newco; and (g) no action or proceeding shall have been
commenced or threatened for the purpose of obtaining an injunction, order or
damages before any court or governmental agency or other regulatory or
administrative agency or commission, domestic or foreign, which Newco shall on
advice of counsel, reasonably determine would (1) result in the imposition of
material limitations on the ability of the Company or Newco effectively to
consummate the Merger, (2) have the effect of rendering the Merger violative
of any applicable law, or (3) have a material adverse effect on the business,
assets or financial condition of the Surviving Corporation.
The obligations of the Company to consummate the Merger are subject to the
satisfaction or waiver, on or before the Effective Time, of the additional
conditions that (a) the representations and warranties of Newco contained in
the Merger Agreement and in any certificate or other writing delivered by
Newco pursuant hereto shall be true and correct in all material respects as of
the Effective Time as if made at and as of such time (other than any
inaccuracies in such representations or warranties that are attributable to
the Company); (b) Newco shall have performed in all material respects all of
its obligations to be performed and complied with by it under the Merger
Agreement at or prior to the Effective Time; (c) consummation on terms
satisfactory to the Company of third party financing for (1) the Merger
Consideration, (2) the value of the Stock Options and (3) the repayment of the
Convertible Debentures; and (d) no action or proceeding shall have been
commenced or threatened for the purpose of obtaining an injunction, order or
damages before any court or governmental agency or other regulatory or
administrative agency or commission, domestic or foreign, which the Company
shall on advice of counsel, reasonably determine would (1) result in the
imposition of material limitations on the ability of the Company or Newco
effectively to consummate the Merger, (2) have the effect of rendering the
Merger violative of any applicable law, or (3) have a material adverse effect
on the business, assets or financial condition of the Surviving Corporation.
CERTAIN COVENANTS OF THE COMPANY AND NEWCO
Conduct of Business. Subject to certain exceptions (including, without
limitation, the payment of regular quarterly dividends on the Company's Common
Stock and Preferred Stock of $0.015 and $0.075 per share, respectively), prior
to the Effective Time (a) the Company will carry on its business in the
ordinary course consistent with past practice and (b) the Company will not,
and will not permit any of its subsidiaries to, conduct certain activities and
enter into certain transactions.
Treatment of Existing Company Stock Options. The Company will use its best
efforts to cause the holders of all Stock Options under the Company's 1981
Incentive Stock Option Plan, 1992 Stock Option Plan, and 1993 Outside
Directors' Stock Option Plan to agree in writing to cancel such Options as of
and subject to the occurrence of the Effective Time, pursuant to an option
termination agreement in form and substance satisfactory to Newco. Each holder
of a Stock Option who executes and delivers such a termination agreement and
whose Option has an exercise price less than $4.25 per share will have the
right to receive in cash, if the Option is presently exercisable, an amount
equal to the number of shares subject to the Option, times the difference
between $4.25 and the per share exercise price of the Option. Of the
outstanding Stock Options, options representing 421,139 shares have exercise
prices of less than $4.25 and options representing 89,175 shares have exercise
prices equal to or more than $4.25.
Indemnification and Insurance. The Company has agreed as the Surviving
Corporation (i) not to change, for three years after the Effective Time, the
provisions of its certificate of incorporation relating to indemnification of
present or former directors or officers of the Company in a manner which
adversely affects their rights to indemnification, and (ii) to use its best
efforts to maintain in effect for not less than three years from and after the
Effective Time the specified officers' and directors' liability insurance
indemnifying them or
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<PAGE>
if the specified insurance is unavailable at the current premiums, to obtain
as much insurance as can be obtained for a premium not in excess of 125% of
the current premium paid for directors' and officers' liability insurance.
Treatment of Existing Convertible Debentures. The Company will take all
actions deemed necessary by Newco to obtain the consent of the holders (other
than the Major Shareholder) of the Convertible Debentures to the prepayment
and/or cancellation of the Convertible Debentures as of the Effective Time.
Vote. The Company has agreed, in accordance with applicable law, to use its
best efforts to solicit from its shareholders proxies in favor of the approval
of the Merger and the Merger Agreement.
Payment of Expenses. Whether or not the Merger is consummated, the Company
has agreed to (i) assume all of the obligations of the Client under the Letter
Agreement including, without limitation, indemnities, contribution,
compensation, expense reimbursements all in accordance with Section 15 of such
Letter Agreement and (ii) pay all reasonable attorneys' fees, expenses and
disbursements incurred by the Client in connection with the transactions
contemplated by the Merger Agreement. The Company shall not assume any
obligation or pay any fees and expenses if the Merger Agreement is terminated
because of a material breach of the Merger Agreement by Newco, Union Capital
or the Major Shareholder.
TERMINATION, AMENDMENTS
The Merger Agreement may be terminated before the Effective Time (a) by the
mutual consent of the Boards of Directors of Newco and the Company, or (b) by
either the Board of Directors of Newco or the Company if the Merger shall not
have been consummated on or before September 30, 1995; provided, however, that
neither party may terminate the Merger Agreement pursuant to clause (b) above,
if the failure of such party to fulfill any of its obligations under the
Merger Agreement shall have been the reason the Merger shall not have been
consummated on or before said date.
Subject to applicable law, the Merger Agreement may be amended, modified and
supplemented by the mutual consent of the Company and Newco (as authorized by
each Board of Directors) at any time prior to the Effective Time; provided,
however, that any decrease of the amount or change in the type of
consideration payable in the Merger in respect of shares of Company Stock, any
amendment affecting conditions to which the obligations of Newco or the
Company are subject, or any amendment affecting the conditions under which the
Merger Agreement may be terminated, shall also be approved by the Special
Committee.
CERTAIN INFORMATION REGARDING NEWCO,
UNION CAPITAL AND THE MAJOR SHAREHOLDER
Newco is a newly formed Delaware corporation organized on March 17, 1995, in
connection with the Merger. Newco's principal offices are located at 405 Park
Avenue New York, New York 10022. The Major Shareholder is the sole
shareholder, director, and executive officer of Newco.
Prior to the Merger, Newco will not have any significant assets or
liabilities (other than its rights and obligations in connection with the
Merger Agreement) and will not engage in any activities other than those
incident to its formation and the transactions contemplated by the Merger
Agreement. At the date of this Proxy Statement, the authorized capital stock
of Newco consists of 4,000,000 shares of common stock, $1.00 par value per
share, of which 3,000,000 shares are issued and outstanding and all of which
are owned by the Major Shareholder.
The Major Shareholder, as the sole shareholder of Newco, and the Board of
Directors of Newco, of which the Major Shareholder is the sole director, have
approved and adopted the Merger Agreement. The business address of the Major
Shareholder is 405 Park Avenue, New York, New York 10022.
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<PAGE>
Union Capital was formed in Nevada on June 28, 1976. The Major Shareholder
owns all of the capital stock of Union Capital. Union Capital has no
significant assets or liabilities, other than the Company Common Stock. The
address of the principal business office of Union Capital is 40 Highland
Drive, West Caldwell, New Jersey 07006.
The Major Shareholder is the Chairman of the Board, President and Chief
Executive Officer of the Company. The Major Shareholder has been the Chief
Executive Officer of the Company for more than the preceding five years.
DESCRIPTION OF COMPANY CAPITAL STOCK
Common Stock. Of the 20,000,000 shares of Company Common Stock, $1.00 par
value, which the Company is authorized to issue, [5,877,948] shares of Company
Common Stock were, as of August 7, 1995, outstanding and held by approximately
[1,250] shareholders of record.
Holders of the Company Common Stock are entitled to one vote per share on
all matters to be voted upon by the shareholders. Common shareholders are
entitled to receive such dividends as may be declared from time to time by the
Board out of funds legally available therefor. In the event of liquidation,
dissolution, or winding up of the Company, the holders of Company Common Stock
are entitled to share ratably in all assets remaining after payment of
liabilities, have no preemptive or conversion rights and are not subject to
further call or assessment by the Company. There are no redemption or sinking
fund provisions applicable to the Company Common Stock. The Company Common
Stock currently outstanding is validly issued, fully paid and nonassessable.
Preferred Stock. Of the 5,000,000 shares of Company Preferred Stock, $1.00
par value, which the Company is authorized to issue, [242,334] shares of
Company Preferred Stock were, as of August 7, 1995, outstanding and held by
approximately [125] shareholders of record.
Holders of the Company Preferred Stock are entitled to a 1/10 vote per share
on all matters to be voted upon by the shareholders.
RECENT MARKET PRICES; DIVIDEND HISTORY
Recent Market Prices. The Company Common Stock is traded principally on the
NYSE. The following table sets forth, for the fiscal periods indicated, the
high and low sales prices per share of Company Common Stock on the NYSE:
<TABLE>
<CAPTION>
HIGH LOW
----- -----
<S> <C> <C>
1993:
First Quarter.................................................. 3 3/4 3
Second Quarter................................................. 3 1/2 2
Third Quarter.................................................. 3 1/4 2 1/4
Fourth Quarter................................................. 2 7/8 2 3/8
1994:
First Quarter.................................................. 3 3/8 2 3/8
Second Quarter................................................. 3 2 3/8
Third Quarter.................................................. 2 5/8 2 1/4
Fourth Quarter................................................. 3 1/2 2 3/8
1995:
First Quarter.................................................. 4 3 3/4
Second Quarter................................................. 3 7/8 3 1/2
Third Quarter (to date) ....................................... 3 3/4 3 1/2
</TABLE>
34
<PAGE>
On October 31, 1994, the last trading day prior to the public announcement
of the Major Shareholder's proposal to purchase Company Common Stock held by
Public Common Shareholders for $3.25 per share, the closing sales price for
the Company Common Stock was $2.875. On March 20, 1995, the last trading day
prior to the public announcement of (i) the approval by the Board of the
Merger Agreement and (ii) the increase by the Major Shareholder of the offered
price to $4.25 per share, the closing sales price for the Company Common Stock
was $3.00. On March 28, 1995, the last trading day prior to the public
announcement of the signing of the Merger Agreement, the closing sales price
for the Company Common Stock was $3.875. Shareholders are advised to obtain
current market quotations for the Company Common Stock.
The Company Preferred Stock trades, on a limited and sporadic basis, in the
over-the-counter market. The Company contacted the NASD regarding trading in
the Company Preferred Stock. The Company was unable to obtain any information
concerning trading in the Company Preferred Stock for fiscal year 1993 but was
provided with the following information, for the fiscal periods indicated:
<TABLE>
<CAPTION>
HIGH BID LOW BID
-------- -------
<S> <C> <C>
1994:
First Quarter............................................. -- --
Second Quarter............................................ 3 --
Third Quarter............................................. 3 2 3/4
Fourth Quarter............................................ 3 2 3/4
1995:
First Quarter............................................. 3 2 3/4
Second Quarter............................................ 3 3
Third Quarter (to date)................................... 3 3
</TABLE>
On March 27, 1995, the last trading day prior to the public announcement of
the signing of the Merger Agreement for which a bid price was reported, the
Company Preferred Stock was quoted at a bid of $3.00.
Dividends During Past Two Years: The Company pays dividends on a quarterly
basis and currently there are no restrictions on the payment of such
dividends. The Company declared and paid dividends on each share of Company
Stock as follows for the years ended 1994 and 1993 and for the first two
quarters of 1995:
<TABLE>
<CAPTION>
FIRST TWO QUARTERS
1994 1993 OF 1995
---- ---- ------------------
<S> <C> <C> <C>
Common Stock.................................... $.06 $.06 $.0015
Preferred Stock................................. $.30 $.30 $ .075
</TABLE>
If the Merger is not consummated for any reason, the payment of any future
dividends will be determined by the Board in view of the results of the
Company's operations, its financial condition and other factors. If the Merger
is consummated, present holders of the Company Common Stock (other than the
Major Shareholder and its affiliates) will have no continuing interest in the
business of the Company.
BUSINESS OF THE COMPANY
OVERVIEW
Mickelberry Corporation is a holding company, incorporated in Delaware in
1926, with marketing services businesses consisting of advertising agencies,
sales promotion businesses, and commercial printers. Each subsidiary operates
autonomously, drawing on the parent company for strategic and financial
support. Strong emphasis is placed on individual initiative and enterprise.
The Company conducts an active acquisition and corporate development program.
35
<PAGE>
PRINTING
The Company, through its subsidiaries Sandy Alexander, Inc. and Modern
Graphic Arts (the "Printing Segment" or "Segment") is a commercial printer
specializing in high-quality color reproduction.
High-quality lithography, also referred to as fine color printing, refers to
the top quality range of commercial printing, such as required by specialty
retailers for catalogs, public companies for annual reports, and a wide
variety of commercial enterprises for advertising and promotional materials.
Four, five, six and even eight colors may be used for detailed reproduction
and accurate color rendition and consistent tone. Quality paper which may
include gloss and coating and a variety of textures and weights are normally
associated with fine color printing.
The Company's Printing Segment provides a full range of capabilities serving
the fine color printing market. The Segment also prints small-run publications
for the publishing industry and a variety of products for the direct-mail
industry.
Two production facilities include a complete spectrum of graphic arts
skills. For pre-production, color separation and pre-press operations the
Segment employs a unique blend of computerized digital equipment and laser
scanning and imaging systems. Press room facilities include six web and six
sheet fed presses. Complete prep, platemaking and bindery departments are also
maintained. In-line finishing capabilities, including cutting, gluing,
perforating and folding finished product, are an important element of post
press services. The Company also provides a separate fulfillment center for
storage and distribution of printed and other material.
The commercial printing industry is fragmented and highly competitive.
According to the U.S. Department of Commerce there are 37,000 commercial
printers in the U.S. market providing shipments of an estimated $56 billion
annually. North American Publishing Co., a publisher of printing industry
magazines and books produces a listing of the 500 largest printers, based on
revenues, in the market. For 1994, the largest printer had revenues of $4.4
billion and the 500th largest had revenues of $9.6 million. Based on this
listing the Company's combined printing business ranks 82nd in revenues for
that year.
Competition in the printing industry is based on quality of work, service,
in the form of ability to accommodate special needs of clients, location and
price. The Company's larger printing facility is located in the New York
metropolitan area. This location affords the Company access to a highly
skilled work force and proximity to the largest printing customers in the
market. The Company's printing facilities are well equipped with state of the
art machinery. Accordingly, the Company competes effectively on the basis of
quality and service. The New York area, however, is also a high cost
environment. Accordingly, where price is the major buying consideration, the
Company's New York facility has difficulty competing with printers in lower
cost regions. The Company's St. Petersburg facility is located in a lower cost
area and is able to compete more effectively on the basis of price.
The Printing Segment employs 28 full-time salespeople, 23 of whom are
located in the Northeast, 1 in the Midwest and 4 in the Southeast.
Principal raw materials used in fine color printing are paper and ink. In
recent years, supplies of such materials have been readily available. However,
during the second half of 1994, as economic conditions improved, suppliers of
paper increased prices substantially and, in certain instances, established
limits on purchases. As a significant customer, the Printing Segment was able
to acquire the product it needed. In addition, the Segment keeps an inventory
of a wide variety of paper and ink products.
The Printing Segment accounted for 64% of consolidated revenues in 1994.
ADVERTISING AND PROMOTION
The Company's Advertising and Promotion segment consists of two advertising
agencies, a sales promotion agency and a company involved in marketing
tableware products.
36
<PAGE>
Partners & Shevack, Inc., with offices in New York City and Bender,
Browning, Dolby & Sanderson Advertising, Inc., with offices in Chicago and
Milwaukee are each full service advertising agencies. They serve a broad range
of clients and plan, create, produce and place advertising in various media
such as television, radio, newspapers and magazines. They also offer
additional services including marketing consultation and research, design and
production of merchandising and promotional materials, direct marketing
capabilities and public relations.
Partners & Shevack was formed through the consolidation of four separate
agencies acquired beginning in 1980. Its major clients include: American Home
Products Corporation, Church & Dwight, Co., Inc., National Westminster
Bancorp, Pfizer, Reckitt & Colman, Inc., The Scotts Company, Dutch Boy Paints
and KLM Royal Dutch Airlines.
Bender, Browning, Dolby & Sanderson was acquired in 1985. It counts among
its clients Amoco Chemical Corp., Country Companies Insurance, Midwest Express
Airlines and Prime Option MasterCard.
The principal sources of the advertising agencies' revenues are commissions
and fees on gross media and production costs.
Commissions are earned on advertising placed with the various media. The
agencies receive production commissions for the preparation and production of
ads. The agencies may charge fees in lieu of media and production commissions.
Federal, State and local governments and their agencies and various consumer
groups have directly or indirectly affected or attempted to affect the scope,
content and manner of presentation of advertising. The continued activity by
government and by consumer groups regarding advertising may cause further
changes in domestic advertising practices in the future.
The Company's promotion agency, Ventura Associates International, Inc., is
involved in the design and administration of all styles of sales promotion
programs including sweepstakes, games, contests, premiums, sales incentives
and rebates. Such programs are widely employed by many businesses to interest
consumers in their products, or to serve as incentives for their employees and
agents. Ventura's creative, account executive and administrative personnel
work closely with its clients in creating and completing a wide variety of
programs.
The Company's advertising and promotion businesses operate in the highly
competitive marketing industry. According to Value Line, U.S. companies spend
$148 billion annually marketing their products. The Agency Red Book lists
4,800 advertising agencies of which 2,900 have billings in excess of $1
million annually. The U.S. Department of Commerce estimates that media
advertising billings amount to about $37 billion annually.
The Company's advertising agencies are considered medium sized. The industry
includes 21 agencies each with annual billings in excess of $1 billion, world-
wide. The Company's agencies each have billings of between $35 million and
$200 million. There are an estimated 4,300 agencies with annual billings under
$25 million.
Competition in the advertising agency business is based on creativity and
client service. Certain large consumer advertisers also require an agency to
have a presence in numerous geographic areas. The Company believes that its
agencies provide creative products and afford client service at the highest
levels. Accordingly, they can compete with agencies much larger in size.
Indeed, size becomes a competitive advantage since the Company's agencies
provide each of their clients with access to the firm's best talent. At a
larger agency, some of these clients would be served by a less experienced
staff. Because of the Company's size, however, certain national and
international advertisers may not consider employing them.
Advertising agencies contract with their clients to serve as agency of
record for specific products or services. These contracts can be terminated on
relatively short notice. The loss of one or more product assignments would be
detrimental to the Company's advertising agencies. In the sales promotion
company clients are served on an assignment basis.
37
<PAGE>
The Excel Marketing Group is engaged in designing, importing and marketing
stainless steel and silverplate flatware and other tableware products under
its own brand, Retroneu(R), and through a licensing agreement under the
Farberware(R) name. Major customers include Bloomingdales, Marshalls and
Lechters.
The retail tabletop market was approximately $3.5 billion in 1992. Excel
competes with many better-known and larger companies in the tabletop industry.
Competition is based on product quality, price and service.
Excel's products are imported from the Orient, principally Korea and China.
Excel has established agreements with manufacturers and merchandise has been
available as needed.
During 1994, Excel's traditional dinnerware continuity promotions suffered
from a lack of consumer and retailer interest. In an attempt to revive these
programs, the Company entered into an agreement to sell licensed products in
connection with the promotions. The licensed products promotions were not
successful.
The Advertising and Promotion segment accounted for 36% of consolidated
revenues in 1994.
GENERAL
None of the Company's customers accounted for 10% of consolidated revenues
for any of the three years ended December 31, 1994.
The Company employed 657 individuals as of December 31, 1994.
The Company conducts an active corporate development program. Potential
acquisition candidates are identified via screening of public information and
through the Company's knowledge of the industries in which it operates. In
addition, the Company receives information from investment bankers and other
intermediaries concerning businesses which are for sale.
38
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected historical financial information for
the Company and its subsidiaries for each of the five years in the period
ended December 31, 1994. The following information should be read in
conjunction with "Management's Discussion and Analysis of Results of
Operations and Financial Condition", and the Consolidated Financial Statements
and related Notes that are included elsewhere in this Proxy Statement.
MICKELBERRY COMMUNICATIONS INCORPORATED
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, AS OF AND FOR THE FISCAL YEARS ENDED DECEMBER 31,
-------------------- -----------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
--------- --------- --------- --------- --------- --------- ---------
IN THOUSANDS (EXCEPT PER SHARE)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues
Tangible products....... $ 25,720 $ 23,064 $ 106,637 $ 100,095 $ 81,273 $ 68,291 $ 64,719
Services................ 5,465 4,497 20,986 18,849 27,971 37,301 35,814
--------- -------- --------- --------- --------- --------- ---------
$ 31,185 $ 27,561 $ 127,623 $ 118,944 $ 109,244 $ 105,592 $ 100,533
========= ======== ========= ========= ========= ========= =========
Income
Tangible products....... 1,248 488 $ 1,739 $ 3,891 $ 3,822 $ 2,703 $ 3,221
Services................ 273 (62) 1,748 684 1,065 2,491 1,155
--------- -------- --------- --------- --------- --------- ---------
1,521 426 3,487 4,575 4,887 5,194 4,376
Unallocated amounts..... (463) (426) (1,582) (2,148) 2,779 (1,285) (3,546)
Interest expense........ (483) (492) (1,990) (2,172) (2,083) (2,235) (2,629)
--------- -------- --------- --------- --------- --------- ---------
Income (loss) before
taxes.................. 575 (492) (85) 255 5,583 1,674 (1,799)
Income taxes (benefits). 230 (197) (34) 101 2,233 670 (2,447)
--------- -------- --------- --------- --------- --------- ---------
Income (loss) before
extraordinary item and
cumulative effect of
change in accounting... 345 (295) (51) 154 3,350 1,004 648
Extraordinary item...... -- -- -- (1,134) -- --
Cumulative effect of
change in accounting... -- -- -- 200 -- -- --
--------- -------- --------- --------- --------- --------- ---------
Net income (loss)....... $ 345 $ 295 $ (51) $ 354 $ 2,216 $ 1,004 $ 648
========= ======== ========= ========= ========= ========= =========
Income (loss) per share
Primary
Income (loss) before
extraordinary item and
cumulative effect of
change in accounting.. $ .06 $ (.05) $ (.02) $ .02 $ .55 $ .16 $ .10
Extraordinary item...... -- -- -- -- (.19) -- --
Cumulative effect of
change in accounting... -- -- -- .03 -- -- --
--------- -------- --------- --------- --------- --------- ---------
Net income (loss)....... $ .06 $ (.05) $ (.02) $ .05 $ .36 $ .16 $ .10
========= ======== ========= ========= ========= ========= =========
Fully diluted
Income (loss) before
extraordinary item and
cumulative effect of
change in accounting.. $ .05 $ (.05) $ (.02) $ .02 $ .49 $ .16 $ .10
Extraordinary item...... -- -- -- -- (.16) -- --
Cumulative effect of
change in accounting... -- -- -- .03 -- -- --
--------- -------- --------- --------- --------- --------- ---------
Net income (loss)....... $ .05 $ (.05) $ (.02) $ .05 $ .33 $ .16 $ .10
========= ======== ========= ========= ========= ========= =========
Cash dividends per
common share........... $ .015 $ .015 $ .06 $ .06 $ .06 $ .06 $ .06
Cash dividends per
preferred share........ $ .075 $ .075 $ .30 $ .30 $ .30 $ .30 $ .30
Total assets............ $ 104,693 $ 97,995 $ 100,456 $ 97,242 $ 88,631 $ 85,378 $ 79,528
Long term obligations... $ 20,113 $ 21,276 $ 20,703 $ 21,528 $ 22,511 $ 17,325 $ 14,736
Total Equity............ $ 35,056 $ 35,081 $ 34,773 $ 35,499 $ 35,605 $ 33,803 $ 33,214
Ratio of earnings to
fixed charges(1)....... 219.05% 0% 96.17% 117.11%
Book value per share.... $ 5.32 $ 5.33 $ 5.28 $ 5.36 $ 5.38 $ 5.53 $ 5.44
</TABLE>
--------
(1) For purposes of computing the ratio of earnings to fixed charges, earnings
coverage represents the sum of income from continuing operations before
income taxes plus fixed charges. Fixed charges represent interest paid or
accrued on indebtedness of the Company.
39
<PAGE>
During 1994 the Company recorded a $2.5 million charge to reduce certain
inventory of the Excel Marketing Group to net realizable values. Also in 1994,
a $1.0 million charge (of which the Company's share is $500,000) was recorded
to adjust the inventory and allowance for returns of Excel Plus, Ltd. a
company in which the Excel Group owns 50%. (See Note 2 of the Notes to
Consolidated Financial Statements.)
In 1993, the Company acquired the Excel Group of companies. (See Note 2.)
During 1992, the Company sold Caribiner, Inc. (See Note 3.) Operating results
for these businesses are included only for the periods during which the
Company owned them. Effective January 1, 1993, the Company changed its method
of accounting for income taxes and recorded a $200,000 effect on income. (See
Note 1.)
Included in unallocated amounts are: for 1993, loss on an investment; for
1992, gain on sale of a business; and for 1991 adjustment to an investment.
(See Notes 3 and 5.) In 1990, the Company recorded a $2.8 million loss on an
investment which is included in unallocated amounts. Income for 1990 also
includes a $2 million adjustment to tax liabilities.
In 1992, as a result of retiring an issue of subordinated debentures, the
Company recorded an extraordinary loss of $1,134,000.
Total equity reflects asset values at historic cost or amortized historic
cost where appropriate (e.g. for property, plant and equipment) (see
Consolidated Balance Sheets and accompanying notes in the financial statements
included elsewhere in this proxy statement). Book values per share are
calculated based on total equity adjusted to include the conversion of the
Convertible Debentures divided by the sum of outstanding Company Stock and the
Company Common Stock deemed to have been issued upon conversion of the
Convertible Debentures. Total equity and book value per share would change if
the fair values of the Company's property, plant and equipment were different
from amortized historic cost and such fair values were substituted for
amortized historic cost in the Company's balance sheets. The Company did not
have its property, plant and equipment appraised to determine what change, if
any, in total equity and book value per share might result from such
substitution of values. Nevertheless, the Company's management does not
believe that the fair values of the Company's property, plant and equipment
would differ materially from amortized historic cost. The reasons for
management's belief are described below.
The Company's property, plant and equipment at March 31, 1995 and December
31, 1994 are summarized as follows:
<TABLE>
<CAPTION>
MARCH 31, 1995 DECEMBER 31, 1994
-------------- -----------------
(IN THOUSANDS)
<S> <C> <C>
Leasehold improvements..................... $ 3,749 $ 3,497
Machinery and equipment.................... 42,736 42,337
-------- --------
Total historic cost........................ 46,485 45,834
Less accumulated depreciation and amortiza-
tion...................................... (20,349) (19,154)
-------- --------
Amortized historic cost.................... $ 26,136 $ 26,680
======== ========
</TABLE>
The balances of machinery and equipment at historic cost can be identified
as printing and non-printing as follows:
<TABLE>
<CAPTION>
MARCH 31, 1995 DECEMBER 31, 1994
-------------- -----------------
(IN THOUSANDS)
<S> <C> <C>
Printing................................... $ 37,710 $ 37,501
Non-printing............................... 5,026 4,836
-------- --------
$ 42,736 $ 42,337
======== ========
</TABLE>
40
<PAGE>
As disclosed above, the Company's property, plant and equipment consists of
leasehold improvements, printing equipment and equipment for non-printing
businesses. The Company does not own any real property.
The Company's management has determined in its reasonable judgment that, as
a general rule, the fair value of leasehold improvements and non-printing
equipment would not exceed amortized historic cost. Leasehold improvements are
attached to the leased property and cannot be sold separate and apart from the
leased property. In most instances any value of the improvements becomes the
property of the landlord.
Non-printing equipment consists of furniture and office equipment including
computer and other electronic data processing and communication devices.
Although valuable to the ongoing businesses, these assets have limited demand
on the resale market.
The Company's printing machinery and equipment is of high quality and well
maintained. However, the market for used printing equipment has been and
remains soft. The printing industry is experiencing a consolidation which has
resulted in a surplus of equipment available for sale. Accordingly, the
Company's management does not believe that the fair value of the Company's
printing machinery and equipment would exceed amortized cost.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
RESPONSIBILITY FOR FINANCIAL STATEMENTS
Management has prepared and is responsible for the consolidated financial
statements and related financial information included in this report. These
financial statements were prepared in accordance with generally accepted
accounting principles which are consistently applied and appropriate in the
circumstances. The statements necessarily include amounts based on
management's best judgment and estimates.
The Company maintains accounting and other control systems, including
internal audits of its subsidiary operations to provide reasonable assurance
that assets are safeguarded and that the books and records reflect the
authorized transactions of the Company. Underlying the concept of reasonable
assurance is the premise that the cost of control should not exceed the
benefit. Management believes that the Company's accounting and other control
systems appropriately recognize this cost/benefit relationship.
The Company's independent accountants, KPMG Peat Marwick, LLP, provide an
independent objective assessment of the degree to which management meets its
responsibility for fairness in financial reporting. They evaluate the
Company's system of internal accounting control in determining the nature and
extent of audit tests and perform such tests and other procedures as they deem
necessary to reach and express an opinion on the financial statements. The
report of KPMG Peat Marwick appears on page F-2.
The Audit Committee of the Board is responsible for reviewing and monitoring
the Company's financial reports and accounting practices. The Audit Committee,
consisting of three non-management directors, meets to discuss audit and
financial reporting matters with representatives of management, the internal
auditor and the independent accountants. The internal auditor and the
independent accountants have direct access to the Audit Committee.
GENERAL
The Company's financial statements reflect the acquisition of a business,
the sale of a business, write-down of an investment, accounting changes and an
extraordinary item. (See Notes 2, 3, 4, 5, 7 and 13 of the Notes to
Consolidated Financial Statements.) These transactions affect the
comparability of the financial statements presented.
41
<PAGE>
RESULTS OF OPERATIONS
Consolidated revenues were $31.2 million in the first quarter of 1995, a 13%
increase over the $27.6 million of revenues recorded in the first quarter of
1994. Revenue increased in both the advertising and promotion and printing
segments representing, for each segment, greater volume of business.
Equity in pre tax earnings of Excel Plus, the Excel Marketing Group's
European joint venture was a loss of $127,000 in the first quarter of 1995
compared with a break-even in 1994.
Operating income was $892,000 in the first quarter of 1995 compared with a
loss of $158,000 in 1994. The improvement in operating income results from the
increased volume of business mentioned above, better margins in the printing
business and reduced losses for the Excel Marketing Group. The Excel Marketing
Group lost money in both the first quarter of 1995 and 1994. These losses
include the Group's equity in the earnings (loss) of Excel Plus. The losses
are lower in 1995 since a smaller portion of the business relates to
supermarket continuity programs.
Pre tax income was a profit of $575,000 for the first quarter of 1995
compared with a loss of $492,000 in 1994. The improvement in pre tax income
mirrors the improvement in operating income discussed above.
Consolidated
Consolidated revenues were $127.6 million in 1994, an increase of $8.7
million over 1993 revenues of $118.9 million. The Excel Marketing Group, was
acquired in 1993, and included in operating results for 10 months. Comparing
1994 and 1993 revenues by including a full year's operations for Excel in
1993, revenues would have increased by $4.7 million in 1994. Most of this
increase results from higher revenues in the advertising and promotion
segment.
Revenues were $118.9 million in 1993, an increase of $9.7 million over 1992
revenues of $109.2 million. Excluding the Excel Marketing Group and Caribiner,
Inc., which was sold in 1992, revenues were $99.4 million in 1993, and $101.6
million in 1992. The $2.2 million decline in revenues in 1993 principally
reflects lower revenues in the advertising and promotions segment.
Operating income was $1.2 million in 1994 and $2.7 million in 1993.
Adjusting to include Excel for all of 1993, operating income would have been
$2.6 million. The decline in operating income in 1994 results from poor
performance for the Excel Group which lost $3.6 million as compared with a
break-even in 1993.
Operating income was $2.7 million in 1993 and 1992. Excluding the operations
of the Excel Group in 1993 and Caribiner in 1992, operating income was $2.7
million in 1993 and $2.4 million in 1992. This increase results from slightly
improved margins in the printing segment.
See below for a discussion of operating results by industry segment.
Income (loss) before taxes, extraordinary item and cumulative effect of
change in accounting principle was a loss of $85,000 in 1994 and income of
$255,000 in 1993. This decline in pretax results includes the reduction in
operating income discussed above, partially offset by an improvement in other
income and expense. In 1993, other expense reflected the write-down of an
investment in a company engaged in the record industry. See Note 5 of the
Notes to Consolidated Financial Statements.
Income before taxes, extraordinary item and change in accounting principle
was $255,000 in 1993 and $5.6 million in 1992. The principal reasons for this
decrease in pretax income are a decrease in investment income, an increase in
other expenses and the $3.2 million gain on the sale of Caribiner recognized
in 1992. The decrease in investment income results from a one-time gain on the
sale of a temporary investment in 1992. The increase in other expenses
reflects the write-down of an investment in a record company.
42
<PAGE>
See Note 13 of the Notes to Consolidated Financial Statements for an
analysis of income tax provisions for the years 1994, 1993 and 1992.
As of January 1, 1994, the Company changed its method of accounting for
temporary investments in order to comply with the provisions of Statement of
Financial Accounting Standards No. 115, Accounting for Certain Investments in
Debt and Equity Securities ("SFAS 115"). Pursuant to SFAS 115, in 1994 an
unrealized loss on certain investments was recognized via an adjustment to
stockholders' equity. This adjustment did not affect net income. For 1993 and
1992, the Company accounted for these investments at the lower of cost or
market with any resulting adjustments included in net income. See Note 7 of
the Notes to Consolidated Financial Statements.
Effective January 1, 1993, the Company changed its method of accounting for
income taxes. In connection with this change, $200,000 of income, representing
the cumulative effect of this change as of that date, was recorded. See Note
13 of the Notes to Consolidated Financial Statements.
In 1992, the Company retired the remaining balance of its issue of 11.5%
Subordinated Debentures resulting in an extraordinary loss of $1.1 million.
See Note 4 of the Notes to Consolidated Financial Statements.
By Industry Segment
Note 15, Business Segment Information, of the Notes to Consolidated
Financial Statements shows revenues and income before taxes for each of the
Company's industry segments for the three years ended December 31, 1994.
Income amounts include investment income and other expense and income in the
industry segment to which they apply but exclude equity in income or loss of
an affiliated company.
Revenues for the advertising and promotion segment were $46.4 million in
1994 an increase of $8.1 million over 1993. Adjusting 1993 revenues to include
a full year for the Excel Marketing Group, revenues increased by $4.1 million
in 1994. This increase reflects greater advertising expenditures by clients of
the Company's advertising subsidiaries and sales growth for the Farberware
flatware and dinnerware products at Excel.
For this segment, revenues increased to $38.4 million in 1993 from $28
million in 1992. Excluding the Excel Marketing Group and Caribiner, revenues
were $18.8 million in 1993 and $20.3 million in 1992. This reduction results
from a decrease in sweepstakes prizes, in the sales promotion business.
In 1994, the advertising and promotion segment recognized a pretax loss of
$876,000 as compared with profit of $613,000 in 1993. Excluding the effects of
investment and other income but including the Company's equity in earnings and
loss of an affiliated Company, the segment lost $2.1 million in 1994 and
earned $547,000 in 1993. This significant change results from operations at
the Excel Marketing Group.
During 1994, Excel's traditional dinnerware continuity promotions suffered
from a lack of consumer and retailer interest. In an attempt to revive these
programs, the Company entered into an agreement to sell licensed products in
connection with the promotions. The licensed products promotions were not
successful.
The Excel Group's joint venture in Europe, Excel Plus Ltd., also experienced
difficult market conditions in 1994 and recognized a loss for the period. For
both its US and European operations the Company recorded adjustments to
inventory values and to the allowance for returns. See Note 2 of the Notes to
Consolidated Financial Statements. In March 1995, the Company was informed by
the other 50% owner of Excel Plus Ltd. that it may want to terminate the joint
venture agreement. The Company is engaged in discussions with the other owner
as to the liquidation of assets and liabilities as well as the future of the
joint venture. Management does not believe that resolution of the uncertainty
regarding this joint venture will have a material effect on the Company.
The inclusion of the results of the Excel Marketing Group for 10 months in
1993 did not materially affect the comparability of pretax income between 1994
and 1993.
43
<PAGE>
Pretax income in the advertising and promotion segment was $.6 million in
1993 and $1.1 million in 1992. Excluding the Excel Marketing Group, Caribiner
and the effects of investment income and other income and expense, income was
$.5 million in 1993 and $.6 million in 1992.
In the printing segment, revenues were $81.2 million in 1994 as compared
with $80.6 million in 1993. This modest increase in revenues reflects a
continuing softness in the market for high quality commercial printing. In
addition, in 1994 the Company installed two finishing lines at its St.
Petersburg, Florida facility and dismantled a web press at the Clifton, New
Jersey plant. During the periods when this work was being performed,
productive capacity was reduced.
Revenues were $80.6 million in 1993 as compared with $81.3 million in 1992.
This decline reflects a soft market. Pricing was extremely competitive since
there was excess printing capacity in the market.
Income for the printing segment was $5.3 million in 1994 and $4.0 million in
1993. Investment income and other income and expense had no effect on these
amounts. The improvement in earnings in 1994 includes better pricing and more
efficient production. It also reflects an adjustment to a self insured medical
reserve and inventory profits recognized when paper prices increased
dramatically in the second half of the year.
Income for the segment was $4.0 million in 1993 and $3.8 million in 1992.
Investment income and other income and expense had no effect on these amounts.
The slight increase in income in 1993 results from improvements in production
efficiencies in the Company's St. Petersburg, Florida facility.
FINANCIAL CONDITION
The Company's financial position as of March 31, 1995 is shown in the
unaudited Consolidated Balance Sheets. The major change in the Company's
financial condition at March 31, 1995 compared to December 31, 1994 is the
increase in non cash working capital and a corresponding decrease in cash and
temporary investments. Inventory balances increased by $7.8 million during the
first quarter. These increases were principally in the printing segment and
result from increased business in printing corporate annual reports.
As of March 31, 1995 the Company had not yet borrowed money to finance the
additions to property, plant and equipment made in 1994. The Company expects
to finance these additions which will increase cash and temporary expenditures
by about $5 million.
The Company's financial position as of December 31, 1994 and 1993 is shown
in the Consolidated Balance Sheets. Note 15, Business Segment Information,
discloses identifiable assets by industry segment. The Consolidated Statements
of Cash Flows for the three years ended December 31, 1994 shows increases and
decreases in cash resulting from operating, investing and financing
activities.
Liquidity
The Company had cash and temporary investments of $9.4 million at December
31, 1994, compared with $13.2 million at the end of 1993. The decline in cash
and temporary investments in 1994 results from payments made for additions to
property, plant and equipment. The Company expects to borrow money to finance
some of these expenditures, bringing cash and temporary investments balances
back to the year-end 1993 level. After completing this financing, cash and
temporary investments will exceed the current needs of ongoing operations. It
is management's intention to invest these funds in new businesses or to expand
existing subsidiaries. The Company may also use some of the cash and temporary
investments to fund a proposed merger transaction. See Note 17 of the Notes to
Consolidated Financial Statements.
Working capital was $18.1 million at December 31, 1994, compared with $21.9
million at December 31, 1993. The Company's working capital balances and
ratios are affected by its advertising businesses. The full amounts of an
advertising agency's receivables and payables are recorded as assets and
liabilities while only the
44
<PAGE>
commission portion of the billings is shown as revenues. The Excel Group uses
a line of credit to finance the acquisition of flatware and dinnerware
inventories.
Capital Reserves
The Company's advertising and promotion segment is not capital intensive,
but the printing segment does require a continuing expansion and upgrading of
equipment. The Company's capital needs for these existing businesses are
satisfied through operations. In addition, equipment acquisitions can be
arranged through many sources of debt or lease financing.
Long-term debt was 37% and 38% of the Company's total capitalization as of
December 31, 1994 and 1993, respectively.
The Company was committed to acquire $1.7 million of property, plant and
equipment at December 31, 1994. The Company expects to finance these
expenditures with loans secured by the equipment.
INFLATION
Inflation has influenced the Company's financial position and operations.
Some of the revenues reflected in the Consolidated Statements of Income are
simply higher prices and do not represent increased activity. These revenues
are, to a degree, offset by increased expenses which also simply reflect
higher costs. Depreciation expense, however, is not adjusted currently to
reflect increased equipment costs. Since much of the Company's equipment is
relatively new, the potential distortion to depreciation expense is not
significant. It has been the Company's experience that new equipment
incorporates productivity savings which offset increased depreciation costs.
45
<PAGE>
BENEFICIAL OWNERSHIP OF SHARES OF THE COMPANY
The following table sets forth to the best of the Company's knowledge, the
beneficial ownership of voting securities, as of March 13, 1995, with respect
to (i) each person or group known to the Company to own more than 5% of the
outstanding Shares and (ii) each director and executive officer of the
Company. Unless otherwise indicated in the footnotes following the table, the
person as to whom the information is given has sole voting and investment
power over the Shares indicated as beneficially owned.
Each person listed below is a citizen of the United States. Unless otherwise
indicated, the business address of each person listed below is 405 Park
Avenue, New York, New York 10022.
<TABLE>
<CAPTION>
PERCENTAGE OF
TITLE OF CLASS NAME OF BENEFICIAL OWNER NUMBER OF SHARES(1) CLASS
-------------- ------------------------ ------------------- -------------
<S> <C> <C> <C>
Common Stock............ James C. Marlas 3,826,903(2) 55.3%
Lindner Dividend Fund 1,302,588(3) 18.1%
7711 Carondelet Avenue
P.O. Box 16900
St. Louis, MO 63105
Dimensional Fund Advisors, Inc. 362,250 6.2%
1299 Ocean Avenue
Suite 650
Santa Monica, CA 90401
George Kane 89,997(4) 1.3%
Bernard S. White 44,102(5) *
Gregory J. Garville 36,325(6) *
C. Gordon Murphy 12,000(7) *
Frank Stillo 11,250(8) *
Robert Garrett 11,070(9) *
Mel Gordon 10,400(10) *
John C. Mickle 10,600(11) *
Fred T. Pugliese 13,583(12) *
Preferred Stock......... Karla Davis 14,472 6%
4033 Santa Barbara
Dallas, TX 75214
Catherine Neuhoff Dickson 21,400 8.8%
2645 Vista Del Arroyo
San Angelo, TX 76904
Henry Neuhoff III 15,793 6.5%
12008 Fieldwood Lane
Dallas, TX 74234
Robert Vincent Neuhoff 15,919 6.6%
4710 Dorset Road
Dallas, TX 75229
</TABLE>
--------
(1) Unless noted otherwise all shares presented are beneficially owned by the
listed owners in terms of both voting and investment power.
46
<PAGE>
(2) 1,974,065 of these shares are held in the name of Union Capital
Corporation, of which Mr. Marlas is the sole stockholder. Mr. Marlas is
the holder of $4,200,000 in principal amount of the Company's 8%
Convertible Subordinated Debentures due May 2002. The convertible
subordinated debentures are convertible into the Company's Common Stock,
par value $1, at any time at a price of $4.25 per share. Accordingly,
988,235 of the shares beneficially owned represent the shares which may
be acquired upon conversion of those debentures. An additional 50,000
shares represent exercisable options (which were granted in 1992 under
the Company's 1981 Incentive Stock Option Plan), and 203,000 shares
represent shares held for Mr. Marlas' benefit in qualified retirement
plans.
(3) Lindener Dividend Fund, Inc. is the beneficial owner of $5,536,000 in
principal amount of the Company's 8% Convertible Subordinated Debentures
due May 2002. Accordingly, all of the Shares beneficially owned represent
the shares which may be acquired upon conversion of those debentures.
(4) includes 32,500 exercisable options.
(5) includes 10,000 exercisable options.
(6) includes 30,000 exercisable options.
(7) includes 10,000 exercisable options.
(8) includes 10,000 exercisable options.
(9) includes 10,000 exercisable options.
(10) includes 10,000 exercisable options.
(11) includes 10,000 exercisable options.
(12) includes 9,000 exercisable options.
* Less than one percent.
The following table sets forth to the best of the Company's knowledge, any
purchases of Company Stock made by the Company or any affiliate since January
1, 1993:
<TABLE>
<CAPTION>
PRICE/ AVERAGE
DATE OF IDENTITY PER PURCHASE
FILING FORM # SECURITY DATE TYPE OF PURCHASER # SHARES SHARE PRICE
------- ------ -------- ------- ---- ------------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
8.2.94 4 Common 7.5.94 Direct Purchase Mr. James C. Marlas 500 $2.50 $2.438
Common 7.11.94 Direct Purchase Mr. James C. Marlas 4000 2.375 2.438
Common 7.13.94 Direct Purchase Mr. James C. Marlas 1000 2.50 2.438
Common 7.15.94 Direct Purchase Mr. James C. Marlas 200 2.50 2.438
Common 7.18.94 Direct Purchase Mr. James C. Marlas 100 2.50 2.438
Common 7.19.94 Direct Purchase Mr. James C. Marlas 3000 2.50 2.438
7.11.94 4 Common 6.20.94 Direct Purchase Mr. James C. Marlas 2000 2.50 2.688
Common 6.21.94 Direct Purchase Mr. James C. Marlas 2500 2.50 2.688
6.8.94 4 Common 5.26.94 Direct Purchase Mr. James C. Marlas 1600 2.50 2.688
</TABLE>
CERTAIN TRANSACTIONS IN COMPANY STOCK
During the past 60 days, no transactions in Company Stock were effected by
the persons named in the table set forth above.
PROXY SOLICITATION
Proxies are being solicited by and on behalf of the Board. All expenses of
this solicitation, including the cost of preparing and mailing this Proxy
Statement, will be borne by the Company. In addition to solicitation by uses
of the mails, proxies may be solicited by directors, officers and employees of
the Company in person or by telephone, telegram or other means of
communication. Such directors, officers and employees will not be additionally
compensated, but may be reimbursed for out-of-pocket expenses in connection
with such solicitation. Arrangements will also be made with custodians,
nominees and fiduciaries for forwarding of proxy
47
<PAGE>
solicitation material to beneficial owners of the Company Common Stock held of
record by such persons, and the Company may reimburse such custodians,
nominees and fiduciaries for reasonable expenses incurred in connection
therewith. MacKenzie Partners, Inc. has been engaged to solicit proxies on
behalf of the Company for a fee of $4,000 plus reasonable out-of-pocket
expenses.
CURRENT INFORMATION: DELISTING AND DEREGISTRATION
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith, files reports, proxy statements and other
documents and information with the Commission. The Company officers, directors
and principal shareholders are also presently subject to certain filing
requirements, as well as certain trading restrictions, imposed under the
Exchange Act. Such reports, proxy statements and other documents and
information, as well as the aforementioned Schedule 13E-3, are available for
inspection and copying at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the Regional Offices of the Commission located at Room 3190,
Kuczynsky Federal Building, 230 South Dearborn Street, Chicago, Illinois
60604, and Seven World Trade Center, New York, New York 10048. Copies of such
material may be obtained at prescribed rates by mail addressed to the
Commission's Public Reference Section, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549. The Company's Common Stock is listed on the New
York Stock Exchange, and such material and other information can also be
inspected at the offices of the New York Stock Exchange at 20 Broad Street,
New York, NY 10005.
After the Effective Time, the Company Common Stock will be delisted from the
New York Stock Exchange, registration of the Company Common Stock under the
Exchange Act will terminate and the Company will cease filing reports with the
Commission. Moreover, the Company will be relieved of the obligation to comply
with the proxy rules of Regulation 14A under Section 14 of the Exchange Act,
and its officers, directors and 10% shareholders will be relieved of the
reporting requirements and "short-swing" trading liability under Section 16 of
the Exchange Act.
INDEPENDENT AUDITORS
Representatives of KPMG Peat Marwick, LLP, the Company's independent
auditors, are expected to be present at the Special Meeting and will have an
opportunity to make a statement should they desire to do so. Such
representatives are also expected to be available to respond to questions.
FUTURE SHAREHOLDER PROPOSALS
If the Merger is not consummated, any shareholder who wishes to present a
proposal for inclusion in the Proxy Statement for action at future Annual
Meetings of Shareholders must comply with the rules and regulations of the
Commission then in effect. The date by which such proposals must be received
by the Company for inclusion in the Company's Proxy Statement for the 1995
Annual Meeting has not yet been determined. If the Merger is not consummated,
the Company will inform holders of the Company Common Stock of the date by
which such proposals must be received by the Company for inclusion in the
Company's Proxy Statement for the 1995 Annual Meeting of Shareholders.
OTHER BUSINESS
The Board does not intend to bring any other matters before the Special
Meeting and does not know of any matters to be brought before the Special
Meeting by others. If any other matter should come before the Special Meeting,
it is the intention of the persons named in the accompanying proxy to vote the
proxy on behalf of the shareholders they represent in accordance with their
best judgment.
48
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Financial Statements:
Consolidated Balance Sheets at March 31, 1995 and 1994.................. F-2
Consolidated Statements of Income for the three months ended March 31,
1995 and 1994.......................................................... F-3
Consolidated Statement of Stockholders' Equity for the three months
ended March 31, 1995................................................... F-4
Consolidated Statement of Cash Flows for the three months ended March
31, 1995 and 1994...................................................... F-5
Notes to Consolidated Financial Statements.............................. F-6
Audited Financial Statements:
Report of Independent Accountants....................................... F-8
Consolidated Balance Sheets............................................. F-9
Consolidated Statements of Income....................................... F-10
Consolidated Statements of Stockholders' Equity......................... F-11
Consolidated Statements of Cash Flows................................... F-12
Notes to Consolidated Financial Statements.............................. F-13
Excel Plus Limited Financial Statements................................. F-25
Other:
Quarterly Data.......................................................... F-37
Pro Forma Financial Data................................................ F-38
Condensed Consolidated Balance Sheet (Unaudited)........................ F-39
Condensed Consolidated Statement of Income (Unaudited).................. F-40
Notes to Unaudited Pro Forma Condensed Consolidated Financial
Statements............................................................. F-41
</TABLE>
F-1
<PAGE>
MICKELBERRY COMMUNICATIONS INCORPORATED
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
--------- ------------
IN THOUSANDS
(EXCEPT SHARES AND PAR
VALUES)
<S> <C> <C>
Assets
Current assets
Cash.................................................. $ 157 $ 1,596
Temporary investments................................. 4,380 7,759
Receivables, less allowances for doubtful accounts and
returns--$4,285
(1994--$5,260)....................................... 34,648 32,701
Inventories........................................... 27,864 20,045
-------- --------
Total current assets................................ 67,049 62,101
Intangibles--net...................................... 10,946 11,152
Property, plant and equipment--net.................... 26,136 26,680
Other................................................. 562 523
-------- --------
$104,693 $100,456
======== ========
Liabilities
Current liabilities
Accounts payable...................................... $ 23,467 $ 16,479
Notes payable......................................... 8,537 9,180
Accrued liabilities................................... 11,040 13,222
Income taxes payable.................................. 2,927 2,614
Current portion of long-term debt..................... 2,615 2,547
-------- --------
Total current liabilities........................... 48,586 44,042
Deferred income taxes................................. 938 938
Long-term debt........................................ 20,113 20,703
Stockholders' equity
Preferred stock, par value $1--5,000,000 shares
authorized; 242,000 shares issued (minimum
liquidation preference $727)......................... 242 242
Common stock, par value $1--20,000,000 authorized;
5,878,000 shares issued.............................. 5,878 5,878
Capital............................................... 2,157 2,157
Retained earnings..................................... 27,029 26,790
Cumulative foreign currency translation adjustment.... (54) (56)
Unrealized holding gain (loss)........................ (196) (238)
-------- --------
Total stockholders' equity.......................... 35,056 34,773
-------- --------
$104,693 $100,456
======== ========
</TABLE>
F-2
<PAGE>
MICKELBERRY COMMUNICATIONS INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994
<TABLE>
<CAPTION>
1ST QUARTER
----------------
1995 1994
------- -------
IN THOUSANDS
(EXCEPT PER
SHARE)
<S> <C> <C>
Revenues
Tangible products.......................................... $25,720 $23,064
Services................................................... 5,465 4,497
------- -------
31,185 27,561
Equity in pre-tax earnings (loss of affiliated company)...... (127) --
Costs and expenses
Cost of revenues
Tangible products.......................................... 19,883 18,256
Services................................................... 4,880 4,207
Selling and administrative................................. 5,403 5,256
------- -------
30,166 27,719
======= =======
Operating income (loss)...................................... 892 (158)
Other expense (income)
Interest expense........................................... 483 492
Investment income.......................................... (127) (148)
Other--net................................................. (39) (10)
------- -------
317 334
------- -------
Income (loss) before taxes................................... 575 (492)
Income taxes (benefit)....................................... 230 (197)
Net income (loss)............................................ $ 345 $ (295)
======= =======
Income (loss) per common share
Primary:
Net income (loss).......................................... 0.06 (0.05)
------- -------
Fully diluted:
Net income (loss).......................................... 0.05 (0.05)
------- -------
Dividends per common share................................. $ 0.015 $ 0.015
======= =======
</TABLE>
F-3
<PAGE>
MICKELBERRY COMMUNICATIONS INCORPORATED
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1995
<TABLE>
<CAPTION>
CUMULATIVE
COMMON CAPITAL FOREIGN UNREALIZED TOTAL
PREFERRED STOCK IN EXCESS CURRENCY HOLDING STOCK-
STOCK, PAR OF PAR RETAINED TRANSLATION GAIN HOLDERS'
PAR VALUE $1 VALUE $1 VALUE EARNINGS ADJUSTMENT (LOSS) EQUITY
------------ -------- --------- -------- ----------- ---------- --------
IN THOUSANDS
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1994................... $242 $5,878 $2,157 $26,790 $(56) $(238) $34,773
Net Income.............. -- -- -- 345 -- -- 345
Cash Dividends.......... -- -- -- (106) -- -- (106)
Translation adjustments. -- -- -- -- 2 -- 2
Change in market value
of available-for-sale
securities (net of
tax)................... -- -- -- -- -- 42 42
Balance at March 31,
1995................... $242 $5,878 $2,157 $27,029 $(54) $(196) $35,056
==== ====== ====== ======= ==== ===== =======
</TABLE>
F-4
<PAGE>
MICKELBERRY COMMUNICATIONS INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
------- -------
IN THOUSANDS
<S> <C> <C>
OPERATING ACTIVITIES
Net Income (loss)............................................. $ 345 $ (295)
Adjustments to reconcile net income to net cash:
Depreciation................................................ 1,195 1,050
Amortization................................................ 209 212
Net change in:
Accounts receivable....................................... (1,947) 1,425
Inventories............................................... (7,819) (2,796)
Accounts payable.......................................... 6,988 2,568
Accrued liabilities....................................... (2,182) (974)
Income taxes.............................................. 313 (186)
Notes payable to bank..................................... (643) (189)
------- -------
Net increase (decrease) from operating activities....... (3,541) 1,193
------- -------
INVESTING ACTIVITIES
Net change in temporary investments........................... 3,421 2,124
Expenditures for property, plant and equipment................ (651) (1,857)
Expenditures for intangibles.................................. -- (34)
Other......................................................... (39) 296
------- -------
Net increase (decrease) from investing activities....... 2,731 529
------- -------
FINANCING ACTIVITIES
Principal payments for debt................................... (525) (430)
Dividends paid................................................ (106) (106)
------- -------
Net increase (decrease) from financing activities....... (631) (536)
------- -------
Effect of exchange rate changes on cash....................... 2 15
------- -------
Net increase (decrease) in cash............................... (1,439) 1,201
Cash at beginning of year..................................... 1,596) 460
------- -------
Cash at end of period......................................... 157 $ 1,661
======= =======
</TABLE>
F-5
<PAGE>
MICKELBERRY COMMUNICATIONS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of the Company's management, the financial statements
reflect all adjustments necessary to a fair statement of the results for the
interim periods presented.
2. The results of operations for the three months ended March 31, 1995 and
1994 are not necessarily indicative of the results to be expected for the full
year.
3. Inventories at March 31, 1995 and December 31, 1994 consist of:
<TABLE>
<CAPTION>
1995 1994
------- -------
IN THOUSANDS
<S> <C> <C>
Finished goods............................................. $ 9,503 $ 8,761
Work-in-process............................................ 12,943 7,166
Raw materials.............................................. 5,418 4,118
------- -------
$27,864 $20,045
======= =======
</TABLE>
4. Intangibles and Property, Plant and Equipment
Intangibles: Intangibles at March 31, 1995 and December 31, 1994 are valued
at cost and consist of:
<TABLE>
<CAPTION>
1995 1994
------- -------
IN THOUSANDS
<S> <C> <C>
Costs in excess of net tangible assets of businesses
acquired.............................................. $15,746 $15,746
Less accumulated amortization.......................... (4,800) (4,594)
------- -------
$10,946 $11,152
======= =======
</TABLE>
Property, Plant and Equipment: Property, plant and equipment at March 31,
1995 and December 31, 1994 are valued at cost and consist of:
<TABLE>
<CAPTION>
1995 1994
-------- --------
IN THOUSANDS
<S> <C> <C>
Leasehold improvements................................. $ 3,749 $ 3,497
Machinery and equipment................................ 42,736 42,337
-------- --------
46,485 45,834
Less accumulated depreciation and amortization......... (20,349) (19,154)
-------- --------
$ 26,136 $ 26,680
======== ========
</TABLE>
5. Consolidated statements of Cash Flows
The following is supplemental information regarding cash flows:
<TABLE>
<CAPTION>
1995 1994
------ ------
IN THOUSANDS
<S> <C> <C>
Cash paid during the period for:
Interest.................................................... $ 283 $ 309
Income taxes................................................ $ 56 $ 103
</TABLE>
6. Equity in Affiliated Company
The Excel Marketing Group, a wholly owned subsidiary of the Company, owns a
50% interest in Excel Plus Ltd., a company engaged in dinnerware and other
product promotions in Europe. The Company accounts
F-6
<PAGE>
MICKELBERRY COMMUNICATIONS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
for Excel Plus under the equity methods and records its share of Excel Plus'
income or loss before taxes as a separate item in the Consolidated Statements
of Income. The Company's share of Excel Plus' income tax expense is included
in the consolidated provision for income taxes.
Summarized financial information of Excel Plus is as follows:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
--------- ------------
IN THOUSANDS
<S> <C> <C>
Current assets...................................... $ 4,771 $ 6,418
Non current assets.................................. 60 52
------- -------
$ 4,831 $ 6,470
======= =======
Current liabilities................................. $ 6,235 $ 7,617
Non current liabilities............................. -- --
Equity.............................................. (1,404) (1,147)
------- -------
$ 4,831 $ 6,470
======= =======
<CAPTION>
1ST QUARTER
----------------------
1995 1994
--------- ------------
<S> <C> <C>
Revenues............................................ $ 1,962 $ 1,245
Costs and expenses.................................. 2,216 1,245
------- -------
Income (loss) before taxes.......................... (254) --
Income taxes (benefit).............................. -- --
------- -------
Net income (loss)................................... $ (254) $ --
======= =======
</TABLE>
F-7
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of Mickelberry Communications Incorporated
We have audited the accompanying consolidated balance sheets of Mickelberry
Communications Incorporated and subsidiaries as of December 31, 1994 and 1993,
and the related consolidated statements of income, stockholders' equity, and
cash flows for each of the three years ended December 31, 1994. In connection
with our audits of the consolidated financial statements, we have also audited
the financial statement schedules as of and for the three years ended December
31, 1994 as listed in the index on page F-1. These consolidated financial
statements and financial statement schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and schedules 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Mickelberry Communications Incorporated and subsidiaries as of December 31,
1994 and 1993 and the results of their operations and their cash flows for
each of the three years ended December 31, 1994 in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedules referred to above, when considered in relation to the
basic consolidated financial statements taken as a whole, present fairly, in
all material respects, the information set forth therein.
As discussed in Notes 1 and 13 to the consolidated financial statements, in
1993 Mickelberry Communications Incorporated changed its method of accounting
for income taxes.
New York, New York
February 24, 1995, except for
Notes 2 and 17, as to which
the date is March 21, 1995
F-8
<PAGE>
MICKELBERRY COMMUNICATIONS INCORPORATED
CONSOLIDATED BALANCE SHEETS
IN THOUSANDS (EXCEPT SHARES AND PAR VALUES)
<TABLE>
<CAPTION>
1994 1993
-------- -------
<S> <C> <C>
ASSETS
Current assets
Cash...................................................... $ 1,596 $ 460
Temporary investments..................................... 7,759 12,722
Receivables, less allowances for doubtful accounts and
returns $5,260
(1993--$3,050)........................................... 32,701 30,832
Inventories............................................... 20,045 16,931
-------- -------
Total current assets.................................... 62,101 60,945
Intangibles--net............................................ 11,152 11,944
Property, plant and equipment--net.......................... 26,680 22,421
Other....................................................... 523 1,932
-------- -------
$100,456 $97,242
======== =======
LIABILITIES
Current liabilities
Accounts payable.......................................... $ 16,479 $15,712
Notes payable............................................. 9,180 6,901
Accrued liabilities....................................... 13,222 11,832
Income taxes payable...................................... 2,614 2,624
Current portion of long-term debt......................... 2,547 1,926
-------- -------
Total current liabilities............................... 44,042 38,995
Deferred income taxes....................................... 938 1,220
Long-term debt.............................................. 20,703 21,528
Stockholders' equity
Preferred stock, par value $1--5,000,000 shares
authorized; 242,000 shares issued (minimum liquidation
preference $727)......................................... 242 242
Common stock, par value $1--20,000,000 shares authorized;
5,878,000 shares issued (5,876,000 in 1993).............. 5,878 5,876
Capital in excess of par value............................ 2,157 2,154
Retained earnings......................................... 26,790 27,266
Cumulative foreign currency translation adjustment........ (56) (39)
Unrealized holding gain (loss)............................ (238) --
-------- -------
Total stockholders' equity.............................. 34,773 35,499
-------- -------
$100,456 $97,242
======== =======
</TABLE>
See Notes to Consolidated Financial Statements.
F-9
<PAGE>
MICKELBERRY COMMUNICATIONS INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1994, 1993
AND 1992 IN THOUSANDS (EXCEPT PER SHARE)
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Revenues
Tangible products............................. $106,637 $100,095 $ 81,273
Services...................................... 20,986 18,849 27,971
-------- -------- --------
127,623 118,944 109,244
Equity in pre-tax income (loss) of affiliated
company........................................ (907) 124 --
Costs and expenses
Cost of revenues
Tangible products (includes rent paid to a
related party: $980 in 1994, $862 in 1993 and
$478 in 1992)................................ 85,089 79,443 66,791
Services...................................... 17,807 16,695 22,278
Selling and administrative.................... 22,668 20,232 17,492
-------- -------- --------
125,564 116,370 106,561
-------- -------- --------
Operating income................................ 1,152 2,698 2,683
Other expense (income)
Interest expense.............................. 1,990 2,172 2,083
Investment income............................. (631) (759) (1,780)
Gain on sale of business...................... -- -- (3,170)
Other--net.................................... (122) 1,030 (33)
-------- -------- --------
1,237 2,443 (2,900)
-------- -------- --------
Income (loss) before taxes (benefit),
extraordinary item and cumulative effect of
change in accounting principle................. (85) 255 5,583
Income taxes (benefit).......................... (34) 101 2,233
-------- -------- --------
Income (loss) before extraordinary item and
cumulative effect of change in accounting
principle...................................... (51) 154 3,350
Extraordinary item--loss on extinguishment of
debt........................................... -- -- (1,134)
Cumulative effect of change in accounting for
income taxes................................... -- 200 --
-------- -------- --------
Net income (loss)............................. $ (51) $ 354 $ 2,216
======== ======== ========
Income (loss) per common share
Primary:
Income (loss) before extraordinary item and
cumulative effect of change in accounting
principle.................................... $ (.02) $ .02 $ .55
Extraordinary item............................ -- -- (.19)
Cumulative effect of change in accounting
principle.................................... -- .03 --
-------- -------- --------
Net income (loss)............................. $ (.02) $ .05 $ .36
======== ======== ========
Fully diluted:
Income (loss) before extraordinary item and
cumulative effect of change in accounting
principle.................................... $ (.02) $ .02 $ .49
Extraordinary item............................ -- -- (.16)
Cumulative effect of change in accounting
principle.................................... -- .03 --
-------- -------- --------
Net income (loss)............................. $ (.02) $ .05 $ .33
======== ======== ========
Dividends per common share.................... $ .06 $ .06 $ .06
======== ======== ========
Number of shares used to calculate earnings per
share
Primary....................................... 5,876 5,914 5,941
Fully diluted................................. 5,876 5,914 7,263
</TABLE>
See Notes to Consolidated Financial Statements.
F-10
<PAGE>
MICKELBERRY COMMUNICATIONS INCORPORATED
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
CUMULATIVE
COMMON CAPITAL FOREIGN UNREALIZED
PREFERRED STOCK, IN EXCESS CURRENCY HOLDING TOTAL
STOCK, PAR OF PAR RETAINED TRANSLATION GAIN STOCKHOLDERS'
PAR VALUE $1 VALUE $1 VALUE EARNINGS ADJUSTMENT (LOSS) EQUITY
------------ -------- --------- -------- ----------- ---------- -------------
IN THOUSANDS
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at 12/31/91..... $242 $5,870 $2,146 $25,545 $ -- $ -- $33,803
Net income.............. -- -- -- 2,216 -- -- 2,216
Cash dividends.......... -- -- -- (425) -- -- (425)
Stock options exercised. -- 5 6 -- -- -- 11
---- ------ ------ ------- ----- ----- -------
Balance at 12/31/92..... 242 5,875 2,152 27,336 -- -- 35,605
Net income.............. -- -- -- 354 -- -- 354
Cash dividends.......... -- -- -- (424) -- -- (424)
Stock options exercised. -- 1 2 -- -- -- 3
Translation adjustments. -- -- -- -- (39) -- (39)
---- ------ ------ ------- ----- ----- -------
Balance at 12/31/93..... 242 5,876 2,154 27,266 (39) -- 35,499
Effect of change in
accounting for
available for-sale
securities (net of
tax)................... -- -- -- -- -- 57 57
Net income.............. -- -- -- (51) -- -- (51)
Cash dividends.......... -- -- -- (425) -- -- (425)
Stock options exercised. -- 2 3 -- -- -- 5
Translation adjustments. -- -- -- -- (17) -- (17)
Change in market value
of available-for-sale
securities (net of
tax)................... -- -- -- -- -- (295) (295)
---- ------ ------ ------- ----- ----- -------
Balance at 12/31/94..... $242 $5,878 $2,157 $26,790 $ (56) $(238) $34,773
==== ====== ====== ======= ===== ===== =======
</TABLE>
For each of the three years ended December 31, 1994, 1993 and 1992, dividends
paid on common stock were $.06 per share and on preferred stock were $.30 per
share. See Notes to Consolidated Financial Statements.
F-11
<PAGE>
MICKELBERRY COMMUNICATIONS INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- --------
IN THOUSANDS
<S> <C> <C> <C>
Operating activities
Net income (loss)................................. $ (51) $ 354 $ 2,216
Adjustments to reconcile net income (loss) to net
cash from operations
Equity in after tax (income) loss of affiliated
company......................................... 544 (81) --
Depreciation..................................... 3,740 3,473 3,187
Amortization..................................... 847 791 549
Extraordinary item (gross of tax benefit)........ -- -- 1,719
Cumulative effect of change in accounting for
income taxes.................................... -- (200) --
Gain on sale of business......................... -- -- (3,170)
Net change in components of operating working
capital
Accounts receivable............................. (1,869) (4,165) 1,643
Inventories..................................... (3,114) 5,094 (457)
Accounts payable................................ 767 (2,453) 6,271
Notes payable................................... 2,279 (1,026) --
Accrued liabilities............................. 1,576 2,296 (6,653)
Income taxes.................................... 163 (1,768) 1,410
------- ------- --------
Net increase from operating activities......... 4,882 2,315 6,715
------- ------- --------
Investing activities
Business acquired................................. -- (9,493) --
Proceeds from sale of business.................... -- -- 7,981
Net change in temporary investments............... 4,567 12,058 (6,745)
Expenditures for intangibles...................... (42) -- --
Expenditures for property, plant and equipment.... (8,004) (2,396) (11,961)
Proceeds (expenditures) for other assets.......... 370 (19) 89
------- ------- --------
Net increase (decrease) from investing
activities.................................... (3,109) 150 (10,636)
------- ------- --------
Financing activities
Principal payments for debt....................... (1,892) (6,612) (5,185)
Proceeds from issuance of debt.................... 1,675 4,111 9,012
Proceeds from issuance of stock................... 5 3 11
Dividends paid.................................... (425) (424) (425)
------- ------- --------
Net increase (decrease) from financing
activities.................................... (637) (2,922) 3,413
------- ------- --------
Effect of exchange rate changes on cash........... -- (9) --
------- ------- --------
Net increase (decrease) in cash................... 1,136 (466) (508)
Cash at beginning of year......................... 460 926 1,434
------- ------- --------
Cash at end of year............................... $ 1,596 $ 460 $ 926
======= ======= ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-12
<PAGE>
MICKELBERRY COMMUNICATIONS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation: The accompanying consolidated financial
statements include the accounts of the Company and its subsidiaries.
Investments in which the Company has at least a 20% but not more than a 50%
interest are accounted for under the equity method.
Earnings per Share: Primary earnings per common share are calculated by
dividing income available to common stock by the sum of the weighted average
number of common shares outstanding plus incremental shares deemed issued via
exercise of stock options. For primary earnings per share purpose, the number
of incremental shares are calculated using average market prices for common
stock during the period.
For purposes of calculating fully diluted earnings per share, incremental
shares resulting from stock options are calculated using end of period market
prices, if higher than average prices. Also for fully diluted purposes, if
dilution results, the number of common shares issuable on conversion of
convertible debt and the after tax effect of interest expense on such debt are
added to the denominator and numerator, respectively, of the earnings per
share calculation.
Intangibles: Intangibles are amortized on a straight-line basis over periods
up to 40 years. When events or changes in circumstance indicate that the
carrying amount of assets, including intangibles, may not be recoverable, the
Company assesses impairment, if any, of such carrying amounts by estimating
future cash flows expected to result from the use of the assets. Where the sum
of the expected future net cash flows exceeds the carrying amount of the asset
no impairment is recognized.
Property and Depreciation: Property, plant and equipment (including
capitalized leased equipment) are recorded at cost and depreciated on
straight-line or accelerated methods over estimated useful lives (which range
as follows: leasehold improvements--5 to 15 years, machinery and equipment--3
to 10 years).
Income Recognition: The principal sources of revenues, for the Company's
advertising agency subsidiaries, are commissions and fees on gross media and
production costs. Revenue is generally recognized on media liability dates for
media and completion dates for production costs. In accordance with industry
practice, payroll costs are expensed as incurred.
Revenues and expenses relating to producing business conferences were
generally recognized on presentation date.
Sales of merchandise by the Company's subsidiary which is engaged in
supermarket promotions, are made subject to customers' rights to return unsold
items. Revenue is recognized by the Company when merchandise is shipped to
customers and a reserve is recorded for estimated future returns.
Income Taxes: In February 1992, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 109, Accounting for
Income Taxes. Statement 109 requires a change from the deferred method of
accounting for income taxes of APB Opinion 11 to the asset and liability
method of accounting for income taxes. Under the asset and liability method of
Statement 109, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. Under
Statement 109, the effect on deferred tax assets and liabilities of a change
in tax rates is recognized in income in the period that includes the enactment
date.
Effective January 1, 1993, the Company adopted Statement 109 and has
reported the cumulative effect of that change in the method of accounting for
income taxes in the Consolidated Statements of Income.
F-13
<PAGE>
MICKELBERRY COMMUNICATIONS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Pursuant to the deferred method under APB Opinion 11, which was applied in
1992 and prior years, deferred income taxes were recognized for income and
expense items that were reported in different years for financial reporting
purposes and income tax purposes using the tax rate applicable for the year of
the calculation. Under the deferred method, deferred taxes were not adjusted
for subsequent changes in tax rates.
Foreign Currency Translation: Assets and liabilities of a foreign subsidiary
and a foreign joint venture are translated at current exchange rates as of the
balance sheet date. Income statement accounts are translated at weighted
average exchange rates during the year. Differences resulting from the
translation process are recorded in stockholders' equity as a currency
translation adjustment.
2. BUSINESS ACQUIRED
In March 1993, the Company acquired the Excel Marketing Group of companies
for $9.5 million plus expenses. The Excel companies are engaged in marketing
dinnerware, flatware and other products in supermarket promotions and through
department stores and mass merchant outlets. The acquisition has been
accounted for as a purchase; and accordingly, the acquired assets and
liabilities have been recorded at their estimated fair values at date of
acquisition. The excess of the purchase price over the fair value of net
assets acquired has been recorded as goodwill, an intangible asset. The
goodwill will be amortized on the straight line basis over a period of 40
years. The results of the Excel companies are included in the Consolidated
Statements of Income from March 1, 1993.
During 1994, the traditional dinnerware continuity promotions conducted with
supermarket chains suffered from a lack of consumer and retailer interest.
Fewer promotions were run and the merchandise sold at each promotion was, in
general, less than in previous years. In an attempt to revive supermarket
promotions, the Company started using licensed products for these programs.
The licensed products promotions were not successful. As a result of the lack
of interest in dinnerware programs and the failure of licensed products, the
Company's management decided to reduce the inventory of products sold via
supermarket promotions by disposing of them at discounted prices through
alternative channels of distribution. A charge of $2.5 million was recorded to
reduce these inventories to their net realizable values.
The Excel Marketing Group owns a 50% interest in Excel Plus Ltd., a company
engaged in dinnerware and other product promotions in Europe. The Company
accounts for Excel Plus under the equity method and records its share of Excel
Plus' income or loss before taxes as a separate item in the Consolidated
Statements of Income. The Company's share of Excel Plus' income tax expense or
benefit is included in the consolidated provision for income taxes.
Summarized financial information of Excel Plus is as follows:
<TABLE>
<CAPTION>
1994 1993
------- ------
IN THOUSANDS
<S> <C> <C>
Current assets............................................ $ 6,418 $3,367
Non current assets........................................ 52 25
------- ------
$ 6,470 $3,392
======= ======
Current liabilities....................................... $ 7,617 $3,163
Non current liabilities................................... -- --
Equity.................................................... (1,147) 229
------- ------
$ 6,470 $3,392
======= ======
Revenues.................................................. $ 6,713 $5,076
Costs and expenses........................................ 8,527 4,828
------- ------
Income (loss) before taxes................................ (1,814) 248
Income taxes (benefit).................................... (91) 86
------- ------
Net income (loss)......................................... $(1,723) $ 162
======= ======
</TABLE>
F-14
<PAGE>
MICKELBERRY COMMUNICATIONS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Included in the operating results of Excel Plus for 1994 is a $1 million
charge to adjust inventory to its net realizable value and to record an
additional allowance for returns.
Undistributed losses of Excel Plus which are included in consolidated
retained earnings are $574,000 at December 31, 1994. The Company has
guaranteed $2,073,600 of debt owed by Excel Plus, Ltd.
3. GAIN ON SALE OF BUSINESS
In June 1992, the Company sold its business conferences subsidiary,
Caribiner, Inc., for approximately $8 million. A gain of $3,170,000 was
recognized as a result of the sale. Operating results for Caribiner, Inc. are
included in the Consolidated Statements of Income through June 30, 1992.
4. DEBT AND FINANCING ARRANGEMENTS
Borrowing Schedule, Long-Term:
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
7.16% Note due monthly through March 1998.................. $ 913 $ 1,154
7.75% Promissory Note due monthly through October 1999..... 2,287 2,572
8.5% Promissory Note due monthly through May 1999.......... 866 1,021
10.29% Promissory Note due monthly through July 1999....... 1,113 1,294
7.58% Note due monthly through April 2000.................. 2,258 2,589
8% Promissory Note due monthly through July 2000........... 1,583 --
7.5% Promissory Note due monthly through July 2000......... 3,767 4,291
8% Convertible Subordinated Debentures due May 2002........ 9,733 9,721
Other debt................................................. 730 812
------- -------
23,250 23,454
Less current portion....................................... 2,547 1,926
------- -------
$20,703 $21,528
======= =======
</TABLE>
Payments due on the debt for years after 1994 are, $2,547,000 in 1995,
$2,534,000 in 1996, $2,457,000 in 1997, $2,410,000 in 1998, $2,415,000 in 1999
and $10,887,000 thereafter.
Extinguishment of Debt: During 1992 the Company retired its issue of 11.5%
Subordinated Debentures. The debentures were issued originally at 83.75% of
their $11,775,000 principal amount. This discount was being amortized over the
term of the debentures. The Company retired the debentures for consideration
equal to their principal amount resulting in a pretax loss of $1,719,000. The
loss, net of a $585,000 tax benefit, is included in the Consolidated
Statements of Income as an extraordinary item.
Conversion: In connection with the 1992 retirement of the 11.5% Subordinated
Debentures, the Company issued $9,828,000 in principal amount of 8%
Convertible Subordinated Debentures. The debentures are convertible at any
time into the Company's common stock, par value $1, at a conversion price of
$4.25 per share. The Company can redeem the debentures for their principal
amount at any time after June 1998 and can redeem them after June 1996 and
before June 1998 provided the common stock is trading at a price in excess of
150% of the conversion price.
Notes Payable and Lines of Credit: The Excel Marketing Group has lines of
credit providing a maximum of $16.8 million for working capital and foreign
exchange purposes. At December 31, 1994, $9,180,000 was
F-15
<PAGE>
MICKELBERRY COMMUNICATIONS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
outstanding under these lines at a weighted average interest rate of 5.2%. The
Excel Group violated certain covenants contained in the lines of credit
agreements. Waivers of these violations were obtained from the lending
institution.
Collateral: As collateral for some of the above debt, the Company has
pledged assets with a net book value of $25,666,000 at December 31, 1994.
Covenants: The borrowing agreements require maintenance of certain
subsidiary earnings and capital requirements and impose restrictions regarding
payments of dividends and other distributions to common shareholders and
purchases of treasury stock. At December 31, 1994, $7,438,000 of retained
earnings was available for these purposes.
5. WRITE-DOWN OF INVESTMENT AND RELATED PARTY TRANSACTIONS
In 1993, the Company invested $1.0 million as the initial equity capital of
November Records, Inc., a corporation organized to produce and distribute
recorded music. As a result of the exigencies encountered in starting this
business, November used the capital invested by the Company in 1993 and sought
additional capital. Because of the risk associated with this further
investment, the Company decided against making an additional capital
contribution to November. The Company's Chief Executive Officer agreed to
invest $500,000 in November. Other investors agreed to invest an additional
$500,000. Following these additional capital contributions the Company's
ownership in November was reduced to 40%. Since the Company's controlling
ownership of November was temporary, its detailed operating accounts have not
been included in the Consolidated Statements of Income. Rather, the write-off
of the Company's investment is included as other expense in 1993.
The Company's printing subsidiary leases facilities from a partnership in
which three members of the Company's Board of Directors own an aggregate
interest of 33%. The Excel Marketing Group leases facilities from a
partnership in which a member of the Company's Board of Directors owns a 14%
interest. Rent paid to these partnerships for the three years ended December
31, 1994, 1993 and 1992 was $980,000, $862,000 and $478,000, respectively.
In connection with the acquisition of the Excel Marketing Group in March
1993, the Company paid $2.6 million to an individual who became a member of
the Company's Board of Directors following the purchase. The payment was made
in exchange for the individual's ownership interest in the Excel Group. In
addition, the Company paid $2.5 million to the individual's brother-in-law and
$100,000 to the individual's mother, each of whom was also an owner of the
Excel Group.
At the time of its acquisition the Excel Marketing Group owed money to the
individual's mother. This obligation was evidenced by a note payable. The
balance owing on this note at December 31, 1994 was $587,500. Interest on the
note is the prime rate plus 1% and amounted to $36,300 and $48,300 for the
years ended December 31, 1993 and 1994.
6. CONSOLIDATED STATEMENTS OF CASH FLOWS
Supplemental information regarding cash flows:
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ ------
IN THOUSANDS
<S> <C> <C> <C>
Cash paid during the year for
Interest........................................... $2,008 $2,141 $1,944
Income taxes....................................... $ 600 $1,083 $ 237
</TABLE>
F-16
<PAGE>
MICKELBERRY COMMUNICATIONS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Noncash Investing and Financing Activities: During 1992, the Company
exchanged equipment with a value of $1,435,000 as partial payment for
replacement equipment.
During 1992, the Company issued $9,828,000 of 8% Convertible Subordinated
Debentures in exchange for $9,828,000 in principal amount of 11.5%
Subordinated Debentures, which were retired.
7. TEMPORARY INVESTMENTS AND INVESTMENT INCOME
Temporary investments consist of the following:
<TABLE>
<CAPTION>
1994 1993
------ -------
IN THOUSANDS
<S> <C> <C>
Money market deposits..................................... $3,560 $ 8,169
Certificates of deposit................................... 1,095 1,053
Bond funds................................................ 3,500 3,500
Unrealized losses......................................... (396) --
------ -------
$7,759 $12,722
====== =======
</TABLE>
Statement of Financial Accounting Standards No. 115, Accounting for Certain
Investments in Debt and Equity Securities ("SFAS 115"), was issued in May 1993
and was applicable to the Company as of January 1, 1994. SFAS 115 requires
that certain investments be classified as either held-to-maturity, trading or
available-for-sale. Held-to-maturity investments are accounted for at
amortized cost. Trading and available-for-sale securities are accounted for at
market value. Changes in market values for trading securities are reported in
the income statement. Changes in market values for available-for-sale
securities are reported, net of tax, as unrealized holding gains or losses in
the Statement of Stockholders' Equity.
Included in temporary investments at December 31, 1994 and 1993 are
investments classified as available-for-sale securities. The unrealized net of
tax gain on such investments as of January 1, 1994 is reported in the
Statement of Stockholders' Equity as the effect of a change in accounting for
available-for-sale securities.
Prior to January 1, 1994 the Company accounted for available-for-sale
securities at the lower of cost or market. During the year ended December 31,
1992 the carrying value of these securities was reduced to market value
Investment income consists of the following:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ------
IN THOUSANDS
<S> <C> <C> <C>
Interest................................................. $629 $721 $ 824
Dividends................................................ 2 3 1
Gain on sales and adjustments to carrying values of
temporary investments, net.............................. -- 35 955
---- ---- ------
$631 $759 $1,780
==== ==== ======
</TABLE>
8. INTANGIBLES AND PROPERTY, PLANT AND EQUIPMENT
Intangibles: Intangibles are valued at cost and consist of:
<TABLE>
<CAPTION>
1994 1993
------- -------
IN THOUSANDS
<S> <C> <C>
Costs in excess of net tangible assets of businesses
acquired.............................................. $15,746 $15,703
Accumulated amortization............................... (4,594) (3,759)
------- -------
$11,152 $11,944
======= =======
</TABLE>
F-17
<PAGE>
MICKELBERRY COMMUNICATIONS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Property, Plant and Equipment: Property, plant and equipment is valued at
cost and consists of:
<TABLE>
<CAPTION>
1994 1993
-------- --------
IN THOUSANDS
<S> <C> <C>
Leasehold improvements................................. $ 3,497 $ 3,006
Machinery and equipment................................ 42,337 34,847
-------- --------
45,834 37,853
Accumulated depreciation............................... (19,154) (15,432)
-------- --------
$ 26,680 $ 22,421
======== ========
</TABLE>
9. COMMITMENTS
Leases: The Company leases certain property, plant and equipment under long
term leases. Some of the leases include renewal options, escalation clauses
and purchase options. Rent expenses charged to operations during the years
ended December 31, 1994, 1993 and 1992 were $3,188,000, $3,148,000 and
$3,954,000, respectively.
Approximate minimum annual rental commitments under all noncancelable
uncapitalized leases for years ended after 1994 are $3,110,000 in 1995,
$3,197,000 in 1996, $3,194,000 in 1997, $2,079,000 in 1998, $956,000 in 1999
and $2,038,000 thereafter.
Capital expenditures: At December 31, 1994, the Company had commitments to
acquire approximately $1.7 million of property, plant and equipment.
10. RETIREMENT PLANS
The Company maintains profit-sharing plans covering most employees. The
costs under these plans were $669,000 in 1994, $697,000 in 1993 and $618,000
in 1992. The Company's policy is to fund the costs accrued.
The Company contributes to multi-employer defined benefit retirement plans
as required under contracts with collective bargaining units representing
certain employees of the Company's printing business. The costs, representing
the required contributions under these plans, were $367,000 in 1994, $329,000
in 1993 and $254,000 in 1992. The Company's policy is to fund the retirement
costs accrued.
11. INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or market,
and consist of:
<TABLE>
<CAPTION>
1994 1993
------- -------
IN THOUSANDS
<S> <C> <C>
Finished goods............................................. $ 8,761 $ 8,751
Work-in-process............................................ 7,166 4,970
Materials.................................................. 4,118 3,210
------- -------
$20,045 $16,931
======= =======
</TABLE>
12. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable consist of the following:
<TABLE>
<CAPTION>
1994 1993
------- -------
IN THOUSANDS
<S> <C> <C>
Trade...................................................... $13,342 $12,566
Due to banks............................................... 2,952 2,683
Other...................................................... 185 463
------- -------
$16,479 $15,712
======= =======
</TABLE>
F-18
<PAGE>
MICKELBERRY COMMUNICATIONS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
1994 1993
------- -------
IN THOUSANDS
<S> <C> <C>
Unearned income........................................... $ 3,803 $ 3,954
Compensation and employee benefits........................ 4,876 3,348
Trade..................................................... 2,549 2,180
Other..................................................... 1,994 2,350
------- -------
$13,222 $11,832
======= =======
</TABLE>
13. INCOME TAXES
As discussed in Note 1, the Company adopted Statement 109 as of January 1,
1993. The cumulative effect of this change in accounting for income taxes of
$200,000 is determined as of January 1, 1993 and is reported separately in the
Consolidated Statements of Income. Pretax income from continuing operations for
the year ended December 31, 1993 was not affected as a result of applying
Statement 109.
Income (loss) before taxes consists of:
<TABLE>
<CAPTION>
1994 1993 1992
------- ---- ------
IN THOUSANDS
<S> <C> <C> <C>
Domestic............................................. $ 1,151 $329 $5,583
Foreign.............................................. (1,236) (74) --
------- ---- ------
$ (85) $255 $5,583
======= ==== ======
</TABLE>
The provision for income taxes (benefit) includes the following:
<TABLE>
<CAPTION>
1994 1993 1992
----- ---- ------
IN THOUSANDS
<S> <C> <C> <C>
Currently payable
Federal................................................ $ 768 $-- $1,583
State and local........................................ 45 65 180
Foreign................................................ -- 43 --
----- ---- ------
813 108 1,763
Deferred
Federal................................................ (702) 115 360
State and local........................................ (145) (37) 110
Foreign................................................ -- (85) --
----- ---- ------
(847) (7) 470
----- ---- ------
$ (34) $101 $2,233
===== ==== ======
</TABLE>
The components of deferred income taxes (benefit) for 1994 and 1993 are as
follows:
<TABLE>
<CAPTION>
1994 1993
------ ------
IN THOUSANDS
<S> <C> <C>
Deferred tax expenses (benefits)
(exclusive of the benefit of net operating loss)......... $ (847) $ 549
Benefit of net operating loss............................. -- (556)
------ ------
$ (847) $ ( 7)
====== ======
</TABLE>
F-19
<PAGE>
MICKELBERRY COMMUNICATIONS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The components of deferred income taxes (benefit) for 1992 are as follows:
<TABLE>
<CAPTION>
1992
------------
IN THOUSANDS
<S> <C>
Difference in basis of assets sold........................... $(1,903)
Reinstatement of deferred income taxes previously adjusted as
a result of net operating losses............................ 2,135
Depreciation................................................. 238
-------
$ 470
=======
</TABLE>
The following is a reconciliation of the applicable statutory federal income
tax rate to the effective rates reported in the financial statements:
<TABLE>
<CAPTION>
1994 1993 1992
------------- ------------- -------------
% OF
PRETAX % OF % OF
AMOUNT INCOME AMOUNT INCOME AMOUNT INCOME
------ ------ ------ ------ ------ ------
DOLLARS IN THOUSANDS
<S> <C> <C> <C> <C> <C> <C>
Tax at statutory rate............. $(29) (34)% $ 87 34 % $1,898 34%
State and local tax net of federal
benefit (expense)................ (68) (79)% 18 7 % 191 4%
Amortization of intangibles....... 77 89 % 44 18 % 68 1%
Nondeductible (deductible)
expenses......................... (14) (16)% (34) (13)% 76 1%
Foreign tax....................... -- -- (14) (6)% -- --
---- ----- ---- ----- ------ ---
$(34) (40)% $101 40 % $2,233 40%
==== ===== ==== ===== ====== ===
</TABLE>
The tax effects of temporary differences and carryforwards that give rise to
significant portions of the deferred tax assets and deferred tax liabilities at
December 31, 1994 and 1993 are presented below.
<TABLE>
<CAPTION>
1994 1993
------- -------
IN THOUSANDS
<S> <C> <C>
Deferred tax assets
Allowance for doubtful accounts........................... $ 185 $ 164
Net operating loss carryforwards.......................... -- 556
Alternative minimum tax credit carryforwards.............. 859 373
Basis of investment....................................... 745 331
Basis of inventory........................................ 1,001 --
Accrued expenses.......................................... -- 55
Other..................................................... 36 50
------- -------
Total gross deferred tax assets......................... 2,826 1,529
Less valuation allowance................................ -- --
------- -------
Net deferred tax assets................................. 2,826 1,529
Deferred tax liabilities
Accumulated depreciation................................ (3,600) (2,748)
Change in accounting.................................... (164) --
Other................................................... -- (1)
------- -------
Total gross deferred tax liabilities.................. (3,764) (2,749)
------- -------
Net deferred tax liabilities.......................... $ (938) $(1,220)
======= =======
</TABLE>
F-20
<PAGE>
MICKELBERRY COMMUNICATIONS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company has alternative minimum tax credit carryforwards of
approximately $859,000 which are available to reduce future federal income
taxes over an indefinite period.
Included in other income for the year ended December 31, 1992 is $491,000
representing interest on tax refunds.
14. STOCKHOLDERS' EQUITY
Options: The Board of Directors of the Company has granted stock options to
certain employees pursuant to the 1981 Incentive Stock Option Plan and the
1992 Stock Option Plan. Pursuant to its term, as of April 1992, options may no
longer be granted under the 1981 Incentive Stock Option Plan. Options
previously granted under the 1981 plan remain viable. Under the 1992 Stock
Option Plan, options for up to 400,000 shares may be granted. Options
generally become exercisable over a three year period following the date of
grant. The option price is the fair market value of the stock on the date of
grant.
Options have been granted to non-employee members of the Company's Board of
Directors pursuant to the 1993 Outside Directors Stock Option Plan. Under this
plan, options for up to 100,000 shares may be granted. The option price is the
fair market value of the stock on the date of grant. Options are exercisable
upon grant.
Changes in options during the years ended December 31, 1994 and 1993, were
as follows:
<TABLE>
<CAPTION>
NO. OF OPTION PRICE
SHARES PER SHARE
------- --------------
<S> <C> <C>
Outstanding at December 31, 1992.................... 434,150 $2.25 --$5.875
Exercised........................................... (1,333) $2.65
Canceled............................................ (21,667) $2.25 --$4.875
Granted............................................. 228,500 $2.75 --$3.313
-------
Outstanding at December 31, 1993.................... 639,650 $2.25 --$5.875
Exercised........................................... (2,000) $2.625
Canceled............................................ (7,000) $2.265--$4.750
Granted............................................. 15,000 $3.31
-------
Outstanding at December 31, 1994.................... 645,650 $2.25 --$5.875
=======
</TABLE>
At December 31, 1994, options on 527,314 shares were exercisable and shares
reserved for future option grants amounted to 254,500.
Preferred Stock, par value $1: The preferred stock is entitled to a
cumulative annual dividend of $.30 per share, may be redeemed at the option of
the Company for $7.50 per share and is entitled to one-tenth of a vote per
share at all stockholder meetings. Each share has a minimum liquidation
preference of $3.00 and will participate with the common stock up to a maximum
liquidation payment of $7.50.
F-21
<PAGE>
MICKELBERRY COMMUNICATIONS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
15. BUSINESS SEGMENT INFORMATION
Information regarding the Company's operations in different industries as of
December 31, 1994, 1993 and 1992 and for the years then ended, is as follows:
<TABLE>
<CAPTION>
PRETAX IDENTI- DEPRECIATION
INCOME FIABLE CAPITAL &
REVENUES (LOSS) ASSETS EXPENDITURES AMORTIZATION
-------- ------- -------- ------------ ------------
IN THOUSANDS
<S> <C> <C> <C> <C> <C>
1994
Advertising and
promotion............... $ 46,431 $ (876) $ 34,343 $ 536 $1,272
Printing................. 81,192 5,270 58,788 7,450 3,286
-------- ------- -------- ------- ------
127,623 4,394 93,131 7,986 4,558
Unallocated amounts...... (2,489) 7,325 18 29
Interest expense......... (1,990)
-------- ------- -------- ------- ------
$127,623 $ (85) $100,456 $ 8,004 $4,587
======== ======= ======== ======= ======
1993
Advertising and
promotion............... $ 38,366 $ 613 $ 35,190 $ 716 $1,195
Printing................. 80,578 3,962 50,239 1,671 3,042
-------- ------- -------- ------- ------
118,944 4,575 85,429 2,387 4,237
Unallocated amounts...... (2,148) 11,813 7 27
Interest expense......... (2,172)
-------- ------- -------- ------- ------
$118,944 $ 255 $ 97,242 $ 2,394 $4,264
======== ======= ======== ======= ======
1992
Advertising and
promotion............... $ 27,971 $ 1,065 $ 14,860 $ 587 $1,147
Printing................. 81,273 3,822 49,662 11,374 2,447
-------- ------- -------- ------- ------
109,244 4,887 64,522 11,961 3,594
Unallocated amounts...... 2,779 24,109
Interest expense......... (2,083) 142
-------- ------- -------- ------- ------
$109,244 $ 5,583 $ 88,631 $11,961 $3,736
======== ======= ======== ======= ======
</TABLE>
Information regarding the Company's foreign and domestic operations is as
follows:
<TABLE>
<CAPTION>
PRETAX
INCOME IDENTIFIABLE
1994 REVENUES (LOSS) ASSETS
---- -------- ------ ------------
<S> <C> <C> <C>
United States................................ $126,991 $1,151 $100,724
Canada....................................... 632 (329) 306
United Kingdom (equity in affiliated co.).... -- (907) (574)
-------- ------ --------
$127,623 $ (85) $100,456
======== ====== ========
<CAPTION>
PRETAX IDENTIFIABLE
1993 REVENUES INCOME ASSETS
---- -------- ------ ------------
<S> <C> <C> <C>
United States................................ $118,376 $ 329 $ 96,655
Canada....................................... 568 (198) 472
United Kingdom (equity in affiliated co.).... -- 124 115
-------- ------ --------
$118,944 $ 255 $ 97,242
======== ====== ========
</TABLE>
During 1992 the Company's operations were confined to the United States.
F-22
<PAGE>
MICKELBERRY COMMUNICATIONS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
16. DISCLOSURE CONCERNING FINANCIAL INSTRUMENTS
The Company does not have any concentrations of credit risk arising from
financial instruments. The Company has guaranteed $350,000 of debt owed by
Southeast Publishing Ventures, Inc. ("SPV"). The Company has a minority
ownership interest in SPV. The Company has guaranteed $2,073,600 of debt owed
by Excel Plus, Ltd. If either SPV or Excel Plus, Ltd. fail to make payments on
their debt the Company would be required to pay the guaranteed amount.
The estimated fair values of the Company's financial instruments at December
31, 1994, and 1993 are as follows:
<TABLE>
<CAPTION>
1994 1993
---------------- ----------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- ------- -------- -------
IN THOUSANDS
<S> <C> <C> <C> <C>
Assets
Temporary investments.................... $ 7,759 $ 7,759 $12,722 $12,818
Long-term investments included in other
assets.................................. $ 410 $ 410 $ 916 $ 956
Liabilities
Notes payable............................ $ 9,180 $ 9,180 $ 6,901 $ 6,901
Long-term debt for which it is
practicable to estimate fair value...... $13,516 $12,632 $13,733 $13,575
Not practicable.......................... $ 9,734 $ -- $ 9,721 $ --
</TABLE>
Fair values of temporary and long term investments were determined based
upon quoted market prices where available or on management's best estimate. In
general, management's best estimates are based on estimated future cash flows
discounted, where appropriate, at rates commensurate with the risks involved.
Fair value of long-term debt was estimated by discounting the debt repayment
streams at rates currently offered by lending institutions. This method of
estimating fair value is not applicable to the 8% Convertible Subordinated
Debentures because it does not consider the value associated with the
conversion privilege. Quoted market prices for the debentures were not
available so it was not practicable to estimate fair value.
Unless noted otherwise, carrying amount is the same as the amount reported
in the balance sheet.
All financial instruments are held for purposes other than trading.
17. OFFER TO PURCHASE COMMON STOCK
On November 1, 1994 the Company announced that James C. Marlas, the
Chairman, President and Chief Executive Officer of the Company, proposed to
acquire, through a merger transaction, all the shares of the Company's Common
Stock not owned by Mr. Marlas for a cash purchase price of $3.25 per share.
Mr. Marlas beneficially owns approximately 48% of Mickelberry's outstanding
Common Stock, not including shares issuable upon conversion of debentures
owned by him. The Company's Board of Directors appointed a special committee
to evaluate Mr. Marlas' proposal.
As a result of the Company's announcement of Mr. Marlas' proposal, on
November 8, 1994 a class action complaint was filed, in the Court of Chancery
of the State of Delaware in and for New Castle County against the Company and
certain of its officers and directors. The lawsuit seeks an injunction barring
Mr. Marlas from acquiring the shares of the Company's Common Stock pursuant to
his proposal. If, however, the proposed
F-23
<PAGE>
MICKELBERRY COMMUNICATIONS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
transaction is consummated the lawsuit seeks rescission and damages as well as
an accounting for profits and reimbursement of expenses. The parties have
reached an agreement in principle to settle this lawsuit, which agreement is
subject to court approval. If court approval is not granted it is not possible
to estimate the liability, if any, which the Company may incur as a result of
this lawsuit. In any event, management does not expect that this lawsuit will
have a material adverse effect on the financial position of the Company.
The proposal was subject to a number of conditions, including the execution
of a mutually satisfactory definitive merger agreement, a satisfactory
agreement reached with institutional investors holding the Company's
Convertible Subordinated Debentures regarding the early retirement of these
securities, the receipt of all necessary consents and governmental approvals
and the receipt of financing.
The Company's special committee of Directors evaluated Mr. Marlas's proposal
(including an increase of the cash purchase price from $3.25 per share to
$4.25 per share) and on March 21, 1995 recommended that the Company enter into
the merger transaction and the Board of Directors approved the Agreement and
Plan of Merger on March 21, 1995 (including the payment of the same
consideration to the holders of the Company's Preferred Stock).
The consummation of the transactions contemplated by the Agreement and Plan
of Merger is subject to a number of conditions, including (a) the approval of
the Agreement by the affirmative vote of at least (1) the holders of a
majority of the shares outstanding or (2) 66 2/3% of the votes cast by the
holders of the shares voting at a special meeting, whichever is greater, (b) a
satisfactory agreement reached with institutional investors holding the
Company's Convertible Subordinated Debentures regarding the early retirement
of these securities, (c) the receipt of all necessary consents and
governmental approvals, (d) the holders of not more than 5% of the outstanding
shares of Preferred Stock and Common Stock shall have exercised their
appraisal rights in the Merger, and (e) the receipt of third-party financing.
F-24
<PAGE>
EXCEL PLUS LIMITED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 1994
TOGETHER WITH THE DIRECTORS' AND AUDITORS' REPORT
REGISTERED NUMBER: 2682392
DIRECTORS' REPORT--FOR THE YEAR ENDED 31 DECEMBER, 1994
The directors present their report on the affairs of the company together
with the accounts and auditors' report for the year ended 31 December 1994.
PRINCIPAL ACTIVITIES AND BUSINESS REVIEW
The principal activity of the company continues to be the supply of goods
for continuity promotions, in particular for the food retail sector.
The results for the year are disappointing. The directors have put in place
immediate remedial action and expect the company's performance to improve
significantly in 1995.
RESULTS AND DIVIDENDS
Turnover for the year amounts to (Pounds)4,362,655 (1993, eleven months--
(Pounds)3,431,411) and loss for the year was (Pounds)548,612 (1993, eleven
months--profit (Pounds)109,291). The directors do not propose to declare a
dividend (1993--(Pounds)nil).
FIXED ASSETS
The movements in tangible fixed assets are set out in Note 7 to the
accounts.
DIRECTORS AND THEIR INTERESTS
The directors of the company who served during the year were:
N.F. Cope
R. Sperling (USA)
J. Saslow (USA)
T.E. McCarthy
P.I. Jones
On 2 March 1995 R. Sperling resigned from the Board of Directors. On 18 May
1995 P.I. Jones resigned from and P.D. Trucman was appointed to the Board of
Directors. On 22 May 1995 I.C. Cummings was appointed to the Board of
Directors.
Except in respect of N.F. Cope, none of the directors had a beneficial
interest in the shares of the company during the year. N.F. Cope had an option
to subscribe for 5,000 "C' ordinary shares of (Pounds)1 each at par.
Subsequent to the year end on 9 May 1995 N.F. Cope waived this option.
SHARE CAPITAL AND SUBSEQUENT EVENT
The called up share capital of the company was divided equally between "A'
ordinary shares and "B' ordinary shares. On 22 May 1995 the company issued 1
"C' ordinary share of (Pounds)1 to the holder of the "A' ordinary shares at a
premium of (Pounds)499,999 for cash consideration. On the same day the holder
of the "B' ordinary shares, Product Plus (London) Limited, acquired all the
issued "A' and "C' ordinary shares and consequently the company became a
wholly owned subsidiary undertaking of Product Plus (London) Limited. On 22
May 1995 the company adopted new Articles of Association.
F-25
<PAGE>
EXCEL PLUS LIMITED
FINANCIAL STATEMENT--(CONCLUDED)
The company has also changed its accounting reference date to 23 May.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
Company law requires the directors to prepare financial statements for each
financial year which give a true and fair view of the state of affairs of the
company and of the profit or loss of the company for that period. In preparing
those financial statements, the directors are required to:
.select suitable accounting policies and then apply them consistently;
.make judgements and estimates that are reasonable and prudent;
.state whether applicable accounting standards have been followed;
. prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the company will continue in business.
The directors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the financial position of the
company and to enable them to ensure that the financial statements comply with
the Companies Act 1985. They are also responsible for safeguarding the assets
of the company and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
CHARITABLE DONATIONS
The company made charitable donations of (Pounds)3,190 (1993--(Pounds)nil)
during the year.
AUDITORS
The directors will place a resolution before the Annual General Meeting to
reappoint Arthur Andersen as auditors for the ensuing period.
By Order of the Board
D.R. WOOLLEY
Secretary
239 Old Marylebone Road
London
NW1 5QT
16 June 1995
F-26
<PAGE>
AUDITORS' REPORT
To the members of Excel Plus Limited.
We have audited the financial statements on pages 5 to 15 which have been
prepared under the historical cost convention and the accounting policies set
out on pages 8 and 9.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
As described on page 3 the company's directors are responsible for the
preparation of the financial statements. It is our responsibility to form an
independent opinion, based on our audit, on those statements and to report our
opinion to you.
BASIS OF OPINION
We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board. An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the financial statements.
It also includes an assessment of the significant estimates and judgements
made by the directors in the preparation of the financial statements and of
whether the accounting policies are appropriate to the company's
circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.
In forming our opinion, we have considered the adequacy of the company's
provisions for inventory returns, and the net realisable value of inventory
held at year end. The provision made by management against inventory has been
based on anticipated sales contracts for 1995 and expected levels of returns.
The future recoverability of inventory balances is contingent on the continued
success of this business which is still in its developmental stage, and
management's judgements in respect of 1995 proving correct. Our opinion is not
qualified in this respect.
Without qualifying our opinion, we draw your attention to Note 14(c) which
sets out the consideration given by the directors to the net liability
position of the company.
OPINION
In our opinion the financial statements give a true and fair view of the
company's state of affairs at 31 December 1994 and of its loss and cash flows
for the year then ended and have been properly prepared in accordance with the
Companies Act 1985.
Arthur Andersen
Chartered Accountants and Registered
Auditors
16 June 1995
1 Surrey Street
London WC2R 2PS
F-27
<PAGE>
EXCEL PLUS LIMITED
PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 DECEMBER 1994
<TABLE>
<CAPTION>
12 MONTHS TO 11 MONTHS TO
31 DECEMBER 31 DECEMBER
1994 1993
NOTE ------------ ------------
(Pounds) (Pounds)
<S> <C> <C> <C>
Turnover...................................... 1(b),2 4,362,655 3,431,411
Cost of sales................................. (3,295,487) (2,208,319)
---------- ----------
Gross profit.................................. 1,067,168 1,223,092
Administrative expenses....................... (1,561,589) (1,037,906)
---------- ----------
Operating (loss)/profit....................... (494,421) 185,186
Net interest payable.......................... 5 (113,039) (17,047)
---------- ----------
(Loss)/profit on ordinary activities before
taxation..................................... 3 (607,460) 168,139
Taxation...................................... 6 58,848 (58,848)
---------- ----------
Retained (loss)/profit for the period......... 12 (548,612) 109,291
========== ==========
</TABLE>
This profit and loss account includes all recognised gains and losses arising
during the year and represents continuing operations.
A statement of the movement in reserves is given in Note 12.
The accompanying notes are an integral part of this profit and loss account.
F-28
<PAGE>
EXCEL PLUS LIMITED
BALANCE SHEET
AS AT 31 DECEMBER 1994
<TABLE>
<CAPTION>
1994 1993
NOTE ---------- ----------
(Pounds) (Pounds)
<S> <C> <C> <C>
Fixed Assets
Tangible assets.................................... 7 32,838 16,725
Current assets
Stock.............................................. 2,659,024 1,357,957
Debtors............................................ 8 1,130,933 917,766
Cash at bank and in hand........................... 709,208 179,559
---------- ----------
4,499,165 2,455,282
Creditors: Amounts falling due within one year..... 9 (4,926,324) (2,317,716)
Net current (liabilities)/assets................... (427,159) 137,566
---------- ----------
Net (liabilities)/assets........................... (394,321) 154,291
========== ==========
Capital and Reserves
Share Capital...................................... 10 45,000 45,000
Reserves........................................... 12 (439,321) 109,291
---------- ----------
Total capital employed............................. (394,321) 154,291
========== ==========
</TABLE>
Signed on Behalf of the Board on 16 June 1995.
T.E. McCarthy
Director
The accompanying notes are an integral part of this balance sheet
F-29
<PAGE>
EXCEL PLUS LIMITED
CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER, 1994
<TABLE>
<CAPTION>
12 MONTHS TO 11 MONTHS TO
31 DECEMBER 31 DECEMBER
1994 1993
NOTE ------------ ------------
(POUNDS) (POUNDS)
<S> <C> <C> <C>
Net cash outflow from operating activities.... 13(a) (776,852) (428,156)
Returns from investments and servicing of fi-
nance........................................
Interest received............................. 9,045 1,486
Interest paid................................. (122,084) (18,533)
-------- --------
Net cash outflow from returns on investments
and servicing of finance..................... (113,039) (17,047)
-------- --------
Taxation......................................
UK corporation tax paid....................... (58,848) --
-------- --------
Investing activities..........................
Purchase of tangible fixed assets............. (22,266) (21,062)
-------- --------
Net cash outflow before financing............. (971,005) (466,265)
Issue of ordinary shares...................... -- 44,998
-------- --------
Net cash inflow from financing................ -- 44,998
-------- --------
Decrease in cash and cash equivalents......... 13(b) (971,005) (421,267)
======== ========
</TABLE>
The accompanying notes are an integral part of this cash flow statement
F-30
<PAGE>
EXCEL PLUS LIMITED
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 1994
1. ACCOUNTING POLICIES
A summary of the principal accounting policies, all of which have been
applied consistently throughout the year, and the preceding period, is set out
below:
a) Basis of accounting
The accounts have been prepared under the historical cost convention in
accordance with UK applicable accounting standards and on a going concern
basis.
b) Turnover
Turnover, which excludes VAT, represents the invoiced value of goods and
services supplied in the normal course of business less provision for actual
and anticipated returns.
c) Stocks
Stocks comprise goods for resale and are stated at the lower of cost and net
realisable value. Cost is determined on a first in, first out basis and
includes transport and handling costs. Net realisable value is the price at
which stocks can be sold in the normal course of business after allowing for
the costs of realisation and, where appropriate, the cost of conversion from
their existing state to a finished condition. Provision is made, where
necessary, for obsolete, slow moving and defective stock.
d) Tangible fixed assets
Tangible fixed assets are stated at cost less accumulated depreciation.
Depreciation is calculated so as to write off the cost of tangible fixed
assets on a straight line basis over the expected useful economic lives of the
assets concerned. The principal annual rates used for this purpose are:
<TABLE>
<S> <C>
Computer equipment....................................................... 25%
Fixtures and fittings.................................................... 15%
</TABLE>
e) Foreign currencies
Trading transactions denominated in foreign currencies are translated into
sterling at the exchange rate ruling at the time of the transaction being
effected. Monetary assets and liabilities denominated in foreign currencies
are translated into sterling at the exchange rates ruling at the balance sheet
date. Exchange gains or losses are included in the operating profit.
f) Taxation
Corporation tax is provided on taxable profits at the current rate. Deferred
taxation (which arises from differences in the timing of the recognition of
items, principally depreciation, in the accounts and by the tax authorities)
has been calculated using the liability method. Deferred tax is provided on
timing differences which will probably reverse at the rates of tax likely to
be in force at the time of reversal. Deferred tax is not provided on timing
differences which, in the opinion of the directors, will probably not reverse.
2. TURNOVER
All turnover and profits on ordinary activities arise from countries within
the European Community.
F-31
<PAGE>
EXCEL PLUS LIMITED
NOTES TO THE ACCOUNTS--(CONTINUED)
3. (LOSS)/PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION
(Loss)/Profit on ordinary activities before taxation is stated after
charging:
<TABLE>
<CAPTION>
12 MONTHS TO 11 MONTHS TO
31 DECEMBER 31 DECEMBER
1994 1993
------------ ------------
(Pounds) (Pounds)
<S> <C> <C>
Auditors' remuneration
--audit fees..................................... 18,000 12,000
--other services................................. 8,000 --
Depreciation....................................... 6,153 4,337
Staff costs (see note 4)........................... 351,776 179,123
======= =======
</TABLE>
4. STAFF COSTS
a) The average number of persons employed by the company (including the
executive director), during the year was 11 (1993-6).
b) Employment costs of all employees included above:
<TABLE>
<CAPTION>
12 MONTHS TO 11 MONTHS TO
31 DECEMBER 31 DECEMBER
1994 1993
------------ ------------
(Pounds) (Pounds)
<S> <C> <C>
Wages and salaries................................. 323,971 164,155
Social Security costs.............................. 27,805 14,968
------- -------
351,776 179,123
======= =======
</TABLE>
c) Directors
<TABLE>
<CAPTION>
12 MONTHS TO 11 MONTHS TO
31 DECEMBER 31 DECEMBER
1994 1993
------------ ------------
(Pounds) (Pounds)
<S> <C> <C>
Highest paid director............................... 49,100 89,141
====== ======
<CAPTION>
Emoluments of the other directors are as follows: NUMBER NUMBER
<S> <C> <C>
(Pounds)Nil--5,000................................ 4 6
====== ======
</TABLE>
5. NET INTEREST PAYABLE
<TABLE>
<CAPTION>
12 MONTHS TO 11 MONTHS TO
31 DECEMBER 31 DECEMBER
1994 1993
------------ ------------
(Pounds) (Pounds)
<S> <C> <C>
On Bank overdraft repayable within 5 years......... (122,084) (18,533)
Bank interest receivable........................... 9,045 1,486
-------- -------
(113,039) (17,047)
======== =======
</TABLE>
F-32
<PAGE>
EXCEL PLUS LIMITED
NOTES TO THE ACCOUNTS--(CONTINUED)
6. TAXATION
The tax credit/(charge) is based on the (loss)/profit on ordinary activities
for the year and comprises:
<TABLE>
<CAPTION>
12 MONTHS TO 11 MONTHS TO
31 DECEMBER 31 DECEMBER
1994 1993
------------ ------------
(Pounds) (Pounds)
<S> <C> <C>
Corporation tax at 33%............................. -- (58,848)
Prior year tax recoverable......................... 58,848 --
------ -------
58,848 (58,848)
====== =======
</TABLE>
7. TANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
FIXTURES,
FITTINGS AND
EQUIPMENT
------------
(Pounds)
<S> <C>
Cost
As at 1 January 1994.......................................... 21,062
Additions..................................................... 22,266
------
As at 31 December 1994........................................ 43,328
------
Depreciation
As at 1 January 1994.......................................... 4,337
Charge for the year........................................... 6,153
------
As at 31 December 1994........................................ 10,490
------
Net Book Value
As at 1 January 1994.......................................... 16,725
======
As at 31 December 1994........................................ 32,838
======
</TABLE>
8. DEBTORS
<TABLE>
<CAPTION>
1994 1993
--------- --------
(Pounds) (Pounds)
<S> <C> <C>
Trade debtors............................................. 893,145 482,227
Amounts due from shareholders............................. -- 116,574
Corporation tax recoverable............................... 58,848 --
VAT recoverable........................................... 129,126 153,721
Other debtors............................................. 16,954 112,566
Prepayments and accrued income............................ 32,860 52,678
--------- -------
1,130,933 917,766
========= =======
</TABLE>
All amounts due, fall for payment within one year.
F-33
<PAGE>
EXCEL PLUS LIMITED
NOTES TO THE ACCOUNTS--(CONTINUED)
9. CREDITORS--AMOUNTS FALLING DUE WITHIN ONE YEAR
<TABLE>
<CAPTION>
1994 1993
--------- ---------
(Pounds) (Pounds)
<S> <C> <C>
Bank overdraft........................................... 2,101,480 600,826
Trade creditors.......................................... 1,603,132 872,035
Amounts due to shareholders.............................. 59,692 264,276
Corporation tax payable.................................. -- 58,848
Other taxes and social security.......................... 18,127 9,133
Accruals and deferred income............................. 1,143,893 512,598
--------- ---------
4,926,324 2,317,716
========= =========
</TABLE>
The bank overdraft facility is guaranteed by the company's ultimate UK
parent company.
10. CALLED-UP SHARE CAPITAL
<TABLE>
<CAPTION>
1994 1993
-------- --------
(Pounds) (Pounds)
<S> <C> <C>
Authorised
22,500 "A' ordinary shares of (Pounds)1 each............. 22,500 22,500
22,500 "B' ordinary shares of (Pounds)1 each............. 22,500 22,500
5,000 "C' ordinary shares of (Pounds)1 each.............. 5,000 5,000
------ ------
50,000 50,000
====== ======
Alloted, called-up and fully paid
22,500 "A' ordinary shares of (Pounds)1 each............. 22,500 22,500
22,500 "B' ordinary shares of (Pounds)1 each............. 22,500 22,500
------ ------
45,000 45,000
====== ======
</TABLE>
On 22 May 1995 the company issued 1 "C' ordinary share of (Pounds)1 to the
holder of the "A' ordinary shares at a premium of (Pounds)499,999 for cash
consideration. On the same day the holder of the "B' ordinary shares, Product
Plus (London) Limited, acquired all the issued "A' and "C' ordinary shares and
consequently the company became a wholly owned subsidiary undertaking of
Product Plus (London) Limited. On 22 May 1995 the company adopted new Articles
of Assocation.
11. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
<TABLE>
<CAPTION>
1994 1993
-------- --------
(Pounds) (Pounds)
<S> <C> <C>
Shareholders' funds at beginning of period................ 154,291 2
Retained (loss)/profit for the financial period........... (548,612) 109,291
New share capital subscribed.............................. -- 44,998
-------- -------
Shareholders' funds at end of period...................... (394,321) 154,291
======== =======
</TABLE>
F-34
<PAGE>
EXCEL PLUS LIMITED
NOTES TO THE ACCOUNTS--(CONTINUED)
12. RESERVES
<TABLE>
<CAPTION>
1994 1993
-------- --------
(Pounds) (Pounds)
<S> <C> <C>
Profit and Loss Account
At beginning of period.................................. 109,291 --
Retained (loss)/profit for the period................... (548,612) 109,291
-------- -------
At end of period........................................ (439,321) 109,291
======== =======
</TABLE>
13. CASH FLOW INFORMATION
a) Reconciliation of operating (loss)/profit to net cash outflow from
operating activities:
<TABLE>
<CAPTION>
1994 1993
---------- ----------
(Pounds) (Pounds)
<S> <C> <C>
Operating (loss)/profit.............................. (494,421) 185,186
Depreciation......................................... 6,153 4,337
Increase in stocks................................... (1,301,067) (1,357,957)
Increase in debtors.................................. (154,319) (917,766)
Increase in creditors................................ 1,166,802 1,658,044
---------- ----------
Net cash outflow from operating activities........... (776,852) (428,156)
========== ==========
</TABLE>
b) Analysis of changes in cash and cash equivalents during the year:
<TABLE>
<CAPTION>
CASH AT BANK BANK
AND IN HAND OVERDRAFT NET
------------ ---------- ----------
(Pounds) (Pounds) (Pounds)
<S> <C> <C> <C>
At beginning of year.................... 179,559 (600,826) (421,267)
At end of year.......................... 709,208 (2,101,480) (1,392,272)
------- ---------- ----------
Change during year...................... 529,649 (1,500,654) (971,005)
======= ========== ==========
</TABLE>
14. GUARANTEES AND OTHER FINANCIAL COMMITMENTS
a) Capital Commitments
No capital expenditure had been approved and contracted for, or approved but
not contracted, by the company at 31 December 1994 (1993--(Pounds)Nil).
b) Pension arrangements
The company does not operate a defined contribution pension scheme. The
company contributes to individual staff private pension plans, and the assets
of the schemes are held separately from those of the company in independently
administered funds. The pension cost charge represents contributions payable
in respect of the period by the company to the fund.
c) Financial Support
Following the change in ownership on 22 May 1995 (see also Note 10), the
called up share capital of the company is held by Product Plus (London)
Limited, a company incorporated in the United Kingdom. The ultimate United
Kingdom parent company of Product Plus (London) Limited, Diversified Agency
Services
F-35
<PAGE>
EXCEL PLUS LIMITED
NOTES TO THE ACCOUNTS--(CONCLUDED)
Limited has agreed to provide the company with financial support. The
directors have considered the financial position of the company and have
concluded that the company is able to meet its liabilities as they fall due.
15. ULTIMATE PARENT COMPANY
As a consequence of the company becoming a wholly owned subsidiary of
Product Plus (London) Limited the company has become a subsidiary undertaking
of Diversified Agency Services Limited, the United Kingdom parent company,
whose principal place of business is at 239 Old Marylebone Road, London NW1
5QT.
The ultimate parent company is Omnicom Group Inc. a company incorporated in
the United States of America. The consolidated accounts of Omnicom Group Inc.
are available to the public and may be obtained from Omnicom Group Inc., 437
Madison Avenue, New York 10022, USA.
16. SUMMARY OF DIFFERENCES BETWEEN UK AND US GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES
These financial statements have been prepared in accordance with UK GAAP,
which differ in certain respects from US GAAP.
Under UK GAAP, deferred taxes are accounted for to the extent that it is
considered probable that a liability or asset will crystallise in the
foreseeable future. Under US GAAP, deferred taxes are accounted for on all
temporary differences, as defined. A valuation allowance is established in
respect of those deferred tax assets where it is more likely than not that
some portion will remain unrealised.
Under US GAAP, a tax benefit for the 1994 loss would be recognised. However
because a question exists concerning the realisation of this benefit, a
reserve for the full amount would be recognised. The net effect of
establishing the reserve would result in income statement and balance sheet
presentations identical to those shown in the accompanying statements.
The cash flow statement has been prepared under UK Financial Reporting
Standard number 1. The principal differences between this statement and cash
flow statements prepared under US Financial Accounting Standards number 95 are
as follows:
1) Under the UK standard, net cash flows from operating activities is
determined before considering cash flows from (a) returns on investments
and servicing of finance and (b) taxes paid. Under the US standard, net
cash flow from operating activities would be determined after these items.
2) The UK definition of cash and cash equivalents includes advances from
banks or financial institutions with a maturity of three months or less at
the date of the advance. Under the US standard, these liabilities would be
shown as a separate item to reconcile net income to the net change in cash
resulting from operating activities.
Other differences between UK and US GAAP do not affect the accompanying
financial statements.
F-36
<PAGE>
MICKELBERRY COMMUNICATIONS INCORPORATED
QUARTERLY DATA
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH FULL
QUARTER QUARTER QUARTER QUARTER YEAR
------- ------- ------- ------- --------
IN THOUSANDS (EXCEPT PER SHARE)
<S> <C> <C> <C> <C> <C>
1994
Revenues........................ $27,561 $29,457 $35,866 $34,739 $127,623
Operating income (loss)......... $ (158) $ 519 $ 1,882 $(1,091) $ 1,152
Net income (loss)............... $ (295) $ 120 $ 912 $ (788) $ (51)
Income (loss) per common share
Primary....................... $ (.05) $ .02 $ .15 $ (.14) $ (.02)
Fully diluted................. $ (.05) $ .02 $ .12 $ (.14) $ (.02)
1993
Revenues........................ $25,300 $29,345 $31,110 $33,189 $118,944
Operating income................ $ 82 $ 422 $ 587 $ 1,607 $ 2,698
Income (loss) before cumulative
effect of change in accounting. $ (100) $ (276) $ (52) $ 582 $ 154
Net income (loss)............... $ 100 $ (276) $ (52) $ 582 $ 354
Income (loss) per common share
Primary.......................
Income (loss) before cumulative
effect of change in accounting. $ (.02) $ (.05) $ (.01) $ .10 $ .02
Net income (loss)............... $ .01 $ (.05) $ (.01) $ .10 $ .05
Fully diluted Income (loss)
before cumulative effect of
change in accounting........... $ (.02) $ (.05) $ (.01) $ .08 $ .02
Net income (loss)............... $ .01 $ (.05) $ (.01) $ .08 $ .05
</TABLE>
During the fourth quarter of 1994, the Excel Marketing Group recorded a $2.5
million charge to reduce certain inventories to net realizable values. In
addition, a $1 million charge was recorded for Excel Plus, a joint venture in
which the Excel Group has a 50% interest. The charge was to adjust inventory
to net realizable value and to record an additional allowance for returns. Net
income for the second quarter of 1994 had previously been reported as
$109,000. Included in that amount was an incorrect investment income number.
Operating income for the second and third quarters of 1993 had previously
been reported as a loss of $141,000 and income of $272,000, respectively.
During these quarters, the results for November Records, Inc., a newly formed
corporation had been included in operating income. During the fourth quarter
of 1993, the Company determined that its controlling ownership of November was
temporary and the inclusion of November's results in operating income was
inappropriate. Also during 1993 the Company had classified its share of income
from Excel Plus, as other income. At year end it was determined that the
results of this joint venture should be included in operating income.
Accordingly, the Company has restated its second and third quarter income
statements to reclassify the losses of November to other expense and to
include the income of the joint venture in operating income. These
reclassifications did not affect either income (loss) before cumulative effect
of change in accounting or net income (loss) for these quarters. (See Notes 2
and 5 of the Notes to Consolidated Financial Statements.)
Effective January 1, 1993, the Company changed its method of accounting for
income taxes. During the first quarter of 1993 a $200,000 cumulative effect
was credited to income as a result of this accounting change. (See Notes 1 and
13 of the Notes to Consolidated Financial Statements.)
This schedule is unaudited.
F-37
<PAGE>
MICKELBERRY COMMUNICATIONS INCORPORATED
PRO FORMA FINANCIAL DATA
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The following unaudited pro forma condensed consolidated balance sheet as of
December 31, 1994 and the unaudited pro forma condensed consolidated statement
of income for the year ended December 31, 1994, give effect to the merger of
Mickelberry Acquisition Corporation into Mickelberry Communications
Incorporated. The pro forma adjustments related to the pro forma condensed
consolidated balance sheet are computed assuming the merger was consummated as
of December 31, 1994. Pro forma adjustments related to the pro forma condensed
consolidated statement of income are computed assuming the transaction was
consummated at January 1, 1994. The pro forma information is based on the
historical financial statements of Mickelberry Communications Incorporated
giving effect to the transaction under the assumptions and adjustments in the
accompanying notes to the pro forma financial statements.
The pro forma statements have been prepared by Mickelberry Communications
Incorporated based upon the balance sheet of Mickelberry Communications
Incorporated as of December 31, 1994 and its income statement for the year
then ended. These pro forma statements may not be indicative of the results
that actually would have occurred if the combination had been in effect on the
dates indicated or which may be obtained in the future. The pro forma
financial statements should be read in conjunction with the audited financial
statements of Mickelberry Communications Incorporated contained elsewhere
herein.
F-38
<PAGE>
MICKELBERRY COMMUNICATIONS INCORPORATED
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1995
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA PRO FORMA
MARCH 31, 1995 ADJUSTMENTS MARCH 31, 1995
-------------- ----------- --------------
IN THOUSANDS (EXCEPT PER SHARE)
<S> <C> <C> <C>
ASSETS
Current assets
Cash........................... $ 157 $ 157
Temporary investments.......... 4,380 4,380
Receivables.................... 34,648 34,648
Inventories.................... 27,864 27,864
-------- --------
Total current assets......... 67,049 67,049
Intangibles--net................. 10,946 (1,291)(/5/) 9,655
Property, plant and equipment--
net............................. 26,136 26,136
Other............................ 562 562
-------- -------- --------
$104,693 $ (1,291) $103,402
======== ======== ========
LIABILITIES
Current liabilities
Accounts payable............... $ 23,467 $ 23,467
Notes payable.................. 8,537 8,537
Accrued liabilities............ 11,040 11,040
Income taxes payable........... 2,927 2,927
Current portion of long-term
debt.......................... 2,615 2,615
-------- --------
48,586 48,586
Deferred income taxes............ 938 938
Long-term debt................... 20,113 17,249 (/4/) 37,362
Stockholders' equity
Preferred stock................ 242 (242)(/3/)
Common equity.................. 34,814 (18,298)(/2/) 16,516
-------- -------- --------
Total stockholders' equity... 35,056 (18,540) 16,516
-------- -------- --------
$104,693 $ (1,291) $103,402
======== ======== ========
Book Value Per Share............. $ 5.32 $ 5.92
======== ========
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
F-39
<PAGE>
MICKELBERRY COMMUNICATIONS INCORPORTED
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
THREE MONTHS ENDED MARCH 31, 1995
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA PRO FORMA
1995 ADJUSTMENTS 1995
---------- ----------- ---------
IN THOUSANDS (EXCEPT PER SHARE)
<S> <C> <C> <C>
Revenues
Tangible products........................ $25,720 $25,720
Services................................. 5,465 5,465
------- -------
31,185 31,185
------- -------
Equity in pre-tax earnings (loss) of affil-
iated company............................. (127) (127)
Costs and expenses
Cost of revenues
Tangible products...................... 19,883 19,883
Services............................... 4,880 4,880
Selling and administrative............. 5,403 (14)(/7/) 5,389
------- ----- -------
30,166 (14) 30,152
------- ----- -------
Operating income (loss).................... 892 14 906
Other expense (income)
Interest expense......................... 483 459 (/6/) 942
Investment income........................ (127) (127)
Other--net............................... (39) (39)
------- -------
317 459 776
------- ----- -------
Income (loss) before taxes (benefit)....... 575 (445) 130
Income taxes (benefit)..................... 230 (178)(/8/) 52
------- ----- -------
Net Income (loss).......................... $ 345 $ 267 $ 78
======= ===== =======
Income (loss) per common share
Primary.................................. $ 0.06 $ 0.03
======= =======
Fully diluted............................ $ 0.05 $ 0.03
======= =======
Number of shares used to calculate earnings
per share
Primary.................................. 5,923 2,789
Fully diluted............................ 8,304 2,789
Ratio of Earnings to Fixed Changes......... 219.05% 113.8%
</TABLE>
See Note to Unaudited Pro Forma Condensed Consolidated Financial Statements.
F-40
<PAGE>
MICKELBERRY COMMUNICATIONS INCORPORATED
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA PRO FORMA
1994 ADJUSTMENTS 1994
---------- ----------- ---------
IN THOUSANDS (EXCEPT PER SHARE)
<S> <C> <C> <C>
Revenues
Tangible products....................... $106,637 $106,637
Services................................ 20,986 20,986
-------- --------
127,623 127,623
-------- --------
Equity in pre-tax earnings (loss) of af-
filiated company......................... (907) (907)
Costs and expenses
Cost of revenues
Tangible products..................... 85,089 85,089
Services.............................. 17,807 17,807
Selling and administrative............ 22,668 (57)(/7/) 22,611
-------- ------- --------
125,564 (57) 125,507
-------- ------- --------
Operating income (loss)................... 1,152 57 1,209
Other expense (income)
Interest expense........................ 1,990 1,837 (/6/) 3,827
Investment income....................... (631) (631)
Other--net.............................. (122) (122)
-------- --------
1,237 1,837 3,074
-------- ------- --------
Income (loss) before taxes (benefit)...... (85) (1,780) (1,865)
Income taxes (benefit).................... (34) (712)(/8/) (746)
-------- --------
Net Income (loss)......................... $ (51) $(1,068) $ (1,119)
======== ======= ========
Income (loss) per common share
Primary................................. $ (0.02) $ (0.40)
======== ========
Fully diluted........................... $ (0.02) $ (0.40)
======== ========
Number of shares used to calculate earn-
ings per share
Primary................................. 5,876 2,789
Fully diluted........................... 5,876 2,789
Ratio of Earnings to Fixed Charges........ 96.17% 52.58%
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
F-41
<PAGE>
MICKELBERRY COMMUNICATIONS INCORPORATED
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The unaudited pro forma condensed consolidated financial statements give
effect to the Merger. In conjunction with the Merger, the Company intends to
borrow $22,876,000 which will be used as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Payment for common and preferred shares..................... $15,022
Cancellation of options..................................... 581
Redemption of convertible debentures........................ 5,628
Estimated transaction expenses.............................. 1,645
-------
$22,876
=======
</TABLE>
The Merger will be accounted for as a step acquisition. Pursuant to this
accounting treatment, residual interests in the Company will be carried over
at the investors' predecessor basis. Since it is impracticable to recompute
predecessor basis, the investors' proportionate equity in the book value of
the Company will be carried over following the Merger. Residual interests of
the Company prior to the Merger which will continue after the Merger amount to
approximately 48%.
2. Adjustment to reflect the reduction in equity resulting from the
acquisition of approximately 52% of the stock of the Company as of March 31,
1995.
3. Elimination of preferred stockholder interest as of March 31, 1995.
4. Issuance of debt to finance the Merger transaction ($22,876,000) net of
redemption of convertible debentures ($5,627,000).
5. Adjustment resulting from the acquisition of approximately 52% of the
Company's common equity at less than book value. The Company has not yet
obtained an appraisal of the fair values of its assets and liabilities.
However, the Company does not believe that such fair values would be
materially different than recorded book value at March 31, 1995. Accordingly,
the reduction in accounting values resulting from the acquisition has been
reflected in intangibles.
6. Increase in interest costs for the three months ended March 31, 1995 and
for the year ended December 31, 1994 as follows:
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1994 MARCH 31, 1995
----------------- ------------------
<S> <C> <C>
Interest on new debt--$22,876 at 10%... $2,287 $ 572
Less interest on redeemed debt--5,627
at 8%................................. (450) (113)
------ -----
$1,837 $ 459
====== =====
</TABLE>
7. Reduction in amortization of intangible assets, as follows:
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1994 MARCH 31, 1995
----------------- ------------------
<S> <C> <C>
Reduction of intangibles--$1,142 / 20.. $ 57 $ 14
====== =====
</TABLE>
8. Adjustment to income taxes at 40% of the amount of net pretax pro forma
adjustments. Statutory rate of 40% represents 34% federal rate and 6% state
and local rate net of federal benefit.
PLEASE MARK, SIGN AND DATE THE ENCLOSED PROXY AND MAIL IT PROMPTLY. NO
POSTAGE STAMP IS NECESSARY IF MAILED IN THE UNITED STATES.
F-42
<PAGE>
ANNEX A
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
MICKELBERRY COMMUNICATIONS INCORPORATED,
MICKELBERRY ACQUISITION CORPORATION,
UNION CAPITAL CORPORATION
AND
MR. JAMES C. MARLAS
DATED AS OF MARCH 21, 1995
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
ARTICLE I
The Merger
<TABLE>
<C> <S> <C>
Section 1.1.Meeting of Mickelberry's Stockholders; Proxy Statement;
Schedule 13E-3.............................................. A-1
1.2.The Merger.................................................. A-2
1.3.Conversion of Outstanding Shares............................ A-2
1.4.Surrender and Exchange...................................... A-3
1.5.Certificate of Incorporation................................ A-3
1.6.By-laws..................................................... A-3
1.7.Directors and Officers...................................... A-3
1.8.Stock Transfer Books........................................ A-3
ARTICLE II
Representations and Warranties of Mickelberry
Section 2.1.Corporate Organization...................................... A-4
2.2.Capitalization.............................................. A-4
2.3.Authorization and Validity of Agreement..................... A-4
2.4.No Conflict or Violation.................................... A-4
2.5.Consents and Approvals...................................... A-5
ARTICLE III
Representations and Warranties of Mickelberry Acquisition
Section 3.1.Corporate Organization...................................... A-5
3.3.Subsidiaries and Equity Investments......................... A-5
3.4Authorization and Validity of Agreement...................... A-5
3.5.No Conflict or Violation.................................... A-5
3.6.Consents and Approvals...................................... A-6
ARTICLE IV
Representations and Warranties of Union Capital and Marlas
Section 4.1.Corporate Organization...................................... A-6
4.2.Capitalization of Union Capital............................. A-6
4.3.Title to Cancelled Shares................................... A-6
4.4.Authorization and Validity of Agreement..................... A-6
4.5.No Conflict or Violation.................................... A-6
ARTICLE V
Covenants of Mickelberry
Section 5.1.Conduct of Mickelberry...................................... A-7
5.2.Access to Information....................................... A-7
5.3.Indemnification and Insurance............................... A-8
5.4.Vote........................................................ A-8
5.5.Letter Agreement and Other Fees and Expenses................ A-8
5.6.Stock Options............................................... A-9
5.7.No Mergers, Consolidations, Sale of Stock, etc. ............ A-9
5.8.Convertible Debentures...................................... A-9
</TABLE>
i
<PAGE>
<TABLE>
ARTICLE VI
Covenants of Mickelberry Acquisition
<C> <S> <C>
Section 6.1.Conduct of Mickelberry Acquisition....................... A-9
6.2.Access to Information.................................... A-9
ARTICLE VII
Covenants of Union Capital and Marlas
Section 7.1.Vote..................................................... A-9
7.2.No Sale or Disposition; Waiver........................... A-10
ARTICLE VIII
Other Agreements
Section 8.1.Best Efforts............................................. A-10
8.2.Notification of Certain Matters.......................... A-10
8.3.Further Assurances....................................... A-10
ARTICLE IX
Conditions to the Merger
Section 9.1.Conditions to the Obligations of Each Party.............. A-10
9.2.Conditions to the Obligation of Mickelberry.............. A-11
9.3.Conditions to the Obligation of Mickelberry Acquisition.. A-11
ARTICLE X
Termination
Section 10.1.Termination.............................................. A-12
10.2.Effect of Termination.................................... A-12
ARTICLE XI
Miscellaneous
Section 11.1.Notices.................................................. A-12
11.2.Survival................................................. A-12
11.3.Amendment................................................ A-13
11.4.Waiver................................................... A-13
11.5.Successors and Assigns................................... A-13
11.6.Governing Law............................................ A-13
11.7.Integration.............................................. A-13
11.8.Headings and References.................................. A-13
11.9.Counterparts; Effectiveness.............................. A-13
Signatures.............................................................. A-14
Exhibit A Form of Certificate of Incorporation of the Surviving
Corporation...................................................
Schedules
Schedule 1.3Certain Shares............................................
Schedule 2.1Subsidiaries..............................................
</TABLE>
ii
<PAGE>
INDEX TO DEFINED TERMS
<TABLE>
<CAPTION>
DEFINED TERM WHERE DEFINED
------------ -------------
<S> <C>
Agreement......................................................... Introduction
Cancelled Shares.................................................. (S)1.3(a)
Certificate of Merger............................................. (S)1.2(b)
Client............................................................ (S)5.5
Common Stock...................................................... (S)2.2
Convertible Debentures............................................ (S)2.4
Delaware Law...................................................... (S)1.2(a)
Effective Time.................................................... (S)1.2(b)
Exchange Act...................................................... (S)1.1(b)
HSR Act........................................................... (S)2.5
Letter Agreement.................................................. (S)5.5
Marlas............................................................ Introduction
Merger............................................................ Recitals
Merger Consideration.............................................. (S)1.3(a)
Mickelberry....................................................... Introduction
Mickelberry Acquisition........................................... Introduction
Option Consideration.............................................. (S)5.6
Options........................................................... (S)5.6
Paying Agent...................................................... (S)1.4(a)
Preferred Stock................................................... (S)2.2
Proxy Statement................................................... (S)1.1(b)
SEC............................................................... (S)1.1(b)
Schedule 13E-3.................................................... (S)1.1(b)
Share............................................................. (S)1.3(a)
Special Meeting................................................... (S)1.1(a)
Subsidiary........................................................ (S)2.1
Surviving Corporation............................................. (S)1.2(a)
Termination Agreement............................................. (S)5.6
Union Capital..................................................... Introduction
Wertheim Opinion.................................................. (S)2.4
</TABLE>
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of March 21, 1995 (this "AGREEMENT")
by and among MICKELBERRY COMMUNICATIONS INCORPORATED, a Delaware corporation
("MICKELBERRY"), MICKELBERRY ACQUISITION CORPORATION, a Delaware corporation
("MICKELBERRY ACQUISITION"), UNION CAPITAL CORPORATION, a Nevada corporation
("UNION CAPITAL") and Mr. JAMES C. MARLAS ("MARLAS").
WHEREAS, each of Mickelberry Acquisition and Union Capital is wholly owned
by Marlas;
WHEREAS, each of Union Capital and Marlas owns shares of common stock of
Mickelberry;
WHEREAS, the parties hereto desire to effect the merger of Mickelberry
Acquisition with and into Mickelberry (the "MERGER") pursuant to the terms of
this Agreement;
WHEREAS, upon the consummation of the Merger, each share of common stock of
Mickelberry Acquisition will be converted into and become one share of common
stock of the surviving corporation; and
WHEREAS, the Board of Directors of each of Mickelberry and Mickelberry
Acquisition have determined that the Merger contemplated hereby is fair to and
in the best interests of Mickelberry and its shareholders and Mickelberry
Acquisition and its sole shareholder;
NOW THEREFORE, in consideration of the foregoing and the mutual agreements
contained herein, the parties hereto agree as follows:
ARTICLE I
The Merger
Section 1.1. Meeting of Mickelberry's Stockholders; Proxy Statement;
Schedule 13E-3. (a) Mickelberry will take all action necessary in accordance
with applicable law to convene a meeting of its stockholders (the "SPECIAL
MEETING") as promptly as practicable after the date hereof to consider and
vote upon the Merger. The Board of Directors of Mickelberry, subject to its
fiduciary duties as advised by counsel, will recommend that Mickelberry's
stockholders vote in favor of the Merger and the approval and adoption of this
Agreement.
(b) As soon as practicable, Mickelberry shall file with the Securities and
Exchange Commission (the "SEC") under the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT"), and shall use its best efforts to have cleared
by the SEC, a proxy statement (together with any amendments or supplements
thereto, the "PROXY STATEMENT"), with respect to the Special Meeting. In
addition, Mickelberry and Mickelberry Acquisition shall file with the SEC and
make available to Mickelberry's shareholders, as required by applicable law, a
joint Schedule 13E-3 (together with any amendments or supplements thereto, the
"SCHEDULE 13E-3") with respect to the Special Meeting and the Merger.
Mickelberry Acquisition, Union Capital and Marlas will provide all information
relating to them or their affiliates (other than Mickelberry or any of its
subsidiaries) for use in preparation of the Proxy Statement and Schedule 13E-
3. Mickelberry will provide all information, other than that relating to
Mickelberry Acquisition, Union Capital, Marlas or their respective affiliates
(other than Mickelberry or any of its subsidiaries), for use in the Proxy
Statement and in the Schedule 13E-3. The information provided and to be
provided by Mickelberry, Mickelberry Acquisition, Union Capital and Marlas,
respectively, for use in the Proxy Statement and in the Schedule 13E-3 shall
be true and correct in all material respects and shall not omit to state any
material fact necessary in order to make such information not misleading as of
the date of the Proxy Statement or the Schedule 13E-3, as the case may be, and
as of the date of the Special Meeting. Mickelberry will promptly advise
Mickelberry Acquisition, Union Capital and Marlas and Mickelberry Acquisition,
Union Capital or Marlas, as the case may be, will promptly advise Mickelberry,
in writing if at any time prior to the Effective Time Mickelberry, Mickelberry
Acquisition, Union Capital or Marlas
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shall obtain knowledge of any facts that might make it necessary or
appropriate to amend or supplement the Proxy Statement or the Schedule 13E-3
in order to make the statements contained or incorporated by reference therein
not misleading or to comply with applicable law. The Proxy Statement shall
contain the recommendation of the Board of Directors of Mickelberry referred
to in subdivision (a) of this Section 1.1 as well as the conclusion of the
Board of Directors of Mickelberry that the terms and conditions of the Merger
are fair to the shareholders of Mickelberry (other than Union Capital and
Marlas).
Section 1.2. The Merger. (a) At the Effective Time, the Merger shall occur
in accordance with the General Corporation Law of the State of Delaware
("DELAWARE LAW"), whereupon the separate existence of Mickelberry Acquisition
shall cease, and Mickelberry shall be the surviving corporation (the
"SURVIVING CORPORATION").
(b) As soon as practicable after all of the conditions set forth in Article
VII have been satisfied or waived, Mickelberry and Mickelberry Acquisition
will file, or cause to be filed, with the Secretary of State of the State of
Delaware a certificate of merger for the Merger in accordance with Delaware
Law (the "CERTIFICATE OF MERGER"). The Merger shall become effective at the
time such filing is made or at such other time as is set forth in the
Certificate of Merger (the "EFFECTIVE TIME").
(c) From and after the Effective Time, the Surviving Corporation shall
possess all the rights, privileges, powers and franchises and be subject to
all of the restrictions, disabilities and duties of Mickelberry and
Mickelberry Acquisition, all as provided under Delaware Law.
Section 1.3. Conversion of Outstanding Shares.
(a) At the Effective Time:
(i) each share of Preferred Stock and of Common Stock of Mickelberry (a
"SHARE" and, collectively, the "SHARES") outstanding immediately prior to
the Effective Time (except for the Cancelled Shares) shall, except as
otherwise provided in subsections (a)(iii) and (b) of this Section 1.3, be
converted into and represent the right to receive $4.25 in cash (the
"MERGER CONSIDERATION");
(ii) each Share held by Union Capital and by Marlas outstanding
immediately prior to the Effective Time other than those listed on Schedule
1.3 hereof (a "CANCELLED SHARE" and, collectively, the "CANCELLED SHARES")
shall, by virtue of the Merger, and without any action on the part of the
holder thereof, be cancelled and retired and cease to exist, without any
conversion thereof; provided, however, that in connection with, and only in
connection with, the consummation of the Merger, each of Union Capital and
Marlas waives its right to receive the Merger Consideration and consents to
being treated less favorably than the other shareholders of Mickelberry;
(iii) each Share held by Mickelberry as treasury stock immediately prior
to the Effective Time or owned by any direct or indirect subsidiary of
Mickelberry immediately prior to the Effective Time shall be cancelled, and
no payment shall be made with respect thereto; and
(iv) each share of common stock of Mickelberry Acquisition outstanding
immediately prior to the Effective Time shall be converted into and become
one share of common stock of the Surviving Corporation.
(b) Notwithstanding subsection (a)(i) of this Section 1.3, Shares
outstanding immediately prior to the Effective Time and held by a holder who
has not voted in favor of the Merger or consented thereto in writing and who
has demanded appraisal for such Shares in accordance with Delaware Law shall
not be converted into a right to receive the Merger Consideration pursuant to
such subsection (a)(i) unless such holder fails to perfect or withdraws or
loses his right to appraisal. If after the Effective Time such holder fails to
perfect or withdraws or loses his right to appraisal, such Shares shall
thereupon be deemed to have been converted into and to represent the right to
receive, at the Effective Time, the Merger Consideration pursuant to the terms
of subsection (a)(i) of this Section 1.3, without any interest thereon or
addition thereto. Mickelberry shall give Mickelberry Acquisition
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prompt notice of any demands received by Mickelberry for appraisal of Shares,
and Mickelberry Acquisition shall have the right to participate in all
negotiations and proceedings with respect to such demands. Mickelberry shall
not, except with the prior written consent of Mickelberry Acquisition, make
any payment with respect to, or settle or offer to settle, any such demands.
Section 1.4. Surrender and Exchange. (a) Promptly after the Effective Time,
the Surviving Corporation, or such bank or trust company acting as paying
agent (the "PAYING AGENT") for the Merger pursuant to an agreement in a form
to be mutually agreed upon by Mickelberry and Mickelberry Acquisition, shall
mail or cause to be mailed to each (i) holder of Shares at the Effective Time
a letter of transmittal for use in surrendering for exchange the certificate
or certificates representing such Shares, and (ii) holder of Options at the
Effective Time a letter of transmittal for use in transmitting the Termination
Agreement. After the Effective Time, each such holder, upon surrender to the
Paying Agent of such certificate or certificates or Termination Agreement, as
the case may be (together with such letter of transmittal duly executed), will
be entitled to receive the Merger Consideration or the Option Consideration,
as the case may be. Until so surrendered, each such certificate shall after
the Effective Time represent for all purposes only the right to receive the
Merger Consideration. At the Effective Time, Mickelberry Acquisition shall
furnish or cause to be furnished to the Paying Agent funds equal to the
aggregate Merger Consideration payable to the holders of Shares and the
aggregate Option Consideration payable to the holders of Options. After the
Effective Time, there shall be no further registration or transfers of Shares.
The Surviving Corporation shall establish reasonable procedures for the
delivery of the Merger Consideration to holders of Shares whose stock
certificates have been lost, destroyed or mutilated.
(b) If any delivery of the Merger Consideration is to be made pursuant to
Section 1.3(a)(i) to a person other than the registered holder of the
certificate or certificates surrendered in exchange therefor, it shall be a
condition to such delivery that the certificate or certificates so surrendered
shall be properly endorsed or be otherwise in proper form for transfer and
that the person requesting such delivery shall (i) pay to the Paying Agent any
transfer or other taxes required as a result of delivery to a person other
than the registered holder or (ii) establish to the satisfaction of the Paying
Agent that such tax has been paid or is not payable.
(c) Any holder of Shares who has not exchanged his Shares for the Merger
Consideration in accordance with subsection (a) within six months after the
Effective Time shall have no further claim upon the Paying Agent and shall
thereafter look only to the Surviving Corporation for payment in respect of
his Shares. Notwithstanding the foregoing, no party hereto shall be liable to
a holder of Shares for any amount paid to a public official pursuant to
applicable abandoned property laws.
Section 1.5. Certificate of Incorporation. The Certificate of Incorporation
of the Surviving Corporation shall be amended in the Merger to read as set
forth in Exhibit A.
Section 1.6. By-laws. The By-laws of Mickelberry Acquisition in effect at
the Effective Time shall be the By-laws of the Surviving Corporation until
amended in accordance with applicable law.
Section 1.7. Directors and Officers. From and after the Effective Time,
until successors are duly elected or appointed in accordance with applicable
law, (a) the directors of Mickelberry at the Effective Time shall be the
directors of the Surviving Corporation and (b) the officers of Mickelberry at
the Effective Time shall be the officers of the Surviving Corporation.
Section 1.8. Stock Transfer Books. At the Effective Time the stock transfer
books of Mickelberry shall be closed and no transfer of Common Stock shall
thereafter be made on such stock transfer books.
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ARTICLE II
Representations and Warranties of Mickelberry
Mickelberry represents and warrants to Mickelberry Acquisition, Union
Capital and Marlas that:
Section 2.1. Corporate Organization. Each of Mickelberry and its
Subsidiaries (as defined below) is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation, and has all requisite corporate power and authority to own its
properties and assets and to conduct its businesses as now conducted.
"SUBSIDIARY" or "SUBSIDIARIES" means any corporation of which Mickelberry
owns, directly or indirectly, shares of capital stock having in the aggregate
50% or more of the total combined voting power of the issued and outstanding
shares of capital stock entitled to vote generally in the election of
directors of such corporation. Schedule 2.1 contains a list of all the
Subsidiaries together with Mickelberry's percentage of ownership of each such
Subsidiary.
Section 2.2. Capitalization. The authorized capital stock of Mickelberry
consists of 25,000,000 shares, consisting of 5,000,000 shares of Preferred
Stock, par value $1.00 per share (the "PREFERRED STOCK"), and 20,000,000
shares of Common Stock, par value $1.00 per share (the "COMMON STOCK"), and
242,334 and 5,877,948 shares of Preferred Stock and Common Stock,
respectively, are issued and outstanding. The shares of Common Stock and the
shares of Preferred Stock have been duly authorized and validly issued, and
are fully paid and nonassessable and no personal liability attaches to the
ownership thereof. The Common Stock and the Preferred Stock are the only
outstanding capital stock of Mickelberry.
Section 2.3. Authorization and Validity of Agreement. Mickelberry has the
corporate power to enter into this Agreement, to carry out its obligations
hereunder, and to consummate the Merger. The execution and delivery of this
Agreement and the performance of Mickelberry's obligations hereunder have been
duly authorized by all necessary corporate action, including, without
limitation, by the Board of Directors of Mickelberry. The consummation of the
Merger has been duly authorized by all necessary corporate action, other than
the affirmative vote of the stockholders of Mickelberry in accordance with
applicable law and this Agreement, and approval of the Merger by the
stockholders of Mickelberry has been recommended by the Board of Directors of
Mickelberry. Wertheim Schroder & Co. Incorporated has delivered to the Special
Committee of the Board of Directors of Mickelberry its opinion, dated March
21, 1995, that the Merger Consideration is fair from a financial point of view
to the holders of the Shares (the "WERTHEIM OPINION") other than Union Capital
and Marlas. This Agreement has been duly executed by Mickelberry and
constitutes the valid and binding obligation of Mickelberry enforceable
against Mickelberry in accordance with its terms, except (i) to the extent
that enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or other laws affecting the enforcement of creditors' rights
generally, and (ii) that the availability of equitable remedies, including
specific performance, is subject to the discretion of the court before which
any proceeding therefor may be brought.
Section 2.4. No Conflict or Violation. As of the Effective Time, the
execution, delivery and performance by Mickelberry of this Agreement and
consummation of the Merger does not and will not (i) violate or conflict with
any provision of the Restated Certificate of Incorporation or By-laws of
Mickelberry, (ii) violate any provision of law, or any order, judgment or
decree of any court or other governmental or regulatory authority, and (iii)
violate or result in a breach of or constitute (with due notice or lapse of
time or both) a default under any contract, lease, loan agreement, mortgage,
security agreement, indenture (other than the indenture for Mickelberry's 8%
Convertible Debentures due May 2002 (the "CONVERTIBLE DEBENTURES")) or other
agreement (other than the two Equipment Financings by Sandy Alexander, Inc.,
as obligor, NationsBank Leasing Corporation, as lender and Mickelberry as
guarantor dated March 25, 1993 and April 7, 1993, respectively) or instrument
to which Mickelberry or any of its Subsidiaries is a party or by which it is
bound or to which its properties or assets are subject, nor will result in the
creation or imposition of any lien, charge or encumbrance of any kind
whatsoever upon any of the properties or assets of Mickelberry or any of its
Subsidiaries, nor will adversely affect or result in the cancellation,
modification, revocation or suspension of any of the licenses,
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franchises, permits, authorizations or approvals issued or granted to
Mickelberry or any of its Subsidiaries by the United States, any state or
local government, any foreign national or local government, or any department,
agency, board, commission, bureau or instrumentality of any of the foregoing,
except (in the case of clauses (ii) and (iii) above only) for such violations
or breaches which would not, individually or in the aggregate, present a
reasonable likelihood of having a material adverse effect on the business,
assets or financial condition of Mickelberry and its subsidiaries, taken as
whole.
Section 2.5. Consents and Approvals. As of the Effective Time, no material
consent, waiver, authorization or approval of any governmental or regulatory
authority, domestic or foreign, or of any other person, firm or corporation,
and no material declaration or notification to or filing or registration with
any such governmental or regulatory authority, is required on the part of
Mickelberry in connection with the execution and delivery of this Agreement by
Mickelberry, the performance by Mickelberry of its obligations hereunder, or
the consummation of the Merger, other than in connection with or in compliance
with the applicable provisions of Delaware Law, the Exchange Act or the Hart-
Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR ACT").
ARTICLE III
Representations and Warranties of Mickelberry Acquisiton
Mickelberry Acquisition represents and warrants to Mickelberry that:
Section 3.1. Corporate Organization. Mickelberry Acquisition is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. Since its date of incorporation, Mickelberry
Acquisition has not engaged in any activities not related to the acquisition,
or proposed acquisition, of Shares or the transactions contemplated by this
Agreement and the Merger and as of the Effective Time Mickelberry Acquisition
will have no liabilities other than those incurred to facilitate or in
connection with the acquisition, or proposed acquisition, of Shares or the
transactions contemplated by this Agreement and the Merger.
Section 3.2. Capitalization of Mickelberry Acquisition. The authorized
capital stock of Mickelberry Acquisition consists of 4,000,000 shares of
common stock, par value $1.00 per share, 3,000,000 of which are issued and
outstanding, and all of which are owned by Marlas.
Section 3.3. Subsidiaries and Equity Investments. As of the date of this
Agreement there are no corporations of which Mickelberry Acquisition owns,
directly or indirectly, shares of capital stock having in the aggregate 50% or
more of the total combined voting power of the issued and outstanding shares
of capital stock entitled to vote generally in the election of directors of
such corporation.
Section 3.4. Authorization and Validity of Agreement. Mickelberry
Acquisition has the corporate power to enter into this Agreement and to carry
out its obligations hereunder. The execution and delivery of this Agreement,
the performance of Mickelberry Acquisition's obligations hereunder and the
consummation of the Merger have been duly authorized by the Board of Directors
and by the sole shareholder of Mickelberry Acquisition and no other
proceedings on the part of Mickelberry Acquisition are necessary to authorize
such execution, delivery and performance. This Agreement has been duly
executed by Mickelberry Acquisition and is the legal, valid and binding
obligation of Mickelberry Acquisition, enforceable against Mickelberry
Acquisition in accordance with its terms, except (i) to the extent that
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or other laws affecting the enforcement of creditors' rights
generally, and (ii) that the availability of equitable remedies, including
specific performance, is subject to the discretion of the court before which
any proceeding therefor may be brought.
Section 3.5. No Conflict or Violation. As of the Effective Time, the
execution, delivery and performance by Mickelberry Acquisition of this
Agreement and consummation of the Merger does not and will
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not (i) violate or conflict with any provision of the charter documents or By-
laws of Mickelberry Acquisition, (ii) violate any provision of law, or any
order, judgment or decree of any court or other governmental or regulatory
authority, and (iii) violate or result in a breach of or constitute (with due
notice or lapse of time or both) a default under any contract, lease, loan
agreement, mortgage, security agreement, trust indenture or other agreement or
instrument to which Mickelberry Acquisition is a party or by which Mickelberry
Acquisition is bound or to which its properties or assets are subject, nor
will result in the creation or imposition of any lien, charge or encumbrance
of any kind whatsoever upon any of the properties or assets of Mickelberry
Acquisition, nor will adversely affect or result in the cancellation,
modification, revocation or suspension of any of the licenses, franchises,
permits, authorizations or approvals issued or granted to Mickelberry
Acquisition by the United States, any state or local government, any foreign
national or local government, or any department, agency, board, commission,
bureau or instrumentality of any of the foregoing except (in the case of
clauses (ii) and (iii) above only) for such violations or breaches which would
not, individually or in the aggregate, present a reasonable likelihood of
having a material adverse effect on the business, assets or financial
condition of Mickelberry Acquisition.
Section 3.6. Consents and Approvals. As of the Effective Time, no material
consent, waiver, authorization or approval of any governmental or regulatory
authority, domestic or foreign, or of any other person, firm or corporation,
and no material declaration or notification to or filing, or registration with
any such governmental or regulatory authority, is required in connection with
the execution and delivery of this Agreement by Mickelberry Acquisition, the
performance by Mickelberry Acquisition of its obligations hereunder or the
consummation of the Merger, other than in connection with or in compliance
with the applicable provisions of Delaware Law, the Securities Act of 1933, as
amended, the Exchange Act or the HSR Act.
ARTICLE IV
Representations and Warranties of Union Capital and Marlas
Each of Union Capital and Marlas represents and warrants to Mickelberry
that:
Section 4.1. Corporate Organization. Union Capital is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Nevada.
Section 4.2. Capitalization of Union Capital. The authorized capital stock
of Union Capital consists of 1,000 shares of common stock, no par value, 100
of which are issued and outstanding, and all of which are owned by Marlas.
Section 4.3. Title to Cancelled Shares. All of the Cancelled Shares are
owned of record and beneficially by Union Capital or Marlas, as the case may
be, in each case free and clear of all liens.
Section 4.4. Authorization and Validity of Agreement. Union Capital has the
corporate power to enter into this Agreement and to carry out its obligations
hereunder. Marlas has full legal capacity to enter into this Agreement and to
carry out its obligation hereunder. The execution and delivery of this
Agreement and the performance of Union Capital's obligations hereunder have
been duly authorized by the board of directors and by the sole shareholder of
Union Capital and no other proceedings on the part of Union Capital are
necessary to authorize such execution, delivery and performance. This
Agreement has been duly executed by each of Union Capital and Marlas and is
the legal, valid and binding obligation of Union Capital and Marlas,
enforceable against Union Capital and Marlas in accordance with its terms,
except (i) to the extent that enforceability may be limited by applicable
bankruptcy, insolvency, reorganization or other laws affecting the enforcement
of creditors' rights generally, and (ii) that the availability of equitable
remedies, including specific performance, is subject to the discretion of the
court before which any proceeding therefor may be brought.
Section 4.5. No Conflict or Violation. As of the Effective Time, the
execution, delivery and performance by each of Union Capital and Marlas of
this Agreement and consummation of the Merger does not
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and will not (i) violate or conflict with any provision of the charter
documents or By-laws of Union Capital, (ii) violate any provision of law, or
any order, judgment or decree of any court or other governmental or regulatory
authority, and (iii) violate or result in a breach of or constitute (with due
notice or lapse of time or both) a default under any contract, lease, loan
agreement, mortgage, security agreement, trust indenture or other agreement or
instrument to which Union Capital or Marlas is a party or by which Union
Capital or Marlas is bound or to which its properties or assets are subject,
nor will result in the creation or imposition of any lien, charge or
encumbrance of any kind whatsoever upon any of the properties or assets of
Union Capital or Marlas, nor will adversely affect or result in the
cancellation, modification, revocation or suspension of any of the licenses,
franchises, permits, authorizations or approvals issued or granted to Union
Capital by the United States, any state or local government, any foreign
national or local government, or any department, agency, board, commission,
bureau or instrumentality of any of the foregoing except (in the case of
clauses (ii) and (iii) above only) for such violations or breaches which would
not, individually or in the aggregate, present a reasonable likelihood of
having a material adverse effect on the business, assets or financial
condition of Union Capital or Marlas, as the case may be.
ARTICLE V
Covenants of Mickelberry
Mickelberry agrees that:
Section 5.1. Conduct of Mickelberry. From and after the date of this
Agreement and until the Effective Time, Mickelberry shall conduct its business
solely in the ordinary course consistent with past practice and, without the
prior written consent of Mickelberry Acquisition, will not, except as required
or permitted pursuant to the terms hereof or as may occur in the ordinary
course of business consistent with past practice:
(i) make any material change in the conduct of its businesses and
operations or enter into any material transaction;
(ii) make any change in its Restated Certificate of Incorporation or By-
laws; issue any additional shares of capital stock or equity securities
(other than an exercise of options or convertible securities, in each case
outstanding on the date hereof), grant any option, warrant or right to
acquire any capital stock or equity securities, issue any security
convertible into or exchangeable for its capital stock, alter in any
material respect the terms of any of its outstanding securities, or make
any change in its outstanding shares of capital stock or in its
capitalization, whether by reason of a reclassification, recapitalization,
stock split or combination, exchange or readjustment of shares, stock
dividend or otherwise;
(iii) incur, assume or guarantee any indebtedness for borrowed money,
issue any notes, bonds, debentures or other corporate securities or grant
any option, warrant or right to purchase any thereof;
(iv) make any sale, assignment, transfer, abandonment or other conveyance
of any of its assets or any part thereof;
(v) subject any of its assets, or any part thereof, to any lien or suffer
such to be imposed other than such liens as may arise by operation of law;
(vi) redeem, retire, purchase or otherwise acquire, directly or
indirectly, any shares of its capital stock or declare, set aside or pay
any dividends (other than regular quarterly dividends on its Common Stock
and Preferred Stock of $0.015 and $0.075 per share, respectively) or other
distribution in respect of such shares;
(vii) take any other action that would cause any of the representations
and warranties made in this Agreement not to remain true and correct; or
(viii) commit itself to do any of the foregoing.
Section 5.2. Access to Information. From and after the date hereof and
subject to the execution of such confidentiality agreements as Mickelberry
shall reasonably require, Mickelberry will give Mickelberry
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Acquisition and its counsel, financial advisors, auditors and other authorized
representatives reasonable access to the offices, properties, books and
records of Mickelberry and will instruct Mickelberry's employees, counsel,
financial advisors and financing sources to cooperate with any such person in
its investigation of Mickelberry.
Section 5.3. Indemnification and Insurance. (a) For a period of three years
from the Effective Time, Mickelberry, as the Surviving Corporation, shall
maintain in its Certificate of Incorporation the provisions with respect to
indemnification set forth in paragraph 8 of Exhibit A attached hereto, which
provisions shall not be amended, repealed or otherwise modified for such a
period in any manner that would adversely affect the rights thereunder of
persons who at the Effective Time were directors, officers, employees or
agents of Mickelberry (such persons being third-party beneficiaries of this
Section 5.3) with respect to actions and omissions occurring prior to the
Effective Time, unless such modification is required by law.
(b) For a period of three years from the Effective Time, the Surviving
Corporation shall use its best efforts to maintain in effect directors' and
officers' liability insurance covering those persons who are currently covered
by Mickelberry's directors' and officers' liability insurance policy with
respect to actions and omissions occurring prior to the Effective Time on
terms no less favorable than the terms of such current insurance coverage.
Notwithstanding the foregoing, if the directors' and officers' liability
insurance referred to in this subdivision (b) is unavailable for the Current
D&O Premium, the Surviving Corporation shall obtain as much insurance as can
be obtained for a premium not in excess (on an annualized basis) of the
current D&O Premium. The Company will use its best efforts to give to any
director and officer covered by this Section 5.3, 30 days prior written notice
of any reduction on coverage or cancellation of the directors' and officers'
liability insurance referred to in this subdivision (b). For purposes of this
subdivision (b), the "CURRENT D&O PREMIUM" shall be an amount not greater than
125% of the premium paid by Mickelberry (on an annualized basis) for
directors' and officers' liability insurance during the period from October 1,
1994 to the Effective Time.
(c) In the event the Surviving Corporation or any of its successors or
assigns (i) consolidates with or merges into any other person and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers all or substantially all of its properties and assets
to any person, then and in each such case, proper provision shall be made so
that the successors and assigns of the Surviving Corporation shall assume all
of the obligations set forth in this Section 5.3.
Section 5.4. Vote. From and after the date hereof, Mickelberry will, to the
extent required by applicable law or as otherwise reasonably requested by
Mickelberry Acquisition and in accordance with Delaware Law and its
certificate of incorporation and By-laws, use its best efforts to (a) solicit
from the shareholders of Mickelberry proxies in favor of the approval of this
Agreement and (b) take all other action necessary or helpful to secure a vote
of shareholders in favor of the Merger and to approve this Agreement.
Section 5.5. Letter Agreement and Other Fees and Expenses. Whether or not
the Merger is consummated (except as provided below), from and after the date
hereof and without the execution of any further instrument, Mickelberry will
(a) assume all of the obligations of Marlas and of any entity formed by him
for purposes of completing the Merger (including but not limited to
Mickelberry Acquisition) (collectively, the "CLIENT") under that certain
Letter Agreement dated November 23, 1994 (the "LETTER AGREEMENT"), by and
among the Client, The Argosy Group L.P. and The Argosy Securities Group L.P.,
including, without limitation, indemnities, contribution, compensation and
expense reimbursements, all in accordance with Section 15 of such Letter
Agreement and in connection therewith Mickelberry will reimburse the Client
for any amounts previously paid by it pursuant to the Letter Agreement and (b)
pay all reasonable attorneys' fees, expenses and disbursements of the Client
incurred prior to or after the date hereof in connection with the transactions
contemplated by this Agreement; provided, however, that Mickelberry shall not
be obligated to assume any obligation or to pay any fees and expenses under
this Section 5.5 (and Marlas shall repay to Mickelberry any amounts paid by
Mickelberry pursuant to this Section 5.5) if this Agreement is terminated
because of a material breach by Mickelberry Acquisition, Union Capital or
Marlas of any of its representations, warranties or covenants contained
hereunder.
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Section 5.6. Stock Options. Prior to the Effective Time, Mickelberry shall
use its best efforts to cause the holders (other than Marlas) of all
outstanding options (the "OPTIONS") under the 1981 Incentive Stock Option Plan
and the 1992 Stock Option Plan to agree in writing to cancel such Options as
of and subject to the occurrence of the Effective Time, pursuant to an Option
Termination Agreement (the "TERMINATION AGREEMENT") in form and substance
satisfactory to Mickelberry Acquisition. Each holder of an Option who so
executes and delivers such a Termination Agreement and whose Option has an
exercise price less than the Merger Consideration, shall have the right to
receive in cash, if the Option is presently exercisable, an amount equal to
the Merger Consideration less the exercise price for each such Option and any
applicable withholding taxes (the "OPTION CONSIDERATION").
Section 5.7. No Mergers, Consolidations, Sale of Stock, etc. From and after
the date hereof, neither Mickelberry nor any of its Subsidiaries will directly
or indirectly, through officers, employees, representatives or agents, solicit
any inquiries or proposals to enter into or continue any discussions,
negotiations or agreements relating to the sale or exchange of the Shares, the
merger, reorganization or business combination of Mickelberry with, or the
disposition of a significant amount of Mickelberry's assets or business to,
any person other than Mickelberry Acquisition or its affiliates.
Section 5.8. Convertible Debentures. From and after the date hereof,
Mickelberry will assist Mickelberry Acquisition and take all actions deemed
necessary by Mickelberry Acquisition to obtain the consent of the holders
(other than Marlas) of the Convertible Debentures to the prepayment and/or the
cancellation, as of the Effective Time, of all the Convertible Debentures on
terms reasonably satisfactory to Mickelberry Acquisition.
ARTICLE VI
Covenants of Mickelberry Acquisition
Mickelberry Acquisition agrees that:
Section 6.1. Conduct of Mickelberry Acquisition. From and after the date of
this Agreement and until the Effective Time, Mickelberry Acquisition shall
conduct its business solely in the ordinary course consistent with past
practice and, without the prior written consent of Mickelberry, will not,
except as required or permitted pursuant to the terms hereof or as may occur
in the ordinary course of business consistent with past practice:
(i) make any change in its Certificate of Incorporation; or
(ii) take any other action that would cause any of the representations
and warranties made in this Agreement not to remain true and correct; or
(iii) commit itself to do any of the foregoing.
Section 6.2. Access to Information. From and after the date hereof and
subject to the execution of such confidentiality agreements as Mickelberry
Acquisition shall reasonably require, Mickelberry Acquisition will give
Mickelberry and its counsel, financial advisors, auditors and other authorized
representatives reasonable access to the offices, properties, books and
records of Mickelberry Acquisition and will instruct Mickelberry Acquisition's
employees, counsel, financial advisors and financing sources to cooperate with
any such person in its investigation of Mickelberry Acquisition.
ARTICLE VII
Covenants of Union Capital and Marlas
Each of Union Capital and Marlas agrees that:
Section 7.1. Vote. Union Capital and Marlas will vote the Cancelled Shares
and the Shares listed on Schedule 1.3 in favor of the approval and adoption of
this Agreement and the approval of the Merger.
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<PAGE>
Section 7.2. No Sale or Disposition; Waiver. From and after the date of this
Agreement and until the earlier of the Effective Time and the termination of
this Agreement, (i) neither Union Capital nor Marlas will sell or otherwise
dispose of any Cancelled Shares or Shares listed on Schedule 1.3 other than to
any of its respective affiliates or otherwise to facilitate the consummation
of the transactions contemplated by this Agreement and (ii) Marlas agrees to
waive any default or event of default under the Convertible Debentures if such
default or event of default has occurred and is continuing solely as a result
of the transactions contemplated by this Agreement.
ARTICLE VIII
Other Agreements
The parties hereto agree that:
Section 8.1. Best Efforts. Upon the terms and subject to the conditions set
forth in this Agreement, each party shall use its best efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations,
including without limitation under the HSR Act, to consummate the transactions
contemplated by this Agreement as promptly as possible. Without limiting the
generality of the foregoing, Mickelberry Acquisition agrees to use its best
efforts to obtain the financing referred to in Section 9.3(c).
Section 8.2. Notification of Certain Matters. Each party to this Agreement
will give prompt notice to the other parties hereof of:
(i) any notice or other communication from any person or entity alleging
that the consent of such person or entity is or may be required in
connection with the transactions contemplated by this Agreement;
(ii) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions
contemplated by this Agreement;
(iii) any action, suit, claim, investigation or proceeding commenced or,
to its knowledge, threatened against, relating to or involving or otherwise
affecting Mickelberry on the one hand, or Mickelberry Acquisition, Union
Capital and/or Marlas on the other hand, which is reasonably likely to
affect materially the transactions contemplated by this Agreement;
(iv) the occurrence, or failure to occur, of any event or change in
circumstances where such occurrence or failure to occur would be likely to
cause any representation or warranty contained in this Agreement to be
untrue and inaccurate in any material respect at any time from the date
hereof to the Effective Time; and
(v) any material failure of such party to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder.
No such notification shall affect the representations or warranties of the
parties or the conditions to the obligations of the parties hereunder.
Section 8.3. Further Assurances. At and after the Effective Time, the
officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of Mickelberry or Mickelberry
Acquisition, any deeds, bills of sale, assignments or assurances and to take
and do in the name and on behalf of Mickelberry or Mickelberry Acquisition any
other actions and things to vest, perfect or confirm of record or otherwise in
the Surviving Corporation any and all right, title and interest in, to and
under any of the rights, properties or assets of Mickelberry acquired or to be
acquired by the Surviving Corporation as a result of, or in connection with,
the Merger.
ARTICLE IX
Conditions to the Merger
Section 9.1. Conditions to the Obligations of Each Party. The obligations of
Mickelberry and Mickelberry Acquisition to consummate the Merger are subject
to (a) the approval of the Merger and this
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Agreement at the Special Meeting by the affirmative vote of at least (1) the
holders of a majority of the Shares outstanding on the record date of such
Special Meeting or (2) 66 2/3% of the votes cast by the holders of the Shares
voting at the Special Meeting, whichever is greater, (b) the Wertheim Opinion
not being withdrawn, (c) any waiting period applicable to the Merger under the
HSR Act shall have terminated or expired, (d) the absence of any statute, rule
or regulation which makes consummation of the Merger illegal or otherwise
prohibited or any order, decree, injunction or judgment enjoining the
consummation of the Merger, and (e) the receipt of an opinion of counsel to
Mickelberry, in form and substance reasonably satisfactory to Mickelberry and
Mickelberry Acquisition, as to the validity of the Merger under Delaware Law.
Section 9.2. Conditions to the Obligation of Mickelberry. The obligation of
Mickelberry to consummate the Merger is subject to the satisfaction or waiver
of the following further conditions:
(a) Mickelberry Acquisition shall have performed in all material respects
all of its obligations hereunder required to be performed by it at or prior
to the Effective Time;
(b) the representations and warranties of Mickelberry Acquisition
contained in this Agreement and in any certificate or other writing
delivered by Mickelberry Acquisition pursuant hereto shall be true in all
material respects at and as of the Effective Time as if made at and as of
such time (other than any inaccuracies in such representations or
warranties that are attributable to Mickelberry);
(c) receipt by Mickelberry of a certificate signed by an executive
officer of Mickelberry Acquisition to the effect set forth in paragraphs
(a) and (b) of this Section;
(d) consummation on terms satisfactory to Mickelberry of third-party
financing for (1) the Merger Consideration, (2) the Option Consideration
and (3) the repayment of the Convertible Debentures; and
(e) no action or proceeding shall have been commenced or threatened for
the purpose of obtaining an injunction, order or damages before any court
or governmental agency or other regulatory or administrative agency or
commission, domestic or foreign, which Mickelberry shall on advice of
counsel, reasonably determine would (1) result in the imposition of
material limitations on the ability of Mickelberry or Mickelberry
Acquisition effectively to consummate the Merger, (2) have the effect of
rendering the Merger violative of any applicable law, or (3) have a
material adverse effect on the business, assets or financial condition of
the Surviving Corporation.
Section 9.3. Conditions to the Obligation of Mickelberry Acquisition. The
obligation of Mickelberry Acquisition to consummate the Merger is subject to
the satisfaction or waiver of the following further conditions:
(a) Mickelberry shall have performed in all material respects all of its
obligations hereunder required to be performed by it at or prior to the
Effective Time;
(b) the representations and warranties of Mickelberry contained in this
Agreement and in any certificate or other writing delivered by Mickelberry
pursuant hereto shall be true in all material respects at and as of the
Effective Time as if made at and as of such time;
(c) receipt by Mickelberry Acquisition of a certificate signed by an
executive officer of Mickelberry to the effect set forth in paragraphs (a)
and (b) of this Section;
(d) consummation on terms satisfactory to Mickelberry Acquisition of
third-party financing for (1) the Merger Consideration, (2) the Option
Consideration and (3) the repayment of the Convertible Debentures;
(e) the holders of not more than 5% of the outstanding shares of
Preferred Stock and Common Stock shall have exercised their appraisal
rights in the Merger in accordance with Delaware Law;
(f) the prepayment and cancellation of all Convertible Debentures;
(g) holders of Options constituting at least 95% of the shares
represented thereby shall have entered into Termination Agreements with
respect thereto in form and substance satisfactory to Mickelberry
Acquisition; and
(h) no action or proceeding shall have been commenced or threatened for
the purpose of obtaining an injunction, order or damages before any court
or governmental agency or other regulatory or administrative
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<PAGE>
agency or commission, domestic or foreign, which Mickelberry Acquisition
shall on advice of counsel, reasonably determine would (1) result in the
imposition of material limitations on the ability of Mickelberry or
Mickelberry Acquisition effectively to consummate the Merger, (2) have the
effect of rendering the Merger violative of any applicable law, or (3) have
a material adverse effect on the business, assets or financial condition of
the Surviving Corporation.
ARTICLE X
Termination
Section 10.1. Termination. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time:
(a) by mutual written consent of Mickelberry and Mickelberry Acquisition
after approval of their respective Board of Directors; or
(b) by either Mickelberry or Mickelberry Acquisition after approval of
the Board of Directors of Mickelberry or Mickelberry Acquisition, as the
case may be, if the Merger has not been consummated on or before September
30, 1995; provided, however, that neither party may terminate this
Agreement pursuant to this clause (b) if the failure of such party to
fulfill any of its obligations under this Agreement shall have been the
reason that the Merger shall not have been consummated on or before said
date.
Section 10.2. Effect of Termination. If this Agreement is terminated
pursuant to Section 10.1, this Agreement shall become void and of no effect
with no liability on the part of any party hereto.
ARTICLE XI
Miscellaneous
Section 11.1. Notices. All notices, requests and other communications to any
party hereunder shall be in writing (including facsimile or similar writing)
and shall be given:
(a) if to Mickelberry to:
Mickelberry Communications Incorporated
405 Park Avenue
New York, New York 10022
Facsimile: (212) 832-0554
Attention: Mr. John C. Mickle
(b) if to Mickelberry Acquisition to:
Mickelberry Acquisition Corporation
c/o Mickelberry Communications Incorporated
405 Park Avenue
New York, New York 10022
Facsimile: (212) 832-0554
Attention: Mr. James C. Marlas
or such other address or facsimile number as such party may hereafter specify
by notice to the other party hereto. Each such notice, request or other
communication shall be effective (i) if given by facsimile, when such
facsimile is transmitted to the facsimile number specified in this Section and
the appropriate confirmation is provided, (ii) if given via United States
mail, three days after such notice is deposited in the mail in a postage pre-
paid envelope, or (iii) if given by any other means, when delivered at the
address specified in this Section.
Section 11.2. Survival. None of the representations, warranties, agreements
or covenants contained herein shall survive the Effective Time except for the
agreements contained in Sections 1.3, 1.4, 1.5, 1.6, 1.7, 1.8, 5.3, 5.5 and
8.3.
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<PAGE>
Section 11.3. Amendment. Subject to applicable law, any provision of this
Agreement may be amended by the parties hereto, by action of each of their
respective Boards of Directors or by their respective officers duly authorized
by such Board of Directors, at any time prior to the Effective Time; provided,
however, that any decrease of the amount or change in the type of the Merger
Consideration or any amendment to Article IX, Article X or this Section 11.3
shall also be approved by the Special Committee of the Board of Directors of
Mickelberry. Any amendment to this Agreement shall be in writing signed by all
the parties hereto.
Section 11.4. Waiver. (a) At any time prior to the Effective Time,
Mickelberry Acquisition on the one hand, and Mickelberry on the other hand,
may (i) extend the time for the performance of any agreement of the other
party or parties hereto, (ii) waive any accuracy in the representations and
warranties contained herein or in any document delivered pursuant hereto, or
(iii) waive compliance with any agreement or condition contained herein;
provided, however, that if such waiver would have the same effect as any
decrease of the amount or change in the type of the Merger Consideration or
any amendment to Article IX, Article X or Section 11.3 hereof, such waiver
shall also be approved by the Special Committee of the Board of Directors of
Mickelberry. Any agreement on the part of any party to any such extension or
waiver shall be effective only if set forth in a writing signed on behalf of
such party and delivered to the other parties.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other right, power or privilege. The
rights and remedies herein provided shall be cumulative and not exclusive of
any rights or remedies provided by law.
Section 11.5. Successors and Assigns. The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided, however, that no party may assign
or otherwise transfer any of its rights under this Agreement without the
consent of the other parties hereto.
Section 11.6. Governing Law. This Agreement shall be construed in accordance
with and governed by the internal laws of the State of Delaware without regard
to principles of conflict of laws.
Section 11.7. Integration. This Agreement embodies the entire agreement and
understanding among the parties hereto and supersedes all prior agreements and
understandings relating to the subject matter hereof.
Section 11.8. Headings and References. The headings of the Articles and
Sections of this Agreement are inserted for convenience only and shall not
constitute a part hereof.
Section 11.9. Counterparts; Effectiveness. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when each party hereto shall have
received counterparts hereof signed by the other party hereto.
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<PAGE>
In Witness Whereof, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.
Mickelberry Communications
Incorporated
/s/ George Kane
-------------------------------------
By: George Kane
Title: Senior Vice President
Mickelberry Acquisition Corporation
/s/ James C. Marlas
-------------------------------------
By: James C. Marlas
Title: President
Union Capital Corporation
/s/ James C. Marlas
-------------------------------------
By: James C. Marlas
Title: Chairman
James C. Marlas
/s/ James C. Marlas
-------------------------------------
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<PAGE>
EXHIBIT A
RESTATED
CERTIFICATE OF INCORPORATION
OF
MICKELBERRY COMMUNICATIONS INCORPORATED
* * * * * * * *
1. The name of the corporation (the "Corporation") is: Mickelberry
Communications Incorporated.
2. The address of its registered office in the State of Delaware is 1209
Orange Street in the City of Wilmington, County of New Castle. The name of its
registered agent at such address is The Corporation Trust Company.
3. The nature of the business or purposes to be conducted or promoted by the
Corporation is to engage in any lawful act or activity for which corporations
may be organized under the General Corporation Law of the State of Delaware.
4. The total number of shares of stock which the Corporation shall have
authority to issue is 4,000,000 shares of Common Stock, each of which shall
have a par value of one dollar ($1.00) per share.
5. In furtherance and not in limitation of the powers conferred by statute,
the by-laws of the Corporation may be made, altered, amended or repealed by
the stockholders or by a majority of the entire board of directors.
6. Whenever a compromise or arrangement is proposed between this Corporation
and its creditors or any class of them and/or between this Corporation and its
stockholders or any class of them, any court of equitable jurisdiction within
the state of Delaware may, on the application in a summary way of this
Corporation or of any creditor or stockholder thereof or on the application of
any receiver or receivers appointed for this Corporation under the provisions
of section 291 of Title 8 of the Delaware Code or on the application of
trustees in dissolution or of any receiver or receivers appointed for this
Corporation under the provisions of section 279 of title 8 of the Delaware
Code order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this Corporation, as the case may be,
to be summoned in such manner as the said court directs. If a majority in
number representing three fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all
stockholders or class of stockholders of this Corporation, as the case may be,
and also on this Corporation.
7. Elections of Directors need not be by written ballot.
8. A Director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under section 174 of the General Corporation
Law of the state of delaware, or (iv) for any transaction from which the
director derived any improper personal benefit. If the Delaware General
Corporation Law is amended after approval by the stockholders of this
provision to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director of the
Corporation shall be eliminated or limited to the fullest extent permitted by
the general Corporation law of the state of Delaware, as so amended.
Any repeal or modification of the foregoing paragraph by the stockholders of
the Corporation shall not adversely affect any right or protection of a
director of the Corporation existing at the time of such repeal or
modification.
<PAGE>
SCHEDULE 1.3
CERTAIN SHARES
59,400 shares of Common Stock held by Marlas in its Keogh Plan
<PAGE>
SCHEDULE 2.1
SUBSIDIARIES
<TABLE>
<CAPTION>
PERCENTAGE OWNED
NAME BY MICKELBERRY
---- ----------------
<S> <C>
Bender, Browning, Dolby & Sanderson............................ 100%
Excel Importing Corp........................................... 100%
M C Graphics, Inc.............................................. 100%
Mickelberry Mining Corporation................................. 100%
Mickelberry Holding Corporation................................ 100%
Excel Showroom, Inc............................................ 100%
Nadler & Larimer (Europe) Corporation.......................... 100%
Newcourt Industries............................................ 100%
Partners & Shevack Inc......................................... 100%
Sandy Alexander, Inc........................................... 100%
Sandy Alexander Realty, Inc. (NJ).............................. 100%
Ventura Associates International, Inc.......................... 100%
Mibon Marketing Inc............................................ 100%
Excel Plus, Ltd................................................ 50%
</TABLE>
<PAGE>
ANNEX B
SCHRODER WERTHEIM OPINION
[LETTERHEAD OF SCHRODER WERTHEIM & CO. INCORPORATED]
August , 1995
The Special Committee of The Board of Directors
Mickelberry Communications Incorporated
405 Park Avenue
New York, NY 10022
The Special Committee of The Board of Directors:
We understand that Mickelberry Communications Incorporated ("Mickelberry" or
the "Company) and Mickelberry Acquisition Corporation ("Mickelberry
Acquisition") have entered into an Agreement and Plan of Merger (the "Merger
Agreement"), whereby Mickelberry Acquisition will merge with Mickelberry (the
"Transaction"). The Merger Agreement provides, among other things, that each
share of Common Stock and Series A Preferred Stock of Mickelberry, except for
shares owned by Mr. James C. Marlas or any of his affiliates, will be
converted into and represent the right to receive $4.25 in cash ("the Merger
Consideration").
You have requested our opinion, as investment bankers, as to the fairness of
the Transaction, from a financial point of view, to the holders of Common
Stock and Series A Preferred Stock of Mickelberry other than James C. Marlas
and affiliated entities (the "Opinion"). It is understood that the Opinion
shall be used by you and the Board of Directors solely in connection with your
consideration of the fairness of the Merger Consideration to the stockholders
of Mickelberry and for no other purpose, and that Mickelberry will not furnish
the Opinion or any other material prepared by Schroder Wertheim & Co.
Incorporated ("Schroder Wertheim") to any other person or persons or use or
refer to the Opinion for any other purpose without Schroder Wertheim's prior
written approval. Schroder Wertheim understands and agrees that its Opinion
may be referred to and reproduced in full in a schedule 13E-3 to be filed with
the Securities and Exchange Commission in connection with the Transaction in
any proxy document mailed to stockholders of Mickelberry or other soliciting
document.
Schroder Wertheim, as part of its investment banking business, is regularly
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, secondary distributions of
listed and unlisted securities, private placements and valuations for estate,
corporate and other purposes.
In connection with our opinion set forth herein, we have, among other
things:
(i) reviewed the Annual Reports on Form 10-K and the audited financial
statements of the Company for the four fiscal years ended December 31,
1994; its Quarterly Report on Form 10-Q for the quarter ended March 31,
1995; its Proxy Statement dated April 11, 1994; and reports issued by the
Company on Form 8-K dated March 3, 1993 and June 30, 1992; and all
amendments thereto;
(ii) reviewed and discussed with management the unaudited financial
results for the three month and six month periods ended June 30, 1995;
(iii) reviewed certain internal, unaudited financial analyses prepared by
management of the Company which relate primarily to the Company's
historical and projected financial information;
(iv) reviewed the management forecasts of the operating and financial
results for the Company dated December 16, 1994 for the fiscal years ending
December 31, 1995 through December 31, 1999 and discussed with management
any subsequent adjustments to those forecasts through August 1, 1995;
(v) visited the principal operating divisions of the Company, including
Sandy Alexander, Inc. and Partners & Shevack, Inc.;
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<PAGE>
(vi) conducted discussions with the senior management of the Company
concerning its historical and forecasted financial and operating results as
presented and described in (i), (ii), (iii) and (iv) above;
(vii) performed various valuation analyses, as deemed appropriate, of
Mickelberry using generally accepted analytical methodologies, including:
(i) discounted cash flow valuation analyses; (ii) the application of the
multiples reflected in recent mergers and acquisitions for comparable
businesses to the financial results of Mickelberry; and (iii) the
application of the public trading multiples of comparable companies to the
financial results of Mickelberry;
(viii) reviewed the trading history of the Company's Common Stock and
Series A Preferred Stock in the public marketplace from January 1, 1990 to
August , 1995;
(ix) reviewed the trading prices and yields of selected publicly traded
preferred stocks;
(x) reviewed the Statement of Resolution Establishing Series of Shares,
Series A Preferred Stock of the Company, dated September 3, 1982;
(xi) reviewed the Merger Agreement dated as of March 21, 1995;
(xii) discussed with the financial advisors to Mr. Marlas and Mickelberry
Acquisition their plans for financing the Transaction; and
(xiii) performed such other financial studies, analyses, inquiries and
investigations as we deemed appropriate.
In rendering our Opinion, Schroder Wertheim does not assume any
responsibility to independently verify the accuracy or completeness of
information furnished by or on behalf of Mickelberry, but does rely on its
accuracy and completeness in all material respects and does not assume any
responsibility to perform (or be required to retain any persons to perform)
any independent valuations or appraisals of Mickelberry's assets. With respect
to financial forecasts for Mickelberry, we have been advised by the management
of Mickelberry and we have assumed, without independent investigation, that
they have been reasonably prepared and reflect the best currently available
estimates and judgment of the management of Mickelberry as to the expected
future financial performance of Mickelberry.
Our Opinion is necessarily based upon financial, economic, market and other
conditions as they exist, and the information made available to us, as of the
date hereof. We disclaim any undertaking or obligation to advise any person of
any change in any fact or matter affecting our Opinion which may come or be
brought to our attention after the date of this Opinion.
This Opinion does not constitute a recommendation as to any action
Mickelberry should take in connection with the Transaction. This Opinion
relates solely to the question of the fairness, from a financial point of
view, of the Merger Consideration.
Based upon and subject to the foregoing, we are of the opinion, as
investment bankers, that as of the date hereof, the Merger Consideration to be
paid by Mickelberry Acquisition in the Transaction is fair, from a financial
point of view, to the holders of Common Stock and Series A Preferred Stock of
Mickelberry, other than James C. Marlas or any of his affiliates.
Very truly yours,
Schroder Wertheim & Co. Incorporated
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ANNEX C
SECTION 262 OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
262 APPRAISAL RIGHTS. (a) Any stockholder of a corporation of this State who
holds shares of stock on the date of the making of a demand pursuant to
subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation,
who has otherwise complied with subsection (d) of this section and who has
neither voted in favor of the merger or consolidation nor consented thereto in
writing pursuant to (S)228 of this title shall be entitled to an appraisal by
the Court of Chancery of the fair value of his shares of stock under the
circumstances described in subsections (b) and (c) of this section. As used in
this section, the word "stockholder" means a holder of record of stock in a
stock corporation and also a member of record of a nonstock corporation; the
words "stock" and "share" mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a nonstock
corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to
be effected pursuant to (S)251, 252, 254, 257, 258, 263 or 264 of this title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock,
or depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc., or (ii)
held of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the holders of the surviving corporation as
provided in subsection (f) of (S)251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
(S)(S)251, 252, 254, 257, 258, 263 and 264 of this title to accept for such
stock anything except:
a. Shares of stock of the corporation surviving or resulting from such
merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts in
respect thereof, which shares of stock or depository receipts at the
effective date of the merger or consolidation will be either listed on a
national securities exchange or designated as a national market system
security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or held of record by more than 2,000
holders;
c. Cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a. and b. of this paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under (S)253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all
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or substantially all of the assets of the corporation. If the certificate of
incorporation contains such a provision, the procedures of this section,
including those set forth in subsection (d) and (e) of this section, shall
apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for
such meeting with respect to shares for which appraisal rights are
available pursuant to subsections (b) or (c) hereof that appraisal rights
are available for any or all of the shares of the constituent corporations,
and shall include in such notice a copy of this section. Each stockholder
electing to demand the appraisal of his shares shall deliver to the
corporation, before the taking of the vote on the merger or consolidation,
a written demand for appraisal of his shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation become
effective; or
(2) If the merger or consolidation was approved pursuant to (S)228 or 253
of this title, the surviving or resulting corporation, either before the
effective date of the merger or consolidation or within 10 days thereafter,
shall notify each of the stockholders entitled to appraisal rights of the
effective date of the merger or consolidation and that appraisal rights are
available for any or all of the shares of the constituent corporation, and
shall include in such notice a copy of this section. The notice shall be
sent by certified or registered mail, return receipt requested, addressed
to the stockholder at his address as it appears on the records of the
corporation. Any stockholder entitled to appraisal rights may, within 20
days after the date of mailing of the notice, demand in writing from the
surviving or resulting corporation the appraisal of his shares. Such demand
will be sufficient if it reasonably informs the corporation of the identity
of the stockholder and that the stockholder intends thereby to demand the
appraisal of his shares.
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied
with subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger
or consolidation, any stockholder shall have the right to withdraw his demand
for appraisal and to accept the terms offered upon the merger or
consolidation. Within 120 days after the effective date of the merger or
consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which
demands for appraisal have been received and the aggregate number of holders
of such shares. Such written statement shall be mailed to the stockholder
within 10 days after his written request for such a statement is received by
the surviving or resulting corporation or within 10 days after expiration of
the period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation which shall
within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list
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at the addresses therein stated. Such notice shall also be given by 1 or more
publications at least 1 week before the day of the hearing, in a newspaper of
general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail and
by publication as the Court deems advisable. The forms of the notices by mail
and by publication shall be approved by the Court, and the costs thereof shall
be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled
to appraisal rights. The Court may require the stockholders who have demanded
an appraisal for their shares and who hold stock represented by certificates
to submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as
to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger
or consolidation, together with a fair rate of interest, if any, to be paid
upon the amount determined to be the fair value. In determining such fair
value, the Court shall take into account all relevant factors. In determining
the fair rate of interest, the Court may consider all relevant factors,
including the rate of interest which the surviving or resulting corporation
would have had to pay to borrow money during the pendency of the proceeding.
Upon application by the surviving or resulting corporation or by any
stockholder entitled to participate in the appraisal proceeding, the Court
may, in its discretion, permit discovery or other pretrial proceedings and may
proceed to trial upon the appraisal prior to the final determination of the
stockholder entitled to an appraisal. Any stockholder whose name appears on
the list filed by the surviving or resulting corporation pursuant to
subsection (f) of this section and who has submitted his certificates of stock
to the Register in Chancery, if such is required, may participate fully in all
proceedings until it is finally determined that he is not entitled to
appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to
the stockholders entitled thereto. Interest may be simple or compound, as the
Court may direct. Payment shall be so made to each such stockholder, in the
case of holders of uncertificated stock forthwith, and the case of holders of
shares represented by certificates upon the surrender to the corporation of
the certificates representing such stock. The Court's decree may be enforced
as other decrees in the Court of Chancery may be enforced, whether such
surviving or resulting corporation be a corporation of this State or of any
state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection
(d) of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation);
provided, however, that if no petition for an appraisal shall be filed within
the time provided in subsection (e) of this section, or if such stockholder
shall deliver to the surviving or resulting corporation a written withdrawal
of his demand for an appraisal and an acceptance of the merger or
consolidation, either within 60 days after the effective date of the merger or
consolidation as provided in subsection (e) of this section or thereafter with
the written approval of the corporation, then the right of such stockholder to
an appraisal shall cease. Notwithstanding the foregoing, no appraisal
proceeding in the Court of Chancery shall be dismissed as to any stockholder
without the approval of the Court, and such approval may be conditioned upon
such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting shareholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation.
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<PAGE>
ANNEX D
[LETTERHEAD OF THE ARGOSY GROUP L.P.]
November 23, 1994
Mr. James C. Marlas
c/o Mickelberry Communications Incorporated
405 Park Avenue
New York, NY 10022
Dear Mr. Marlas:
This agreement (the "Agreement") will confirm that you, individually and on
behalf of any entity formed by you for purposes of completing a transaction of
the type described below (collectively, "you"), have retained The Argosy Group
L.P. and The Argosy Securities Group L.P. (collectively, "Argosy") as your
exclusive financial advisor on the terms and conditions set forth herein, in
connection with your proposed acquisition of the common stock of Mickelberry
Communications Incorporated (the "Company") that is currently owned by
shareholders other than yourself or your affiliates (the "Public Shares")
either through a merger or cash tender offer (the "Transaction"). In addition,
upon execution of a definitive agreement with respect to the Transaction,
Argosy will act as exclusive placement agent, on the terms and conditions set
forth herein, in connection with the proposed placement with lending
institutions of bank or senior financing (the "Senior Debt") to consummate the
Transaction. The net proceeds from the Senior Debt will be used to purchase
the Public Shares and potentially to refinance the Company's 8% Convertible
Subordinated Debentures due May 2002 (the "Financing").
D-1
<PAGE>
1. Retention. (a) Subject to the provisions set forth below in this
Agreement, you hereby retain Argosy as your exclusive financial advisor in
connection with the Transaction and exclusive placement agent in connection
with the proposed placement of the Senior Debt in the event of a Transaction.
You agree that you will not directly, or indirectly, engage an investment
banking firm other than Argosy to place any Senior Debt (or any securities
similar to Senior Debt) with respect to the Transaction.
(b) Argosy agrees to act as your exclusive financial advisor for the
transaction and exclusive placement agent for the Financing, subject to
satisfactory completion of its due diligence investigation.
2. Compensation. (a) In consideration for services rendered hereunder, you
agree to pay to Argosy a Transaction Fee and a Financing Fee. The transaction
Fee will be payable in two parts: (i) $75,000 in cash upon the execution of
this Agreement; and (ii) $125,000 in cash upon the closing of the Transaction.
In the event during the term of this Agreement that a third-party purchases a
majority of the Company's common shares beneficially owned by you, Argosy will
be entitled to receive the $125,000 fee as detailed in the preceding section
(ii). In the event that the Transaction is consummated and Argosy places the
Senior Debt, a Financing Fee equal to 1.0% of the gross proceeds of the Senior
Debt will be payable on the date of the closing of the Financing (the "Closing
Date") directly out of the proceeds of the Senior Debt. Such placement fees
shall be paid by wire transfer or by delivery to Argosy of a certified or
official bank check or checks payable to its order in immediately available
funds. In the event that at your request Argosy places securities in the
Financing other than Senior Debt, Argosy will be compensated at a level that
is customary for the type of securities placed.
(b) Whether or not the Transaction or the Financing is consummated, you
hereby agree to reimburse Argosy promptly upon request (not less frequently
than monthly) for all reasonable out-of-pocket expenses (including word
processing charges, messenger and duplicating services, facsimile expenses,
research document expenses, travel expenses and other customary expenditures)
incurred by it in connection with the Transaction and the Financing. Prior to
the execution of a definitive agreement with respect to a Transaction, fees
and disbursements of legal counsel shall only be reimbursable under this
paragraph 2(b) to the extent approved in advance by you. Amounts payable
pursuant to this paragraph 2(b) and paragraph 2(a) may be withheld by Argosy
from the payment of the proceeds of the placement of the Senior Debt.
(c) Argosy's engagement relating to the Transaction and the Financing under
this Agreement may be terminated by either Argosy or you upon five days'
written notice delivered to the terminated party, except as noted in Section
5. In the event of a Transaction, if a Financing is consummated prior to the
expiration or other termination of this Agreement, then Argosy shall be
entitled to receive all of the amounts due under Sections 2(a) and 2(b).
Argosy shall be responsible to keep a true and complete record of all
prospective lenders (the "Argosy Investors") which have been contacted by
Argosy with respect to, or provided information relating to, the Financing,
utilizing record keeping methods customary in the investment banking business
for placement agents of securities. If this Agreement is terminated by you and
you (or any of your affiliates) consummates a Financing pursuant to which any
Argosy Investor (or any affiliate thereof) is a party, prior to one year from
the date of Argosy's termination, then you shall promptly pay Argosy a fee
equal to 1.0% of the proceeds received by you in such a transaction from any
such Argosy Investor.
In the event that this Agreement expires, or is terminated for any reason,
you shall promptly pay Argosy all amounts due under Section 2(b).
(d) Except as set forth herein, no fee paid or payable to Argosy or any of
its affiliates shall be credited against any other fee paid or payable to
Argosy or any of its affiliates. Nothing contained in this Agreement shall
require Argosy to purchase any securities or make any investment in the
Company for its own account, directly or indirectly.
3. Offering Materials. (a) You will use your best efforts to cause the
Company to furnish Argosy with information necessary to prepare a private
placement memorandum with respect to the Financing (the "Offering Materials"),
subject to the Company obtaining a confidentiality agreement acceptable to it.
D-2
<PAGE>
(b) Argosy will perform due diligence; however you recognize and confirm
that Argosy (A) will use and rely primarily on the Offering Materials and on
information available from generally recognized public sources in performing
the services contemplated by this Agreement without having independently
verified the same; (B) is authorized as exclusive placement agent with respect
to the Senior Debt to transmit to any prospective lender a copy or copies of
the Offering Materials, forms of purchase agreements and any other legal
documentation supplied to Argosy expressly for transmission to any prospective
lender by you or on your behalf in connection with the performance of Argosy's
services hereunder or any transaction contemplated hereby; (C) does not assume
responsibility for the accuracy or completeness of the Offering Materials and
such other information; (D) will not make an appraisal of any assets of the
Company; and (E) reserves the right to continue to perform due diligence
during the course of the engagement until the Financing is consummated or this
Agreement is terminated in accordance with Section 2(c). Argosy agrees to keep
the Offering Materials confidential so long as it is and remains non-public,
unless disclosure is required by law or requested by any government or
regulatory agency or body (and then only after giving the Company notice and
an opportunity to contest such disclosure to the extent practicable), and
Argosy will not make use thereof, except in connection with its services
hereunder.
(c) You agree that any reference to Argosy in any release, communication, or
material distributed to prospective lenders is subject to Argosy's prior
written approval. If Argosy resigns prior to the dissemination of any such
release, communication or material, no reference shall be made therein to
Argosy.
(d) Without Argosy's prior written consent, no advice rendered by Argosy in
connection with the services performed by Argosy pursuant to this Agreement
will be quoted by you or your affiliates or representatives nor will any such
advice be referred to in any report, document, release or other communication,
whether written or oral, prepared, issued or transmitted by such person,
except to the extent required by law (in which case the appropriate party
shall so advise the other in writing prior to such use and shall consult with
the other with respect to the form and timing of disclosure).
(e) You represent (and, upon the execution of a definitive agreement with
respect to the Transaction, will cause the Company to represent) that the
Offering Materials will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements contained therein, in light of the circumstances under
which they are made, not misleading, except that no representation will be
made with respect to any of the projections contained therein. You agree to
advise Argosy promptly of the occurrence of any event or any other change
known to you which results in the Offering Materials containing any untrue
statement of a material fact or omitting to state any material fact required
to be stated therein or necessary to make the statements contained therein, in
light of the circumstances under which they were made, not misleading.
4. Indemnity. (a) In consideration of Argosy's agreement to act on your
behalf, notwithstanding any limitations set forth herein, you agree to
indemnify and hold harmless Argosy, its agents, employees, officers and
directors, and any person who controls Argosy within the meaning of Section 15
of the Securities Act of 1933 or Section 20 of the Securities Exchange Act of
1934, as amended (each, an "Indemnified Party" and collectively, the
"Indemnified Parties"), from and against any and all losses, claims, damages,
liabilities and expenses (including, but not limited to, all reasonable legal
expenses, any and all other reasonable expenses incurred in investigating,
preparing or defending against any action or proceeding, commenced or
threatened, (whether or not any Indemnified Party is a named party)), to which
an Indemnified Party, jointly or severally, may become subject, which arise
out of or are based upon (i) any transaction contemplated by this Agreement,
the retention of Argosy under this Agreement, the performance of services by
Argosy hereunder or any involvement or alleged involvement of Argosy in the
Transaction or the Financing, or (ii) any untrue statement or alleged untrue
statement of fact contained in any information (oral or written) or document
furnished or made available by the Company directly (including, without
limitation, the Offering Materials, as from time to time amended and
supplemented), or through Argosy or otherwise, or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading. Notwithstanding the
foregoing, no Indemnified Party shall be entitled to indemnification under
this Section 4 to the extent such loss, claim, damage, liability or expense is
determined by a final judgment of a court of competent jurisdiction to have
resulted
D-3
<PAGE>
primarily from any Indemnified Person's gross negligence, willful malfeasance,
bad faith or material breach of this Agreement ("Disabling Conduct") and any
payment or reimbursement made to such Indemnified Party by you in connection
with any such action or proceeding will be repaid by such Indemnified Party to
you.
If any action or proceeding (including any governmental proceeding) is
brought or asserted against an Indemnified Party in respect of which indemnity
may be sought against you, such Indemnified Party shall promptly notify you in
writing of the institution of such action or proceeding. Each Indemnified
Party shall give you prompt notice upon becoming aware of any claim for which
indemnity or contribution may be sought hereunder; failure to provide such
notice will not, however, relieve you from any obligation or liability you
have hereunder or otherwise, except to the extent such failure causes you to
forfeit material rights. You, at your option, may assume the defense of any
such claim with counsel reasonably satisfactory to Argosy, except if such
Indemnified Party has been advised by counsel that, due to a conflict of
interests or because there may be legal defenses available to such Indemnified
Party that are different from or additional to defenses available to you,
separate counsel for you and such Indemnified Party is advisable in which
case, the fees and expenses of one firm of counsel on behalf of all
Indemnified Parties shall be at your expenses; provided, that, upon invoking
such option you shall keep such Indemnified Party informed of the progress of
any such claim.
You agree that, without the prior written consent of each of the relevant
Indemnified Parties, you will not settle, compromise or consent to the entry
of any judgment in any pending or threatened claim, action or proceeding in
respect of which indemnification could be sought hereunder (whether or not
such Indemnified Parties are actual or potential parties to such claim, action
or proceeding, (i) that involved any equitable relief that binds or purports
to bind such Indemnified Parties and (ii) unless such settlement, compromise
or consent includes an unconditional release for such Indemnified Parties from
all liability arising out of such claim, action or proceeding. Argosy and each
such Indemnified Party shall have the right to employ separate counsel in any
such action to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of Argosy or such Indemnified Party
unless (a) the Company has agreed to pay such fees and expenses, or (b) you
shall have failed to assume the defense of such action or proceeding. You
shall not be liable for any settlement of any such action or proceeding
effected without your written consent (which shall not be unreasonably
withheld or delayed), but if you have failed to assume such defense, if such
claim is settled with your written consent, or there is a final judgement for
the plaintiff in any such action or proceeding, you agree to indemnify and
hold harmless Argosy and any such Indemnified Party from and against any loss,
liability, damage or expense by reason of such settlement or judgment.
If the indemnification provided for in this Section 4 is unavailable to an
Indemnified Party in respect of any losses, claims, damages, liabilities and
expenses referred to herein or insufficient to hold an indemnified person
harmless (other than by reason of such Person's Disabling Conduct), then you
agree that in lieu of indemnifying such Indemnified Party, you shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such losses, claims, damages, liabilities and expenses (i) in such
proportion as is appropriate to reflect the relative benefits received by them
on the one hand and the Indemnified Party on the other from the placement of
the Senior Debt or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also your
relative fault on the one hand the relative fault of the Indemnified Party on
the other in connection with the untrue statements or omissions or other
actions (or alleged untrue statements, omissions or other actions) which
resulted in such losses, claims, damages, liabilities or expenses, as well as
any other relevant equitable considerations. The relative benefits received by
you on the one hand the Indemnified Party on the other shall be deemed to be
in the same proportion as the total principal amount of the Senior Debt, less
the value of the compensation which would be received by such Indemnified
Party pursuant to Section 2(a) hereof, bears to such compensation. Your
relative fault on the one hand the relative fault of the Indemnified Party on
the other shall be determined by reference to, among other things, whether
such untrue statements or omissions or other actions (or alleged untrue
statements, omissions or other actions) relate to information supplied or
action taken by you or the Company on the one hand or by the Indemnified Party
on the other and the relevant persons' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statements,
omissions or actions. The amount paid or payable by a party as a result of the
losses, claims, damages, liabilities and expenses referred to above
D-4
<PAGE>
shall be deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any
action or claim. You and Argosy agree that it would not be just and equitable
if contribution pursuant to this Section 4 were determined by pro rata
allocation or by any other method of allocation which does not take into
account the equitable considerations referred to above.
The aforesaid indemnity and contribution agreements shall apply to any
related activities engaged in by any Indemnified Party prior to this date and
to any modification of Argosy's engagement hereunder, and shall remain in full
force and effect regardless of any investigation made by or on behalf of
Argosy or any of its agents, employees, officers, directors or controlling
persons and shall survive the placement of the Senior Debt. You agree to
promptly notify Argosy of the commencement of any litigation or proceeding
against you or any of your affiliates in connection with the transactions
contemplated hereby. The agreements contained in this Section 4 shall remain
in full force and effect following the completion or termination of Argosy's
engagement hereunder and shall be in addition to any liability that you may
otherwise have to Argosy and its agents, employees, officers, directors or
controlling persons.
You also agree that no Indemnified Party shall have any liability (whether
direct or indirect, in contract or tort to otherwise) to you for or in
connection with advice or services rendered or to be rendered by Argosy
pursuant to this Agreement, the transactions contemplated hereby or any
Indemnified Party's actions or inactions in connection with any such advice,
services or transactions except for liabilities (and related expenses) that
are determined by a final judgment of a court of competent jurisdiction to
have resulted primarily from such Indemnified Party's Disabling Conduct in
connection with any such advice, actions, inactions or services.
5. Survival of Certain Provisions. The representations, warranties,
covenants and confidentiality provisions contained in Section 3, the
provisions contained in Section 4 of this Agreement and your obligation to pay
Argosy any compensation earned pursuant hereto shall remain operative and in
full force and effect regardless of (a) any completion or termination of the
Transaction or the Financing, (b) any termination of this Agreement, or (c)
any investigation made by or on behalf of Argosy or any affiliate of Argosy,
and shall be binding upon, and shall inure to the benefit of, any successors,
assigns, heirs and personal representatives of you, Argosy, the Indemnified
Parties and any such person.
6. Conditions of Placement. It is understood that the obligations of Argosy
are to use reasonable efforts to place the Senior Debt and there is no
obligation on the part of Argosy to purchase the Senior Debt. The obligations
of Argosy are subject to satisfactory completion of a due diligence
investigation by Argosy and its counsel, market conditions and the form and
terms of the Senior Debt, the Offering Materials and all related documents
being mutually acceptable to you and Argosy.
7. Notices. Notice given pursuant to any of the provisions of this Agreement
shall be in writing and shall be mailed or delivered (a) if to you, at your
office at 405 Park Avenue, New York 10022; and (b) if to Argosy, at its
offices at 1325 Avenue of the Americas, New York, New York 10019, Attention:
Jay Bloom.
The parties hereto, by written notice to the other parties, may designate
additional or different addresses for subsequent notices or communications.
8. Counterparts. (a) This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same instrument.
9. Third Party Beneficiaries. This Agreement has been and is made solely for
the benefit of the parties hereto, and their respective successors and
assigns, and no other person shall acquire or have any right under or by
virtue of this Agreement.
10. Choice of Law, Jurisdiction, Recovery of Attorney's Fees. This Agreement
shall be governed by, and construed in accordance with, the laws of the State
of New York (without regard to its conflict of laws provisions). You hereby
irrevocably submit to the exclusive jurisdiction of the Federal and New York
State courts located in the City of New York in connection with any suit,
action or proceeding related to this agreement or any of the matters
contemplated hereby, irrevocably waive and defense of lack of personal
jurisdiction and
D-5
<PAGE>
irrevocably agree that all claims in respect of any suit, action or proceeding
may be heard and determined in any such court. You irrevocably waive, to the
fullest extent you may effectively do so under applicable law, any objection
which you may now or hereafter have to the laying of venue of any such suit,
action or proceeding brought in any such court and any claims that any such
suit, action or proceeding brought in any such court has been brought in an
inconvenient forum. Subsequent to the signing of a definitive agreement with
respect to the Transaction, you will cause the Company to agree to pay or
reimburse Argosy for all reasonable costs and expenses incurred by Argosy in
connection with the enforcement of any of its rights under this Agreement
including, without limitation, all reasonable attorneys fees and expenses of
its counsel.
11. Headings. The section headings in this Agreement have been inserted as a
matter of convenience of reference and are not a part of this Agreement.
12. Press Announcements. At any time after the consummation or other public
announcement of the Transaction or the placement of the Senior Debt, and with
your prior approval (which approval shall not be unreasonably withheld or
delayed), Argosy may place an announcement (at its expense) in such newspapers
and publications as it may choose, stating that Argosy has acted as financial
advisor and placement agent of the Senior Debt contemplated by this Agreement.
13. Term. Except as provided herein, the Agreement shall run from the date
of this letter to December 31, 1995, unless extended by mutual consent of the
parties.
14. Amendment. This Agreement may not be modified or amended except in
writing duly sworn by the parties hereto.
15. Assignment; Successors. You consent to the assignment of Argosy's rights
hereunder to any affiliate of, or successor to, Argosy. Upon the signing of a
definitive agreement with respect to a Transaction, you shall cause the
Company to assume all of your obligations under this Agreement, including,
without limitation, indemnities, contribution, compensation and expense
reimbursements, whereupon you shall be released from any such obligations.
16. Enforceability. If any term, provision, covenant or restriction
contained in this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void, unenforceable or against its regulatory
policy, the remainder of the terms, provisions, covenants and restrictions
contained in this Agreement shall remain in full force and effect and shall in
no way be affected, impaired or invalidated.
Please sign and return the original and one copy of this letter to indicate
your acceptance of the terms set forth herein whereupon this letter and your
acceptance shall constitute a binding agreement between you and Argosy.
Very truly yours,
THE ARGOSY GROUP L.P.
THE ARGOSY SECURITIES GROUP L.P.
/s/ Jay Bloom
By: _________________________________
Jay Bloom
Managing Director
Accepted and agreed to as of November 23, 1994
/s/ James C. Marlas
By: _________________________________
James C. Marlas, on behalf of
himself and any entity formed by
him for purposes of completing a
Transaction
D-6
<PAGE>
PROXY
MICKELBERRY COMMUNICATIONS INCORPORATED
SPECIAL MEETING OF SHAREHOLDERS--SEPTEMBER 12, 1995
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints GEORGE KANE and FRED T. PUGLIESE, and each of
them, Proxies of the undersigned with power of substitution to each, to vote
all shares of Mickelberry Communications Incorporated (the "Company") which the
undersigned is entitled to vote at the Special Meeting of Shareholders to be
held on September 12, 1995 at 9:00 a.m. local time at the offices of the
Company at 405 Park Avenue, New York, NY 10022, or at any adjournment or
postponement thereof, as indicated on the reverse side.
CONTINUED ON REVERSE SIDE
<PAGE>
------------------ ------------------
COMMON PREFERRED
1. APPROVAL AND ADOPTION OF AGREEMENT AND PLAN OF MERGER. Approval and adoption
of the Agreement and Plan of Merger, dated as of March 21, 1995 (the "Merger
Agreement"), among the Company, Mickelberry Acquisition Corporation, Union
Capital Corporation and James C. Marlas, as described in the Proxy
Statement.
[_] FOR [_] AGAINST [_] ABSTAIN
2. TRANSACTION OF OTHER BUSINESS. Transaction of such other business as may
properly come before the meeting or any adjournments or postponements
thereof.
SHARES WILL BE VOTED AS DIRECTED EXCEPT THAT IF NO DIRECTION IS GIVEN, THIS
PROXY WILL BE VOTED IN FAVOR OF PROPOSAL 1. THE UNDERSIGNED HEREBY ACKNOWLEDGES
RECEIPT OF THE PROXY STATEMENT OF THE COMPANY DATED AUGUST , 1995.
DATED: ________________, 1995
-----------------------------
(SIGNATURE)
-----------------------------
(SIGNATURE, IF JOINTLY HELD)
TITLE: ______________________
PLEASE SIGN EXACTLY AS YOUR
NAME APPEARS ON YOUR STOCK
CERTIFICATE. WHEN SHARES ARE
HELD BY JOINT TENANTS, BOTH
SHOULD SIGN. WHEN SIGNING AS
AN ATTORNEY, EXECUTOR, AD-
MINISTRATOR, TRUSTEE OR
GUARDIAN, GIVE FULL TITLE AS
SUCH. IF A CORPORATION, SIGN
IN FULL CORPORATION NAME BY
PRESIDENT OR OTHER AUTHO-
RIZED OFFICER. IF A PARTNER-
SHIP, SIGN IN PARTNERSHIP
NAME BY AUTHORIZED PERSON.
THIS PROXY VOTES ALL SHARES
IN ALL CAPACITIES.
PLEASE SIGN, DATE AND MAIL YOUR PROXY CARD PROMPTLY.
