<PAGE>
FORM 10-K/A
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT of 1934
For the Fiscal Year Ended December 31, 1994
-----------------
or
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT of 1934
For the transition period from _____________ to ________________
Commission File Number 1-67
----
MICKELBERRY COMMUNICATIONS INCORPORATED
- --------------------------------------------------------------------------------
(Exact name of registrant specified in its charter)
Delaware 36-1474360
- ------------------------------- --------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
405 Park Avenue, New York, New York 10022
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 212/832-0303
------------
Securities registered pursuant to Section 12 (b) of the Act:
Title of each class Name of each exchange on
- ------------------- which registered
Common stock, par value ------------------------
$1 per share New York Stock Exchange
8% Convertible Subordinated Debentures New York Stock Exchange
Securities registered pursuant to Section 12 (g) of the Act:
None
----------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K. [_]
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of March 13, 1995 was $9,671,361.
5,877,948 shares of common stock, par value $1 per share, were issued
and outstanding at March 13, 1995.
<PAGE>
The undersigned Registrant hereby amends the following items, financial
statements, exhibits or other portions of its Annual Report on Form 10-K for the
fiscal year ended December 31, 1994 (the "Form 10-K"), as set forth below.
Throughout this report, the Registrant and its subsidiaries are
collectively referred to as the Company.
Refer to pages 4-5 for the exhibit index.
PART III
Item 13. Certain Relationships and Related Transactions
The Excel Marketing Group has a note outstanding owed to Robert
Sperling's mother. The note was in existence prior to the acquisition of Excel
by the Company. The largest aggregate amount owed to her during the year was
$612,500. As of the most recent practicable date the amount owed to her was
$587,500. The note bears interest at a rate of prime plus 1%.
Excel leases facilities from a partnership, Rolin Realty Company, in
which Robert Sperling, his brother-in-law and his mother own interests of 14%,
14% and 20% respectively. Rent paid to the partnership for the year ended
December 31, 1994 was $405,747.
The Company's printing subsidiary, Sandy Alexander, Inc. leases
facilities from a partnership, Vega Associates, in which Mel Gordon, George Kane
and Frank Stillo, members of the Board of Directors, own interests of 14%, 5%
and 14%, respectively. Rent paid to the partnership for the year ended December
31, 1994 was $574,400.
During 1993 the Company invested $1,000,000 as the initial capital of
November Records, Inc. ("November") a corporation organized to produce and
distribute recorded music. The Company's initial ownership in November was 100%.
This ownership interest was reduced to 80% as a result of interests granted to
an employee of November in consideration of his contribution of assets to
November. 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.
During 1994 James C. Marlas, the Company's Chief Executive Officer agreed to
invest $500,000 in November. Other investors agreed to invest an additional
$500,000. Following these capital contributions the ownership in November is as
follows:
2
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Mickelberry Communications 40%
James C. Marlas 25%
Other investors 35%
The Company has guaranteed $350,000 of debt owed by Southeast Publishing
Ventures, Inc. ("SPV"). The Company has a minority interest in SPV. Robert
Garrett, a member of the Company's Board of Directors, is the Chairman of SPV.
Robert Sperling and Frank Stillo have employment agreements with the
Excel Marketing Group and Sandy Alexander, Inc., respectively. The agreements
each terminate on December 31, 1997. Annual base compensation is $175,000 for
Mr. Sperling and $242,528 for Mr. Stillo. Each of the agreements provides for
incentive compensation based on operating earnings achieved by the respective
subsidiaries. Mr. Sperling's contract also provides for incentive compensation
based on a sale of the stock or assets of the subsidiary.
On February 17, 1995 the Excel Marketing Group and Mr. Sperling agreed
to terminate Mr. Sperling's employment agreement as of that date. Mr. Sperling
will continue to receive his annual base compensation through the end of 1995.
Mr. Sperling also resigned from his membership on the board of directors of the
Company as of that date.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
Financial Statements, Supplementary Data and Financial Statement
Schedules of the Registrant:
The following consolidated financial statements and report of
independent accountants thereon and supplementary data appear on pages 6
through 40 of this report.
Consolidated Financial Statements of Mickelberry Communications Incorporated:
Report of Independent Accountants
Consolidated Balance Sheets
December 31, 1994 and 1993
Consolidated Statements of Income
Years Ended December 31, 1994, 1993 and 1992
Consolidated Statements of Stockholders' Equity
Years Ended December 31, 1994, 1993 and 1992
Consolidated Statements of Cash Flows
Years Ended December 31, 1994, 1993 and 1992
Notes to Consolidated Financial Statements
Financial Statements of Excel Plus Limited
3
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Supplementary Data:
Quarterly Data (unaudited)
Financial Statement Schedule:
II - Valuation and Qualifying Accounts
All other financial statement schedules have been omitted since the
required information is included in the consolidated financial statements or the
notes thereto, or is not applicable or required under the rules of Regulation
S-X.
Exhibits
(3)(i) Restated articles of incorporation (incorporated herein by reference
from Form S-15, Registration #2-79035 filed September 1982).
(3)(ii) By-laws (incorporated herein by reference from Form S-2, Registration
#2-84083 filed June 15, 1983).
(4) Instruments defining the rights of security holders - Indenture dated as of
June 9, 1992 (incorporated herein by reference from Form T-3, Application
for Qualification of Indenture #22-21987 filed May 7, 1992).
(10) Material Contracts:
(a) 1981 Incentive Stock Option Plan of the Company (incorporated herein
by reference from Form S-8, Registration No. 33-8712 filed September
12, 1986).
(b) 1992 Stock Option Plan of the Company (incorporated herein by
reference from Form S-8, Registration No. 33-48196 filed May 29,
1992).
(c) Agreement and Plan of Merger by and Among Ingleby Enterprises Inc.,
Ingleby Holding Corp., Ingleby Acquisition Corp., Mickelberry
Corporation, Mickelberry Holding Corporation and Caribiner, Inc.
(incorporated herein by reference from Form 8-K dated as of June 30,
1992 and filed July 13, 1992).
(d) Stock Purchase Agreement between Mickelberry Holding Corporation and
the Sellers listed in Schedule 1.1 hereto for the purchase and sale of
the outstanding capital stock of each of Excel Importing Corp., Excel
Cutlery, Inc. and Excel Associates Inc. (Incorporated herein by
reference from Form 8-K dated as of March 15, 1993).
4
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(e) Agreement and Plan of Merger dated as of March 21, 1995 by and among
Mickelberry Communications Incorporated, Mickelberry Acquisition Corporation,
Union Capital Corporation and Mr. James C. Marlas.
(11) Statement Re: Computation of Per Share Earnings
(21) Subsidiaries of the Company
(24) Powers of Attorney
.1 Power of Attorney executed by Robert Garrett
.2 Power of Attorney executed by James C. Marlas
.3 Power of Attorney executed by John C. Mickle
.4 Power of Attorney executed by Mel Gordon
(b) Reports on Form 8-K
The Company filed no reports on Form 8-K during the fourth quarter of 1994.
5
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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
6
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MICKELBERRY COMMUNICATIONS INCORPORATED
CONSOLIDATED BALANCE SHEETS
In Thousands (except shares and par values)
<TABLE>
<CAPTION>
Assets 1994 1993
--------- --------
<S> <C> <C>
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
-------- -------
</TABLE>
$100,456 $97,242
======== =======
See Notes to Consolidated Financial Statements.
7
<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.
8
<PAGE>
MICKELBERRY COMMUNICATIONS INCORPORATED
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Years Ended December 31, 1994, 1993 and 1992
In Thousands
<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
------------ -------- ---------- --------- ----------- ---------- --------
<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 avail-
able for-sale securi-
ties (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.
9
<PAGE>
MICKELBERRY COMMUNICATIONS INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1994, 1993 and 1992
In Thousands
<TABLE>
<CAPTION>
Operating activities 1994 1993 1992
------- ------- --------
<S> <C> <C> <C>
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.
10
<PAGE>
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.
11
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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.
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
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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.
13
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Summarized financial information of Excel Plus is as follows:
<TABLE>
<CAPTION>
In Thousands 1994 1993
-------- ------
<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>
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
<TABLE>
<CAPTION>
Borrowing Schedule, Long-Term:
In Thousands 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
------- -------
</TABLE>
$20,703 $21,528
======= =======
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<PAGE>
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 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
15
<PAGE>
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>
In Thousands 1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Cash paid during the year for
Interest $2,008 $2,141 $1,944
Income taxes $ 600 $1,083 $ 237
</TABLE>
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>
In Thousands 1994 1993
------- -------
<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) -
------ -------
</TABLE>
$7,759 $12,722
====== =======
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
16
<PAGE>
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>
In Thousands 1994 1993 1992
-------- -------- ------
<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>
In Thousands 1994 1993
------- -------
<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>
17
<PAGE>
Property, Plant and Equipment: Property, plant and equipment is valued at
cost and consists of:
<TABLE>
<CAPTION>
In Thousands 1994 1993
-------- --------
<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.
18
<PAGE>
11. Inventories
Inventories are stated at the lower of cost (first-in, first-out) or
market, and consist of:
<TABLE>
<CAPTION>
In Thousands 1994 1993
------- -------
<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>
In Thousands 1994 1993
------- -------
<S> <C> <C>
Trade $13,342 $12,566
Due to banks 2,952 2,683
Other 185 463
------- -------
$16,479 $15,712
======= =======
</TABLE>
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
In Thousands 1994 1993
------- ------
<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.
19
<PAGE>
Income (loss) before taxes consists of:
<TABLE>
<CAPTION>
In Thousands 1994 1993 1992
-------- ------- --------
<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>
In Thousands 1994 1993 1992
------- ------ -------
<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>
In Thousands 1994 1993
----- -------
<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>
The components of deferred income taxes (benefit) for 1992 are as follows:
<TABLE>
<CAPTION>
In Thousands 1992
-------
<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>
=======
20
<PAGE>
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 % of % of
Dollars in Pretax
Thousands Amount Income Amount Income Amount Income
------ ------ ------ ------ ------ ------
<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>
In Thousands
Deferred tax assets 1994 1993
-------- --------
<S> <C> <C>
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>
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.
21
<PAGE>
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) $ 2.650
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 $ 3.310
-------
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
22
<PAGE>
$3.00 and will participate with the common stock up to a maximum liquidation
payment of $7.50.
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>
In Thousands Pretax Identi- Depreciation
Income fiable Capital &
1994 Revenues (Loss) Assets Expenditures Amortization
- ---- -------- ------- -------- ------------- ------------
<S> <C> <C> <C> <C> <C>
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 24,109 142
Interest
expense (2,083)
-------- ------- -------- ------- ------
$109,244 $ 5,583 $ 88,631 $11,961 $3,736
======== ======= ======== ======= ======
</TABLE>
23
<PAGE>
Information regarding the Company's foreign and domestic operations is as
follows:
<TABLE>
<CAPTION>
In Thousands 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
======== ====== ========
</TABLE>
<TABLE>
<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.
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
In Thousands Amount Value Amount Value
------- ------- -------- -------
<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>
24
<PAGE>
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 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
25
<PAGE>
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.
26
<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
27
<PAGE>
DIRECTORS' REPORT - FOR THE YEAR ENDED 31 DECEMBER 1994 (CONTINUED)
SHARE CAPITAL AND SUBSEQUENT EVENT (CONTINUED)
became a wholly owned subsidiary undertaking of Product Plus (London) Limited.
On 22 May 1995 the company adopted new Articles of Association.
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
239 Old Marylebone Road D.R. WOOLLEY
London Secretary
NW1 5QT 16 June 1995
28
<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 16 June 1995
Chartered Accountants and Registered Auditors
1 Surrey Street
London
WC2R 2PS
29
<PAGE>
PROFIT AND LOSS ACCOUNT - FOR THE YEAR ENDED 31 DECEMBER 1994
<TABLE>
<CAPTION>
NOTE 12 MONTHS TO 11 MONTHS TO
31 DECEMBER 31 DECEMBER
1994 1993
(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 3 (607,460) 168,139
ACTIVITIES BEFORE TAXATION
Taxation 6 58,848 (58,848)
---------- ----------
RETAINED (LOSS)/PROFIT 12 (548,612) 109,291
FOR THE PERIOD ========== ==========
</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.
30
<PAGE>
BALANCE SHEET - AS AT 31 DECEMBER 1994
<TABLE>
<CAPTION>
NOTE 1994 1993
(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 9 (4,926,324) (2,317,716)
within one year
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
31
<PAGE>
CASH FLOW STATEMENT - FOR THE YEAR ENDED 31 DECEMBER, 1994
<TABLE>
<CAPTION>
NOTE 12 MONTHS TO 11 MONTHS TO
31 DECEMBER 31 DECEMBER
1994 1993
(Pounds) (Pounds)
<S> <C> <C> <C>
NET CASH OUTFLOW FROM OPERATING 13(a) (776,852) (428,156)
ACTIVITIES
Returns from investments
and servicing of finance
Interest received 9,045 1,486
Interest paid (122,084) (18,533)
-------- --------
NET CASH OUTFLOW FROM RETURNS ON (113,039) (17,047)
INVESTMENTS AND SERVICING OF FINANCE -------- --------
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
32
<PAGE>
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:
Computer equipment 25%
Fixtures and fittings 15%
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.
33
<PAGE>
NOTES TO THE ACCOUNTS - FOR THE YEAR ENDED 31 DECEMBER 1994
1. ACCOUNTING POLICIES (CONTINUED)
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.
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>
34
<PAGE>
NOTES TO THE ACCOUNTS - FOR THE YEAR ENDED 31 DECEMBER 1994
4. STAFF COSTS (CONTINUED)
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
======== =========
Emoluments of the other directors are
as follows: Number Number
(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>
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>
35
<PAGE>
NOTES TO THE ACCOUNTS - FOR THE YEAR ENDED 31 DECEMBER 1994
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.
36
<PAGE>
NOTES TO THE ACCOUNTS - FOR THE YEAR ENDED 31 DECEMBER 1994
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
========= =========
Allotted, 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 Association.
37
<PAGE>
NOTES TO THE ACCOUNTS - FOR THE YEAR ENDED 31 DECEMBER 1994
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
======== =======
12. RESERVES 1994 1993
(Pounds) (Pounds)
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>
38
<PAGE>
NOTES TO THE ACCOUNTS - FOR THE YEAR ENDED 31 DECEMBER 1994
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 AND IN BANK NET
HAND OVERDRAFT
(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
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.
39
<PAGE>
NOTES TO THE ACCOUNTS - FOR THE YEAR ENDED 31 DECEMBER 1994
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.
40
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
MICKELBERRY COMMUNICATIONS INCORPORATED
- ---------------------------------------
(Registrant)
JAMES C. MARLAS
- -----------------------------------------*
James C. Marlas - Chairman of the Board,
President, Chief Executive Officer and
Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
ROBERT GARRETT
- -------------------------------------------*
Robert Garrett - Director
MEL GORDON
- -------------------------------------------*
Mel Gordon - Director
/s/ George Kane
- -------------------------------------------
George Kane - Senior Vice President and
Director (principal financial
and accounting officer)
JOHN C. MICKLE
- -------------------------------------------*
John C. Mickle - Director
N/A
- -------------------------------------------
Frank Stillo - Director
N/A
- -------------------------------------------
Bernard S. White - Director
N/A
- -------------------------------------------
C. Gordon Murphy - Director
* By /s/ George Kane
-------------------------------------
George Kane
Attorney-in-Fact
Dated: June 29, 1995
<PAGE>
EXHIBIT 10(e)
================================================================================
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
SECTION 1.1. Meeting of Mickelberry's Stockholders; Proxy
Statement; Schedule 13E-3.......................... A-7
1.2. The Merger......................................... A-8
1.3. Conversion of Outstanding Shares................... A-9
1.4. Surrender and Exchange............................. A-10
1.5. Certificate of Incorporation....................... A-11
1.6. By-laws............................................ A-11
1.7. Directors and Officers............................. A-11
1.8. Stock Transfer Books............................... A-11
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF MICKELBERRY
SECTION 2.1. Corporate Organization............................. A-12
2.2. Capitalization..................................... A-12
2.3. Authorization and Validity of Agreement............ A-12
2.4. No Conflict or Violation........................... A-13
2.5. Consents and Approvals............................. A-13
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF MICKELBERRY ACQUISITION
SECTION 3.1. Corporate Organization............................. A-14
3.3. Subsidiaries and Equity Investments................ A-14
3.4. Authorization and Validity of Agreement............ A-14
3.5. No Conflict or Violation........................... A-15
3.6. Consents and Approvals............................. A-15
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF UNION CAPITAL AND MARLAS
SECTION 4.1. Corporate Organization............................. A-16
4.2. Capitalization of Union Capital.................... A-16
4.3. Title to Cancelled Shares.......................... A-16
4.4. Authorization and Validity of Agreement............ A-16
4.5. No Conflict or Violation........................... A-17
i
<PAGE>
ARTICLE V
COVENANTS OF MICKELBERRY
SECTION 5.1. Conduct of Mickelberry............................. A-17
5.2. Access to Information.............................. A-18
5.3. Indemnification and Insurance...................... A-19
5.4. Vote............................................... A-20
5.5. Letter Agreement and Other Fees and Expenses....... A-20
5.6. Stock Options...................................... A-20
5.7. No Mergers, Consolidations, Sale of Stock, etc..... A-21
5.8. Convertible Debentures............................. A-21
ARTICLE VI
COVENANTS OF MICKELBERRY ACQUISITION
SECTION 6.1. Conduct of Mickelberry Acquisition................. A-21
6.2. Access to Information.............................. A-22
ARTICLE VII
COVENANTS OF UNION CAPITAL AND MARLAS
SECTION 7.1. Vote............................................... A-22
7.2. No Sale or Disposition; Waiver..................... A-22
ARTICLE VIII
OTHER AGREEMENTS
SECTION 8.1. Best Efforts....................................... A-22
8.2. Notification of Certain Matters.................... A-23
8.3. Further Assurances................................. A-23
ARTICLE IX
CONDITIONS TO THE MERGER
SECTION 9.1. Conditions to the Obligations of Each Party........ A-24
9.2. Conditions to the Obligation of Mickelberry........ A-24
9.3. Conditions to the Obligation of Mickelberry
Acquisition....................................... A-25
ARTICLE X
TERMINATION
SECTION 10.1. Termination....................................... A-26
10.2. Effect of Termination............................. A-26
ii
<PAGE>
ARTICLE XI
MISCELLANEOUS
SECTION 11.1. Notices........................................... A-27
11.2. Survival.......................................... A-27
11.3. Amendment......................................... A-27
11.4. Waiver............................................ A-28
11.5. Successors and Assigns............................ A-28
11.6. Governing Law..................................... A-28
11.7. Integration....................................... A-29
11.8. Headings and References........................... A-29
11.9. Counterparts; Effectiveness....................... A-29
SIGNATURES .................................................. A-30
EXHIBIT A Form of Certificate of Incorporation of the
Surviving Corporation
SCHEDULES
Schedule 1.3 Certain Shares
Schedule 2.1 Subsidiaries
iii
<PAGE>
INDEX TO DEFINED TERMS
Defined Term Where Defined
------------ -------------
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
iv
<PAGE>
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"),
------------
<PAGE>
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 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
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<PAGE>
"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
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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 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
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<PAGE>
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.
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,
---------- ------------
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<PAGE>
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
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<PAGE>
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,
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 ACQUISITION
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<PAGE>
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
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<PAGE>
Acquisition of this Agreement and consummation of the Merger does not and will
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.
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<PAGE>
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 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,
A-10
<PAGE>
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;
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(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 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
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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
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<PAGE>
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.
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
A-14
<PAGE>
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.
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
A-15
<PAGE>
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
A-16
<PAGE>
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 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);
A-17
<PAGE>
(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;
A-18
<PAGE>
(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 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.
A-19
<PAGE>
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.
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
A-20
<PAGE>
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
A-21
<PAGE>
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.
A-22
<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
-----------------------------
A-23
<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
<PAGE>
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.
-2-
<PAGE>
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.
-3-
<PAGE>
SCHEDULE 1.3
Certain Shares
--------------
59,400 shares of Common Stock held by Marlas in its Keogh Plan
<PAGE>
SCHEDULE 2.1
Subsidiaries
------------
Percentage Owned
Name by Mickelberry
---- ----------------
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%
<PAGE>
MICKELBERRY COMMUNICATIONS INCORPORATED
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
EXHIBIT 11
----------
<TABLE>
<CAPTION>
1994 1993 1992 1991
----------------------- ----------------------- ----------------------- -----------------------
Fully Fully Fully Fully
Primary Diluted Primary Diluted Primary Diluted Primary Diluted
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income (loss) attributable
to common stock:
Income (loss) before
extraordinary item and
cumulative effect of
change in accounting
principle $ (51,000) $ (51,000) $ 154,000 $ 154,000 $3,350,000 $3,350,000 $1,004,000 $1,004,000
Less dividends on
preferred stock (73,000) (73,000) (73,000) (73,000) (73,000) (73,000) (73,000) (73,000)
Add interest on convertible
debentures (if applicable) - - - - - 265,000 - -
--------- --------- --------- --------- --------- --------- --------- ---------
1. Income (loss) before
extraordinary item and
cumulative effect of
change in accounting
principle (124,000) (124,000) 81,000 81,000 3,277,000 3,542,000 931,000 931,000
2. Extraordinary item - - - - (1,134,000) (1,134,000) - -
3. Cumulative effect of
accounting change - - 200,000 200,000 - - - -
--------- --------- --------- --------- --------- --------- --------- ---------
4. Net income (loss),
as adjusted $ (124,000) $ (124,000) $ 281,000 $ 281,000 $2,143,000 $2,408,000 $ 931,000 $ 931,000
========= ========= ========= ========= ========= ========= ========= =========
Shares used in calculating
earnings (loss) per share
(all weighted averages):
Shares outstanding 5,876,000 5,876,000 5,875,000 5,875,000 5,873,000 5,873,000 5,869,000 5,869,000
Shares deemed issued for
stock options (if
dilutive) - - 39,000 39,000 68,000 93,000 3,000 3,000
Shares deemed issued for
convertible debentures
(if applicable and
dilutive) - - - - - 1,297,000 - -
--------- --------- --------- --------- --------- --------- --------- ---------
5. Total 5,876,000 5,876,000 5,914,000 5,914,000 5,941,000 7,263,000 5,872,000 5,872,000
========= ========= ========= ========= ========= ========= ========= =========
Earnings (loss) per share:
Income (loss) before extra-
ordinary item and cumula-
tive effect of change in
accounting principle (1
divided by 5) $ (.02) $ (.02) $ .02 $ .02 $ .55 $ .49 $ .16 $ .16
Extraordinary item (2
divided by 5) - - - - (.19) (.16) - -
Cumulative effect of
accounting change (3
divided by 5) - - .03 .03 - - - -
--------- --------- --------- --------- --------- --------- --------- ---------
Net income (4 divided by 5) $ (.02) $ (.02) $ .05 $ .05 $ .36 $ .33 $ .16 $ .16
========= ========= ========= ========= ========= ========= ========= =========
<CAPTION>
1990
-----------------------
Fully
Primary Diluted
---------- ----------
<S> <C> <C>
Income (loss) attributable
to common stock:
Income (loss) before
extraordinary item and
cumulative effect of
change in accounting
principle $ 648,000 $ 648,000
Less dividends on
preferred stock (73,000) (73,000)
Add interest on convertible
debentures (if applicable) - -
--------- ---------
1. Income (loss) before
extraordinary item and
cumulative effect of
change in accounting
principle 575,000 575,000
2. Extraordinary item - -
3. Cumulative effect of
accounting change - -
--------- ---------
4. Net income (loss),
as adjusted $ 575,000 $ 575,000
========= =========
Shares used in calculating
earnings (loss) per share
(all weighted averages):
Shares outstanding 5,863,000 5,863,000
Shares deemed issued for
stock options (if
dilutive) 3,000 3,000
Shares deemed issued for
convertible debentures
(if applicable and
dilutive) - -
--------- ---------
5. Total 5,866,000 5,866,000
========= =========
Earnings (loss) per share:
Income (loss) before extra-
ordinary item and cumula-
tive effect of change in
accounting principle (1
divided by 5) $ .10 $ .10
Extraordinary item (2
divided by 5) - -
Cumulative effect of
accounting change (3
divided by 5) - -
--------- ---------
Net income (4 divided by 5) $ .10 $ .10
========= =========
</TABLE>
<PAGE>
EXHIBIT 21
MICKELBERRY COMMUNICATIONS INCORPORATED
SCHEDULE OF SUBSIDIARIES
State or Other
Jurisdiction of
Name Incorporation
- ---- ---------------
Mickelberry Holding Corporation Delaware
Bender, Browning, Dolby & Sanderson
Advertising, Inc. Illinois
Excel Importing Corp.(1) New York
Mibon Marketing, Inc.(1) Ontario, Canada
Excel Plus, Ltd.(2) London, United Kingdom
MC Graphics, Inc.-
dba Modern Graphic Arts Delaware
Partners & Shevack Inc. New York
Sandy Alexander, Inc. Texas
Ventura Associates International, Inc. New York
(1) dba Excel Marketing Group
dba Excel Associates
dba Excel Cutlery
(2) 50% owned
<PAGE>
EXHIBIT 24.1
POWER OF ATTORNEY
-------------
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints George Kane his true and lawful attorney-
in-fact and agent for him and in his name, place and stead, to sign
the Annual Report on Form 10-K of Mickelberry Communications Incorporated,
and any and all amendments thereto, and to file the same, with all exhibits
thereto and other documents in connection therewith, with the Securities
and Exchange Commission.
The power of attorney will expire the 15th of August, 1995.
SIGNATURE DATE
--------- ----
/s/ Robert Garrett 6/29/95
<PAGE>
EXHIBIT 24.2
POWER OF ATTORNEY
-------------
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints George Kane his true and lawful attorney-
in-fact and agent for him and in his name, place and stead, to sign
the Annual Report on Form 10-K of Mickelberry Communications Incorporated,
and any and all amendments thereto, and to file the same, with all exhibits
thereto and other documents in connection therewith, with the Securities
and Exchange Commission.
The power of attorney will expire the 15th of August, 1995.
SIGNATURE DATE
--------- ----
/s/ James C. Marlas 6/29/95
<PAGE>
EXHIBIT 24.3
POWER OF ATTORNEY
-------------
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints George Kane his true and lawful attorney-
in-fact and agent for him and in his name, place and stead, to sign
the Annual Report on Form 10-K of Mickelberry Communications Incorporated,
and any and all amendments thereto, and to file the same, with all exhibits
thereto and other documents in connection therewith, with the Securities
and Exchange Commission.
The power of attorney will expire the 15th of August, 1995.
SIGNATURE DATE
--------- ----
/s/ John C. Mickle 6/29/95
<PAGE>
EXHIBIT 24.4
POWER OF ATTORNEY
-------------
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints George Kane his true and lawful attorney-
in-fact and agent for him and in his name, place and stead, to sign
the Annual Report on Form 10-K of Mickelberry Communications Incorporated,
and any and all amendments thereto, and to file the same, with all exhibits
thereto and other documents in connection therewith, with the Securities
and Exchange Commission.
The power of attorney will expire the 15th of August, 1995.
SIGNATURE DATE
--------- ----
/s/ Mel Gordon 6/29/95
