SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[x] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2)
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240-14a-11(c) or Section 240-14a-12
Marlton Technologies, Inc.
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(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
1) Title of each class of securities to which transaction applies:
____________________________________________________________________
2) Aggregate number of securities to which transaction applies:
____________________________________________________________________
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
____________________________________________________________________
4) Proposed maximum aggregate value of transaction:
____________________________________________________________________
5) Total fee paid:
____________________________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:_____________________________________________
2) Form, Schedule or Registration Statement No.:_______________________
3) Filing Party:_______________________________________________________
4) Date Filed:_________________________________________________________
MARLTON TECHNOLOGIES, INC.
2828 CHARTER ROAD
PHILADELPHIA, PENNSYLVANIA 19154
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 19, 2005
[TIME]
Dear Shareholder:
We strongly encourage your attendance and participation at a Special
Meeting of Shareholders of Marlton Technologies, Inc., which will be held at
___________ on Monday, December 19, 2005, commencing at ____________ to consider
and vote upon the following matters:
1. a proposal to amend the Articles of Incorporation to effect a 1 for
5,000 reverse stock split of the Company's class of Common Stock; and
2. the transaction of such other business as may properly come before
the Special Meeting or any adjournments thereof.
As a result of the reverse stock split if approved, (i) each
shareholder holding fewer than 5,000 shares of the Company's Common Stock will
receive $1.25 per share in cash from the Company and will cease to be a Marlton
shareholder; (ii) each shareholder holding greater than 5,000 shares of the
Common Stock will receive one share for every 5,000 shares they own and will
receive $1.25 in cash for each share that would otherwise be converted into a
fractional share as a result of the proposed reverse split; and (iii) the number
of shareholders of record of the Company will decrease to fewer than 300 holders
so that the Company can deregister its Common Stock as a class under the
Securities Exchange Act of 1934, and terminate the Company's public reporting
obligation with the Securities and Exchange Commission.
We have enclosed a proxy statement which more fully explains the
proposed reverse split. Only holders of record as of the close of business on
[record date], 2005, will be entitled to receive notice of and to vote at the
Special Meeting and any adjournments thereof.
THE BOARD OF DIRECTORS EMPHASIZES THE IMPORTANCE OF YOUR VOTE ON THE
PROPOSAL DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT. THE BOARD HAS REVIEWED
THE TERMS OF THE PROPOSED REVERSE SPLIT AND HAS DETERMINED THAT IT IS FAIR TO,
AND IN THE BEST INTERESTS OF, THE COMPANY AND ITS SHAREHOLDERS. THE BOARD
UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE APPROVAL OF THE PROPOSED REVERSE
SPLIT.
WHETHER OR NOT YOU PLAN TO BE PRESENT AT THE SPECIAL MEETING, PLEASE
PROMPTLY COMPLETE, SIGN, DATE AND RETURN THE FORM OF PROXY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
By order of the Board of Directors,
Alan I. Goldberg
Corporate Secretary
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MARLTON TECHNOLOGIES, INC.
2828 CHARTER ROAD
PHILADELPHIA, PENNSYLVANIA 19154
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 19, 2005
[TIME]
This proxy statement is furnished in connection with the
solicitation of proxies by the Board of Directors (the "Board") of Marlton
Technologies, Inc. (the "Company" or "Marlton"), to be used at a Special Meeting
of Shareholders to be held at ___________ on December 19, 2005, commencing at
______, and at any adjournments thereof (the "Special Meeting"). If the enclosed
form of proxy is properly executed and returned, the shares represented thereby
will be voted in accordance with the instructions specified by the shareholder.
This proxy statement and form of proxy were first mailed or delivered to
shareholders on or about [mailing date], 2005.
You are being asked to consider and vote on the following
matters:
1. a proposal to amend the Company's Articles of Incorporation to
effect a 1 for 5,000 reverse stock split (the "Reverse Split") of the Company's
class of Common Stock (the "Common Stock"); and
2. the transaction of such other business as may properly come before
the Special Meeting or any adjournments thereof.
As a result of the Reverse Split if approved, (i) each shareholder
holding fewer than 5,000 shares of Common Stock will receive $1.25 per share in
cash from the Company and will cease to be a Marlton shareholder; (ii) each
shareholder holding greater than 5,000 shares of Common Stock will receive one
share for every 5,000 shares they own and will receive $1.25 in cash for each
share that would otherwise be converted into a fractional share as a result of
the Reverse Split; and (iii) the number of shareholders of record of the Company
will decrease to fewer than 300 holders so that the Company can deregister its
Common Stock as a class under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and terminate the Company's public reporting obligation
with the Securities and Exchange Commission (the "SEC").
THE REVERSE STOCK SPLIT DESCRIBED IN THIS PROXY STATEMENT HAS NOT BEEN APPROVED
OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, AND NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS PASSED
UPON THE FAIRNESS OR MERITS OF THE REVERSE STOCK SPLIT NOR UPON THE ACCURACY OR
ADEQUACY OF THE INFORMATION CONTAINED IN THIS PROXY STATEMENT. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
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SUMMARY TERM SHEET
The following summary term sheet, including the section
entitled "Questions and Answers About the Special Meeting and the Reverse
Split," emphasizes certain material details of the proposed Reverse Split. In
addition to reviewing this summary term sheet, we strongly encourage you to read
the more detailed description of the proposed transaction provided in this proxy
statement. The date on which the Reverse Split takes effect is referred to
herein as the "Effective Date."
REVERSE STOCK SPLIT The Board has unanimously approved the
Reverse Split in order to reduce the Company's number
of shareholders of record to fewer than 300 holders.
Shareholders who own fewer than 5,000 shares of Common
Stock on the Effective Date will no longer be
shareholders of the Company ("Discontinued
Shareholders"). Shareholders holding more than 5,000
shares on the Effective Date will remain shareholders
of the Company after the Reverse Split ("Continuing
Shareholders"), but will receive payment for any
fractional shares that would result from the Reverse
Split. The shares we purchase will be retired and the
outstanding shares eliminated by the Reverse Split will
become authorized but unissued shares. See "PROPOSAL
NO.1 - TO EFFECT A REVERSE STOCK SPLIT."
PAYMENT Discontinued Shareholders will receive $1.25 in cash
per share as a result of the Reverse Split; Continuing
Shareholders will receive the same cash consideration
for any shares that would otherwise become fractional
shares as a result of the Reverse Split. See "Effects
on Shareholders with Fewer Than 5,000 Shares of Common
Stock" and "Effects on Shareholders with 5,000 or More
Shares of Common Stock."
SHAREHOLDER APPROVAL The affirmative vote of the holders of a majority of
the outstanding shares of Common Stock present and
entitled to vote at the Special Meeting is required to
approve the Reverse Split. Senior officers of the
Company own approximately 43% of the outstanding shares
of Common Stock and have indicated that they will vote
to approve the Reverse Split. The transaction does not
require the approval of a majority of the unaffiliated
shareholders. See "PROPOSAL NO.1 - TO EFFECT A REVERSE
STOCK SPLIT."
PURPOSE OF TRANSACTION The Reverse Split represents the first step in the
Company's plan to terminate its public reporting
obligations under the Exchange Act by reducing the
number of its shareholders of record to fewer than 300
holders, and deregistering its class of Common Stock
from under the Exchange Act. See "Purposes and
Advantages of the Reverse Split."
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REASONS FOR TRANSACTION The Board believes that the escalating costs and
heightened disclosure obligations associated with being
a public reporting company, particularly the pending
internal control, audit assessment and review
requirements of Section 404 of the Sarbanes-Oxley Act
of 2002 ("SOA"), and the limited trading market and
analyst coverage for the Common Stock do not justify
the perceived benefits of being a public reporting
company. See "Purposes and Advantages of the Reverse
Split."
SPECIAL COMMITTEE The Board appointed a Special Committee composed of
three independent directors to consider and review the
terms of the Reverse Split and to recommend the
approval or rejection of the Reverse Split to the
Board. The Special Committee retained the firm of
Mufson Howe Hunter & Partners LLC ("MHH") as its
financial advisor to evaluate and report on the
fairness of the Reverse Split to unaffiliated
shareholders. See "PROPOSAL NO.1 - TO EFFECT A REVERSE
STOCK SPLIT - Background of the Proposal."
FAIRNESS OF TRANSACTION MHH has rendered its opinion that the consideration is
fair to unaffiliated shareholders. Based in part on
that opinion, the Board believes that the consideration
is fair to the Company's shareholders, including its
unaffiliated shareholders, and recommends that
shareholders vote to approve the Reverse Split. See
"Fairness of the Reverse Stock Split."
DISSENTERS' OR
APPRAISAL RIGHTS Shareholders who receive shares and/or cash in
the Reverse Split do not have dissenters' or appraisal
rights under Pennsylvania law. See "Appraisal and
Dissenters' Rights."
TRADING MARKET After the Effective Date, the Common Stock will no
longer be quoted or traded on the American Stock
Exchange (the "Amex"), but may be traded on the
over-the-counter market and quoted in the Pink Sheets
although no assurances in this regard can be made.
FINAL BOARD APPROVAL If the proposal is approved by the shareholders, the
Board would still retain the authority to determine
whether to effect the Reverse Split. While it is
unlikely that it would do so, the Board could elect to
delay or even abandon the Reverse Split without further
action by shareholders. See "PROPOSAL NO.1 - TO EFFECT
A REVERSE STOCK SPLIT."
CERTIFICATES Shareholders should not send stock certificates to the
Company at this time. If the Reverse Split is approved
and effected, shareholders will be notified about
forwarding certificates and receiving payment.
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QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND
THE REVERSE SPLIT
Q: WHAT IS THE TIME AND PLACE OF THE SPECIAL MEETING?
A: The Special Meeting will be held at [location] on December 19, 2005
at [time].
Q: WHAT PROPOSALS WILL BE VOTED ON AT THE SPECIAL MEETING?
A: Shareholders will be asked to vote on a proposal to approve the
Reverse Split, and to transact such other business as may properly come before
the meeting.
Q: WHY IS THE REVERSE SPLIT BEING PROPOSED?
A: If completed, the Reverse Split would reduce the number of
shareholders of record to fewer than 300 persons and would allow the Company to
deregister its class of Common Stock under the Exchange Act and terminate its
public company reporting obligations. As a result, the Company would no longer
be obligated to comply with the SEC's public company reporting requirements or
the new SOA provisions.
Q: WHAT ARE THE ADVANTAGES OF DEREGISTERING?
A: The benefits of deregistering include:
o eliminating the costs associated with preparing and filing
disclosure documents under the Exchange Act with the SEC, as well
as reducing audit and accounting costs;
o eliminating the costs of SOA compliance and related regulations,
including in particular SOA Section 404, which requires public
reporting companies to establish costly systems of internal
controls over financial reporting and provide annual assessments of
the efficacy of such controls;
o increasing protection of sensitive customer and commercial or
financial information from disclosure to current and future
competitors;
o affording our shareholders who hold fewer than 5,000 shares
immediately before the Reverse Split the opportunity to receive
cash for their shares without having to pay brokerage commissions
and other transaction costs; and
o enabling management to focus its time and resources on the
achievement of the Company's strategic business objectives rather
than meeting public company reporting obligations.
Q: WHAT ARE THE DISADVANTAGES OF DEREGISTERING?
A: Some of the disadvantages include:
o Discontinued Shareholders will not have an opportunity to liquidate
their shares after the Reverse Split at a time and for a price of
their own choosing; instead, they will receive a
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pre-determined amount of cash for their shares and will no longer
be our shareholders with the opportunity to participate in or
benefit from any future potential appreciation in our value;
o Continuing Shareholders will not be able to readily access
information regarding the Company and its operations from publicly
available materials filed with the SEC or Amex following the
Reverse Split;
o our shares may experience a further reduction in liquidity as a
result of their delisting from trading on Amex;
o equity-based compensation, such as stock options, may be perceived
to have less value due to our status as a non-reporting company.
This may adversely effect our ability to recruit key employees;
o our Common Stock may become less attractive as consideration for
acquisitions of other operating companies or assets; and
o the Company will be less able to access the public markets for
additional financing in the future.
Q: IS IT POSSIBLE THAT THE NUMBER OF HOLDERS OF RECORD WILL INCREASE, THEREBY
MAKING US A REPORTING COMPANY AGAIN?
A: We would have to re-register under the Exchange Act if the number of
holders of record of our Common Stock exceeds 300 holders of record on January 1
of any subsequent year. After the Reverse Split is effected, we may attempt to
repurchase any shares of Common Stock proposed to be transferred by a Continuing
Shareholder if such proposed transfer might cause the number of holders of
record of our Common Stock to equal or exceed 300.
Q: IF I OWN FEWER THAN 5,000 SHARES, IS THERE ANY WAY I CAN CONTINUE TO BE A
SHAREHOLDER AFTER THE TRANSACTION?
A: If you currently own fewer than 5,000 shares of our Common Stock,
you can continue to be a shareholder after the Effective Date by purchasing, in
the open market or in private purchases, enough additional shares to cause you
to own a minimum of 5,000 shares in a single account immediately prior to the
Effective Date. There is no assurance, however, that any shares will be
available for purchase prior to the Effective Date.
Q: IS THERE ANYTHING I CAN DO TO TAKE ADVANTAGE OF THE OPPORTUNITY TO RECEIVE
CASH FOR MY SHARES AS A RESULT OF THE TRANSACTION IF I CURRENTLY OWN MORE
THAN 5,000 SHARES?
A: If you currently own 5,000 or more shares, you can receive cash for
shares you own as of the Effective Date if you reduce your ownership to fewer
than 5,000 shares by selling such shares in the open market or otherwise
transferring them. There is no assurance, however, that any purchasers of shares
will be available prior to the Effective Date.
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Q: WHAT HAPPENS IF I OWN A TOTAL OF 5,000 OR MORE SHARES BENEFICIALLY, BUT I
HOLD FEWER THAN 5,000 SHARES OF RECORD IN MY NAME AND FEWER THAN 5,000
SHARES WITH MY BROKER IN "STREET NAME"?
A: An example of this would be that you have 1,000 shares registered in
your own name with our transfer agent and you have 4,000 shares registered with
your broker in "street name." Accordingly, you are the beneficial owner of a
total of 5,000 shares, but you do not own 5,000 shares of record or beneficially
in the same name. If this is the case, as a result of the transaction, you would
receive cash for the 1,000 shares you hold of record, and you will also receive
cash for the 4,000 shares held in street name if your broker or other nominee
accepts our offer for beneficial owners of fewer than 5,000 shares of our Common
Stock held in the broker's or nominee's name to receive cash. You can avoid this
result by consolidating your holdings of 5,000 or more shares into a single
account prior to the Effective Date.
Q: WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF THE TRANSACTION TO ME?
A: Shareholders who do not receive any cash as a result of the Reverse
Split should not recognize any gain or loss. For Continuing Shareholders, their
tax basis and holding period in the shares of our Common Stock should change
proportionally after the reverse split. Shareholders who will be paid in cash
for some or all of their shares of our Common Stock as a result of this
transaction will generally recognize capital gain or loss for federal income tax
purposes if the shares were held for more than one year. Such gain or loss will
be measured by the difference between the cash received by such shareholder and
the aggregate adjusted tax basis of the shares of Common Stock that were
redeemed in the transaction. Continuing Shareholders who received cash for
fractional shares as a result of the Reverse Split may have dividend income.
While we do not provide tax advice to any shareholder, a summary of the
generally applicable material tax consequences of the Reverse Split can be found
in the section "Federal Income Tax Consequences."
Q: AM I ENTITLED TO DISSENTERS' OR APPRAISAL RIGHTS?
A: Under the Pennsylvania Business Corporation Law of 1988, as amended
(the "PBCL"), statutory dissenters' or appraisal rights are not available in a
reverse stock split transaction.
Q: WHAT IS THE VOTING RECOMMENDATION OF OUR BOARD OF DIRECTORS?
A: Based on the recommendation of the Special Committee and the report
of MHH, the Board has determined that the Reverse Split is advisable and in the
best interests of the Company and its shareholders. The Board has therefore
unanimously approved the Reverse Split and recommends that you vote "FOR"
approval of this matter at the Special Meeting.
Q: WHAT IS THE COST TO THE COMPANY TO EFFECT THE REVERSE STOCK SPLIT?
A: We estimate that the total cash outlay of the Reverse Split will be
approximately $1,813,500, including the amount to be paid in lieu of fractional
shares. This figure includes at least $251,000 in transaction expenses which we
expect to incur, including the legal, accounting and financial advisor fees, and
distribution costs. This estimated amount could increase or decrease if the
number of fractional shares that will be outstanding upon the Reverse
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Split changes as a result of purchases or sales of shares of our Common Stock
prior to the Effective Date.
Q: WHAT SHARES CAN I VOTE?
A: You may vote all shares of our Common Stock that you own as of the
close of business on the record date, which is [RECORD DATE]. These shares
include (1) shares held directly in your name as the "holder of record," and (2)
shares held for you in "street name" as the "beneficial owner" through a nominee
(such as a broker or bank). Nominees may have different procedures and, if you
own shares in a street name, you should contact your nominee prior to voting.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. Once the Reverse Split is consummated, we will send instructions
on where to send your stock certificates and how you will receive any cash
payments you may be entitled to receive. Shareholders who hold one or more full
shares are not entitled to any cash payments and should not send in their stock
certificates for re-issuance. The old pre-split stock certificates remain valid.
Q: CAN I VOTE MY SHARES WITHOUT ATTENDING THE SPECIAL MEETING?
A: Whether you hold your shares directly as the shareholder of record
or beneficially in "street name," you may direct your vote without attending the
Special Meeting. You may vote by signing your proxy card or, for shares held in
"street name," by signing the voting instruction card sent to you by your broker
or nominee and mailing it in the enclosed, pre-addressed envelope. If you
provide specific voting instructions, your shares will be voted as you instruct.
If you sign but do not provide instructions, your shares will be voted in favor
of the Reverse Split.
Q: CAN I CHANGE MY VOTE?
A: You may change your proxy instructions at any time prior to the vote
at the Special Meeting. For shares held directly in your name, proxies may be
revoked at any time prior to being voted (i) by delivery of written notice to
the Company's Corporate Secretary, (ii) by submission of a later dated proxy
(which automatically revokes the earlier dated proxy card), or (iii) by revoking
the proxy and voting in person at the Special Meeting. Attendance at the Special
Meeting will not cause your previously signed proxy card to be revoked unless
you specifically so request. For shares held beneficially by you in street name,
you may change your vote only by submitting new voting instructions to your
broker or nominee. Shares held in street name may not be voted by you at the
Special Meeting other than through voting instructions submitted to your broker
or nominee before the meeting.
Q: WHAT ARE THE VOTING REQUIREMENTS TO APPROVE THE REVERSE STOCK SPLIT?
A: Under the PBCL, the presence at the Special Meeting in person or by
proxy of the holders of at least a majority of the issued and outstanding
Marlton shares as of the record date is necessary to establish a quorum to
consider the Reverse Split proposal. Approval of the Reverse Split will require
the affirmative vote of the holders of a majority of the shares represented in
person or by proxy at the Special Meeting.
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Q: HOW ARE VOTES COUNTED?
A: You may vote "FOR," "AGAINST" or "ABSTAIN" on the Reverse Split. If
you sign and date your proxy card with no further instructions, your shares will
be voted "FOR" the approval of the transaction, all in accordance with the
recommendations of our Board of Directors.
Q: WHERE CAN I FIND THE VOTING RESULTS OF THE SPECIAL MEETING?
A: We will announce preliminary voting results at the Special Meeting
and publish final results in a Current Report on Form 8-K filed with the SEC or
by amending the Schedule 13E-3 filed in connection with the Reverse Split.
Q: IF THE REVERSE SPLIT IS APPROVED BY OUR SHAREHOLDERS, DOES IT HAVE TO BE
DECLARED BY OUR BOARD OF DIRECTORS?
A: No. While our Board may proceed with the Reverse Split at any time
without further notice to or action on the part of our shareholders, the Board
may also determine to delay or abandon the declaration of the Reverse Split
based on new or changed circumstances that, in its sole discretion, it believes
merit such delay or abandonment.
Q: HOW WILL WE OPERATE AFTER THE TRANSACTION?
A: If the Reverse Split is consummated, and assuming that we have fewer
than 300 holders of record after the transaction, we would deregister under the
Exchange Act and no longer be subject to the SEC's reporting and related
requirements under the federal securities laws that are applicable to public
reporting companies. The Common Stock would be delisted from trading on Amex and
would be expected to trade in the over-the-counter market. We expect to
otherwise conduct our business in accordance with our current operation.
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PROPOSAL NO. 1 -- TO EFFECT A REVERSE STOCK SPLIT
The Board of Directors is seeking the approval of the
transaction discussed below. If approved by the shareholders, and upon final
action by the Board, a 1 for 5,000 reverse stock split of our Common Stock will
be effected. Shareholders who own less than 5,000 shares of Common Stock will
receive $1.25 in cash per share and will cease to be shareholders of the
Company. Shareholders who own more than 5,000 shares will continue as
shareholders holding one (1) share for every 5,000 shares held prior to the
Effective Date and receiving cash at the same rate in lieu of any fractional
shares. The shares we purchase will be retired and the outstanding shares
eliminated by the Reverse Split will become authorized but unissued shares. As
of [date of this proxy], there were 12,939,696 shares of Common Stock
outstanding and held by approximately [holders] of record. Of these holders,
approximately [#] hold of record fewer than 5,000 shares of Common Stock.
BACKGROUND OF THE PROPOSAL
In recent years, the disclosure obligations of public
companies have been heightened by an increasingly complex process of complying
with the Exchange Act's filing and reporting requirements. We incur substantial
direct and indirect costs associated with the preparation and filing of the
Exchange Act's reporting requirements imposed on public reporting companies. The
financial costs and time demands associated with public reporting increased
significantly with the implementation of SOA, including the significant costs
and burdens of meeting the pending internal control evaluation and audit
requirements of SOA Section 404. While the SEC has delayed the application of
Section 404 to non-accelerated filers like us until our 2007 fiscal year, the
cost of implementing Section 404's internal control procedures is expected to be
burdensome and costly for a small company like Marlton.
We will have to incur substantial costs to implement these
procedures unless and until we deregister under the Exchange Act. Historically,
we have also incurred substantial indirect costs as a result of the management
time expended to prepare and review our public filings. These indirect costs are
expected to increase under the SOA and Section 404 in particular.
Over the period since the implementation of these heightened
disclosure requirements, the daily trading volume for our Common Stock has
averaged approximately 10,000 shares, ranging from a large number of days with
almost no trading at all to infrequent spikes of over 50,000 shares. The Board
believes that the erratic trading volumes have resulted in a highly inefficient
market for the Common Stock, with the trading price varying from a recent high
of $1.56 to a low of $0.20 per share in 2002. These low trading volumes and
market capitalization have limited the Company's ability to use its Common Stock
as a source of funding. The Company has not raised any capital through the sales
of Common Stock in a public offering in over five years and has no plans to do
so in the foreseeable future.
The Board has also determined that, given the Company's size,
the absence of sustained interest from public investors and securities research
analysts, and other factors, the Company has not enjoyed appreciable enhancement
in its image which often results from reporting company status.
In light of these circumstances, our Board believes that it is
in the best interest of the Company and its shareholders to undertake the
Reverse Split, enabling us to deregister our
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Common Stock under the Exchange Act. Deregistering will relieve us of the
administrative burden, cost and competitive disadvantages associated with filing
reports and otherwise complying with the requirements imposed under the Exchange
Act and the SOA.
Previously, our Board, acting upon the recommendation of a
special committee of independent directors, entered into in an agreement in 2002
to merge the Company into an entity controlled by, among others, Messrs. Jeffery
K. Harrow, Chairman of the Company's Board of Directors, Scott J. Tarte, Vice
Chairman of the Board, Robert B. Ginsburg, President and Chief Executive Officer
of the Company, and Alan I. Goldberg, General Counsel and Corporate Secretary of
the Company. If consummated, the merger would have resulted in the Company
ceasing to be a public reporting company. Subsequently, the group offered to
terminate the merger transaction after other persons approached the Board with
varying inquiries or proposals to acquire the Company. The committee, after
considering and evaluating a number of factors relating to Marlton, the proposal
to terminate the merger agreement and the two other preliminary inquiries
regarding possible acquisitions of Marlton, and after consulting with its
independent financial advisor and counsel, recommended to the Board that it
accept the proposal to terminate the merger agreement and that it not pursue
discussions with the two other potential acquirers. The Board accepted the
recommendations of the committee and executed an agreement terminating the
proposed merger.
While the Company's officers and directors have had informal
discussions since 2002 about whether the Company was achieving the benefits of
being a public reporting company when weighed against the costs of complying
with our public company reporting obligations, the Board did not consider taking
any formal steps to deregister the Common Stock until 2005.
In a meeting of the Board on August 4, 2005, with all the
directors present, the Board began to discuss the possibility of terminating its
public reporting obligations with the SEC by deregistering its class of Common
Stock from under the Exchange Act. In connection with its consideration of the
deregistration, the Board sought the advice of outside counsel and was
subsequently provided with a briefing on the mechanics of a reverse stock split
and deregistration. Because the Board believes that future growth and further
enhancement of shareholder value remain viable prospects for the Company, the
Board determined that it remained in the best interests of the Company and a
majority of our shareholders for the Company to continue as an independent
company, but not as a public reporting company.
On August 8, 2005, at a meeting of the Board with all
directors and counsel present, the Board established a Special Committee
consisting of independent directors Messrs. A.J. Agarwal, Washburn Oberwager and
Richard Vague to review the reverse stock split proposal and authorized it to
engage a financial adviser and other consultants to review the fairness of the
transaction and its consideration to the Company's shareholders, including
unaffiliated shareholders. At the meeting, the directors, counsel and management
discussed potential investment banker candidates to review the fairness of the
proposed consideration. The Special Committee selected three potential
candidates and authorized its members to interview those firms.
On August 15, 2005, at a meeting of the Special Committee with
all members present, the committee reviewed the materials provided and
qualifications of the three candidates for investment banker adviser to the
Special Committee, and listened to presentations by the candidates. The Special
Committee was advised of any prior contacts with the candidates, noting that one
candidate had provided a prior valuation of the company in 2004 and a founding
member of another had performed investment banking work for the Company when
employed by a different
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investment banking firm. The Special Committee discussed each of the candidates
and determined that two had met the Special Committee's requirements to serve as
its financial adviser.
On August 16, 2005, at a meeting of the Special Committee with
all members and counsel present, the Special Committee reviewed the
qualifications of the final two investment banker candidates and determined to
select MHH to serve as its financial adviser, subject to clarification of the
scope and cost of the representation with representatives of MHH. The committee
authorized the chairman to contact MHH for the required clarification and to ask
that it be prepared to address the committee at its next meeting.
On August 22, 2005, at a meeting of the Special Committee with
all members present, as well as counsel and senior management of the Company,
the Special Committee reviewed its anticipated selection of MHH as its financial
adviser and confirmed the selection of MHH. Representatives of MHH were then
asked to join the meeting and to provide an overview of their process and
schedule for rendering its advice to the committee.
On August 29, 2005, at a meeting of the Special Committee with
all members present along with counsel and representatives of MHH, the committee
reviewed preliminary terms of a reverse stock split. The Special Committee also
discussed the current trading levels of the Common Stock, the possibility of a
third party offer for the Company, SEC processing of the reverse split materials
and the outlines of a fairness opinion from MHH as part of its review of the
transaction. The Special Committee reaffirmed its desire to terminate the
Company's public company reporting obligation, but to remain an independent
company and not to put the Company up for sale. The Special Committee also
authorized its chairman to confirm the preliminary terms of the reverse split as
soon as possible.
At a meeting of the Special Committee on September 13, 2005,
with all members present, as well as counsel, representatives of MHH and senior
management of the Company, the revised terms of the Reverse Split were presented
and discussed, including a range of cash consideration values and a discussion
of the source of funding for the Reverse Split. The Special Committee was
advised that the Company's primary lender had indicated informally that it would
consent to the transaction and the Company could use its revolving credit
facility to fund the transaction subject to availability under its borrowing
formula, but that its formal approval would be required. Mr. Harrow indicated to
the Special Committee that he and Mr. Tarte would loan the Company any
additional funds it may need to complete the payments to the shareholders
receiving cash for their shares, on the same terms as the credit facility. In
addition, MHH provided an oral presentation of recent going private transactions
including the range of premiums paid in those transactions.
On September 19, 2005, at a meeting of the Special Committee
with all members present, as well as counsel and representatives of MHH, the
committee was provided with a review of the Reverse Split proposal, including a
discussion of the recent trading activity and increase in stock price. MHH
representatives noted the negative growth of the Company for the last two of the
previous three years, as well as general economic conditions, and presented its
analysis of the proposal, using multiple methodologies, including premiums paid,
comparable company, discounted cash flow and cost of capital procedures.
Following a discussion with and questioning of MHH representatives regarding
their evaluation procedures and results, the meeting was adjourned to later in
the day. The meeting was subsequently reconvened and the discussion continued.
Based upon the work product of MHH,
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the Special Committee instructed MHH to request a revised proposal that was
within the range of fair values MHH had presented and above the trading price on
the day proposed.
At a meeting on September 22, 2005, of all members of the
Special Committee and the Board, as well as counsel and representatives of MHH
and senior management, a revised proposal was presented. After discussion of the
revised proposal by the Special Committee and MHH, the Board determined that the
proposal was fair to the unaffiliated shareholders and approved the Reverse
Split and determined to present the proposal to the shareholders for approval
with its recommendation that the shareholders approve the Reverse Split. The
Board retained the authority to terminate the transaction even after shareholder
approval.
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SPECIAL FACTORS
PURPOSES AND ADVANTAGES OF THE REVERSE SPLIT
PURPOSE. The principal purpose of the Reverse Split is to
decrease the number of holders of record of our Common Stock below 300 holders.
This will:
o allow termination of the registration of our Common Stock under
the Exchange Act resulting in the suspension of our duties to file
annual and quarterly reports, proxy statements and other filings
with the SEC and to comply with SOA;
o provide management more time to focus on the long term strategic
objectives of the Company rather than on the frequent periodic
filing requirements imposed on public reporting companies;
o avoid required or inadvertent disclosure of the Company's
sensitive commercial, financial and operating information to
competitors and potential competitors; and
o allow shareholders with under 5,000 shares to receive cash for
their shares of our Common Stock at a fair price. We will pay all
transaction costs incurred, allowing our shareholders to avoid
brokerage commissions.
COST SAVINGS. Due in part to a series of highly-publicized
corporate scandals and the resulting legislative action, the costs of
maintaining public company status have increased dramatically in recent years.
In particular, SOA has imposed a host of new compliance burdens upon public
companies. These rapidly evolving obligations have translated into significant
costs for reporting companies, including increased audit fees, securities
counsel fees, outside director fees and greater potential liability faced by
officers and directors. On top of the financial costs, compliance with these
guidelines requires substantial amounts of time and attention from the members
of our management team, distracting them from their pursuit of operational
success. As a relatively small publicly traded company, we feel that these
mounting costs will detract from the financial success of our Company.
Our Board believes that, by deregistering our shares of Common
Stock and suspending our periodic reporting obligations, we will realize annual
cost savings of approximately $453,000 in 2006, and $353,000 thereafter. These
estimated annual cost savings reflect, among other things: (i) a reduction in
audit, legal and other fees required for publicly held companies, (ii) the
elimination of various internal costs associated with filing periodic reports
with the SEC, (iii) the reduction or elimination of the cost of officers' and
directors' liability insurance, (iv) the reduction or elimination of various
clerical and other expenses, including printing, stock transfer and proxy
solicitation expenses, and (v) the reallocation of management and personnel
time.
OPERATIONAL FLEXIBILITY. Our Board believes that consummating
the Reverse Split and ending our status as a public reporting company will
enable management to concentrate its efforts on our long-term growth, free from
the constraints and distractions of public reporting status. Our Board believes
that we will benefit more if its business decisions can be made with a view
toward long-term growth and with less emphasis on the effect of decisions upon
the short-term earnings and the consequent short-term effect of such earnings on
the market value of our Common Stock.
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COMPETITIVE PROTECTION. As a public reporting company, we are
required to disclose information to the public, including to actual and
potential competitors, that may be helpful to these competitors in challenging
our business operations. Some of this information includes the identity of
material customers, including the percentage of our business that originates
from those customers, known trends and contingencies that may impact our
operating results and the identity of key employees. These competitors and
potential competitors can use that information against us in an effort to take
market share, employees and customers away from us. Terminating our public
company reporting obligation will protect that sensitive information from
required or inadvertent disclosure.
DISADVANTAGES OF THE PROPOSAL
REDUCTION OF PUBLIC SALE OPPORTUNITIES FOR OUR SHAREHOLDERS.
Following the transaction, we anticipate that the already limited market for
shares of our Common Stock may be reduced or eliminated altogether. Our
shareholders may no longer have the option of selling their shares of our Common
Stock in a public market. While shares may be traded in the over-the-counter
market and quoted in the Pink Sheets for some period of time, any such market
for our Common Stock may be highly illiquid after the suspension of our periodic
reporting obligations.
LOSS OF CERTAIN PUBLICLY AVAILABLE INFORMATION. Upon
terminating the registration of our Common Stock under the Exchange Act, our
duty to file periodic reports with the SEC would be suspended. The information
regarding our operations and financial results that is currently available to
the general public and our investors will not be available after we have
terminated our registration. Upon the suspension of our duty to file reports
with the SEC, investors seeking information about us may have to contact us
directly to receive such information. We cannot assure you that we will be in a
position to provide the requested information to an investor. While our Board
acknowledges the circumstances in which such termination of publicly available
information may be disadvantageous to some of our shareholders, our Board
believes that the overall benefit to the Company to no longer being a public
reporting company substantially outweighs the disadvantages to those
shareholders.
POSSIBLE SIGNIFICANT DECLINE IN THE VALUE OF OUR SHARES.
Because of the limited liquidity for the shares of our Common Stock following
the consummation of the Reverse Split and the diminished opportunity for our
shareholders to monitor actions of our management due to the lack of public
information, continuing shareholders may experience a decrease in the value of
their shares of our Common Stock, which decrease may be significant.
INABILITY TO PARTICIPATE IN ANY FUTURE INCREASES IN VALUE OF
OUR COMMON STOCK. Discontinued Shareholders will have no further financial
interest in the Company and thus will not have the opportunity to participate in
any potential appreciation in the value of our shares. Our Board of Directors
determined that this factor does not make the transaction unfair to
shareholders, because those shareholders who wish to remain shareholders after
the Reverse Split can do so by acquiring additional shares so that they own at
least 5,000 shares of our Common Stock before the Effective Date.
ALTERNATIVES TO THE REVERSE SPLIT
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The Board and the Special Committee did not give substantial
consideration to many alternatives to the Reverse Split proposal, including
selling the Company. Upon concluding that the termination of its public
reporting requirement and delisting of its Common Stock from Amex represented an
important strategic objective for the Company, the Board solicited the advice of
legal counsel on the most advantageous means of accomplishing this objective.
With the help of its legal counsel, the Board discussed a possible issuer tender
offer for the Common Stock, but identified the Reverse Split as the preferred
vehicle for its purpose. The Board eliminated a possible issuer tender offer
because it did not offer adequate assurance of reducing the number of record
holders of the Common Stock below the necessary threshold of 300. Without such
assurance, the Board feared the possibility of a costly transaction that failed
to achieve its intended result. The Board favored the precision of the Reverse
Split, allowing them to predict the number of post-transaction shareholders
based upon the specified split ratio.
EFFECTS ON SHAREHOLDERS WITH FEWER THAN 5,000 SHARES OF COMMON STOCK
If the Reverse Split is implemented, Discontinued Shareholders
will:
o not receive a fractional share of Common Stock as a result of the
Reverse Split;
o receive a cash payment in exchange for surrender of the shares of
our Common Stock they held on the Effective Date in accordance
with the procedures described in this proxy statement;
o not be required to pay any service charges or brokerage
commissions in connection with the Reverse Split;
o not receive any interest on the cash payments made as a result of
the Reverse Split; and
o have no further ownership interest in our Company and no further
voting rights.
Cash payments to Discontinued Shareholders as a result of the
Reverse Split will be subject to income taxation if the cash payment exceeds a
shareholder's tax basis. For a discussion of the federal income tax consequences
of the Reverse Split, please see the section of this proxy statement entitled
"Federal Income Tax Consequences."
If you do not currently hold at least 5,000 shares of Common
Stock in a single account and you want to continue to hold shares of our Common
Stock after the Reverse Split, you may do so by taking either of the following
actions:
o purchase a sufficient number of additional shares of our Common
Stock in the open market or privately and have them registered in
your name and consolidated with your current record account, if
you are a record holder, or have them entered in your account with
a nominee (such as your broker or bank) in which you hold your
current shares so that you hold at least 5,000 shares of our
Common Stock in your account on the Effective Date; or
o if you hold an aggregate of 5,000 or more shares in one or more
accounts, consolidate your accounts so that you hold at least
5,000 shares of our Common Stock in one account immediately before
the Effective Date.
-17-
Either course of action will require you to act far enough in
advance to ensure completion by the close of business on the day prior to the
Effective Date.
EFFECTS ON SHAREHOLDERS WITH 5,000 OR MORE SHARES OF COMMON STOCK
If the Reverse Split is consummated, Continuing Shareholders
will:
o continue to be our shareholders and will be the only persons
entitled to vote as shareholders after the consummation of the
Reverse Split;
o receive cash for any of their shares that would otherwise become
fractional shares as a result of the Reverse Split; and
o likely experience a reduction in liquidity (which may be
significant) with respect to their shares of our Common Stock.
FAIRNESS OF THE REVERSE SPLIT
A Special Committee of the independent members of our Board of
Directors has reviewed the purpose, structure, effects, advantages and
disadvantages of the Reverse Split proposal and determined that the transaction
is in the best interests of Marlton and is substantively and procedurally fair
to unaffiliated holders of our Common Stock. The Special Committee did not
assign a specific weight to each of the factors it considered in a formulaic
fashion, but rather viewed each factor in light of the overall facts,
circumstances and cost benefit analysis that led to initial proposal of the
Reverse Split. A discussion of the specific factors considered by the Special
Committee and the Board in making the fairness determination follows.
PROCEDURAL FAIRNESS. Although the Special Committee did not
obtain an unaffiliated stockholder representative to act on behalf of the
unaffiliated shareholders and the approval of a majority of the unaffiliated
holders of Common Stock is not required to authorize the transaction, the
Special Committee and the Board believe that the Reverse Split is procedurally
fair because:
o the Special Committee, which the Board established to review the
Reverse Split proposal, consisted entirely of independent
directors and has unanimously approved the transaction;
o the transaction is being effected in accordance with the
applicable requirements of Pennsylvania law;
o the Special Committee retained the services of MHH to serve as
financial advisor for the transaction and render an opinion as to
the fairness of the cash consideration to be received by
Discontinued Shareholders and Continuing Shareholders receiving
cash consideration in lieu of fractional shares;
o the Transaction is being submitted to a vote of Marlton
shareholders and is subject to approval of a majority of the
outstanding shares of Common Stock;
o affiliated and unaffiliated shareholders are treated equally under
the Reverse Split proposal;
-18-
o stockholders can increase, divide or otherwise adjust their
existing holdings, prior to the Effective Date, so as either to
retain some or all of their shares or to receive cash with respect
to some or all of their shares; and
o Discontinued Shareholders would likely have the option to
repurchase shares of Marlton in the over-the-counter market.
Of particular importance to the Board's determination of
procedural fairness was the equal treatment of affiliated and unaffiliated
shareholders. The Board noted that shareholders would receive the same cash
consideration in the transaction, regardless of their affiliation with the
Company. Although the Board considered the fact that shareholders would receive
differing treatment based upon the size of their holdings, the Board did not
feel that this aspect of the transaction impacted procedural fairness due to the
ability of shareholders to adjust their holdings prior to the consummation of
the transaction based upon their preferences. By announcing the transaction
before the Effective Date, the Board recognized that our shareholders may alter
their holdings with respect to the 5,000 share threshold and thereby determine
whether or not they wish to remain Marlton shareholders or receive cash in
exchange for their holdings.
SUBSTANTIVE FAIRNESS. In order to facilitate its consideration
of the substantive fairness of the Reverse Split to unaffiliated shareholders,
the Special Committee retained MHH to serve as its financial advisor in
connection with the transaction. MHH performed a thorough due diligence review
of the Company and its financial results and projections, including
conversations with members of the Company's senior management. MHH also
undertook an analysis of the valuation multiples and financial terms of recent
mergers and acquisitions of other business service companies in comparison to
similar data for Marlton. Based upon this review, MHH determined that $1.24 to
$1.57 per share represented a fair range of values for the Common Stock. The
Special Committee relied significantly on this determination in approving the
transaction consideration at $1.25 per share. The Board agreed that $1.25
represented a fair price based on the analysis of the MHH and the recommendation
of the Special Committee. For more information on the fairness opinion, see
"Opinion of Mufson Howe Hunter & Partners LLC."
In addition to receiving fair consideration for their shares,
the Special Committee also considered the fact that Discontinued Shareholders
and other shareholders receiving cash would get the benefit of selling their
shares without paying brokerage fees or commissions. The Special Committee noted
that this feature of the transaction weighed in favor of the overall substantive
fairness of the Reverse Split because it allowed shareholders receiving cash to
realize more value for their shares than a sale in the open market would afford
them.
The Special Committee also considered the substantive fairness
of the transaction to unaffiliated shareholders who would be Continuing
Shareholders following the Reverse Split. The Special Committee and the Board
agreed that the Reverse Split was substantively fair to these Continuing
Shareholders as well. The Board reached this conclusion based on the fact that
Continuing Shareholders would retain the ability to participate in the future
profitability of the Company. Since a principal purpose behind the Reverse Split
proposal was to eliminate its public company reporting obligations and thereby
improve operational efficiency, the Special Committee and the Board reasoned
that Continuing Shareholders could benefit from the long term cost savings
resulting from this transaction. The Special Committee and the Board also
considered that holders of over 5,000 Marlton shares would have the option to
reduce their holdings below the transaction
-19-
threshold before the Effective Date if they wished to receive the transaction
consideration rather than continue to hold the Company's shares.
In light of the fairness opinion delivered by MHH, the
recommendation of the Special Committee of independent directors, and thorough
consideration of the advantages and disadvantages of the Reverse Split, the
Board has determined that the transaction is in all respects fair to both
affiliated and unaffiliated holders of our Common Stock.
OPINION OF MUFSON HOWE HUNTER & PARTNERS LLC
On September 22, 2005, MHH rendered its opinion to the Special
Committee that the proposed price per share to be paid to shareholders in
connection with the reverse split of $1.25 is fair, from a financial point of
view, to the shareholders. The full text of MHH's opinion is attached as Exhibit
A to this document. The fairness opinion is also available for inspection and
copying at Marlton's principal executive offices located at 2828 Charter Road,
Philadelphia, Pennsylvania 19154. We encourage you to read MHH's opinion to
understand the information reviewed, assumptions made, analyses prepared, and
matters considered by MHH, as well as the limitation of its opinion.
MHH's opinion is for the use and benefit of the Board in its
evaluation of the Reverse Split and is not intended for any other purpose. MHH's
opinion does not constitute a recommendation to Marlton stockholders as to how
such shareholders should vote with respect to the Reverse Split.
The following is a summary of MHH's opinion and the analyses
that MHH prepared to support its opinion. In arriving at its opinion, MHH, among
other things:
(a) reviewed a draft of the preliminary proposal, as described in
a draft of Marlton's proxy statement, dated September 16,
2005;
(b) reviewed the Company's 10-Qs for the three months ended June
30, and March 31, 2005 and its 10-Ks for the years ended
December 31, 2002, 2003 and 2004;
(c) reviewed Marlton's detailed forecasts for the years ending
December 31, 2005 and 2006 and summary forecasts for the years
ending December 31, 2007, 2008 and 2009 and prepared
discounted cash flow analyses from such forecasts;
(d) discussed with members of the senior management of Marlton,
the Company's business, operating results, financial condition
and prospects;
(e) compared stock prices, operating results, earnings estimates
and financial condition of certain publicly-traded tradeshow
design and marketing services companies which MHH deemed
reasonably comparable to Marlton, to similar data for Marlton;
(f) compared valuation multiples (to the extent available) and
other financial terms of mergers and acquisitions of certain
tradeshow design and marketing services companies which MHH
deemed reasonably comparable to Marlton, to similar data for
Marlton;
-20-
(g) compared premiums or discounts to recent share prices for
certain recent reverse stock splits;
(h) analyzed Marlton's stock price trading history; and
(i) reviewed certain other information and performed other
analyses that MHH deemed appropriate.
In arriving at its opinion, MHH assumed that all information
publicly available to it or furnished to it by the Company was accurate and
complete. MHH is not aware of any facts or circumstances that would make such
information inaccurate or misleading, but MHH has not independently verified and
does not assume any responsibility or liability for such information. With
respect to the forecasts furnished to MHH by the Company, MHH assumed that such
forecasts were reasonably prepared on a basis reflecting the best currently
available estimates and judgments of Marlton's management as to the future
results of operations and financial condition of the Company. MHH conducted only
a limited physical inspection of Marlton's facilities and did not appraise any
of the assets of the Company. MHH has assumed that the Reverse Split will be
completed as described in the proxy material, and has also assumed that all
governmental, regulatory or other consents required to consummate the Reverse
Split will be obtained without any material restrictions imposed on the Company.
MHH's opinion is based upon market, economic and other conditions as they exist
on, and can be evaluated as of, the date MHH rendered its opinion.
In connection with rendering its opinion, MHH performed
certain financial, comparative and other analyses as summarized below. The
preparation of a fairness opinion involves various determinations as to the most
appropriate and relevant methods of financial and comparative analyses and the
application of those methods to the particular circumstances. Therefore, such an
opinion is not readily susceptible to partial analysis or summary description.
Furthermore, in arriving at its opinion, MHH did not attribute any particular
weight to any analysis or factor considered by it, but rather made qualitative
judgments as to the significance and relevance of each analysis and factor.
Accordingly, MHH believes that its analyses must be considered as a whole and
that considering any portion of such analyses and factors, without considering
all analyses and factors as a whole, could create a misleading or incomplete
view of the process underlying its opinion. In its analyses, MHH made numerous
assumptions with respect to industry performance, general business and economic
conditions and other matters, many of which are beyond MHH's control. Neither
Marlton, MHH nor any other person assumes responsibility if future results
differ materially from those assumed. Any estimates contained in these analyses
were not necessarily indicative of actual values or predictive of future results
or values, which may be significantly more or less favorable than those set
forth therein. In addition, analyses relating to the value of businesses do not
purport to be appraisals or to reflect the prices at which such businesses
actually may be sold.
PREMIUMS PAID ANALYSIS. MHH reviewed acquisition transactions
of publicly-traded companies in the business services market since 2003. For
each of these transactions, MHH compared the acquisition price with the closing
prices per share of the acquired company one-month and one-week prior to the
announcement of the transaction. For the one-month premiums, this resulted in a
median premium of 25.1% since 2003, with a range of 14.6% to 34.0% based upon
the thirty-third (33%) and sixty-
-21-
seventh (67%) percentiles. For the one-week premiums, this resulted in a median
premium of 22.3% since 2003, with a range of 13.0% to 32.3% based upon the
thirty-third (33%) and sixty-seventh (67%) percentiles.
MHH also reviewed seventeen recent transactions which were
announced during the past 6 months comparable to the Marlton transaction. In
connection with such analysis, MHH reviewed publicly available information of
selected transactions involving reverse stock splits with a stated purpose
similar to the Company's transaction. For each of these transactions, MHH
determined the "cash out" price of the transaction with the closing price per
share of the company one-month and one-week prior to the announcement of the
transaction. For the one-month premiums, this resulted in a median premium of
22.4% since 2003, with a range of 18.7% to 32.2% based upon the thirty-third
(33%) and sixty-seventh (67%) percentiles. For the one-week premiums, this
resulted in a median premium of 23.0% since 2003, with a range of 14.4% to 32.1%
based upon the thirty-third (33%) and sixty-seventh (67%) percentiles.
MHH applied these premiums to the Company's 5-day and 3-month
volume weighted average price ("VWAP") of $1.394 and $1.064, respectively. This
resulted in a range of indicated values of $1.20 to $1.87.
COMPARABLE COMPANY ANALYSIS. In connection with its opinion,
MHH compared certain financial information, including the market values and
trading multiples of the Company, with similar information for publicly traded
companies whose business MHH believed to be comparable to that of the Company.
MHH noted that none of the companies used in this analysis were identical to the
Company. The companies used in the comparison were:
o Viad Corp (VVI)
o GL Events
o Ambassadors International Inc. (AMIE)
o Co-Active Marketing Group, Inc.
Based on the market values of these companies, MHH determined various multiples
of their latest 12 months' earnings before interest, taxes, depreciation and
amortization ("EBITDA"). Using these multiples and noting that the Company was
particularly comparable to Viad Corp., MHH determined that that the range of
EBITDA multiples was 7.4x to 13.2x, with a median of 10.0x. MHH determined the
relevant range for Marlton to be 7.4x to 12.6x. Applying these multiples to both
the Company projected LTM EBITDA through September 30, 2005 and its projected
LTM EBITDA through December 31, 2005 resulted in a range of implied enterprise
value from approximately $31.4 million to approximately $57.2 million.
Consequently, the range of implied value per share was $1.22 to $2.40.
COMPARABLE MERGERS & ACQUISITIONS ANALYSIS. Using publicly
available information, MHH reviewed and compared the purchase prices and
valuation multiples paid in twelve acquisitions of business services companies
that MHH deemed comparable to the Company. MHH calculated the enterprise values
for each target company as a multiple of its LTM EBITDA. The range of EBITDA
multiples was 6.2x to 11.0x,
-22-
with a median of 8.3x. MHH determined the relevant range for Marlton to be 7.5x
to 10.4x. When only acquisitions with total values under $100 million were taken
into consideration, the range of EBITDA multiples was 6.2x to 11.0x, with a
median of 7.5x. MHH determined the relevant range for Marlton to be 6.2x to
11.0x.
Applying these multiples to both the Company projected LTM
EBITDA through September 30, 2005 and its projected LTM EBITDA through December
31, 2005 resulted in a range of implied enterprise value from approximately
$26.3 million to approximately $49.9 million. Consequently, the range of implied
value per share was $0.98 to $2.07.
Given the limited number of comparable transactions, MHH also
evaluated a much larger group of acquisitions which included all business
services companies acquired since January 1, 2003. MHH calculated the enterprise
values for each target company as a multiple of its LTM EBITDA.
For all the transactions, this resulted in a median multiple
of 8.1x since 2003, with a range of 7.4x to 10.4x based upon the thirty-third
(33%) and sixty-seventh (67%) percentiles.
For the all transactions under $100 million in transaction
value, this resulted in a median multiple of 7.4x since 2003, with a range of
6.0x to 10.9x based upon the thirty-third (33%) and sixty-seventh (67%)
percentiles.
For the all transactions under $50 million in transaction
value, this resulted in a median multiple of 6.3x since 2003, with a range of
5.5x to 8.1x based upon the thirty-third (33%) and sixty-seventh (67%)
percentiles.
Applying these multiples to both the Company projected LTM
EBITDA through September 30, 2005 and its projected LTM EBITDA through December
31, 2005 resulted in a range of implied enterprise value from approximately
$23.5 million to approximately $49.4 million. Consequently, the range of implied
value per share was $0.84 to $2.04.
DISCOUNTED CASH FLOW ANALYSIS. MHH prepared a discounted cash
flow analysis to derive a range of values for Marlton. MHH utilized projections
through 2009 furnished to it by the management of Marlton. MHH calculated the
present values of the projected free cash flows (net income plus depreciation
and certain other non-cash expenses, less cash for working capital and capital
expenditures) for the five months ended December 31, 2005 and the four fiscal
years ending December 31, 2009 and the terminal value. To calculate a terminal
value for Marlton at the end of the forecast period, MHH applied a range of 6.0
to 8.0 times projected year ending December 31, 2009 EBITDA. MHH used discount
rates of 20.5 percent to 23.5 percent.
Based on the foregoing, MHH calculated the range of implied
equity values per share for Marlton of $1.00 to $1.43 based on Marlton
management's projections.
CONCLUSION. Based upon the above analyses, MHH determined that
$1.25 per share is fair, from a financial point of view, to the shareholders.
Only the Special Committee and the Board are entitled to rely on the opinion and
advisory services of MHH.
-23-
MHH, as part of its financial advisory business, is frequently
engaged in rendering financial advice in connection with mergers and
acquisitions and was selected by the Board based upon its qualifications,
reputation and experience in similar transactions. MHH has acted as the
financial advisor to the Special Committee in connection with the proposed
transaction and Marlton has agreed to pay MHH a fee of $75,000. Pursuant to the
agreement between Marlton and MHH, $25,000 of the fee was to be paid as a
retainer, $25,000 was to be paid when MHH orally delivered its opinion and the
balance was to be paid upon the delivery of its written opinion to the Special
Committee. In addition, the Company has agreed to reimburse MHH for its
reasonable out-of-pocket expenses not to exceed $10,000. and to indemnify MHH
against certain liabilities relating to or arising from this engagement.
SPECIAL INTERESTS OF AFFILIATED PERSONS IN THE TRANSACTION
In considering the recommendation of our Board with respect to
the Reverse Split, our shareholders should be aware that our executive officers
and directors have interests in the transaction which may differ from those of
our shareholders generally. These interests may create potential conflicts of
interest. After the Reverse Split, our directors and executive officers will
face less legal exposure compared to public reporting company directors and
officers. While there are still significant controls, regulations and
liabilities for directors and executives officers of unregistered companies, the
legal exposure for the members of our Board and our executive officer will be
reduced after the Reverse Split.
In addition, Messrs. Harrow and Tarte have agreed to serve as
back-up lenders in the event that the Company is unable to fund the transaction
under its existing credit facility. Please see "Costs of the Transaction and
Source of Funds."
COSTS OF THE TRANSACTION AND SOURCE OF FUNDS
Based on estimates of the record ownership of shares of our
Common Stock, the number of shares outstanding and other information as of
[Record Date], and assuming that approximately 1,250,000 shares are redeemed, we
estimate that the total funds required to consummate the Reverse Split will be
around $1,813,500, of which approximately $1,562,500 will be used to pay the
consideration to shareholders entitled to receive cash for their shares of our
Common Stock and $251,000 will be used to pay the costs of the reverse stock
split, as follows:
Legal, Accounting and Financial Advisor $225,000
Special Meeting, Printing and Distribution 15,000
SEC Filing Fees and Press Releases 1,000
Transfer Agent Fees 10,000
-----------
TOTAL TRANSACTION FEES $251,000
===========
We intend to the finance the Reverse Split through funds
obtained from our revolving credit facility with Bank of America (the "Loan
Facility"), to the extent we have the requisite availability under our borrowing
formula. This Loan Facility provides maximum borrowing capacity of $15,000,000
at a total effective interest rate of 6%. The Loan Facility restricts the
Company's ability to pay dividends, and includes certain financial covenants
including fixed charge coverage ratio and maximum capital expenditure amount.
The Loan Facility is incorporated herein by reference to the Exhibits 10.21,
10.39, 10.40 and 10.41 of the Company's Annual Report on Form 10-K for the year
ended December 31, 2004.
-24-
The Company currently has about $7,000,000 in availability
under the Loan Facility, and expects to have at least $3,000,000 in availability
at year end. The Loan Facility prohibits any payment in respect of stock,
redemption of stock and certain intercompany transfers of fund without the
lender's consent. Although the proposed Reverse Split would violate these
prohibitions if consummated, we have obtained the preliminary approval of the
lender to fund the transaction under the Loan Facility.
In the event that we are unable to fully fund the Reverse
Split through the Loan Facility due to lack of sufficient availability or
otherwise, the Company has secured a commitment from Messrs. Harrow and Tarte to
loan Marlton the amount necessary to consummate the transaction, at the same
interest rate charged under the Loan Facility and repayable at such time as
Marlton has availability under such facility.
FEDERAL INCOME TAX CONSEQUENCES
Summarized below are material federal income tax consequences
to us and to our shareholders resulting from the Reverse Split, if consummated.
This summary is based on the provisions of the Internal Revenue Code of 1986, as
amended, more commonly referred to as the Code, the Treasury Regulations, issued
pursuant thereto, and published rulings and court decisions in effect as of the
date hereof, all of which are subject to change. This summary does not take into
account possible changes in such laws or interpretations, including amendments
to the Code, other applicable statutes, Treasury Regulations and proposed
Treasury Regulations or changes in judicial or administrative rulings; some of
which may have retroactive effect. No assurance can be given that any such
changes will not adversely affect the federal income tax consequences of the
Reverse Split.
This summary does not address all aspects of the possible
federal income tax consequences of the Reverse Split and is not intended as tax
advice to any person or entity. In particular, and without limiting the
foregoing, this summary does not consider the federal income tax consequences to
our shareholders in light of their individual investment circumstances nor to
our shareholders subject to special treatment under the federal income tax laws
(for example, tax exempt entities, life insurance companies, regulated
investment companies and foreign taxpayers), or who hold, have held, or will
hold our Common Stock as part of a straddle, hedging, or conversion transaction
for federal income tax purposes. In addition, this summary does not address any
consequences of the Reverse Split under any state, local or foreign tax laws.
We will not obtain a ruling from the Internal Revenue Service
or an opinion of counsel regarding the federal income tax consequences to our
shareholders as a result of the Reverse Split. Accordingly, you are encouraged
to consult your own tax advisor regarding the specific tax consequences of the
proposed transaction, including the application and effect of state, local and
foreign income and other tax laws.
This summary assumes that you are one of the following: (i) a
citizen or resident of the United States, (ii) a domestic corporation, (iii) an
estate the income of which is subject to United States federal income tax
regardless of its source, or (iv) a trust if a United States court can exercise
primary supervision over the trust's administration and one or more United
States persons are authorized to control all substantial decisions of the trust.
This summary also assumes that you have held and will continue to hold your
shares as capital assets for federal income tax purposes.
-25-
You should consult your tax advisor as to the particular
federal, state, local, foreign, and other tax consequences, applicable to your
specific circumstances.
We believe that the Reverse Split will be treated as a
"recapitalization" for federal income tax purposes. This should result in no
material federal income tax consequences to us or to our shareholders who do not
receive cash in the transaction. However, if you are receiving cash in the
transaction, you may not qualify for tax-free "recapitalization" treatment for
federal income tax purposes.
SHAREHOLDERS WHO DO NOT RECEIVE CASH IN CONNECTION WITH THE
REVERSE SPLIT. If you (1) continue to hold Common Stock directly immediately
after the Reverse Split, and (2) you receive no cash as a result of the Reverse
Split, you should not recognize any gain or loss in the Reverse Split for
federal income tax purposes. Your aggregate adjusted tax basis in your shares of
our Common Stock held immediately after the Reverse Split will be equal to your
aggregate adjusted tax basis in such shares held immediately prior to the
Reverse Split and you will have the same holding period or periods in your
Common Stock as you had in such Common Stock immediately prior to the Reverse
Split.
SHAREHOLDERS WHO RECEIVE CASH IN CONNECTION WITH THE REVERSE
SPLIT. If you (1) receive cash in exchange for your shares as a result of the
Reverse Split, (2) you do not continue to hold any Common Stock directly
immediately after the Reverse Split, and (3) you are not related to any person
or entity that holds Common Stock immediately after the Reverse Split, you will
recognize capital gain or loss on the Reverse Split for federal income tax
purposes, with such gain measured by the difference between the cash you
received for your shares and your aggregate adjusted tax basis in those shares.
If you receive cash in exchange for some of your shares of our
Common Stock as a result of the Reverse Split, but either continue to directly
own stock immediately after the Reverse Split, or are related to a person or
entity who continues to hold stock immediately after the Reverse Split, you will
recognize capital gain or loss in the same manner as set forth in the previous
paragraph, provided that your receipt of cash either is "not essentially
equivalent to a dividend," or constitutes a "substantially disproportionate
redemption of stock," as described below.
o "NOT ESSENTIALLY EQUIVALENT TO A DIVIDEND." You will satisfy the
"not essentially equivalent to a dividend" test if the reduction
in your proportionate interest in the Company resulting from the
Reverse Split (taking into account for this purpose the Common
Stock owned by persons related to you) is considered a "meaningful
reduction" given your particular facts and circumstances. In other
cases, the Internal Revenue Service has ruled that a small
reduction by a minority shareholder whose relative stock interest
is minimal and who exercises no control over the affairs of a
corporation will satisfy this test.
o "SUBSTANTIALLY DISPROPORTIONATE REDEMPTION OF STOCK." The receipt
of cash in the Reverse Split will be a "substantially
disproportionate redemption of stock" for you if the percentage of
the outstanding shares of our Common Stock owned by you (and by
persons related to you) immediately after the Reverse Split is (a)
less than 50% of all outstanding shares and (b) less than 80% of
the percentage of shares of our Common Stock owned by you
immediately before the Reverse Split.
-26-
In applying these tests, you will be treated as owning shares
of our Common Stock actually or constructively owned by certain individuals and
entities related to you. If your receipt of cash in exchange for Common Stock is
not treated as capital gain or loss under any of the tests, it will be treated
first as ordinary dividend income to the extent of your ratable share of our
current and accumulated earnings and profits, then as a tax-free return of
capital to the extent of your aggregate adjusted tax basis in your shares, and
any remaining amount will be treated as capital gain. See "CAPITAL GAIN AND
LOSS" and "SPECIAL RATE FOR CERTAIN DIVIDENDS," below.
CAPITAL GAIN AND LOSS. For individuals, net capital gain
(defined generally as your total capital gains in excess of capital losses for
the year) recognized upon the sale of capital assets that have been held for
more than 12 months generally will be subject to tax at a rate not to exceed
15%. Net capital gain recognized from the sale of capital assets that have been
held for 12 months or less will continue to be subject to tax at ordinary income
tax rates. Capital gain recognized by a corporate taxpayer will continue to be
subject to tax at the ordinary income tax rates applicable to corporations.
There are limitations on the deductibility of capital losses.
SPECIAL RATE FOR CERTAIN DIVIDENDS. In general, dividends are
taxed at ordinary income rates. However, you may qualify for a 15% rate of tax
on any cash received in the Reverse Split that is treated as a dividend as
described above, if (i) you are an individual or other non-corporate
shareholder, (ii) you have held the shares of our Common Stock with respect to
which the dividend was received for more than 60 days during the 120-day period
beginning 60 days before the dividend date, as determined under the Code, and
(iii) you were not obligated during such period (pursuant to a short sale or
otherwise) to make related payments with respect to positions in substantially
similar or related property. You are urged to consult with your tax advisor
regarding your applicability for, and the appropriate federal, state, local,
foreign or other tax treatment of, any such dividend income.
WITHHOLDING TAX ON NON U.S. PERSONS. If you are not a U.S.
person (a "Non U.S. Person"), cash payments made to you that qualify as a
dividend, as described above, may be subject to a withholding of a 30% U.S. tax.
Cash payments that you receive from payment for fractional or odd lot shares are
likely to be classified as a dividend because you are likely to have increased
your percentage ownership in the Common Stock as a result of the Reverse Split.
We will determine at the time of payment if we are required to withhold. You may
reduce the rate of withholding if you provide us with a properly executed form
W-8BEN on which you claim the benefits of an applicable tax treaty.
If the 30% (or reduced) tax withheld exceeds your actual U.S.
tax liability, you may filed with the IRS for a refund.
BACKUP WITHHOLDING. Shareholders will be required to provide
their social security or other taxpayer identification numbers (or, in some
instances, additional information) in connection with the Reverse Split to avoid
backup withholding requirements that might otherwise apply. The letter of
transmittal will require each shareholder to deliver such information when the
Common Stock certificates are surrendered following the Effective Date. Failure
to provide such information may result in backup withholding at a rate of 28%.
As explained above, the amounts paid to you as a result of the
Reverse Split may result in dividend income, capital gain income, or some
combination of dividend and capital gain income to you depending on your
individual circumstances. You should consult your tax advisor as
-27-
to the particular federal, state, local, foreign, and other tax consequences of
the transaction, in light of your specific circumstances.
THE PRECEDING DISCUSSION OF THE MATERIAL U.S. FEDERAL INCOME
TAX CONSEQUENCES OF THE REVERSE SPLIT IS GENERAL AND DOES NOT INCLUDE ALL
CONSEQUENCES TO EVERY SHAREHOLDER UNDER FEDERAL, STATE, LOCAL, OR FOREIGN TAX
LAWS. ACCORDINGLY, EACH SHAREHOLDER SHOULD CONSULT ITS OWN TAX ADVISOR AS TO THE
PARTICULAR TAX CONSEQUENCES TO IT OF THE REVERSE STOCK SPLIT, INCLUDING THE
APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS, AND OF ANY
PROPOSED CHANGES IN APPLICABLE LAW.
APPRAISAL AND DISSENTERS' RIGHTS
The Pennsylvania Business Corporation Law of 1988, as amended,
does not afford shareholders appraisal or dissenters' rights for a reverse split
transaction.
RECOMMENDATION OF THE BOARD
Our Board has unanimously determined that the Reverse Split is
from all perspectives fair to, and in the best interests of, the Company and its
shareholders. Members of the Board and senior officers of the Company own
approximately 43% of the outstanding shares of Common Stock and have indicated
that they will vote to approve the Reverse Split.
THEREFORE, THE BOARD RECOMMENDS THAT THE SHAREHOLDERS VOTE
"FOR" THE APPROVAL OF THE REVERSE SPLIT ON THE ATTACHED PROXY.
THE COMPANY
Marlton Technologies, Inc., through its Sparks Exhibits &
Environments and Sparks Custom Retail subsidiaries, is engaged in the design,
marketing and production of trade show, museum, theme park and themed interior
exhibits, store fixtures, premium incentive plans, corporate events, and point
of purchase displays, both domestically and internationally. Our executive
offices are located at 2828 Charter Road, Philadelphia, Pennsylvania 19154 and
our telephone number is (215) 676-6900.
RECENT DEVELOPMENTS
On March 15, 2005, Sparks Exhibits & Environments Corp., a
subsidiary of the Company, acquired substantially all of the assets and assumed
specified liabilities of Showtime Enterprises, Inc. and its subsidiary, Showtime
Enterprises West, Inc. (collectively "Showtime") from the Chapter 11 bankruptcy
proceeding which Showtime had filed in January 2005. Showtime designed, marketed
and produced trade show exhibits, point of purchase displays, museums and
premium incentive plans. Showtime had sales of approximately $21 million in
2004. The aggregate purchase price was $6.3 million, comprised of $2.8 million
paid in cash, $1.7 million for contingent royalty and percentage of sales
payments, $1 million of long-term debt assumption and $0.8 million for stock
warrants. The Company financed this acquisition by increasing its revolving
credit facility borrowing capacity and obtaining a new term loan. The Company's
Audit Committee engaged the Company's registered public accounting firm to
perform the required audit of Showtime's financial statements.
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It was subsequently determined that such audit could not be
performed due to the unavailability of necessary documentation and personnel of
Showtime due to the bankruptcy proceeding. The Company subsequently applied for
a waiver of these financial statement requirements with the Office of Chief
Accountant of the SEC, but the waiver was denied. The inability to file these
audited financial statements would limit the Company's ability to engage in
certain types of transactions requiring SEC review, including without
limitation, public offerings and certain private offerings of securities and
business combination transactions requiring shareholder approval.
MARKET INFORMATION FOR OUR COMMON STOCK
Our common stock trades on Amex under the symbol "MTY." The
following table sets forth the quarterly high and low sales prices for our last
two fiscal years and the first three quarters of this fiscal year.
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SALES PRICE ($)
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FISCAL YEAR 2003 HIGH LOW
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First Quarter .33 .18
Second Quarter .40 .29
Third Quarter .80 .38
Fourth Quarter .80 .42
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SALES PRICE ($)
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FISCAL YEAR 2004 HIGH LOW
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First Quarter .67 .45
Second Quarter .66 .45
Third Quarter .70 .53
Fourth Quarter .98 .58
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SALES PRICE ($)
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FISCAL YEAR 2005 HIGH LOW
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First Quarter 1.48 .72
Second Quarter 1.25 .68
Third Quarter [1.56] [.70]
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DIVIDEND POLICY
No dividends were paid during the past two fiscal years. The
Company currently intends to employ all available funds in the business. Future
dividend policy will be determined in accordance with the financial requirements
of the business. However, the Company's loan agreement provides that the Company
may not pay dividends to its shareholders without the lender's prior written
consent and also provides restrictions on the ability of the Company's
subsidiaries to transfer funds to the Company in the form of dividends, loans or
advances.
DIRECTORS AND EXECUTIVE OFFICERS
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Set forth below is information about our directors and
executive officers, including their names, ages, all positions and offices held
by each of them, the period during which each has served in his current role,
and the principal occupations of each over the past five years.
JEFFREY K. HARROW, age 48, serves as our Chairman and has been
a director and officer of the Company since November 2001. Mr. Harrow served as
President and CEO of CMPExpress.com from 1999 through 2000. Mr. Harrow
negotiated the sale of the CMPExpress.com business to Cyberian Outpost (Nasdaq
ticker "COOL") in September 2000. From 1982 through 1998, Mr. Harrow was the
President, CEO and a Director of Travel One, which was in 1998 the 6th largest
travel management company in the United States. Mr. Harrow previously served as
a board member for the Company and has served as a board member for Eastern
Airlines Advisory Board, Cherry Hill National Bank (sold to Meridian Bank), and
Hickory Travel Systems. Mr. Harrow is a graduate of George Washington University
School of Government and Business Administration earning his B.B.S. in 1979.
A.J. AGARWAL, age 39, has been a director since 2001. Mr.
Agarwal is a Senior Managing Director in the Mergers & Acquisitions Advisory
Group for The Blackstone Group. Since joining Blackstone 1992, Mr. Agarwal has
worked on a variety of mergers and acquisitions transactions (both in an
advisory capacity and as a principal). Before joining Blackstone, Mr. Agarwal
was with Bain & Company. Mr. Agarwal graduated from Princeton University magna
cum laude and Phi Beta Kappa and received an MBA from Stanford University
Graduate School of Business. He serves as a trustee of Princeton University's
Foundation for Student Communication, the publisher of Business Today magazine.
WASHBURN OBERWAGER, age 58, has been a director since 2002.
Mr. Oberwager was Chief Executive Officer and a co-owner from 1987 to 1999 of
Western Sky Industries, Inc., a leading manufacturer of aircraft systems and
components. This $170 million business was divested in 1999. Since that time,
Mr. Oberwager has provided equity capital for high tech companies and has been a
principal in Avery Galleries, which specializes in American paintings.
SCOTT J. TARTE, age 43, has served as an officer and director
of the Company since November 2001 and is currently Vice Chairman of the
Company. From January 2001 to November 2001, Mr. Tarte served as acting CEO of
Medidata Solutions, a privately held technology company specializing in
applications that streamline the data collection process for clinical trials of
new drug compounds seeking FDA approval. From January 1988 to November 1998, Mr.
Tarte was an owner and served as Chief Operating Officer of Travel One. Mr.
Tarte oversaw all corporate operations and finance of the company, and shared
responsibility for strategic planning with Mr. Harrow. In November 1998, Travel
One was sold to the American Express Corporation. Mr. Tarte launched American
Express One, a $3 billion travel division representing a consolidation of the
prior Travel One organization and over $2 billion of legacy American Express
business. In December 1999, Mr. Tarte resigned his position with American
Express but agreed to remain as a paid consultant. Mr. Tarte graduated from the
University of Pennsylvania with a B.A. in 1984 and he received his law degree
from Fordham University in 1987.
RICHARD VAGUE, age 49, has been a director since 2001. Mr.
Vague co-founded Juniper Financial in 1999, a direct consumer bank with advanced
internet and wireless functionality. Mr. Vague is the Chairman and CEO of
Juniper Financial. Prior to co-founding Juniper Financial, from 1985 to 1999,
Mr. Vague was co-founder, Chairman and CEO of First USA, a credit card company
that grew from a virtual start-up in 1985 to the largest VISA credit card issuer
in the
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world. He also served as chairman of Paymentech, the merchant payment-processing
subsidiary of First USA and is a former board member of VISA.
ROBERT B. GINSBURG, age 51, is our Chief Executive Officer and
President and has served as an officer of the Company since August 1990. Mr.
Ginsburg also served as a director of the Company from 1990 to 2004. From 1985
to August 1990, Mr. Ginsburg was actively involved in the development and
management of business opportunities, including the acquisition of manufacturing
companies, investment in venture capital situations and the provision of finance
and management consulting services as a principal of Omnivest Ventures, Inc. Mr.
Ginsburg is a Certified Public Accountant.
ALAN I. GOLDBERG, age 53, is our General Counsel and Corporate
Secretary and has served as an officer of the Company since August 1990. Mr.
Goldberg also served as a director of the Company from 1991 to the 2004. From
April 1987 through August 1990 he was involved in venture capital investments
and business acquisitions as a principal of Omnivest Ventures, Inc. Mr. Goldberg
is a corporate attorney.
STEPHEN P. ROLF, age 50, became Chief Financial Officer and
Treasurer of the Company in January 2000. Mr. Rolf was employed from 1977 to
December 1999 by Hunt Corporation, a New York Stock Exchange listed manufacturer
and distributor of office and graphics products. Mr. Rolf worked in various
financial capacities for Hunt Corporation, including Vice President and
Controller.
Each director and executive officer is a citizen of the United
States and may be contacted at the Company's executive offices at 2828 Charter
Road, Philadelphia, Pennsylvania 19154, telephone number (215) 676-6900.
To the Company's knowledge, none of our executive officers or
directors has been convicted in a criminal proceeding during the past five years
(excluding traffic violations or similar misdemeanors) or has been a party to
any judicial or administrative proceeding during the past five years (except for
matters that were dismissed without sanction or settlement) that resulted in a
judgment, decree or final order enjoining the person from future violations of,
or prohibiting activities subject to, federal or state securities laws, or a
finding of any violation of federal or state securities laws.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information concerning the
shares of Common Stock, beneficially owned as of [Record Date], by (i) the
Company's directors; (ii) the Company's executive officers; (iii) the Company's
directors and executive officers as a group; and (iv) each person or entity
known to the Company to own beneficially more than 5% of the outstanding shares
of Common Stock.
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Shares of Common Stock
Beneficially Owned
Prior to Reverse Stock Split
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Name and Address of Beneficial No. of Shares Percent of
Owners, Officers and Directors Class
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Scott J. Tarte 4,198,816 (1) (3) 27.9
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Jeffrey K. Harrow 4,188,344 (2) (3) 27.8
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Robert B. Ginsburg 2,634,684 (3) (4) (5) 18.1
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Alan I. Goldberg 1,300,772 (6) 9.4
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A.J. Agarwal 100,000 (7) -
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Richard Vague 100,000 (8) -
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Washburn Oberwager 100,000 (9) -
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Stephen P. Rolf 121,000 (10) -
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All directors and executive 12,743,616 (11) 63.3%
officers as a group (8 persons)
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Lawrence Schan 990,750 (12) 7.7
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Stanley D. Ginsburg 815,467 (13) 6.3
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Ira Ingerman 774,367 (14) 6.0
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Lombard Associates 1,044,926 (15) 8.1
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(1) Includes an aggregate of 2,125,000 shares which Mr. Tarte may acquire upon
the exercise of outstanding options and warrants.
(2) Includes an aggregate of 2,138,336 shares which Mr. Harrow may acquire
upon the exercise of outstanding options and warrants.
(3) Messrs. Harrow, Tarte and R. Ginsburg are parties to a Stockholders'
Agreement as described below. The amount listed does not include shares
held by other parties to the Stockholders' Agreement, and each party
disclaims beneficial ownership of all shares held by the other parties
thereto.
(4) Includes an aggregate of 1,630,021 shares which Mr. Ginsburg may acquire
upon the exercise of outstanding options and warrants.
(5) Does not include for each of Messrs. Goldberg and Ginsburg 194,670 shares
held by the Company's 401(k) Plan for the benefit of the Company's
employees. Each of Messrs. Goldberg and Ginsburg is a trustee of such
plan, and each disclaims beneficial ownership of all such shares except
those shares held for his direct benefit as a participant in such plan.
(6) Includes an aggregate of 896,221 shares which Mr. Goldberg may acquire
upon the exercise of outstanding options and warrants.
(7) Includes an aggregate of 100,000 shares which Mr. Agarwal may acquire upon
the exercise of outstanding options and warrants.
(8) Includes an aggregate of 100,000 shares which Mr. Vague may acquire upon
the exercise of outstanding options and warrants.
(9) Includes an aggregate of 100,000 shares which Mr. Oberwager may acquire
upon the exercise of outstanding options and warrants.
(10) Includes an aggregate of 120,000 shares which Mr. Rolf may acquire upon
the exercise of outstanding options and warrants.
(11) Includes shares beneficially owned by Messrs. Harrow, Tarte, R. Ginsburg,
Goldberg, Agarwal, Vague, Oberwager and Rolf. The address for each of the
Company's executive officers and directors is 2828 Charter Road,
Philadelphia, Pennsylvania, 19154.
(12) Mr. Schan's address is: 507 Fishers Road, Bryn Mawr, PA 19010.
(13) Mr. Stanley Ginsburg's address is: 50 Belmont Ave., #1014, Bala Cynwyd, PA
19004.
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(14) Mr. Ingerman's address is: 1300 Centennial Road, Narbeth, PA 19072.
(15) Lombard Associates is a sole proprietorship owned by Charles P. Stetson,
Jr. and its address is: 115 East 62nd Street, New York, New York 10021.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS WITH AFFILIATES
The Company leases its principal facility in Philadelphia from
2828 Partnership L.P., a limited partnership whose general partners are Stanley
Ginsburg (the father of Robert Ginsburg, our President and Chief Executive
Officer) and Ira Ingerman, each a beneficial owner of more than five percent of
our Common Stock. In 2004, the Company paid $771,025 pursuant to this lease.
STOCKHOLDERS' AGREEMENT
On November 20, 2001, Messrs. Tarte, Harrow and Robert
Ginsburg and the Company entered into a Stockholders' Agreement pursuant to
which, with certain exceptions, (i) Messrs. Tarte and Harrow have the right to
designate that number of individuals as nominees (which nominees include Tarte
and Harrow) for election as directors as shall represent a majority of the
Company Board, (ii) Messrs. Tarte, Harrow and Ginsburg will vote their shares of
Common Stock in favor of the Messrs. Tarte and Harrow designees and Mr.
Ginsburg, (iii) without the prior written consent of Mr. Ginsburg, for a period
of seven years following the effective date of the Stockholders' Agreement,
Messrs. Tarte and Harrow agreed not to vote any of their shares of Common Stock
in favor of (x) the merger of the Company, (y) the sale of substantially all of
the Company's assets, or (z) the sale of all the shares of Common Stock, in the
event that in connection with such transactions the shares of Common Stock are
valued at less than $2.00 per share, (iv) Messrs. Tarte, Harrow and Ginsburg
will recommend to the Board that it elect Mr. Harrow as the Chairman of the
Board of the Company, Mr. Ginsburg as the President and Chief Executive Officer
of the Company, and Mr. Tarte as the Vice Chairman of the Board of the Company
and as the Chief Executive Officer of each subsidiary of the Company, and (v)
Messrs. Tarte, Harrow and Ginsburg shall have a right of first refusal with
respect to one another in connection with any sale of the shares of Common Stock
held by them. The term of the Stockholders' Agreement is 20 years. For the
Company's last Annual Meeting, Messrs. Tarte and Harrow did not designate any
nominees for directors other than themselves. Due to the Amex's requirement that
a majority of the Board be comprised of independent directors, Mr. Ginsburg has
waived the Stockholders' Agreement requirement (and his employment agreement
requirement) that Messrs. Tarte and Harrow vote for him as a nominee for
director, as long as the Company provides him with Board observer rights
allowing him to receive notice and all materials for Board meetings as provided
to Board members and the right to attend Board meetings without any voting
rights.
FINANCIAL STATEMENTS AND OTHER INFORMATION
A summary of the Company's financial information can be found
in our Annual Report on Form 10-K for the year ended December 31, 2004, which is
included as Exhibit B to this proxy statement, and our Quarterly Report on Form
10-Q for the quarter ended September 31, 2005, which is included as Exhibit C to
this proxy statement.
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OTHER MATTERS
PROXY SOLICITATION
The Company will bear the expense of the solicitation of
proxies for use at the Special Meeting. In addition to solicitation of proxies
by the mails, some of our officers and directors may solicit proxies by
telephone, facsimile or personal interview without any additional remuneration.
The Company will reimburse brokers, nominees, custodians and other fiduciaries
for expenses in forwarding proxy materials to their principals.
"RULE 13E-3 TRANSACTION" TRANSACTION
The Reverse Split described in this proxy statement is
considered a "Rule 13e-3 transaction" as defined under the Exchange Act because
it has the purpose or effect of reducing the number of record owners of the
Common Stock to less than 300 persons and will lead to delisting of the Common
Stock from trading on Amex. As required by the rules of the SEC, we have filed a
Rule 13e-3 Transaction Statement on Schedule 13E-3 with the SEC. The Schedule
13E-3 is available on the SEC's website at http://www.sec.gov or by contacting
the Company's Corporate Secretary at the address above.
PROXY REVOCATION AND VOTING OF SHARES
A properly executed proxy may be revoked at any time prior to
it being voted (i) by delivery of written notice to the Company's Corporate
Secretary, (ii) by submission of a later dated proxy, or (iii) by revoking the
proxy and voting in person at the Special Meeting.
Only shareholders of record at the close of business on
[Record Date] will be entitled to vote at the Special Meeting. On that date
there were 12,939,696 shares of Common Stock issued and outstanding. Each share
of Common Stock is entitled to one vote on all matters submitted to the
shareholders for approval. A majority of the issued and outstanding shares of
Common Stock eligible to vote must be represented in person or by proxy at the
meeting to establish a quorum. The affirmative vote of the holders of a majority
of the outstanding shares of Common Stock present and entitled to vote at the
Special Meeting is required to approve the Reverse Split and any other proposals
which may properly come before the meeting or any adjournments thereof.
Abstentions, votes withheld, and broker non-votes will be
counted for purposes of determining a quorum but will not be counted otherwise.
Broker non-votes occur as to any particular proposal when a broker returns a
proxy but does not have authority to vote on such proposal.
WHERE YOU CAN FIND MORE INFORMATION
As permitted by the SEC, this proxy statement omits certain
information contained in the Schedule 13E-3. As explained above, the Schedule
13E-3, and any amendments or exhibits that it incorporates by reference, remain
available for shareholder inspection. Statements made in this proxy statement,
or any other document which this proxy statement incorporates by reference,
should not necessarily be considered complete. Each such statement is qualified
in its entirety by reference to that document filed as an exhibit with the SEC.
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As a public company, we are currently subject to the
informational reporting requirements of the Exchange Act. In compliance with
this obligation, the Company files annual, quarterly and periodic reports, proxy
statements and other communicative documents with the SEC. The SEC maintains a
public reference room located at 100 F Street, N.E., Room 1580, Washington, D.C.
20549 where visitors may copy and read any document that we file with the SEC.
You may call the SEC at 1-800-732-0330 to gain further information about the
public reference room. Certain of our SEC filings are also available to the
public through the SEC's website at http://www.sec.gov.
We have included with this proxy statement copies of our
Annual Report on Form 10-K for the fiscal year ended December 31, 2004, and our
Quarterly Report on Form 10-Q for the quarter ended September 30, 2005.
OTHER MATTERS FOR THE MEETING
The Board knows of no other matters to be brought before the
Special Meeting. If other matters properly come before the meeting, the persons
named in the accompanying form of proxy will exercise their best judgment in
voting the proxies solicited and received by the Company.
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EXHIBIT A
Opinion of Mufson Howe Hunter & Partners LLC
[LOGO] Mufson Howe Hunter & Partners LLC
INVESTMENT BANKING
1600 Market Street, 16th Floor
Philadelphia, PA 19103
Phone: 215.399.5400
Fax: 215.399.5415
www.mhhco.com
September 22, 2005
Special Committee of the Board of Directors
Marlton Technologies, Inc.
2828 Charter Road
Philadelphia, PA 19154
Attention: Richard W. Vague, Member of the Special Committee
To: Members of the Special Committee and Board of Directors,
We understand that Marlton Technologies, Inc. ("Marlton", or the "Company")
proposes to undertake a 5,000-to-1 reverse stock split of common stock,
resulting in (i) the cash-out of all record holders of fewer than 5,000 shares
of common stock, and (ii) a decrease in the number of shareholders of record to
below 300 persons, which will permit the Company to deregister its common stock
under the Securities Exchange Act of 1934, delist the Common Stock from trading
on the American Stock Exchange and terminate the Company's public reporting
obligation with the Securities and Exchange Commission (the "Reverse Split.") As
a result of the Reverse Split, shareholders holding less than 5,000 shares of
the Company's common stock will receive $1.25 in cash per share; shareholders
holding more than 5,000 shares will receive the same cash consideration for any
fractional shares that they hold after the effective time of the Reverse Split.
You have requested our opinion as to the fairness, from a financial point of
view, of the cash consideration to be received by the shareholders of Marlton
Technologies (other than its executive officers) pursuant to the Reverse Split.
Our opinion does not address the relative merits of the Reverse Split nor any
other alternatives to the Reverse Split that might exist for the Company.
In arriving at our opinion, we have, among other things:
(a) reviewed a draft of the proposal, as described in a draft of the Company's
Proxy Statement, dated September 16, 2005;
(b) reviewed the Company's 10-Qs for the three months ended June 30, and March
31, 2005 and its10-Ks for the years ended December 31, 2002, 2003 and 2004;
(c) reviewed Marlton's detailed forecasts for the years ending December 31,
2005 and 2006 and summary forecasts for the years ending December 31, 2007,
2008 and 2009 and prepared discounted cash flow analyses from such
forecasts;
(d) discussed with members of the senior management of Marlton, the Company's
business, operating results, financial condition and prospects;
(e) compared stock prices, operating results, earnings estimates and financial
condition of certain publicly-traded tradeshow design and marketing
services companies we deemed reasonably comparable to Marlton, to similar
data for Marlton;
MEMBER OF NATIONAL ASSOCIATION OF SECURITIES DEALERS AND
SECURITIES INVESTOR PROTECTION CORPORATION
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Board of Directors
Marlton Technologies, Inc.
September 22, 2005
(f) compared valuation multiples (to the extent available) and other financial
terms of mergers and acquisitions of certain tradeshow design and marketing
services companies we deemed reasonably comparable to Marlton, to similar
data for Marlton;
(g) analyzed Marlton's stock price trading history; and
(h) reviewed certain other information and performed other analyses that we
deemed appropriate.
In arriving at our opinion, we assumed that all information publicly available
to us or furnished to us by the Company was accurate and complete. We are not
aware of any facts or circumstances that would make such information inaccurate
or misleading, but we have not independently verified and do not assume any
responsibility or liability for such information. With respect to the forecasts
furnished to us by the Company, we assumed that such forecasts were reasonably
prepared on a basis reflecting the best currently available estimates and
judgments of Marlton's management as to the future results of operations and
financial condition of the Company. We conducted only a limited physical
inspection of Marlton's facilities and did not appraise any of the assets of the
Company. We have assumed that the Reverse Split will be completed as described
in the proxy material, and have also assumed that all governmental, regulatory
or other consents required to consummate the Reverse Split will be obtained
without any material restrictions imposed on the Company. Our opinion is based
upon market, economic and other conditions as they exist on, and can be
evaluated as of, the date of this letter.
Our opinion is for the use and benefit of the Board of Directors of Marlton in
its evaluation of the Reverse Split and is not intended for any other purpose.
Our opinion does not constitute a recommendation to Marlton stockholders as to
how they should vote with respect to the Reverse Split.
Based upon and subject to the foregoing, we are of the opinion as of the date of
this letter; the proposed price per share to be paid to shareholders in
connection with the Reverse Split of $1.25 is fair, from a financial point of
view, to the shareholders (other than its executive officers).
We acted as the exclusive financial advisor to the Special Committee of
Marlton's Board of Directors in connection with the Reverse Split. The Company
will pay us a fee for our services, a portion of which has already been paid to
us and the remainder is payable upon delivery of this opinion. The Company has
also agreed to reimburse us for our reasonable expenses and to indemnify us for
certain liabilities relating to or arising from this opinion.
Very truly yours,
Mufson Howe Hunter & Partners LLC
MEMBER OF NATIONAL ASSOCIATION OF SECURITIES DEALERS AND
SECURITIES INVESTOR PROTECTION CORPORATION
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EXHIBIT B
Annual Report on Form 10-K for the Year Ended December 31, 2004
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EXHIBIT C
Quarterly Report on Form 10-Q for the Quarter Ended September 30, 2005
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PRELIMINARY COPY
REVOCABLE PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
MARLTON TECHNOLOGIES, INC.
MARLTON TECHNOLOGIES, INC. SPECIAL MEETING OF SHAREHOLDERS
December __, 2005
IMPORTANT
Please complete both sides of the Proxy Card. Sign, date and
return the attached Proxy Card in the postage paid envelope as soon as possible.
Your vote is important, regardless of the number of shares that you own.
The undersigned shareholder of Marlton Technologies, Inc.
("Marlton") hereby constitutes and appoints _________________ as the Proxy or
Proxies of the undersigned with full power of substitution and resubstitution,
to vote at the Special Meeting of Shareholders of Marlton to be held at the
__________, on December __, 2005, at ___:___ __.m., local time (the "Special
Meeting"), all of the shares of the Common Stock of Marlton which the
undersigned is entitled to vote at the Special Meeting, or at any adjournment
thereof, on each of the following proposals, all of which are described in the
accompanying Proxy Statement:
1. The amendment of Marlton's Articles of Incorporation to
effect a 1-for-5,000 reverse stock split of Marlton's class of Common Stock (the
"Reverse Split"). As a result of the Reverse Split, (a) each shareholder owning
fewer than 5,000 shares of Common Stock immediately before the Reverse Split
will receive $1.25 in cash, without interest, for each share owned by such
shareholder immediately prior to the Reverse Split and will no longer be a
shareholder of Marlton; and (b) each shareholder holding greater than 5,000
shares of Common Stock will receive one share for every 5,000 shares they own
and will receive $1.25 in cash for each share that would otherwise be converted
into a fractional share as a result of the Reverse Split.
[_] FOR [_] AGAINST [_] ABSTAIN
2. In their discretion, upon such other business as may
properly come before the Special Meeting or any adjournments thereof.
IMPORTANT: Please sign and date this Proxy on the reverse
side. Your Board of Directors recommends a vote "FOR" the approval of the
amendments to Marlton's Articles of Incorporation to effect the Reverse Split.
This Proxy, when properly executed, will be voted in the
manner directed herein by the undersigned shareholder. Unless otherwise
specified, the shares will be voted FOR the approval of the amendment to
Marlton's Articles of Incorporation to effect the Reverse Split.
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All Proxies previously given by the undersigned are hereby
revoked. Receipt of the Notice of the Special Meeting of Shareholders of Marlton
and of the accompanying Proxy Statement is hereby acknowledged.
Please sign exactly as your name appears above. When signing
as attorney, executor, administrator, trustee, guardian or agent, please give
your full title. If share are held jointly, each holder should sign.
---------------------------------- ----------------------------------
Signature Signature
Dated: _______________, 2005 Dated: _________________, 2005
PLEASE SIGN, DATE AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED ENVELOPE. NO
POSTAGE IS REQUIRED FOR MAILING IN THE U.S.A.
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