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PROPOSED ISSUANCE OF COMMON STOCK The Board of Directors unanimously recommends that you vote FOR this proposal. General There will be presented to the meeting a proposal to authorize the issuance of the Company’s Common Stock, par value $1 per share (the Common Stock). in connection with a possible repurchase of. or exchange of securities for (an Exchange Transaction), the Company’s outstanding 11% Subordinated Debentures due June 1998 (the Existing Debentures). The Board of Directors of the Company has determined that the Company’s capital structure would be enhanced by retiring the Existing Debentures through the issuance of one or more new securities having a reduced interest cost to the Company. The Board of Directors believes it will be necessary to issue debt securities convertible into or exchangeabl e for Common Stock (New Convertible Debt) and/or new shares of Common Stock to the holders of the Existing Debentures in order to effectuate any Exchange Transaction. Under the New York Stock Exchange’s stockholder approval policy, stockholder approval is required for certain plans or arrangements involving the issuance of common stock and for the issuance of new shares of common stock which will have, upon issuance, voting power equal to or in excess of 20% of the voting power outstanding before such issuance or involving a number of shares equal to or in excess of 20% of the number of shares of common stock outstanding before such issuance (the Exchange Requirement). In order to provide the Company with the flexibility to issue New Convertible Debt and/or Common Stock in compliance with the Exchange Requirement, the Board of Directors is submitting to a vote of the Company’s stockholders the proposed issuance of up to 3,000,000 shares of Common Stock (subject to customary adjustments) in connection with an Exchange Transaction. There can be no assurance that any such securities will be issued or that any Exchange Transaction will be consummated. Stockholders will not be asked to vote on the specific terms of an Exchange Transaction at a future date unless such vote is required by state law. The Company believes that no such requirement exists. Reasons for the Proposed Issuance The Company has outstanding $11,775,000 in principal amount of Existing Debentures. The Existing Debentures were issued in 1983 for a price equal to 83.75% of the face value, so that the effective interest cost to the Company, including amortization of discount, is 14.9% of the discounted amount per annum. The Company believes that current market conditions allow the Company the opportunity to achieve a reduction in interest costs through an Exchange Transaction in which all or a significant portion of the Existing Debentures are retired. In addition to reducing the Company’s interest costs, the Company believes an Exchange Transaction will permit the expansion of the Company’s equity capital through the conversion of debt securities into Common Stock. The Existing Debentures currently are redeemable by the Company at par. The Company believes that an Exchange Transaction of the type described below is preferable to a redemption of the Existing Debentures for cash in that such a transaction would preserve the cash resources available to the Company. Moreover, the Company believes that the equity feature of the New Convertible Debt will allow the Company to borrow at more favorable interest rates than would be available through a sale of non-convertible subordinated debt securities. Exchange Transaction The Existing Debentures require annual principal payments of $2,500,000 and mature in June 1998. Annual payment requirements can be satisfied by sinking fund payments or through open market purchases. The Company is current on all required principal and interest payments due in respect of the Existing Debentures. As a result of open market purchases made by the Company. the next required payment of principal is $1,775,000 in 1995. The Existing Debentures impose restrictions regarding the payment of dividends and other distributions to holders of Common Stock. At December 31. 1991. $7,434,000 of retained earnings was available for these purposes. The Company has engaged in certain preliminary discussions with a substantial institutional holder of Existing Debentures (the Institutional Holder) relating to a possible Exchange Transaction. Although the final terms of any Exchange Transaction cannot be predicted, and no assurance can be given that an Exchange Transaction will occur, the Company expects that an Exchange Transaction would include the issuance of New Convertible Debt in an amount not to exceed the currently outstanding principal amount of Existing Debentures. The New Convertible Debt would be expected to (i) have a ten year stated maturity (subject to sinking fund requirement): (ii) bear interest at a rate of approximately 8% per annum (subject to modification based on market conditions): (iii) be convertible into Common Stock at a fixed conversion price ranging from $4.00 to $4.50 per share (such conversion price to be determined prior to issuance of the New Convertible Debt pursuant to negotiations between the Company and the Institutional Holder): (iv) be redeemable at par during (and not before) the fourth and fifth year after the date of issuance provided that the price of the Common Stock is at least equal to 150% of the conversion price on twenty of the thirty days prior to the date of redemption and be redeemable at par at any time after the fifth year after issuance; and (v) contain certain convenants relating to, among other things, the payment of cash dividends on, and the repurchase of, Common Stock (which covenants are not expected to be more restrictive to the Company than those contained in the Existing Debentures). The Existing Debentures are listed on the New York Stock Exchange. The Company does not intend to list the New Convertible Debt on a national securities exchange, although it may elect to do so. If the New Convertible Debt is not so listed, the trading market for the New Convertible Debt could be adversely affected. The Company expects that the Exchange Transaction will be made available to all holders of Existing Debentures. Assuming New Convertible Debt having an aggregate principal amount equal to $1 1,775.000 were issued and were convertible into Common Stock, upon conversion of all such New Convertible Debt, 2,616,667 shares of Common Stock would be issued if the conversion price were $4.50 per share. and 2,943,750 shares of Common Stock would be issued if the conversion price were $4.00 per share. Such shares would represent approximately 44.6% of the shares currently outstanding and approximately 44.4% of the outstanding voting rights, in the case of a $4.50 per share conversion price, and approximately 50% of the shares currently outstanding and approximately 49.9% of the outstanding voting rights, in the case of a $4.00 per share conversion price. Accordingly, the Exchange Requirement would be applicable to such issuance. The Company does not intend to issue New Convertible Debt having a conversion price that would result in more than 3,000,000 shares (subject to customary adjustments) being issuable upon conversion of the New Convertible Debt. Accordingly, the proposed issuance being presented to stockholders of the Company is limited to not more than 3,000,000 shares of Common Stock (plus any shares issuable pursuant to customary adjustments). James C. Marlas. the Chairman and Chief Executive Officer of the Company, holds $4.2 million in principal amount of Existing Debentures. Mr. Marlas has not, and will not, participate in any negotiations or vote of the Board of Directors relating to an Exchange Transaction of the type described above. The final terms of an Exchange Transaction will be determined through negotiations between the Company and the Institutional Holder. Mr. Marlas has indicated that he would exchange his Existing Debentures in an Exchange Transaction of the type described above. If the Exchange transaction described above were consummated, a substantial number of new shares of Common Stock would be issuable upon conversion of the New Convertible Debt. Assuming a $4.00 per share conversion price and the issuance of $11,775.000 in principal amount of New Convertible Debt, the shares of Common Stock currently outstanding (including shares held by Mr. Marlas) would represent approximately 66.7% of the total number of shares outstanding after giving effect to such issuance (Fully Diluted Shares). If all the New Convertible Debt were converted into shares of Common Stock at such price, Mr. Marlas would own approximately 43.1% of the Fully Diluted Shares, as compared to the approximately 46.8% of the outstanding shares currently owned by Mr. Marlas. As of December 31, 1991, the book value per share of Common Stock was $5.66. Assuming conversion prices of $4.50 and $4.00 per share and giving effect to the issuance and conversion of the maximum amount of New Convertible Debt, the book value per share of Common Stock would be $5.17 and $4.98, respectively, at such date. As of March 31, 1992, the closing sale price of the Common Stock as reported on the New York Stock Exchange Composite Tape was $3 per share. The Company believes that interest savings that would be obtained from the issuance of the New Convertible Debt and the deleveraging of the Company’s balance sheet that would occur as a result of the conversion of any New Convertible Debt would enhance the Company’s financial position and earnings prospects. Required Vote Authorization of the issuance of Common Stock in compliance with the Exchange Requirement will require the affirmative vote of a majority of the voting rights represented, collectively, by the Common Stock and Preferred Stock, par value $1 per share, outstanding as of March 26, 1992, the record date for the ฀Annual Meeting of Stockholders. Mr. Marlas intends to vote his shares in favor of the proposed issuance. Stockholders are not being asked to vote on any Exchange Transaction. The Company may at any time alter the proposed terms of any Exchange Transaction or determine not to proceed with any such transaction. Mickelberry Corporation 411/92