SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
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January 12, 2005
Date of Report (Date of earliest event reported)
Marlton Technologies, Inc.
(Exact name of registrant as specified in its charter)
Pennsylvania 1-7708 22-18225970
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
Incorporation)
2828 Charter Road
Philadelphia, PA 19154
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (215) 676-6900
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
SECTION 1 - REGISTRANT'S BUSINESS AND OPERATIONS.
ITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
On January 12, 2005, our subsidiary, Sparks Exhibits &
Environments Corp., signed an agreement (the "Agreement") to purchase
substantially all of the assets and assume specified liabilities of Showtime
Enterprises, Inc. and its subsidiary, Showtime Enterprises West, Inc.
(collectively "Showtime"). Showtime designs, markets and produces trade show
exhibits, point of purchase displays, museums and premium incentive plans; it
had sales of approximately $21 million in 2004. On January 12, 2005, Showtime
filed a Chapter 11 bankruptcy petition in the United States Court for the
District of New Jersey (Camden Vicinage) (the "Court") (Case Nos. 05-11089 and
05-11090). The petition and certain other documents (including the Agreement)
filed with the Court in connection with the bankruptcy proceeding are available
by accessing the Court's website. The closing (the "Closing") of the
transactions contemplated by the Agreement is subject to Court approval and the
satisfaction or waiver of customary conditions.
The purchase price payable pursuant to the Agreement consists of (i)
$2.25 million in cash (of which a $500,000 downpayment will be placed in
escrow), (ii) the assumption of approximately $5.25 million of indebtedness and
(iii) the assumption of specified contractual obligations.
The $5.25 million of indebtedness is comprised of $4.65 million in
principal amount of Showtime's senior subordinated debentures (the "Showtime
Debentures") and approximately $602,000 of indebtedness payable to the United
States Small Business Administration. As noted below, Sparks has obtained an
option to acquire the Showtime Debentures from two accredited investors (the
"Investors"). The indebtedness payable to the Small Business Administration is
payable in equal monthly installments of principal and interest (at 4% per year)
through April 23, 2009 (or earlier upon customary events of default), and is
subject to a security interest in the accounts receivable, inventory, machinery
and equipment of Showtime. Spark's obligation with respect to this indebtedness
will be guaranteed by Marlton.
At the Closing, Sparks will enter into two four year employment
agreements pursuant to which the employees party thereto will each be entitled
to, among other things, (i) annual base salaries of $185,000 and $250,000,
respectively, (ii) bonuses based on a percentage of revenues (ranging from 0.75%
for revenues of up to $15 million increasing (but not ratably) to 1.5% for
revenues exceeding $25 million) generated by Showtime's customers and account
executives acquired pursuant to the Agreement (collectively, the "Showtime
Customers"), subject to reduction by approximately $42,000 in each of the second
through fourth years of the term thereof and (iii) options exercisable through
2011 (subject to earlier termination upon termination of employment) to acquire
500,000 shares of Marlton common stock at an exercise price equal to the closing
price of Marlton's common stock on the day before the Closing. For each such
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employee, options to acquire 100,000 shares vest on the first anniversary of the
Closing based on continued employment through such date and the balance of these
options vest, subject to acceleration upon a change in control, in each of 2006
through 2009 if the annual revenue generated by Showtime Customers attain
certain thresholds in such year. Specifically, options to acquire 50,000 shares
vest in each such year if annual revenue is $12.5 million increasing ratably to
the vesting of options to acquire 100,000 shares in each such year if annual
revenue is $25 million. The issuance of these options is exempt from the
registration requirements of the Securities Act of 1933, as amended (the "Act")
pursuant to, among other things (i) Section 4(2) thereunder inasmuch as there
are only two recipients of such securities and such recipients are financially
sophisticated and (ii) an issuance not involving the sale of securities.
Sparks has also obtained from the Investors an option to purchase their
warrants to acquire capital stock of Showtime and the Showtime Debentures. Upon
the Closing (or earlier, at Sparks' election), Sparks will acquire such
securities and will be obligated to pay the Investors an aggregate of (i)
$400,000 in cash, (ii) $400,000 in principal amount of four year notes bearing
interest, payable monthly in arrears, at the rate of 6% per year, (iii) one
percent of the sales originating from the Showtime Customers for the four years
from the Closing, and (iv) warrants exercisable for seven years from the Closing
to acquire an aggregate of 600,000 shares of Marlton's common stock. These
warrants are exercisable to acquire 500,000 shares at an exercise price per
share equal to the average closing price for the 20 days before the Closing (the
"Average Price") and exercisable to acquire 100,000 shares at an exercise price
per share equal to $0.50 more than the Average Price. The issuance of these
warrants is exempt from the registration requirements of the Act, pursuant to,
among other things, Section 4(2) thereof, as there are only two Investors and
each is an accredited investor.
SECTION 2 - FINANCIAL INFORMATION.
ITEM 2.03. CREATION OF A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION
UNDER AN OFF-BALANCE SHEET ARRANGEMENT OF A REGISTRANT.
The information set forth under item 1.01 is hereby
incorporated by reference herein to the extent necessary to respond to item
2.03.
SECTION 3 - SECURITIES AND TRADING MARKETS.
ITEM 3.02. UNREGISTERED SALES OF EQUITY SECURITIES.
The information set forth under Item 1.01 is hereby
incorporated by reference herein to the extent necessary to respond to item
3.02.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
Marlton Technologies, Inc.
By: /s/ Robert B. Ginsberg
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Robert B. Ginsburg, Chief Executive Officer
Dated: January 19, 2005
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