<PAGE> 1
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SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted
by Rule l4a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
MARKETING SPECIALISTS CORPORATION
(Name of Registrant as Specified In Its Charter)
------------------------------------------------------------------------
(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)(1) 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:
================================================================================
<PAGE> 2
MARKETING SPECIALISTS CORPORATION
17855 NORTH DALLAS PARKWAY, SUITE 200
DALLAS, TEXAS 75287
June 16, 2000
Dear Stockholder:
We cordially invite you to attend the Annual Meeting of Stockholders of
Marketing Specialists Corporation to be held on Wednesday, June 28, 2000, at
10:00 a.m., at Hotel Intercontinental, 15201 North Dallas Parkway, Dallas, Texas
75248.
The matters to be considered at the meeting are described in the formal
notice and proxy statement on the following pages.
We encourage your participation at this meeting. Whether or not you plan to
attend in person, it is important that your shares be represented at the
meeting. Please review the proxy statement and sign, date and return your proxy
card in the enclosed envelope as soon as possible.
If you attend the meeting and prefer to vote in person, your proxy card can
be revoked at your request.
We appreciate your confidence in Marketing Specialists and look forward to
the chance to visit with you at the meeting.
Very truly yours,
MARKETING SPECIALISTS CORPORATION
/s/ RONALD D. PEDERSEN
--------------------------------------
Ronald D. Pedersen,
Chairman of the Board
<PAGE> 3
MARKETING SPECIALISTS CORPORATION
17855 NORTH DALLAS PARKWAY, SUITE 200
DALLAS, TEXAS 75287
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
YOU ARE GIVEN NOTICE that an Annual Meeting of the Stockholders of
Marketing Specialists Corporation (the "Company" or "Marketing Specialists")
will be held on Wednesday, June 28, 2000, at 10:00 a.m., at Hotel
Intercontinental, 15201 North Dallas Parkway, Dallas, Texas 75248.
The meeting is called:
1. To elect three members of the Marketing Specialists Board of
Directors (the "Board") to serve as successor Class I directors until the
2001 annual meeting of stockholders and until their successors are duly
elected and qualified, to elect three members of the Board to serve as
successor Class II directors until the 2002 annual meeting of stockholders
and until their successors are duly elected and qualified and to elect two
members of the Board to serve as Class III directors until the 2003 annual
meeting of stockholders and until their successors are duly elected and
qualified.
2. To ratify the appointment of Arthur Andersen, LLP as the Company's
independent accountants for 2000.
3. To approve an amendment to the Company's 1998 Stock Option and
Incentive Plan to increase the aggregate number of shares available for
issuance thereunder.
4. To consider and act upon any other matters that may properly come
before the Annual Meeting or any adjournment or postponement of the
meeting.
You are entitled to vote at the Annual Meeting or at any adjournment or
postponement of the meeting if you owned shares of Marketing Specialists common
stock at the close of business on June 14, 2000. A list of the stockholders
entitled to vote will be available for your review at the meeting and, for the
ten days before the meeting during normal business hours, at the offices of the
Company.
All stockholders are cordially invited to attend the Annual Meeting. To
ensure your representation at the meeting, we urge you to complete, date, sign
and return the enclosed proxy as promptly as possible. We have enclosed a
postage-prepaid envelope for that purpose. If you attend the Annual Meeting, you
may vote in person even if you have already returned a proxy. If you have any
questions regarding the Annual Meeting, please call Gayla Cruikshank at (972)
349-6233 or Eric Golle at (972) 349-6317.
By order of the Board of Directors
/s/ GERALD R. LEONARD
------------------------------------
Gerald R. Leonard,
Chief Executive Officer and
President
Dallas, Texas
June 16, 2000
IMPORTANT
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE,
SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED PRE-ADDRESSED
ENVELOPE AS PROMPTLY AS POSSIBLE. IF YOU ATTEND THE ANNUAL MEETING, YOU MAY
REVOKE YOUR PROXY BY VOTING YOUR SHARES IN PERSON, EVEN THOUGH YOU HAVE
PREVIOUSLY SIGNED AND RETURNED A PROXY.
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Voting Rights and Solicitation.............................. 1
Proposal One -- Election of Directors....................... 3
Proposal Two -- Ratification of Appointment of Independent
Accountants............................................... 5
Proposal Three -- Approval of Amendment to the Stock Option
Plan...................................................... 5
Security Ownership of Certain Beneficial Owners and
Management................................................ 9
Executive Compensation...................................... 13
Certain Relationships and Related Transactions.............. 15
Stockholder Return Performance Graph........................ 18
Compliance with Section 16(a) of the Securities Exchange Act
of 1934................................................... 19
Other Matters............................................... 19
Marketing Specialists Stockholder Proposals................. 19
</TABLE>
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MARKETING SPECIALISTS CORPORATION PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
This proxy statement is furnished in connection with the solicitation by
the Board of Directors of Marketing Specialists Corporation (the "Company" or
"Marketing Specialists") of proxies to be voted at the Annual Meeting of
Stockholders to be held on Wednesday, June 28, 2000 (the "Annual Meeting"), and
any adjournment or adjournments thereof, for the purposes set forth in the
accompanying Notice of Meeting. The mailing of this proxy statement and
accompanying form of proxy to stockholders will commence on or about June 16,
2000.
VOTING RIGHTS AND SOLICITATION
RECORD DATE; VOTING POWER
You are entitled to vote at the Annual Meeting if you owned shares of
Marketing Specialists common stock (the "Common Stock") at the close of business
on June 14, 2000. This date is known as the record date. As of the record date,
there were approximately 19,573,037 shares of Common Stock issued and
outstanding held by approximately 668 holders of record. Holders of the Common
Stock on the record date are entitled to one vote per share on any matter that
may properly come before the Annual Meeting. As of the record date, there were
approximately 335,700 shares of restricted Common Stock issued and outstanding,
each of which entitles the holder to 1/10 of a vote. The Common Stock and the
restricted Common Stock will vote together as a single class on all of the
proposals described in this proxy statement that are to be voted on at the
Annual Meeting.
VOTE REQUIRED
The election of the nominees to the Board of Directors of the Company (the
"Board") will require the affirmative vote of a plurality of the votes cast by
the stockholders on the election. The failure to vote, a vote to abstain or a
broker non-vote will not count as a vote against this proposal.
The ratification of the appointment of the independent accountants and the
approval of the amendment to the 1998 Stock Option and Incentive Plan (the
"Stock Option Plan") will require the affirmative vote of a majority of the
voting power present in person or represented by proxy at the meeting and
entitled to vote. The failure to vote or a broker non-vote will not count as a
vote against these proposals, but a vote to abstain will have the same legal
effect as a vote against these proposals.
Broker non-votes occur where a broker holding stock in street name votes
the shares on some matters but not on others. The missing votes are deemed to be
"broker non-votes." The inspectors will treat broker non-votes as shares that
are present and entitled to vote for the purpose of determining a quorum.
However, for purposes of determining the outcome of any matter as to which the
broker or nominee has indicated on the proxy that it does not have discretionary
authority to vote, those shares will be treated as present and not entitled to
vote with respect to that matter, even though those shares are considered to be
entitled to vote for quorum purposes and may be entitled to vote on other
matters.
A "no" vote for any proposal on the enclosed proxy card will be a vote
against that proposal. If we do not receive a sufficient number of "yes" votes
on any of the proposals, then that proposal will not become effective.
Stockholders have no right to cumulative voting in the election of
directors. Consequently, at each annual meeting, the holders of a plurality of
the voting power of the Common Stock will be able to elect all of the successors
of the class of directors whose terms expire at that meeting.
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REVOKING A PROXY
You may revoke a previously given proxy at any time before it is voted at
the Annual Meeting by either:
- filing with the Secretary of Marketing Specialists a written instrument
revoking the proxy;
- submitting a duly executed proxy bearing a later date; or
- voting in person at the Annual Meeting.
QUORUM
Before business may be conducted at the Annual Meeting, a quorum of
stockholders must be present. A quorum exists when shares of the Common Stock
and restricted Common Stock representing a majority of the voting power entitled
to vote are present in person or represented by proxy at the meeting. In the
absence of a quorum, the holders of shares representing a majority of the voting
power of the shares present or represented at the meeting have the power to
adjourn the meeting without further notice, other than by announcement at the
meeting at the time of its adjournment.
VOTING RIGHTS; PROXIES
All shares of Common Stock represented by properly executed proxies will,
unless the proxies have been previously revoked, be voted as indicated on the
proxies.
If you do not indicate instructions in your proxy, your shares of Common
Stock will be voted in favor of the election of nominees to the Board, the
ratification of the appointment of the independent accountants and the approval
of the amendment to the Stock Option Plan. The persons acting under the enclosed
proxy will have the discretion to vote on any other matter properly presented at
the Annual Meeting using their best judgment, unless authorization is expressly
withheld in the proxy.
If you would like to attend the Annual Meeting and your shares are held by
a broker, bank or other nominee, you must:
- bring to the meeting a recent brokerage statement or a letter from the
nominee confirming your beneficial ownership of the shares;
- bring to the meeting a form of personal identification; and
- obtain from the broker, bank or other nominee a proxy issued in your
name.
The Annual Meeting may be postponed or adjourned for any reason. At a
subsequent reconvening of the Annual Meeting, all proxies will be voted in the
same manner as they would have been voted at the original meeting unless they
have been revoked.
EXPENSES/SOLICITATION OF PROXIES
Marketing Specialists will pay the expenses of the solicitation of proxies,
including the cost of preparing and mailing this document to Marketing
Specialists stockholders. Marketing Specialists will reimburse brokers,
nominees, banks and other stockholders of record for their expenses incurred in
forwarding proxy materials to beneficial owners. It is expected that the
solicitation of proxies will be primarily by mail, but directors, officers and
employees of Marketing Specialists may solicit proxies by personal interview,
telephone or telecopy. These persons will receive no additional compensation for
such services.
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PROPOSAL ONE -- ELECTION OF DIRECTORS
BOARD OF DIRECTORS
The business of the Company is managed under the direction of the Board and
is fixed by resolution duly adopted from time to time by the Board. The
Company's Second Amended and Restated Certificate of Incorporation provides that
the Board shall be divided into two classes until a third class is elected at
the annual meeting of stockholders to be held in 2000. From and after such date,
the Board shall be divided into three classes, as nearly equal in number as
possible. The Class I directors who were elected at the annual meeting of
stockholders in 1999 were elected to hold office for a term expiring at the
annual meeting of stockholders to be held in 2001. The initial Class II
directors were elected to hold office for a term expiring at the annual meeting
of stockholders to be held in 2000. Instead, all Class I, II and III directors
will be elected at the Annual Meeting. The successor Class I directors who are
elected at the Annual Meeting shall hold office for a term expiring at the
annual meeting of stockholders to be held in 2001. The successor Class II
directors who are elected at the Annual Meeting shall hold office for a term
expiring at the annual meeting of stockholders to be held in 2002. The initial
Class III directors who are elected at the Annual Meeting shall hold office for
a term expiring at the annual meeting of stockholders to be held in 2003. At the
annual meeting of stockholders to be held in 2001, and at each annual meeting of
stockholders held thereafter, the directors elected to succeed the class of
directors whose term expires at that meeting shall hold office for a term
expiring at the annual meeting of stockholders to be held in the third year
following the year of their selection.
At the Annual Meeting, the Marketing Specialists stockholders will elect
three successor Class I directors, three successor Class II directors and two
Class III directors. The Board has nominated Ronald D. Pedersen, Timothy M. Byrd
and James A. Schlindwein as successor Class I directors, Nick G. Bouras, Gerald
R. Leonard and Edward P. Grace, III as successor Class II directors, and John P.
Rochon and Michael J. Merriman as Class III directors. The Board anticipates
that each of the nominees will serve, if elected, as a director. If any person
nominated by the Board is unable to accept election as a director, the proxies
will be voted for another person recommended by the Board.
The Board recommends a vote "FOR" the election of the nominees for election
as directors listed below.
<TABLE>
<CAPTION>
EXPIRATION OF
NAME AGE SINCE PROPOSED TERM
---- --- ----- -------------
<S> <C> <C> <C>
Ronald D. Pedersen......................................... 60 1999 2001
Timothy M. Byrd............................................ 45 1999 2001
James A. Schlindwein....................................... 71 1998 2001
Nick G. Bouras............................................. 47 1999 2002
Gerald R. Leonard.......................................... 53 1998 2002
Edward P. Grace, III....................................... 49 1998 2002
John P. Rochon............................................. 48 1999 2003
Michael J. Merriman........................................ 43 1999 2003
</TABLE>
Set forth below is biographical information for the individuals nominated
as a director.
Ronald D. Pedersen has served as Chairman of the Board of Directors of the
Company since the consummation of the merger of Merkert American Corporation
with Richmont Marketing Specialists Inc. ("Richmont") on August 18, 1999 (the
"Merger"). He formerly served as President, Chief Executive Officer and as a
director of Richmont. Mr. Pedersen has also served during 1999 as President,
Chief Executive Officer of Marketing Specialists Sales Company ("MSSC"), a
wholly-owned subsidiary of the Company and currently serves as a director of
MSSC. Mr. Pedersen has been in the food industry for over 30 years, including
three years with Anderson Clayton foods and seven years with Colgate Palmolive.
He is past Chairman and a current member of the Board of the Association of
Sales and Marketing Companies.
Timothy M. Byrd has been a director of the Company since the consummation
of the Merger in August 1999. He has served as the Chief Financial Officer of
the Company since September 1999. He was previously the Chief Administrative
Officer, Assistant Treasurer and a director of Richmont. Mr. Byrd served
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<PAGE> 8
as a director of Richmont from 1997 until the Merger. Mr. Byrd has also served
as Chief Administrative Officer of MSSC since September 1998, and as a director
of MSSC since 1996. Since 1990, Mr. Byrd has been the Chief Financial Officer of
Mary Kay Holding Corporation as well as the Chief Financial Officer of Richmont
Corporation. From 1980 to 1990, Mr. Byrd served in various accounting and
finance positions at Mary Kay, Inc., including Chief Financial Officer, Vice
President and Controller. He is also a member of the Office of the Chairman of
Mary Kay Holding Corporation.
James A. Schlindwein has been a director of the Company since the
simultaneous purchase of Merkert Enterprises, Inc. ("Merkert Enterprises"),
purchase of Rogers-American Company, Inc. ("Rogers-American") and initial public
offering (together, the "Combination") on December 18, 1998. Prior to his
retirement in September 1994, Mr. Schlindwein served as Executive Vice
President, Merchandising Services, and a director of Sysco Corporation, a
national institutional food service distributor, where he had served since 1980.
He is also a director of Tri-Valley Growers, EMMPAK Foods, Inc., Alaska Seafood
International, Agra Quest, Inc., Chilay Corporation and Thompson's Pet Pasta
Products, Inc.
Nick G. Bouras has been a director of the Company since the consummation of
the Merger in August 1999. He formerly served as Vice President, Assistant
Secretary and as a director of Richmont. He is Vice President, Assistant
Secretary and a director of MSSC. Mr. Bouras has been President and Chief
Executive Officer of Richmont Corporation since 1989. Prior to his role at
Richmont, Mr. Bouras was Vice President, Investments of Mary Kay, Inc. Mr.
Bouras also spent several years as a tax accountant with Ernst & Young and
Touche Ross & Company.
Gerald R. Leonard has been Chief Executive Officer and President of the
Company since the Combination in December 1998. Effective March 2, 2000, Mr.
Leonard became President and Chief Executive Officer of MSSC. Mr. Leonard was
previously Chief Executive Officer of Merkert Enterprises from September 1994
until December 1998, and served as the President of Merkert Enterprises from
September 1994 until June 1998. From May 1992 to September 1994, Mr. Leonard
served Merkert Enterprises as President of the Food Enterprises, New England
Division, and has been with Merkert Enterprises in various executive capacities
since 1983.
Edward P. Grace III has served as a director of the Company since the
Combination in December 1998. Mr. Grace is also Managing Director of Webvestors
Equity Partners, LP, a venture capital firm, as well as Managing Member of
iHatch.com, LLC, a virtual incubator company. From 1989 until September 1996,
Mr. Grace served as Chairman of the Board, President and Chief Executive Officer
of Bugaboo Creek Steak House, Inc., operator of Bugaboo Creek Steak House and
The Capital Grille restaurants. Mr. Grace is a director of Mantra
Communications, Inc., Bungo.com, Inc. and Professional Facilities Management,
Inc. He also serves as a Trustee of Bryant College and Johnson & Wales
University.
John P. Rochon has been a director of the Company since the consummation of
the Merger in August 1999. He was previously the Chairman of the Board of
Directors of Richmont and served in that capacity and as a director from 1997
until the closing of the Merger in August 1999. Mr. Rochon has served on the
Board of Directors of MSSC since 1996 and is currently Chairman of the Board of
Directors of Richmont Corporation, a merchant banking, investment holding and
trading company, and Chief Executive Officer of Mary Kay Holding Corporation, a
role he has had since 1991. Formerly, Mr. Rochon held several executive
positions with Mary Kay, Inc., including Vice Chairman, Chief Financial Officer,
Controller and Director of Manufacturing. Mr. Rochon currently serves on the
Board of Directors of Nu-kote Holding, Inc. and Royal Appliance Mfg. Co. ("Royal
Appliance").
Michael J. Merriman has served as director of the Company since the
consummation of the Merger in August 1999. He has also served as a director of
Royal Appliance, the parent company of Dirt Devil, Inc., since 1993. Mr.
Merriman was appointed Chief Executive Officer of Royal Appliance in July 1995
and President and Chief Operating Officer in January 1995. From May 1992 until
his appointment as President, he had been Vice President -- Finance, Treasurer
and Secretary of Royal Appliance. Richmont Capital Partners I, L.P. owns
approximately 15.6% of the common stock of Royal Appliance.
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PROPOSAL TWO -- RATIFICATION OF
APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board, upon recommendation of the Audit Committee, has approved and
recommends the appointment of Arthur Andersen, LLP, independent accountants, to
audit the consolidated financial statements of Marketing Specialists and its
subsidiaries for the year ending December 31, 2000. This appointment was made
subject to the approval of Marketing Specialists' stockholders. Arthur Andersen
has been serving Marketing Specialists in this capacity since 1998. Marketing
Specialists has been advised that no member of Arthur Andersen has any direct
financial interest or material indirect financial interest in Marketing
Specialists or any of its subsidiaries or, during the past three years, has had
any connection with Marketing Specialists or any of its subsidiaries in the
capacity of promoter, underwriter, voting trustee, director, officer or
employee.
Representatives of Arthur Andersen will be present at the Annual Meeting
and will have the opportunity to make a statement, if they so desire, and
respond to appropriate questions.
The Board of Directors recommends a vote "FOR" the ratification by the
stockholders of this appointment.
PROPOSAL THREE -- APPROVAL OF
AMENDMENT TO THE STOCK OPTION PLAN
The Board has adopted, subject to stockholder approval, an amendment to the
Company's Amended and Restated 1998 Stock Option and Incentive Plan to increase
the maximum number of shares of Common Stock available for issuance thereunder
(the "Plan Amendment"). The primary effect of the Plan Amendment will be to
increase the total number of shares of Common Stock currently available for
issuance under the Stock Option Plan from 1,847,762 to 2,587,855. The full text
of the Plan Amendment is included in Appendix A to this proxy statement.
The Stock Option Plan provides that the maximum number of shares of Common
Stock available for issuance shall not exceed 13% of the total number of shares
of Common Stock outstanding as of January 1 of the most recent year. The Plan
Amendment would increase the number of shares available for issuance under the
Stock Option Plan to 13% of the total number of shares of Common Stock
outstanding as of May 15, 2000, with subsequent increases each January 1
thereafter to take into account any increases in the number of shares
outstanding. The Stock Option Plan currently authorizes the issuance of up to
1,847,762 shares of Common Stock. Upon approval of the Plan Amendment, the
maximum number of shares of Common Stock available for issuance under the Stock
Option Plan will be 2,587,855.
As of May 15, 2000, 1,420,047 shares of Common Stock had been optioned,
sold or otherwise subtracted from the maximum number of shares available under
the Stock Option Plan. The Board has determined that it would be desirable to
increase the aggregate number of shares of Common Stock that may be optioned and
sold under the Stock Option Plan to 2,587,855 in order to have available
appropriate long-term incentive and competitive compensation opportunities for
the employees, directors and consultants of the Company. Accordingly, the Board
adopted the Plan Amendment.
The Board of Directors recommends a vote "FOR" this proposal.
SUMMARY OF THE STOCK OPTION PLAN
General. In July 1998, the Board adopted, and the stockholders approved,
the Amended and Restated 1998 Stock Option and Incentive Plan. The purpose of
the Stock Option Plan is to provide a performance incentive for officers,
employees, consultants and independent directors to promote the financial
success and progress of the Company. The Company anticipates that providing
these persons with a direct stake in the Company's welfare will result in a
closer identification of their interests with those of the Company, thereby
stimulating their efforts on behalf of the Company and strengthening their
desire to remain with the Company.
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The following summary does not purport to be complete and is qualified in
its entirety by this reference to the Stock Option Plan.
Stock Option Plan Administration. The Stock Option Plan is currently
administered by the Compensation Committee of the Board. Each member of the
Compensation Committee must be a "non-employee director" as that term is defined
under the rules promulgated by the Securities and Exchange Commission and an
"outside director" as that term is defined in Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Internal Revenue Code"), and the
regulations promulgated thereunder. Subject to the provisions of the Stock
Option Plan, the Compensation Committee has full power to select, from among the
employees and other persons eligible for awards, the individuals to whom awards
will be granted, to make any combination of awards to participants, and to
determine the specific terms and conditions of each award. The Compensation
Committee may permit Common Stock, and other amounts payable pursuant to an
award, to be deferred. In these instances, the Compensation Committee may permit
dividends or deemed dividends, if any, to be credited to the amount of
deferrals. In addition, the Stock Option Plan permits the Board or the
Compensation Committee to delegate all or part of its or their duties to the
Chief Executive Officer regarding the granting of awards to employees who are
not executive officers or "covered employees" within the meaning of Section
162(m) of the Internal Revenue Code.
Eligibility. Persons eligible to participate in the Stock Option Plan are
those officers, employees, independent directors and other key persons, such as
consultants, of the Company and its subsidiaries who are responsible for or
contribute to the management, growth or profitability of the Company and its
subsidiaries, as selected from time to time by the Compensation Committee.
Currently, the Company has approximately 241 participants in the Stock Option
Plan. As of May 15, 2000, approximately 226 active employees of the Company were
eligible to participate in the Stock Option Plan.
Stock Options. The Stock Option Plan permits the granting of (a) options to
purchase Common Stock intended to qualify as "incentive stock options" as
defined under Section 422 of the Internal Revenue Code and (b) options that do
not so qualify ("non-qualified stock options"). Only employees of the Company
and its subsidiaries may be granted incentive stock options. The option exercise
price of each option will be determined by the Compensation Committee, but may
not be less than 100% of the fair market value of the Common Stock on the date
of grant in the case of incentive stock options (110% in the case of incentive
stock options granted to the holder of more than 10% of the combined voting
power of all classes of the Company's capital stock on the date of grant), and
may not be less than 85% of the fair market value of the Common Stock on the
date of grant in the case of non-qualified stock options.
The term of each option will be fixed by the Compensation Committee and may
not exceed ten years from the date of grant in the case of an incentive stock
option (five years in the case of an incentive stock option granted to the
holder of more than 10% of the combined voting power of all classes of the
Company's capital stock on the date of grant). The Compensation Committee will
determine at what time or times each option may be exercised and, subject to the
provisions of the Stock Option Plan, the period of time, if any, after
retirement, death, disability or termination of employment during which options
may be exercised. Options may be made exercisable in installments, and the
exercisability of options may be accelerated by the Compensation Committee.
Upon exercise of options, the option price must be paid in full either in
cash or by certified or bank check or other instrument acceptable to the
Compensation Committee. If the Compensation Committee permits, payment may also
be made by delivery of shares of Common Stock already owned by the optionee. The
exercise price may also be delivered to the Company by a broker pursuant to
irrevocable instructions to the broker from the optionee.
At the discretion of the Compensation Committee, stock options granted
under the Stock Option Plan may include a "reload" feature. A reload feature
permits an optionee exercising an option by the delivery of shares of Common
Stock to automatically be granted an additional stock option, with an exercise
price equal to the fair market value of the Common Stock on the date the
additional stock option is granted, to purchase that number of shares of Common
Stock equal to the number delivered to exercise the original stock option.
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<PAGE> 11
One of the purposes of this feature is to enable participants to maintain an
equity interest in the Company without dilution.
To qualify as incentive stock options, options must meet additional United
States federal tax requirements. Those requirements include limits on the value
of shares subject to incentive stock options which first become exercisable in
any one calendar year, and a shorter term and higher minimum exercise price in
the case of certain large stockholders.
Stock Options Granted to Independent Directors. The Stock Option Plan
provides for the automatic grant to each independent director of a non-qualified
stock option to purchase 20,000 shares of Common Stock upon his or her initial
election to the Board. Each independent director who is serving as a director of
the Company on the fifth business day after each annual meeting of stockholders
will automatically be granted on that day a non-qualified stock option to
acquire 5,000 shares of Common Stock. In addition, the independent director who
serves as chairman of the Audit Committee of the Board will receive an
additional 5,000 shares of Common Stock on the fifth business day after each
annual meeting of stockholders. The exercise price of each non-qualified stock
option will be the fair market value of the Common Stock on the date of grant.
Half of the non-qualified stock options granted to independent directors vest
upon the first anniversary of the grant date, and the remaining half vest in
equal annual installments over the number of years remaining in each director's
term as of the first anniversary of the date of grant. The options terminate on
the tenth anniversary of the date of grant.
Stock Appreciation Rights. The Compensation Committee may award a stock
appreciation right either as a freestanding award or in tandem with a stock
option. Upon exercise of the right, the holder will be entitled to receive an
amount equal to the excess of the fair market value on the date of exercise of
one share of Common Stock over the exercise price per share specified in the
related stock option multiplied by the number of shares of Common Stock
regarding which the right is exercised. In the case of a freestanding right, the
price per share specified in that right, which price may not be less than 85% of
the fair market value of the Common Stock on the date of grant, is used instead
of the exercise price per share. This amount may be paid in cash, Common Stock,
or a combination thereof, as determined by the Compensation Committee. If the
right is granted in tandem with a stock option, exercise of the right cancels
the related option to the extent of that exercise.
Restricted Stock. The Compensation Committee may also award shares of
Common Stock to officers, other employees and key persons of the Company subject
to conditions and restrictions determined by the Compensation Committee. These
conditions and restrictions may include the achievement of performance goals and
continued employment with the Company through a specified restricted period. The
purchase price of shares of restricted stock will be determined by the
Compensation Committee. If the performance goals and other restrictions are not
attained, the employees will forfeit their awards of restricted stock.
Deferred Stock Awards. The Compensation Committee may also award phantom
stock units to officers, other employees and key persons of the Company subject
to conditions and restrictions determined by the Compensation Committee. These
conditions and restrictions may include the achievement of performance goals and
continued employment with the Company through a specified deferred period. At
the end of the deferral period, the Deferred Stock Award will be paid in shares
of Common Stock to the extent vested. Deferred Stock Award participants will not
have any stockholder rights with respect to the phantom stock unit underlying
the award during the deferral period.
Unrestricted Stock. The Compensation Committee may also grant shares, at no
cost or for a purchase price determined by the Compensation Committee, which are
free from any restrictions under the Stock Option Plan. Unrestricted stock may
be issued to employees and key persons in recognition of past services or other
valid consideration, and may be issued in lieu of cash bonuses to be paid to
employees and key persons.
Performance Share Awards. The Compensation Committee may also grant
performance share awards to employees or other key persons of the Company
entitling the recipient to receive shares of Common Stock upon the achievement
of individual or Company performance goals and other conditions determined by
the Compensation Committee.
7
<PAGE> 12
Dividend Equivalent Rights. The Compensation Committee may grant dividend
equivalent rights, which give the recipient the right to receive credits for
dividends that would be paid if the grantee had held specified shares of Common
Stock. Dividend equivalent rights may be granted as a component of another award
or as a freestanding award. Dividend equivalents credited under the Stock Option
Plan may be paid currently or be deemed to be reinvested in additional shares of
Common Stock, which may accrue additional dividend equivalents at fair market
value at the time of deemed reinvestment or on the terms then governing the
reinvestment of dividends under the Company's dividend reinvestment plan, if
any. Dividend equivalent rights may be settled in cash, shares, or a combination
thereof, in a single installment or installments, as specified in the award.
Awards payable in cash on a deferred basis may provide for crediting and payment
of interest equivalents.
Adjustments for Stock Dividends. The Compensation Committee will make
appropriate adjustments in the maximum number of shares reserved for issuance
under the Stock Option Plan and to outstanding awards to reflect capital
restrictions, stock dividends, stock splits and similar events.
Change in Control Provisions. In the event of a sale of all, or
substantially all, of the assets or Common Stock of the Company, a merger or
consolidation which results in a change in control or the liquidation or
dissolution of the Company, all stock options and stock appreciation rights
shall automatically become fully exercisable. In addition, at any time before or
after a change in control, the Compensation Committee may accelerate awards and
waive conditions and restrictions on any awards to the extent it may determine
appropriate.
Amendments and Termination. The Board may at any time amend or discontinue
the Stock Option Plan, and the Compensation Committee may at any time amend or
cancel outstanding awards for the purpose of satisfying changes in the law or
for any other lawful purpose. No action may be taken, however, which adversely
affects any rights under outstanding awards without the holder's consent.
Further, amendments to the Stock Option Plan shall be subject to approval by the
Company's stockholders if and to the extent required by the Securities Exchange
Act of 1934, as amended, to ensure that awards granted under the Stock Option
Plan are exempt under Rule 16b-3 promulgated under the Securities Exchange Act
of 1934, or required by the Internal Revenue Code to preserve the qualified
status of incentive stock options.
Award Benefits. The following table shows awards which have been granted
under the Stock Option Plan as of May 15, 2000, to certain executive officers.
1998 STOCK OPTION AND INCENTIVE PLAN
<TABLE>
<CAPTION>
NUMBER OF SHARES EXERCISE PRICE
NAME AND POSITION UNDERLYING AWARDS PER SHARE
----------------- ----------------- --------------
<S> <C> <C>
Ronald D. Pedersen.......................................... -- $ --
Chairman of the Board
Gerald R. Leonard........................................... 100,000 3.00
Chief Executive Officer and President
Bruce A. Butler............................................. -- --
Chief Operation Officer
Glenn F. Gillam............................................. 100,000 3.00
President of Broker Operations
Douglas H. Holstein......................................... 50,000 3.00
Executive Vice President of Sales
Sidney D. Rogers, Jr. ...................................... 10,000 11.25
Chief Administrative Officer, Vice President and
Secretary(1) 4,000 15.00
</TABLE>
---------------
(1) Mr. Rogers is no longer employed with the Company. On June 30, 2000, all of
his options will expire.
8
<PAGE> 13
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of the Common Stock as of March 31, 2000, by (i) each
person known by the Company to beneficially own five percent or more of the
outstanding shares of the Common Stock, (ii) each director and named executive
officer of the Company named below, and (iii) all directors and executive
officers of the Company as a group. As of March 31, 2000, the Company had
19,790,835 shares of Common Stock outstanding, including 19,455,135 shares of
unrestricted Common Stock and 335,700 shares of restricted Common Stock
outstanding. Except as otherwise indicated, the Company believes that the
beneficial owners of the Common Stock listed below, based on information
furnished by such owners, have sole investment and voting power with respect to
such shares, subject to community property laws where applicable.
<TABLE>
<CAPTION>
SHARES PERCENTAGE
BENEFICIALLY OF SHARES
NAME OF BENEFICIAL OWNER(1) OWNED(2) BENEFICIALLY OWNED
--------------------------- ------------ ------------------
<S> <C> <C>
MS Acquisition Ltd.(3)...................................... 13,086,589(4) 66.1%
17855 N. Dallas Parkway, Suite 200
Dallas, Texas 75287
James L. Monroe............................................. 13,377,911(5) 67.7%
8 Cedar Street, Suite 54A
Woburn, Massachusetts 01801
John P. Rochon(3)........................................... 13,086,589(4) 66.1%
Timothy M. Byrd(3).......................................... 13,086,589(4) 66.1%
Nick G. Bouras(3)........................................... 13,086,589(4) 66.1%
Edward P. Grace, III........................................ 59,045(6) *
Gerald R. Leonard........................................... 234,152(7) 1.2%
James A. Schlindwein........................................ 485,819(8) 2.5%
Glenn F. Gillam............................................. 24,325(9) *
Michael J. Merriman......................................... 0(10) *
Bruce A. Butler............................................. 13,136,589(11) 66.5%
Gary R. Guffey.............................................. 13,136,589(12) 66.5%
Jeffrey A. Watt............................................. 13,136,589(13) 66.5%
Ronald D. Pedersen.......................................... 13,136,589(14) 66.5%
Goldman Sachs Asset Management(15).......................... 991,000 5.0%
One New York Plaza
New York, NY 10004
All directors and executive officers as a group (11
persons).................................................. 13,939,930(16) 70.4%
</TABLE>
---------------
* less than 1%
(1) Unless otherwise indicated, the mailing address for each stockholder and
director is c/o Marketing Specialists Corporation, 17855 North Dallas
Parkway, Suite 200, Dallas, Texas 75287.
(2) Beneficial ownership information is determined in accordance with the rules
of the Securities and Exchange Commission ("SEC"). In computing the number
of shares of Common Stock beneficially owned by a person, shares of Common
Stock subject to options held by that person that are currently exercisable
or exercisable within 60 days of this report are deemed outstanding, but
are not deemed to be outstanding for the purpose of computing the
percentage ownership of any other person.
(3) Beneficial ownership information is based on a report on Schedule 13D filed
with the SEC, dated April 3, 2000. Because of their direct or indirect
ownership interests in, or control of, MS Acquisition Limited, each of MSSC
Acquisition Corporation, Richmont Capital Partners I, L.P., J.R.
Investments Corp., John P. Rochon, Timothy M. Byrd and Nick G. Bouras may
be deemed to beneficially own such shares.
9
<PAGE> 14
(4) Beneficial ownership information is based on a report on Schedule 13D filed
with the SEC, dated April 3, 2000. All of these shares are the subject of a
certain post-Merger Voting Agreement, dated as of August 18, 1999, by and
among MS Acquisition Ltd., Ronald D. Pedersen, Bruce A. Butler, Gary R.
Guffey, Jeffrey A. Watt, JLM Management Company, LLC and Monroe & Company,
LLC (the "Voting Agreement"). Such shares include 9,600,617 shares of
Common Stock directly owned by MS Acquisition Limited and an additional
3,485,972 shares of Common Stock that are also subject to the Voting
Agreement. Each of MS Acquisition Ltd., MSSC Acquisition Corporation,
Richmont Capital Partners I, L.P., J.R. Investments Corp., John P. Rochon,
Nick G. Bouras and Timothy M. Byrd disclaims beneficial ownership of the
3,485,972 shares.
(5) Beneficial ownership information is based on the Schedule 13D/A filed by
James L. Monroe, JLM Management, LLC and Monroe & Company, LLC on October
14, 1999. Such Schedule 13D/A states that 7,800,624 shares of Common Stock
are beneficially owned, including (i) 405,210 shares of Common Stock and
111,900 shares of restricted Common Stock, which shares are convertible
into shares of Common Stock in specific circumstances, that are held by
Monroe & Company, LLC, of which Mr. Monroe is the sole manager; (ii)
398,544 shares of Common Stock and 111,900 shares of restricted Common
Stock that are held by JLM Management, LLC, of which Mr. Monroe is the sole
manager; and (iii) 21,927 shares of Common Stock and 5,595 shares of
restricted Common Stock held by Sandra Monroe, Mr. Monroe's spouse, and for
which Mr. Monroe disclaims beneficial ownership. The number also includes
shares of Common Stock that are also subject to the Voting Agreement,
including 5,577,287 shares acquired by MS Acquisition Limited in January
2000 and March 2000 and subject to the Voting Agreement. Mr. Monroe
disclaims beneficial ownership of these shares. See footnotes (3) and (4).
(6) Includes 4,000 shares subject to options exercisable within 60 days of
March 31, 2000.
(7) Includes (i) 4,275 shares of Common Stock held by Merkert Enterprises, Inc.
Employee Stock Ownership Trust and allocable to Mr. Leonard; and (ii)
44,760 shares of restricted Common Stock, which shares are convertible into
shares of Common Stock in certain circumstances. Does not include an
aggregate of 55,044 shares held by The Corrie E. Leonard Irrevocable Trust
and The Kevin M. Leonard Irrevocable Trust, for which Mr. Leonard serves as
a Trustee. Mr. Leonard disclaims beneficial ownership of the shares of
Common Stock held by such trusts. Includes 8,000 shares subject to options
exercisable within 60 days of March 31, 2000.
(8) Includes 473,319 shares held by the Merkert Enterprises, Inc. Employee
Stock Ownership Trust, of which Mr. Schlindwein is the trustee. Mr.
Schlindwein disclaims beneficial ownership of these shares. Includes 5,000
shares subject to options exercisable within 60 days of March 31, 2000.
(9) Includes 3,925 shares held by the Merkert Enterprises, Inc. Employee Stock
Ownership Trust and allocable to Mr. Gillam. Includes 20,000 shares subject
to options exercisable within 60 days of March 31, 2000.
(10) Excludes 20,000 shares subject to options not exercisable within 60 days of
March 31, 2000.
(11) Beneficial ownership information is based on the Schedule 13D filed by
Bruce A. Butler on August 27, 1999. Such Schedule 13D states that 7,559,302
shares of Common Stock are beneficially owned. All of these shares are the
subject of the Voting Agreement. Mr. Butler directly owns 301,721 shares
and disclaims 7,257,581 shares of Common Stock that are also subject to the
Voting Agreement. Mr. Butler also beneficially owns 5,577,287 shares
acquired by MS Acquisition Limited in January 2000 and March 2000 that are
subject to the Voting Agreement. Mr. Butler disclaims beneficial ownership
of these shares. See footnotes (3) and (4).
(12) Beneficial ownership information is based on the Schedule 13D filed by Gary
R. Guffey on August 27, 1999. Such Schedule 13D states that 7,559,302
shares of Common Stock are beneficially owned. All of these shares are the
subject of the Voting Agreement. Mr. Guffey directly owns 301,721 shares
and disclaims 7,257,581 shares of Common Stock that are subject to the
Voting Agreement. Mr. Guffey also beneficially owns 5,577,287 shares
acquired by MS Acquisition Limited in January 2000 and March 2000 that are
subject to the Voting Agreement. Mr. Guffey disclaims beneficial ownership
of these shares. See footnotes (3) and (4).
10
<PAGE> 15
(13) Beneficial ownership information is based on the Schedule 13D filed by
Jeffrey A. Watt on August 27, 1999. Such Schedule 13D states that 7,559,302
shares of Common Stock are beneficially owned. All of these shares are the
subject of the Voting Agreement. Mr. Watt directly owns 819,759 shares and
disclaims 6,739,543 shares of Common Stock that are also subject to the
Voting Agreement. Mr. Watt also beneficially owns 5,577,287 shares acquired
by MS Acquisition Limited in January 2000 and March 2000 that are subject
to the Voting Agreement. Mr. Watt disclaims beneficial ownership of these
shares. See footnotes (3) and (4).
(14) Beneficial ownership information is based on the Schedule 13D filed by
Ronald D. Pederson on August 27, 1999. Such Schedule 13D states that
7,559,302 shares of Common Stock are beneficially owned. All of these
shares are the subject of the Voting Agreement. Mr. Pederson directly owns
1,259,017 shares and disclaims 6,300,285 shares of Common Stock that are
also subject to the Voting Agreement. Mr. Pederson also beneficially owns
5,577,287 shares acquired by MS Acquisition Limited in January 2000 and
March 2000 that are subject to the Voting Agreement. Mr. Pederson disclaims
beneficial ownership of these shares. See footnotes (3) and (4).
(15) Beneficial ownership information is based on the Schedule 13G/A filed by
Goldman Sachs Asset Management, a separate operating division of Goldman,
Sachs & Co., on February 10, 2000.
(16) Includes 51,000 shares subject to options exercisable within 60 days of
March 31, 2000.
MEETINGS OF THE BOARD AND COMMITTEES
The Board held 14 meetings in 1999. No director attended fewer than 75% of
the aggregate of the total meetings of the Board. The Board has established an
audit committee (the "Audit Committee") and a compensation committee (the
"Compensation Committee"). The Audit Committee, which consists of Messrs.
Merriman, Grace and Schlindwein, generally meets on a quarterly basis, but met
two times in 1999. All members attended both meetings. The Audit Committee
recommends to the Board the firm to be appointed as independent accountants to
audit financial statements and to perform services related to the audit. The
Audit Committee also reviews the scope and results of the audit with the
independent accountants, reviews with management and the independent accountants
the Company's year-end operating results and the accounting issues facing the
Company, considers the adequacy of the internal accounting procedures and
considers the effect of such procedures on the accountants' independence.
The Compensation Committee, which consists of Messrs. Merriman, Grace and
Schlindwein, met on two occasions during 1999. All members attended both
meetings. The Compensation Committee reviews and recommends to the Board the
compensation arrangements for all directors and officers, approves such
arrangements for other senior level employees and administers and takes such
other action as may be required in connection with certain compensation and
incentive plans of the Company. The Compensation Committee also determines the
number of options to be granted or shares of Common Stock to be issued to
eligible persons under the Company's stock option plans and prescribes the terms
and provisions of each grant made under the stock option plans. In addition, the
Compensation Committee interprets the stock option plans and grants thereunder,
and establishes, amends and revokes rules and regulations for administration of
such plans.
All directors are reimbursed for travel expenses incurred in attending
meetings of the Board and its committees.
COMPENSATION OF DIRECTORS
Employee directors do not receive compensation for their services on the
Board or committees thereof. Each director who is not an employee of the Company
(an "Independent Director") receives annual compensation in the amount of
$25,000. Under the Company's stock option plan, each Independent Director is
entitled to receive an initial option to purchase 20,000 shares of Common Stock
upon his or her election to the Board, and each Independent Director who is
serving as a director on the fifth business day after each annual meeting of
stockholders will receive an option to purchase 5,000 additional shares of
Common Stock.
11
<PAGE> 16
The Independent Director who serves as chairman of the Audit Committee may
receive options to purchase an additional 5,000 shares of Common Stock on the
fifth business day after each annual meeting of stockholders. All options
granted to Independent Directors under the Company's stock option plan vest 50%
upon the first anniversary of the grant date and the remaining 50% vests in
equal annual installments over the number of years remaining in each Independent
Director's term as of the first anniversary of the grant date. Such options
terminate upon the tenth anniversary of the grant date and have an exercise
price per share equal to the fair market value of the Common Stock on the grant
date.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In 1999, James A. Schlindwein, Edward P. Grace, III and Michael J. Merriman
served as members of the Compensation Committee. Each member is an outside
Independent Director and is not a current or former officer or employee of the
Company or any of its affiliates.
RESIGNATION OF BOARD MEMBER
Effective October 6, 1999, James L. Monroe tendered his resignation as a
member of the Board. In his resignation, Mr. Monroe indicated that his reasons
for resigning were "that the designees of Richmont Capital Partners dominate and
control the Board of Directors of the Company" and that the Board "has adopted a
program of abrogating and sacrificing the rights of Monroe & Company, LLC for
the benefit of Richmont." Monroe & Company, LLC, an affiliate of Mr. Monroe, is
the plaintiff in pending litigation against the Company. The Company and Monroe
and Company, LLC have agreed in principle to a settlement, the terms of which
are currently in negotiation.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD ON EXECUTIVE COMPENSATION
Before the purchases of Merkert Enterprises and Rogers-American and the
initial public offering on December 18, 1998, Marketing Specialists did not have
a compensation committee and Marketing Specialists' sole director made all
decisions concerning compensation of executive officers.
Before the completion of the initial public offering, the Company did not
compensate its only executive officer, Mr. Monroe. In connection with the
completion of the initial public offering, Mr. Monroe resigned as an executive
officer and the Company entered into employment agreements with certain
individuals, some of whom currently serve as executive officers. These
employment agreements established the salaries of the Chief Executive Officer
and other executive officers at levels negotiated with representatives of
Merkert Enterprises and Rogers-American in connection with the purchases of
Merkert Enterprises and Rogers-American. Additionally, in connection with the
closing of the initial public offering, Marketing Specialists granted some of
its executive officers options to acquire shares of its Common Stock.
Since the initial public offering, the responsibility for the establishment
and administration of executive compensation policies has been delegated to the
Compensation Committee. Over the next year, the Compensation Committee intends
to formulate compensation policies concerning the executive officers. In
general, the Compensation Committee believes that it should utilize base salary,
incentive bonuses and equity incentives as the three basic components of
executive compensation. The Compensation Committee also believes that executive
compensation should be structured so as to align the interests of executive
management with the long-term interests of the Company's stockholders.
COMPENSATION COMMITTEE
James A. Schlindwein, Chairman
Edward P. Grace, III
Michael J. Merriman
12
<PAGE> 17
EXECUTIVE COMPENSATION
The following sections set forth and discuss the compensation paid or
awarded to the Company's Chief Executive Officer and the five most highly
compensated executive officers. Since the Company paid no compensation prior to
the Combination on December 18, 1998, most of the compensation reported for 1998
for those former Merkert Enterprises and Rogers-American employees was paid by
Merkert Enterprises and Rogers-American prior to December 18, 1998. Certain
former Richmont employees did not serve as executive officers until after the
consummation of the Merger on August 18, 1999. Since the Company paid no
compensation prior to such date for these individuals, 1998 compensation is not
listed below and most of the compensation reported for 1999 in these sections
was paid by Richmont.
SUMMARY COMPENSATION TABLE
The following table shows (i) for former Merkert Enterprises and
Rogers-American employees, the 1998 and 1999 compensation paid by the Company,
including compensation paid by Merkert Enterprises and Rogers-American prior to
the Combination on December 18, 1998, and (ii) for former Richmont employees,
the 1999 compensation paid by the Company, including compensation paid by
Richmont prior to the Merger on August 18, 1999:
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------------
AWARDS
SECURITIES
ANNUAL COMPENSATION UNDERLYING PAYOUTS
-------------------------------------- OPTIONS/ ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OTHER SARS(#) COMPENSATION(S)
--------------------------- ---- --------- -------- -------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Ronald D. Pedersen(*)........... 1999 $441,000 -- -- -- $ 4,800(1)
Chairman of the Board
Gerald R. Leonard(**)........... 1999 433,910 -- $ 6,958 60,000 10,267(1)
Chief Executive Officer and 1998 370,820 -- 11,208 40,000 --
President
Bruce A. Butler(***)............ 1999 343,076 $145,000 -- 69,805(2)
Chief Operations Officer
Glenn F. Gillam(**)............. 1999 304,166 100,000 3,378 -- 5,542(1)
President of Broker Operations 1998 268,333 100,000 10,927 100,000 --
Douglas H. Holstein(**)......... 1999 290,769 -- 300,077(3) -- 2,674(1)
Executive Vice President of 1998 275,866 -- -- 50,000 338,708(4)
Sales
Sidney D. Rogers, Jr.(****)..... 1999 195,000 -- 2,214 -- 7,437(1)
Chief Administrative Officer, 1998 201,667 -- 3,584 70,000(5) --
Vice President and Secretary
</TABLE>
---------------
(*) Former Richmont CEO and Chairman of the Board until the Merger.
Currently, serves as Chairman of the Board of the Company.
(**) Former Merkert Enterprises and Rogers-American employees who commenced
employment with the Company upon consummation of the Combination on
December 18, 1998.
(***) Former Richmont employee who did not serve as an executive officer until
the Merger on August 18, 1999.
(****) Former Merkert Enterprises employee who commenced employment with the
Company upon consummation of the Combination on December 18, 1998.
Effective March 31, 2000, Mr. Rogers is no longer employed with the
Company.
(1) Consists of amounts contributed by the Company to the Company's 401(k)
Plan in which all employees of the Company are eligible to participate.
(2) Consists of amounts contributed by the Company to the Company's 401(k)
Plan in which all employees of the Company are eligible to participate
and $65,005 for moving and relocation expenses.
13
<PAGE> 18
(3) Consists primarily of the allocation of tax refund bonuses pursuant to a
settlement agreement dated December 2, 1999, between the Company and
former stockholders of Rogers-American.
(4) Consists of payments related to the Combination.
(5) Effective March 31, 2000, Mr. Rogers no longer holds 56,000 previously
awarded options that did not vest.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth the options granted in 1999 to the named
executive officers:
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
SHARES TOTAL OPTIONS POTENTIAL REALIZABLE VALUE
UNDERLYING GRANTED TO AT ASSUMED ANNUAL RATES
OPTIONS EMPLOYEES IN PRICE EXPIRATION ---------------------------
NAME GRANTED FISCAL YEAR ($/SHARE) DATE 5% 10%
---- ---------- ------------- --------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gerald R. Leonard............... 60,000 6.09% $13.50 8/09 $509,400 $1,290,930
Sidney D. Rogers................ -- -- -- -- -- --
Bruce A. Butler................. -- -- -- -- -- --
Glen F. Gillam.................. -- -- -- -- -- --
Douglas H. Holstein............. -- -- -- -- -- --
Ronald D. Pedersen.............. -- -- -- -- -- --
</TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
The following table sets forth information concerning the number and value
of unexercised options to purchase shares of the Common Stock held by each of
the named executive officers who held such options at December 31, 1999. None of
the named persons exercised any stock options during 1999.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 1999 DECEMBER 31, 1999(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gerald R. Leonard......... -- -- 8,000 92,000 -- --
Sidney D. Rogers, Jr. .... -- -- 14,000 56,000 -- --
Glen F. Gillam............ -- -- 20,000 80,000 -- --
Douglas H. Holstein....... -- -- 10,000 40,000 -- --
Bruce A. Butler........... -- -- -- -- -- --
Ronald D. Pedersen........ -- -- -- -- -- --
</TABLE>
---------------
(1) Since the exercise price of the options for these individuals ($11.25,
$13.50 and $15.00) was greater than the closing sale price of the Common
Stock, as reported by the Nasdaq National Market, on December 31, 1999
($4.44), none of the options were "in-the-money".
EMPLOYMENT AND NONCOMPETE AGREEMENTS WITH EXECUTIVE OFFICERS
On April 27, 1999, Mr. Leonard entered into an employment and
noncompetition agreement with the Company providing for a base salary, which is
currently $455,000. The term of employment is for five years, and will continue
from month to month thereafter unless terminated by either party. If the Company
terminates Mr. Leonard's employment without cause, Mr. Leonard is entitled to
receive his then current base salary until expiration of the initial term or the
extension period. Mr. Leonard would also receive a continuation of group health
and automobile benefits during such time period. Pursuant to the agreement, Mr.
Leonard is subject to noncompetition and nonsolicitation provisions for one year
after the termination of his employment.
On April 2, 1996, Mr. Butler entered into an employment agreement with
MSSC, providing for a base salary, which is currently $350,000, and for a term
of three years. The term is automatically extended for
14
<PAGE> 19
additional one year terms unless terminated by the Company. If the Company
terminates Mr. Butler's employment without cause, Mr. Butler is entitled to
receive his then current base salary until the expiration of the extension
period. Pursuant to the agreement, Mr. Butler is subject to noncompetition and
nondisclosure provisions for one year after the termination of his employment.
Additionally, Mr. Butler entered into an executive retention bonus agreement
with MSSC providing for a special retention bonus of $250,000, provided that Mr.
Butler, among other conditions, continues to be employed by the Company through
November 30, 2000. Mr. Butler received $125,000 of the bonus in a lump sum
payment and is receiving the balance in equal installments over a 12 month
period. On November 20, 1995, Mr. Butler and the Company entered into an
amendment to his deferred compensation plan that provides for the sum of
$1,250,000 to be distributed to Mr. Butler in the event of his death or
termination of employment. Pursuant to this amendment, Mr. Butler is fully
vested without regard to age or years of employment; however, if Mr. Butler
voluntarily terminates his employment prior to December 31, 2006, he forfeits
50% of the vested amount.
On April 2, 1996, Mr. Pedersen entered into an employment agreement with
MSSC providing for a base salary, which is currently $441,000. In addition, if
the Company terminates Mr. Pedersen's employment, Mr. Pedersen is entitled to
receive his then current base salary for a period of two years after
termination. Pursuant to the agreement, Mr. Pedersen is subject to
noncompetition provisions for a period of two years following his termination.
On November 20, 1995, Mr. Pedersen and the Company entered into an amendment to
his deferred compensation plan that provides the principal amount to be
distributed to Mr. Pedersen in the event of his death or termination of
employment. Pursuant to this amendment, Mr. Pedersen is fully vested without
regard to his age or years of employment in the amount of $2,750,000.
On December 18, 1998, Mr. Holstein entered into an employment and
noncompetition agreement with MSSC, providing for a base salary, which is
currently $300,000. The term of employment is for three years, and will continue
month to month thereafter. If the Company terminates Mr. Holstein's employment
without cause, Mr. Holstein is entitled to receive his then current base salary
until expiration of his initial term or for twelve months from the date of
termination of employment. In addition, Mr. Holstein is also entitled to
continuation of group health plan and automobile benefits during such period.
Effective as of March 31, 2000, Sidney D. Rogers, Jr.'s employment with the
Company was terminated. Pursuant to the separation and release agreement with
the Company, dated March 27, 2000, Mr. Rogers will be entitled to receive
severance in the amount of approximately $344,000 payable in 45 installments in
accordance with the Company's regularly scheduled payroll as well as certain
other benefits specified in the agreement.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
By letter dated June 7, 2000, from Richmont Capital Partners I, L.P. to the
Board, Richmont Capital Partners I, L.P. and a group of investors proposed to
purchase all the outstanding shares of Common Stock for a price of $2.50 per
share. Richmont Capital Partners I, L.P., through its wholly owned subsidiary,
MS Acquisition Ltd., is the beneficial owner of approximately 49 percent of the
issued and outstanding shares of the Company. In the letter, Richmont Capital
Partners I, L.P. states that its price "is fair to, and in the best interests
of, the Company's stockholders. The proposed acquisition price represents a
premium of nearly 150% over the closing price of the Company's common stock over
the last five trading days [and] values the Company on an enterprise-value basis
of nearly $350.0 million, which represents a multiple of more than seven times
the Company's projected EBITDA." According to the letter, Richmont Capital
Partners I, L.P. is prepared to move expeditiously to complete the transaction,
and has requested a meeting with representatives of the Company. Each of Messrs.
Rochon, Byrd and Bouras are directors of the Company, and Mr. Byrd is the chief
financial officer of the Company, and all are affiliated with MS Acquisition
Ltd. and Richmont Capital Partners I, L.P. The Company has formed a special
committee of disinterested directors to respond to this proposal.
In connection with the founding and organization of the Company, Monroe &
Company II, LLC purchased 1,376,111 shares of Common Stock for a nominal
purchase price. On May 11, 1998, Monroe & Company, LLC, a Delaware limited
liability company and an affiliate of James Monroe, a shareholder and
15
<PAGE> 20
former director of the Company ("Monroe"), entered into a consulting agreement
with Merkert American Corporation formerly known as Monroe, Inc., also an
affiliate of James Monroe ("MAC"), pursuant to which Monroe was engaged to
render certain business consulting, financial advisory and investment banking
services to MAC on an exclusive basis for three years (the "1998 Consulting
Agreement"). Pursuant to the 1998 Consulting Agreement, Monroe was to be paid a
financial advisory fee equal to (i) 5% of any consideration paid by the Company
in connection with any transaction which results in the merger, consolidation or
combination of the Company and a third party, the acquisition by the Company of
the capital stock or assets of a third party or a joint venture with any third
party ("Consideration") up to $1.0 million; plus (ii) 4% of the Consideration
paid in excess of $1.0 million and up to $2.0 million; plus (iii) 3% of the
Consideration paid in excess of $2.0 million and up to $3.0 million; plus (iv)
2% of the Consideration paid in excess of $3.0 million and up to $4.0 million;
plus (v) 1% of the Consideration paid in excess of $4.0 million. Under the 1998
Consulting Agreement, Monroe was also to be paid a fee equal to 0.75% of any
principal amount committed under a senior credit facility for the Company from a
lending institution. An additional fee was payable to Monroe upon increases in
such amount or upon refinancing with a new lender during the term of the
consulting agreement. The Company also agreed to indemnify Monroe against
certain liabilities.
On August 18, 1999, the 1998 Consulting Agreement (without giving effect to
fees that may be owed in connection with the Merger) was superseded and replaced
with a letter agreement (the "1999 Consulting Agreement") between Monroe,
Richmont Capital Partners I, L.P., a Delaware limited partnership ("Richmont
Capital", and together with Monroe, the "Consultants") and MAC. The 1999
Consulting Agreement provides for the Consultants to render certain business
consulting, financial advisory and investment banking services to MAC on an
exclusive basis in connection with possible transactions (as defined) and
consulting projects for a term of three years. The financial advisory fees to be
paid under the 1999 Consulting Agreement are the same as those under the 1998
Consulting Agreement except that they would be split equally between the
Consultants. The Company also agreed to indemnify the Consultants against
certain liabilities. On October 1, 1999, Monroe filed suit in Massachusetts
state court against the Company seeking $2.5 million representing financial
advisory and other fees resulting form subsequent transactions pursuant to both
1998 and 1999 Consulting Agreements. Monroe & Company, LLC, and the Company have
agreed in principle to a settlement, the terms of which are currently in
negotiation.
In April 1998, Gerald R. Leonard, Chairman of the Board, Chief Executive
Officer and President of the Company, purchased approximately 275,000 shares of
Common Stock from the Company for an aggregate purchase price of $1.5 million.
The purchase price for such stock was paid by a promissory note from Mr. Leonard
to the Company in the principal amount of $1.5 million (the "Leonard Note"). The
Leonard Note provides that amounts outstanding thereunder will bear interest at
a rate per annum of 6%, compounded semi-annually and that the entire principal
amount and accrued interest will be due and payable on April 8, 2003. Mr.
Leonard's obligations under the Leonard Note are secured by a pledge of 98,361
of the shares of Common Stock pursuant to a stock pledge agreement. The Leonard
Note is a recourse obligation of Mr. Leonard with respect to the sum of (i) the
outstanding principal amount from time to time less $0.8 million (but not less
than $0) plus (ii) one-half of the accrued and unpaid interest at such time.
On February 17, 2000, the Company sold certain improved real properties
containing general office and warehouse space situated in Arizona and California
to RCPI Office Properties, LLC, a company affiliated with MS Acquisition Limited
("MS Acquisition"), for approximately $7.3 million. Concurrently therewith, the
Company leased back from RCPI Office Properties, LLC, the premises at fixed
monthly rentals of approximately $20,000 per month for the Arizona property and
$42,000 per month for the California property. The Arizona and California leases
expire in February 2001 and February 2004, respectively, subject to renewal
options and early termination provisions. The Company believes that the terms of
these transactions were similar to those that would have been obtained as a
result of arms-length negotiations between unrelated parties.
16
<PAGE> 21
On January 7, 2000, the Company received an equity investment from MS
Acquisition. MS Acquisition increased its equity position by purchasing
1,577,828 additional shares of Common Stock at an aggregate purchase price of
$5.0 million ($3.17 per share representing the fair market value thereof)
pursuant to the terms of a stock purchase agreement. On March 30, 2000, the
Company received another equity investment when MS Acquisition purchased an
additional 4.0 million shares of Common Stock at a price of $2.50 per share
pursuant to the terms of a stock purchase agreement.
17
<PAGE> 22
STOCKHOLDER RETURN PERFORMANCE GRAPH
The following graph compares, during the period commencing December 15,
1998 (the first day that the Common Stock was traded on Nasdaq) and ending for
each of the periods December 31, 1998 and December 31, 1999, respectively, the
cumulative total stockholder return on the Common Stock, based on the market
price of the Common Stock and assuming reinvestment of dividends, with the total
return assuming a $100 investment in the Common Stock, the Wilshire Small Cap
Index and the S&P Small Cap Distributor (Food and Health) Index. The comparisons
in this graph are historical and are not intended to forecast or be indicative
of possible future performance of the Common Stock.
[GRAPH]
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
Wilshire S&P Small Cap
Small Cap Distributor
MSC Index (2)
----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Value at 12/15/98(1) $100.00 $100.00 $100.00
Value at 12/31/98 $100.80 $106.92 $107.63
Value at 12/31/99 $25.00 $147.88 $ 84.28
</TABLE>
---------------
(1) The beginning measurement point is established by the market close on
December 15, 1998, the first day on which the Common Stock was traded on
Nasdaq.
(2) In the prior year's definitive proxy statement, the Company used a peer
issuer comparison consisting of eleven food manufacturers, retailers and
distributors which were selected in good faith. The Company has determined
that it is in the best interests of its stockholders to discontinue its use
of the peer issuer comparison for the present year and replace it with the
S&P Small Cap Distributor (Food and Health) Index for the following reasons:
(a) due to unforeseen circumstances outside of present Company management
control, the peer issuer comparison could no longer be made as the eleven
food manufacturers, retailers and distributors could no longer be
identified, (b) the S&P Small Cap Distributor (Food and Health) Index is a
published capitalization-weighted index that measures the performance of the
food and health products distributor sector of the S&P Small Cap Index and
will facilitate analysis and create a more accurate comparison of the
Company's Common Stock performance as compared to a broad equity market
index, and (c) the S&P Small Cap Distributor (Food and Health) Index is more
readily accessible to the Company's stockholders, as such index is more
widely recognized and used.
18
<PAGE> 23
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
The Company's executive officers and directors and beneficial owners of
more than 10% of its Common Stock are required under Section 16(a) of the
Exchange Act to file reports of ownership and changes in ownership with the
Securities and Exchange Commission. Copies of those reports must also be
furnished to the Company. Based solely on a review of the copies of reports
furnished to the Company, and written representations from certain reporting
persons that no other reports were required, the Company believes that during
1999 no person who was a director, executive officer or beneficial owner of more
than 10% of the Common Stock failed to file on a timely basis all reports
required by Section 16(a).
OTHER MATTERS
Marketing Specialists does not expect that any matters other than those
described in this document will be brought before the Annual Meeting. If any
other matters are presented, however, the persons named in the proxy intend to
vote the proxy in their discretion.
The accompanying form of proxy has been prepared at the direction of the
Board and is sent to you at the request of the Board. The Board has designated
the proxies named therein.
MARKETING SPECIALISTS STOCKHOLDER PROPOSALS
In order for us to consider a stockholder proposal for inclusion in next
year's proxy materials we must receive the stockholder proposal at 17855 North
Dallas Parkway, Suite 200, Dallas, Texas 75287 by February 16, 2001. Pursuant to
Rule 14a-4(c)(1) under the Exchange Act, if any stockholder proposal intended to
be presented at the 2001 annual meeting without inclusion in the Company's proxy
statement for such meeting is received at the above address after May 2, 2001,
then a proxy will have the ability to confer discretionary authority to vote on
such proposal.
By Order of the Board of Directors
By: /s/ GERALD R. LEONARD
----------------------------------
Gerald R. Leonard,
Chief Executive Officer and
President
19
<PAGE> 24
APPENDIX A
PLAN AMENDMENT
AMENDMENT NO. 2 TO THE
AMENDED AND RESTATED
MERKERT AMERICAN CORPORATION
1998 STOCK OPTION AND INCENTIVE PLAN
WHEREAS, the Board of Directors of Marketing Specialists Corporation (the
"Company") has authorized an increase in the number of shares of the Company's
common stock available for issuance under the Amended and Restated Merkert
American Corporation 1998 Stock Option and Incentive Plan (the "Plan").
ACCORDINGLY, the Company hereby amends the Plan as follows:
The first sentence of Section 3(a) of the Plan is hereby amended to read in
its entirety as follows:
"The maximum number of shares of Stock reserved and available for issuance
under the Plan (the "Maximum Share Number") shall be such aggregate number of
shares of Stock as does not exceed the sum of (i) thirteen percent (13%) of the
total number of shares of Stock outstanding on the date of this Amendment, plus
(ii) as of January 1, 2001 and each January 1 thereafter, thirteen percent (13%)
of any net increase since the date of this Amendment in the total number of
shares of Stock actually outstanding (subject to adjustment as provided in
Section 3(b) hereof)."
IN WITNESS WHEREOF, the Company has caused its duly authorized officer to
execute this Amendment No. 2 as of May 15, 2000.
MARKETING SPECIALISTS CORPORATION
By: /s/ TIMOTHY M. BYRD
-----------------------------------
Name: Timothy M. Byrd
Title: Chief Financial Officer
A-1
<PAGE> 25
MKG-PS-99
<PAGE> 26
MARKETING SPECIALISTS CORPORATION
17855 North Dallas Parkway, Suite 200
Dallas, Texas 75287
ANNUAL MEETING OF STOCKHOLDERS, JUNE 28, 2000
The undersigned stockholder of Marketing Specialists Corporation (the
"Company") hereby appoints Gerald R. Leonard and Timothy M. Byrd, and either
of them, with power of substitution and revocation, to represent and vote all
the shares of Common Stock of the Company held of record by the undersigned at
the 2000 Annual Meeting and any adjournment(s) as set forth below.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND WILL BE VOTED IN
ACCORDANCE WITH THE SPECIFICATIONS MADE ON THE REVERSE SIDE. UNMARKED PROXIES
WILL BE VOTED IN FAVOR OF EACH OF THE MATTERS LISTED ON THE REVERSE SIDE. THE
PROXIES WILL USE THEIR DISCRETION WITH RESPECT TO ANY MATTER REFERRED TO IN
ITEM (4). THIS PROXY IS REVOCABLE AT ANY TIME BEFORE IT IS EXERCISED.
The undersigned hereby acknowledges receipt of the Notice of Meeting and Proxy
Statement dated June 16, 2000 for the Annual Meeting of Stockholders.
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PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY
IN THE ENCLOSED ENVELOPE.
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Please sign EXACTLY as name appears on this card. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee, guardian or corporate officer, please give full title.
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HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
--------------------------------- -------------------------------------
--------------------------------- -------------------------------------
--------------------------------- -------------------------------------
<PAGE> 27
[ ] PLEASE MARK VOTES
AS IN THIS EXAMPLE
-------------------------------------------------------------------------------
MARKETING SPECIALISTS CORPORATION
-------------------------------------------------------------------------------
Mark box at right if an address change or comment has been noted on [ ]
the reverse side of this card.
1. Election of Directors:
FOR ALL WITH- FOR ALL
NOMINEES HOLD EXCEPT
(1) Ronald D. Pedersen (5) Gerald R. Leonard
(2) Timothy M. Byrd (6) Edward P. Grace, III [ ] [ ] [ ]
(3) James A. Schlindwein (7) John P. Rochon
(4) Nick G. Bouras (8) Michael J. Merriman
NOTE: IF YOU DO NOT WISH YOUR SHARES VOTED "FOR" A PARTICULAR NOMINEE, MARK
THE "FOR ALL EXCEPT" BOX AND STRIKE A LINE THROUGH THE NAME(S) OF THE
NOMINEE(S). YOUR SHARES WILL BE VOTED FOR THE REMAINING NOMINEE(S).
FOR AGAINST ABSTAIN
2. Ratification of the appointment of Arthur [ ] [ ] [ ]
Andersen, LLP as independent accountants for
2000.
3. Approval of amendment to the Company's Stock [ ] [ ] [ ]
Option Plan.
4. Upon such other business as may properly come [ ] [ ] [ ]
before said meeting, or any adjournment(s)
thereof.
PLEASE BE SURE TO SIGN AND DATE THIS PROXY. DATE
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STOCKHOLDER SIGN HERE CO-OWNER SIGN HERE
DETACH CARD DETACH CARD
