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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
MARCH 28, 2000
MARKETING SPECIALISTS CORPORATION
(Exact name of registrant as specified in its charter)
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DELAWARE 0-24667 04-3411833
(State or other (Commission (IRS employer
jurisdiction of file number) identification no.)
incorporation or
organization)
</TABLE>
17855 N. DALLAS PARKWAY, SUITE 200
DALLAS, TEXAS 75287
(Address and zip code of principal executive offices)
Registrant's telephone number, including area code:
(972) 349-6200
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Merkert American Corporation
490 Turnpike Street
Canton, Massachusetts 02021
(Former name and address)
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ITEM 5. OTHER EVENTS
On March 28, 2000, the Registrant distributed a Consent Solicitation
Statement to the holders of its 10 1/8% Senior Subordinated Notes due 2007. A
copy of this Consent Solicitation Statement is filed as Exhibit 99.1 hereto.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) EXHIBITS
The following Exhibits are filed herewith:
99.1 Consent Solicitation Statement as
distributed to the holders of the Company's
10 1/8% Senior Subordinated Notes due 2007.
[SIGNATURE PAGE FOLLOWS]
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MARKETING SPECIALISTS CORPORATION
By: /s/ TIMOTHY M. BYRD
-----------------------------------
Timothy M. Byrd
Chief Financial Officer
Date: March 29, 2000
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EXHIBIT INDEX
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EXHIBIT
NO. DESCRIPTION
- ------- -----------
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99.1* Consent Solicitation Statement as distributed to the holders of the Company's
10 1/8% Senior Subordinated Notes due 2007.
</TABLE>
* filed herewith
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EXHIBIT 99.1
CONSENT SOLICITATION STATEMENT
MARKETING SPECIALISTS CORPORATION
(AS SUCCESSOR TO RICHMONT MARKETING SPECIALISTS INC.)
SOLICITATION OF CONSENTS TO THE PROPOSED AMENDMENTS TO
THE INDENTURE GOVERNING ITS 10%% SENIOR SUBORDINATED NOTES DUE 2007
(CUSIP NO. 765472AC9)
- -------------------------------------------------------------------------------
THE SOLICITATION (AS DEFINED BELOW) WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME
ON MARCH 30, 2000, UNLESS EXTENDED FOR A SPECIFIED PERIOD OR ON A DAILY BASIS
UNTIL THE REQUISITE CONSENTS (AS DEFINED BELOW) HAVE BEEN RECEIVED (THE
"EXPIRATION DATE"). IF THE TRUSTEE (AS DEFINED BELOW) RECEIVES AN OFFICERS'
CERTIFICATE FROM THE COMPANY (AN "OFFICERS' CERTIFICATE") CERTIFYING THAT THE
REQUISITE CONSENTS HAVE BEEN RECEIVED ON ANY DATE PRIOR TO THE EXPIRATION DATE,
THE THIRD SUPPLEMENTAL INDENTURE (AS DEFINED BELOW) MAY, AT THE COMPANY'S SOLE
DISCRETION, BE EXECUTED AND DELIVERED AT SUCH PRIOR DATE. HOLDERS (AS DEFINED
BELOW) WHO WISH TO CONSENT AND RECEIVE THE CONSENT PAYMENT (AS DEFINED BELOW)
SHOULD MAIL (BY REGISTERED OR CERTIFIED MAIL), HAND DELIVER OR SEND BY OVERNIGHT
COURIER OR FACSIMILE (CONFIRMED BY PHYSICAL DELIVERY) THEIR PROPERLY COMPLETED
AND EXECUTED CONSENTS (AS DEFINED BELOW) TO THE TRUSTEE AT THE ADDRESS SET FORTH
ON THE BACK COVER PAGE HEREOF PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE
EXPIRATION DATE. CONSENTS MAY BE REVOKED AT ANY TIME PRIOR TO THE DATE ON WHICH
THE TRUSTEE RECEIVES AN OFFICERS' CERTIFICATE FROM THE COMPANY CERTIFYING THAT
THE REQUISITE CONSENTS HAVE BEEN RECEIVED (THE "CONSENT DATE"). IF THE
CONDITIONS TO THE EFFECTIVENESS OF THE PROPOSED AMENDMENTS ARE SATISFIED,
INCLUDING THE RECEIPT BY THE COMPANY OF THE REQUISITE CONSENTS, HOLDERS WHO DO
NOT DELIVER A PROPERLY COMPLETED CONSENT PRIOR TO THE EXPIRATION DATE
NONETHELESS WILL BE ENTITLED TO RECEIVE A CONSENT PAYMENT AND WILL BE BOUND BY
THE PROPOSED AMENDMENTS IF THEY BECOME EFFECTIVE.
- -------------------------------------------------------------------------------
Marketing Specialists Corporation, formerly known as Merkert American
Corporation (the "Company") is soliciting (the "Solicitation") consents (the
"Consents") of Holders of its 101A% Senior Subordinated Notes due 2007 (the
"Notes") to proposed amendments (the "Proposed Amendments") to the Indenture
governing the Notes, dated as of December 19, 1997 (the "Indenture"), between
the Company and Chase Bank of Texas National Association (formerly Texas
Commerce Bank National Association), as trustee (the "Trustee"). The Company
assumed the Notes pursuant to the First Supplemental Indenture, dated August 18,
1999, executed in connection with the merger of Richmont Marketing Specialists
Inc. ("Richmont Marketing"), the original issuer of the Notes, with and into the
Company on August 18, 1999 (the "Merger"). Pursuant to the Second Supplemental
Indenture, dated as of October 13, 1999, by and among the Company, Paul Inman
Associates, Inc. ("Paul Inman"), the Existing Guarantor Subsidiaries (as defined
therein) and the Trustee, executed in connection with the acquisition of Paul
Inman by the Company, Paul Inman unconditionally guaranteed all of the Company's
obligations under the Indenture on the terms and subject to the considerations
set forth therein. The Company is seeking Consents to the Proposed Amendments
from Holders to (i) permit the Company to refinance its existing senior credit
facility with $85.0 million of senior
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secured credit facilities, including both a term loan and a revolving credit
facility, (ii) enable the Company and its Restricted Subsidiaries to engage in
additional Sale/Leaseback Transactions (as defined in Section 1.01 of the
Indenture), (iii) permit the Company and its Restricted Subsidiaries to Incur
(as defined in Section 1.01 of the Indenture) additional Indebtedness (as
defined in Section 1.01 of the Indenture) not otherwise permitted by the
Indenture in an amount not to exceed $10.0 million, (iv) permit the Company and
its Restricted Subsidiaries to Incur additional Indebtedness in an amount not to
exceed $20.0 million in connection with the acquisition of all of the
outstanding capital stock of The Sales Force Companies, Inc. ("Sales Force"),
(v) restrict the ability of the Company and its Restricted Subsidiaries to Incur
any Assumed Deferred Obligations (as defined below) unless such Assumed Deferred
Obligations are expressly subordinated in right of payment to the Notes, and
(vi) restrict the ability of the Company and its Restricted Subsidiaries to
Incur Indebtedness in connection with any acquisition without receiving cash
capital contributions or cash proceeds from sale of Capital Stock (as defined in
Section 1.01 of the Indenture) of the Company in an amount equal to such
Indebtedness. The purpose and effect of the Solicitation and the Proposed
Amendments are more fully described herein under "Summary-Background" and "The
Proposed Amendments."
In the event that certain conditions described below are satisfied,
including the receipt by the Company of the valid and unrevoked Consents of
Holders of at least a majority in aggregate principal amount of the Notes
outstanding on the Record Date ("the Requisite Consents"), the Company will make
a payment in cash in an amount equal to $20.00 per $1,000 of principal amount of
Notes (a "Consent Payment") to each Holder. No Consent Payment will be made to
the Holders unless the Requisite Consents are received by the Company prior to
the Expiration Date and not duly revoked. See "The Solicitation-Conditions of
the Solicitation" and "-Consent Payments."
Consents will not be effective unless completed in accordance with the
instructions set forth herein and in the accompanying form of Consent and
returned to the Trustee at its address set forth on the back cover page of this
Consent Solicitation Statement prior to 5:00 P.M., New York City time, on the
Expiration Date. If the conditions to the effectiveness of the Proposed
Amendments are satisfied, including the receipt by the Company of the Requisite
Consents, Holders who do not deliver a properly completed Consent prior to the
Expiration Date nonetheless will be entitled to receive a Consent Payment and
will be bound by the Proposed Amendments if they become effective. Notes should
not be tendered or delivered in connection with the Solicitation.
For purposes of the Solicitation, the term "Holder" means a registered
holder of Notes as reflected in the records of the Trustee, as registrar under
the Indenture, as of the close of business on March 17, 2000 (the "Record
Date").
---------------------
The Solicitation Agent for the Solicitation is:
CHASE' SECURITIES INC.
The Date of this Consent Solicitation Statement is March 27, 2000
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The Solicitation is being made upon the terms and subject to the
conditions in this Consent Solicitation Statement and the accompanying form of
Consent. Only Holders or any person who holds a proxy substantially in the form
included with the form of Consent, duly executed by a Holder (a "Duly Designated
Proxy"), will be eligible to consent to the Proposed Amendments and receive the
Consent Payment or revoke any Consent previously given by such Holder. Persons
who purchase an interest in the Notes after the Record Date must obtain a proxy
from the Holder of such Notes in order to consent to the Proposed Amendments or
to revoke a Consent previously given.
Any beneficial owner of an interest in the Notes held of record on the
Record Date by The Depository Trust Company ("DTC"), or its nominees, through
authority granted by DTC may direct the participant in DTC (a "DTC Participant")
through which such beneficial owner's Notes are held on the Record Date to
execute, on such beneficial owner's behalf, or may obtain a proxy from such DTC
Participant and execute directly, as if such beneficial owner were a Holder, a
Consent with respect to Notes beneficially owned by such beneficial owner on the
date of execution. Accordingly, such beneficial owners are urged to contact the
person responsible for their account to obtain a valid proxy or to direct a
Consent to be signed on their behalf with respect to their Notes.
Adoption of the Proposed Amendments requires the valid and unrevoked
Consent of Holders of at least a majority in aggregate principal amount of the
Notes outstanding on the Record Date (the "Requisite Consents"). At the close of
business on the Record Date, $100.0 million aggregate principal amount of the
Notes was outstanding. Following the receipt by the Trustee of an Officers'
Certificate certifying that the Requisite Consents have been received, the
Company, its Restricted Subsidiaries and the Trustee may, at the Company's sole
discretion, execute and deliver the Third Supplemental Indenture to the
Indenture (the "Third Supplemental Indenture") containing the Proposed
Amendments. The Third Supplemental Indenture will become effective upon such
execution, the substantially concurrent purchase from the Company by MS
Acquisition Limited of $10.0 million of common stock of the Company, the receipt
by the Holders of the Consent Payment and the satisfaction of conditions to such
effectiveness as set forth in the Indenture and the Third Supplemental
Indenture. The Third Supplemental Indenture will be binding upon each Holder,
regardless of whether or not such Holder delivered its Consent. In addition, the
Company's obligation to pay the Consent Payments to Holders is conditioned upon,
among other things, the (i) receipt of the Requisite Consents by the Company
prior to the Expiration Date and such Requisite Consents not being duly revoked,
(ii) execution, delivery and continued effectiveness of the Third Supplemental
Indenture, (iii) substantially concurrent refinancing of the Company's existing
senior credit facility, and (iv) substantially concurrent purchase from the
Company by MS Acquisition Limited of common stock of the Company for $10.0
million.
Regardless of whether the Proposed Amendments become effective, the
Notes will continue to be outstanding in accordance with all other terms of the
Notes and the Indenture. The changes sought to be effected by the Proposed
Amendments will not alter the Company's obligation to pay the principal of or
interest on the Notes or alter the stated interest rate or maturity date of the
Notes.
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The Solicitation will expire at 5:00 P.M., New York City time, on March
30, 2000, unless extended for a specified period or on a daily basis until the
Requisite Consents have been received. If the Trustee receives an Officers'
Certificate certifying that the Requisite Consents have been received on any
date prior to the Expiration Date, the Third Supplemental Indenture may, at the
Company's sole discretion, be executed and delivered at such prior date. Consent
with respect to a particular interest in the Notes may be revoked by a Holder of
such interest at any time up to, but will become irrevocable upon, the Consent
Date. Notwithstanding anything to the contrary set forth in this Consent
Solicitation Statement, the Company reserves the right to extend, amend or
terminate the Solicitation at any time.
HOLDERS WHO WISH TO CONSENT TO THE PROPOSED AMENDMENTS AND RECEIVE THE
CONSENT PAYMENT SHOULD MAIL, HAND DELIVER OR SEND BY OVERNIGHT COURIER OR
FACSIMILE (CONFIRMED BY PHYSICAL DELIVERY) THEIR PROPERLY COMPLETED AND EXECUTED
CONSENTS TO THE TRUSTEE AT THE ADDRESS SET FORTH ON THE BACK COVER HEREOF PRIOR
TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. HOLDERS SHOULD NOT
TENDER OR DELIVER THEIR NOTES IN CONNECTION WITH THE SOLICITATION.
THIS CONSENT SOLICITATION STATEMENT DOES NOT CONSTITUTE A SOLICITATION
OF CONSENT IN ANY JURISDICTION IN WHICH, OR TO OR FROM ANY PERSON TO OR FROM
WHOM, IT IS UNLAWFUL TO MAKE SUCH A SOLICITATION UNDER APPLICABLE SECURITIES OR
BLUE SKY LAWS. The Company is not aware of any jurisdiction in which the making
of the Solicitation is not in compliance with applicable law. If the Company
becomes aware of any jurisdiction in which the making of the Solicitation would
not be in compliance with applicable law, it will make a good faith effort to
comply with such law. If after such good faith effort, the Company cannot comply
with such law, Consents will not be solicited from Holders residing in such
jurisdiction. In any jurisdiction where the securities, blue sky or other laws
require the Solicitation to be made by a licensed broker or dealer, the
Solicitation will be deemed to be made on behalf of the Company by the
Solicitation Agent or one or more registered brokers or dealers licensed under
the laws of such jurisdiction.
If any person receiving this Consent Solicitation Statement has sold or
transferred its Notes prior to the Record Date, this Consent Solicitation
Statement and the documents delivered with it should be passed on to the person
through whom such sale or transfer was effected for transmission to the
purchaser or transferee.
This Consent Solicitation Statement is solely for the purpose of the
Solicitation. Neither the Solicitation nor the delivery of this Consent
Solicitation Statement constitutes an offering for the Notes or any other
security of the Company, and this Consent Solicitation Statement may not be used
for such purposes or in connection with the purchase or sale of any securities,
including, without limitation, the Notes.
----------------
4
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TABLE OF CONTENTS
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Available Information...................................................................6
Forward-Looking Statements..............................................................7
Summary.................................................................................9
The Proposed Amendments................................................................17
Risk Factors...........................................................................30
The Solicitation.......................................................................33
Certain U.S. Federal Income Tax Consequences...........................................41
Exhibit A: Proposed Amendments to the Indenture Governing the 101A% Senior
Subordinated Notes Due 2007.....................................................A-1
</TABLE>
5
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AVAILABLE INFORMATION
The Company currently files reports and other information with the U.S.
Securities and Exchange Commission (the "Commission"). Such reports and other
information should be available for inspection at the public reference
facilities of the Commission located at 450 Fifth Street, N.W., Washington, D.C.
20549, and at the regional offices of the Commission located in the Citicorp
Center, 500 West Madison Street (Suite 1400), Chicago, Illinois 60661 and Seven
World Trade Center, 13th Floor, New York, New York 10048. Copies should be
obtainable, by mail, upon payment of the Commission's customary charges, by
writing to the Commission's principal office at 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Commission also maintains an Internet website at
http://www.sec.gov that contains reports and other information. There is a time
delay between the Company's filings with the Commission and the availability of
the filing through the Commissions website. The filings may be available through
a number of alternative service bureaus.
For information about the Company, Holders are referred to the
documents, in their entirety or sections thereof, filed by the Company with the
Commission, which are available for inspection and copies of which should be
obtainable in the manner set forth above, including the following (the
"Documents"):
(a) The section entitled "Risk Factors" set forth in the
Company's Registration Statement on Form S-1 (File No. 333-53419) filed
May 22, 1998, as amended;
(b) The section entitled "Risk Factors" set forth in the
Company's Definitive Proxy Statement on Form 14A (File No. 000-24667)
filed July 9, 1999;
(c) The sections entitled "Risk Factors" and "Description of
the Notes" set forth in Richmont Marketing Specialists Inc.'s
Registration Statement on Form S-4 (File No. 333-74261) filed on March
11, 1999, as amended, and the Prospectuses contained therein; (d) The
Company's Annual Report on Form 10-K for the year ended December 31,
1998;
(e) The Company's Quarterly Report filed on Form 10-0 for the
quarter ended September 30, 1999;
(f) The Company's Quarterly Report filed on Form 10-Q for the
quarter ended June 30, 1999;
(g) Richmont Marketing Specialists Inc.'s Quarterly Report on
Form 10-0 for the quarter ended June 30, 1999;
(h) The Company's Quarterly Report Filed on Form 10-Q for the
quarter ended March 31, 1999;
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(i) The Company's Current Report Filed on Form 8-K on
March 10, 2000;
(j) The Company's Current Report Filed on Form 8-K on
February 3, 2000;
(k) The Company's Current Report filed on Form 8-K on
February 1, 2000;
(1) The Company's Current Report filed on Form 8-K on
January 13, 2000; and
(m) The Company's Current Report filed on Form 8-K on
March 24, 2000.
All information appearing in this Consent Solicitation Statement is
qualified in its entirety by the information and financial statements (including
notes thereto) appearing in the Documents.
The Company will provide without charge to each person to whom this
Consent Solicitation Statement is delivered, upon request of such person, copies
of the Indenture and the form of the Third Supplemental Indenture, and the
Documents (not including exhibits to such Documents). Written or telephone
requests for such copies should be directed to the Information Agent at its
address or telephone number set forth on the back cover page of this Consent
Solicitation Statement.
Statements made in this Consent Solicitation Statement concerning the
provisions of any contract, agreement, indenture or other document referred to
herein are not necessarily complete. With respect to each such statement
concerning a contract, agreement, indenture, or other document filed with the
Commission, reference is made to such filing for a more complete description of
the matter involved, and each such statement is qualified in its entirety by
such reference.
FORWARD-LOOKING STATEMENTS
This Consent Solicitation Statement contains certain forward-looking
statements within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act, which are intended to be covered by safe harbors
created thereby. Holders are cautioned that all forward-looking statements
involve risks and uncertainties, including, without limitation, our ability to
continue building the Company's business, our ability to diversify our services
and customers, the ability to obtain necessary supplies, the ability to make
projected capital expenditures, and the ability to achieve projected quarterly
results, as well as general market conditions, competition, and pricing. All
statements, other than statements of historical facts, included or incorporated
by reference in this Consent Solicitation Statement that address activities,
events or developments that we expect or anticipate will or may occur in the
future, including such things as future capital expenditures (including the
amount and nature thereof), business strategy and measures to implement such
strategy, competitive strengths, goals, expansion and growth of the Company's
business and operations, plans, references to future success as well as other
statements which include words such as "anticipate," "believe," "plan,"
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"estimate," "expect," and "intend" and other similar expressions, constitute
forward-looking statements. Although we believe that the assumptions underlying
the forward-looking statements contained herein are reasonable, any of the
assumptions could be inaccurate, and the inclusion of such information should
not be regarded as a representation by us or any other person that our
objectives and plans will be achieved. These forward-looking statements speak
only as of the date hereof. None of the Company or any subsidiary of the Company
undertakes any obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise. These
statements are based on certain assumptions and analyses made by the Company in
light of its experience which the Company believes are appropriate in the
circumstances. However, whether actual results and developments will conform
with the Company's expectations and predictions is subject to a number of risks
and uncertainties, including general economic, market or business conditions,
the other factors enumerated above, and others many of which are beyond the
control of the Company. Consequently, all forward-looking statements made or
incorporated by reference in this Consent Solicitation Statement are qualified
by these cautionary statements, and there can be no assurance that the actual
results or developments anticipated by the Company will be realized or, even if
substantially realized, that they will have the expected consequences to or
effects on the Company or its business or operations.
The delivery of this Consent Solicitation Statement shall not under any
circumstances create any implication that the information contained in this
Consent Solicitation Statement is correct as of any time subsequent to the date
hereof or that there has been no change in the information contained in this
Consent Solicitation Statement or in the affairs of the Company or its
subsidiaries since the date hereof.
Questions concerning the Solicitation should be directed to the
Solicitation Agent, and requests for additional copies of this Consent
Solicitation Statement or the Consent should be directed to the Information
Agent, in each case at their respective addresses and telephone numbers set
forth on the back cover page of this Consent Solicitation Statement.
No person (including the Solicitation Agent, the Trustee and the
Information Agent) has been authorized to give any information or make any
representations in connection with the Solicitation other than as expressly set
forth in this Consent Solicitation Statement and in the form of Consent. Any
information or representations not set forth in this Consent Solicitation
Statement, in a supplement hereto or in the form of Consent are not authorized
and should not be relied upon.
8
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SUMMARY
The following summary is qualified in its entirety by, and should be
read in conjunction with, the information appearing elsewhere in this Consent
Solicitation Statement and Exhibit A hereto and the information contained in the
Documents filed by the Company with the Commission. Capitalized terms used below
that are not defined in this Consent Solicitation Statement shall have the
meanings assigned to them in the Indenture unless otherwise indicated.
THE COMPANY
Marketing Specialists Corporation is one of the largest food brokers in
the United States. The Company sells and markets grocery and consumer products
on behalf of manufacturers and coordinates the execution of manufacturers'
marketing programs with retailers and wholesalers.
BACKGROUND
Pursuant to an Agreement and Plan of Merger dated as of April 28, 1999,
as amended on July 8, 1999, Richmont Marketing, the original issuer of the
Notes, was merged with and into the Company (formerly known as Merkert American
Corporation) on August 18, 1999. At the effective time of the Merger, the
separate corporate existence of Richmont Marketing ceased and each issued and
outstanding share of Richmont Marketing common stock was converted into the
right to receive shares of common stock of the Company. Prior to the Merger,
Richmont Marketing issued $100.0 million aggregate principal amount of 101/8%
Senior Subordinated Notes due 2007 pursuant to the Indenture. In connection with
the Merger, the Company assumed Richmont Marketing's obligations under the
Indenture and the Notes pursuant to a Supplemental Indenture dated August 18,
1999. The Indenture contains certain restrictive covenants, including, among
others, limitations on incurrence of indebtedness.
RECENT DEVELOPMENTS
On October 13, 1999, the Company acquired all of the outstanding
capital stock of Paul Inman for approximately $12.2 million. Paul Inman is a
full-service food broker with operations in Michigan, Indiana, Ohio and
Illinois. For the twelve months ended September 30, 1999, Paul Inman had
revenues of approximately $18.0 million and a net loss of approximately $0.5
million. As of September 30, 1999, Paul Inman had total assets of approximately
$6.4 million and stockholders' equity of approximately $4.5 million. In
connection with the acquisition of Paul Inman by the Company, the Second
Supplemental Indenture was entered into as of October 13, 1999 by and among the
Company, Paul Inman, the Existing Guarantor Subsidiaries (as defined therein)
and the Trustee. Pursuant to the Second Supplemental Indenture, Paul Inman
unconditionally guaranteed all of the Company's obligations under the Notes and
Indenture on the terms and subject to the considerations set forth therein.
On January 7, 2000, MS Acquisition Ltd., the Company's largest
shareholder, purchased approximately 1.6 million shares of common stock of the
Company at a price of $3.17 per share, for an aggregate purchase price of $5.0
million. The funds have been used to provide an
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additional source of capital for the Company's ongoing operations and to provide
the Company with additional liquidity.
On January 27, 2000, Marketing Specialists Sales Company, a
wholly-owned subsidiary of the Company ("MSSC"), acquired the assets of
Johnson-Lieber, Inc. ("Johnson-Lieber") for approximately $3.0 million in cash,
$9.24 million in promissory notes subordinated to MSSC's guaranty of the Notes
(which are to be paid in equal payments over 108 months without interest) and
the assumption of certain car and office leases. Johnson-Lieber is a
full-service food brokerage firm with operations in Washington, Oregon, Montana
and Alaska. For the year ended December 31, 1999, Johnson-Lieber had revenues of
approximately $11.7 million and net income of approximately $0.1 million.
On March 2, 2000, MSSC executed a stock purchase agreement with Sales
Force to purchase all the issued and outstanding capital stock of Sales Force
for approximately $21.8 million. The purchase price, including certain
adjustments anticipated at closing, will be paid in cash of approximately $5
million, assumed debt of approximately $8.1 million and $12.2 million in new
non-interest bearing promissory notes subordinated in right of payment to the
Notes which are to be paid in equal installments over 28 quarters (the present
value of which is approximately $8.7 million discounted at 101A%, the interest
rate borne by the Notes). For the year ended December 31, 1999, Sales Force's
revenues were approximately $32 million and net income was approximately $1.2
million. As of December 31, 1999, Sales Force had total assets of approximately
$11.2 million, and total stockholders' equity of approximately $0.9 million.
For the fourth quarter of fiscal 1999, the Company had revenues of
approximately $107.0 million and a net loss of approximately $3.4 million.
PURPOSE AND EFFECT OF THE CONSENT SOLICITATION
The Company is seeking Consents to (i) permit the Company to refinance
its existing senior credit facility with $85.0 million of senior secured credit
facilities, including both a $35.0 million term loan and a $50.0 million
revolving credit facility, (ii) enable the Company and its Restricted
Subsidiaries to engage in additional Sale/Leaseback Transactions (as defined in
Section 1.01 of the Indenture), (iii) permit the Company and its Restricted
Subsidiaries to Incur (as defined in Section 1.01 of the Indenture) additional
Indebtedness (as defined in Section 1.01 of the Indenture) not otherwise
permitted by the Indenture in an amount not to exceed $10.0 million, (iv) permit
the Company and its Restricted Subsidiaries to Incur additional Indebtedness in
an amount not to exceed $20.0 million in connection with the acquisition of all
of the outstanding capital stock of Sales Force, (v) restrict the ability of the
Company and its Restricted Subsidiaries to Incur any Assumed Deferred
Obligations (as defined below) unless such Assumed Deferred Obligations are
expressly subordinated in right of payment to the Notes, and (vi) restrict the
ability of the Company and its Restricted Subsidiaries to Incur Indebtedness in
connection with any acquisition after the effective date of the Proposed
Amendments without receiving cash capital contributions or cash proceeds from
sale of Capital Stock of the Company in an amount equal to such Indebtedness.
The proceeds from the new secured credit facilities will be used to replace the
existing $25.0 million revolving credit facility and to reduce the existing term
loan from approximately $43.0 million to $35.0 million. If adopted, the Proposed
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Amendments would provide the Company with additional financial and operational
flexibility and assist the Company in its goal of establishing a national
brokerage company with coast to coast coverage but restrict its ability to
consummate additional acquisitions.
If the Proposed Amendments become effective, the Company intends to (i)
refinance its existing senior credit facility by entering into a Second Amended
and Restated Credit Agreement among the Company and First Union National Bank,
as agent (the "First Union Credit Facility") and entering into a new revolving
credit facility pursuant to a credit agreement among the Company, certain of its
subsidiaries and The Chase Manhattan Bank, as agent (the "New Chase Revolver,"
and together with the First Union Credit Facility the "New Senior Credit
Facility"), (ii) enter into Sale/Leaseback Transactions with respect to certain
properties owned by the Company located in Canton, Massachusetts and Charlotte,
North Carolina (which together will result in the Incurrence by the Company of
approximately $14.6 million of Attributable Debt), and (iii) acquire all of the
outstanding capital stock of Sales Force and Incur Indebtedness in an amount not
to exceed $20.0 million in connection therewith (through both the issuance of
promissory notes subordinated in right of payment to the Notes and the
assumption of debt of Sales Force). If the Proposed Amendments become effective,
the Company will consummate the Equity Investment (as defined below).
In connection with the Solicitation, MS Acquisition Ltd., the largest
stockholder of the Company, has agreed to purchase from the Company an
additional $10.0 million of common stock for a per share purchase price equal to
$2.50 (the "Equity Investment"). After giving effect to the Equity Investment,
MS Acquisition Ltd. will beneficially own approximately 48.5% the voting power
of the capital stock of the Company. The effectiveness of the Proposed
Amendments are conditioned on, among other things, the substantially concurrent
consummation of the Equity Investment.
Absent the adoption of the Proposed Amendments and the consummation of
the transactions described herein, including the Equity Investment and the
refinancing of the Existing Credit Facility, the Company believes that its
ability to fund working capital would be significantly limited, it would lack
sufficient liquidity, and its ability to complete its national coverage strategy
would be significantly impaired.
CONDITIONAL TRANSACTIONS
The effectiveness of the Third Supplemental Indenture is conditioned
upon the substantially concurrent consummation of the Equity Investment, the
receipt by the Holders of the Consent Payment and the satisfaction of conditions
to such effectiveness as set forth in the Indenture and the Third Supplemental
Indenture. In addition, the Company's obligation to pay the Consent Payments to
Holders is conditioned upon, among other things, the (i) receipt of the
Requisite Consents by the Company prior to the Expiration Date and such
Requisite Consents not being duly revoked, (ii) execution, delivery and
continued effectiveness of the Third Supplemental Indenture, (iii) substantially
concurrent refinancing of the Company's existing senior credit facility, and
(iv) substantially concurrent purchase from the Company by MS Acquisition Ltd.
of $10.0 million of common stock of the Company. The Equity Investment is
conditioned upon the substantially concurrent effectiveness of the Third
Supplemental Indenture and the substantially concurrent refinancing of the
Company's Existing Credit Facility by the New Senior Credit Facility. The
refinancing of the Existing Credit Facility by the New Senior Credit Facility is
conditioned, among other things, upon the substantially concurrent effectiveness
of the Third Supplemental Indenture.
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THE SOLICITATION
The Proposed Amendments.............. The Company is seeking Consents from
Holders to the Proposed Amendments in
order to:
o permit the Company to refinance its
existing senior credit facility with
$85.0 million of senior secured
credit facilities, including both a
term loan and revolving credit
facility;
o enable the Company and its Restricted
Subsidiaries to engage in additional
Sale/Leaseback Transactions;
o permit the Company and its Restricted
Subsidiaries to Incur additional
Indebtedness not otherwise permitted
by the Indenture in an amount not to
exceed $10.0 million;
o permit the Company and its Restricted
Subsidiaries to Incur additional
Indebtedness in an amount not to
exceed $20.0 million in connection
with the acquisition of all of the
outstanding capital stock of Sales
Force;
o restrict the ability of the Company
and its Restricted Subsidiaries to
Incur any Assumed Deferred
Obligations unless such Assumed
Deferred Obligations are expressly
subordinated in right of payment to
the Notes; and
o restrict the ability of the Company
and its Restricted Subsidiaries to
incur Indebtedness in connection with
an acquisition without receiving cash
capital contributions or cash
proceeds from the sale of Capital
Stock of the Company in an amount
equal to such Indebtedness.
Consent Payment...................... In the event that certain conditions
described below are satisfied, including
the receipt by the Company of the
Requisite Consents prior to the
Expiration Date which are not duly
revoked, the Company will make a payment
in cash in an amount equal to $20.00 per
$1,000 of principal amount of Notes to
each Holder. See "-Conditions of the
Solicitation."
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Record Date ......................... At the close of business in New York on
March 17, 2000.
Expiration Date...................... 5:00 p.m. New York City time on
March 30, 2000, unless extended by the
Company, in its sole discretion.
Requisite Consents................... Adoption of the Proposed Amendments
requires the valid and unrevoked Consent
of Holders of at least a majority in
aggregate principal amount of the Notes
outstanding on the Record Date. As of
the Record Date, $100.0 million
aggregate principal amount of the Notes
was outstanding. Accordingly, the
Proposed Amendments must be approved by
the Holders of more than $50.0 million
aggregate principal amount of the Notes.
Conditions of the Solicitation....... Following the receipt by the Trustee of
an Officers' Certificate from the
Company certifying that the Requisite
Consents have been received, the Company
and the Trustee may, at the Company's
sole discretion, execute and deliver the
Third Supplemental Indenture containing
the Proposed Amendments. The Third
Supplemental Indenture will become
effective upon such execution, the
substantially concurrent consummation of
the Equity Investment, the receipt by
the Holders of the Consent Payment and
the satisfaction of conditions to such
effectiveness as set forth in the
Indenture and the Third Supplemental
Indenture. The Third Supplemental
Indenture will be binding upon each
Holder, regardless of whether or not
such Holder delivered its Consent. In
addition, the Company's obligation to
pay the Consent Payments to Holders is
conditioned upon, among other things,
the (i) receipt of the Requisite
Consents by the Company prior to the
Expiration Date and such Requisite
Consents not being duly revoked, (ii)
execution, delivery and continued
effectiveness of the Third Supplemental
Indenture, (iii) substantially
concurrent refinancing of the Company's
existing senior credit facility, and
(iv) substantially concurrent purchase
from the Company by MS Acquisition Ltd.
of $10.0 million of common stock of the
Company.
How to Consent....................... See "The Solicitation-Consent
Procedures" and "-How to Consent.
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<PAGE> 14
Revocation of Consent................ A Consent may be revoked by the Holder
granting such Consent if the Trustee
receives a properly completed and
executed written notice of revocation
before the Consent Date. A Consent
becomes irrevocable upon the Consent
Date
Consequences to Non-Consenting
Holders......................... At such time as the Proposed Amendments
become operative, all then current
Holders, including non-consenting
Holders, and all subsequent Holders,
will be bound by the Proposed
Amendments. If the Proposed Amendments
are approved through the receipt of the
Requisite Consents and become operative,
Holders who do not timely consent to the
Proposed Amendments nonetheless will be
eligible to receive the Consent Payment
and the Proposed Amendments will be
binding upon them.
Solicitation Agent; Information
Agent........................... Any questions regarding the Solicitation
may be directed to the Solicitation
Agent at the telephone number and
address set forth on the back cover page
of this Consent Solicitation Statement.
Requests for assistance or additional
copies of this Consent Solicitation
Statement and the form of Consent may be
directed to the Information Agent at the
telephone number and address set forth
on the back cover page of this Consent
Solicitation Statement.
Certain U.S. Federal Income Tax
Consequences ................... For a summary of certain U.S. federal
income tax consequences to Holders of
the receipt of Consent Payments pursuant
to the Solicitation and the adoption of
the Proposed Amendments, see "Certain
U.S. Federal Income Tax Consequences."
Risk Factors ........................ Prior to delivering a Consent, Holders
should carefully consider the risk
factors described under the caption
"Risk Factors" in this Consent
Solicitation Statement, the Company's
Registration Statement on Form S-1 (File
No. 333-53419), filed May 22, 1998, as
amended and its Definitive Proxy
Statement on Form 14A (File No.
000-24667) filed July 9, 1999 and
Richmont Marketing Specialists Inc.'s
Registration Statement on Form S-4 (File
No. 333-74261) filed on March 11, 1999,
as amended.
The Company cannot predict the effect,
if any, that the Proposed Amendments
would have on the market price of the
Notes. The Proposed Amendments could
increase the credit risks with respect
to the Company, adversely affect the
market price of the Notes, or otherwise
be materially adverse to the interests
of the Holders. See "Risk Factors."
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<PAGE> 15
THE PROPOSED AMENDMENTS
The description of the terms of the Indenture and the Proposed
Amendments set forth below is only a summary and is qualified in its entirety by
reference to (i) the terms of the Indenture as currently in effect, which are
incorporated herein by reference, and (ii) the relevant provisions of the
Indenture as proposed to be amended by the Proposed Amendments which is set
forth in Exhibit A to this Consent Solicitation Statement. Holders should
carefully review this entire Consent Solicitation Statement and Exhibit A hereto
before granting a Consent.
A. REFINANCING OF COMPANY'S EXISTING CREDIT FACILITY
The Company is currently a party to an Amended and Restated
Credit Agreement, dated December 18, 1998, as amended and restated
August 18, 1999, among the Company and First Union National Bank, as
agent (the "Existing Credit Facility"). The Existing Credit Facility
refinanced, in part, the Former Chase Facility (as defined below) at
the effective time of the Merger on August 18, 1999. The Former Chase
Facility provided for a revolving credit facility with a maximum
borrowing capacity of $25.0 million. The Existing Credit Facility
provides for a term loan of $50.0 million and a revolving credit
facility with a maximum borrowing capacity of $25.0 million. The
Indebtedness attributable to the term loan portion of the Existing
Credit Facility was Incurred pursuant to Section 4.03(a) of the
Indenture at the time of the merger of Richmont Marketing, the original
issuer of the Notes, with the Company. The Indebtedness attributable to
the revolving credit facility was subsequently Incurred pursuant to
Section 4.03(b)(i) of the Indenture. As of the effective time of the
Merger, the Existing Credit Facility had outstanding borrowings under
the revolving credit facility of approximately $11.1 million and the
Former Chase Facility had no outstanding borrowings. As of March 15,
2000, the Existing Credit Facility had outstanding borrowings under the
revolving credit facility of approximately $17.3 million, plus an
outstanding letter of credit in the amount of approximately $1.1
million which secures the Company's rental payment obligations for its
corporate headquarters in Dallas. In addition, the outstanding balance
of the term loan was approximately $43.0 million.
The borrowings of the Company under the Existing Credit
Facility are secured by a lien on substantially all of the Company's
and its subsidiaries tangible and intangible property. In addition, the
Company's obligations under the Existing Credit Facility are jointly
and severally guaranteed by all of the Company's operating
subsidiaries.
NEW FIRST UNION CREDIT FACILITY
The Company proposes to become a party to a Second Amended and
Restated Credit Agreement among the Company and First Union National
Bank, as agent (the "New First Union Credit Facility"). The New First
Union Credit Facility will consist of a two-year, secured $35.0 million
term loan. The Company will pay commitment and other fees of
approximately $1.0 million in connection with obtaining the New First
Union Credit Facility. Funds advanced under the New First Union Credit
Facility will be
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<PAGE> 16
used to partially refinance outstanding amounts under the Existing
Credit Facility and to pay certain transaction costs.
The New First Union Credit Facility will be secured by a lien
on substantially all of the Company's and its subsidiaries' tangible
and intangible property. In addition, the New First Union Credit
Facility will be jointly and severally guaranteed by all current and
future subsidiaries of the Company. Interest is payable on the New
First Union Credit Facility at a rate based on one of two customary
interest rates plus an additional interest margin of 375 or 500 basis
points, as applicable.
The New First Union Credit Facility requires the Company to
comply with various affirmative and negative covenants, including,
among others: (i) the maintenance of certain financial ratios, (ii)
restrictions on additional indebtedness, (iii) restrictions on liens,
guarantees, dividends and the disposition of assets and (iv)
restrictions on certain mergers, consolidations, and acquisitions. The
New First Union Credit Facility contains customary events of default,
including cross-default provisions relating to the Notes.
In connection with the New First Union Credit Facility, the
Company will issue to an affiliate of First Union detachable warrants
to purchase up to 4.0% of the Company's common stock on a fully-diluted
basis. The exercise price of the warrants will be nominal, and the
warrants will be exercisable at any time after the second anniversary
of the issuance of the warrants.
Before the effective date of the Proposed Amendments, the
letter of credit outstanding under the Existing Credit Facility will be
replaced by a $1.1 million letter of credit issued for the account of
Richmont Capital Partners I, L.P. ("RCPI"), the general partner of MS
Acquisition Ltd., the Company's largest shareholder. The Company will
in turn issue to RCPI a reimbursement note subordinated in right of
payment to the Notes in the amount of the letter of credit. The
promissory note will become payable if the letter of credit is drawn.
NEW CHASE REVOLVER
The Company also proposes to become a party to a Credit
Agreement among the Company, certain of its subsidiaries and The Chase
Manhattan Bank, as agent (the "New Chase Revolver", and together with
the New First Union Credit Facility, the "New Senior Credit Facility").
The New Chase Revolver will consist of a two-year, senior secured $50
million revolving line of credit, subject to a borrowing base equal to
a specified percentage of eligible receivables. The Company will pay
commitment and other fees of approximately $700,000 in connection with
obtaining the New Chase Revolver. Funds advanced under the New Chase
Revolver will be used by the Company to repay a portion of outstanding
amounts under the Existing Credit Facility, to partially finance the
acquisition of Sales Force, to finance the Company's working capital
and capital expenditure requirements in the ordinary course of
business, and to pay fees and expenses relating to the closing of the
New Chase Revolver. The New Chase Revolver contains customary events of
default, including cross-default provisions relating to the Notes.
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<PAGE> 17
The New Chase Revolver will be secured by a first priority
security interest in cash, cash equivalents, accounts receivable and
inventory of the Company and certain of its subsidiaries and proceeds
thereof but not in any asset that is the proceeds of equipment,
fixtures, real estate, intellectual property or the stock of
subsidiaries. In addition, Paul Inman, Bromar, Inc. and MSSC will be
co-borrowers under the New Chase Revolver, jointly and severally liable
for all borrowings and other related obligations thereunder. Interest
is payable on the New Chase Revolver at a rate based on one of two
customary interest rates plus an additional interest margin ranging
from 150 to 350 basis points. The applicable margin is determined based
on certain financial ratios of the Company.
The New Chase Revolver requires the Company to comply with
various affirmative and negative covenants, including, among others:
(i) the maintenance of certain financial ratios, (ii) restrictions on
additional indebtedness, (iii) restrictions on liens, guarantees,
dividends and the disposition of assets and (iv) restrictions on
certain mergers, consolidations, and acquisitions.
Amounts borrowed under the New Chase Revolver will be
guaranteed by RCPI, subject to a maximum guaranty amount of $10
million. The RCPI guaranty will be released by the lenders if the
Company achieves $40 million of EBITDA for the nine-month period ended
December 31, 2000 or if the Company achieves $50 million of EBITDA
during any subsequent twelve-month period.
PROPOSED AMENDMENTS
1. LIMITATION ON INDEBTEDNESS-BANK INDEBTEDNESS
(SECTION 4.03(b)(i))
Section 4.03(a) of the Indenture restricts the ability of the
Company and its Restricted Subsidiaries (as defined in Section 1.01 of
the Indenture) to incur Indebtedness (as defined in Section 1.01 of the
Indenture). Section 4.03(b)(i) of the Indenture permits the Company to
Incur Bank Indebtedness (as defined in Section 1.01 of the Indenture)
or Indebtedness pursuant to any other revolving credit, term loan or
working capital financings in an aggregate principal amount not to
exceed the greater of $25.0 million and the Borrowing Base (as defined
in Section 1.01 of the Indenture) in effect from time to time. The
Proposed Amendments would amend the $25.0 million limitation to provide
for an $85.0 million limitation. The $85.0 million limitation for
Section 4.03(b)(i) as set forth in the Proposed Amendments is the
maximum borrowing that would be available to the Company under the New
Senior Credit Facility. The purpose of the Proposed Amendment is to
permit the Company to refinance the Existing Credit Agreement and to
provide for an increase in the amount of permitted Indebtedness
thereunder under the terms of the Indenture.
The full text of the proposed clause (i) of Section 4.03(b) of
the Indenture, marked to indicate changes from the existing provision,
is set forth in Exhibit A hereto.
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<PAGE> 18
2. LIMITATION ON RESTRICTIONS ON DISTRIBUTIONS FROM RESTRICTED
SUBSIDIARIES (SECTION 4.05)
Section 4.05 of the Indenture restricts the ability of the
Company or any Restricted Subsidiary to create or permit to exist any
restriction on the ability of a Restricted Subsidiary, among other
things, to (x) make loans or advances to the Company or (y) transfer
any of its property or assets to the Company, subject to certain
exceptions. Among the permitted exceptions are restrictions that were
created under agreements that were in effect when the Notes were
originally issued, or under agreements constituting Refinancing
Indebtedness (as defined in Section 1.01 of the Indenture).
Encumbrances or restrictions created under the Existing Senior Credit
Facility fall within such exceptions and are permitted by the
Indenture. The New Senior Credit Facility described above contains
various negative covenants, including restrictions on the ability of
the Company and its Restricted Subsidiaries to make intercompany loans
and transfer assets. The Proposed Amendments would amend Section
4.05(i) of the Indenture to permit the restrictions that will be
imposed on the Company and its Restricted Subsidiaries by the New
Senior Credit Facility.
The full text of the proposed amendment to clause (i) of
Section 4.05 of the Indenture, marked to show changes from the existing
provision, is set forth in Exhibit A hereto.
3. DEFINITIONS OF CREDIT AGREEMENT AND SENIOR CREDIT DOCUMENTS
(SECTION 4.03(b)(i))
Section 1.01 of the Indenture defines "Credit Agreement" as
the credit agreement dated as of October 14, 1997, as amended and
restated as of the Closing Date (as defined in Section 1.01 of the
Indenture) and as further amended, restated, waived or otherwise
modified from time to time, among the Company and The Chase Manhattan
Bank, as agent (the "Former Chase Facility"). The Former Chase Facility
was in place at the time the Notes were issued in 1997, but was
subsequently refinanced by the Existing Credit Facility. The Proposed
Amendments would amend the definition of Credit Agreement in the
Indenture to refer to the New Senior Credit Facility, which refinances
the Company's Existing Credit Facility, which refinanced the Former
Chase Facility at the effective time of the Merger. The purpose of this
Proposed Amendment is to permit the Company to refinance the total
borrowings under the New Senior Credit Facility, if necessary, through
Refinancing Indebtedness (as defined in Section 1.01 of the Indenture),
since the term Bank Indebtedness used in Section 4.03(b)(i) refers to
the definition of Credit Agreement.
The full text of the proposed definition of "Credit
Agreement," marked to indicate changes from the existing definition, is
set forth in Exhibit A hereto.
In addition, Section 1.01 of the Indenture defines "Senior
Credit Documents" by reference to the Former Chase Facility as
described above. The Proposed Amendment would amend the definition of
Senior Credit Documents in the Indenture to properly refer
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<PAGE> 19
to documents executed and delivered by the Company or its subsidiaries
in connection with the New Senior Credit Facility.
The full text of the proposed definition of "Senior Credit
Documents," marked to indicate changes from the existing definition, is
set forth in Exhibit A hereto.
B. LIMITATION ON INDEBTEDNESS-ATTRIBUTABLE DEBT (SECTION 4.03(b)(VIII))
On February 17, 2000 Bromar, Inc., ("Bromar") an indirect
wholly owned subsidiary of the Company, sold to RCPI Office Properties,
LLC, ("RCPI Office Properties") an affiliate of MS Acquisition Ltd.,
real property comprising 25,112 square feet, owned by the Company. The
property, located in Phoenix, Arizona, was sold for a purchase price of
approximately $2.4 million. The Company has entered into a one-year
lease with RCPI Office Properties to lease the property at a base
monthly rent of $20,414.17. The Company Incurred Attributable Debt (as
defined in Section 1.01 of the Indenture) of approximately $0.2 million
pursuant to the Sale/Leaseback of this property under Section
4.03(b)(viii) of the Indenture.
On February 17, 2000 Bromar sold to RCPI Office Properties
real property comprising 37,350 square feet, owned by the Company and
located in Orange County, California, for a purchase price of
approximately $4.9 million. The Company has entered into a four-year
lease with RCPI Office Properties to lease the property at a base
monthly rent of $37,350.00. The Company Incurred Attributable Debt of
approximately $1.7 million pursuant to the Sale/Leaseback of this
property under Section 4.03(b)(viii) of the Indenture.
The terms of the Sale/Leaseback transactions consummated by
the Company were on terms no less favorable than could have been
obtained in arms-length dealings with a third party, and were
unanimously approved by the Company's Board of Directors.
In addition to the consummated Sale/Leaseback Transactions
described above, the Company intends to sell two buildings and the real
estate connected thereto, comprising 91,000 square feet, located in
Canton, Massachusetts for an anticipated sales price of approximately
$9.0 million (the "Canton Sale/Leaseback"). The Company plans to
leaseback 48,000 square feet of the property for a period of
approximately seven years. The Company intends to Incur Attributable
Debt of approximately $5.9 million in connection with such transaction.
The Company is currently marketing the property but has yet to accept
an offer. There can be no assurance that the Company can consummate
this transaction at all or on the terms described herein.
The Company also intends to sell two buildings and the real
estate connected thereto, comprising 99,700 square feet, located in
Charlotte, North Carolina for an anticipated sales price of
approximately $8.3 million (the "Charlotte Sale/Leaseback," and
together with the Canton Sale/Leaseback, the "Proposed Sale/Leaseback
Transactions"). The Company plans to leaseback 84,000 square feet of
the property for a ten-year term. The Company intends to Incur
Attributable Debt of approximately $8.7
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million in connection with such transaction. A letter of intent to
purchase the property was entered into on February 21, 2000 and the
Company expects the closing to occur on or before May 1, 2000. Pursuant
to a settlement agreement reached in December of 1999 between the
Company and Curtis L. Rogers, as representative of the former
shareholders of Rogers-American Company, Inc., $2.5 million of the
anticipated proceeds must be paid to the former shareholders of
Rogers-American Company, Inc. Rogers-American Company, Inc. was
acquired by the Company in December 1998. There can be no assurance
that the Company can consummate this transaction at all or on the terms
described herein.
PROPOSED AMENDMENTS
Section 4.14 of the Indenture prohibits the Company and its
Restricted Subsidiaries from entering into any Sale/Leaseback
Transaction (as defined in Section 1.01 of the Indenture) unless (i)
the Company is entitled to Incur Indebtedness in an amount equal to the
Attributable Debt with respect to such Sale/Leaseback Transaction
pursuant to Section 4.03 of the Indenture, (ii) the Company is entitled
to create a Lien (as defined in Section 1.01 of the Indenture) on such
property securing the Attributable Debt without equally and ratably
securing the Securities (as defined in Section 1.01 of the Indenture)
pursuant to Section 4.03 of the Indenture, (iii) the net cash proceeds
received by the Company in connection with the Sale/Leaseback
Transaction are at least equal to the fair market value of such
property, and (iv) the transfer of such property is permitted by, and
the Company applies the proceeds of such transaction in compliance
with, Section 4.06 of the Indenture (Limitation on Sales of Assets and
Subsidiary Stock). The Proposed Sale/Leaseback Transactions would
comply with clauses (ii) through (iv) of the immediately preceding
sentence and therefore the Company is only seeking a consent to amend
Section 4.03(b)(viii) of the Indenture with respect to such Proposed
Sale/Leaseback Transactions. Section 4.03(b)(viii) of the Indenture
permits the Company and its Restricted Subsidiaries to Incur
Attributable Debt in connection with a Sale/Leaseback Transaction, as
well as to Incur Purchase Money Indebtedness (as defined in Section
1.01 of the Indenture) and Indebtedness relating to Capitalized Lease
Obligations (as defined in Section 1.01 of the Indenture) in an
aggregate amount not to exceed $2.0 million at any time outstanding.
The Proposed Amendments would increase the amount of Indebtedness
related to Purchase Money Indebtedness, Capitalized Lease Obligations
and Attributable Debt permitted under this Section 4.03(b)(viii) from
$2.0 million to $18.0 million at any time outstanding. The purpose of
the Proposed Amendments is to permit the Company to effectuate
additional Sale/Leaseback Transactions, including, without limitation,
the Proposed Sale/Leaseback Transactions.
The full text of the proposed clause (viii) of Section 4.03(b)
of the Indenture, marked to indicate changes from the existing
provision, is set forth in Exhibit A hereto.
C. LIMITATION ON INDEBTEDNESS-GENERAL INDEBTEDNESS (SECTION 4.03(b)(IX)
AND (b)(x))
On January 18, 1999, MSSC acquired the assets of C.H. Belt and
Associates, Inc., a full-service food brokerage firm operating in
Southern California and Las Vegas,
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Nevada ("C.H. Belt"), for approximately $600,000 in cash and assumed
indebtedness. Approximately $500,000 of Indebtedness associated with
the C.H. Belt acquisition was Incurred pursuant to Section 4.03(b)(ix)
of the Indenture. For the year ended December 31, 1999, C.H. Belt had
revenues of approximately $1,079,400 and a net loss of approximately
$17,200. As of December 31, 1999, C.H. Belt had total assets of
approximately $568,900 and total stockholders' deficit of approximately
$169,900.
As of April 30, 1999, MSSC purchased the stock of
Timmons-Sheehan, Inc. d/b/a The Sell Group-Minneapolis, a full-service
brokerage firm operating in the Minneapolis region ("Timmons-Sheehan"),
for approximately $1.7 million in cash and $2.7 million in non-interest
bearing promissory notes subordinated in right of payment to the Notes.
Approximately $2.8 million of Indebtedness associated with the
Timmons-Sheehan acquisition was Incurred pursuant to Section
4.03(b)(ix) of the Indenture. For the year ended December 31, 1999,
Timmons-Sheehan had revenues of approximately $5.7 million and a net
loss of $150,000. As of December 31, 1999, Timmons-Sheehan had total
assets of approximately $1.1 million and total stockholders' equity of
approximately $41,400.
On January 27, 2000, MSSC acquired the assets of
Johnson-Lieber, a full-service food brokerage firm operating in
Washington, Alaska, Oregon and Montana, for approximately $3 million in
cash and $9.2 million in promissory notes subordinated in right of
payment to the Notes which are to be paid in 108 equal monthly
installments, the total present value of which is $5.5 million, and the
assumption of certain car and office leases. Approximately $9.2 million
of Indebtedness associated with the Johnson-Lieber acquisition was
Incurred pursuant to Section 4.03(b)(ix) of the Indenture. For the year
ended December 31, 1999, Johnson-Lieber had revenues of approximately
$11.7 million and net income of approximately $0.1 million.
The Company will, before the effective date of the Proposed
Amendments, issue to RCPI a $1.1 million reimbursement note
subordinated in right of payment to the Notes. The note is in respect
of a letter of credit, issued for the account of RCPI, which secures
certain of the Company's leasehold obligations. The promissory note
will become payable if the letter of credit is drawn. This Indebtedness
will be Incurred by the Company pursuant to Section 4.03(b)(ix) of the
Indenture.
PROPOSED AMENDMENTS
Section 4.03 of the Indenture restricts the ability of the
Company and its Restricted Subsidiaries to Incur Indebtedness. Section
4.03(b)(ix) of the Indenture permits the Company to Incur Indebtedness
other than Indebtedness permitted to be Incurred pursuant to Section
4.03(a) of the Indenture or any other clause of Section 4.03(b) of the
Indenture in an aggregate principal amount on the date of the
Incurrence that, when added to all other Indebtedness Incurred pursuant
to Section 4.03(b)(ix) and then outstanding does not exceed $15.0
million.
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The Proposed Amendments would amend Section 4.03(b)(ix) of the
Indenture to provide that Section 4.03(b)(ix) would only apply to
Indebtedness Incurred prior to the effective date of the Proposed
Amendments.
The full text of the proposed clause (ix) of Section 4.03(b)
of the Indenture, marked to indicate changes from the existing
provision, is set forth in Exhibit A hereto.
In addition, the Proposed Amendments would amend Section
4.03(b) to add a clause (x) which would permit the Company to Incur
Indebtedness on or after the effective date of the Proposed Amendments
(other than Indebtedness permitted to be Incurred pursuant to Section
4.03(a) of the Indenture or pursuant to any other clause of Section
4.03(b) of the Indenture) in an aggregate principal amount on the date
of the Incurrence that, when added to all other Indebtedness Incurred
pursuant to Section 4.03(b)(x) and then outstanding, does not exceed
$10.0 million.
The full text of the proposed clause (x) of Section 4.03(b) of
the Indenture, marked to indicate changes from the existing provision,
is set forth in Exhibit A hereto.
In connection with the Proposed Amendment to Section
4.03(b)(x), the Company is also seeking to amend Section 4.03(c) of the
Indenture to provide that any deferred obligations of any entity (other
than Sales Force.) acquired by the Company or any Restricted Subsidiary
which are assumed by the Company or a Restricted Subsidiary, in
reliance on Section 4.03(b) must be subordinated in right of payment to
the Notes. See "Limitation on Indebtedness-Subordination of Assumed
Deferred Obligations" below for a more complete description of this
proposal.
D. LIMITATION ON INDEBTEDNESS-SALES FORCE ACQUISITION
(SECTION 4.03(b)(XI))
Pursuant to a stock purchase agreement, dated as of March 2,
2000, MSSC has agreed to purchase all the issued and outstanding
capital stock of Sales Force. Sales Force is an Indiana corporation
operating in Illinois, Wisconsin, Minnesota, Missouri, Iowa, Oklahoma,
North Dakota, Nebraska and Kansas. The purchase price, including
certain adjustments described below, will be paid as follows: cash of
$5.0 million; assumed debt of approximately $8.5 million; and
promissory notes subordinated in right of payment to the Notes in an
amount not to exceed $11.5 million (determined in accordance with
generally accepted accounting principles). The purchase price is
subject to adjustment, either upward or downward, if, at the closing,
the: (i) long-term liabilities; (ii) present value of the
off-balance-sheet liabilities; (iii) working capital; or (iv)
unrestricted cash, of Sales Force is more or less than certain
threshold amounts. In addition, the Purchase Price will be increased by
$2.2 million if within one year following the closing, MSSC, or any
affiliate of MSSC, is appointed to represent certain principals and the
annualized commission revenues resulting from such appointment exceeds
a minimum amount. The closing of the Sales Force acquisition is subject
to the satisfaction or waiver of certain conditions set forth in the
purchase agreement. Under certain conditions, if the acquisition does
not close on or prior to April 14, 2000, Sales
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<PAGE> 23
Force has the right to terminate the purchase agreement and to receive
a termination fee of $500,000.
PROPOSED AMENDMENTS
Section 4.03 of the Indenture restricts the ability of the
Company and its Restricted Subsidiaries to Incur Indebtedness,
including Indebtedness Incurred in connection with acquisitions. The
Proposed Amendments would amend Section 4.03(b) to provide for a clause
(xi) which would permit the Company to Incur Indebtedness in an amount
not to exceed $20.0 million in connection with Mass's acquisition of
all of the outstanding capital stock of Sales Force. The purpose of the
Proposed Amendments is to permit the Company to consummate the
acquisition of Sales Force.
The full text of the proposed clause (xi) of Section 4.03(b)
of the Indenture is set forth in Exhibit A hereto.
E. LIMITATION ON INDEBTEDNESS-SUBORDINATION OF ASSUMED DEFERRED
OBLIGATIONS (SECTION 4.03(c))
In connection with acquisition by the Company or its
Restricted Subsidiaries of the capital stock, assets or operations of
other entities, the Company or its Restricted Subsidiaries may assume
certain obligations of the entities being acquired. See "Limitation on
Indebtedness-General Indebtedness Basket" for a description of the
Company's recent and pending acquisitions.
PROPOSED AMENDMENTS
Section 4.03 of the Indenture restricts the ability of the
Company and its Restricted Subsidiaries to Incur Indebtedness,
including Indebtedness Incurred in connection with acquisitions.
Section 4.03(c) of the Indenture restricts the ability of the Company
to Incur any Indebtedness if the proceeds thereof are used, directly or
indirectly, to repay, prepay, redeem, defease, retire, refund or
refinance any Subordinated Indebtedness (as defined in Section 1.01 of
the Indenture). Section 4.03(c) also restricts the ability of the
Company to Incur Deferred Obligations unless such Deferred Obligations
are expressly subordinated in right of payment to the Notes.
The Proposed Amendments would amend Section 4.03(c) to provide
that the Company may not Incur any Assumed Deferred Obligations (as
defined) unless such Assumed Deferred Obligations are expressly
subordinated in right of payment to the Notes. The Proposed Amendments
would not be applicable to Assumed Deferred Obligations Incurred in
connection with the Sales Force Acquisition. The purpose of the
Proposed Amendments is to restrict the ability of the Company to Incur
Assumed Deferred Obligations in connection with acquisitions by the
Company or its Restricted Subsidiaries, and to ensure that any Assumed
Deferred Obligations Incurred are junior in right of payment to the
Notes.
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<PAGE> 24
The full text of the Proposed Amendments to clause (c) of
Section 4.03 of the Indenture, marked to indicate changes from the
existing provision, is set forth in Exhibit A hereto.
In connection with the Proposed Amendment to Section 4.03(c),
the Proposed Amendments would also amend Section 1.01 to provide for a
definition of Assumed Deferred Obligations. Pursuant to the Proposed
Amendments, "Assumed Deferred Obligations" would mean, with respect to
an entity acquired by the Company or any Restricted Subsidiary, any
Indebtedness of that entity issued to the employees of, stockholders
of, or the holders of an equivalent equity interest in, any other
entity previously acquired by the entity being acquired by the Company
or Restricted Subsidiary, as the case may be.
The full text of the proposed definition of "Assumed Deferred
Obligations" is set forth in Exhibit A hereto.
F. LIMITATION ON INDEBTEDNESS-INCURRENCE OF INDEBTEDNESS IN CONNECTION
WITH ACQUISITIONS (SECTION 4.03(c))
In connection with acquisitions by the Company or its
Restricted Subsidiaries of the capital stock, assets or operations of
other entities, the Company or its Restricted Subsidiaries may, subject
to Section 4.03, Incur Indebtedness as a result of such acquisitions or
may assume certain obligations of the entities being acquired. See
"Limitation on Indebtedness-General Indebtedness" for a description of
the Company's recent and pending acquisitions.
PROPOSED AMENDMENTS
Section 4.03 of the Indenture restricts the ability of the
Company and its Restricted Subsidiaries to Incur Indebtedness,
including Indebtedness Incurred in connection with acquisitions.
The Proposed Amendments would amend Section 4.03(c) to provide
that, after the effective date of the Proposed Amendments, the Company
may not incur any Indebtedness (including Deferred Obligations and
Assumed Deferred Obligations) pursuant to Section 4.03(b) in connection
with the acquisition of any Person by the Company or any Restricted
Subsidiary unless substantially concurrent with such Incurrence, the
Company receives cash capital contributions or cash proceeds from the
sale of Capital Stock (other than Disqualified Stock (as defined in
Section 1.01 of the Indenture)) in an amount equal to such
Indebtedness. The Proposed Amendments to Section 4.03(c) would not be
applicable to the Incurrence of Indebtedness in connection with the
acquisition of Sales Force, or to Indebtedness consisting of Purchase
Money Indebtedness, Attributable Debt and Capitalized Lease Obligations
which is otherwise permitted by clause (viii) of Section 4.03(b). The
Proposed Amendments would not be applicable to Indebtedness Incurred
pursuant to Section 4.03(a). The purpose of the
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<PAGE> 25
Proposed Amendments is to restrict the ability to Incur additional
Indebtedness in connection with acquisitions by the Company.
The full text of the Proposed Amendments to clause (c) of
Section 4.03 of the Indenture, marked to indicate changes from the
existing provision, is set forth in Exhibit A hereto.
G. LIMITATION ON RESTRICTED PAYMENTS-NET CASH PROCEEDS
(SECTION 4.04(a)(C)(2))
Section 4.04(a) limits the ability of the Company and its
Restricted Subsidiaries to make Restricted Payments (as defined in
Section 4.04(a) of the Indenture). Section 4.04(a) provides that the
Company and its Restricted Subsidiaries may not make a Restricted
Payment if (A) a Default (as defined in Section 1.01 of the Indenture)
shall have occurred and be continuing, (B) the Company could not Incur
at least $1.00 of additional Indebtedness under Section 4.03(a) of the
Indenture or (C) the aggregate amount of such Restricted Payment and
all other Restricted Payments would exceed the sum of (1) 50% of
Consolidated Net Income (as defined in Section 1.01 of the Indenture)
accrued during the period from the Closing Date (as defined in Section
1.01 of the Indenture) to the end of the most recent fiscal quarter
ending prior to the date of such Restricted Payment for which financial
statements are then available, (2) the aggregate Net Cash Proceeds (as
defined in Section 1.01 of the Indenture) received by the Company from
the issue or sale of its Capital Stock (other than Disqualified Stock)
subsequent to the Closing Date, (3) the aggregate Net Cash Proceeds
received by the Company from the issue or sale of its Capital Stock
(other than Disqualified Stock) to an employee stock ownership plan or
other trust subsequent to the Closing Date, (4) the amount by which
Indebtedness of the Company or its Restricted Subsidiaries is reduced
on the Company's balance sheet upon the conversion or exchange of any
Indebtedness of the Company or its Restricted Subsidiaries issued
subsequent to the Closing Date and convertible or exchangeable for
Capital Stock (other than Disqualified Stock) of the Company, and (5)
the amount equal to the net reduction in Investments (as defined in
Section 1.01 of the Indenture) in Unrestricted Subsidiaries (as defined
in Section 1.01 of the Indenture) resulting from the payments of
dividends, repayments of the principal of loans or advances or other
transfers of assets to the Company or any Restricted Subsidiary from
Unrestricted Subsidiaries or the redesignation of Unrestricted
Subsidiaries as Restricted Subsidiaries not to exceed, in the case of
an Unrestricted Subsidiary, the amount of Investments previously made
by the Company in such Unrestricted Subsidiary, which amount was
included in the calculation of the amount of Restricted Payments or the
sale, liquidation or repayment of any such Investment in Unrestricted
Subsidiaries, in an amount not to exceed the lesser of (x) the net cash
proceeds received by the Company or any Restricted Subsidiary in
connection with such sale, liquidation or repayment, and (y) the
initial amount of such Investment, which amount was included in the
calculation of the amount of Restricted Payments.
The Proposed Amendments would amend Section 4.04(a)(C)(2) to
provide that the Net Cash Proceeds resulting from the Equity Investment
or the sale of Capital Stock in connection with the Incurrence of
acquisition-related Indebtedness (as described under
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<PAGE> 26
the heading "Limitation of Indebtedness-Incurrence of Indebtedness in
Connection with Acquisitions") would not constitute Net Cash Proceeds
for the purposes of determining whether a Restricted Payment may be
made.
The full text of the proposed amendment to Section
4.04(a)(C)(2), marked to indicate changes from the existing provision,
is set forth in Exhibit A hereto.
THE COMPANY CANNOT PREDICT THE EFFECT, IF ANY, THAT THE
PROPOSED AMENDMENTS WOULD HAVE ON THE MARKET PRICE OF THE NOTES. THE
PROPOSED AMENDMENTS COULD INCREASE THE CREDIT RISKS WITH RESPECT TO THE
COMPANY, ADVERSELY AFFECT THE MARKET PRICE OF THE NOTES, OR OTHERWISE
BE MATERIALLY ADVERSE TO THE INTERESTS OF THE HOLDERS.
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<PAGE> 27
PRO FORMA CAPITALIZATION
The following sets forth a historical and pro forma capitalization
table of the Company. The pro forma column gives effect to (i) total borrowings
of $56.1 under the New Senior Credit Facility, with $28.9 in remaining borrowing
capacity, (ii) the purchase of $10.0 million of common stock of the Company by
MS Acquisition Ltd., (iii) the acquisition of approximately 1.6 million shares
of common stock of the Company by MS Acquisition Ltd. on January 7, 2000 for
$5.0 million, (iv) the acquisition of Johnson-Lieber, Inc., (v) the acquisition
of Sales Force and (vi) the February 17, 2000 consummation of Sale/Leaseback
Transactions relating to Bromar's properties located in Phoenix, Arizona and
Orange County, California. The pro forma column does not give effect to the
anticipated Sale/Leaseback Transactions relating to the Company's properties
located in Canton, Massachusetts and Charlotte, North Carolina and the related
Attributable Debt that would be Incurred pursuant thereto or to any Indebtedness
that may be Incurred pursuant to the proposed clause (x) of Section 4.03(b).
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
-----------------------
ACTUAL PRO FORMA
------ ---------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Revolving Credit Facility(1)................... $ 20.3 $ 21.1
Term Loan 43.8 35.0
Mortgage....................................... 12.9 12.9
Acquisition Obligations........................ 98.0 118.8
Other.......................................... 8.2 8.2
10-1/8% Sr. Sub. Notes......................... 100.0 100.0
------- --------
Total Debt..................................... 283.2 296.0
Shareholders' Equity........................... 118.2 136.2
------- --------
Total Capitalization........................... $ 401.4 $ 432.2
======= ========
</TABLE>
- -------------
(1) Following the refinancing of the revolving credit facility, the new
revolving credit facility will provide for borrowings of up to $50
million.
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<PAGE> 28
RISK FACTORS
Holders of Notes should carefully consider, in addition to the other
information set forth in this Consent Solicitation Statement and in the
accompanying form of Consent, the following factors before marking and returning
a Consent.
SUBSTANTIAL AND INCREASED LEVERAGE; ABILITY TO SERVICE INDEBTEDNESS
The Company has significant debt service obligations. Such obligations
will increase as a result of the incurrence of additional indebtedness in
connection with the Proposed Amendments. As of December 31, 1999, the Company
had aggregate outstanding long term indebtedness of approximately $228.0
million, and stockholders' equity equal to approximately $118.0 million. After
giving effect to G) borrowings of $33.0 million under the New Senior Credit
Facility, with $17.0 million in remaining borrowing capacity, (ii) the purchase
of $10.0 million of common stock of the Company by MS Acquisition Ltd., (iii)
the acquisition of approximately 1.6 million shares of common stock of the
Company by MS Acquisition Ltd. on January 7, 2000, (iv) the acquisition of
Johnson-Lieber, (v) the acquisition of Sales Force, (vi) the February 17, 2000,
consummation of Sale/Leaseback Transactions relating to Bromar's properties
located in Phoenix, Arizona and Orange County, California, as if they had
occurred as of December 31, 1999, the Company would have had aggregate
outstanding long term indebtedness of approximately $257.9 million and
stockholders' equity equal to approximately $136.2 million. In addition, the
Proposed Amendments will permit the Company and its Restricted Subsidiaries to
Incur additional Indebtedness of $10.0 million and engage in additional
Sale/Leaseback Transactions resulting in Attributable Debt in an amount not to
exceed $18.0 million. The Company may incur additional indebtedness in the
future, subject to certain limitations contained in the instruments governing
its indebtedness, including the Indenture.
The Company's high degree of leverage could have important consequences
to Holders, including, but not limited to, the following: (i) the Company's
ability to obtain additional financing in the future for working capital
expenditures, debt service requirements, acquisition, general corporate purposes
and other purposes may be materially limited or impaired; (ii) a substantial
portion of the Company's cash flow from operations must be dedicated to the
payment of principal and interest on its indebtedness, thereby reducing the
funds available to the Company for other purposes, including its operations and
future business opportunities; (iii) certain of the Company's borrowings,
including borrowings under the New Senior Credit Facility, will be at variable
rates of interest, exposing the Company to the risk of fluctuating interest
rates; (iv) the indebtedness outstanding under the New Senior Credit Facility
will be secured by a lien on substantially all the assets of the Company and
will mature prior to the maturity of the Notes; (v) the Company's flexibility to
adjust to changing market conditions and ability to withstand competitive
pressures could be limited by its leveraged position and the covenants contained
in its debt instruments, thus putting the Company at a competitive disadvantage;
and (vi) the Company may be vulnerable in a downturn in general economic
conditions or in its business or be unable to carry out capital spending that is
important to its growth and productivity improvement programs.
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<PAGE> 29
The Company will be required to make scheduled principal payments under
the New Senior Credit Facility prior to maturity of the Notes. The Company's
ability to make scheduled payments or to refinance its obligations with respect
to its indebtedness, including the Notes, will depend on its financial and
operating performance, which is subject to prevailing economic and competitive
conditions and to certain financial, business and other factors beyond its
control, including interest rates and increased operating costs. There can be no
assurance that the Company will maintain a level of cash flows from operations
sufficient to permit it to pay the principal, premium, if any, and interest on
its indebtedness, including the Notes.
If the Company's cash flow and capital reserves are insufficient to
fund its debt service obligations, the Company may be forced to reduce or delay
capital expenditures, sell assets, seek additional capital or restructure or
refinance its indebtedness, including the Notes. There can be no assurance that
any such alternative measures would be successful or would permit the Company to
meet its scheduled debt service obligations. In the absence of such operating
results and resources, the Company could face substantial liquidity problems and
might be required to dispose of material assets or operations to meet its debt
service and other obligations. The Indenture restricts, and the New Senior
Credit Facility will restrict, the Company's ability to sell assets and use the
proceeds therefrom. There can be no assurance as to the ability of the company
to consummate such sales or to obtain the proceeds which the company could
realize therefrom or that such proceeds would be adequate to meet the
obligations then due.
In the event that the Company is unable to generate sufficient cash
flow and the Company is otherwise unable to obtain funds necessary to meet
required payments of principal, premium, if any, or interest on its
indebtedness, or if the Company otherwise fails to comply with the various
covenants in the instruments governing such indebtedness (including covenants in
the Indenture and the New Senior Credit Facility) the Company could be in
default under the terms of agreements governing such indebtedness, including the
Indenture and the New Senior Credit Facility. In the event of such default, the
holders of such indebtedness could elect to declare all the funds borrowed
thereunder to be due and payable together with accrued and unpaid interest, the
lenders under the New Senior Credit Facility could elect to terminate their
commitments thereunder and the Company could be forced into bankruptcy or
liquidation. Any default under the agreements governing the indebtedness of the
Company could have a significant adverse effect on the Company's ability to pay
principal, premium, if any, and interest on the Notes and on the market value of
the Notes.
Absent the adoption of the Proposed Amendments and the consummation of
the transactions described herein, including the Equity Investment and the
refinancing of the Existing Credit Facility, the Company believes that its
ability to fund working capital would be significantly limited, it would lack
sufficient liquidity, and its ability to complete its national coverage strategy
would be significantly impaired.
FRAUDULENT TRANSFER AND PREFERENCE CONSIDERATIONS
The incurrence of the Consent Payments are subject to review under
relevant federal and state fraudulent conveyance and similar statutes in a
bankruptcy case or a lawsuit by or on behalf of creditors of the Company. Under
these statutes, if a court were to find that, at the time the
29
<PAGE> 30
Consent Payments were made, the Company (i) was insolvent, (ii) was rendered
insolvent by reason of the Consent Payments, (iii) was engaged in a business
transaction for which the remaining assets of the Company constituted
unreasonably small capital, or (iv) intended to incur, or believed it would
incur, debts beyond its ability to pay as such debts matured, such court may be
asked to void the Consent Payments (in whole or in part) as a fraudulent
conveyance and require that Holders who receive Consent Payments pursuant to the
Solicitation and in certain cases their transferees, turn over to the Company's
trustee in bankruptcy or to the Company as a debtor in possession, for the
benefit of the Company's creditors, such Consent Payments. The measure of
insolvency for purposes of the foregoing will vary depending upon the
jurisdiction the law of which is being applied. Generally, however, the Company
would be considered insolvent if the fair value of its assets was less than the
amount of its liabilities or if it incurred debts beyond its ability to repay
such debts as they mature.
The Company believes that it will be solvent at the time of the Consent
Payments, will be able to repay its debts as they mature following Consent
Payments and will have sufficient capital to carry on its business.
Separate and apart from any fraudulent transfer risk, the Consent
Payments may also be subject to challenge as preference payments under the
federal bankruptcy laws if such payments (i) are determined to have been made on
account of antecedent debt, (ii) are made within 90 days (or one year, if the
relevant recipient is an insider of the Company) prior to a bankruptcy filing by
or against the Company, (iii) are made when the Company is insolvent and (iv)
permit the relevant recipient to receive more than it otherwise might receive in
a Chapter 7 liquidation under the bankruptcy laws. If such payment were deemed
to be a preference, such payment could be recovered by the Company's trustee in
the bankruptcy or the Company as a debtor in possession, and the recipients
whose payments were recovered would be entitled to have claims against the
Company.
EFFECTS OF THE PROPOSED AMENDMENTS
If the Requisite Consents are received to enable the Company to
consummate the refinancing of its Existing Senior Credit Facility, additional
Sale/Leaseback Transactions, the incurrence of an additional $10.0 million of
Indebtedness and acquisition of Sales Force, and the Third Supplemental
Indenture is executed, certain of the principal restrictive covenants contained
in the Indenture will be amended, thereby enabling the refinancing of its
Existing Senior Credit Facility, additional Sale/Leaseback Transactions, the
incurrence of an additional $10.0 million of Indebtedness and the acquisition of
Sales Force to be consummated. The Indenture, as so amended, will continue to
govern the terms of the Notes. The amended covenants and other provisions will
permit the Company to, among other things, incur indebtedness, engage in the
additional Sale/Leaseback Transactions and make the acquisition of Sales Force,
which would otherwise not have been permitted pursuant to the Indenture. It is
possible that such actions will increase the credit risk with respect to the
Company faced by Holders. See "-Substantial and Increased Leverage; Ability to
Service Indebtedness."
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<PAGE> 31
THE SOLICITATION
Holders and beneficial owners of the Notes are urged to consult their
financial and tax advisors in making their own decision on what action to take
with respect to the Proposed Amendments.
GENERAL
Following the receipt by the Trustee of an Officers' Certificate
certifying that the Requisite Consents have been received, the Company and the
Trustee may, at the Company's sole discretion, execute and deliver the Third
Supplemental Indenture containing the Proposed Amendments. The Third
Supplemental Indenture will become effective upon such execution, the concurrent
consummation of the Equity Investment, and the satisfaction of conditions to
such effectiveness as set forth in the Indenture and the Third Supplemental
Indenture. The Third Supplemental Indenture will be binding upon each Holder,
regardless of whether or not such Holder delivered its Consent. If the
Solicitation is terminated for any reason, the Consents will be voided, no
Consent Payments will be made, and the Proposed Amendments will not become
effective.
Participation in the Solicitation is voluntary, and Holders and
beneficial owners of the Notes should consider carefully whether to consent to
the Proposed Amendments.
Consents are being solicited by the Company. The Company has retained
Chase Securities Inc. (the "Solicitation Agent") to aid in the solicitation of
Consents, including, but not limited to, soliciting Consents from brokerage
firms, banks, nominees, custodians and fiduciaries. The Company has also
retained Georgeson Shareholder Communications Inc. (the "Information Agent") to
provide information in connection with the Solicitation.
REQUISITE CONSENTS
Adoption of the Proposed Amendments requires the valid and unrevoked
Consent of Holders of at least a majority in aggregate principal amount of Notes
outstanding on the Record Date. As of the Record Date, $100.0 million aggregate
principal amount of Notes was outstanding. Accordingly, the Proposed Amendments
must be approved by the Holders of more than $50.0 million aggregate principal
amount of the Notes.
The Company may, in its sole discretion, execute and deliver the Third
Supplemental Indenture, subject to the terms and conditions set forth herein, as
soon as is practicable after the receipt by the Trustee of an Officers'
Certificate certifying that the Requisite Consents have been received. However,
the Company reserves the right to delay execution and delivery of the Third
Supplemental Indenture until such time following the receipt by the Trustee of
an Officers' Certificate certifying that the Requisite Consents have been
received as the Company deems appropriate.
The failure of a Holder to deliver a Consent will have the same effect
as if such Holder had voted "Against" the Proposed Amendments.
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<PAGE> 32
FAILURE TO OBTAIN REQUISITE CONSENTS
In the event the Requisite Consents are not received or the
Solicitation is terminated for any reason, no Consent Payments will be made and
the Proposed Amendments will not become effective.
RECORD DATE
Registered Holders as of the close of business on the Record Date
(March 17, 2000) will be entitled to notice of, and Holders will be entitled to
consent to, the Proposed Amendments.
CONSENT PAYMENTS
In the event that certain conditions described below, including receipt
by the Company of the Requisite Consents prior to the Expiration Date which have
not been duly revoked, are satisfied, the Company will make a Consent Payment to
each Holder or its Duly Designated Proxy, as further described below. The
Consent Payment will be in cash in an amount equal to $20.00 per $1,000 of
principal amount of Notes held by such Holder on the Record Date. No interest
will accrue or be payable on Consent Payments.
Each Holder or Duly Designated Proxy will be eligible to receive the
Consent Payment. Holders or Duly Designated Proxies who do not timely vote in
favor of the Proposed Amendments, Holders or Duly Designated Proxies whose
Consents to the Proposed Amendments are timely revoked as aforesaid and Holders
or Duly Designated Proxies who vote against the Proposed Amendments will still
receive the Consent Payment and the Proposed Amendments with respect to such
Notes, if it becomes effective, will be binding on them and any transferee
thereof. The Consent Payment will only be paid if the Company receives the
Requisite Consents prior to the Expiration Date and such Consents have not been
duly revoked.
The Company's obligation to make Consent Payments to Holders is
contingent upon, among other things, the (i) receipt of the Requisite Consents
by the Company prior to the Expiration Date and such Requisite Consents not
being revoked, (ii) execution, delivery and continued effectiveness of the Third
Supplemental Indenture, (iii) substantially concurrent refinancing of the
Company's Existing Senior Credit Facility and (iv) substantially concurrent
purchase from the Company by MS Acquisition Ltd. of common stock of the Company
for $10.0 million. Consent Payments will be made promptly after the satisfaction
of such conditions by check mailed to the respective addresses of the Holders
entitled to receive Consent Payments as such addresses appear on records
maintained by the Trustee as of the Record Date or to such other person
designated in the Special Payment Instructions box in the form of Consent.
Payment will not be made through DTC.
CONSENT PROCEDURES
This Consent Solicitation Statement and the form of Consent are being
sent to all Holders. Only Holders (or their Duly Designated Proxies) may execute
and deliver a Consent.
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<PAGE> 33
A beneficial owner of Notes who is not the Holder of such Notes (e.g., a
beneficial owner whose Notes are recorded in the name of a nominee such as a
brokerage firm) and who wants to consent to the Proposed Amendments and receive
a Consent Payment must either (i) arrange for the Holder to execute the Consent
and deliver it to the Trustee on such beneficial owner's behalf or (ii) obtain a
proxy duly executed by the Holder authorizing the beneficial owner to execute
and deliver to the Trustee the Consent with respect to the Notes on behalf of
such Holder. A form of proxy that may be used for such purpose is included with
the form of Consent.
"DTC Participants" (i.e., brokers, banks and other financial
institutions that participate through DTQ, rather than DTC or its nominee, must
execute the form of Consent. The Company anticipates that DTC or its nominee
will execute an omnibus proxy in favor of DTC Participants holding such Notes,
which will authorize each such DTC Participant to consent to the Proposed
Amendments with respect to the principal amount of Notes shown as beneficially
owned by such DTC Participant on the books of DTC on the Record Date.
Any beneficial owner of Notes held of record on the Record Date by DTC
or its nominee, through authority granted by DTC, may direct the DTC Participant
through which such beneficial owner's Notes are held in DTC on the Record Date
to execute, on such beneficial owner's behalf, or may obtain a proxy from such
DTC Participant and execute directly as if such beneficial owner were a Holder,
the Consent with respect to Notes beneficially owned by such beneficial owner on
the date of execution.
Any Holder or Duly Designated Proxy will be entitled to receive the
Consent Payment upon the satisfaction of all conditions relating thereto,
including receipt of the Requisite Consents, whether or not such Holder
thereafter transfers to another person the Notes to which the Consent relates. A
Consent, if effective, will be binding on any transferee(s) whether or not any
notation with respect to the Consent is made on the Notes relating to such
Consent. If a Holder or Duly Designated Proxy desires to transfer the right to
receive the Consent Payment to any transferee of the Notes, such Holder or Duly
Designated Proxy may complete the applicable provision for directing payment in
the form of Consent.
HOW TO CONSENT
All forms of Consent that are properly completed, executed and
delivered to the Trustee before 5:00 RM., New York City time, on the Expiration
Date and not revoked before the Consent Date will be given effect in accordance
with the specifications thereof. Holders (or their Duly Designated Proxies) who
desire to consent to the Proposed Amendments should mark the FOR box on the form
of Consent and complete, sign, and date such form of Consent included herewith
and mail, hand deliver, or send by overnight courier or facsimile (confirmed by
physical delivery) their properly completed and executed Consent to the Trustee
at its address listed on the back cover page hereof and on the form of Consent,
all in accordance with the instructions contained herein and therein. IF NONE OF
THE BOXES ON THE CONSENT IS CHECKED, BUT THE CONSENT IS OTHERWISE PROPERLY
COMPLETED AND EXECUTED, THE HOLDER WILL BE DEEMED TO HAVE CONSENTED TO THE
PROPOSED AMENDMENTS. The method of delivery of the Consent and all other
required documents to the Trustee is at the election and risk of the Holders
and, except as otherwise provided in the form of Consent, delivery will be
deemed made only when actually
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received by the Trustee. If such delivery is by mail, it is recommended that the
Holder use registered mail with return receipt requested. In all cases,
sufficient time should be allowed to assure timely delivery. FORMS OF CONSENT
SHOULD BE DELIVERED TO THE TRUSTEE, AND NOT TO THE COMPANY, THE INFORMATION
AGENT OR THE SOLICITATION AGENT. HOWEVER, THE COMPANY RESERVES THE RIGHT TO
ACCEPT ANY CONSENT RECEIVED BY THE COMPANY, THE INFORMATION AGENT OR THE
SOLICITATION AGENT. IN NO EVENT SHOULD A HOLDER TENDER OR DELIVER NOTES IN
CONNECTION WITH THE SOLICITATION.
A form of Consent must be executed by a Holder in exactly the same
manner as such Holder's name appears on the certificates for the Notes or on a
security position listing as the owner of the Notes. If Notes to which the
Consent relates are held of record by two or more joint holders, all such
Holders must sign the Consent. If a Consent is signed by a trustee, partner,
executor, administrator, guardian, attorney-in-fact, officer of a corporation,
or other person acting in a fiduciary or representative capacity, such person
must so indicate when signing and must submit with the Consent appropriate
evidence of authority to execute the Consent. In addition, if a Consent relates
to less than the total principal amount of Notes recorded in the name of such
Holder, the Holder must list the serial numbers (or other information sufficient
to enable the Trustee to identify such Notes) and principal amount of Notes
recorded in the name of such Holder to which the Consent relates. If Notes are
recorded in different names, separate forms of Consent must be executed by each
such Holder. If a Consent is executed by a person other than the Holder, then it
must be accompanied by a proxy or an appropriate power of attorney in a form
satisfactory to the Company and the Trustee, in each case duly executed by the
Holder.
Pursuant to Section 9.04 of the Indenture, until the Proposed
Amendments becomes effective, a Consent to the Proposed Amendments by a Holder
is a continuing consent by that Holder and every subsequent registered holder of
such Note or portion thereof that evidences the same debt as the consenting
Holder's Note, even if notation of the Consent is not made on any such Note.
However, any such Holder or subsequent holder may revoke the Consent as to his
Note or portion thereof prior to the Expiration Date by following the procedures
for revoking Consent described in "Revocation of Consent" below.
The record ownership of a Note shall be proved by the Trustee. All
questions as to the validity, form, and eligibility (including time of receipt)
for Consent Payments and acceptance or revocation of Consents with respect to
Notes will be determined by the Company in its sole discretion, which
determination will be conclusive and binding subject only to such final review
as may be required by the Trustee concerning proof of execution and ownership.
The Company reserves the absolute right to reject any or all forms of Consent or
revocations that are not in proper form or the acceptance of which could, in the
opinion of the Company or its counsel, be unlawful. The Company also reserves
the right, subject to such final review as the Trustee requires for proof of
execution and ownership, to waive any defects or irregularities in connection
with deliveries of particular forms of Consents or revocations. Unless waived,
any defects or irregularities in connection with deliveries of forms of Consents
or revocations must be cured within such time as the Company shall determine.
None of the Company, any of its affiliates, the Solicitation Agent, the
Information Agent, the Trustee or any other person shall be under any duty to
give any notification of any such defects, irregularities, or waiver, nor shall
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any of them incur any liability for failure to give such notification. The
Company's interpretation of the terms and conditions of this Solicitation shall
be conclusive and binding.
EXPIRATION DATE; EXTENSION; AMENDMENTS
The Term "Expiration Date" means 5:00 P.M., New York City time, on
March 30, 2000, unless the Company, in its sole discretion, extends the period
during which the Solicitation is open, in which event the term "Expiration Date"
means the latest time and date to which the Solicitation is extended. If the
Trustee receives an Officers' Certificate certifying that the Requisite Consents
have been received on any date prior to the Expiration Date, the Third
Supplemental Indenture may, at the Company's sole discretion, be executed and
delivered at such prior date. The Company reserves the right to extend the
Solicitation at any time and from time to time, whether or not the Requisite
Consents have been received, by giving oral (confirmed in writing) or written
notice to the Trustee no later than 9:00 A.M., New York City time, on or before
the next business day after the previously announced Expiration Date. Any such
extension will be followed as promptly as practicably by notice thereof by press
release or other public announcement (or by written notice to Holders). Such
announcement or notice may state that the Company is extending the Solicitation
for a specified period of time or on a daily basis until 5:00 P.M., New York
City time, on the date on which the Requisite Consents have been received.
The Company expressly reserves the right for any reason (i) to
terminate the Solicitation at any time (whether or not the Requisite Consents
have been received) by giving oral (confirmed in writing) or written notice of
such termination to the Trustee and (ii) not to extend the Solicitation beyond
the Expiration Date whether or not the Requisite Consents have been received by
such date. Any such action by the Company will be followed as promptly as
practicable by notice thereof by press release or other public announcement (or
by written notice to Holders). If the Solicitation is terminated by the Company,
for any reason, all Consents will be voided, no Consent Payments will be made
and the Proposed Amendments will not be effected.
The Company expressly reserves the right to modify at any time or from
time to time, the terms of the Solicitation (including, without limitation,
modifying the amount or form of consideration to be paid to Holders delivering
Consents) and the Proposed Amendments in any manner it deems necessary or
advisable. If the Company delivers (i) an Officers' Certificate to the Trustee
in accordance with the terms of the Indenture certifying that, and (ii) if the
Trustee reasonably requires, an opinion of counsel to the effect that such
modifications are not, in the aggregate, adverse to Holders (compared to the
terms of the Solicitation and the Proposed Amendments described in this Consent
Solicitation Statement), Consents given prior to such modifications will remain
valid and effective and will constitute Consents to the Proposed Amendments, as
so modified. The Trustee is entitled to rely conclusively on any such
certificate or opinion. The Company will not be obligated to deliver notice of
such amendments to Holders prior to executing the Third Supplemental Indenture.
Notwithstanding the foregoing, no reduction of the Consent Payments, or any
other modifications that are, in the aggregate, materially adverse to Holders,
will be made without at least five business days' notice thereof by
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<PAGE> 36
press release or other public announcement (or by written notice to Holders) or
without providing Holders with an opportunity to withdraw their Consents.
REVOCATION OF CONSENT
Each properly completed and executed Consent received by the Trustee
prior to the Expiration Date will be counted, notwithstanding any transfer of
the Notes to which it relates, unless the procedure for revoking Consents
described below has been followed. A Consent delivered by a Holder or Duly
Designated Proxy before the Expiration Date shall be deemed to supersede any
earlier revocation of Consent relating to the same Notes.
A Consent may be revoked by the Holder granting such Consent (or a Duly
Designated Proxy of such Holder) if the Trustee receives a properly completed
and executed written notice of revocation before the Consent Date. EXCEPT AS
PROVIDED ELSEWHERE IN THIS CONSENT SOLICITATION STATEMENT, A CONSENT BECOMES
IRREVOCABLE UPON THE CONSENT DATE. The notice of revocation must indicate the
serial numbers of the Notes in which such revocation relates (or other
information sufficient to enable the Trustee to identify such Notes), as well as
the aggregate principal amount represented by such Notes. The fact and date of
the execution of any such revocation must be proved in such manner as the
Company deems sufficient, subject to such reasonable rules and regulations as
the Trustee prescribes. A transferee of Notes may revoke a Consent given by a
Holder in respect of such Notes only if such transferee is a Duly Designated
Proxy. In such case, the transferee must deliver to the Trustee a revocation of
Consent accompanied by a proxy duly executed by such Holder in accordance with
the procedures set forth above.
The revocation must be executed by such Holder in exactly the same
manner as such Holder's name appears on the Consent to which the revocation
relates or be accompanied by evidence satisfactory to the Company and the
Trustee that the holder revoking such Consent has succeeded to registered
ownership of the Notes to which such Consent relates or otherwise has the power
to revoke such Consent pursuant a duly executed proxy. If a revocation is signed
by a trustee, partner, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or representative
capacity, such person must so indicate when signing and must submit with the
revocation appropriate evidence of authority to execute the revocation. A
revocation of the Consent shall be effective only as to the Notes listed on the
revocation and only if such revocation complies with the provisions of the form
of Consent and this Consent Solicitation Statement. Only a Holder as reflected
in the records of the Trustee on the Record Date or its Duly Designated Proxy is
entitled to revoke a Consent previously given with respect to such Notes. A
beneficial owner of Notes who is not the Holder of such Notes desiring to revoke
a Consent given with respect to such Notes must either (i) arrange with the
Holder to execute and deliver either to the Trustee on such beneficial owner's
behalf, or to such beneficial owner for forwarding to the Trustee by such
beneficial owner, a revocation of any Consent already given with respect to such
Notes, or (ii) obtain a proxy duly executed by the Holder authorizing such
beneficial holder to act on behalf of the Holder as to such Consent.
A revocation of a Consent may only be rescinded by the execution and
delivery of a new Consent. A Holder or a Duly Designated Proxy who has delivered
a revocation may thereafter
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deliver a new Consent by following one of the prescribed procedures at any time
prior to the Expiration Date.
The Company reserves the right to contest the validity of any
revocation and all questions as to the validity (including time of receipt) of
any revocation will be determined by the Company in its sole discretion, which
determination will be conclusive and binding subject only to such final review
as may be required by the Trustee concerning proof of execution and ownership.
None of the Company, any of its affiliates, the Solicitation Agent, the
Information Agent, the Trustee, or any other person will be under any duty to
give notification of any defect or irregularities with respect to any revocation
nor shall any of them incur any liability for failure to give such notification.
CONDITIONS OF THE SOLICITATION
Following the receipt by the Trustee of an Officers' Certificate
certifying that the Requisite Consents have been received, the Company and the
Trustee may, at the Company's sole discretion, execute and deliver the Third
Supplemental Indenture containing the Proposed Amendments. The Third
Supplemental Indenture will become effective upon such execution, the
substantially concurrent purchase from the Company by MS Acquisition Ltd. of
$10.0 million of common stock of the Company, the receipt by the Holders of the
Consent Payment and the satisfaction of conditions to such effectiveness as set
forth in the Indenture and the Third Supplemental Indenture. The Third
Supplemental Indenture will be binding upon each Holder, regardless of whether
or not such Holder delivered its Consent. In addition, the Company's obligations
to pay the Consent Payments to Holders delivering Consents is conditioned upon,
among other things, (i) the receipt of the Requisite Consents by the Company
prior to the Expiration Date and such Requisite Consents not being duly revoked,
(ii) the execution, delivery and continued effectiveness of the Third
Supplemental Indenture, (iii) the substantially concurrent refinancing of the
Company's existing senior credit facility, and (iv) the substantially concurrent
purchase by MS Acquisition Ltd. from the Company of common stock of the Company
for $10.0 million.
Consummation of the Solicitation is subject to the fulfillment of a
number of conditions which are for the sole benefit of the Company. The Company
reserves the right at any time to waive, in its sole discretion, any or all of
such conditions. However, the Company's failure to exercise any of the foregoing
rights shall not be deemed a waiver of any such right, and each right shall be
deemed a continuing right which may be asserted at any time. THE SOLICITATION
MAY HE ABANDONED OR TERMINATED BY THE COMPANY AT ANY TIME, EITHER BEFORE OR
AFTER OBTAINING THE REQUISITE CONSENTS, FOR ANY REASON, IN WHICH CASE ALL
CONSENTS WILL BE VOIDED, NO CONSENT PAYMENTS WILL BE MADE AND THE PROPOSED
AMENDMENTS WILL NOT BE EFFECTED.
CONSEQUENCES TO NON-CONSENTING HOLDERS
After the Proposed Amendments become operative, all Holders of Notes,
including non-consenting Holders, and all subsequent Holders of Notes will be
bound by the Proposed Amendments. Additionally, Holders who do not timely
consent to the Proposed Amendments will be eligible to receive the Consent
Payment and the Proposed Amendments, if approved
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through the receipt of the Requisite Consents, will be binding upon them. The
Consent Payment will only be paid if the Company receives the Requisite Consents
prior to the Expiration Date and such Consents have not been duly revoked.
THE AGENTS
The Company has retained Chase Securities Inc. ("Chase Securities") as
Solicitation Agent in connection with the Solicitation. Chase Securities was the
initial purchaser of the Notes at their original issuance. In its capacity as
Solicitation Agent, Chase Securities will solicit Consents, attempt to respond
to inquiries of holders and receive a customary fee for such services plus
reimbursement for reasonable out-of-pocket expenses. The Company has also agreed
to indemnify the Solicitation Agent and its affiliates against certain
liabilities and expenses, including liabilities under the securities laws in
connection with the Solicitation.
The Company has also retained Georgeson Shareholder Communications Inc.
as Information Agent in connection with the Solicitation. The Information Agent
will also receive a customary fee for its services plus reimbursement for
reasonable out-of-pocket expenses.
Questions concerning the Solicitation should be directed to the
Solicitation Agent and requests for additional copies of this Consent
Solicitation Statement or the form of Consent should be directed to the
Information Agent at their respective addresses and telephone numbers set forth
on the back cover page of this Consent Solicitation Statement.
The Company has not authorized either the Solicitation Agent or the
Information Agent to give any information or make any representations in
connection with this Solicitation other than those contained in this Consent
Solicitation Statement and, if given or made, such information or
representations must not be relied upon as having been authorized.
EXPENSES
The Company will pay the Consent Payments and bear the expenses of
preparing, printing and mailing this Consent Solicitation Statement and the
accompanying form of Consent as well as its legal, accounting and other expenses
in connection with the Solicitation.
In addition to the use of mails, Consents may be solicited by
directors, officers, employees and agents of the Company in person or by
telephone, telegram or other means of communication. Such directors, officers,
employees or agents will not be additionally compensated but may be reimbursed
for out-of-pocket expenses in connection with the Solicitation.
No commission or other remuneration will be paid to any broker, dealer,
salesman or other person for soliciting Consents other than the fees being paid
to the Solicitation Agent and the Information Agent. Brokers, dealers,
commercial banks and trust companies will be reimbursed for reasonable
out-of-pocket expenses incurred by them in forwarding Solicitation materials to
their customers.
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CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
The following general discussion describes certain U.S. federal income
tax consequences to Holders resulting from the adoption of the Proposed
Amendments and the receipt of the Consent Payments pursuant to the Solicitation.
This discussion is general in nature and does not discuss all aspects of U.S.
federal income taxation that may be relevant to a Holder in light of the
Holder's particular circumstances or to certain types of Holders subject to
special treatment under U.S. federal income tax laws (such as insurance
companies, partnerships, tax-exempt organizations, financial institutions,
brokers, dealers in securities and foreign persons). In addition, the discussion
does not consider the effect of any foreign, state, local or other tax laws, or
any U.S. tax considerations other than U.S. federal income tax considerations,
that may be applicable to particular Holders. Further, this summary assumes that
Holders hold their Notes as "capital assets" (generally, property held for
investment) within the meaning of section 1221 of the Internal Revenue Code of
1986, as amended (the "Code").
THIS SUMMARY IS BASED UPON U.S. FEDERAL INCOME TAX LAWS AND
REGULATIONS CURRENTLY IN EFFECT, WHICH ARE SUBJECT TO CHANGE, POSSIBLY WITH
RETROACTIVE EFFECT. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS CONCERNING THE
APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS
AS WELL AS ANY CONSEQUENCES TO THEM UNDER THE LAWS OF ANY OTHER TAXING
JURISDICTION.
Although the matter is not entirely free from doubt, the Company
believes that the Consent Payments paid to Holders pursuant to the Solicitation
should be taxable as ordinary income to such Holders.
The Company does not believe that the adoption of the Proposed
Amendments should result in a deemed exchange of "old" Notes for "new" Notes for
U.S. federal income tax purposes, If the adoption of the Proposed Amendments
were viewed as resulting in such a deemed exchange, such deemed exchange should
constitute a recapitalization for U.S. federal income tax purposes, in which
case the Holder would not recognize loss but would likely recognize gain in an
amount equal to the lesser of (i) the excess of the fair market value of the
"new" Notes on the date of the deemed exchange plus the amount of Consent
Payments received by such Holder over the Holder's adjusted tax basis in the
"old" Notes and (ii) the amount of Consent Payments received by such Holder. Any
such recognized gain would likely constitute capital gain, subject to the market
discount rules discussed below, and would generally be long-term capital gain if
the Holder's holding period for the Note exceeded one year. Holders should have
a tax basis in the "new" Notes equal to the adjusted tax basis in the "old"
Notes increased by any gain recognized on the deemed exchange and reduced by the
amount of Consent Payments received. Holders should also have the same holding
period in the "new" Notes as they had in the "old" Notes.
Subject to a statutory de minimis exception, a Holder who acquired a
Note at a market discount (i.e., at a price below its stated principal amount)
generally should treat any gain recognized on a deemed exchange as ordinary
income, rather than capital gain, to the extent of the portion of the market
discount that accrued while the Holder held the Note. This treatment
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would not apply to a Holder of a Note who elected to treat all interest on a
Note as original issue discount or include market discount in gross income as it
accrued. In addition, any unrecognized accrued market discount with respect to
an "old" Note should carry over to the "new" Note.
If there is a deemed exchange of "old" Notes for "new" Notes and if the
issue price of the "new" Notes (i.e., their fair market value on the date of the
deemed exchange) is less than their stated principal amount, subject to a
statutory de minimis exception, the "new" Notes would be treated as issued with
original issue discount within the meaning of Section 1273 of the Code. Each
Holder of a "new" Note that is issued with original issue discount would be
required to include certain amounts in ordinary income as interest for U.S.
federal income tax purposes before receiving cash to which such interest income
is attributable, in addition to being required to report as income for U.S.
federal income tax purposes stated interest earned on the "new" Note in
accordance with the Holder's method of tax accounting. If a Holder's initial tax
basis in the "new" Note exceeds its issue price but does not exceed its stated
principal amount, the resulting acquisition premium, as defined In Treasury
regulations promulgated under Section 1272 of the Code, may be amortized by the
Holder to offset original issue discount accruals. Similarly, if a Holder's
initial tax basis in a "new" Note exceeds its stated principal amount, resulting
in amortizable bond premium, as defined under Sections 171 and 1272 of the Code,
a Holder generally would not be required to include such original issue discount
in income and generally would be entitled to amortize such premium over the term
of the "new" Notes.
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EXHIBIT A
PROPOSED AMENDMENTS TO THE INDENTURE GOVERNING
THE 10%% SENIOR SUBORDINATED NOTES DUE 2007
LIMITATION ON INDEBTEDNESS (SECTION 4.03(b)(i))
Clause (b)(i) of Section 4.03 "Limitation on Indebtedness" shall be
amended by deleting the words 125.0 million" and adding the words "$85.0
million" as set forth below:
(i) Bank Indebtedness or Indebtedness Incurred pursuant to any
other revolving credit, term loan or working capital financings in an
aggregate principal amount at any time outstanding not in excess of the
greater of $85.0 million and the Borrowing Base in effect from time to
time (in each case less the aggregate amount of all repayments of
principal actually made thereunder since the Closing Date with Net
Available Cash from Asset Dispositions pursuant to Section
4.06(a)(iii)(A));
DEFINITION OF CREDIT AGREEMENT (SECTION 1.01)
The definition of Credit Agreement in Section 1.01 shall be amended by
adding "(i)", adding the words "[INSERT DATE]," deleting the words "October 14,
1997, as amended and restated as of the Closing Date, and as further" adding the
word "as", adding the words "and certain of its subsidiaries, as borrowers,"
deleting the word "and" and adding the words "for the lenders and the lenders
from time to time party thereto, and (ii) the Second Amended and Restated Credit
Agreement, dated as of [INSERT DATE], as amended, restated, waived or otherwise
modified from time to time, among the Company, the lenders from time to time
party thereto and First Union National Bank, as agent for the lenders" and
adding the words "in each case" as set forth below:
"Credit Agreement" means (i) the Credit Agreement, dated as of
[INSERT DATE] as amended, restated, waived or otherwise modified from
time to time, among the Company and certain of its subsidiaries, as
borrowers, The Chase Manhattan Bank, as agent for the lenders and the
lenders from time to time party thereto, and (ii) the Second Amended
and Restated Credit Agreement, dated as of [INSERT DATE], as amended,
restated, waived or otherwise modified from time to time, among the
Company, the lenders from time to time party thereto and First Union
National Bank, as agent for the lenders (except in each case to the
extent that any such amendment, waiver or other modification thereto
would be prohibited by the terms of this Indenture, unless otherwise
agreed to by the Holders of at least a majority in aggregate principal
amount of Securities at the time outstanding).
LIMITATION ON RESTRICTIONS ON DISTRIBUTIONS FROM RESTRICTED SUBSIDIARIES
(SECTION 4.05)
Clause (i) of Section 4.05 "Limitation on Restrictions on Distributions
from Restricted Subsidiaries" shall be amended by inserting "(x)" before the
words "an agreement" in the first
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line thereof and inserting "or (y) the Senior Credit Documents" at the end of
the clause as follows:
(i) any encumbrance or restriction pursuant to (x) an
agreement in effect at or entered into on the Closing Date or (y) the
Senior Credit Documents;
DEFINITION OF SENIOR CREDIT DOCUMENTS (SECTION 1.01)
The definition of Senior Credit Documents in Section 1.01 shall be
amended by deleting the words "(if any) and", deleting the word "Guaranty",
adding the word "guaranties", adding the words "any security documents related
thereto, whether executed by the Company or any Subsidiary", and deleting the
words "the Borrower's Security Agreement and the Subsidiary Security Agreement,
each as defined in the Credit Agreement" as set forth below:
"Senior Credit Documents" means the collective reference to
the Credit Agreement, the notes issued pursuant thereto, the guaranties
thereof, and any security documents related thereto, whether executed
by the Company or any Subsidiary.
LIMITATION ON INDEBTEDNESS (SECTION 4.03(b)(VIII))
Clause (b)(viii) of Section 4.03 "Limitation on Indebtedness" shall be
amended by deleting the words 12.0 million" and replacing them with the words
"$18.0 million" as set forth below:
(viii) Purchase Money Indebtedness, Attributable Debt and
Capitalized Lease Obligations in an aggregate principal amount not in
excess of $18.0 million at any time outstanding;
LIMITATION ON INDEBTEDNESS (SECTION 4.03(b)(IX))
Clause (b)(ix) of Section 4.03 "Limitation on Indebtedness" shall be
amended by adding the words "Incurred prior to [THE EFFECTIVE DATE OF THE
PROPOSED AMENDMENTS]" after the word "Indebtedness," adding the words "prior to
[THE EFFECTIVE DATE OF THE PROPOSED AMENDMENTS]" after the words "all other
Indebtedness Incurred" and deleting the punctuation mark "." and adding the
punctuation mark ";" as set forth below:
(ix) Indebtedness Incurred prior to [THE EFFECTIVE DATE OF THE
PROPOSED AMENDMENTS] (other than Indebtedness permitted to be Incurred
pursuant to Section 4.03(a) or any other clause of this Section
4.03(b)) in an aggregate principal amount on the date of Incurrence
that, when added to all other Indebtedness Incurred prior to [THE
EFFECTIVE DATE OF THE PROPOSED AMENDMENTS] pursuant to this clause (ix)
and then outstanding, shall not exceed $15.0 million;
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LIMITATION ON INDEBTEDNESS (SECTION 4.03(b)(x))
Clause (b) of Section 4.03 "Limitation on Indebtedness" shall be
amended by adding clause (x) as set forth below:
(x) Indebtedness Incurred on or after, [THE EFFECTIVE DATE OF
THE PROPOSED AMENDMENTS] (other than Indebtedness permitted to be
Incurred pursuant to Section 4.03(a) or any other clause of this
Section 4.03(b)) in an aggregate principal amount on the date of
Incurrence that, when added to all other Indebtedness Incurred on or
after [THE EFFECTIVE DATE OF THE PROPOSED AMENDMENTS] pursuant to this
clause (x) and then outstanding, shall not exceed $10.0 million; or
LIMITATION ON INDEBTEDNESS (SECTION 4.03(b)(xi))
Clause (b) of Section 4.03 "Limitation on Indebtedness" shall be
amended by adding clause (xi) as set forth below:
(xi) Indebtedness Incurred in connection with the purchase by
the Company of all of the outstanding capital stock of Sales Force
Companies, Inc. pursuant to that certain stock purchase agreement,
dated as of March 2, 2000, by and between Marketing Specialists Sales
Company and Sales Force Companies, Inc., as such may be amended, in an
amount not to exceed $20.0 million in the aggregate.
LIMITATION ON INDEBTEDNESS (SECTION 4.03(c))
Section 4.03(c) shall be amended to add the following language at the
end of such Section: "Notwithstanding the foregoing, the Company shall not, and
shall not permit any Restricted Subsidiary to, Incur any Assumed Deferred
Obligations pursuant to Section 4.03(b) (other than pursuant to clause (xi) of
Section 4.03(b)) unless such Assumed Deferred Obligations are expressly
subordinated in right of payment to the Securities. The Company or any
Restricted Subsidiary shall not Incur any Indebtedness after [THE EFFECTIVE DATE
OF THE PROPOSED AMENDMENTS] pursuant to Section 4.03(b) (other than Indebtedness
Incurred pursuant to clauses (viii) or (xi) of Section 4.03(b)) in connection
with the acquisition of any Person by the Company or any Restricted Subsidiary
unless substantially concurrent with such Incurrence, the Company receives cash
capital contributions or cash proceeds from the sale of Capital Stock (other
than Disqualified Stock) in an amount equal to such Indebtedness."
(c) Notwithstanding the foregoing, the Company shall not Incur
any Indebtedness pursuant to paragraph (b) above if the proceeds
thereof are used, directly or indirectly, to repay, prepay, redeem,
defease, retire, refund or refinance any Subordinated Obligations
unless such Indebtedness shall be subordinated to the Securities to at
least the same extent as such Subordinated Obligations. The Company
shall not Incur any Indebtedness pursuant to Section 4.03(a) or 4.03(b)
if such Indebtedness is subordinate or junior in ranking in any respect
to any Senior Indebtedness unless such Indebtedness is Senior
Subordinated Indebtedness or is expressly subordinated in right of
payment to Senior Subordinated Indebtedness. The Company shall not
Incur any Indebtedness that
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constitutes Deferred Obligations after the Closing Date unless such
Indebtedness is expressly subordinated in right of payment to the
Securities. In addition, the Company shall not Incur any Secured
Indebtedness that is not Senior Indebtedness unless contemporaneously
therewith effective provision is made to secure the Securities equally
and ratably with (or on a senior basis to, in the case of Indebtedness
Subordinated in right of payment to the Securities) such Secured
Indebtedness for so long as such Secured Indebtedness is secured by a
Lien. A Guarantor Subsidiary shall not Incur any Indebtedness if such
Indebtedness is by its terms expressly subordinate or junior in ranking
in any respect to any Senior Indebtedness of such Guarantor Subsidiary
unless such Indebtedness is Senior Subordinated Indebtedness of such
Guarantor Subsidiary or is expressly subordinated in right of payment
to Senior Subordinated Indebtedness of such Guarantor Subsidiary. A
Guarantor Subsidiary shall not Incur any Indebtedness that constitutes
Deferred Obligations after the Closing Date unless such Indebtedness is
expressly subordinated in right of payment to the Subsidiary
Guarantees. In addition, a Guarantor Subsidiary may not Incur any
Secured Indebtedness that is not Senior Indebtedness of such Guarantor
Subsidiary unless contemporaneously therewith effective provision is
made to secure the Subsidiary Guarantee of such Guarantor Subsidiary
equally and ratably with (or on a senior basis to, in the case of
Indebtedness subordinated in right of payment to such Subsidiary
Guarantee) such Secured Indebtedness for as long as such Secured
Indebtedness is secured by a Lien. Notwithstanding the foregoing, the
Company shall not, and shall not permit any Restricted Subsidiary to,
Incur any Assumed Deferred Obligations pursuant to Section 4.03(b)
(other than pursuant to clause (xi) of Section 4.03(b)) unless such
Assumed Deferred Obligations are expressly subordinated in right of
payment to the Securities. The Company or any Restricted Subsidiary
shall not Incur any Indebtedness after [THE EFFECTIVE DATE OF THE
PROPOSED AMENDMENTS] pursuant to Section 4.03(b) (other than
Indebtedness Incurred pursuant to clauses (viii) or (xi) of Section
4.03(b)) in connection with the acquisition of any Person by the
Company or any Restricted Subsidiary unless substantially concurrent
with such Incurrence, the Company receives cash capital contributions
or cash proceeds from the sale of Capital Stock (other than
Disqualified Stock) in an amount equal to such Indebtedness.
DEFINITIONS (SECTION 1.01)
Section 1.01 shall be amended by adding the following after the
definition of "Asset Disposition" and before the definition of "Attributable
Debt":
"Assumed Deferred Obligations" means, with respect to any
Person acquired by the Company or any Restricted Subsidiary, any
Indebtedness of such Person issued to the employees of, stockholders
of, or the holders of an equivalent equity interest in, any other
entity previously acquired by the entity being acquired by the Company
or Restricted Subsidiary, as the case may be.
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<PAGE> 45
LIMITATION OF RESTRICTED PAYMENTS (SECTION 4.04(a)(C)(2))
Clause (a)(C)(2) of Section 4.04 "Limitation on Restricted Payments"
shall be amended by adding "(i)" prior to the words "a Subsidiary" and adding
the words ", (ii) MS Acquisition Limited of $10.0 million of common stock of the
Company pursuant to that certain Stock Purchase Agreement, dated as of the date
of the Credit Agreement, by and between the Company and MS Acquisition Limited,
and (iii) any Person in connection with the sale of Capital Stock to such Person
pursuant to the last sentence of Section 4.03(c));" as set forth below:
(2) the aggregate Net Cash Proceeds received by the Company
from the issue or sale of its Capital Stock (other than Disqualified
Capital Stock) subsequent to the Closing Date (other than an issuance
or sale to (i) a Subsidiary of the Company or an employee stock
ownership plan or other trust established by the Company or any of its
Subsidiaries, (ii) MS Acquisition Limited of $10.0 million of common
stock of the Company pursuant to that certain Stock Purchase Agreement,
dated as of the date of the Credit Agreement, by and between the
Company and MS Acquisition Limited, and (iii) any Person in connection
with the sale of Capital Stock to such Person pursuant to the last
sentence of Section 4.03(c));
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<PAGE> 46
CONSENT SOLICITATION STATEMENT
MARKETING SPECIALISTS CORPORATION
SOLICITATION OF CONSENTS TO THE PROPOSED AMENDMENTS TO
THE INDENTURE GOVERNING ITS 10Y8% SENIOR SUBORDINATED NOTES DUE 2007
Consents properly completed, duly executed and delivered by facsimile
transmission (confirmed by physical delivery) to the Trustee at its facsimile
number set forth below will be accepted. Consents and any other required
documents should be sent or delivered by each Holder or its broker, dealer,
commercial bank or other nominee to the Trustee at its address set forth below.
Requests for assistance or additional copies of this Consent Solicitation
Statement and the form of Consent may be directed to the Information Agent at
the telephone numbers and address listed below:
THE TRUSTEE IS:
CHASE BANK OF TEXAS NATIONAL ASSOCIATION
By Mail.
By Overnight or Hand Deliver:
Overnight Courier.
1201 Main Street, 18th Floor
Dallas, TX 75201
Attention: Frank Ivins-Confidential
By Facsimile Transmission:
(214) 672-5746
Confirm by Telephone:
(214) 672-5678
THE INFORMATION AGENT IS.
GEORGESON SHAREHOLDER COMMUNICATIONS INC.
17 State Street-10th Floor
New York, New York 10004
Banks and Brokers call collect (212) 440-9800
Call Toll Free 1-800-223-2026
Any question regarding the Solicitation may be directed to the
Solicitation Agent at the telephone number and address listed below. You may
also contact your broker, dealer, commercial bank or trust company or nominee
for assistance concerning the Solicitation.
The Solicitation Agent for the Solicitation is.
CHASE SECURITIES INC.
270 Park Avenue
New York, New York 10017
Telephone: (212) 270-1100
Attention: Robert Berk
