October 29, 2004
By Facsimile and U.S. Mail
Lawson M. Vicario, Esq.
Wyche Burgess Freeman & Parham, PA
PO Box 728
Greenville, SC 29602-0728
Re: RSI Holdings, Inc.
Draft Schedule 13E-3/TO-T
Submitted by BCM Acquisition Corporation, Buck A. Mickel
Charles C. Mickel and Minor M. Shaw
Dated October 13, 2004
Dear Ms. Vicario,
We have the following comments on the above-referenced
filing:
Offer to Purchase
1. Please confirm that the tender offer will be open for at least
twenty full business days as required by Rule 14e-1(a). Because
the offer expires at 5:00 p.m. instead of midnight on what may
ultimately be the twentieth business day following commencement of the
exchange offer, it is unclear whether the offer will be open for the
full twenty business days. See Question and Answer Eight in Exchange
Act Release No. 16623 (March 5, 1980).
2. We note that you may waive the minimum condition. As it
appears that the minimum condition is a material condition to the
offer, the waiver of the minimum condition would be a material change
requiring that at least five business days remain in the offer after
the announcement of the waiver. Please confirm your intent to extend
the offer, as necessary, so that at least five business days remain
after dissemination of this material change to the offer. We note the
disclosure on page 20.
Special Factors, page 9
Background, page 9
3. We note the following facts:
* The Mickel siblings beneficially own 76% of the company and two
of them are officers and directors of RSI.
* The Mickel siblings and RSI`s board began considering a going-
private transaction in late 2003.
* The parties had considered previously a merger transaction. The
company established a special committee and the special committee
hired a financial advisor to provide a fairness opinion.
* Two of the Mickel siblings serve on the five-member board of
directors of RSI, and at least two additional directors will be
directors of the surviving entity if the transactions are
completed.
* One of these directors is also the Secretary and CFO of the
company and will continue to be Secretary and CFO of the company if
the transaction is successful.
* RSI will incur $90,524 in fees and expenses, including printing
and mailing costs, in connection with this transaction.
It appears that RSI may be engaged in this transaction and
therefore required to file a Schedule 13E-3. See Rule 13e-3(b)(2).
Please provide us your analysis in this regard. In doing so, please
advise us whether the employment or compensation agreements with any
of the officers and directors will change as a result of the transaction.
4. Revise to provide a detail of the cost savings expected as a
result of this transaction. For example, on page 10 you disclose
that RSI incurred $45,435 in "public-company-related expenses" for
the most recent fiscal year and that these expenses are estimated
to be $107,200 for the next fiscal year, and that, if the company
goes private, it has a projected savings of $109,200. Please provide
a breakdown of these expenses and explain which of the various
expenses will continue to be incurred if the transactions are
consummated.
5. Revise this section to explain what has occurred since
September 13, 2004, when the company dissolved the special committee
and engaged the financial advisor to provide a second fairness
opinion.
Certain Effects of the Offer, page 13
6. Revise to disclose all Item 1013 information with respect to
each filing person. This should include a discussion of the benefits
and detriments of the transaction with respect to the company, its
affiliates and unaffiliated security holders as required by
Instruction 2 to Item 1013 of Regulation M-A. It should also
include the effect on the affiliates interests in net book value and
net earnings in amounts and percentages as required by Instruction 3
to Item 1013 of Regulation M-A.
Purchaser`s Position Regarding the Fairness of the Offer,
page 14
7. Generally, the factors outlined in Instruction 2 to Item 1014
are considered relevant in assessing the fairness of the consideration
to be received in a going private transaction. To the extent any of
the listed factors was not deemed relevant in the context of this
transaction, or was given little weight, this in itself may be an
important part of the decision-making process that should be
explained for shareholders. See Q&A No. 20 in SEC Release No. 34-
17719 (April 13, 1981). Please expand the disclosure to address
all of the factors. In particular, it does not appear that the
filing persons address going concern value, prior repurchases by
the company or firm offers by third parties.
8. Revise to discuss what consideration, if any, the filing
persons gave to the fairness opinion provided to the special
committee in connection with the proposed merger transaction.
9. Revise to clarify the basis for the filing persons` fairness
determination in the absence of the procedural safeguards outlined
in Item 1014 of Regulation M-A. See Q&A No. 21 in Exchange Act
Release No. 17719 (April 13, 1981).
Exchange Act Registration, page 14
10. Clarify for us upon which Rule RSI will rely upon to terminate
its Section 12(g) and 15(d) Exchange Act reporting requirements.
In this section, you indicate that you may terminate your
registration if there are fewer than 500 shareholders of record.
Rule 13e-3 must be complied with where a transaction or series of
transactions listed in that rule causes the company to be delisted or
have fewer than 300 shareholders of record.
RSI Financial Projections, page 15
11. Disclose which members of management prepared the financial
projections and the degree to which Mr. Buck Mickel was involved
in the preparation of the projections.
12. Eliminate the disclaimers in the last two sentences in this
section. While you may provide appropriate cautionary language
regarding forward-looking information, you may not disclaim
responsibility for the accuracy or validity of information
contained in your document.
Conduct of RSI`s Business if the Offer is Not Completed, page 18
13. Clarify that RSI will amend its Schedule 13E-3 and comply with
the filing, timing and dissemination requirements of that rule in
the event it engages in the transactions contemplated in this section
addressed by Rule 13e-3.
Acceptance for Payment and Payment for Shares, page 20
14. You disclose that BCM will pay for shares validly tendered and
not properly withdrawn "as promptly as practicable" and will
return deposited shares that are not tendered "as soon as practicable."
Please revise this language to comply with Rule 14e-1(c), which
requires you to pay for or return all shares tendered or deposited
"promptly" after the expiration date.
15. You reserve the right to delay acceptance of shares "in order
to comply, in whole or in part, with any applicable law." Tell us
under what circumstances you might rely on this language to delay
payment of the shares. We are unable to locate any disclosure in the
document regarding required governmental approvals. You may not
eliminate withdrawal rights and retain the right to accept shares
for payment until all conditions, other than required governmental
approvals, are satisfied or waived. Please clarify or eliminate
this language.
16. We note from page 21 that BCM reserves the right to assign to
its affiliates the right to purchase all or a portion of the
tendered shares. Please confirm to us that, to the extent you do so,
you will revise your Schedule TO-T to include as bidders the persons
or entities to whom such rights are assigned.
Certain Federal Income Tax Consequences of the Offer, page 24
17. Revise this subsection and its title to clarify that you
describe all material federal tax consequences of the transaction.
In this regard, you should eliminate the term "certain" from the
heading.
18. Please eliminate the statement in the second and concluding
paragraphs that the discussion is included "for general
information" only. We believe this statement may suggest that
security holders may not rely on the description of material tax
consequences included in the offering document.
19. You state that stockholders "should consult" their own tax
advisors. Because stockholders may rely on the disclosure that
appears in your registration statement, including disclosure
relating to tax consequences, eliminate this language as it may
suggest otherwise. We will not object if you recommend or
encourage such consultation.
Certain Information Concerning RSI, page 26
20. We note that you have included audited selected financial
information for the fiscal year ended August 31, 2003, and
unaudited information for the most recent fiscal year. Please
consider your obligation to update this information.
21. Refer to the disclosure at the top of page 29. We note that
you have not assumed responsibility for the accuracy, completeness
or truth of the information concerning RSI. While you may include
appropriate language about the limits on the reliability of the
information, you may not disclaim responsibility for its accuracy.
Please revise.
Merger; Dissenters` Rights; "Going Private" Rules, page 30
22. Revise to clarify your intent to comply with the disclosure,
timing and dissemination requirements of Rule 13e-3 in connection
with any merger following the tender offer. See Item P.9 in the
Division of Corporation Finance`s Manual of Publicly Available
Telephone Interpretations.
Certain Conditions of the Offer, page 32
23. Revise the heading of this section to eliminate the term
"certain" and revise the section to disclose all conditions of the
offer. Disclose the definition of the Minimum Tender Condition in
this section.
24. All conditions of the offer, other than required governmental
approvals, must be satisfied or waived prior to the expiration of
the offer. We note several references to occurrences that may
affect the merger. It is unclear how you will be able to make
these determinations prior to the expiration of the offer. Please
advise. Also, you cannot terminate the offer, eliminate withdrawal
rights and retain the right to accept shares for payment until all
conditions are satisfied or waived. Please revise the last sentence
of the penultimate paragraph of this section accordingly.
25. A tender offer may be conditioned on a variety of events and
circumstances, provided that they are not within the direct or
indirect control of the bidder, and are drafted with sufficient
specificity to allow for objective verification that the
conditions have been satisfied. With this in mind, revise the
following:
* condition (a), to provide qualify the "diminution in the value
of the shares;"
* condition (a), to specify or generally describe the "benefits
expected to be derived by BCM" of the offer to you so that
security holders will have the ability to objectively determine
whether the condition has been triggered.
* condition (c), to clarify the term "material Adverse Effect;"
and
* the penultimate paragraph of this section, which indicates that
the conditions may result from "any action or inaction by BCM."
26. We note that you may determine in your "sole judgment" whether
certain offer conditions have occurred or are satisfied. In the
absence of any objective criteria, such as a standard of
reasonableness, satisfaction of the offer conditions in the sole
discretion of the bidder is the equivalent of a waiver of the
offer condition. When a bidder waives a material offer condition,
the offer must remain open for at least five business days from the
date notice of the waiver is provided to security holders. Please
revise the penultimate paragraph to include an objective standard
for the determination of whether a condition has been satisfied.
27. We note that you have reserved the right to waive any of the
conditions to the offer "at any time and from time to time."
Defining the conditions as a continuing right that may be waived
at any time suggest that conditions to the offer may be waived
after expiration of the offer. Please be advised that all
conditions of the offer, other than those dependent upon the receipt
of necessary government approvals, , must be satisfied or waived
before the expiration of the offer. Please revise the disclosure
accordingly.
State Takeover Laws, page 35
28. Please provide us additional information on a supplemental
basis regarding your belief that you qualify for the exception to
the North Carolina Shareholder Protection Act.
Fees and Expenses, page 36
29. Clarify the expenses to be paid by RSI. For example, what
costs account for the $18,000 in "Information Agent, Printing and
Mailing Costs"? Does this include fees payable to Georgeson
Shareholder Communications?
30. Disclose the fee payable to Georgeson as required by Item 1009
of Regulation M-A.
Schedule B - Security Ownership of Certain Beneficial Owners and
Management
31. Revise the table to include all shares beneficially owned by
each person named in the table.
Closing Comments
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be certain that they have provided all information investors require.
Since the filing persons are in possession of all facts relating
to a company`s disclosure, they are responsible for the accuracy
and adequacy of the disclosures they have made.
In connection with responding to our comments, please
provide, in writing, a statement from the company acknowledging that
* the filing persons are responsible for the adequacy and accuracy
of the disclosure in the filings;
* staff comments or changes to disclosure in response to staff
comments in the filings reviewed by the staff do not foreclose the
Commission from taking any action with respect to the filing; and
* the filing persons may not assert staff comments as a defense in
any proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement has access to all information you provide to the staff
of the Division of Corporation Finance in our review of your filing
or in response to our comments on your filing.
Respond to our comments promptly. Please furnish a response
letter, keying your response to our comment letter. You should
transmit the letter via EDGAR under the label "CORRESP." In the
even that you believe that compliance with any of the above comments
is inappropriate, provide a basis for such belief to the staff in the
response letter. Please contact me at (202) 942-1881 if you have
any questions.
Sincerely,
Abby Adams
Special Counsel
Office of Mergers and Acquisitions