July
3,
2007
|
Daniel
F. Duchovny, Esq.
Special
Counsel,
Office
of Mergers & Acquisitions,
United
States Securities and Exchange Commission
100
F Street, NE
Washington,
DC 20549
|
|
| |
Preliminary Proxy Statement on Schedule
14A |
| |
Schedule 13D filed by Shamrock Capital
Growth
Fund II, L.P. et. al. |
Dear
Mr.
Duchovny:
We
are
submitting, on behalf of AVP, Inc. (the "Company"), its responses to the comment
letter from the Division of Corporation Finance, dated June 4, 2007 (the
“Staff’s Letter”), relating to the filing of the Company's preliminary proxy
materials. To facilitate your review of this submission, we have restated and
responded to each of the comments set forth in the Staff’s Letter. The numbered
paragraphs set forth below correspond to the numbered paragraphs in the Staff
Letter and are filed together with the Company's amended Schedule 13E-3 (the
“Amended 13E-3”) and revised preliminary proxy statement (the "Revised Proxy
Statement"), amending the previous Schedule 13E-3 and proxy statement, each
filed on May 9, 2007.
The
written statement of the Company and additional reporting persons requested
in
the Staff’s Letter is enclosed.
By
copy
of this letter, we are providing the Staff three hard copies of the Revised
Proxy Statement and Amended 13E-3, marked to show changes, indicating to which
comment each change corresponds.
 |
|
Daniel
F. Duchovny, Esq.
SEC
July
3, 2007
Page
2
|
Schedule
13E-3
1. We
note
that Bruce Binkow will roll over his equity position in the company into equity
of the acquiring entity. Rule 13e-3 requires that each affiliate engaged in
a
going private transaction file a Schedule 13E-3 and furnish the required
disclosures. Please include Mr. Binkow as a filing person in the Schedule 13E-3.
Alternatively, please provide us
your
detailed legal analysis addressing why you believe Mr. Binkow is not a
filing person.
Response
to Comment 1:
Mr.
Binkow has not decided whether to roll over his equity position.
Accordingly, statements to the effect that he would roll his position have
been
deleted from the Revised Proxy Statement, and he has not been added to the
Amended 13E-3 as a reporting person
2. Please
note that each new filing person must individually comply with the filing,
dissemination and disclosure requirements of Schedule 13E-3. Therefore, you
will
need to revise the disclosure to include all of the information required by
Schedule 13E-3 and its instructions for Mr. Binkow, if added in response to
the
preceding comments. For example, include a statement as to whether Mr. Binkow
believes the Rule 13e-3 transaction
to be procedurally and substantially fair to unaffiliated security holders
and
an
analysis
of the material factors upon which Mr. Binkow relied in reaching such a
conclusion. Refer to Item 8 to Schedule 13E-3 and Q&A No. 5 of Exchange Act
Release No.
17719
(Apr. 19, 1981) and Question and Answer No. 5 of Exchange Act Release
No. 34-17719
(April 13, 1981).
In
this regard, the reasons for the transaction and the alternatives considered
by
Mr. Binkow may be different than those of the company and other filing persons,
and this fact should be reflected in the disclosure. In addition, be sure that
Mr. Binkow signs the Schedule 13E-3.
Response
to Comment 2:
Please
see our response to Comment 1.
Item
10.
Source and Amount of Funds
3. Please
include the disclosure relating to the fees and expenses to be incurred in
connection with the merger in an appropriate location in the proxy
statement.
Response
to Comment 3:
This
comment has been complied with on page 31, at the indicated
location.
Item
13.
Financial Information
4. Please
tell us why you have not provided the pro forma financial information required
by Item 1010(b) of Regulation M-A.
| |
|
Daniel
F. Duchovny, Esq.
SEC
July
3, 2007
Page
3
|
Response
to Comment 4:
Pursuant
to Item 1010(b) of Regulation M-A, the Company is required to furnish pro forma
financial information if such information is material. Because stockholders
will
receive only cash and will have no continuing interest in AVP after the merger,
the Company considers pro forma financial information immaterial.
Proxy
Statement
5. Please
fill in the blanks in the proxy statement.
Response
to Comment 5:
The
Staff’s comment is noted. To the extent such information is known, the blanks
have been filled, in the Revised Proxy Statement.
Cover
Letter
6. We
note
your disclosure here and elsewhere in the proxy statement that the filing
persons determined that the merger is fair to and in the best interests of
the
company and “its stockholders.” Please revise here and throughout the filing to
more clearly and consistently articulate whether the going private transaction
is substantively and procedurally fair to unaffiliated
security
holders. See Item 1014(a) of Regulation M-A.
Response
to Comment 6:
This
comment has been complied with in the stockholders’ letter and on pages 4, 5, 9,
and 13, at the indicated locations.
Summary
Term Sheet, page 4
7. Please
clarify the first sentence in the paragraph captioned “Required Votes” on page
6. Make
a
similar revision to the first answer on page 10 and in the appropriate
disclosure
under
“The Special Meeting.”
Response
to Comment 7:
This
comment has been complied with in the Notice of Meeting and on pages 6, 10,
and
39, at the indicated locations.
8. Refer
to
the “Go shop/no shop”
section. We note that the 45-day “go shop” period expired after you filed the
preliminary
proxy statement. Please update your disclosure to
note any
developments in connection with the go-shop period.
| |
|
Daniel
F. Duchovny, Esq.
SEC
July
3, 2007
Page
4
|
Response
to Comment 8:
This
comment has been complied with on pages 7, 12, and 45, at the indicated
locations.
9. Revise
the “Termination of the Merger Agreement” section to disclose the amount of any
termination fee due in each instance set forth in the bullet points in the
section. Please make a similar revision to the appropriate section under the
heading “The Merger Agreement.”
Response
to Comment 9:
This
comment has been complied with on pages 7 and 49-50, at the indicated
locations.
10. Please
update the disclosure under the caption “Summary Financial
Information.”
Response
to Comment 10:
The
Company has updated the “Summary Financial Information” (pg. 8), to include
information for the three months ended March 31, 2007.
Special
Factors
11. The
information required by Items 7, 8 and 9 of Schedule 13E-3 must appear in a
“Special Factors” section at
the
beginning of the proxy statement,
following the Summary Term Sheet. See Rule 13e-3(e)(1)(ii). Please relocate
the
sections “Forward-Looking Statements,” “Introduction,” “Parties to the Merger,”
and “The Special Meeting.”
Response
to Comment 11:
The
sections “Forward-Looking Statements”, “Introduction”, “Parties to the Merger”,
and “The Special Meeting” have been relocated after the “Special Factors”
section.
12. Please
disclose, for each filing person, the information required by Item 1013(a)-(c)
of Regulation
M-A for each filing person. Also,
provide the disclosure required by Item 8
of
Schedule 13E-3 for each filing person other than the company.
Response
to Comment 12:
The
first comment has been complied with on page 26, at the indicated location;
the
second comment has been complied with on pages 13 and 27, at the indicated
locations.
Background
of the Merger, page 15
13. Please
explain why the assumption of Mr. Chardavoyne of the position as your chief
financial
officer on March 31 was not considered to impair his qualifications to serve
on
the
committee of independent directors.
Response
to Comment 13:
| |
|
Daniel
F. Duchovny, Esq.
SEC
July
3, 2007
Page
5
|
This
comment has been complied with on pages 12 and 14, at the indicated
locations.
14. Please
expand your disclosure in this section. For example, describe (i) the meetings
of
the
special committee and the matters discussed at each meeting instead of the
general disclosure included in the sixth paragraph of this section, (ii) the
negotiations with the Shamrock entities over the transaction, its terms
(including the terms relating to the preferred
stock), its structure and the transaction documentation, (iii) the role, if
any,
of Mr.
Armato in the negotiations of the transaction, (iv) the negotiations by the
Shamrock entities
with Mr. Armato regarding the voting agreement, and (v) the negotiations
with
Mr.
Armato and Mr. Binkow relating to the rollover of their securities.
Response
to Comment 14:
This
comment has been complied with throughout page 12. There were no negotiations
regarding the Series B Preferred Stock, based on the understanding, as discussed
in response to Comment 40, that the rights of holders of these shares are fixed
by AVP’s charter.
15. Please
describe the duties of the special committee, the scope of its authority, and
the
period
during which it served.
Response
to Comment 15:
The
requested disclosure has been added as the last sentence to the 4th paragraph
on
page 12.
16. Please
disclose the financial projections provided to Jefferies in an appropriate
location of
the
proxy statement. We note you provided projections with Target Management Case
and a Conservative Management Case.
Response
to Comment 16:
The
financial projections provided to Jefferies have been added on pages 23 through
25.
17. Clarify
whether Jefferies made any presentations to the special committee or the board
of
directors, besides delivering its opinion. Note that each presentation presented
by an outside party, whether oral or written, preliminary or final, is a
separate report that requires
a reasonably detailed description meeting the requirements of Item 1015(b)(6)
of
Regulation M-A and that each such presentation must be filed as an exhibit
to
Schedule 13E-3.
Response
to Comment 17:
This
comment has been complied with on pages 12 and 22, at the indicated
locations.
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|
Daniel
F. Duchovny, Esq.
SEC
July
3, 2007
Page
6
|
Recommendations
of the Special Committee and Our Board
of Directors, page 16
18. Revise
your disclosure to disclose whether the board of directors made a determination
of both substantive and procedural fairness. See Item 1014 of Regulation
M-A.
Response
to Comment 18:
This
comment has been complied with on page 13, at the indicated
location.
19. Please
provide the disclosure required by Item 1014(b) of Regulation M-A and the
related Instruction 2.
Response
to Comment 19:
This
comment has been complied with on page 15, at the indicated
location.
20. We
note
that the board of directors adopted the special committee’s conclusions and that
the special committee appears to have considered the opinion and presentation
by
Jefferies. Note that if any filing person has based its fairness determination
on the analysis of factors undertaken by others, such person must expressly
adopt
this
analysis and discussion as their own in order to satisfy the disclosure
obligation. See Question 20 of Exchange Act Release No. 34-17719 (April 13,
1981). Please revise.
Response
to Comment 20:
This
comment has been complied with on page 13, at the indicated
location.
Reasons
for the Special Committee’s Determination, page 16
21. Please
revise your disclosure here and throughout the proxy statement to accurately
reflect
the opinion
of Jefferies as included
in Annex B which addresses fairness to the
holders
of common stock other than
Parent, Acquisition Corp. and their respective affiliates.
Response
to Comment 21:
This
comment has been complied with on pages 5, 12, 13, and 16 at the indicated
locations.
22. Please
address, here and throughout the proxy statement as necessary, how any filing
person relying on the financial advisor’s opinion was able to reach the fairness
determination
as to unaffiliated security holders given that the financial advisor’s
fairness opinion
addressed fairness
with respect to security holders other than Parent, Acquisition
Company
and their respective affiliates, rather than all security holders unaffiliated
with the company.
| |
|
Daniel
F. Duchovny, Esq.
SEC
July
3, 2007
Page
7
|
Response
to Comment 22:
This
comment has been complied with on pages 5 and 13, at the indicated locations.
23. Please
reconcile the disclosure in the penultimate bullet point on page 16 expressing
doubt about the Shamrock entities’ financial resources with the disclosure on
page 30 which
expresses certainty that Acquisition will
obtain the funds for the transaction from cash
on
hand.
Response
to Comment 23:
The
Company has deleted the words “the likelihood” from the indicated bullet point
on page 13, in response to this comment.
24. We
note
that the 45-day “go shop” period expired after you filed the preliminary proxy
statement.
Please disclose how
the
special committee and the board considered this fact
in
reaching its procedural fairness determination.
Response
to Comment 24:
The
Company has revised the indicated bullet point on page 14, in response to this
comment.
25. Please revise
the fourth bullet point on page 19 to describe the type of disruptions to
your
business
considered by the special committee and explain why the committee believed
there
might be any such disruptions.
Response
to Comment 25:
This
bullet point has been deleted, in response to the comment, as the special
committee did not believe that there would be disruptions to the Company’s
business following the announcement of the merger.
26. Please
explain how the negative factors described on page 19 could be mitigated by
the
company
and disclose whether the company in fact took any mitigating
action.
Response
to Comment 26:
The
reference to the mitigation of negative factors has been deleted, as the Company
does not believe any mitigation is necessary.
27. Refer
to
the disclosure relating to procedural fairness on page 19. Clarify how the
board
made a determination of procedural fairness even though the going private
transaction does not require the approval of unaffiliated security holders
and
no unaffiliated representative acting solely on behalf of the unaffiliated
security holders was retained.
Response
to Comment 27:
The
last paragraph on pg. 14 has been added in response to this
comment.
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|
Daniel
F. Duchovny, Esq.
SEC
July
3, 2007
Page
8
|
Opinion
of Jefferies & Company, Inc., page 19
28. Please
disclose how the Historical Share Price Performance analysis supported the
financial advisor’s opinion.
Response
to Comment 28:
The
last sentence under “Opinion of Jefferies & Company, Inc.-Historical Share
Price Performance” has been added in response to this comment (pg.
18).
29. Please
revise to disclose the data underlying the results described in this section.
For example, disclose (i) the enterprise value, LTM revenues, and estimated
2007
and 2008 revenues and EBITDA for each company in the Comparable Company
Analysis, including AVP, (ii) the data from each transaction that resulted
in
the multiple disclosed on page 23 with respect to the Selected Comparable
Transactions Analysis and the AVP data to which you applied the multiple to
arrive at the implied per share equity values, (iii) the company’s projected
results that were used in conducting the Discounted Cash Flow Analysis and
how
Jefferies derived implied per share equity values from that data. For each
analysis, show how the information from the analysis resulted in the
multiples/values disclosed.
Response
to Comment 29:
A
table has been added on pg. 19 in response to this comment.
30. Please
explain the basis of the each reference range used in the Comparable Company
Analysis and describe any qualitative considerations made in narrowing or
expanding the results obtained from the analysis in deriving each range. Also,
explain what “other matters” Jefferies considered in this analysis and the
Selected Comparable Transactions analysis, as disclosed in the last paragraph
of
each analysis.
Response
to Comment 30:
A
sentence has been added on page 19 at the indicated location.
The phrase “other matters” has been deleted in response to the Staff’s
comment.
31. Please
disclose the implied enterprise value for the company in the first paragraph
on
page 24.
Response
to Comment 31:
The
implied enterprise value for the Company has been disclosed in the paragraph
immediately following the “Selected Comparable Transaction Multiples” table (pg.
21).
32. In
connection with our comment above, please provide a cross-reference in the
Discounted Cash Flow Analysis section to where the financial projections appear
in your proxy.
Response
to Comment 32:
A
cross-reference has been added to end of the “Discounted Cash Flow analysis”
section (pg. 21) in response to the Staff’s comment.
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|
Daniel
F. Duchovny, Esq.
SEC
July
3, 2007
Page
9
|
33. Please
explain how Jefferies determined that discount rates of 26-30%, perpetual growth
rates of 5.0-7.0% and terminal EBITDA values of 5.5x-7.5x were the most
appropriate indicators of value in the Discounted Cash Flow Analysis. Disclose
the industry averages.
Response
to Comment 33:
The
requested disclosure has been added to the “Discounted Cash Flow Analysis”
section (pg. 21).
34. Please
explain the difference between the perpetual growth and the terminal multiple
methods used in the Discounted Cash Flow Analysis.
Response
to Comment 34:
The
requested disclosure has been added to the “Discounted Cash Flow Analysis”
section (pg. 21).
35. Please
describe the services provided by Jefferies to the filing persons and their
affiliates and quantify the compensation received by Jefferies for the past
two
years. Refer to Item 1015(b)(4) of Regulation M-A.
Response
to Comment 35:
The
requested disclosure has been added to the last sentence of the penultimate
paragraph on page 22 and to the last paragraph on page 22.
Interests
of AVP
Directors and Executive Officers in the Merger, page 27
36. Please
describe the “customary benefits” Mr. Armato is expected to receive under his
new employment agreement.
Response
to Comment 36:
The
Company has revised the Revised Proxy Statement (pg. 28) to disclose the
“customary benefits” Mr. Armato is expected to receive, including paid vacation,
insurance coverage and travel reimbursement.
37. We
note
that under the caption “Plans for AVP after the Merger” you disclose that there
are no plans other than those disclosed in connection with the merger. In light
of that, please explain what provisions were made in the registration rights
agreement described on page 28. Are the parties considering a public offering
subsequent to the going private transaction?
Response
to Comment 37:
The
Company has revised the Revised Proxy Statement (pg. 29) to disclose that
Shamrock and its co-investors customarily enter into registration rights
agreements with respect to acquired businesses, even though there is no public
offering contemplated subsequent to this transaction.
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|
Daniel
F. Duchovny, Esq.
SEC
July
3, 2007
Page
10
|
38. We
note
under the caption “Stockholders Agreement” on page 28 that “certain other
stockholders” of Holdings will enter
into
a
stockholders agreement. Please name those security holders.
Response
to Comment 38:
The
Company has deleted the phrase “and certain other stockholders” (pg. 29), as
Holdings, Shamrock, and Mr. Armato will be the only parties to the stockholders
agreement.
Material
U.S.
Federal Income Tax Consequences of the Merger, page 30
39. We
note
your statements that the discussion “is for general information only.” Please
delete
these statements, as it implies that you are not responsible for the disclosure
in
your
proxy statement.
Response
to Comment 39:
The
Company has deleted the phrase “for general information purposes” (pp. 31 and
33) as requested.
Appraisal
Rights,
page 32
40. Please
explain your basis for stating that you believe the fair value of the preferred
stock is its liquidation value.
Response
to Comment 40:
The
Company has revised the Revised Proxy Statement (pg. 36) to disclose that its
belief that the fair value of the preferred stock is its liquidation value
is
based on the ruling in In
the Matter of Appraisal of Ford Holdings, Inc. Preferred
Stock
that
a clear statement in a corporation’s certificate of incorporation of the amount
that a preferred stockholder will receive in a merger binds the preferred
stockholders, who cannot seek “additional consideration in the merger through
the appraisal process.”
Security
Ownership,
page 65
41. Given
the
voting agreement signed by Mr. Armato and the Shamrock entities on April
5,
2007,
please include the Shamrock entities as a beneficial owner in the table
in this
section.
Response
to Comment 41:
The
Shamrock entities have been included as a beneficial owner on the Security
Ownership table (pg. 74 and note 15 on pg. 75).
42. Please
include the full name of security holders listed in this section.
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|
Daniel
F. Duchovny, Esq.
SEC
July
3, 2007
Page
11
|
Response
to Comment 42:
The
Company has revised the Security Ownership table to include the full name of
all
security holders listed in the table (pg. 74).
Information
concerning
Shamrock Affiliates, page 71
43. We
note
your disclosure in the first paragraph about a “potential interpretation” of the
going private rules and that the Shamrock affiliates “may be deemed to be
affiliates” of the company in the going private transaction. Note that the
Shamrock entities, as filing persons, are
affiliates of the company engaged in this going private transaction and that
their status is not the result of
a
“potential” interpretation of the going private rules. Please revise this
language to remove doubt from the disclosure or delete it.
Response
to Comment 43:
The
Company has revised the Revised Preliminary Proxy Statement to delete the phase
“potential interpretation”, (pg. 79), as the Shamrock entities are affiliates of
the Company.
Form
of
Proxy
44. Please
revise the form
of
proxy
to clearly identify it as being preliminary. See Rule 14a-6(e)(1) of Regulation
14A.
Response
to Comment 44:
The
Company has revised the form of proxy to clearly identify it as being
preliminary.
Schedule
13D
45. Given
that the voting agreement entered into with Mr. Armato on April
5
encompasses
any
shares over which Mr. Armato holds beneficial ownership, please revise your
disclosure to
include
all securities Mr. Armato has a right to acquire within 60 days.
Response
to Comment 45:
We
expect that an amendment to Schedule 13D, reflecting this comment, will be
filed
shortly.
46. It
appears that the Shamrock entities have formed a group with Mr. Armato as a
result of
entering
into the voting agreement. In this respect, please tell us why you have not
included a facing page for Mr. Armato in the Schedule 13D and why you have
checked row 2(b) in the facing pages for the persons reporting on this Schedule
13D.
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|
Daniel
F. Duchovny, Esq.
SEC
July
3, 2007
Page
12
|
Response
to Comment 46:
We
expect that an amendment to Schedule 13D, reflecting this comment, will be
filed
shortly.
Your
prompt attention to this filing would be greatly appreciated. Should you have
any questions concerning any of the foregoing please contact me by telephone
at
(212) 407-4827.
Best
regards,
David
C.
Fischer
AVP,
INC.
6100
CENTER DRIVE, SUITE 900
LOS
ANGELES CA 90045
(310)
426-8000
July
3,
2007
Securities
and Exchange Commission
Washington
DC 20549-0303
Re:
Schedule
13E-3, File No. 005-79737
Mesdames/Gentlemen:
In
connection with responding to your comments on the captioned filing, AVP, Inc.,
as a reporting person, acknowledges that:
| · |
The
reporting person is responsible for the adequacy and accuracy of
the
disclosure in the filings;
|
| · |
Staff
comments or changes to disclosure in response to staff comments do
not
foreclose the Commission from taking any action with respect to the
filing; and
|
| · |
The
reporting person 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.
|
| |
|
|
| |
Very
truly
yours, |
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|
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AVP, INC. |
|
|
|
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By: |
/s/ Leonard
Armato |
| |
Leonard
Armato, |
| |
Chief
Executive Officer |
Each
of
the undersigned reporting persons acknowledges as aforesaid.
| |
|
|
|
| /s/
Leonard Armato |
|
|
|
|
Leonard
Armato
|
|
|
|
| |
|
|
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AVP
HOLDINGS,
INC. |
|
|
|
| |
By: |
/s/ Robert
F.
Perille |
| |
Robert
F. Perille, |
| |
President |
| |
|
|
| |
AVP
ACQUISITION CORP. |
|
|
|
| |
By: |
/s/ Robert
F. Perille |
| |
Robert
F. Perille, |
| |
President |
| |
|
|
| |
SHAMROCK
CAPITAL
GROWTH |
| |
FUND II, L.P. |
| |
By: Shamrock Capital Partners II,
L.L.C. |
| |
Its: General Partner |
|
|
|
| |
By: |
/s/ Stephen
D. Royer |
| |
Stephen
D. Royer, |
| |
Executive
Vice
President |
| |
|
|
| |
SHAMROCK
CAPITAL
PARTNERS II, L.P. |
|
|
|
| |
By: |
/s/ Stephen
D. Royer |
| |
Stephen
D. Royer, |
| |
Executive
Vice
President |
