Unassociated Document
UNITED
STATES
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 Earliest Event reported) — October 26, 2009 (October 20,
2009)
MDC
PARTNERS INC.
(Exact
name of registrant as specified in its charter)
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Canada
(Jurisdiction
of Incorporation)
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001-13718
(Commission
File Number)
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98-0364441
(IRS
Employer Identification No.)
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45
Hazelton Ave., Toronto, Ontario, Canada M5R 2E3
(Address
of principal executive offices and zip code)
(416)
960-9000
(Registrant’s
Telephone Number)
Check the
appropriate box below if the Form 8−K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
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⃞
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Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
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Soliciting
material pursuant to Rule 14a−12 under the Exchange Act (17 CFR
240.14a−12)
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Pre−commencement
communications pursuant to Rule 14d−2(b) under the Exchange Act (17 CFR
240.14d−2(b))
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Pre−commencement communications
pursuant to Rule 13e−4(c) under the Exchange Act (17 CFR 240.13e−
4(c))
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Item
1.01. Entry Into a Material Definitive
Agreement.
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On October 20, 2009, MDC Partners Inc.
(“MDC”) and its wholly-owned subsidiaries, as guarantors (the “Guarantors”),
entered into a Purchase Agreement (the “Purchase Agreement”) with certain
initial purchasers named in Schedule 1 therein (the “Initial Purchasers”),
relating to the issuance and sale by MDC of $225 million aggregate principal
amount of its 11% Senior Notes due 2016 (the “Notes”), jointly, severally and
unconditionally guaranteed on a senior unsecured basis by the
Guarantors. The Notes were sold in a private placement in reliance on
exemptions from registration under the Securities Act of 1933, as amended (the
“Securities Act”).
The
Company used net proceeds of this offering to repay the outstanding balance
under and terminate its prior senior secured credit facility, and the Company
will redeem its outstanding 8% C$45 million convertible debentures due June
2010.
The Purchase Agreement includes
customary representations, warranties and covenants by MDC. Under the
terms of the Purchase Agreement, MDC is required to indemnify the Initial
Purchasers against certain liabilities. Certain of the Initial
Purchasers and their affiliates have, from time to time, performed various
financial advisory and investment banking services for MDC and its affiliates,
for which they received or will receive customary fees and
expenses.
Indenture
On October 23, 2009, MDC entered into
an indenture (the “Indenture”) among MDC, the Guarantors and The Bank of New
York Mellon, as trustee, relating to issuance by MDC of the
Notes. The Notes bear interest at a rate of 11% per annum, accruing
from October 23, 2009. Interest is payable semiannually in arrears in
cash on May 1 and November 1 of each year, beginning on May 1,
2010. The Notes will mature on November 1, 2016, unless earlier
redeemed or repurchased.
The Notes are guaranteed on a senior
unsecured basis by all of MDC’s existing and future wholly-owned
subsidiaries. The Notes are unsecured and unsubordinated obligations
of MDC and rank (i) equally in right of payment with all of MDC’s or any
Guarantor’s existing and future senior indebtedness, (ii) senior in right of
payment to MDC’s or any Guarantor’s existing and future subordinated
indebtedness, (iii) effectively subordinated to all of MDC’s or any Guarantor’s
existing and future secured indebtedness to the extent of the collateral
securing such indebtedness and (iv) structurally subordinated to all existing
and future liabilities of MDC’s subsidiaries that are not
Guarantors.
MDC may,
at its option, redeem the Notes in whole at any time or in part from time to
time, on and after November 1, 2013 at a redemption price of 105.500% of the
principal amount thereof if redeemed during the twelve-month period beginning on
November 1, 2013, at a redemption price of 102.750% of the principal amount
thereof if redeemed during the twelve-month period beginning on November 1, 2014
and at a redemption price of 100% of the principal amount thereof if redeemed
during the twelve-month period beginning on November 1, 2015.
Prior to
November 1, 2013, MDC may, at its option, redeem some or all of the Notes at a
price equal to 100% of the principal amount of the Notes plus a “make whole”
premium and accrued and unpaid interest. MDC may also redeem, at its
option, prior to November 1, 2012, up to 35% of the Notes with the proceeds from
one or more equity offerings at a redemption price of 111% of the principal
amount thereof.
If MDC
experiences certain kinds of changes of control (as defined in the Indenture),
holders of the Notes may require MDC to repurchase any Notes held by them at a
price equal to 101% of the principal amount of the Notes plus accrued and unpaid
interest. In addition, if MDC sells assets under certain
circumstances, it must offer to repurchase the Notes at a price equal to 100% of
the principal amount of the Notes plus accrued and unpaid interest.
The
Indenture includes covenants that, among other things, restrict MDC’s ability
and the ability of its restricted subsidiaries (as defined in the Indenture) to
incur or guarantee additional indebtedness; pay dividends on or redeem or
repurchase the capital stock of MDC; make certain types of investments; impose
limitations on dividends or other amounts from MDC’s restricted subsidiaries;
incur certain liens; sell or otherwise dispose of certain assets; enter into
transactions with affiliates; enter into sale and leaseback transactions; and
consolidate or merge with or into, or sell substantially all of MDC’s assets to,
another person. These covenants are subject to a number of important
limitations and exceptions. The Notes are also subject to customary
events of default, including cross-payment default and cross-acceleration
provision.
Registration
Rights Agreement
On October 23, 2009, MDC entered into
an Exchange and Registration Rights Agreement (the “Registration Rights
Agreement”) among MDC, the Guarantors and the Initial Purchasers pursuant to
which MDC agreed, to the extent the Notes do not become freely transferable
without restriction under the Securities Act, as of the fifth business day
following the one year anniversary of their issuance (“Registrable Securities”)
to (i) use commercially reasonable efforts to file with the Securities and
Exchange Commission a registration statement relating to an offer to exchange
any and all of such Notes for a like aggregate principal amount of debt
securities and guarantees substantially identical to the Notes that are
registered under the Securities Act or (ii) in certain circumstances, register
the resale of the Notes.
If MDC fails to comply with certain of
its obligations under the Registration Rights Agreement (each, a “Registration
Default”), then, as liquidated damages for such Registration Default, special
interest, in addition to the base interest rate of the Notes, shall accrue on
all Registrable Securities then outstanding at a per annum rate of 0.25% for the
first 90 days following such Registration Default, at a per annum rate of 0.50%
for the second 90 days following such Registration Default, at a per annum rate
of 0.75% for the third 90 days following such Registration Default and at a per
annum rate of 1.0% thereafter for the remaining period of such Registration
Default. Other than the Company’s obligation to pay special interest,
it will not have any liability for damages with respect to a Registration
Default on any Registrable Securities.
Credit
Agreement
On
October 23, 2009, MDC, Maxxcom Inc. (a subsidiary of MDC) and each of their
subsidiaries party thereto entered into a new $75 million senior secured
revolving credit facility (the “Credit Agreement”) with Wells Fargo Foothill,
LLC, as agent, and the lenders from time to time party thereto. The
Credit Agreement, together with proceeds from the Notes issuance, replaced MDC’s
existing $185 million senior secured financing agreement with Fortress Credit
Corp., as collateral agent, Wells Fargo Foothill, Inc., as administrative agent,
and a syndicate of lenders (the “Fortress Facility”). Capitalized
terms used in this section and not otherwise defined have the meanings set forth
in the Credit Agreement, filed as Exhibit 10.2 hereto.
Advances under the Credit Agreement
bear interest as follows: (a)(i) LIBOR Rate Loans bear interest at the LIBOR
Rate and (ii) Base Rate Loans bear interest at the Base Rate, plus (b) an
applicable margin. The initial applicable margin for borrowing is
3.00% in the case of Base Rate Loans and 3.25% in the case of LIBOR Rate
Loans. The applicable margin may be reduced subject to MDC achieving
certain trailing twelve month earnings level (as defined). In
addition to paying interest on outstanding principal under the Credit Agreement,
MDC is required to pay an unused revolver fee to lenders under the Credit
Agreement in respect of unused commitments thereunder.
The Credit Agreement is guaranteed by
all of MDC’s present and future subsidiaries, other than immaterial
subsidiaries. The Credit Agreement includes covenants that,
among other things, restrict MDC’s ability and the ability of its subsidiaries
to incur or guarantee additional indebtedness; pay dividends on or redeem or
repurchase the capital stock of MDC; make certain types of investments; impose
limitations on dividends or other amounts from MDC’s subsidiaries; incur certain
liens, sell or otherwise dispose of certain assets; enter into transactions with
affiliates; enter into sale and leaseback transactions; and consolidate or merge
with or into, or sell substantially all of MDC’s assets to, another
person. These covenants are subject to a number of important
limitations and exceptions. The Credit Agreement also contains
financial covenants, including a senior leverage ratio, a fixed charge coverage
ratio and a minimum earnings level (as defined). The Credit
Agreement is also subject to customary events of default.
The foregoing descriptions
of the Purchase Agreement, the Indenture, the Registration Rights Agreement and
the Credit Agreement do not purport to be complete and are qualified in their
entirety by reference to the full text of the agreements, which are filed hereto
as Exhibits 1.1,
4.1, 10.1
and 10.2, respectively, to this Current Report on Form 8-K and incorporated
herein by reference.
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Item
1.02. Termination of a Material Definitive
Agreement
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On October 23, 2009, in connection with
the issuance of the Notes, MDC repaid in full all outstanding loans, together
with interest and all other amounts due under the Fortress Facility, and
terminated the Fortress Facility.
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Item
2.03. Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a
Registrant
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The
information set forth above under Item 1.01 of this Current Report on Form 8-K
is incorporated by reference into this Item 2.03.
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Item
3.03. Material Modification to Rights of Security
Holders
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The
information set forth above under Item 1.01 of this Current Report on Form 8-K
is incorporated by reference into this Item 3.03.
Each of
the Indenture and the Credit Agreement contains a covenant that, among other
things, restricts the Company’s ability to pay dividends or distributions or
redeem or repurchase capital stock.
On October 20, 2009, MDC issued a press
release announcing the pricing of its offering, in a private placement, of the
Notes. A copy of the Company’s press release is attached hereto as
Exhibit 99.1 and is incorporated herein by reference.
On October 23, 2009, MDC issued a press
release announcing the completion of its offering, in a private placement, of
the Notes and its entry into a new $75 million revolving credit
facility. A copy of the Company’s press release is attached hereto as
Exhibit 99.2 and is incorporated herein by reference.
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Item
9.01. Financial Statements and
Exhibits
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1.1
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Purchase
Agreement, dated as of October 20, 2009, among the Company, the Note
Guarantors and Goldman, Sachs & Co., as representative of the initial
purchasers named in Schedule 1
therein.
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4.1
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Indenture,
dated as of October 23, 2009, among the Company, the Note Guarantors and
The Bank of New York Mellon, as trustee, including the form of 11% Senior
Notes due 2016.
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10.1
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Exchange
and Registration Rights Agreement, dated as of October 23, 2009, among the
Company, the Note Guarantors and Goldman, Sachs & Co., as
representative of the initial purchasers named in Schedule 1
therein.
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10.2
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Credit
Agreement, dated as of October 23, 2009, among the Company, Maxxcom Inc.,
a Delaware corporation, each of their subsidiaries party thereto, Wells
Fargo Foothill, LLC, as agent, and the lenders from time to time party
thereto.
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99.1
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Text
of press release issued by the Company on October 20, 2009, regarding the
pricing of the Notes.
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99.2
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Text
of press release issued by the Company on October 23, 2009, regarding the
completion of the offering of Notes and the entering into of a new $75
million revolving credit facility.
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Signatures
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed by the undersigned hereunto duly
authorized.
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Date: October
26, 2009
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MDC
Partners Inc.
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By:
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/s/ Mitchell Gendel
Mitchell
Gendel,
General
Counsel & Corporate Secretary
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