Exhibit 1
April 14, 2002
Xxxxx & Xxxxx Company
0000 Xxxxxxx Xxxx, Xxxxx 000,
Xxxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxx, Chief
Executive Officer
Re: Warburg, Xxxxxx Investors, L.P. Takeout
Xx. Xxxxxxxx:
Reference is herein made to that certain Option Agreement, by and among
Warburg, Xxxxxx Investors, L.P. ("Warburg"), Xxxxx & Xxxxx Company (the
"Company") and Bank of America, dated as of March 7, 2002 (the "Option
Agreement") pursuant to which the Company has an option ("Refinancing Option")
to replace the recent financing provided to the Company by Warburg, including
the $5,000,000 Convertible Promissory Note, executed March 7, 2002 (the "Note"),
the additional $6,000,000 loan contemplated pursuant to the Option Agreement and
the approximately $4,158,431 on common equity investment in the Company (such
financings referred to herein collectively as the "Warburg Transaction"). This
letter agreement (this "Letter Agreement") sets forth the agreement of the
parties hereto with respect to such Refinancing Option.
Kojaian Ventures, L.L.C. ("KV") hereby agrees to provide to the Company
the money necessary for the Company to exercise the Refinancing Option as
provided in the Option Agreement and replace the Warburg Financing. The terms
are:
1. KV shall provide to the Company Fifteen Million One Hundred Fifty-Eight
Thousand Four Hundred Thirty-One Dollars ($15,158,431.00) plus interest accrued
on the Note and Warburg's reasonable documented out-of-pocket expenses
associated with the Note, which expenses shall not exceed $100,000.
Xxxxx & Xxxxx Company
April 14, 2002
Page 2
2. Except as specified in paragraph 3, KV's investment shall be in the form of
convertible subordinated indebtedness in the form used in the Warburg
Transaction, modified to make KV the payee and with the following additional
modifications:
a. Interest rate of 12% compounded quarterly;
b. Upon conversion of the $11,000,000 indebtedness contemplated by this
Letter Agreement, the Series A Preferred Stock shall have a dividend
rate of 12% per annum; and
c. The Series A Preferred Stock shall be adjusted so the dilution
component of the Series A Preferred Stock (i) would be reduced from
approximately 50% to 40%, (ii) would be based solely on the number of
Adjusted Common Shares Outstanding and (iii) until the one (1) year
anniversary of the closing of the transactions contemplated by this
Letter Agreement, the minimum liquidation preference would be 150% of
the Stated Value per share. For purposes of this Letter Agreement, the
term "Adjusted Common Shares Outstanding" shall mean (w) the common
shares outstanding as of the date hereof plus (x) those common stock
options that are outstanding as of the date hereof and that have an
exercise price equal to or less than $5.00 (other than those common
stock options, if any, that are cancelled within 12 months after the
closing of the transactions contemplated by this Letter Agreement)
plus (y) all common stock options authorized but unissued as of the
date hereof which are issued within 12 months after the closing of the
transactions contemplated by this Letter Agreement plus (z) 50% of
additional common stock options, if any, authorized after the date
hereof and issued within 12 months after the closing of the
transactions contemplated by this Letter Agreement; provided that the
number of additional common stock options counted for purposes of this
clause (z) shall not exceed that number of common stock options
cancelled during such 12-month period.
3. The Company shall redeem at cost the 1,337,358 common stock shares issued to
Warburg upon its exercise of warrants earlier this year and issue an equal
number of such shares after redemption to KV or its designee at the same price
per share paid to Warburg.
4. The Company shall pay down Six Million Dollars on its bank financing.
5. In all other respects KV shall be substituted for, have the rights,
privileges and prerogatives of, and have the documentation used (but modified
with the foregoing changes, other conforming changes and rewritten to substitute
its name for Warburg) for, Warburg in the Warburg Transaction.
6. The consummation of the transactions contemplated by this Letter Agreement is
subject to the following conditions:
a. receipt by the Company of all necessary consents, approvals or waivers
required by the lenders pursuant to the Amended and Restated Credit
Agreement, by and among the Company and various financial
institutions, dated as of December 31,
Xxxxx & Xxxxx Company
April 14, 2002
Page 3
2000, as amended by the First Amendment, dated as of August 22, 2001,
the Second Amendment, dated as of November 29, 2001 and the Third
Amendment, dated as of March 7, 2001 (the "Credit Agreement");
b. receipt by the Independent Committee of the Company's Board of
Directors (the "Independent Committee") from an independent financial
advisor of a written opinion to the effect that the transactions
contemplated in this Letter Agreement are fair from a financial point
of view;
c. definitive documentation embodying the terms of this Letter Agreement
which is reasonably satisfactory to both parties; provided that the
definitive documentation shall be substantially identical to the
definitive documentation used in the Warburg Transaction, except as
provided in this Letter Agreement and for such other conforming
changes as are reasonably necessary to effect the intent of this
Letter Agreement;
d. satisfaction of all legal requirements, including those under
applicable securities laws and regulations; and
e. approval of this Letter Agreement by the Board of Directors of the
Company in the exercise of their fiduciary duties; provided that in
the event such approval is not obtained by 5:00 P.M. Eastern Daylight
Savings Time, April 15, 2002, for any reason, KV shall have the right,
at its sole option, to terminate immediately this Letter Agreement;
and provided further that in the event approval of this Letter
Agreement is rejected at any time by the Board of Directors, either
party hereto may terminate this Letter Agreement immediately upon such
rejection.
7. The Company will use its reasonable best efforts to seek satisfaction of each
of the conditions set forth in paragraph 6. The parties shall endeavor in good
faith to consummate the transactions contemplated herein, including but not
limited to funding, pay off, documentation, filings, approvals and other
necessary actions, as soon as possible but in no event later than May 13, 2002,
at which date this Letter Agreement and the definitive documentation relating
hereto shall become null and void and be of no further force and effect.
8. The Company represents and warrants that: subject to Section 6 herein, it has
all necessary power and authority to enter into, execute and deliver this Letter
Agreement and to perform all of the obligations to be performed by it hereunder
and to consummate the transactions contemplated hereunder; this Letter Agreement
has been duly authorized, executed and delivered by the Company and constitutes
the valid and binding obligation of the Company, enforceable against the Company
in accordance with its terms, subject, as to enforcement of remedies, to
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally and to general equitable principles; the Independent
Committee has recommended acceptance of this Letter Agreement; and all documents
required to be filed under
Xxxxx & Xxxxx Company
April 14, 2002
Page 4
the U.S. securities laws in respect of the Credit Agreement have been filed with
the Securities and Exchange Commission by the Company.
9. Following the date of this Letter Agreement and until the earlier of (a) the
closing of the transactions contemplated by this Letter Agreement, (b) the date
on which any of the conditions set forth in Sections 6(a), (b) or (e) become not
capable of being satisfied by May 13, 2002 (provided that the party asserting
that a condition is not capable of being satisfied shall provide reasonable
evidence supporting such determination to the other party) and (c) May 13, 2002,
the Company shall not, directly or indirectly (i) initiate, solicit or encourage
any inquiries or proposals that constitute, or could reasonably be expected to
lead to, a proposal or offer for an alternative refinancing transaction of the
type contemplated by this Letter Agreement (an "Alternative Proposal"), (ii)
engage in negotiations or discussions concerning (and shall cease any current
negotiations or discussions), or provide to any person or entity any
confidential information or data relating to the Company for the purposes of, or
otherwise cooperate with or assist or participate in, facilitate or encourage,
any inquiries or the making of any Alternative Proposal, or (iii) agree to,
approve or recommend any Alternative Proposal. Nothing in this Section 9 shall
prevent the Company from providing confidential Company information to any
director in connection with the exercise by such director of his fiduciary
duties to the Company.
10. Upon execution of this letter by the Company, the amount of $1,000,000 which
was delivered to Xxxxxx Xxxxxx as an xxxxxxx money deposit may be negotiated by
the Company in a specially designated account to be used solely in connection
with the transactions contemplated by this Letter Agreement and shall be
credited against the amount described in paragraph 1 of this Letter Agreement.
In the event that a closing of the transactions contemplated by this Letter
Agreement does not occur for any reason other than solely as a result of a
breach by KV of this Letter Agreement or the definitive documentation relating
thereto, then upon request therefor by KV, said $1,000,000 shall immediately be
returned by the Company to KV without interest or deduction.
This Letter Agreement may be executed in counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument. Delivery by facsimile of an executed counterpart of any
signature page to this Letter Agreement to be executed hereunder shall have the
same effectiveness as the delivery of a manually executed counterpart thereof.
[Signature page to follow]
Xxxxx & Xxxxx Company
April 14, 2002
Page 5
IN WITNESS WHEREOF, the parties have caused this Letter Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
Sincerely,
KOJAIAN VENTURES, L.L.C.,
a Michigan limited liability company
By: Kojaian Ventures-MM, Inc., a Michigan
corporation, Managing Member
By: /s/ C. Xxxxxxx Xxxxxxx
------------------------------
C. Xxxxxxx Xxxxxxx, President
ACCEPTED AND AGREED:
---------------------
XXXXX & XXXXX COMPANY
By /s/ Xxxxx X. Xxxxxxxx
----------------------------
Name: Xxxxx X. Xxxxxxxx
Title: President, Chief Executive Officer
