Exhibit 1
RCBA Strategic Partners, L.P.
c/o BLUM Capital Partners, L.P.
000 Xxxxxxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
(000) 000-0000
November 10, 2000
FS Equity Partners III, L.P.
FS Equity Partners International, L.P.
00000 Xxxxx Xxxxxx Xxxxxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: J. Xxxxxxxx Xxxxxxx
Gentlemen:
This letter outlines the general terms and conditions under which
RCBA Strategic Partners, L.P. ("XXXX"), which is an affiliate of
XXXX Capital Partners, L.P., FS Equity Partners III, L.P. and FS
Equity Partners International, L.P. (together with their
affiliates other than the Company, "FS") and the other signatories
hereto (the "Other Investors") would propose to acquire all of the
Common Stock, par value $0.01 per share (the "Common Stock"), of
CB Xxxxxxx Xxxxx Services, Inc. (the "Company"). Such acquisition
would be structured as a proposed merger of XXXX XX Corp.
("Newco") with and into the Company (the "Proposed Transaction").
1. Proposal to the Board; Negotiation of Proposed Transaction.
Attached hereto as Annex A is a letter from Newco to the Board of
Directors of the Company (the "Board") proposing the proposed
transaction (the "Proposal Letter"). The parties hereto agree
that Newco will submit the Proposal Letter to the board. The
specific terms and conditions of the Proposed Transaction
(including, without limitation, the financing thereof and the
agreement and plan of merger (the "Merger Agreement")), except as
specifically provided in sections 2, 3 and 4 of this letter, will
be determined by XXXX in its sole discretion and XXXX will
determine whether Newco will enter into the Merger Agreement and
proceed with the Proposed Transaction; provided, however that if
either the amount of consideration payable per share of common
stock or any other material economic terms of the Proposed
Transaction (including, without limitation, the material economic
terms of the financing thereof) are changed without the prior
consent of FS, then FS will thereafter no longer be bound by the
terms of sections 2 and 3 of this letter if FS objects in writing
to such revised terms within three business days of being notified
of such terms (in which event FS will no longer have the right to
invest in the Proposed Transaction or receive the New FS Warrant
as contemplated by section 2 below). In addition, with respect to
all material terms of the Proposed Transaction (including, without
limitation, the financing thereof), XXXX will use its good faith
efforts to (i) promptly communicate such terms to the other
parties hereto, (ii) permit the other parties hereto to
participate in the negotiation of such terms and (iii) consider
the views of the other parties hereto in the negotiation of such
terms.
2. Equity Contributions. (a) In furtherance of the proposed
Transaction, on the closing date of the Proposed Transaction, (x)
XXXX would contribute to Newco all of the Common Stock
beneficially owned by it as of the date hereof (which is equal to
2,345,900 shares) and receive in exchange therefor an equivalent
number of shares of Newco common stock, (y) FS would contribute to
Newco all of the Common Stock beneficially owned by it as of the
date hereof (which is equal to 3,402,463 shares) and receive in
exchange therefor an equivalent number of shares of Newco common
stock, and (z) the Other Investors would contribute to Newco all
of the outstanding common stock beneficially owned by them as of
the date hereof (which shares are set forth opposite the names of
such other investors on schedule I hereto) and receive in exchange
therefor an equivalent number of shares of Newco common stock. In
addition, on the closing date of the proposed transaction, XXXX
and its affiliates would purchase from Newco between approximately
$64.3 million and $116.9 million (depending upon the extent that
employees of the Company decide to purchase equity of the Company
anticipated to be made available on the closing date of the
Proposed Transaction) (the "Additional Equity Contribution") of
newly issued common stock of Newco for a cash price per share of
Common Stock equal to the cash price per share of Common Stock
paid to the stockholders of the Company in the proposed
transaction. In connection with the consummation of the proposed
transaction, each outstanding share of Newco common stock would be
converted automatically into one share of Common Stock. Each of
the parties hereto agrees to negotiate in good faith and use all
reasonable efforts to enter into definitive documentation with
respect to the matters set forth in this paragraph (the
"Investment Documentation") prior to the execution of the Merger
Agreement. The Investment Documentation will be drafted by
Xxxxxxx Xxxxxxx & Xxxxxxxx (counsel to Newco and XXXX).
b) On the closing date of the Proposed Transaction, the
warrant currently held by FS to acquire Common Stock (the "Old FS
Warrant") will be cancelled and the Company will issue to FS a new
warrant to acquire common stock (the "New FS Warrant") at an
exercise price of $30 per share and that is substantially similar
to the Old FS Warrant, with the following exceptions: (i) the New
FS Warrant will expire on August 27, 2007, (ii) the New FS Warrant
will be a warrant to acquire a number of shares of Common Stock
equal to the number that represents the same percentage of the
total outstanding shares of Common Stock immediately after
consummation of the Proposed Transaction as the Old FS Warrant
entitled FS immediately prior to the consummation of the Proposed
Transaction, and (iii) the New FS Warrant will not be exercisable
unless and until (x) a merger, sale or other acquisition of the
company, (y) an underwritten initial public offering of the Common
Stock or (z) August 26, 2007, and upon the occurrence of any event
specified in clause (x) or (y) the New FS Warrant will
automatically be exercised in a cashless manner.
3. Stockholders Agreement. Attached hereto as Annex B is a
summary setting forth the principal terms governing the ownership
of Common Stock by the parties hereto subsequent to the
consummation of the Proposed Transaction. Each of the parties
hereto agrees to negotiate in good faith and use all reasonable
efforts to enter into a definitive stockholders agreement with
terms reflecting those set forth in Annex B to this letter (the
"Stockholders Agreement") prior to the execution of the Merger
Agreement. The Stockholders Agreement will be drafted by Xxxxxxx
Xxxxxxx & Xxxxxxxx.
4. Management and Employee Arrangements. Each of the parties
hereto agrees to negotiate in good faith and, to the extent a
party thereto, use all reasonable efforts to enter into, mutually
agreeable definitive agreements (the "Management and Employee
Agreements") prior to the execution of the Merger Agreement that
set forth the employment terms of, and the receipt of equity-based
and other compensation by, certain of the Other Investors and
other employees of the Company subsequent to the consummation of
the Proposed Transaction. Such definitive agreements will be
drafted by Xxxxxxx Xxxxxxx & Xxxxxxxx.
5. Representation and Warranty. Each of the parties hereto
represents and warrants to each of the other parties hereto that
the total number of shares of Common Stock beneficially owned by
such first party and its affiliates as of the date hereof is
accurately set forth on Schedule I to this letter.
6. Exclusivity; Voting. (a) During the exclusivity period
(as defined below), each of the parties hereto other than XXXX (in
their individual capacities as stockholders of the Company and not
in their capacities as officers or directors of the Company, if
applicable) will (i) not, directly or indirectly, make,
participate in or agree to, or initiate, solicit, encourage or
knowingly facilitate any inquiries or the making of, any proposal
or offer with respect to, or a transaction to effect, a merger,
reorganization, share exchange, consolidation, business
combination, recapitalization, liquidation, dissolution or similar
transaction involving the Company or any of its subsidiaries, or
any purchase or sale of 20% or more of the consolidated assets
(including without limitation stock of its subsidiaries) of the
Company and its subsidiaries, taken as a whole, or any purchase or
sale of, or tender or exchange offer for, the equity securities of
the Company that, if consummated, would result in any person or
entity beneficially owning securities representing 20% or more of
the total voting power of the Company (or of the surviving parent
entity in such transaction) or any of its subsidiaries (any such
proposal, offer or transaction (other than the transactions
contemplated by this letter) being hereinafter referred to as a
"Competing Acquisition Proposal"), (ii) vote or consent (or cause
to be voted or consented), in person or by proxy, any shares of
common stock beneficially owned or held by record such party
hereto or to which such party has, directly or indirectly, the
right to vote or direct the voting (the "Subject Shares") against
any Competing Acquisition Proposal at any meeting (whether annual
or special and whether or not an adjourned or postponed meeting)
of stockholders of the Company, (iii) not, directly or indirectly,
sell, transfer or otherwise dispose of any shares of Common Stock
beneficially owned by such party and (iv) not enter into any
agreement, commitment or arrangement that is inconsistent with any
of the foregoing. notwithstanding anything to the contrary stated
herein, each of the parties hereto other than XXXX may undertake
any of the acts otherwise not permitted by this Section 6(a) to
the extent such act is part of the Proposed Transaction.
(b) During the Exclusivity Period, each of the parties hereto
agrees to vote or consent (or cause to be voted or consented), in
person or by proxy, any Subject Shares in favor of the Proposed
Transaction and the approval and adoption of the Merger Agreement
and any related transactions at any meeting (whether annual or
special and whether or not an adjourned or postponed meeting) of
stockholders of the Company.
(c) For purposes of this letter, the "Exclusivity Period" shall
be defined as the period beginning upon execution of this letter
and ending upon the earliest to occur of the following events:
(i) 6 months after the date hereof, (ii) if Credit Suisse First
Boston ("CSFB") notifies XXXX that CSFB will be unable to arrange
or provide the debt financing necessary to consummate the Proposed
Transaction at the expected closing date, (iii) the date that the
Board enters into a binding agreement to effect a Competing
Acquisition Proposal, (iv) 30 days after the date the Board
rejects the Proposed Transaction in writing and (v) Newco's
proposal to enter into the Proposed Transaction is terminated;
provided, however that, in the case of clause (iv), if the process
implemented by the Board to consider the Proposed Transaction
and/or a Competing Acquisition Proposal is continuing and XXXX in
good faith is continuing to pursue the Transaction in a manner
consistent with such process, then the duration of the period set
forth in such clause shall continue for so long as such process
and XXXX'x good faith pursuit continue.
(d) Notwithstanding anything to the contrary in this Section 6,
Section 6(a) and (b) of this letter shall terminate and be of no
further force and effect in the event that any of the following
shall occur: (i) XXXX or XXXX Capital Partners, L.P. ("XXXX
Capital") sells, transfers or otherwise disposes of, or agrees to
sell, transfer or otherwise dispose of, any shares of Common Stock
beneficially owned by XXXX or XXXX Capital other than in
connection with the Proposed Transaction, or (ii) XXXX or XXXX
Capital votes or agrees to vote in favor of, or sells or agrees to
sell any shares of Common Stock beneficially owned by XXXX or XXXX
Capital pursuant to, a Competing Acquisition Proposal. XXXX
agrees to provide reasonable prior notice to each of the other
parties hereto of any intention by XXXX or XXXX Capital to
undertake any of the acts set forth in this Section 6(d).
(e) During the Exclusivity Period, without the prior consent of
FS, XXXX will not make a Competing Acquisition Proposal other than
the Proposed Transaction; provided, however that for purposes of
this clause (e), the "Exclusivity Period" shall be determined
without regard to clause (c)(v) of this paragraph 6.
(f) The obligations of the parties hereto under paragraphs 2, 3
and 4 will terminate immediately upon expiration of the
Exclusivity Period.
7. Fees and Expenses. (a) Except to the extent otherwise set
forth in the Merger Agreement, all costs incurred by any party
hereto in preparing this letter and the annexes hereto and in
pursuing and negotiating the transactions contemplated hereby
(including all attorneys' fees and costs relating thereto)
("Transaction Expenses") will be paid by the party incurring such
Transaction Expenses; provided, that the parties hereto agree that
if a Merger Agreement is executed it shall provide for the
reimbursement of all such transaction expenses by the Company at
the time of the consummation of the Proposed Transaction.
(b) Any break-up fee or similar payment made to Newco in
connection with the Proposed Transaction that is not required to
be paid to the debt financing sources for the Proposed Transaction
shall be distributed to XXXX and, if and to the extent as may be
agreed pursuant to paragraph 4 above, to Xxxxxxx X. Xxxxx and W.
Xxxxx Xxxxx.
(c) In the event that the Proposed Transaction is consummated,
the parties hereto agree that RCBA GP, L.L.C. and FS Holdings,
Inc. shall be entitled to receive from the Company at closing a
transaction fee of $3 million and $2 million, respectively.
8. Confidentiality. Except as otherwise required by law or
paragraph 1 above or as may be required to be disclosed by any
party in any Schedule 13D filing, the terms of the Proposed
Transaction and this letter will be kept strictly confidential by
the parties hereto regarding persons other than their attorneys
and accountants (under duties of confidentiality) unless each of
the other parties hereto releases or consents to the release of
any such information.
9. Governing law; Jurisdiction. This letter agreement shall be
governed by and interpreted and enforced in accordance with the
laws of the State of New York as applied to contracts made and
fully performed in such state. Each of the parties hereto hereby
submits to the exclusive jurisdiction of any state or federal
court sitting in the Borough of Manhattan in the City of New York.
The parties hereto waive all right to trial by jury in any action,
suit or proceeding brought to enforce or defend any rights or
remedies under this agreement.
10. Legal Effect. The consummation of the transactions
contemplated by Sections 2, 3 and 4 of this letter are conditioned
upon the negotiation and execution of the Merger Agreement and of
Definitive Investment Documentation, a definitive Stockholders
Agreement and Definitive Management and Employee Agreements,
respectively, that are consistent with the terms of Sections 1, 2,
3 and 4 of this letter (and any annexes referred to therein) and
such other terms as the parties thereto may agree among
themselves.
[Remainder of Page Intentionally Left Blank]
If this letter agreement correctly sets forth our agreements with
respect to the matters described herein, please so indicate by
signing this letter in the space provided below for that purpose.
Very truly yours,
RCBA STRATEGIC PARTNERS, L.P.
By: RCBA GP, L.L.C., its general partner
By: /s/ Claus X. Xxxxxx
__________________________________
Name: Claus X. Xxxxxx
Title: Managing Partner
ACCEPTED AND AGREED TO AS OF
THE DATE FIRST SET FORTH ABOVE:
FS EQUITY PARTNERS III, L.P.
By: FS Capital Partners, L.P., its general
Partner
By: FS Holdings, Inc., its general
partner
By: /s/ Xxxxx X. Xxxxxxx
________________________
Name: Xxxxx X. Xxxxxxx
Title:
FS EQUITY PARTNERS INTERNATIONAL, L.P.
By: FS&Co. International, L.P., its general
Partner
By: FS International Holdings Limited,
its general partner
By: /s/ Xxxxx X. Xxxxxxx
________________________
Name: /s/ Xxxxx X. Xxxxxxx
Title:
OTHER INVESTORS:
/s/ Xxxxxxx X. Xxxxx
______________________________
Xxxxxxx X. Xxxxx
/s/ W. Xxxxx Xxxxx
______________________________
W. Xxxxx Xxxxx
/s/ Xxxxxxxx X. Xxxxx
______________________________
Xxxxxxxx X. Xxxxx
THE XXXX HOLDING COMPANY
/s/ Xxxxxx X. Xxxx
______________________________
By: Xxxxxx X. Xxxx
SCHEDULE I
Total Shares of Total Shares of
Outstanding Common Common Stock
Stock Owned Beneficially Owned
------------------ ---------------------
XXXX and its affiliates 3,423,886 3,439,091
FS and its affiliates 3,402,463 3,402,463
Xxxxxxx X. Xxxxx 35,000 647,526
W. Xxxxx Xxxxx 58,600 125,200
Xxxxxxxx X. Xxxxx 397,874 409,984
Xxxxxx X. Xxxx 734,290 555,360
Except as set forth in footnote 2, as determined in
accordance with Rule 13d-3 promulgated by the Securities
and Exchange Commission under the Securities Exchange
Act of 1934, as amended.
The shares listed as beneficially owned by Xxxxxxx X.
Xxxxx include currently exercisable options (the "Xxxxx-
Xxxx Options") granted by The Xxxx Holding Company
(which is the wholly-owned subsidiary of The Xxxx
Company, which is wholly-owned by the Xxx Xxxx Separate
Property Trust, a trust for which Xxxxxx X. Xxxx is
trustee) to Xx. Xxxxx with respect to 521,590 shares of
Common Stock held by The Xxxx Holding Company and
warrants to acquire 55,936 shares of Common Stock,
which warrants are also held by The Xxxx Holding
Company. The shares listed as beneficially owned by
Xxxxxx X. Xxxx do not include the Xxxxx-Xxxx Options.
ANNEX A
XXXX XX Corp.
c/o BLUM Capital Partners, L.P.
000 Xxxxxxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
(000) 000-0000
November 10, 2000
Board of Directors
CB Xxxxxxx Xxxxx Services, Inc.
000 Xxxxx Xxxxxxxxx Xxxxxxxxx
Xx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxxx
Chairman of the Board of Directors
Dear Sirs:
XXXX XX Corp., a Delaware corporation ("Newco"), is very
pleased to present its all-cash proposal ("Proposal") to purchase
all of the common stock of CB Xxxxxxx Xxxxx Services, Inc. (the
"Company") not owned by the Offering Group identified below at a
price of $15.50 per share (the "Transaction"). The purchase price
we are offering your stockholders represents a premium of 29.4% to
the average closing price of the Company's common stock on the New
York Stock Exchange for the three-month period ended on November
9, 2000. Newco has been formed by RCBA Strategic Partners, L.P.
("XXXX"), an affiliate of XXXX Capital Partners, L.P., for the
purpose of effecting the Proposal. The Offering Group includes
(i) XXXX and other entities affiliated with XXXX, (ii) Xxxxxxx
Xxxxxx & Co. Incorporated through its affiliates FS Equity
Partners III, L.P., a Delaware limited partnership, and FS Equity
Partners International, L.P., a Delaware limited partnership
(collectively, "Xxxxxxx Xxxxxx"), and (iii) certain directors and
senior management of the Company, including Xx. Xxx Xxxxx. The
Offering Group presently owns or controls approximately 38% of the
outstanding common stock of the Company.
We believe that the Proposal constitutes an excellent opportunity
for the stockholders of the Company to realize full value for
their shares to an extent not available to them in the
marketplace, and that they will find this value compelling. In
addition, we believe the financing needed to complete the
Transaction can be obtained in a timely manner and the conditions
to the Transaction will be limited. As a result, we believe we
have the ability to complete the Transaction quickly and provide
near-term liquidity for your stockholders.
The terms of the Proposal are summarized below:
Purchase Price
Our cash purchase price of $15.50 per share for the Company's
common stock places a total value on the Company's common stock of
approximately $340 million (including for each option to acquire
the Company's common stock the difference between the purchase
price and the exercise price). The Proposal represents a
substantial premium to the Company's current stock price and prior
averages. The offer represents a 24.0% premium to the Company's
closing stock price of $12.50 on November 9, 2000; a 29.4% premium
to the Company's three-month average of $11.98 per share for the
period ending November 9, 2000; and a 37.1% premium to the
Company's six-month average of $11.31 per share for the period
ending November 9, 2000. In addition, the Company's "public
float" is extraordinarily limited with an average of 17,114 shares
traded each market day during the 3-month period ending November
9, 2000. In other words, we believe the Proposal gives the
Company's public stockholders an opportunity to obtain liquidity
at a full and fair valuation.
Equity Financing
It is contemplated that the 8,052,113 outstanding shares of
the Company common stock currently owned by the Offering Group
effectively will be converted into shares of common stock of the
Company after the closing of the Transaction. In addition, XXXX
will provide approximately an additional $47.6 million of equity
to the Company, as well as up to approximately an additional $52.6
million to the extent that the employees of the Company do not
subscribe for all of the common stock that we anticipate making
available to them for purchase at the closing of the Transaction.
XXXX Capital Partners, L.P., which together with its
affiliates currently beneficially owns approximately 16.1% of the
Company's outstanding common stock, is a leading private equity
and strategic block investment firm with approximately $3.8
billion of equity capital under management, including through
affiliates. XXXX Capital was founded 25 years ago and has
invested in a wide variety of businesses in partnership with
management teams to create long-term value.
The proposal contained in this letter has received all necessary
internal approvals from XXXX and no other internal approvals are
required. A description of the terms relating to the Equity
Financing is contained within the letter agreement (and related
term sheet) attached hereto as Exhibit 1.
Debt Financing
We have had discussions with Credit Suisse First Boston ("CSFB")
regarding debt financing totaling $600 million dollars to support
the Transaction. This debt would be comprised of funded senior
term loans of up to $275 million and $225 million of subordinated
indebtedness. In addition, a revolving credit facility of $100
million would be provided for ongoing working capital purposes
post-closing. The contemplated debt structure is structured to
allow for the consummation of the Proposal and provide ample
capital for the Company' future growth and working capital needs.
As is customary for transactions of this nature, consummation of
the Transaction is subject to receipt of the required debt
financing. We intend to execute commitment letters for all of the
required debt financing at the time a definitive merger agreement
is executed. We anticipate that definitive documentation for the
debt financing would be finalized in the period prior to the vote
of the Company's stockholders with respect to the Transaction.
CSFB is prepared to devote the necessary resources to close the
transaction expeditiously. Should you wish to discuss any aspect
of the proposed financing with CSFB, we would be happy to arrange
an opportunity for you to meet with appropriate representatives.
Structure
We currently contemplate that the Transaction will be
consummated in two steps. In the first step, each of the members
of the Offering Group will contribute all of the shares of common
stock of the Company beneficially owned by such member to Newco in
exchange for newly-issued shares of Newco. Immediately following
completion of the first step of the Transaction, Newco will be
merged into the Company. Pursuant to the merger, all shares of
the Company's common stock (other than the shares held by Newco)
will be converted into the right to receive the Purchase Price,
all shares of common stock of the Company held by Newco will be
cancelled and all shares of common stock of Newco will be
converted into shares of the common stock of the Company. At the
conclusion of the Transaction, assuming the Company's employees
agree to purchase the full amount of the common stock that we make
available to them, the outstanding equity ownership of the Company
would approximately be as follows: XXXX and affiliates, 45%;
management and employees of the Company, 25%; Xxxxxxx Xxxxxx, 23%
and other investors, 7%. We and our representatives are prepared
to discuss our proposed acquisition structure with you in detail
at your request.
Treatment of Existing Indebtedness
At the closing of the Transaction, the Company's existing bank
credit facility would be refinanced with the proceeds of the debt
financing. In addition, prior to the closing we would tender for
all of the outstanding 8-7/8% Senior Subordinated Notes of the
Company. We would also seek consents from the holders of the 8-
7/8% Senior Subordinated Notes to the deletion of substantially
all of the negative covenants contained within the indenture
relating to such notes.
Employees
We are keenly aware of the importance of the Company's
employees, in particular, sales professionals, and we believe the
Transaction will benefit the employees of the Company. Our
capital structure is designed to enable the Company to grow and
thereby enhance the opportunities available to its employees. In
addition, the employees will be given the opportunity to own a
significant amount of equity in the Company going forward. At the
closing of the Transaction, we anticipate taking the following
actions with respect to certain of the compensation and benefit
programs available to the Company's employees:
* Deferred Compensation Plan. We will leave the Company Match,
Retention and Recruitment Programs under the Deferred Compensation
Plan in place at closing and allow each participant in the
Deferred Compensation Plan who has invested his or her own funds
in the stock fund alternatives under the DCP to (i) convert the
value of that investment (based upon the purchase price paid to
the Company's stockholders in the Transaction) into any of the
insurance mutual fund alternatives now provided under the Deferred
Compensation Plan, (ii) receive a cash payment equal to the value
of that investment (based upon the purchase price paid to the
Company's stockholders in the Transaction), which payment may at
the option of such participant be used to purchase shares of the
common stock of the Company that the Offering Group intends to
make available after the closing of the Transaction (which shares
are included in the approximate aggregate 12% made available to
employees as discussed below), or (iii) continue that investment
after the closing of the Transaction as part of the approximate
aggregate 12% to be made available to employees. After the
closing of the Transaction, deferrals under the DCP will only be
invested in the insurance mutual fund alternatives under the DCP.
* Capital Appreciation Plan (401(k)). For legal reasons, it is
impractical for the Company's 401(k) plan to hold stock of a
private company. However, we will purchase all of the stock held
in that plan at the price paid to the Company's stockholders in
the Transaction and permit participants to invest the proceeds in
any of the other funds available under the 401(k) plan.
* Stock Options and Equity Incentive Plan Awards. Each
outstanding employee option and equity incentive plan award will
be purchased for a cash amount equal to the difference between the
price paid to the Company's stockholders in the Transaction and
such option's exercise price or such award's purchase price, which
amount may be used to purchase part of the approximate aggregate
12% to be made available to employees.
* Stock Ownership in the New Private Company. We will make
available up to approximately 12% of the outstanding common stock
of the Company for purchase by employees at a purchase price equal
to the price paid to the Company's stockholders in the Transaction.
We also intend to maintain the Company's training and performance
recognition programs for its sales professionals going forward,
including CBRE University, the annual recognition event and the
Las Vegas World Conference.
In addition, we intend to enter into agreements with certain
members of senior management of the Company allowing them to
purchase, and to receive options to purchase, common stock of the
Company. We also anticipate entering into employment agreements
with certain members of senior management of the Company.
Legal Documentation/Conditions
The Proposal is subject to the following conditions:
approval by the board of directors of the Company and stockholders
pursuant to the requirements of the Delaware General Corporate Law
and the rules of the New York Stock Exchange, receipt of any
material governmental and third party approvals (including
expiration of all applicable waiting periods under Xxxx-Xxxxx-
Xxxxxx), receipt of consents from the holders of a majority of
the outstanding 8-7/8% Senior Subordinated Notes as described
above, receipt of the necessary debt financing as described above
and the negotiation and execution of definitive agreements
providing for the merger and the transactions outlined in Exhibit
A to this letter, including a mutually satisfactory definitive
merger agreement which would contain customary covenants,
representations, warranties, conditions and other provisions.
While we have devoted a great deal of time and effort to studying
the Company and have completed substantially all of our business
and financial due diligence, our Proposal is also subject to
completion of confirmatory legal due diligence to be conducted by
XXXX and its legal advisors. Given the familiarity of XXXX with
the Company, this diligence would be completed expeditiously and
should not delay consummation of a definitive merger agreement.
Our Proposal is based on our understanding that the Company's
capitalization consists of: 21,213,928 common shares issued and
outstanding, 1,345,587 "phantom shares" outstanding under the
Company's Deferred Compensation Plan, (iii) 902,918 options to
purchase common stock outstanding that have exercise prices at or
below $15.50 per share with an unweighted average exercise price
of $5.81 and (iv) 2,439,299 additional options and warrants
outstanding with exercise prices in excess of $15.50 per share.
We are prepared to negotiate a definitive merger agreement
immediately and would be delighted to provide a draft of such
agreement at your request. If the Company determines to promptly
accept our Proposal, the Transaction could be completed as early
as February 2001.
* * *
We believe the Board of Directors should feel confident that
this Proposal represents a fair and attractive price for the Company.
The Proposal provides liquidity at a significant premium for the
current stockholders. We have no intention of attempting to
acquire the Company other than in a transaction approved by the
Board of Directors. Unless earlier accepted, the Proposal will
terminate at 5:00 PM (PST) on December 1, 2000.
We are prepared to discuss this offer with you immediately.
in responding to us or in seeking further information concerning
our Proposal, or for any other matter, please call Xxxxx Xxxxxx,
Managing Partner, XXXX Capital Partners, L.P. at 000-000-0000 or
000-000-0000.
Sincerely yours,
XXXX XX CORP.
By:
_____________________
Name: Claus X. Xxxxxx
Title: President
ANNEX B
Stockholders Agreement
Outline of Material Terms
All capitalized terms not otherwise defined herein shall have
the meanings given such terms in the letter agreement dated as of
November 10, 2000 to which this term sheet is attached.
Restrictions on Transfer
Except as described under "Co-Sale/Tag Along Right" and "Right of
First Offer" below, no holder (each a "Stockholder") of Common
Stock may transfer such Common Stock except (a) in the case each
of FS, Xxxxxxxx X. Xxxxx and The Xxxx Holding Company, to its or
his affiliates or, in the case of FS, commencing on or after April
12, 2003, pro rata to its partners, provided that each such
transferee agrees to be bound by the terms of the Stockholders
Agreement, (b) in the case of each of Xxxxxxx X. Xxxxx and W.
Xxxxx Xxxxx, to the members of such Stockholder's immediate family
or a trust for the benefit of such Stockholder's immediately
family members, provided that such transferee agree to be bound by
the terms of the Stockholders Agreement, or (c) as provided by,
and in compliance with, the other sections hereof.
The restrictions on transfer set forth in the prior paragraph
shall terminate upon the earlier of (x) ten years after the
closing, and (y) the first date on which Common Stock has been
sold in an underwritten public offering registered under the
Securities Act of 1933 (the "Initial Public Offering"). Each
Stockholder (including XXXX) will agree to a 180 day lock-up
period on transfers in connection with an Initial Public Offering.
In addition, no Common Stock may be transferred prior to its
registration under applicable securities laws unless the
transferring Stockholder (x) delivers to the Company an opinion of
counsel reasonably satisfactory to the Company indicating that the
proposed transfer is exempt from applicable securities laws and
(y) causes the transferee(s) to execute and deliver to the Company
a counterpart to the Stockholders Agreement.
Co-Sale/Tag Along Right
XXXX may transfer its Common Stock in its sole discretion;
however, prior to the Initial Public Offering, each Stockholder
may elect to participate pro-rata in any such transfer (other than
transfers to affiliates of XXXX who agrees in writing to be bound
by the Stockholders Agreement).
Right of First Offer
Beginning on the third anniversary of the closing of the Merger
Agreement, each of FS, Xxxxxxxx X. Xxxxx and The Xxxx Holding
Company may transfer the shares of Common Stock it or he
beneficially owns to any unaffiliated entity if prior to such
transfer (i) such Stockholder has offered to transfer such shares
to XXXX pursuant to a written notice of offer (which notice shall
include the per share offer price and any other material terms of
the offer), (ii) XXXX has refused to purchase such shares on the
terms of such offer notice and (iii) such shares are transferred
to the proposed transferee within 120 days of XXXX'x refusal on
terms no more favorable to the proposed transferee than those
identified to XXXX in the offer notice, provided that such
transferee (A) is acceptable to XXXX (such acceptance to not be
unreasonably withheld; it is understood that if the proposed
transfer is to a nationally-recognized private equity sponsor or
institutional equity investor such consent will not be withheld
unless XXXX'x decision to withhold consent results from XXXX'x
direct experience with such proposed transferee in connection with
another actual or proposed transaction), and (B) agrees to be
bound by the terms of the Stockholders Agreement.
Preemptive Right
Prior to the Initial Public Offering, if the Company issues any
shares of capital stock of the Company or any options, warrants,
convertible securities or other right to acquire such capital
stock, the other Stockholders will be entitled to purchase a pro
rata portion of such securities upon the same terms in order to
maintain their percentage ownership of the capital stock of the
Company, provided that such preemptive right will be subject to
customary exceptions, including, without limitation, issuances (i)
to Company employees, outside directors and consultants and (ii)
to customers, venders, lenders and other non-equity financing
sources, lessors of equipment and other providers of goods or
services to the Company.
Sale of the Company
If XXXX sells to a third party a majority of the Common Stock
beneficially owned by XXXX, XXXX will have the right to require
that all other Stockholders sell a pro rata portion of their
shares of Common Stock on the same terms as XXXX.
Initial Public Offering
Each Stockholder will vote for, consent to, raise no objections
against and participate in any reorganization of the Company
effectuated to facilitate an Initial Public Offering, provided
that such reorganization may not have a disproportionate impact
upon any of the Stockholders.
Registration Rights
Subsequent to an Initial Public Offering, each Stockholder
(including XXXX) will be entitled to one demand registration right
for each 7.5% of the Common Stock owned by such Stockholder at the
closing of the merger (rounded down to the nearest whole number of
demands). Such demand rights may be exercised beginning 180 days
after an Initial Public Offering and will be subject to customary
restrictions and limitations.
Subsequent to an Initial Public Offering, whenever the Company
proposes to register any of its securities under the Securities
Act of 1933 and the form to be used may be used for the
registration of a Stockholder's Common Stock, such Stockholder may
elect to participate in the registration, subject to customary
priorities, cutbacks and other terms and conditions.
All of the reasonable costs and expenses of registering such
Common Stock pursuant to the foregoing paragraphs (other than any
underwriters discounts and commissions) will be paid by the
Company.
Voting
In addition to the voting requirements otherwise set forth in this
term sheet, each Stockholder other than XXXX shall vote all shares
beneficially owned by such Stockholder in the manner directed by
XXXX, except with respect to the following matters:
- any transaction with XXXX and its affiliates, other than a
transaction with another portfolio company of XXXX that has been
negotiated on arms-length terms in the ordinary course of business
between the managements of the Company and such other portfolio
company
- any amendment to the certificate of incorporation or bylaws of
the Company that adversely affects any Stockholder, other than an
increase in the authorized capital stock of the Company.
Board Representation
Each Stockholder agrees to vote all shares beneficially owned by
such Stockholder at any meeting of the stockholders of the Company
(or to consent in any written consent in lieu thereof) in favor of
the election of the following directors of the Company:
- 3 directors designated by XXXX
- Xxxxxxx X. Xxxxx and W. Xxxxx Xxxxx (each for so long as
remaining an employee of the Company)
- 1 director designated by FS
The Stockholders further agree, upon the request of XXXX at any
time, to vote all shares beneficially owned by such Stockholder at
any meeting of the stockholders of the Company (or to consent in
any written consent in lieu thereof) in favor of the election of 1
additional director designed by XXXX.
FS shall have the additional right to designate up to two non-
voting observers to the Board.
Advisory Assistance
Xxxxxxxx X. Xxxxx and Xxxxxx X. Xxxx each will continue to assist
the Company in an advisory capacity for so long as he beneficially
owns Common Stock.
General Consent Rights
Prior to an Initial Public Offering, without the approval of a
majority of the directors that are not appointed by XXXX, the
Company will not do any of the following:
- enter into any transaction with XXXX and its affiliates, other
than a transaction with another portfolio company of XXXX that has
been negotiated on arms-length terms in the ordinary course of
business between the managements of the Company and such other
portfolio company
- amend its certificate of incorporation or bylaws in a manner
that adversely affects any Stockholder, other than an increase in
the authorized capital stock of the Company
- repurchase or redeem, or declare or pay a dividend with respect
to or make a distribution upon, any shares of capital stock of the
Company beneficially owned by XXXX unless (x) all other holders of
such class of capital stock of the Company are given the same
right and (y) if such capital stock is not Common Stock, such
repurchase, redemption or dividend is required by the terms of
such capital stock
FS Consent Rights
Prior to an Initial Public Offering, without the approval of the
director designated by FS, the Company will not do any of the
following:
- acquire by purchase or otherwise any business or assets for a
purchase price in excess of $75 million
- sell or dispose of assets which have an aggregate fair market
value in excess of $75 million
- incur indebtedness, unless such indebtedness would (i) be
permitted pursuant to the terms of the debt financing entered into
in connection with the Proposed Transaction or (ii) not cause the
Company to exceed a 4.5:1 ratio of total outstanding indebtedness
to normalized EBITDA for the trailing 12-month period
- issue to Company employees, directors or consultants capital
stock, or options, warrants or other securities to acquire capital
stock if such other issuances, in the aggregate, on a fully
diluted basis, exceed 5% of the total amount of outstanding
capital stock of the Company immediately after the closing of the
Merger Agreement, other than (i) issuances pursuant to the
Management and Employee Agreements or (ii) issuances in amounts
equal to the capital stock repurchased from, or the options,
warrants or other securities to acquire capital stock cancelled
with respect to, Company employees, outside directors or
consultants
Information Rights/
Inspection Rights
Prior to an Initial Public Offering, any group of affiliated
Stockholders beneficially owning greater than 10% of the Common
Stock will be entitled to (i) receive the annual, quarterly and
monthly financial statements of the Company that are prepared for
the Board of Directors of the Company, and (ii) exercise customary
inspection rights with respect to the books, records and employees
of the Company.
Indemnification
The Company would agree to indemnify each Stockholder in its or
his capacity as such, and, with respect to XXXX, XX and The Xxxx
Holding Company, its officers, directors, members, partners and
affiliates, against all third party claims arising from the
operation of the Company or the ownership of Common Stock, unless
such loss resulted from such party's (or such party's
representative's) committing fraud, gross negligence, or willful
misconduct.
