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
FS Equity Partners III, L.P.
FS Equity Partners International, L.P.
November 10, 2000
Page 2
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
FS Equity Partners III, L.P.
FS Equity Partners International, L.P.
November 10, 2000
Page 3
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.
FS Equity Partners III, L.P.
FS Equity Partners International, L.P.
November 10, 2000
Page 4
(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
FS Equity Partners III, L.P.
FS Equity Partners International, L.P.
November 10, 2000
Page 5
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.
FS Equity Partners III, L.P.
FS Equity Partners International, L.P.
November 10, 2000
Page 6
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: 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.
CB Xxxxxxx Xxxxx Services, Inc.
November 10, 2000
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.
CB Xxxxxxx Xxxxx Services, Inc.
November 10, 2000
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.
CB Xxxxxxx Xxxxx Services, Inc.
November 10, 2000
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:
(i) 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, (ii) receipt of any material governmental and
third party approvals (including expiration of all
applicable waiting periods under Xxxx-Xxxxx-Xxxxxx),
(iii) receipt of consents from the holders of a majority of
the outstanding 8-7/8% Senior Subordinated Notes as
described above, (iv) receipt of the necessary debt
financing as described above and (v) the negotiation and
execution of definitive agreements providing for the merger
and the transactions outlined in Exhibit 1 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: (i) 21,213,928 common
shares issued and outstanding, (ii) 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.
CB Xxxxxxx Xxxxx Services, Inc.
November 10, 2000
* * *
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 Except as described under "Co-Sale/Tag
Transfer 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 XXXX may transfer its Common Stock in
Right 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).
CB Xxxxxxx Xxxxx Services, Inc.
November 10, 2000
Right of First Beginning on the third anniversary of
Offer 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 If XXXX sells to a third party a
Company 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 Each Stockholder will vote for, consent
Offering 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.
CB Xxxxxxx Xxxxx Services, Inc.
November 10, 2000
Registration Subsequent to an Initial Public
Rights 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.
CB Xxxxxxx Xxxxx Services, Inc.
November 10, 2000
Board Each Stockholder agrees to vote all
Representation 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 Xxxxxxxx X. Xxxxx and Xxxxxx X. Xxxx
Assistance each will continue to assist the
Company in an advisory capacity for so
long as he beneficially owns Common
Stock.
General Consent Prior to an Initial Public Offering,
Rights 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
CB Xxxxxxx Xxxxx Services, Inc.
November 10, 2000
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/ Prior to an Initial Public Offering,
Inspection Rights 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.
