Exhibit 1
TIMOTHY GOLLIN
910 Travis
Suite 2150
Houston TX 77002
713 218 7700
October 25, 2000
Mr. A. John Knapp
910 Travis
Suite 2205
Houston TX 77002
Dear John:
In accordance with our discussions, you have agreed to advance Travis Street
Partners LLC up to $266,400 on my behalf on a non-recourse basis which in total
would represent a full funding of my 13.32% interest. The first advance
anticipated to be required is $133,200.
We agree as follows:
1. Until you receive full return of your principal
investment plus interest at 8% per annum
compounded monthly, you will be entitled to 100%
of the distributions made pro rata to the
proportion of my interest in the Series A equity
which you have funded.
2. After you receive all monies due under paragraph
1 in full and until you have received a payout of
4x your original investment (including interest),
you will be entitled to 50% of the distributions
made pro rata to the proportion of my interest in
the Series A equity which you have funded.
3. After you have received a payout of 4x your
original investment (including interest), you
will be entitled to one-third of the
distributions made pro rata to the proportion of
my interest in the Series A equity which you have
funded.
4. I may elect to ask you to fund any percentage of
my 13.32% interest. The funding required to
subscribe for 100% of this interest is currently
expected to be $266,400 but could be higher or
lower depending on final deal structure.
5. I reserve the right to reimburse you for one
third of the amount you fund, for cash, within 60
days of funding, with interest at 12% per annum
since the date of your funding, provided that
this occurs prior to 10 December 2000, and to
reduce your interest pro rata accordingly.
6. It is anticipated that approximately $75,000 of
fees relating to organization and management of
Travis Street Partners LLC will be paid directly
to me. This initial payment will be made to me
personally and will not be part of a distribution
to my interest in the Series A Shares. Your
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distributions will include any distributions
which are made to the Series A, including
management fees.
As an illustration, assuming:
- the deal is completed in twelve months
- the aggregate amount of the Series A equity is $2
million
- my 13.32% share of the Series A equity is $266,400
- you have invested $133,200 on my behalf (i.e.
underwritten half of my equity), and
- the total amount distributable to the Series A equity
will be $20 million,
then my total pro rata return would be $2,664,000 and the pro rata return to
your $133,200 investment would be $1,332,000. Thus, your returns would be as
follows:
- From the $1,332,000 you would first receive your
investment of $133,200
- Second, you would receive interest on that investment
of 0.75% per month compounded for a total of
approximately 8.3% or $11,056.
- After the first two distributions, a balance of
$1,181,907 would remain.
- In order to reach a 4x payout, you will need to
receive a total of $577,022 (representing $133,200
initially invested plus $11,056 of interest, in
aggregate times 4). Therefore, you would receive 50%
of the next $865,533, or $432,767.
- The balance remaining to be divided would be
$322,211. Of this remainder, you would receive
one-third or $107,404 and I would receive two thirds
or $214,808.
- In this specific case, your aggregate return
including return of capital would be $684,426 or
better than 5x investment.
If the above terms accurately reflect our agreement, please sign below and
return the original document to me for my records. I appreciate your assistance
and your support.
Very truly yours,
/s/ Timothy Gollin
Timothy Gollin
AGREED AND ACCEPTED:
By: /s/ A. John Knapp
---------------------------------
A. John Knapp
Date: ________________________________________
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