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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
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Date of Report
(Date of earliest event reported)
July 7, 2000
BUSINESS RESOURCE GROUP
(Exact name of registrant as specified in its charter)
California 0-26208 77-0150337
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(State of (Commission File Number) (IRS Employer Identification No.)
incorporation)
2150 North First Street, Suite 101
San Jose, CA 95131
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(Address of principal executive offices) (Zip Code)
(408) 325-3200
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(Registrant's telephone number,
including area code)
N/A
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(Former name or former address, if changed since last report)
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Item 5. Other Events.
Business Resource Group, a California corporation (the "Company") received
from BRG Acquisition Corporation, a Delaware corporation (the "Purchaser"),
which is wholly owned by Business Resource Holdings, Inc. ("Holdings, Inc."),
which in turn is wholly owned by BR Holdings LLC, a Delaware limited liability
company ("BR Holdings"), a majority-owned subsidiary of Three Cities Fund III,
L.P., a Delaware limited partnership ("Three Cities") an Offer to Purchase
("Offer"), dated July 14, 2000, all outstanding shares (the "Shares") of common
stock, par value $0.01 per share, of the Company for $9.25 per Share, net to the
seller in cash (the "Common Stock"). A copy of the Offer is filed herewith as
Exhibit 1 and incorporated by reference.
The Offer is being made pursuant to a Plan and Agreement of Merger dated
as of July 7, 2000, between the Company and the Purchaser (the "Merger
Agreement"). A copy of the Merger Agreement is filed herewith as Exhibit 2, and
is incorporated by reference. The Merger Agreement provides that, if the
Purchaser purchases tendered Shares, the Purchaser will take all steps in its
power (including voting its Shares) to cause the Company to be merged into the
Purchaser (the "Merger") in a transaction in which Holdings, Inc. (the sole
stockholder of the Purchaser) will become the owner of all the stock of the
surviving corporation in the Merger (the "Surviving Corporation"), and the other
shareholders of the Company will receive the same amount of cash per Share as is
paid for Shares tendered in response to the Offer (unless shareholders have
rights to demand appraisal of their Shares and particular shareholders exercise
those rights). Because of a provision of the California General Corporation Law
which could prevent the Company's shareholders from receiving cash as a result
of the Merger, the Company may be required under the terms of the Merger
Agreement to reincorporate under the laws of the State of Delaware before the
Merger takes place, in which event the Merger would result in a merger of the
new Delaware corporation into the Purchaser. If less than 51% of the outstanding
Shares that neither the Purchaser nor BR Holdings owns, or has a binding
agreement to acquire immediately before the Offer expires, are properly tendered
and not withdrawn, the Purchaser may not purchase the tendered Shares unless the
Company consents to its doing so. Also, the Purchaser will not have to purchase
the Shares which are tendered unless the Shares which are properly tendered and
not withdrawn, together with the Shares which the Purchaser or BR Holdings own,
or have a binding agreement to acquire, total at least 53.5% of the outstanding
Shares. If the Purchaser does not purchase the tendered Shares, the Merger will
not take place.
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In connection with the Merger Agreement, Brian McNay and Jeff Tuttle
entered into Share Exchange Agreements with the Purchaser (the "Share Exchange
Agreements"), dated July 7, 2000 which, among other things, and subject to
certain exceptions, require such shareholders to transfer a total of 319,168
shares of Common Stock in exchange for equity interests in BR Holdings,
representing a total of 6% of the total equity of BR Holdings. The exchange of
the Company Common Stock for BR Holdings equity will take place immediately
before Purchaser accepts the Shares which are tendered in response to the Offer.
Each further agree to a number of non-competition related issues, including but
not limited to, not owning, managing or consulting with a business competing
with Surviving Corporation or soliciting or influencing a customer or client of
the Surviving Corporation for five (5) years after the Merger, or up to three
(3) years after he ceases to be an employee of the Surviving Corporation. A copy
of each Share Exchange Agreement is filed as Exhibits 3(a) and 3(b),
respectively, and incorporated herein by reference.
Also in connection with the Merger Agreement, on July 7, 2000, the
Company's Chief Executive Officer, John Peth, agreed to cancel options he holds
on 166,000 shares of Common Stock of the Company (see Deferred Compensation
Agreement below). In addition, Mr. Peth, Executive Vice President of Sales,
Brian McNay, Executive Vice President of Marketing, Jeff Tuttle and Chief
Financial Officer and Chief Operating Officer, John Palmer entered into
Employment Agreements with Purchaser (the "Employment Agreements"). Each
respective Employment Agreement provides for a base salary of $375,000 per year
for John Peth, $525,000 for Brian McNay, $300,000 for Jeff Tuttle and $160,000
for John Palmer as of the Effective Time of the Merger (as defined in the Merger
Agreement), incentive compensation in the form of restricted stock at the price
of $0.05 per share, with Mr. Peth receiving the right to purchase 6.5% of the
Surviving Corporation's issued and outstanding shares (but not less than
1,300,000), Mr. McNay receiving the right to purchase 1.75% of the issued and
outstanding shares (but not less than 350,000), Mr. Tuttle receiving the right
to purchase 1.75% of the issued and outstanding shares (but not less than
350,000), and Mr. Palmer receiving the right to purchase 2.0% of the issued
and outstanding shares (but not less than 400,000), the scope and terms of
employment, and other employment-related issues. In addition, Mr. Peth, in
connection with the Offer and the Merger, and his entering into the Deferred
Compensation Agreement (described below), also will purchase at the Effective
Time an additional 360,000 shares at the purchase price of $0.05 per share.
These purchased shares will be fully vested upon purchase and will not be
subject to forfeiture or repurchase by the Surviving Corporation upon Mr. Peth's
termination of employment. Copies of the Employment Agreements are filed as
Exhibit (4)(a) - 4(d), respectively, and incorporated herein by reference.
Also in connection with the Merger Agreement, on July 7, 2000, John
Palmer, the Company's Chief Financial Officer and Chief Operating Officer signed
a Commitment Letter with Purchaser (the "Commitment Letter"). The Commitment
Letter confirms that Mr. Palmer will tender in the offer all the Company's
Shares he owns for $9.25 per Share, in cash. He further agrees to a number of
non-competition related issues, including but not limited to, not owning,
managing or consulting with a business competing with Surviving Corporation or
soliciting or influencing a customer or client of the Surviving Corporation for
five (5) years after the Merger, or up to three (3) years after he ceases to be
an employee of the Surviving Corporation. A copy of the Commitment Letter is
filed as Exhibit 5, and incorporated herein by reference.
Also in connection with the Merger Agreement, on July 7, 2000, John Peth,
the Company's Chief Executive Officer, signed a Deferred Compensation Agreement
with Purchaser (the "Deferred Compensation Agreement"). The Deferred
Compensation Agreement provides that upon cancellation of options currently held
by Mr. Peth, which entitle him to purchase a total of 166,00 shares of Common
Stock of the Company, he will be entitle to deferred compensation from BR
Holdings', receiving payments on Subordinated Notes, Junior Subordinated Notes,
dividends or a liquidation distribution with regard to the Preferred Stock of
Holdings, Inc., the sale of Notes by Holdings, Inc. and the sale of Preferred
Stock by Holdings, Inc. He further agrees to a number of non-competition related
issues, including but not limited to, not owning, managing or consulting with a
business competing with Surviving Corporation or soliciting or influencing a
customer or client of the Surviving Corporation for five (5) years after the
Merger, or up to three (3) years after he ceases to be an employee of the
Surviving Corporation. A copy of the Deferred Compensation Agreement is filed as
Exhibit 6, and incorporated herein by reference.
At a meeting held on July 6, 2000, acting on the recommendation of a
committee of independent, disinterested directors not affiliated with the
Purchaser or its stockholders (the "Special Committee"), the Board unanimously
(with John Peth, Brian McNay and Jeff Tuttle, the three directors who will
acquire interests in one or both of Holdings, Inc. and BR Holdings, being absent
or not voting) (i) approved the Merger Agreement and the transactions
contemplated by it, the Offer, and the Merger as described in the Merger
Agreement; (ii) determined that the Merger Agreement and the transactions
contemplated by it are advisable and fair to, and in the best interests of, the
Company and its shareholders; and (iii) resolved to recommend that the Company's
shareholders tender their shares in response to the Offer and, if approval of
the Company's shareholders is required by applicable law to consummate the
Merger, adopt and approve the Merger Agreement and the Merger. Accordingly, the
Board unanimously (with the three directors who will acquire interests in one or
both of Holdings, Inc. and BR Holdings being absent or not voting) recommends
that the shareholders of the Company tender their shares of Common Stock
pursuant to the Offer. The Company filed a Solicitation/Recommendation Statement
on Schedule 14d-9 on July 21, 2000, a copy of which is filed as Exhibit 7 and
incorporated by reference. A copy of the Company's press release announcing the
Merger Agreement and the transactions contemplated thereby, is filed as Exhibit
8, and incorporated herein by reference.
The Special Committee selected, and the Company retained, Merrill Lynch to
evaluate the fairness, from a financial point of view, of the consideration to
be paid in the Offer and the Merger (collectively, the "Transaction"). On July
6, 2000, Merrill Lynch delivered to the Special Committee its oral opinion,
later confirmed in writing (the "Merrill Opinion"), to the effect that, as of
that date and based upon the assumptions made, matters considered and limits of
its review, as set forth in its opinion, the $9.25 per Share merger
consideration was fair from a financial point of view to the holders of the
Common Stock, other than Management Participants in the Transaction. A copy of
the Merrill Opinion is filed as Exhibit 9, and incorporated herein by reference.
On July 10, 2000, a few hours after the Offer was announced, George
Reynolds, a purported shareholder of the Company, instituted an action in the
Superior Court of California, Santa Clara County, against the Company and Harry
S. Robbins, John W. Peth, Brian D. McNay and Jeffrey D. Tuttle, all of whom are
directors of the Company. The Complaint claims the action is brought as a class
action on behalf of the holders of the Company's Common Stock (the "Class")
against the Company and its directors "arising out of the defendants' efforts to
complete a management-led buyout" of the Company at "a grossly inadequate and
unfair price and their efforts to provide certain insiders and directors with
preferential treatment at the expense of, and which is unfair to, the public
shareholders." The suit alleges that the defendants "are engaging in
self-dealing, are not acting in good faith toward plaintiff and the other
members of the Class, and have breached and are breaching their fiduciary duties
to the members of the Class." The suit seeks, among other things, an injunction
against the defendants, and persons acting in concert with them, consummating an
offer by John Peth and three of the Company's senior officers to purchase
outstanding shares of the Company for $9.25 per Share.
The Company and the directors named as defendants in the lawsuit intend to
defend the lawsuit vigorously and believe it is without merit. A copy of the
Complaint is filed as Exhibit 10, and incorporated herein by reference.
The materials filed as exhibits hereto contain forward-looking statements
within the meaning of the safe harbor provisions of the Securities Exchange Act
of 1934 (the "Exchange Act"), including statements regarding the operations of
the Company during the interim period between the execution of the Merger
Agreement and the consummation of the transactions contemplated thereby. The
forward-looking statements are subject to various risks and uncertainties.
Although the Company believes its expectations are based on reasonable
assumptions within the bounds of its knowledge of its business and operations,
there can be no assurance that actual results will not vary materially from its
expectations. Those risks and uncertainties include the failure of certain
conditions set forth in the Merger Agreement and adverse industry and economic
conditions. Other risk factors are detailed from time to time in the reports of
the Company under the Exchange Act.
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Item 7. Exhibits
1 Offer to Purchase for Cash dated July 14, 2000
2 Plan and Agreement of Merger dated as of July 7, 2000
3(a) Share Exchange Agreement of Brian McNay dated July 7, 2000
3(b) Share Exchange Agreement of Jeffrey Tuttle dated July 7, 2000
4(a) Employment Agreement of John Peth dated as of July 7, 2000
4(b) Employment Agreement of Brain McNay dated as of July 7, 2000
4(c) Employment Agreement of Jeffrey Tuttle dated as of July 7, 2000
4(d) Employment Agreement of John Palmer dated as of July 7, 2000
5 Commitment Letter of John Palmer dated July 7, 2000
6 Deferred Compensation Agreement of John Peth dated July 7, 2000
7 Schedule 14d-9 filed July 21, 2000
8 Press Release dated July 11, 2000
9 Opinion of Merrill Lynch dated July 6, 2000 to the Special Committee of
the Board of Directors of the Company
10 Complaint of George Reynolds filed July 10, 2000 against Business
Resource Group et al.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BUSINESS RESOURCE GROUP
(Registrant)
Date: July 24, 2000 By: /s/ John W. Peth
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John W. Peth
President and Executive Officer
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EXHIBIT INDEX
Exhibit Number Description
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+ 1 Offer to Purchase for Cash dated July 14, 2000
+ 2 Plan and Agreement of Merger dated as of July 7, 2000
+ 3(a) Share Exchange Agreement of Brian McNay dated July 7, 2000
+ 3(b) Share Exchange Agreement of Jeffrey Tuttle dated July 7, 2000
+ 4(a) Employment Agreement of John Peth dated as of July 7, 2000
+ 4(b) Employment Agreement of Brian McNay dated as of July 7, 2000
+ 4(c) Employment Agreement of Jeffrey Tuttle dated as of July 7, 2000
+ 4(d) Employment Agreement of John Palmer dated as of July 7, 2000
+ 5 Deferred Compensation Agreement of John Peth dated July 7, 2000
+ 6 Commitment Letter of John Palmer dated July 7, 2000
o 7 Schedule 14d-9 filed July 21, 2000
+ 8 Press Release dated July 11, 2000 (1)
# 9 Opinion of Merrill Lynch dated July 6, 2000 to the Special
Committee of the Board of Directors of the Company
# 10 Complaint of George Reynolds filed July 10, 2000 against
Business Resource Group et al.
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+ Filed as an exhibit to Purchaser's Tender Offer Statement on Schedule TO
dated July 14, 2000, and incorporated herein by reference.
(1) Filed as an exhibit to the Company's Schedule 14d-9 on July 11, 2000,
and incorporated by reference.
# Filed as an exhibit to the Company's Schedule 14d-9 dated July 18, 2000,
and incorporated by reference.
o Filed on July 21, 2000 and incorporated by reference.
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