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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-9
(Rule 14d-101)
SOLICITATION/RECOMMENDATION STATEMENT
UNDER SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
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BUSINESS RESOURCE GROUP
(NAME OF SUBJECT COMPANY)
BUSINESS RESOURCE GROUP
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, PAR VALUE $0.01 PER SHARE
(TITLE OF CLASS OF SECURITIES)
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12329K 10 4
(CUSIP NUMBER OF CLASS OF SECURITIES)
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HARRY S. ROBBINS
BUSINESS RESOURCE GROUP
2150 NORTH FIRST STREET, SUITE 101
SAN JOSE, CALIFORNIA 95131
(408) 325-3200
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICE AND COMMUNICATIONS
ON BEHALF OF THE PERSON(S) FILING STATEMENT)
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With a copy to:
<TABLE>
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SCOTT D. BLICKENSTAFF, ESQ. STEVEN J. TONSFELDT, ESQ.
ORRICK, HERRINGTON & SUTCLIFFE LLP VENTURE LAW GROUP
1020 MARSH ROAD 2800 SAND HILL ROAD
MENLO PARK, CALIFORNIA 94025 MENLO PARK, CALIFORNIA 94025
(650) 614-7400 (650) 854-4488
</TABLE>
/ / Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer.
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INTRODUCTION
This Solicitation/Recommendation Statement on Schedule 14D-9 (this
"Schedule 14D-9") relates to an offer by 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" or "Parent"), to purchase all of the outstanding shares of
Common Stock (as defined below) of Business Resource Group, a California
corporation (the "Company" or "BRG").
ITEM 1. SUBJECT COMPANY INFORMATION.
The name of the subject Company is Business Resource Group, its principal
executive offices are located at 2150 North First Street, Suite 101, San Jose,
California 95131, and its phone number is (408) 325-3200. This Schedule 14D-9
relates to the Company's common stock, par value $0.01 per share (the "Common
Stock" or "Shares"). As of June 29, 2000, there were 5,298,753 shares of Common
Stock outstanding.
ITEM 2. IDENTITY AND BACKGROUND OF FILING PERSON.
(a) NAME AND ADDRESS. The name, business address and business telephone
number of the Company filing this statement are set forth in Item 1 above, which
information is incorporated herein by reference.
(b) TENDER OFFER. This Schedule 14D-9 relates to the tender offer made by
the Purchaser disclosed in a Tender Offer Statement on Schedule TO dated July
14, 2000 (as amended or supplemented from time to time, the "Schedule TO"), to
purchase all the outstanding shares of the Common Stock at a price (the "Offer
Price") of $9.25 per Share, net to the seller in cash, without interest, upon
the terms and subject to the conditions set forth in the Offer to Purchase dated
July 14, 2000 (as amended or supplemented from time to time, the "Offer to
Purchase"), and the related Letter of Transmittal (which, together with any
amendments or supplements thereto, collectively constitute the "Offer"), filed
as Exhibits (a)(1) and (a)(2) hereto, respectively, and incorporated herein 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").
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
("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. The Merger Agreement, a copy of which is filed as Exhibit (e)(1) hereto,
is summarized in the sections entitled "Purpose of the Offer and the Proposed
Merger; Plans for the Company," "Terms of the Offer," "The Merger" and
"Conditions to the Offer" in the Offer to Purchase, and incorporated herein by
reference.
As set forth in the Schedule TO, the principal executive offices of the
Purchaser are located at the offices of Three Cities Research, Inc. ("TCR"), 650
Madison Avenue, New York, New York 10022. The principal executive offices of
Holdings, Inc., BR Holdings and Three Cities are located at that same address.
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ITEM 3. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS.
Except as set forth in the response to this Item 3 or as incorporated by
reference herein, to the knowledge of the Company, there are no material
agreements, arrangements or understandings and no actual or potential conflicts
of interest between the Company or its affiliates on the one hand and the
Purchaser or its affiliates or the Company's executive officers, directors or
affiliates on the other hand.
A summary of the material provisions of the Merger Agreement is included in
"Purpose of the Offer and the Proposed Merger; Plans for the Company," "Terms of
the Offer," "Conditions to the Offer" and "The Merger" in the Offer to Purchase,
which is incorporated by reference herein. The summary of the Merger Agreement
in the Offer to Purchase is qualified in its entirety by reference to the Merger
Agreement.
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 The 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 (e)(2)(i) and (e)(2)(ii),
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"). The
Employment Agreements provide 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 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 (e)(3)(i)-(iv), respectively, and incorporated herein by
reference. Messrs. Peth, McNay, Tuttle and Palmer are sometimes referred to in
this document as the "Management Participants."
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. In the Commitment Letter, he
further agreed 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 (e)(4), 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,
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ITEM 3. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS.--(CONTINUED)
which entitle him to purchase a total of 166,000 shares of Common Stock of the
Company, Mr. Peth will become entitled 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 has further agreed 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 (e)(5), and incorporated herein by reference.
Also in connection with the Merger Agreement, at a meeting convened on
July 6, 2000, the Board of Directors of the Company (the "Board") resolved (with
Messrs. Peth, McNay and Tuttle being absent or not voting) to fully accelerate
the vesting of all outstanding options to acquire shares of the Company's Common
Stock effective three business days prior to the scheduled closing date for the
Merger, subject to the condition subsequent that the Merger be consummated. The
effect of this acceleration was not considered to be significant in that the
Merger Agreement provides that holders of any Company stock options that remain
unexercised at the time the Merger is consummated, whether vested or unvested at
that time, will be entitled to receive a cash payment in the amount of the
positive difference between the Offer Price and the exercise price per Share
under each stock option multiplied by the number of shares of Common Stock
covered by such option.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) SOLICITATION RECOMMENDATION.
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. Copies of the Company's letter to the
shareholders of the Company communicating the Board's recommendation, and the
Company's press release announcing the Merger Agreement and the transactions
contemplated thereby, are filed as Exhibits (a)(3) and (a)(4) hereto,
respectively, and are incorporated herein by reference.
(b) BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY.
In the fall of 1999, the Company engaged a financial advisor, Huntington
Holdings, Inc., to assist it in evaluating various possible strategic
alternatives to enhance shareholder value. Possible strategic alternatives being
considered included, but were not limited to, a merger, a strategic alliance,
the infusion of additional equity, or an affiliation with a strategic partner.
Huntington Holdings had had an advisory relationship with the Company
intermittently since 1994 and had been engaged by the Company to source and
advise upon potential acquisitions on an ongoing basis commencing in October
1998.
In preparation for its new assignment, representatives of Huntington
Holdings conducted a due diligence review and investigation of the Company. At
the completion of this process, Huntington Holdings, along with members of the
Company's management, prepared a confidential memorandum (the "Confidential
Memorandum"), which described the Company and its business, for circulation in
connection with the solicitation process.
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ITEM 4. THE SOLICITATION OR RECOMMENDATION.--(CONTINUED)
On January 6, 2000, the Company made a public announcement to the effect
that it had retained Huntington Holdings to seek methods for enhancing
shareholder value.
Over the next several months, as part of a general solicitation effort,
Huntington Holdings contacted 135 potential financial buyers and 44 potential
strategic partners or buyers on behalf of the Company. Of these, 45 financial
buyers and two strategic buyers executed confidentiality agreements with the
Company and received copies of the Confidential Memorandum for their
consideration.
On January 21, 2000, John Corwin of Huntington Holdings contacted W. Robert
Wright, II of TCR and informed him that Huntington Holdings had been retained by
the Company to assist in evaluating strategic alternatives to enhance value to
its shareholders. Mr. Corwin asked whether a company formed by funds advised by
TCR might be interested in acquiring the Company. Following these discussions,
TCR executed a confidentiality agreement on January 31, 2000 and was forwarded a
package of information on the Company, including the Confidential Memorandum, to
review. Due to the nature of the Company's business and the importance of key
employees to the value of that business, the Company and its financial advisors
believed the commitment of key employees and management to the business would be
important to the marketability of the Company and would maximize shareholder
value. Accordingly, with the concurrence of Huntington Holdings, the
Confidential Memorandum indicated that Messrs. Peth, Palmer, McNay and Tuttle
were willing to continue with and invest in the recapitalized company.
On February 16, 2000, Mr. Wright and Willem deVogel of TCR attended a
management presentation regarding the Company delivered by John Peth, President
and Chief Executive Officer of the Company, John Palmer, Chief Operating Officer
and Chief Financial Officer of the Company, Brian McNay, Executive Vice
President of Sales of the Company, Jeffrey Tuttle, Executive Vice President of
Marketing of the Company, and Mr. Corwin, at the Company's headquarters in San
Jose, California. On March 2 and 3, 2000, representatives of TCR visited the
Company's headquarters to discuss the process for TCR to conduct due diligence
regarding the Company.
On March 16, 2000, Messrs. deVogel and Wright met with Messrs. Peth and
Corwin at the Company's headquarters in San Jose, CA and discussed the
possibility that a company formed by Three Cities advised by TCR might make a
tender offer for $9.75 per Share. The closing price of the Company's stock on
that day was $7.94. During the meeting, the TCR representatives noted that the
members of the management of companies TCR acquired normally received an equity
interest in the companies. Representatives of the Company said it would take
some time to review the proposal.
On March 23, 2000, a meeting of the Company's Board was convened and
considered the TCR proposal. At this meeting, in view of the potential that the
Company's management group might be requested or required to participate as an
equity participant in the acquisition entities that might be employed by TCR in
the proposed transaction, the Company's Board appointed a Special Committee of
independent, disinterested directors (consisting of two directors, Harry Robbins
and George Kelly), to consider strategic opportunities presented to the Company,
enter into discussions or negotiations related to such strategies or
opportunities and recommend to the Board what action, if any, should be taken
with respect to them. The Special Committee retained Venture Law Group as its
counsel and considered investment banks it might retain as advisors to render an
opinion about the fairness of any transaction which might be agreed upon. The
Special Committee selected, and the Company subsequently retained, Merrill Lynch
Business Advisory Services, a division of Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch") for this purpose.
On April 12, 2000, Harry Robbins, one of the members of the Special
Committee, called Willem deVogel and told him that the Special Committee would
not recommend an offer of $9.75 per Share for the Company. Subsequently, J.
William Uhrig, another partner at TCR, and Mr. Corwin agreed that discussions
should continue.
On April 28, 2000, Messrs. Robbins, Kelly and Corwin met at TCR's offices
in New York with Messrs. Uhrig and deVogel to discuss the price which a TCR
acquisition company might be willing to pay for the Company's Shares and to
discuss the progress of TCR's review of a possible transaction.
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ITEM 4. THE SOLICITATION OR RECOMMENDATION.--(CONTINUED)
During the week of May 1, 2000, there was a series of telephone
conversations between Messrs. Uhrig and Corwin regarding the price the TCR
acquisition company might be willing to pay. Informal meetings of the Special
Committee, including Mr. Corwin and representatives of Venture Law Group, were
convened several times during this week to consider the progress of these
discussions.
On May 5, 2000, TCR stated to Mr. Corwin that, subject to completion of due
diligence, it appeared the TCR acquisition company would be willing to pay
$11.75 per Share for the Company's Common Stock. During the days that followed,
the Special Committee, together with Huntington Holdings and Venture Law Group,
convened several telephonic meetings to consider the proposed transaction and
proposed price per Share. On May 12, 2000, Mr. Corwin informed Mr. Uhrig that
the Special Committee was prepared to authorize the Company and its advisors to
proceed with the negotiation of a transaction at that price.
On May 15, 2000, Clifford Chance Rogers & Wells, LLC ("CCR&W"), the
attorneys for TCR, sent Orrick, Herrington & Sutcliffe LLP, the attorneys for
the Company, a draft of a Plan and Agreement of Merger. Subsequently, on May 20,
2000, a representative of Venture Law Group contacted David Bernstein of CCR&W
and informed him that Venture Law Group, as counsel to the Special Committee,
would take the principal role in reviewing and negotiating a merger agreement.
During the second and third weeks of May, representatives of TCR continued
their due diligence review of the Company. Also during this period, TCR
presented information regarding the Company to potential financing sources,
which would be used in connection with the acquisition and as a source of funds
for the Company after acquisition. On May 22, 2000, a representative of TCR
informed Mr. Corwin that, because of negative reactions of prospective financing
sources at the $11.75 price, TCR would not be willing to proceed at $11.75 per
Share. The TCR representative said TCR was not willing to pay a price per Share
of more than $9.00 for the Shares of the Company.
On June 1 and 2, 2000, Messrs. Uhrig and de Vogel met in New York with
Messrs. Robbins and Corwin to discuss TCR's revised proposal. Following these
meetings, Mr. Uhrig said that, as a possible alternative to paying $9.00 per
Share in cash, TCR acquisition company might be willing to pay $8.00 in cash,
and have the Company issue to its shareholders convertible preferred stock with
a liquidation preference of $2.00 per share, which would remain outstanding but
not be tradable on any securities market in the foreseeable future, after the
TCR acquisition company acquired the Company's Common Stock.
On June 8, 2000, Mr. Corwin and counsel for the Special Committee told
counsel for TCR that the Special Committee would not recommend the $9.00 per
Share cash proposal, or the proposal that contemplated an $8.00 per Share cash
payment together with a convertible preferred stock dividend, but it would
consider an offer of $9.75 in cash following a dividend to the Company's
shareholders of $2.00 in convertible preferred stock. That was confirmed later
in the day to Messrs. deVogel and Wright of TCR. In response, Mr. deVogel sent a
letter to Messrs. Corwin, Kelly and Robbins in which he stated that, in view of
the fact that the Special Committee would not recommend TCR's offer of $9.00 per
Share in cash, TCR was terminating all discussions with the Company.
On June 9, 2000, Mr. Robbins told Mr. deVogel that the Special Committee
and the Board would be meeting on June 15 and June 16, 2000, respectively.
Mr. Robbins urged that TCR increase the price to $9.75 per Share. Eventually,
Mr. deVogel proposed increasing the price to $9.25 per Share. On that same day,
Mr. deVogel told Mr. Peth on the telephone that TCR might be willing to proceed
with a transaction at that price. Mr. Peth said he was not authorized to discuss
price, but would convey the information to the Special Committee.
Following June 9, 2000, there were discussions between TCR and the Special
Committee of the transaction at $9.25 per Share. Among other things, TCR agreed
that if the transaction were at that price, the break-up fee it would require
if, after an agreement was signed the Company accepted what it viewed as a
better proposal, would be one percent (1%) of the enterprise value of the
Company, rather than the five percent (5%) TCR had previously been seeking.
On June 15, 2000, the Special Committee convened a telephonic meeting in
which it reviewed the $9.25 per Share offer with Merrill Lynch, Huntington
Holdings and Venture Law Group. At this meeting, representatives of Merrill
Lynch made a presentation regarding its preliminary views as to the fairness of
the proposed consideration, from a financial
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ITEM 4. THE SOLICITATION OR RECOMMENDATION.--(CONTINUED)
point of view, to the shareholders of the Company, other than the Management
Participants. Representatives of Venture Law Group reviewed the proposed terms
and conditions of the transaction, and Mr. Corwin reviewed the history of the
discussions between the two parties and the fact that after a lengthy
solicitation process no other potential buyer had made a proposal to acquire the
Company or even expressed serious interest in making such a proposal. Based on a
very lengthy analysis and review of status, the Special Committee concluded that
it was prepared to recommend to the entire Board and its advisors to proceed
with the negotiation of a transaction at $9.25 per Share in cash to the
Company's shareholders on terms substantially consistent with those presented.
Following this meeting, a meeting of the entire Board, including the members of
management sitting on the Board and representatives of Orrick, Herrington &
Sutcliffe LLP, as legal counsel to the Company, was convened. A lengthy
discussion ensued regarding the proposed transaction and its proposed time
schedule. At the completion of this discussion, the Board of Directors, with all
of the members of management who were Board members abstaining, confirmed the
Special Committee's recommendation that negotiations regarding the proposed
transaction proceed along the terms of the transaction outlined at the meeting.
On June 20, 2000, the attorneys for TCR sent representatives of Brobeck,
Phleger & Harrison LLP, the law firm which had been retained by Messrs. Peth,
Palmer, McNay and Tuttle, to represent them in connection with the proposed
transaction, drafts of an agreement regarding the exchanging of a total of
319,168 shares of the Company, held by Messrs. McNay and Tuttle, for interests
in BR Holdings and copies of the Limited Liability Company Agreement of BR
Holdings. On June 22, CCR&W sent Brobeck, Phleger & Harrison drafts of
employment agreements under which, if the Purchaser acquired the Company, the
four members of the management identified above would be employed by the
Purchaser (which, after the Merger, would own and operate the business of the
Company).
Between June 21 and July 7, 2000, there were a number of discussions and
negotiations among the parties and their respective advisors of the terms of
pertinent agreements and documents, including the Merger Agreement, the
Employment Agreements, the Share Exchange Agreements, the Deferred Compensation
Agreement and the Commitment Letter.
On July 6, 2000, the Special Committee met with all members present. Among
other things, the Special Committee received (i) an oral presentation of Merrill
Lynch regarding certain principal financial terms of the transaction and the
fairness from a financial point of view of the consideration to be received by
the Company's shareholders in the transaction, other than the Management
Participants, a written copy of which is attached hereto as Exhibit (e)(6), and
is incorporated herein by reference, together with Merrill Lynch's oral opinion,
subsequently confirmed in writing, as to the fairness, from a financial point of
view, of the consideration to be received in the Offer and Merger by the
Company's shareholders, other than the Management Participants, a copy of which
is attached hereto as Annex A, and is incorporated herein by reference; and
(ii) a briefing by representatives of Venture Law Group as to the terms of the
proposed transaction and the financing for the transaction (with drafts of the
transaction documents having been distributed to the members of the Special
Committee in advance of the meeting). The Special Committee also reviewed with
Mr. Corwin the history of the negotiations and the procedures that Huntington
Holdings had engaged to pursue possible partners in connection with the general
solicitation process. Based on the factors described below in "Reasons," the
Special Committee by unanimous action resolved to recommend to the full Board
the approval of the proposed transaction and approval of the Merger Agreement. A
meeting of the Board was convened immediately after completion of the Special
Committee meeting and, by unanimous action (with Messrs. Peth, McNay and Tuttle,
the three directors who will acquire interests in one or both of Holdings, Inc.
or BR Holdings, being absent or not voting), the proposed transaction and Merger
Agreement were approved.
During the evening of Friday, July 7, 2000, after the U.S. securities
markets had closed, the Merger Agreement was executed. On Monday, July 10, 2000,
before the U.S. securities markets had opened, the Company and TCR jointly
announced the signing of the Merger Agreement and the Purchaser's intention to
commence the Offer.
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ITEM 4. THE SOLICITATION OR RECOMMENDATION.--(CONTINUED)
(c) REASONS.
In making the determinations and recommendations set forth in subparagraph
(a) above, the Special Committee and the Board considered a number of factors,
including, without limitation, the following:
(i) the amount and form of consideration to be received by the
Company's shareholders in the Offer and the Merger;
(ii) the Company's prospects if it were to remain independent,
including the risks and benefits inherent in remaining
independent, including the risk arising from the workspace
products and services industry becoming increasingly
competitive;
(iii) the possible alternatives to the Offer and the Merger
(including the possibility of continuing to operate the Company
as an independent entity) and other potential business
combination transactions as well as discussions with other
potential acquirers of the Company, the fact that, after
Huntington Holdings had contacted nearly 180 potential
acquirors and strategic partners, only the Purchaser and its
affiliates had elected to make a definitive offer to acquire
the Company, the judgment of the Special Committee and the
Board that other potential acquirers were unlikely to offer
greater value for the Company, the range of possible benefits
to the Company's shareholders of such alternatives and the
timing and likelihood of accomplishing the goal of any of such
alternatives;
(iv) information with regard to the financial condition, results of
operations, business and prospects of the Company, the
regulatory approvals required to consummate the Offer and the
Merger as well as current economic and market conditions
(including current conditions in the industry in which the
Company competes);
(v) the historical and recent trading activity and market prices of
shares of Common Stock, and the fact that the Offer and the
Merger will enable the holders of shares of Common Stock to
realize a premium of 37% over the last sale price of such Shares
reported on the NASDAQ National Market on July 7, 2000, the last
full trading day prior to the day on which there was a public
announcement of the execution of the Merger Agreement, 64% over
the average closing prices of the past twelve (12) months, 109%
over the average closing prices of the past twenty-four
(24) months and 122% over the average closing prices of the past
thirty-six (36) months;
(vi) the limited analyst coverage for the Company and the low trading
volume in the Company's Common Stock, which makes it extremely
difficult, if not impossible, for any interested shareholder to
acquire or dispose of any substantial block of shares;
(vii) the substantial costs to the Company associated with
maintaining its registration under the United States securities
laws and the listing of the Company's Common Stock on the
Nasdaq National Market;
(viii) the fact that the Merger Agreement permits the Company to
furnish information to, and enter into discussions or
negotiations with, any person that makes an unsolicited bona
fide written proposal to acquire the Company pursuant to a
merger, consolidation, share exchange, business combination,
tender or exchange offer or other similar transaction if
(A) the Board determines in good faith (after consultation with
its financial advisor) that the proposal would, if consummated,
result in a transaction more favorable to the Company's
shareholders than the transactions contemplated by the Merger
Agreement, (B) the Board further determines in good faith
(after consultation with its financial adviser) that the
proposal would likely result in the Company's shareholders
receiving consideration with a value which is greater than the
Offer Price, and (C) no information is so furnished, and no
such discussions or negotiations are held, prior to the
execution by the receiving party and the Company of an
appropriate confidentiality agreement;
7
<PAGE>
ITEM 4. THE SOLICITATION OR RECOMMENDATION.--(CONTINUED)
(ix) the fact that the Merger Agreement permits the Special Committee
and the Board to withdraw or modify its approval or
recommendation of the Offer and the Merger if the Special
Committee or the Board determines in good faith, after having
received advice from outside counsel, that the failure to take
such action would be a breach of the fiduciary duties of the
Board under applicable law;
(x) the fact that the Merger Agreement permits the Company (with the
approval of the Special Committee) to terminate the Merger
Agreement, after complying with certain procedural steps and
paying to the Purchaser a reasonable termination fee and
reimbursing it for certain of its expenses, in order to accept a
Superior Proposal (as defined in Section 7.1(d) of the Merger
Agreement);
(xi) the fact that the Offer and the Merger provide for a prompt cash
tender offer for all of the shares of Common Stock to be
followed by the Merger for the same consideration, thereby
enabling the Company's shareholders, at the earliest possible
time, to obtain the benefits of the transaction in exchange for
their shares of Common Stock;
(xii) the financial analysis and presentation of Merrill Lynch to the
Special Committee on July 6, 2000, and the oral opinion of
Merrill Lynch on July 6, 2000 (which opinion was subsequently
confirmed by delivery of a written opinion of Merrill Lynch
dated July 6, 2000), the date the Board adopted the Merger
Agreement, to the effect that, as of such date, and based upon
and subject to certain matters stated in such opinion, the $9.25
per Share cash consideration, net to the seller, to be received
by holders of shares of Common Stock, other than the Management
Participants pursuant to the Merger Agreement, was fair, from a
financial point of view, to such holders, other than Management
Participants. The full text of Merrill Lynch's written opinion,
dated July 6, 2000, which sets forth the assumptions made,
matters considered and limitations on the review undertaken by
Merrill Lynch, is attached hereto as Annex A, and is
incorporated herein by reference. Merrill Lynch's opinion was
prepared solely for the Special Committee to assist the special
committee in its analysis of the Offer and the Merger and speaks
only to the fairness, from a financial point of view, of the
cash consideration to be received in the Offer and the Merger by
holders of shares of Common Stock, other than the Management
Participants, and is not intended to constitute, and does not
constitute, a recommendation as to whether any shareholder
should tender shares of Common Stock pursuant to the Offer.
Holders of shares of Common Stock are urged to read such opinion
carefully in its entirety;
(xiii) the high likelihood that the proposed acquisition would be
consummated, in light of the fact that the Offer and Merger are
not subject to any financing contingencies and the financial
strength of Purchaser and Parent;
(xiv) the terms of the Merger Agreement, including the parties'
representations, warranties and covenants and the conditions to
their respective obligations.
The foregoing discussion of the information and factors considered by the
Special Committee and the Board is not intended to be exhaustive, but includes
many of the factors considered by the Special Committee and the Board. In view
of the variety of factors considered in connection with its evaluation of the
Offer and the Merger, the Special Committee and the Board did not find it
practicable to, and did not, quantify or otherwise assign relative weights to
the specific factors or determine that any single factor was of determinative
importance. Rather, the Special Committee and the Board each viewed its position
and recommendations as being based on the totality of the information presented
to and considered by it. In addition, it is possible that different members of
the Special Committee and the Board assigned different weights to the various
factors described above.
(d) INTENT TO TENDER.
To the best of the Company's knowledge, all of its executive officers,
directors, affiliates or subsidiaries currently intend to offer all Shares of
the Company Common Stock which are held of record or beneficially owned by such
persons pursuant to the Offer, other than the Company Common Stock, if any, held
by such
8
<PAGE>
ITEM 4. THE SOLICITATION OR RECOMMENDATION.--(CONTINUED)
persons which, if tendered, could cause such person to incur liability under the
provisions of Section 16(b) of the Securities Exchange Act of 1934; provided
that two of the Company's senior officers will exchange certain shares in
accordance with the Share Exchange Agreement and the Chief Executive Officer of
the Company will forfeit certain options in exchange for an equity interest in
the Purchaser pursuant to the Deferred Compensation Agreement.
(e) OPINION OF MERRILL LYNCH, PIERCE, FENNER & SMITH.
The Special Committee selected, and the Company retained, Merrill Lynch
solely 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, 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 consideration
was fair from a financial point of view to the holders of the Common Stock,
other than Management Participants in the Transaction.
THE FULL TEXT OF THE MERRILL LYNCH OPINION, DATED JULY 6, 2000, WHICH SETS
FORTH A DESCRIPTION OF THE ASSUMPTIONS MADE, GENERAL PROCEDURES FOLLOWED,
FACTORS CONSIDERED AND LIMITATIONS ON THE REVIEW UNDERTAKEN, IS ATTACHED AS
ANNEX A. BUSINESS RESOURCE GROUP SHAREHOLDERS ARE URGED TO READ THE MERRILL
LYNCH OPINION CAREFULLY IN ITS ENTIRETY, ESPECIALLY WITH REGARD TO THE
ASSUMPTIONS MADE AND FACTORS CONSIDERED BY MERRILL LYNCH. THE MERRILL LYNCH
OPINION WAS PROVIDED FOR THE SOLE USE AND BENEFIT OF THE SPECIAL COMMITTEE AND
IS DIRECTED ONLY TO THE FAIRNESS, FROM A FINANCIAL POINT OF VIEW, OF THE
CONSIDERATION TO THE STOCKHOLDERS, OTHER THAN MANAGEMENT PARTICIPANTS IN THE
TRANSACTION, DOES NOT ADDRESS THE MERITS OF THE UNDERLYING DECISION BY THE
COMPANY TO ENGAGE IN THE TRANSACTION AND DOES NOT CONSTITUTE A RECOMMENDATION TO
ANY STOCKHOLDER AS TO WHETHER TO TENDER SUCH STOCKHOLDER'S SHARES IN THE OFFER
OR AS TO HOW SUCH STOCKHOLDER SHOULD VOTE ON THE PROPOSED MERGER OR ANY MATTER
RELATED THERETO.
The summary set forth below does not purport to be a complete description
of the analyses underlying the Merrill Lynch opinion or the presentation made by
Merrill Lynch to the Special Committee. The preparation of a fairness opinion is
a complex analytical process involving various determinations as to the most
appropriate and relevant methods of financial analysis and the applications of
those methods to the particular circumstances and, therefore, such an opinion is
not readily susceptible to partial analysis or summary description. Accordingly,
Merrill Lynch believes that its analyses must be considered as a whole and that
selecting portions of its analyses, without considering all of its analyses,
would create an incomplete view of the underlying Merrill Lynch opinion. In
arriving at its opinion, Merrill Lynch did not attribute any particular weight
to any analysis or factor considered by it, but rather made qualitative
judgments as to the significance and relevance of each analysis and factor.
In performing its analyses, Merrill Lynch made numerous assumptions with
respect to industry performance, general business, economic, market and
financial conditions and other matters, many of which are beyond the control of
Merrill Lynch or the Company. Any estimates contained in the analyses performed
by Merrill Lynch are not necessarily indicative of actual values or future
results, which may be significantly more or less favorable than suggested by
such analyses. Additionally, estimates of the value of businesses or securities
do not purport to be appraisals or to reflect the prices at which such
businesses or securities might actually be sold. Accordingly, such analyses and
estimates are inherently subject to substantial uncertainty. In addition, as
described above, the Merrill Lynch opinion and Merrill Lynch's presentation to
the Special Committee were among several factors taken into consideration by the
Special Committee in making its determination to accept the $9.25 per Share
consideration. Consequently, the Merrill Lynch analyses described below should
not be viewed as determinative of the decision of the Special Committee with
respect to the fairness of the $9.25 per Share consideration.
9
<PAGE>
ITEM 4. THE SOLICITATION OR RECOMMENDATION.--(CONTINUED)
In arriving at its opinion, Merrill Lynch, among other things:
o reviewed certain publicly available business and financial information
relating to the Company that Merrill Lynch deemed to be relevant;
o reviewed certain information, including financial forecasts, relating to
the business, earnings, cash flow, assets, liabilities and prospects of
the Company furnished to Merrill Lynch by the Company;
o conducted discussions with members of the Company senior management and
representatives of BRG concerning the matters described in the two
preceding clauses;
o reviewed the market prices and valuation multiples of certain publicly
traded companies that Merrill Lynch deemed to be relevant;
o reviewed the results of operations of the Company and compared them with
those of certain publicly traded companies that Merrill Lynch deemed to
be relevant;
o compared the proposed financial terms of the Transaction with the
financial terms of certain other transactions that Merrill Lynch deemed
to be relevant;
o reviewed a draft dated July 5, 2000 of the Merger Agreement; and
o reviewed such other financial studies and analyses and took into account
such other matters as Merrill Lynch deemed necessary, including Merrill
Lynch's assessment of general economic, market and monetary conditions.
In preparing its opinion, Merrill Lynch assumed and relied on the accuracy
and completeness of all information supplied or otherwise made available to
Merrill Lynch, discussed with or reviewed by or for Merrill Lynch, or publicly
available, and Merrill Lynch did not assume any responsibility for independently
verifying such information, did not undertake an independent evaluation or
appraisal of any of the assets or liabilities of the Company and was not
furnished with any such evaluation or appraisal. In addition, Merrill Lynch did
not assume any obligation to conduct any physical inspection of the properties
or facilities of the Company. With respect to the financial forecast information
furnished to or discussed with Merrill Lynch by the Company, Merrill Lynch
assumed that such information was reasonably prepared and reflected the best
currently available estimates and judgment of the Company's management as to the
expected future financial performance of the Company. Merrill Lynch also assumed
that the final form of Merger Agreement was substantially similar to the last
draft reviewed by Merrill Lynch. In addition, in connection with the preparation
of the opinion, Merrill Lynch was not authorized by the Company or the Special
Committee to solicit, nor did Merrill Lynch solicit, third-party indications of
interest for the acquisition of all or any part of the Company.
The Merrill Lynch opinion was necessarily based upon market, economic and
other conditions as they existed and could be evaluated on, and on the
information made available to Merrill Lynch, as of July 6, 2000, the date of its
opinion.
The following is a summary of the material portions of the financial and
comparative analyses performed by Merrill Lynch in connection with its
preparation of the Merrill Lynch opinion.
Merrill Lynch calculated a range of implied valuations for the Company by
utilizing the following three principal valuation analyses:
1. SELECTED COMPARABLE COMPANY ANALYSIS. A publicly traded comparable
company analysis reviews a business' operating performance and outlook
relative to a group of publicly traded peer companies to determine an
implied unaffected market trading valuation multiple.
2. SELECTED COMPARABLE M&A TRANSACTION ANALYSIS. A comparable acquisition
transaction analysis provides an implied valuation multiple based upon
financial information of companies which have been acquired in selected
recent transactions and which are in the same or similar industries as
the business being valued.
10
<PAGE>
ITEM 4. THE SOLICITATION OR RECOMMENDATION.--(CONTINUED)
3. DISCOUNTED CASH FLOW ANALYSIS. A discounted cash flow analysis provides
insight into the intrinsic value of a business based on the projected
earnings and capital requirements and the net present value of the
subsequent cash flows anticipated to be generated by the assets of the
business.
SELECTED COMPARABLE COMPANIES ANALYSIS. Using publicly available information,
Merrill Lynch reviewed the stock prices as of July 5, 2000 and market multiples
of the common stock of the following companies for purposes of the analyses
described below:
o HON Industries
o Kimball International
o Miller (Herman), Inc.
o Mity-Lite Inc
o Open Plan Systems Inc.
o Steelcase Inc.
o Reconditioned Systems Inc.
Merrill Lynch believes these companies are engaged in lines of business
that are generally comparable to those of the Company.
LATEST TWELVE MONTHS EBITDA ANALYSIS. Merrill Lynch determined the equity
market value and derived the unlevered value (defined as market value plus
preferred equity at liquidation value plus short term debt plus long term
debt plus minority interest less the cash and cash equivalents) for these
comparable companies. Merrill Lynch calculated a range of such unlevered
values as a multiple of the latest twelve months earnings before interest,
taxes, depreciation and amortization ("EBITDA"). This calculation resulted
in a range of multiples from 2.6x to 7.7x, compared to an implied multiple
based on the $9.25 per Share consideration of 8.6x for the Company.
LATEST TWELVE MONTHS EBIT ANALYSIS. Merrill Lynch determined the equity
market value and derived the unlevered value (defined as market value plus
preferred equity at liquidation value plus short term debt plus long term
debt plus minority interest less the cash and cash equivalents) for these
comparable companies. Merrill Lynch calculated a range of such unlevered
values as a multiple of the latest twelve months earnings before interest
and taxes ("EBIT"). This calculation resulted in a range of multiples from
2.9x to 12.9x, compared to an implied multiple based on the $9.25 per Share
consideration of 10.9x for the Company.
LATEST TWELVE MONTHS EARNINGS PER SHARE ANALYSIS. Merrill Lynch determined
the prices of the comparable companies as a multiple of latest twelve
months earnings per share ("EPS") The latest twelve months EPS multiples
ranged from 4.0x to 15.5x, compared to an implied multiple based on the
$9.25 per Share consideration of 16.9x for the Company.
LAST TWELVE MONTHS CASH FLOW ANALYSIS. Merrill Lynch determined the prices
of the comparable companies as a multiple of latest twelve months cash
flow. The latest twelve months cash flow multiples ranged from 3.7x to
10.7x, compared to an implied multiple based on the $9.25 per Share
consideration of 11.0x for the Company.
SELECTED COMPARABLE M&A TRANSACTION ANALYSIS. Using publicly available
information and certain information provided by the Company management on the
four acquisitions completed by the Company, Merrill Lynch reviewed the purchase
prices and multiples paid in the following eight selected transactions.
<TABLE>
<CAPTION>
TARGET ACQUIROR
--------------------------- ------------------------------
<S> <C>
Baquet-Pastrijak Inc. Business Resource Group
Modern Office Interiors Business Resource Group
Re'Nu Office Systems Business Resource Group
Office Furniture Network Business Resource Group
DO Group, Inc. Mity-Lite Inc.
The CenterCore Group, Inc. Mity-Lite Inc.
Steelcase Strafor S.A. Steelcase Inc.
Knoll Inc. Warburg, Pincus Ventures Inc.
</TABLE>
11
<PAGE>
ITEM 4. THE SOLICITATION OR RECOMMENDATION.--(CONTINUED)
LATEST TWELVE MONTHS EBITDA ANALYSIS. Merrill Lynch derived the unlevered
value (defined as offer value plus preferred equity at liquidation value
plus short term debt plus long term debt plus minority interest less the
cash and cash equivalents) for these selected transactions. Merrill Lynch
calculated a range of such unlevered values as a multiple of the latest
twelve months EBITDA. This calculation resulted in a range of multiples
from 5.8x to 7.8x, compared to an implied multiple based on the $9.25 per
Share consideration of 8.6x for the Company.
LATEST TWELVE MONTHS EBIT ANALYSIS. Merrill Lynch derived the unlevered
value (defined as offer value plus preferred equity at liquidation value
plus short term debt plus long term debt plus minority interest less the
cash and cash equivalents) for these selected transactions. Merrill Lynch
calculated a range of such unlevered values as a multiple of the latest
twelve months EBIT. This calculation resulted in a range of multiples from
5.0x to 11.2x, compared to an implied multiple based on the $9.25 per Share
consideration of 10.9x for the Company.
LATEST TWELVE MONTHS NET INCOME ANALYSIS. Merrill Lynch compared the
multiples of latest twelve months net income implied by the offer values of
the selected transactions. The latest twelve months net income multiples
ranged from 8.3x to 16.5x, compared to an implied multiple based on the
$9.25 per Share consideration of 16.9x for the Company.
No company, transaction or business used in the analyses described under
"--Selected Comparable Companies Analysis" and "--Selected Comparable M&A
Transaction Analysis" is identical to the Company as of July 6, 2000.
Accordingly, an examination of the results of those analyses necessarily
involves complex considerations and judgments concerning differences in
financial and operating characteristics and other factors that could affect the
transaction or the public trading or other values of the company or companies to
which they are being compared. Mathematical analysis (such as determining the
average or median) is not in itself a meaningful method of using comparable
acquisition or company data.
DISCOUNTED CASH FLOW ANALYSIS. Merrill Lynch performed a discounted cash
flow analysis of the Company on a stand alone basis using a set of
forecasts provided by management of the Company. Utilizing the the Company
forecasts, Merrill Lynch calculated the theoretical unlevered discounted
present value for the Company by adding together the present value of
(1) the projected stream of unlevered free cash flow through the fiscal
year 2004 for the Company and (2) the projected terminal value of the
Company at the end of fiscal year 2004. The terminal value of the Company
was calculated based upon EBITDA multiples ranging from 4.75x to 5.25x and
the unlevered after-tax discount rates used in the discounted cash flow
analyses ranged from 17.0% to 18.0%. This calculation resulted in a range
of implied equity values for the Company ranging from $7.29 to $8.87,
compared to the consideration of $9.25 per Share.
The Special Committee selected Merrill Lynch on the basis of its experience
and expertise. Merrill Lynch is an internationally recognized investment banking
and advisory firm which, as a part of its investment banking business, regularly
is engaged in the valuation of businesses and securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for corporate and other purposes. Merrill Lynch has provided in
the past, and may continue to provide in the future, financial advisory services
to Three Cities Research Corp. In addition, in the ordinary course of its
business, Merrill Lynch may actively trade the equity securities of the Company
for its own account and for the accounts of its customers and, accordingly, may
at any time hold a long or short position in such securities.
ITEM 5. PERSONS/ASSETS, RETAINED, EMPLOYED, COMPENSATED OR USED.
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 connection with the Transaction. Pursuant to the engagement letter,
dated as of May 9, 2000, between the Company and Merrill Lynch, the Company has
agreed to pay Merrill Lynch a fee of $200,000 for services rendered in
connection with the Transaction. Of this amount, $50,000 was payable on the date
of the engagement letter and $150,000 was payable upon the date Merrill Lynch
delivered its opinion. The Company has also agreed to reimburse Merrill Lynch
for the reasonable out-of-pocket
12
<PAGE>
ITEM 5. PERSONS/ASSETS, RETAINED, EMPLOYED, COMPENSATED OR USED.--(CONTINUED)
expenses incurred by it in connection with its engagement (including reasonable
counsel fees and disbursements) and to indemnify Merrill Lynch and its
affiliates from and against certain liabilities, including liabilities under the
federal securities laws, arising out of its engagement.
The Company retained Huntington Holdings, Inc. ("Huntington") for the
purposes of identifying and advising the Company on opportunities for its sale
and participating in negotiations for its sale. Pursuant to the terms of the
Huntington engagement letter, the Company is obligated to pay it a retainer of
$10,000 per month until the close of sale, $500,000, minus the sum total of all
monthly retainers paid should a purchase price be at $6.00 per Share, plus an
additional $2,000 per $.01 over the $6.00 purchase price per share, for a total
of $1,040,000 at the $9.25 price. The Company also agreed to indemnify
Huntington against certain liabilities arising out of Huntington's engagement.
A summary of the material provisions of the agreement with D.F. King & Co.,
Inc., in its capacity as Information Agent, is included in Section 19 of the
Offer to Purchase, and incorporated herein by reference.
A summary of the material provisions of the agreement with American Stock
and Transfer Trust Company, in its capacity as Depositary, is included in
Section 19 of the Offer to Purchase, and incorporated herein by reference.
Except as disclosed herein, neither the Company nor any person acting on
its behalf currently intends to employ, retain or compensate any person to make
solicitations or recommendations to shareholders on its behalf concerning the
Offer.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
During the past 60 days, neither the Company nor any subsidiary of the
Company nor, to the best of the Company's knowledge, any executive officer,
director or affiliate of the Company, has effected a transaction in shares of
Common Stock.
ITEM 7. PURPOSES OF THE TRANSACTION AND PLANS OR PROPOSALS.
SUBJECT COMPANY NEGOTIATIONS. Other than as set forth in this Schedule
14D-9, no negotiation is being undertaken or is underway by the Company in
response to the Offer that relates to (1) a tender offer for or other
acquisition of the Company's securities by the Company, any subsidiary of the
Company or any other person; (2) an extraordinary transaction, such as a merger,
reorganization or liquidation, involving the Company or any subsidiary of the
Company; (3) a purchase, sale or transfer of a material amount of assets by the
Company or any subsidiary of the Company; (4) any material change in the present
dividend rate or policy, or (5) indebtedness or capitalization of the Company.
Except as described above or in Item 3 of this Schedule 14D-9, there are no
transactions, board resolutions, agreements in principle or signed contracts in
response to the Offer which relate to, or would result in, one or more of the
matters referred to in this Item 7.
ITEM 8. ADDITIONAL INFORMATION.
(a) REGULATORY APPROVALS.
For information regarding governmental and regulatory approvals required in
order to consummate the Offer and the Merger, including pre-merger notifications
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, see
Section 18 of the Offer to Purchase which is incorporated by reference herein.
(b) RIGHTS OF DISSENTING SHAREHOLDERS.
Under California law, shareholders who have not tendered their shares of
Common Stock will have certain rights to dissent from the merger and demand
appraisal of, and to receive payment of, the fair value of their shares. If
immediately before the Merger is consummated, the Shares are traded on the
Nasdaq National Market (as they currently are), holders of Shares will not have
dissenters' appraisal rights as a result of the Merger unless
13
<PAGE>
ITEM 8. ADDITIONAL INFORMATION.--(CONTINUED)
holders of 5% or more of the outstanding Shares dissent from the Merger and
notify the Company, before the vote on the Merger, of their intention to seek
appraisal of their shares. If trading of the Shares on the Nasdaq National
Market is terminated before the Effective Time of the Merger, holders of Shares
at the Effective Time of the Merger who follow the procedures set forth in
Chapter 13 of the California General Corporation Law ("CGCL") will be entitled
to receive the appraised value of their Shares., which may be more or less than
what the would receive as a result of the Merger, regardless of how many Shares
are held by persons who seek appraisal of their shares.
Under California law, fair market value is determined as of July 7, 2000,
the trading day before the first announcement of the terms of the Merger
Agreement and the Merger, excluding any appreciation or depreciation as a
consequence of the Merger, but adjusted for any stock split, reverse stock
split, or share dividend becoming effective after that date.
If the parties are unable to agree on a fair market value or the Company
denies that the Shares are dissenting Shares, the dissenting shareholder may
request the Superior Court of Santa Clara County to determine the fair market
value of the Shares. The Court's decision would be subject to appellate review.
Persons who are beneficial owners of Shares held of record by another
person, such as a broker, a bank or nominee, should instruct the record holder
to follow the procedure outlined below if the beneficial owners wish to dissent
from the approval of the Merger.
To perfect their dissenters' rights, shareholders of record must:
1. NOT vote their dissenting Shares to approve the Merger;
2. make written demand for the purchase of their dissenting Shares to
the Company or its transfer agent on or before the date of the
Action by Written Consent of Shareholders of Business Resource
Group;
3. within thirty (30) days after the mailing to shareholders by the
Company of notice of approval of the Merger, submit the
certificates representing their dissenting shares to the Company,
for notation thereon that they represent the dissenting shares.
The text of Sections 1301-1305 of the CGCL, which contain the requirements
and procedures for seeking the appraised value of shares in connection with a
merger, is attached as Schedule II to the Offer to Purchase, and is incorporated
herein by reference.
If the Company changes its state of incorporation to Delaware, the
availability of, and procedures for, asserting dissenters' appraisal rights as a
result of the Merger will be governed by Section 262 of the Delaware General
Corporations Law ("DGCL"), instead of Chapter 13 of the CGCL. There are
differences between the Delaware provisions and the California Provisions. Among
other things, under the Delaware provisions, if the Shares are traded on the
Nasdaq National Market System immediately before the Merger is consummated,
holders of Shares will not have dissenters' appraisal rights no matter how many
Shares are owned by holders who dissent from the Merger. Also, if dissenters'
appraisal rights are available, there are some differences between the
procedures under the DGCL and those under the CGCL. The text of Section 262 of
the DGCL is attached as Schedule III to the Offer to Purchase, and is
incorporated herein by reference.
THE REQUIREMENTS FOR SEEKING THE APPRAISED VALUE OF SHARES AS A RESULT OF A
MERGER ARE COMPLICATED AND MUST BE FOLLOWED CAREFULLY. WE URGE YOU TO READ THE
RELEVANT PORTIONS OF THE CGCL AND THE DGCL IN THE TEXT OF SCHEDULES II AND III,
RESPECTIVELY, OF THE OFFER TO PURCHASE IF YOU ARE CONSIDERING DISSENTING AND
SEEKING THE APPRAISED VALUE OF YOUR SHARES.
(c) CERTAIN LEGAL PROCEEDINGS.
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
14
<PAGE>
ITEM 8. ADDITIONAL INFORMATION.--(CONTINUED)
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 (e)(8), and incorporated herein by reference.
(d) OTHER MATERIAL INFORMATION.
The information contained in all of the Exhibits referred to in Item 9
below is incorporated by reference herein.
ITEM 9. EXHIBITS.
<TABLE>
<S> <C> <C>
o + (a)(1) Offer to Purchase dated June 14, 2000.
o + (a)(2) Letter of Transmittal.
* (a)(3) Letter to Shareholders of the Company dated July 18, 2000.
^ (a)(4) Press Release of the Company dated July 11, 2000.
+ (a)(5) Form of Summary Advertisement dated July 17, 2000.
+ (e)(1) Plan and Agreement of Merger dated as of July 7, 2000, between Business Resource Group and BRG
Acquisition Corporation.
+ (e)(2)(i) Share Exchange Agreement dated July 7, 2000 between BR Holdings, LLC and Brian McNay.
+ (e)(2)(ii) Share Exchange Agreement dated July 7, 2000 between BR Holdings, LLC and Jeff Tuttle.
+ (e)(3)(i) Employment Agreement of John Peth dated as of July 7, 2000.
+ (e)(3)(ii) Employment Agreement of Jeff Tuttle dated as of July 7, 2000.
+ (e)(3)(iii) Employment Agreement of Brian McNay dated as of July 7, 2000.
+ (e)(3)(iv) Employment Agreement of John Palmer dated as of July 7, 2000.
+ (e)(4) Commitment Letter of John Palmer dated July 7, 2000.
+ (e)(5) Deferred Compensation Agreement of John Peth dated July 7, 2000.
(e)(6) Summary of presentation delivered by Merrill Lynch, to the Special Committee, on July 6, 2000.
*# (e)(7) Opinion of Merrill Lynch dated July 6, 2000 to the Special Committee of the Board of Directors
of the Company.
(e)(8) Complaint of George Reynolds filed July 10, 2000 against Business Resource Group et al.
(e)(9) Unanimous Written Consent of the Board of Directors of the Company dated July 18, 2000.
</TABLE>
------------------
* Included in materials delivered to shareholders of the Company.
+ Filed as an exhibit to the Purchaser's Tender Offer Statement on Schedule TO
dated July 14, 2000, and incorporated herein by reference.
^ Filed as an exhibit to the Company's 14d-9 dated July 11, 2000, and
incorporated herein by reference.
# Incorporated by reference to Annex A of this Schedule 14d-9.
o Delivered to shareholders with the Schedule TO.
15
<PAGE>
SIGNATURE
AFTER DUE INQUIRY AND TO THE BEST OF MY KNOWLEDGE AND BELIEF, I CERTIFY
THAT THE INFORMATION SET FORTH IN THIS STATEMENT IS TRUE, COMPLETE AND CORRECT.
By: /s/ HARRY S. ROBBINS
--------------------------------
Name: Harry S. Robbins
Title: Member, Special Committee
of the Board of Directors
July 18, 2000
16
<PAGE>
ANNEX A
OPINION OF MERRILL LYNCH
<PAGE>
Private Client Group
Business Advisory Services
Sears Tower
233 South Wacker Drive
[LOGO] MERRILL LYNCH Suite 5620
Chicago, IL 60606
(312) 928-8800
FAX (312) 928-1987
FAX (312) 928-8844
July 6, 2000
Special Committee of the
Board of Directors (the "Special Committee")
Business Resource Group
2150 North First Street, Suite 101
San Jose, CA 95131
Members of the Special Committee:
Business Resource Group (the "Company") and BRG Acquisition Corporation (the
"Acquiror"), a subsidiary of BR Holdings LLC, which is a subsidiary of Three
Cities Research Corp. ("Three Cities"), propose to enter into a Plan and
Agreement of Merger (the "Merger Agreement") pursuant to which (i) the Acquiror
would commence a tender offer (the "Tender Offer") for all outstanding shares of
the Company's common stock, par value $0.01 per share (the "Common Shares"), for
$9.25 per share, net to the seller in cash (the "Consideration") and (ii) the
Company, or the Company's successor, would be merged into the Acquiror in a
merger (the "Merger"), in which any Common Share not acquired in the Tender
Offer, other than certain Common Shares held by management, held in treasury,
held by the Acquiror or held by any direct or indirect subsidiary of the Company
or as to which dissenter's rights have been perfected, would be converted into
the right to receive the Consideration. The Tender Offer and the Merger, taken
together, are referred to as the "Transaction."
You have asked us whether, in our opinion, the Consideration to be received by
the holders of the Common Shares, other than members of the management of the
Company who are participating in the Transaction with Three Cities (the
"Participating Holders"), pursuant to the Merger Agreement is fair from a
financial point of view to such holders, other than the Participating Holders.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed certain publicly available business and financial
information relating to the Company that we deemed to be
relevant;
(2) Reviewed certain information, including financial forecasts,
relating to the business, earnings, cash flow, assets,
liabilities and prospects of the Company furnished to us by
the Company;
(3) Conducted discussions with members of the senior management
and representatives of the Company concerning the matters
described in clauses 1 and 2 above;
<PAGE>
MERRILL LYNCH BUSINESS ADVISORY SERVICES
Business Resource Group
07/06/00
Page 2
(4) Reviewed the market prices and valuation multiples of certain
publicly traded companies that we deemed to be relevant;
(5) Reviewed the results of operations of the Company and compared
them with those of certain publicly traded companies that we
deemed to be relevant;
(6) Compared the proposed financial terms of the Transaction with
the financial terms of certain other transactions that we
deemed to be relevant;
(7) Reviewed a draft dated July 5, 2000 of the Merger Agreement;
and
(8) Reviewed such other financial studies and analyses and took
into account such other matters as we deemed necessary,
including our assessment of general economic, market and
monetary conditions.
In preparing our opinion, we have assumed and relied on the accuracy and
completeness of all information supplied or otherwise made available to us,
discussed with or reviewed by or for us, or publicly available, and we have not
assumed any responsibility for independently verifying such information or
undertaken an independent evaluation or appraisal of any of the assets or
liabilities of the Company or been furnished with any such evaluation or
appraisal. In addition, we have not assumed any obligation to conduct any
physical inspection of the properties or facilities of the Company. With respect
to the financial forecast information furnished to or discussed with us by the
Company, we have assumed that such information has been reasonably prepared and
reflects the best currently available estimates and judgment of Company's
management as to the expected future financial performance of the Company. We
have also assumed that the final form of the Merger Agreement will be
substantially similar to the last draft reviewed by us.
Our opinion is necessarily based upon market, economic and other conditions as
they exist and can be evaluated on, and on the information made available to us
as of, the date hereof.
In connection with the preparation of this opinion, we have not been authorized
by the Company or the Special Committee to solicit, nor have we solicted,
third-party indications of interest for the acquisition of all or any part of
the Company.
In addition, the Company has agreed to indemnify us for certain liabilities
arising out of our engagement. We have also in the past, and may continue in the
future, provide financial advisor services to Three Cities. In the ordinary
course of our business, we may actively trade the Common Shares and other
securities of the Company, for our own account and for the accounts of customers
and, accordingly, may at any time hold a long or short position in such
securities.
This opinion is for the sole use and benefit of the Special Committee. Our
opinion does not address the merits of the underlying decision by the Company to
engage in the Transaction and does not constitute a recommendation to any holder
of the Common Shares as to whether to tender such Common Shares in the Tender
Offer or as to how such holder should vote on the proposed Merger or any matter
related thereto.
We are not expressing any opinion herein as to the prices at which the Common
Shares will trade following the announcement of the Transaction.
<PAGE>
MERRILL LYNCH BUSINESS ADVISORY SERVICES
Business Resource Group
07/06/00
Page 3
On the basis of, and subject to the foregoing, we are of the opinion that, as of
the date hereof, the Consideration to be received by the holders of the Common
Shares in the Transaction, other than the Participating Holders, is fair from a
financial point of view to the holders of Common Shares, other than the
Participating Holders.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: /s/ Kit A. Kamholz
----------------------------------------
Kit A. Kamholz
Vice President
Merrill Lynch Business Advisory Services
<PAGE>
EXHIBIT INDEX
<TABLE>
<S> <C> <C>
o + (a)(1) Offer to Purchase dated June 14, 2000.
o + (a)(2) Letter of Transmittal.
* (a)(3) Letter to Shareholders of the Company dated July 18, 2000.
^ (a)(4) Press Release of the Company dated July 11, 2000.
+ (a)(5) Form of Summary Advertisement dated July 17, 2000.
+ (e)(1) Plan and Agreement of Merger dated as of July 7, 2000, between Business Resource Group and BRG
Acquisition Corporation.
+ (e)(2)(i) Share Exchange Agreement dated July 7, 2000 between BR Holdings, LLC and Brian McNay.
+ (e)(2)(ii) Share Exchange Agreement dated July 7, 2000 between BR Holdings, LLC and Jeff Tuttle.
+ (e)(3)(i) Employment Agreement of John Peth dated as of July 7, 2000.
+ (e)(3)(ii) Employment Agreement of Jeff Tuttle dated as of July 7, 2000.
+ (e)(3)(iii) Employment Agreement of Brian McNay dated as of July 7, 2000.
+ (e)(3)(iv) Employment Agreement of John Palmer dated as of July 7, 2000.
+ (e)(4) Commitment Letter of John Palmer dated July 7, 2000.
+ (e)(5) Deferred Compensation Agreement of John Peth dated July 7, 2000.
(e)(6) Summary of presentation delivered by Merrill Lynch, to the Special Committee, on July 6, 2000.
*# (e)(7) Opinion of Merrill Lynch dated July 6, 2000 to the Special Committee of the Board of Directors
of the Company.
(e)(8) Complaint of George Reynolds filed July 10, 2000 against Business Resource Group et al.
(e)(9) Unanimous Written Consent of the Board of Directors of the Company dated July 18, 2000.
</TABLE>
------------------
* Included in materials delivered to shareholders of the Company.
+ Filed as an exhibit to the Purchaser's Tender Offer Statement on Schedule TO
dated July 14, 2000, and incorporated herein by reference.
^ Filed as an exhibit to the Company's 14d-9 dated July 11, 2000, and
incorporated herein by reference.
# Incorporated by reference to Annex A of this Schedule 14d-9.
o Delivered to shareholders with the Schedule TO.
