-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WO0NVXoISOLhx0Hs/cdZJiOQI3WeJpRb+mKSJAEGHHQ6ojTVyt6BpKsHk6ygh/52 At9RBQa5E2t/4qU7nBlAbw== /in/edgar/work/20000804/0000889812-00-003366/0000889812-00-003366.txt : 20000921 0000889812-00-003366.hdr.sgml : 20000921 ACCESSION NUMBER: 0000889812-00-003366 CONFORMED SUBMISSION TYPE: SC TO-T/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20000804 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: BUSINESS RESOURCE GROUP CENTRAL INDEX KEY: 0000945028 STANDARD INDUSTRIAL CLASSIFICATION: [5020 ] IRS NUMBER: 770150337 STATE OF INCORPORATION: CA FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: SC TO-T/A SEC ACT: SEC FILE NUMBER: 005-45031 FILM NUMBER: 686734 BUSINESS ADDRESS: STREET 1: 2150 N FIRST ST STREET 2: STE 101 CITY: SAN JOSE STATE: CA ZIP: 95131 BUSINESS PHONE: 4083253200 MAIL ADDRESS: STREET 1: 2150 NORTH FIRST STREET SUITE 101 CITY: SAN JOSE STATE: CA ZIP: 95131 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: BUSINESS RESOURCE GROUP CENTRAL INDEX KEY: 0000945028 STANDARD INDUSTRIAL CLASSIFICATION: [5020 ] IRS NUMBER: 770150337 STATE OF INCORPORATION: CA FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: SC TO-T/A BUSINESS ADDRESS: STREET 1: 2150 N FIRST ST STREET 2: STE 101 CITY: SAN JOSE STATE: CA ZIP: 95131 BUSINESS PHONE: 4083253200 MAIL ADDRESS: STREET 1: 2150 NORTH FIRST STREET SUITE 101 CITY: SAN JOSE STATE: CA ZIP: 95131 SC TO-T/A 1 0001.txt TENDER OFFER STATEMENT - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ SCHEDULE TO (RULE 14D-100) TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1) OR 13(E)(1) OF THE SECURITIES EXCHANGE ACT OF 1934 ------------------------ AMENDMENT NO. 1 ------------------------ BUSINESS RESOURCE GROUP (NAME OF SUBJECT COMPANY (ISSUER)) BRG ACQUISITION CORPORATION BUSINESS RESOURCE HOLDINGS, INC. BR HOLDINGS LLC THREE CITIES FUND III, L.P. (OFFERORS) (NAMES OF FILING PERSONS (IDENTIFYING STATUS AS OFFEROR, ISSUER, OR OTHER PERSON)) ------------------------ COMMON STOCK, $0.01 PAR VALUE (TITLE OF CLASS OF SECURITIES) 12329K 10 4 (CUSIP NUMBER OF CLASS OF SECURITIES) ------------------------ J. WILLIAM UHRIG With copies to: BRG ACQUISITION CORPORATION DAVID W. BERNSTEIN, ESQ. C/O THREE CITIES RESEARCH, INC. CLIFFORD CHANCE ROGERS & WELLS LLP 650 MADISON AVENUE, 200 PARK AVENUE, NEW YORK, NEW YORK 10022 NEW YORK, NEW YORK 10166-0153 (212) 838-9660 (212) 878-8000
(NAME, ADDRESS AND TELEPHONE NO. OF PERSON AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF FILING PERSONS) ------------------------ CALCULATION OF FILING FEE
TRANSACTION VALUATION AMOUNT OF FILING FEE $58,987,425.75 $11,797.49
(1) Calculated in accordance with Rule 0-11(d) under the Securities Exchange Act of 1934 solely for purposes of computing the filing fee; based upon the tender offer price of $9.25 cash per share and 6,377,019 shares of common stock (including options to purchase shares of common stock) outstanding and not already owned by Offeror group immediately prior to the expiration of the tender offer. (2) Estimated for purposes of calculating the amount of filing fee only. The amount assumes the purchase of 6,377,019 shares of Common Stock, par value $0.01 per share, of Business Resource Group (the "Common Shares") at a price per share of $9.25 in cash. Such number of shares represents all of the shares and options outstanding as of June 29, 2000, less 319,168 Common Shares to be separately contributed to the Offeror group immediately prior to the expiration of the tender offer. /x/ Check the box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the offsetting fee with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form of Schedule and the date of its filing. $9,212 of the filing fee was previously paid with the initial filing of the Schedule TO. Amount Previously Paid: $9,212 Filing Parties: N/A Form or Registration No.: N/A Date Filed: N/A
/ / Check the box if the filing relates solely to preliminary communications made before commencement of a tender offer. Check the appropriate boxes below to designate any transactions to which the statement relates: /x/ third-party tender offer subject to Rule 14d-1. / / issuer tender offer subject to Rule 13e-4. / / going-private transaction subject to Rule 13e-3. / / amendment to Schedule 13D under Rule 13d-2. Check the following box if the filing is a final amendment reporting the results of the tender offer: / / SCHEDULE TO This Tender Offer Statement on Schedule TO, as amended, relates to the offer by BRG Acquisition Corporation, a Delaware corporation ("Purchaser"), to purchase all of the outstanding common shares, $0.01 par value per share (each a "Common Share"), of Business Resource Group, a California corporation (the "Company"), which as of July 7, 2000 the Purchaser did not own or have agreements to own at $9.25 per Common Share, net to the seller in cash, without interest (the "Per Share Amount"), upon the terms and subject to the conditions set forth in the Offer to Purchase dated July 14, 2000 (the "Offer to Purchase"), a copy of which is attached hereto as Exhibit (a)(1), and in the related Letter of Transmittal, a copy of which is attached hereto as Exhibit (a)(2) (the "Letter of Transmittal"). The information in the Amended Offer to Purchase and the related Letter of Transmittal is incorporated herein by reference in answer to each of the Items 1 through 13 of Schedule TO, except that, to the extent that a partial answer is here given to any of those Items, the information contained in the Offer to Purchase and Letter of Transmittal is incorporated herein by reference in partial answer to those Items. In response to Item 13 of Schedule 13E-3, the Company's audited financial statements as of and for the years ended October 31, 1998 and 1999 are incorporated herein by reference to Item 8 of the Company's Annual Report on Form 10-K for the year ended October 31, 1999, as filed with the Securities and Exchange Commission (the "Commission") on January 1, 2000. Also in response to Item 13 of Schedule 13E-3, the Company's unaudited financial statements as of and for the quarter and six months ended April 30, 2000 are incorporated herein by reference to Part I, Item 1 of the Company's Quarterly Report on Form 10-Q for the six months ended April 30, 1999 filed with the Commission on June 14, 2000. ITEM 3. IDENTITY AND BACKGROUND OF FILING PERSONS. (c) Business and Backgrounds of Natural Persons. During the last five years, neither the Purchaser nor, to the best of Purchaser's knowledge, any of the persons listed in Schedule I to the Offer to Purchase (i) has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) was a party to a proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining further violations of, or prohibiting activities subject to, federal or state securities laws or finding any violation of such laws. ITEM 5. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS. (a) Transactions. (2) The Purchaser has agreed to employ four officers and/or directors of the Company (together, the "Managers") if and when the Company is merged with the Purchaser. At that time, the Managers and their annual base salaries (in addition to participation in an incentive stock program and eligibility for bonuses based on operating earnings of the company surviving that merger) are as follows: (i) Jack Peth $375,000; (ii) Brian McNay $525,000; (iii) Jeff Tuttle $300,000; and (iv) John Palmer $160,000. Additional details concerning their compensation arrangements and equity interests are set forth in the Offer to Purchase and the exhibits to this Schedule TO. (b) Significant Corporate Events. None 2 ITEM 8. INTEREST IN SECURITIES OF THE SUBJECT COMPANY. (a) Securities Ownership. None. (b) Securities Transactions. None. ITEM 11. ADDITIONAL INFORMATION. (a) Agreements, Regulatory Requirements, and Legal Proceedings. Not applicable. (b) Not applicable. ITEM 12. MATERIAL TO BE FILED AS EXHIBITS.
EXHIBIT NO. DESCRIPTION - ----------- ------------------------------------------------------------------------------------------------- (a)(1) -- Offer to Purchase, dated July 14, 2000, as amended on August 4, 2000. (a)(2) -- Form of Letter of Transmittal.* (a)(3) -- Form of Notice of Guaranteed Delivery.* (a)(4) -- Form of letter, dated July 14, 2000, to brokers, dealers, commercial banks, trust companies and other nominees.* (a)(5) -- Form of letter to be used by brokers, dealers, commercial banks, trust companies and nominees to their clients.* (a)(6) -- Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9.* (a)(7) -- Form of Summary Advertisement, dated July 14, 2000.* (b) -- Commitment Letter executed by Comerica Bank--California. (c)(1) -- Fairness Opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated* (c)(2) -- Merrill Lynch Board Presentation. (d)(1) -- Plan and Agreement of Merger, dated July 7, 2000, between the Company and the Purchaser.* (d)(2) -- Share Exchange Agreements:* (i) Share Exchange Agreement, dated July 7, 2000, between BR Holdings LLC and Brian McNay; (ii) Share Exchange Agreement, dated July 7, 2000, between BR Holdings LLC and Jeff Tuttle; (d)(3) -- Commitment Letter, dated as of July 7, 2000, by John Palmer for benefit of Purchaser.* (d)(4) -- Form of Peth Deferred Compensation Agreement, dated as of July 7, 2000.* (d)(5) -- Employment Agreement between Jeff Tuttle and the Purchaser dated as of July 7, 2000.* (d)(6) -- Employment Agreement between Jack Peth and the Purchaser dated as of July 7, 2000.* (d)(7) -- Employment Agreement between John Palmer and the Purchaser dated as of July 7, 2000.* (d)(8) -- Employment Agreement between Brian McNay and the Purchaser dated as of July 7, 2000.* (e) -- None. (f) -- See Offer to Purchase (filed herewith as Exhibit (a)(1)), including Schedule II and Schedule III thereto. (g) -- See Offer to Purchase (filed herewith as Exhibit (a)(1). (h) -- None requested or provided.
- ------------------ * Previously filed. ITEM 13. INFORMATION REQUIRED BY SCHEDULE 13E-3 Item 4. Terms of the Transaction (1004)(c), (1004)(f) Different Terms; Eligibility for Listing or Trading. Not applicable. (1004)(e) Provisions for Unaffiliated Security Holders. None. Item 5. Past Contacts, Transactions, Negotiations and Agreements (1005c) Negotiations or Contracts. The filing parties are not aware of any matters to be disclosed on this Item (5)(c) other than that disclosed in the Offer to Purchase attached hereto as Exhibit (a)(1). 3 Item 6. Purposes of the Transaction and Plans or Proposals. (1006c8) Upon completion of the tender offer, Purchaser may cause the suspension of the Company's obligation to file reports under section 15(d) of the Exchange Act. Item 7. Purposes, Alternatives, Reasons and Effects. (1013) Purposes, Alternatives, Reasons and Effects in a Going-Private Transaction. TCR (which advises Three Cities Fund III and caused BR Holdings, Holdings, Inc. and the Purchaser to be formed for the purpose of participating in the acquisition of the Company) believes that if the Company is not publicly traded, and therefore is not required to focus on short term operating results, there is a substantial possibility of a significant increase in the Company's long term profitability, and therefore its long term value. Because BR Holdings, through Holdings, Inc. will own 100% of the comany which survives the merger of the Purchaser and the Company, they will own 100% of the net earnings and net assets of the Company which survives that merger. The historical net income and shareholders equity of the Company is shown under "Selected Consolidated Financial Data" on page 16 of the Offer to Purchase. However, exercises of options which will be given to key employees of the Company could reduce the ownership by BR Holdings and Holdings Inc. of the Company, and therefore their interest in its net earnings and net assets, to 88%. Three Cities Fund III will own approximately 94% of BR Holdings, and therefore will indirectly own 94% of the interest of BR Holdings and Holdings Inc. in the Company and in its net earnings and net units. Ultimately, Three Cities Fund III and the other holders of interests in BR Holdings will receive the benefits of any increase in the value of the Company. However, there is no guarantee that the value of the Company will increase enough to justify the substantial investment Three Cities Fund III will be making to acquire its interest in the Company, and it is possible that the value of the Company will decline, not increase. The Purchaser has not considered nor rejected alternative means to accomplish its objectives with regard to the Company. Neither the purchase of the shares which are tendered in response to the Offer nor the Merger will be a taxable event with regard to the Company, Three Cities Fund, BR Holdings, Holdings, Inc. or the Purchaser. Item 8. Fairness of the Transaction. (1014)(c) Approval of Security Holders. The information set forth in the Offer to Purchase is incorporated by reference. Three Cities Fund (and therefore BR Holdings, Holdings, Inc. and the Purchaser) did not consider any other factors relating to the fairness of the transaction (including any of the other factors set forth in general instruction (2) to Item 1014 of Regulation M.A) because they were not relevant to the decisions as to whether Three Cities Fund wanted to acquire the Company and the price it was willing to pay for it. Information regarding factors considered by the Company is incorporated by reference to the Company's Schedule 14D-9 dated July 21, 2000, as amended dated August 2, 2000. (1014)(f) Other Offers. N/A Item 9. Reports, Opinions, Appraisals and Negotiations. (1015)(b) Preparer and Summary of the Report, Opinion, or Appraisal. See Exhibit (c). Item 12. The Solicitation or Recommendation. The information set forth in the Offer to Purchase is incorporated by reference. Item 14. The Solicitation or Recommendation. The information set forth in the Offer to Purchase is incorporated by reference. 4 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. Dated: August 4, 2000 BRG ACQUISITION CORPORATION By: /s/ Jeanette Welsh________________ Name: Jeanette Welsh Title: Secretary and Treasurer BUSINESS RESOURCE HOLDINGS, INC. By: /s/ Jeanette Welsh________________ Name: Jeanette Welsh Title: Secretary and Treasurer BR HOLDINGS LLC By: /s/ Jeanette Welsh________________ Name: Jeanette Welsh Title: Secretary and Treasurer THREE CITIES FUND III, L.P. By: TCR Associates III, L.L.C. its general partner By: TCR GP, L.L.C. its Managing Member By: /s/ Willem de Vogel____________ Name: Willem de Vogel Title: Managing Member 5 EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION - ----------- ------------------------------------------------------------------------------------------------- (a)(1) -- Offer to Purchase, dated July 14, 2000, as amended on August 4, 2000. (a)(2) -- Form of Letter of Transmittal.* (a)(3) -- Form of Notice of Guaranteed Delivery.* (a)(4) -- Form of letter, dated July 14, 2000, to brokers, dealers, commercial banks, trust companies and other nominees.* (a)(5) -- Form of letter to be used by brokers, dealers, commercial banks, trust companies and nominees to their clients.* (a)(6) -- Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9.* (a)(7) -- Form of Summary Advertisement, dated July 14, 2000.* (b) -- Commitment Letter executed by Comerica Bank--California. (c)(1) -- Fairness Opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated* (c)(2) -- Merrill Lynch Board Presentation. (d)(1) -- Plan and Agreement of Merger, dated July 7, 2000, between the Company and the Purchaser.* (d)(2) -- Share Exchange Agreements:* (i) Share Exchange Agreement, dated July 7, 2000, between BR Holdings LLC and Brian McNay; (ii) Share Exchange Agreement, dated July 7, 2000, between BR Holdings LLC and Jeff Tuttle; (d)(3) -- Commitment Letter, dated as of July 7, 2000, by John Palmer for benefit of Purchaser.* (d)(4) -- Form of Peth Deferred Compensation Agreement, dated as of July 7, 2000.* (d)(5) -- Employment Agreement between Jeff Tuttle and the Purchaser dated as of July 7, 2000.* (d)(6) -- Employment Agreement between Jack Peth and the Purchaser dated as of July 7, 2000.* (d)(7) -- Employment Agreement between John Palmer and the Purchaser dated as of July 7, 2000.* (d)(8) -- Employment Agreement between Brian McNay and the Purchaser dated as of July 7, 2000.* (e) -- None. (f) -- See Offer to Purchase (filed herewith as Exhibit (a)(1)), including Schedule II and Schedule III thereto. (g) -- See Offer to Purchase (filed herewith as Exhibit (a)(1). (h) -- None requested or provided.
- ------------------ * Previously filed. 6 AMENDED OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF BUSINESS RESOURCE GROUP BY BRG ACQUISITION CORPORATION AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF BR HOLDINGS LLC WHICH IS MAJORITY-OWNED BY THREE CITIES FUND III, L.P. FOR $9.25 NET PER SHARE THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON FRIDAY, AUGUST 11, 2000, UNLESS THE OFFER IS EXTENDED. THIS OFFER IS BEING MADE IN ACCORDANCE WITH A PLAN AND AGREEMENT OF MERGER (THE "MERGER AGREEMENT"), DATED AS OF JULY 7, 2000, BETWEEN BUSINESS RESOURCE GROUP (THE "COMPANY") AND BRG ACQUISITION CORPORATION (THE "PURCHASER"). THE BOARD OF DIRECTORS OF THE COMPANY, BASED ON A RECOMMENDATION OF A SPECIAL COMMITTEE, (1) HAS UNANIMOUSLY (WITH THE THREE DIRECTORS WHO WILL ACQUIRE INTERESTS IN ONE OR BOTH OF THE PURCHASER'S PARENTS BEING ABSENT OR NOT VOTING) APPROVED THE MERGER AGREEMENT, THE OFFER AND A MERGER OF THE COMPANY AND THE PURCHASER (THE "MERGER") IN WHICH, IF THE MERGER TAKES PLACE, THE STOCKHOLDER OF THE PURCHASER WILL BECOME THE SOLE STOCKHOLDER OF THE MERGED COMPANY AND THE SHAREHOLDERS OF THE COMPANY (OTHER THAN THE PURCHASER AND ITS STOCKHOLDER) WILL RECEIVE THE SAME AMOUNT OF CASH PER COMMON SHARE AS IS PAID FOR SHARES PURCHASED THROUGH THE OFFER, (2) HAS DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY'S SHAREHOLDERS (OTHER THAN THE PURCHASER, ITS PARENT AND THE EXECUTIVE OFFICERS OF THE COMPANY WHO WILL BE EXCHANGING THEIR SHARES FOR INTERESTS IN THE PURCHASER'S PARENT) AND (3) RECOMMENDS THAT SHAREHOLDERS TENDER THEIR SHARES IN RESPONSE TO THE OFFER. THIS OFFER IS CONDITIONED ON AT LEAST 51% OF THE OUTSTANDING SHARES THE PURCHASER OR ITS PARENT DOES NOT OWN OR HAVE AGREEMENTS TO PURCHASE IMMEDIATELY BEFORE THE TENDER OFFER EXPIRES, OR SUCH GREATER NUMBER OF SHARES AS WILL INCREASE THE OWNERSHIP OF THE PURCHASER AND ITS PARENT TO 53.5% OF THE OUTSTANDING SHARES, BEING PROPERLY TENDERED AND NOT WITHDRAWN. THE PURCHASER MAY NOT, WITHOUT THE COMPANY'S CONSENT, WAIVE THE CONDITION REGARDING TENDER OF AT LEAST 51% OF THE SHARES THE PURCHASER OR ITS PARENT DOES NOT OWN OR HAVE AGREEMENTS TO PURCHASE IMMEDIATELY PRIOR TO THE EXPIRATION OF THIS OFFER. THIS OFFER IS NOT CONDITIONED ON THE ABILITY OF THE PURCHASER TO OBTAIN FINANCING (BUT IT IS SUBJECT TO SOME OTHER CONDITIONS--SEE SECTION 11). TWO EXECUTIVE OFFICERS OF THE COMPANY HAVE AGREED TO TRANSFER APPROXIMATELY 6% OF THE CURRENTLY OUTSTANDING COMMON STOCK TO THE PURCHASER'S PARENT, IMMEDIATELY BEFORE THE PURCHASER ACCEPTS THE TENDERED SHARES IN EXCHANGE FOR INTERESTS IN THE PARENT. THE COMPANY'S DIRECTORS AND EXECUTIVE OFFICERS HAVE AGREED, OR SAID THEY INTEND, TO TENDER IN RESPONSE TO THE TENDER OFFER ALL THE ADDITIONAL SHARES THEY OWN OR WILL ACQUIRE BY EXERCISING OPTIONS (WHICH WILL TOTAL APPROXIMATELY 28.2% OF THE OUTSTANDING COMMON STOCK, ASSUMING NOBODY ELSE EXERCISES OPTIONS). IMPORTANT Any shareholder who wishes to tender shares should (A) complete and sign a Letter of Transmittal (or a facsimile of one) in accordance with the instructions set forth in the Letter of Transmittal and (B) mail or deliver it, together with the certificate(s) representing the tendered shares and any other required documents, to the Depositary named on the back cover of this Offer to Purchase or (C) tender the shares using the procedures for book-entry transfer described in Section 9. A shareholder whose shares are registered in the name of a broker, dealer, commercial bank, trust company or other nominee must contact the nominee in order to tender shares. A shareholder who wishes to tender shares but whose certificates are not immediately available, or who cannot comply with the procedures for book-entry transfer on a timely basis, may tender the shares by following the procedures for guaranteed delivery described in Section 9. Questions and requests for assistance, or for additional copies of this Offer to Purchase, the Letter of Transmittal, or other tender offer materials, may be directed to the Information Agent at its address and telephone number set forth on the back cover. Holders of shares may also contact brokers, dealers or banks for additional copies of this Offer to Purchase, the Letter of Transmittal or other tender offer materials. August 4, 2000 SUMMARY TERM SHEET OFFER OF BRG ACQUISITION CORPORATION TO PURCHASE ALL THE OUTSTANDING COMMON STOCK OF BUSINESS RESOURCE GROUP We (BRG Acquisition Corporation) are offering to purchase all the outstanding common stock of Business Resource Group which we or our parent do not already own for $9.25 per share in cash. The following are some questions you, as a shareholder of Business Resource Group, may have, and answers to those questions. WHO IS OFFERING TO BUY MY SECURITIES? Our name is BRG Acquisition Corporation. We were formed for the purpose of making a tender offer for Business Resources Group common shares. We are wholly owned by Business Resource Holdings, Inc., which is wholly owned by BR Holdings LLC. BR Holdings LLC is a limited liability company which was formed by Three Cities Fund III, L.P. Three Cities Fund is an investment fund, which is advised by Three Cities Research, Inc. WHAT ARE THE CLASSES AND AMOUNTS OF SECURITIES SOUGHT IN THE OFFER? We are seeking all the common stock of the Company which we or our parent will not already own. HOW MUCH ARE YOU OFFERING TO PAY AND WHAT IS THE FORM OF PAYMENT? We are offering to pay $9.25 per share, net to you, in cash. If you tender your shares to us, you will not have to pay brokerage fees or similar expenses. DO YOU HAVE THE FINANCIAL RESOURCES TO MAKE PAYMENT? The Three Cities Fund and two affiliated funds will provide approximately $46 million to us, through BR Holdings LLC and Business Resource Holdings, Inc., which we can use in connection with the tender offer and the merger which we expect will follow it (as discussed below). We have arranged bank financing for the rest of what we will need to purchase all the shares which are tendered to us and not withdrawn, and to provide funding for the merger. IS YOUR FINANCIAL CONDITION RELEVANT TO MY DECISION WHETHER TO TENDER IN RESPONSE TO THE OFFER? Because all the funding which will be needed will come from Three Cities Fund and the affiliated funds or from bank financing which has already been arranged, we do not think our financial condition is relevant to your decision whether to tender your shares in response to the offer. DO YOU ALREADY OWN SHARES OF THE COMPANY? No. But two members of the Company's management (both of whom are directors) have agreed that, before the tender offer expires, they will exchange 319,168 shares of the Company's stock for an approximately 6% interest in our parent, BR Holdings LLC. That is approximately 20% of the shares they own. They have agreed to tender the remainder of their shares in response to our tender offer. HOW LONG DO I HAVE TO DECIDE WHETHER TO TENDER IN RESPONSE TO THE OFFER? You will have at least until 5:00 p.m., New York City time, on August 11, 2000 to decide whether to tender your shares in response to the tender offer. Further, if you can't deliver everything that is required by that time, you may be able to use a guaranteed delivery procedure, which is described in the Offer to Purchase booklet relating to our tender offer. ii CAN THE OFFER BE EXTENDED AND UNDER WHAT CIRCUMSTANCES? We can extend the Initial Expiration Time of the tender offer until August 17, 2000. If, after purchasing all of the shares which are tendered on that date, we and our parent would not own at least 90% of the outstanding common stock, we will be able to extend the initial Expiration Time to not later than September 13, 2000. We cannot extend it beyond that date without the Company's consent. However, after we accept and pay for the shares which have been properly tendered by the initial expiration date, we can extend the offer and you will be able to tender shares you have not previously tendered. However, you will not be able to withdraw shares your tender during the additional period, and we will pay for shares which are tendered during the additional period as we receive them, rather than waiting for the entire additional period to expire. You should not rely on our extending the offer beyond August 11, 2000. There is a good chance we will not do so. HOW WILL I BE NOTIFIED IF THE OFFER IS EXTENDED? If we extend the offer, we will inform American Stock Transfer and Trust Company which is the Depositary with regard to the tender offer) of that fact, and will make a public announcement of the extension, not later than 9:00 a.m., New York City time, on the day after the day on which the Offer was scheduled to expire. WHAT ARE THE MOST SIGNIFICANT CONDITIONS TO THE OFFER? We will not have to purchase the tendered shares unless at least 51% of the shares we or our parent do not own or have agreements to purchase are properly tendered and not withdrawn, and unless that occurs we will not be able to purchase the tendered shares without the Company's consent. Also, we will not have to purchase the tendered shares if after doing so, we would not own at least 53.5% of the outstanding common stock. Further, we will not have to purchase the tendered shares unless the Company's warranties in the merger agreement (including a warranty that there was no material adverse change in the business or financial condition of the Company and its subsidiaries between January 31, 2000 and the date of the Merger Agreement) are correct in all material respects when the tender offer expires. Finally, we will not have to purchase the tendered shares if there is a material disruption to the financial markets in the United States, a war or a similar event which makes the purchase of the tendered shares impracticable. HOW DO I TENDER MY SHARES? To tender shares, you must deliver the certificates representing the shares, together with a completed Letter of Transmittal, to American Stock Transfer and Trust Company, as Depositary, not later than the time the tender offer expires. If your shares are held in street name, your broker or bank probably can tender the shares through The Depositary Trust Company. If it does, you will not have to deliver a completed Letter of Transmittal to the Depositary, but your broker or bank will commit through DTC that you will be bound by the terms of the Letter of Transmittal. If you cannot get something that it is required to The Depositary by the Expiration Time of the tender offer, you can get a little extra time to do that by getting a broker, a bank or another fiduciary which is a member of the Securities Transfer Agents Medallion Program to guarantee that the missing items will be received by The Depositary within three Nasdaq National Market trading days. However, The Depositary must receive the missing items within that three trading day period. UNTIL WHAT TIME CAN I WITHDRAW PREVIOUSLY TENDERED SHARES? You can withdraw shares until the Expiration Time of the Offer and, if we have not by August 17, 2000 agreed to accept your shares for payment, you can withdraw them at any time after that until we do accept them for payment. However, if we accept the shares which have been tendered by a date and then extend the offer for an additional period, you will not be able to withdraw shares which you tender during the additional period. iii HOW DO I WITHDRAW PREVIOUSLY TENDERED SHARES? To withdraw shares, you must deliver a written notice of withdrawal, or a facsimile of one, to the Depositary while you still have the right to withdraw shares. WHAT DOES THE COMPANY'S BOARD OF DIRECTORS THINK OF THE OFFER? We are making the offer in accordance with a Plan and Agreement of Merger which has been approved by the Company's Board of Directors, on the recommendation of a Special Committee of directors which does not include any members of the management who will own interests in BR Holdings. The Board with those members of the management not voting, unanimously approved the Plan and Agreement of Merger, the tender offer and the proposed merger with us in which our immediate parent would become the sole shareholder of the merged company, and any Business Resource Group shareholders other than our parent or us who do not tender their shares would receive the same amount of cash as is paid to shareholders who do tender their shares. IS THIS THE FIRST STEP IN A GOING-PRIVATE TRANSACTION? Yes. If the merger takes place, the Company no longer will be publicly owned. Even if the merger does not take place, if we purchase all the tendered shares, there may be so few remaining shareholders and publicly held shares that the Company's common stock will no longer be eligible to be traded through a Nasdaq market or on a securities exchange, there may not be a public trading market for the Company's stock, and the Company may cease making filings with the SEC or otherwise being required to comply with the SEC rules relating to publicly held companies. WILL THE TENDER OFFER BE FOLLOWED BY A MERGER IF LESS THAN ALL THE COMPANY'S SHARES ARE TENDERED IN RESPONSE TO THE OFFER? If at least 51% of the shares which we and BR Holdings do not own or have agreements to purchase immediately prior to the expiration of the tender offer are properly tendered and not withdrawn, the Company will be merged into us. If that merger takes place, BR Holdings (through its subsidiary, Business Resource Holdings, Inc.) will own all the shares of the Company, and the other shareholders of the Company will receive $9.25 per share in cash (or any higher amount which is paid in the tender offer, if the tender offer price is changed). WILL CURRENT BUSINESS RESOURCE GROUP DIRECTORS OR OFFICERS HAVE AN INTEREST IN THE COMPANY WHICH SURVIVES THE MERGER? Two officers of Business Resource Group, both of whom are directors, will be exchanging approximately 6% of the outstanding Business Resource Group shares for approximately 6% of the interests in BR Holdings. That is approximately 20% of the shares the two officers own (they have agreed to tender the remainder of their shares in response to the offer). In addition, Business Resource Holdings, Inc., which is wholly owned by BR Holdings and will be the sole stockholder of the company which survives the merger, will offer officers and key employees of the surviving company the right to purchase up to 14.6% of the Business Resource Holdings, Inc. stock under an employee stock incentive program. The four senior executives of Business Resource Group (three of whom are directors) will be entitled to purchase approximately 80% of those shares (approximately 11.7% of the total stock of Business Resource Holdings, Inc.). IF I DECIDE NOT TO TENDER, HOW WILL THE OFFER AFFECT MY SHARES? If at least 51% of the shares we and our parent do not own or have agreements to purchase are properly tendered and not withdrawn, unless the Company and we agree otherwise (which is very unlikely) the Company and we will be merged. If the merger described above takes place, you will receive as a result of the merger the same cash per share which you would have received if you had tendered your shares. Therefore, if the merger takes place, the only difference to you between tendering your shares and not tendering your shares is that you will be paid earlier if you tender your shares. However, after we purchase the tendered shares, the number of shareholders and of shares of the Company's stock which are still in the hands of the public may be so small that there no longer will be a public trading market (or an active public trading market) for the Company's common iv stock. Also, as is described above, the Company may cease making filings with the SEC or otherwise being required to comply with the SEC rules relating to publicly held companies. WHAT IS THE MARKET VALUE OF MY SHARES AS OF A RECENT DATE? On July 7, 2000, the last trading day before the tender offer and merger were announced, the last sale price of Business Resource Group common stock reported on the Nasdaq National Market was $6.75 per share. On July 10, 2000, after the announcement of the tender offer and merger, the price of the Company's common stock rose to $9.00 per share. Between January 1, 2000 and July 7, 2000, the price of the Company's common stock ranged between $3.1875 and $9.00 per share. WHO CAN I TALK TO IF I HAVE QUESTIONS ABOUT THE TENDER OFFER? You can call Tom Long at D.F. King (telephone no. 212-269-5550). D.F. King is acting as the Information Agent with regard to our tender offer. HOW LONG WILL IT TAKE BETWEEN THE TIME YOU PURCHASE THE TENDERED SHARES AND THE TIME YOU ARE MERGED WITH THE COMPANY? If we and our parent own at least 90% of the outstanding Company stock after we purchase the tendered shares, it shouldn't take us more than a week or so to complete the merger. If we do not own at least 90% of the Company's stock after we purchase the tendered shares, the Company will probably have to convert itself from a California corporation to a Delaware corporation before the vote on the merger can take place. Under those circumstances, it could take several months for us to complete the merger. v TABLE OF CONTENTS
PAGE ----- INTRODUCTION............................................................................................... 1 SPECIAL FACTORS............................................................................................ 3 1. Background of the Offer; Contacts with the Company................................................... 3 2. Purpose of the Offer and the Proposed Merger; Plans for the Company.................................. 5 3. Certain Federal Income Tax Consequences.............................................................. 6 4. Certain Effects of the Transaction................................................................... 7 5. Fairness of the Transaction.......................................................................... 8 6. Reports, Opinions, Appraisals and Certain Negotiations............................................... 9 THE TENDER OFFER........................................................................................... 10 7. Terms of the Offer................................................................................... 10 8. Acceptance for Payment and Payment for Shares........................................................ 11 9. Procedures for Tendering Shares...................................................................... 12 10. Withdrawal Rights.................................................................................... 14 11. Conditions of the Offer.............................................................................. 15 12. Price Range of Shares................................................................................ 16 13. Certain Information Concerning the Company........................................................... 16 14. Information Concerning the Purchaser, Holdings, Inc., BR Holdings LLC and Three Cities Fund III................................................................................ 18 15. Source and Amount of Funds........................................................................... 19 16. The Merger........................................................................................... 20 17. Dividends and Distributions.......................................................................... 23 18. Certain Legal Matters; Regulatory Approvals.......................................................... 23 19. Fees and Expenses.................................................................................... 24 20. Miscellaneous........................................................................................ 24 SCHEDULE I................................................................................................. I-1 SCHEDULE II................................................................................................ II-1 SCHEDULE III............................................................................................... III-1
TO THE HOLDERS OF COMMON STOCK OF BUSINESS RESOURCE GROUP: INTRODUCTION BRG Acquisition Corporation (the "Purchaser"), a Delaware corporation, which is indirectly wholly-owned by BR Holdings LLC ("BR Holdings"), hereby offers to purchase all the outstanding shares of common stock, par value $0.01 per share ("Shares"), of Business Resource Group (the "Company"), a California corporation, for $9.25 per Common Share, net to the seller in cash (the "Offer Price"), upon the terms and subject to the conditions set forth in this Offer to Purchase and in the related Letter of Transmittal (which terms and conditions constitute the "Offer"). The Offer will expire at 5:00 p.m., New York City time, on August 11, 2000, unless it is extended. The Offer is being made as contemplated by a Plan and Agreement of Merger (the "Merger Agreement") dated July 7, 2000, between the Company and the Purchaser. The Merger Agreement provides that, if the Purchaser purchases the tendered shares, the Purchaser and BR Holdings will take all steps in their power (including voting their Shares) to cause the Purchaser to be merged with the Company (the "Merger") in a transaction in which Business Resource Holdings, Inc., the sole shareholder of the Purchaser and a wholly-owned subsidiary of BR Holdings) will become the owner of all the stock of the corporation which results from the Merger (essentially, the Company), 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 convert itself into a Delaware corporation before the Merger takes place. If less than 51% of the outstanding Shares that neither the Purchaser nor BR Holdings owns 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 BRG Holdings own, total at least 53.5% of the outstanding Shares. If the Purchaser does not purchase the tendered Shares, the Merger will not take place. On June 29, 2000, there were 5,298,753 outstanding Shares. Two officers of the Company have agreed that before the Offer expires they will transfer a total of 319,168 shares to BR Holdings in exchange for equity interests in BR Holdings. Therefore, if no additional Shares are issued before the Offer expires, the Purchaser will not be required or permitted (unless the Company consents) to accept the tendered shares unless at least 2,539,588 Shares are properly tendered and not withdrawn. However, the Company has told the Purchaser it expects options to purchase at least 281,859 Shares to be exercised by officers of the Company before the Offer expires. That would increase the number of outstanding Shares to 5,580,612 and would increase to 2,683,336 Shares, the number of Shares which would have to be properly tendered and not withdrawn for the Purchaser to be required or permitted (without the Company's consent) to accept the tendered Shares. The directors and officers of the Company have agreed, or indicated they intend, to tender all their Shares (including the Shares they will acquire through exercise of options) in response to the Offer. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, THE FINANCIAL ADVISOR TO A SPECIAL COMMITTEE ESTABLISHED BY THE COMPANY'S BOARD OF DIRECTORS, HAS DELIVERED TO THAT SPECIAL COMMITTEE ITS WRITTEN OPINION TO THE EFFECT THAT, AS OF JULY 6, 2000, THE $9.25 IN CASH TO BE RECEIVED BY THE COMPANY'S SHAREHOLDERS, OTHER THAN THE MEMBERS OF MANAGEMENT OF THE COMPANY WHO HAVE AGREED TO EXCHANGE THEIR SHARES FOR INTERESTS IN BR HOLDINGS, AS A RESULT OF THE OFFER AND IN THE MERGER IS FAIR TO THOSE SHAREHOLDERS FROM A FINANCIAL POINT OF VIEW. THE FULL TEXT OF THAT WRITTEN OPINION, AND A DESCRIPTION OF THE ASSUMPTIONS MADE, THE MATTERS CONSIDERED AND THE SCOPE OF THE OPINION, WILL BE INCLUDED WITH THE COMPANY'S SOLICITATION/ RECOMMENDATION STATEMENT ON SCHEDULE 14D-9 (THE "SCHEDULE 14D-9"), WHICH WAS MAILED TO SHAREHOLDERS ON JULY 21, 2000. SHAREHOLDERS ARE URGED TO READ THE MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED OPINION IN ITS ENTIRETY. 1 The purpose of the Offer and the Merger is to enable the Purchaser to acquire all the outstanding stock of the Company. Tendering shareholders will not be required to pay brokerage fees or commissions or, except as set forth in Instruction 6 to the Letter of Transmittal, stock transfer taxes as a result of the sale of Shares to the Purchaser in response to the Offer. Any tendering shareholder who fails to complete and sign the Substitute Form W-9 included in the Letter of Transmittal may be subject to a required backup Federal income tax withholding of 31% of the gross proceeds payable for the tendered shares. See Section 3. The Purchaser will pay all charges and expenses of American Stock and Transfer Trust Company, as Depositary (the "Depositary"), and D.F. King & Co., Inc., as Information Agent (the "Information Agent"), incurred in connection with the Offer. See Section 19. THE BOARD OF DIRECTORS OF THE COMPANY (WITH THE THREE DIRECTORS WHO WILL ACQUIRE INTERESTS IN ONE OR BOTH OF THE PURCHASER'S PARENTS BEING ABSENT OR NOT VOTING), BASED ON A RECOMMENDATION OF A SPECIAL COMMITTEE, (1) HAS APPROVED THE OFFER AND THE MERGER WHICH MAY FOLLOW THE OFFER, (2) HAS DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY'S SHAREHOLDERS, AND (3) RECOMMENDS THAT THE COMPANY'S SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES IN RESPONSE TO THE OFFER. Conditions to the Offer. The Offer is subject to some conditions. They are described in Section 11. HOWEVER, THE OFFER IS NOT CONDITIONED ON THE PURCHASER'S OBTAINING FINANCING. The Purchaser has the right, in its sole discretion, to waive any of the conditions to the Offer, other than the condition that at least 51% of the Shares which the Purchaser or BR Holdings do not own or have agreements to purchase when the Offer expires be properly tendered and not withdrawn. See Section 11. THIS OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION WHICH YOU SHOULD READ CAREFULLY BEFORE YOU MAKE ANY DECISION WITH RESPECT TO THE OFFER. 2 SPECIAL FACTORS 1. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY. In early January, a representative of Three Cities Research, Inc. ("TCR") received from John Corwin of Huntington Holdings, unsolicited, a description of the Company and a form of confidentiality agreement. Mr. Corwin explained that they had been retained by the Company to assist in evaluating strategic alternatives to enhance value to its shareholders. On January 21, 2000, John Corwin contacted W. Robert Wright, II of TCR and asked whether funds advised by TCR might be interested in acquiring the Company. On January 31, 2000, TCR signed and returned the confidentiality agreement. Mr. Wright indicated that TCR could be interested in studying the opportunity in more detail. On February 16, 2000, Mr. Wright and Willem deVogel of TCR attended a presentation regarding the Company given by Jack Peth, the Company's President and Chief Executive Officer, John Palmer, the Company's Chief Operating Officer and Chief Financial Officer, Brian McNay, the Company's Executive Vice President--Sales, Jeffrey Tuttle, the Company's Executive Vice President--Marketing, and Mr. Corwin at the Company's headquarters in San Jose, California. The presentation described the Company's business and strategy. Messrs. Wright and deVogel were shown a sample of some of the company's products, and met several employees. 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. Shortly after that, TCR was sent a package of information regarding the history of the Company, the strategy for its growth and industry information. That package included a statement that Messrs. Peth, Palmer, McNay and Tuttle all wish to continue with and invest in the recapitalized Company. On March 16, 2000, Messrs. deVogel and Wright met with Mr. Peth and Mr. Corwin at the Company's headquarters in San Jose and discussed the possibility that a company formed by Funds advised by TCR might make a tender offer for the Company. After substantial analysis of the Company and the industry, Messrs. deVogel and Wright proposed a purchase price of $9.75 per share. The closing price of the Company's stock on that day was $7.94 and the offer price reflected a 23% premium to market. During the meeting the TCR representatives noted that the members of the management of companies TCR Funds acquired normally received equity interests in the companies. During the following period, the Company's Board appointed a Special Committee consisting of Harold Robbins and George Kelly, to consider strategic opportunities presented to the Company, enter into discussions or negotiations related to such strategies on opportunities and recommend to the Board of Directors what action, if any, should be taken with respect to them. The Special Committee retained Venture Law Group as its counsel and interviewed investment banks it might retain as advisors and which could be asked to render an opinion about the fairness of any transaction which might be agreed upon. The Special Committee subsequently retained Merrill Lynch, Pierce, Fenner & Smith Incorporated for these purposes. On April 12, 2000, Harold 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. At that day, the last reported sale price of the Company's stock was $7.75 per share. Subsequently, J. William Uhrig, another partner in TCR, and Mr. Corwin agreed that discussions should continue. At the Company's suggestion, 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. The parties discussed the background and strategy of the TCR funds and principals, as well as the possible sale price of the Company. 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. On May 5, 2000, TCR said 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 stock. On May 12, 2000, Mr. Corwin informed Mr. Uhrig that the Special Committee would recommend a transaction at that price. 3 On May 15, 2000, Clifford Chance Rogers & Wells, LLC ("CCR&W"), the attorneys for TCR, sent Orrick, Herrington & Sutcliffe LLC, the attorneys for the Company, a draft of a Plan and Agreement of Merger. Subsequently, on May 20, 2000, an attorney at Venture Law Group told an attorney at CCR&W that The 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 performed detailed due diligence. regarding the Company. In addition, TCR presented information regarding the Company to potential providers of senior debt financing which would be used in connection with the acquisition and as a source of funds for the Company after the acquisition. On May 22, 2000, a representative of TCR told Mr. Corwin that, because of the nature of the Company's business (particularly the importance to that business of one very large customer and one major supplier), and because of negative reactions of prospective financing sources, TCR would not be willing to proceed with a transaction at $11.75 per share. TCR had proposed the transaction to 17 financing sources, none of which was willing to provide financing if the transaction was at $11.75 per share, but two of which were willing to provide financing for the Company following a transaction at $9.25 per share (only one of which, the Company's traditional financing source, would provide the amount of financing TCR thought would be necessary). All the potential financing sources which were not interested in proceeding stated that the reasons for their decision were based on the customer and supplier concentration and the reliance on the technology industy. The TCR representatives said TCR would not be willing to pay more than $9.00 per share for the stock of the Company. On June 1 and 2, 2000, Messrs. Uhrig and deVogel 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, the TCR acquisition company would be willing to pay $8.00 in cash, and to have the Company issue to its shareholders convertible preferred stock with a liquidation preference of $2.00 per share, which would remain outstanding 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 Mr. Uhrig had proposed, 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, TCR was terminating all discussions with the Company. On June 9, 2000, Mr. Robbins told Mr. deVogel that the Special Committee and the Board of Directors of the Company 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 it to $9.25 per share. On the 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 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 1% of the enterprise value of the Company, rather than the 5% TCR had previously been seeking. On June 16, 2000, TCR was told that the Special Committee had recommended that the Board of Directors approve, and recommend to its shareholders, a transaction in which a TCR acquisition company would make a tender offer at $9.25 per share which, if successful, would be followed by a merger in which shareholders who had not tendered their shares, other than the TCR acquisition company, would receive the same $9.25 per share, and the Board of Directors had approved a transaction on those terms and determined that it would recommend that transaction to the Company's shareholders. On June 20, 2000, the attorneys for TCR sent Brobeck, Phleger & Harrison, LLP the personal attorneys for Messrs. Peth, Palmer, McNay and Tuttle, drafts of an agreement regarding those members of the Company's management's exchanging shares of the Company for interests in BR Holdings and copies of the Limited Liability Company Agreement of BR Holdings. On June 22, CCRW sent Brobeck drafts of employment 4 agreements under which, if the Purchaser acquired the Company, the four members of the Company's management 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 discussions of the terms of the Merger Agreement. In addition, there were discussions of which members of the Company's management would exchange shares of the Company for interests in BR Holdings and the terms on which they might do so, of terms of employment agreements between the Company and four members of the Company's management, of how the Purchaser would be able to enforce non-competition provisions, on which TCR was insisting of stock interests in the parent of the merged company which would be provided to key employees and officers of the Company (including Messrs. Peth, Palmer, McNay and Tuttle) after the Merger, and of deferred compensation which would be paid to Mr. Peth in exchange for his cancelling options to purchase shares. Late on 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 opened, the Company and TCR jointly announced the signing of the Merger Agreement and the Purchaser's intention to commence the Offer. A discussion of alternative transactions considered by the Company, and the Special Committee's reasoning in first stating it would not recommend an offer of $9.75 per share and then reconsidering an offer at $9.25 per share appears on pages 3 through 7 of the Company's Amended Schedule 14D-9. 2. PURPOSE OF THE OFFER AND THE PROPOSED MERGER; PLANS FOR THE COMPANY. Purpose. The purpose of the Offer and the Merger is to enable BR Holdings, through Business Resource Holdings, Inc. ("Holding, Inc.") and the Purchaser, to acquire all the outstanding stock of the Company. BR Holdings and Holdings, Inc. were formed to acquire the Company. If at least 51% of the outstanding Shares that neither the Purchaser nor BR Holdings owns or has agreements to purchase when the Offer expires are properly tendered and not withdrawn, after purchasing the tendered Shares the Purchaser and BR Holdings together will own at least 53.5% of the outstanding Shares, and the other conditions set forth in the Merger Agreement are satisfied or waived, the Purchaser is required by the Merger Agreement to take all steps in its power to effect the Merger. TCR (which advises Three Cities Fund III and caused BR Holdings, Holdings, Inc. and the Purchaser to be formed for the purpose of participating in the acquisition of the Company) believes that if the Company is not publicly traded, and therefore is not required to focus on short term operating results, there is a substantial possibility of a significant increase in the Company's long term profitability, and therefore it's long term value. Because BR Holdings, through Holdings, will own 100% of the comany which survives the merger of the Purchaser and the Company, they will own 100% of the net earnings and net assets of the Company which survives that merger. The historical net income and shareholders equity of the Company is shown under "Selected Consolidated Financial Data" in page 16. However, exercises of options which will be given to key employees of the Company could reduce the ownership by BR Holdings and Holdings of the Company, and therefore their interest in its net earnings and net assets, to 88%. Three Cities Fund III will own approximately 94% of BR Holdings, and therefore will indirectly own 94% of the interest of BR Holdings and Holdings in the Company, and therefore in its net earnings and net assets. Ultimately, Three Cities Fund III and the other holders of interests in BR Holdings will receive the benefits of any increase in the value of the Company. However, there is no guarantee that the value of the Company will increase enough to justify the substantial investment Three Cities Fund III will be making to acquire its interest in the Company, and it is possible that the value of the Company will decline, not increase. The Company may not, and may not authorize or permit its or any of its subsidiaries' officers, directors, employees, agents or representatives (including any investment banker, attorney or accountant retained by it or by any of its subsidiaries) directly or indirectly to initiate, solicit, encourage or otherwise facilitate any inquiry or the making of any proposal or offer with respect to a merger, reorganization, share exchange, consolidation or similar transaction involving the Company, or any purchase of or tender for, all or any significant portion of the Company's equity securities or any significant portion of the assets of the Company and its subsidiaries on a consolidated basis. However, this will not prevent the Company from, in response to an acquisition proposal which the Company receives despite complying with the previous sentence and which the Special Committee of the Company's Board determines, in good faith after consultation with its independent financial advisor, would 5 result (if consummated in accordance with its terms) in a transaction which (i) would result in the Company's shareholders' receiving cash consideration which is greater than the Offer Price and (ii) would be more favorable to the Company's shareholders than the Offer and the Merger, furnishing non-public information (after receipt of an appropriate confidentiality agreement) to the person, entity or group which makes the acquisition proposal and entering into discussions and negotiations with that potential acquiror. If the Company receives an acquisition proposal, or the Company learns that someone other than the Purchaser is contemplating soliciting tenders of Shares or otherwise proposes to acquire the Company or its Shares if the Company's shareholders do not tender their Shares to the Purchaser in response to the Offer or do not approve the Merger, the Company has agreed promptly to notify the Purchaser of that fact and to provide the Purchaser with all information in the Company's possession which the Purchaser reasonably requests regarding the acquisition proposal, solicitation of tenders or other proposed transaction, and the Company will promptly, from time to time, provide the Purchaser with any additional information the Company obtains regarding the acquisition proposal, the solicitation of tenders or the other proposed transaction. The Company may terminate the Merger Agreement if the Company receives a proposal for a cash acquisition of the Company, or somebody commences an all cash tender offer for all of the outstanding Shares, which (x) would result in the Company's shareholders' receiving consideration which is greater than the Offer Price, (y) is not subject to the outcome of due diligence or any other investigation, is not subject to a financing contingency and is from a proposed acquiror which the Special Committee reasonably determines in good faith after consultation with its independent financial advisor has the financial resources necessary to carry out the transaction, and (z) the Special Committee determines in good faith after consultation with its independent financial advisor to be more favorable to the Company's shareholders than the Offer and the Merger. However, the Company may only cancel the Merger Agreement if, after the Company has received the proposal and given the Purchaser at least 10 business days' prior notice that the Merger Agreement will terminate if the Purchaser does not increase the Offer Price to an amount at least as great as the cash consideration the Company's shareholders would receive under the proposal or tender offer by the other person, (A) the Purchaser does not increase the Offer Price to an amount at least as great as the cash per share the Company's shareholders would receive as a result of the proposal or tender offer by the other person, and (B) the Company has (1) paid the Purchaser $750,000 and (2) reimbursed the Purchaser (or agreed in writing to reimburse the Purchaser) for all the expenses (up to $500,000) related to the transactions which are the subject of the Merger Agreement which the Purchaser or its affiliates (including Three Cities Research, Inc., BR Holdings and the Three Cities Fund) incurred in connection with the Merger Agreement and the transactions contemplated by it. If the Company notifies the Purchaser that the Merger Agreement will terminate unless the Purchaser increases the Offer Price, the Company will not be able to revoke that notice without the Purchaser's consent. 3. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The following summary is a general discussion of certain of the expected Federal income tax consequences of the Offer. The summary is based on the Internal Revenue Code of 1986, as amended (the "Code"), and published regulations, rulings and judicial decisions in effect at the date of this Offer to Purchase, all of which are subject to change. The summary does not discuss all aspects of Federal income taxation that may be relevant to a particular holder in light of his or her personal circumstances or to certain types of holders subject to special treatment under the Federal income tax laws, such as life insurance companies, financial institutions, tax-exempt organizations and non-U.S. persons. The following summary may not be applicable with respect to Shares acquired through exercise of employee stock options or otherwise as compensation. It also does not discuss any aspects of state or local tax laws or of tax laws of jurisdictions outside the United States of America. THE DESCRIPTION OF FEDERAL INCOME TAX CONSEQUENCES SET FORTH BELOW IS FOR GENERAL INFORMATION ONLY. HOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF THE SALE OF THEIR SHARES, INCLUDING THE APPLICATION OF FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS AND POSSIBLE CHANGES IN TAX LAWS. Sales of Shares in response to the Offer will be taxable transactions for Federal income tax purposes, and may also be taxable transactions under applicable state, local, foreign and other tax laws. For Federal income tax purposes, a tendering shareholder will generally recognize gain or loss equal to the difference between the 6 amount of cash received by the shareholder upon sale of the Shares and the shareholder's tax basis in the Shares which are sold. Under present law, gain or loss will be calculated separately for each block of Shares tendered and purchased pursuant to the Offer. If tendered Shares are held by a tendering shareholder as capital assets, gain or loss recognized by the tendering shareholder will be capital gain or loss, which will be long-term or short term depending on whether the tendering shareholder's holding period for the Shares exceeds one year. Long-term capital gains recognized by a shareholder who is an individual will generally be taxed at a maximum Federal marginal tax rate of 20%. Short term capital gains recognized by an individual will generally be taxed at the individual's ordinary income tax rate. Capital gains recognized by a tendering corporate shareholder will be taxed at a maximum Federal marginal tax rate of 35%. A shareholder (other than certain exempt shareholders, including all corporations and certain foreign individuals) who tenders Shares may be subject to 31% backup withholding unless the shareholder provides its taxpayer identification number ("TIN") and certifies that the TIN is correct or properly certifies that it is awaiting a TIN. This should be done by completing and signing the substitute Form W-9 included as part of the Letter of Transmittal. A shareholder that does not furnish its TIN also may be subject to a penalty imposed by the IRS. If backup withholding applies to a shareholder, the Depositary is required to withhold 31% from each payment to that shareholder. Backup withholding is not an additional tax. Rather, the amount of the backup withholding can be credited against the Federal income tax liability of the person subject to the backup withholding, provided that the required information is given to the IRS. If backup withholding results in an overpayment of tax, a refund can be obtained by the shareholder upon filing an income tax return. Neither the purchase of the shares which are tendered in response to the Offer nor the Merger will be a taxable event with regard to the Company, Three Cities Fund, BR Holdings, Holdings Inc. or the Purchaser. 4. CERTAIN EFFECTS OF THE TRANSACTION. The Offer and the Merger present shareholders of the Company (including officers and directors of the Company, except to the extent two officers will be exchanging approximately 20% of their shares of the Company for interests in Holdings) the opportunity to receive a price for their shares which is approximately 37% greater than the last sale price reported on the Nasdaq National Market on July 7, 2000, the last full day of trading before the Offer and the Merger were announced, and is greater than the highest reported sale price since September 1995. See "Price Range of Shares" beginning on page 16 for information about reported sale prices since November 1, 1997. TCR hopes that when the Company is no longer publicly owned, and therefore is no longer required to focus on short term operating results, the Company will be able to take steps which increase its long term value. If the current shareholders of the Company have disposed of all their shares through the Offer and the Merger, they will not participate in that increase in long term value. Instead, the benefit of that increase in long term value will go to the investors in Holdings Inc. (including two officers of the Company, who will be acquiring approximately 6% of Holdings Inc.). Also, 12% of the stock of the Company which survives the Merger will be set aside for options to be granted to key employees of the Company and the chief executive officer of the Company will have the right to purchase 1% of Holdings, Inc. This will give key employees an opportunity to participate in any increase in the long term value of the Company. Nasdaq National Market. The purchase of the Shares tendered in response to the Offer will reduce the number of Shares that might otherwise trade publicly and probably will significantly reduce the number of holders of Shares, which could adversely affect the liquidity and market value of the remaining Shares held by the public. Depending upon the number of Shares purchased as a result of the Offer, the Shares may no longer meet the standards of the National Association of Securities Dealers, Inc. (the "NASD") for continued inclusion in the Nasdaq National Market (the top tier market of the Nasdaq Stock Market), which require that an issuer have at least 200,000 publicly held shares with a market value of $1 million held by at least 400 shareholders (or 300 shareholders holding round lots) and have net tangible assets of at least $1 million, $2 million or $4 million depending on profitability levels during the issuer's four most recent fiscal years. If these standards are not met, the Shares might nevertheless continue to be included in the NASD's Nasdaq National Market with quotations published in the Nasdaq "additional list" or in one of the "local lists." However, if the number of holders of Shares falls below 300 or the number of publicly held Shares falls below 100,000, or if there are not at least two 7 market makers for Shares, the Shares would no longer qualify for Nasdaq Stock Market reporting, and the Nasdaq Stock Market would cease to provide any quotations. Shares held directly or indirectly by an officer or director of the Company, or by a beneficial owner of more than 10% of the Shares, ordinarily will not be considered as being publicly held for this purpose. According to the Company, as of June 29, 2000, there were approximately 228 holders of record and approximately 525 beneficial owners of Shares and 5,298,753 Shares were outstanding. If, as a result of the purchase of Shares pursuant to the Offer or otherwise, the Shares no longer meet the NASD requirements for continued inclusion on the Nasdaq National Market or in any other tier of the Nasdaq Stock Market, the ability to sell Shares could be adversely affected. If the Shares no longer meet the requirements for inclusion in any tier of the Nasdaq Stock Market, quotations might or might not still be available from other sources. The extent of the public market, and availability of quotations, for the Shares would depend upon the number of holders of Shares after the purchase of the Shares tendered in response to the Offer, whether securities firms are interested in maintaining a market in the Shares, the possible termination of registration under the Securities and Exchange Act of 1934, as amended (the "Exchange Act"), as described below, and other factors. Exchange Act Registration. The Shares are currently registered under the Exchange Act. That registration may be terminated upon application of the Company to the Securities and Exchange Commission if the Shares are not listed on a national securities exchange or quoted on Nasdaq and there are fewer than 300 record holders of the Shares. The termination of registration of the Shares under the Exchange Act would substantially reduce the information the Company would be required to furnish to holders of Shares and to the SEC and would make certain provisions of the Exchange Act, such as the short-swing profit recovery provisions of Section 16(b) of the Exchange Act, the requirement that the Company furnish a proxy statement or information statement in connection with shareholder actions pursuant to Section 14 of the Exchange Act, and the requirements of Rule 13e-3 under the Exchange Act with respect to "going-private" transactions, no longer applicable to the Company. See Section 18. In addition, "affiliates" of the Company and persons holding "restricted securities" of the Company may be deprived of the ability to dispose of those securities pursuant to Rule 144 under the Securities Act of 1933, as amended. If the Purchaser purchases the Shares which are tendered in response to the Offer, the Company may seek to cause the Company to terminate quotation of the Shares on the Nasdaq Stock Market and, if there are fewer than 300 remaining holders of record of Shares, to apply to terminate the registration of the Shares under the Exchange Act. It might do that before the shareholders are asked to vote to approve the Merger (if shareholder approval is required), in which case the Purchaser could give the necessary approval of the Merger without the Company's sending a proxy statement or an information statement to its shareholders. Even if less than 51% of the outstanding Shares which the Purchaser and BR Holdings did not own or have agreements to purchase on July 11, 2000 are properly tendered and not withdrawn, if the Purchaser purchases the Shares which are properly tendered and not withdrawn (which would require the Company's consent), the Shares may no longer be eligible for inclusion on the Nasdaq Stock Market and the Company may be able to terminate the registration of the Shares under the Exchange Act. If that is the case, the Purchaser will seek to cause the Company to terminate the registration of the Shares under the Exchange Act as soon as practicable after they are no longer quoted on the Nasdaq Stock Market. 5. FAIRNESS OF THE TRANSACTION. The Purchaser, BR Holdings, Holdings, Inc. and the Three Cities Fund (the "Purchaser Entities") believe that the Offer and the Merger are fair to holders of Shares who are not affiliated with the Purchaser, BR Holdings, Holdings, Inc. the Three Cities Fund or the Company. An important reason for their belief is the fact that the $9.25 per share which the Purchaser is offering for the Shares in the Offer, and which holders of Shares will receive as a result of the Merger if it occurs, is more than 37% higher than the last sale price of the Shares reported on the Nasdaq National Market on July 7, 2000, the last full day of trading prior to the day on which there was a public announcement of the execution of the Merger Agreement and the transactions contemplated by it (including the Offer). Other factors which contribute to the Purchaser's belief that the Offer and the Merger are fair to holders of Shares who are not affiliated with the Purchaser, BR Holdings, Holdings, Inc. the Three Cities Fund or the Company are (a) in addition to exceeding the last reported sale price of the Shares on July 7, 2000, by more than 37%, the Offer Price exceeds by more than 2.5% the highest price at which the Shares were traded during the twelve months prior to that (which was $9.00 per Share); and exceeds the highest price at which the Shares have traded since 1995, and (b) the Offer Price substantially exceeds the Company's shareholders' equity 8 per share at April 30, 2000 (which was $3.81 per share). Further, the Purchaser Entities were unsuccessful in efforts to obtain financing for a transaction at a price significantly above $9.25 per share and the Purchaser Entities are aware that the Special Committee obtained an opinion from Merrill Lynch Business Advisory Services, a division of Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") regarding the fairness from a financial point of view of the consideration to be paid in the Offer and the Merger to the Company's shareholders, other than members of its management who would be acquiring interests in BR Holdings. See Item 6. However, the principal concern of the Purchaser Entities was to make sure the price would be fair to the investors in Three Cities Fund. Merrill Lynch gave an opinion to a Special Committee of the Company's Board of Directors regarding the fairness from a financial point of view of the consideration to be paid in the Offer and the Merger to the Company's shareholders, other than members of its management who would be acquiring interests in BR Holdings. See Item 6. The Purchaser Entities understand that the Special Committee and the entire Board of Directors of the Company (with the three directors who will acquire interests in BR Holdings or participate in the Business Resource Holdings, Inc. stock purchase plan not present or abstaining) unanimously approved the Offer and the Merger Agreement. Therefore, the Merger Agreement was approved by all the directors of the Company who are not employees of the Company. Additional information concerning the determinations of the Special Committee and the Board is contained in the Company's Schedule 14D-9 filed on July 21, 2000, as amended on August 2, 2000. On July 10, 2000, a few hours after the Offer was announced, George Reynolds, who says he is a 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 against the Company and its directors "arising out of the defendants' efforts to complete a management-led buyout ('MBO') 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 the outstanding shares of the Company for $9.25 per share. 6. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS. None of the Purchaser Entities has received a report, opinion or appraisal from an outside party related to the Offer or the Merger, including, but not limited to, any report, opinion or appraisal relating to the consideration or the fairness of the consideration being offered to holders of Shares or the fairness of the transaction to the Company, to the Purchaser, Holdings, Inc., the Three Cities Fund or its shareholders (including BR Holdings) or to holders of Shares or other securities of the Company who are not affiliates of the Company. The Schedule 14D-9, which will be filed by the Company with the SEC, copies of which will be sent to the Company's shareholders, describes an opinion of Merrill Lynch regarding the fairness of the Offer and the Merger to the Company's shareholders (other than the purchaser, BR Holdings and two executive officers of the Company who will exchange shares for interests in BR Holdings) from a financial point of view. 9 THE TENDER OFFER 7. TERMS OF THE OFFER. On the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of the extension or amendment), the Purchaser will accept for payment and pay for all Shares which are validly tendered prior to the Expiration Time and not withdrawn in accordance with Section 10. The term "Expiration Time" means 5:00 p.m., New York City time, on August 11, 2000, unless the Purchaser extends the period during which the Offer is open, in which event the term "Expiration Time" will mean the time and date at which the Offer, as extended, will expire before the Purchaser accepts or pays for any Shares. The Purchaser may extend the Expiration Time until not later than August 17, 2000 (or, if the number of shares tendered does not increase the Shares owned by the Purchaser and BR Holdings to least 90% of the outstanding Shares, until not later than September 13, 2000). Also, the Purchaser may extend the Offer for a period of up to 20 business days subsequent to the Expiration Time. During that subsequent period, if there is one, the Purchaser will purchase and pay for Shares as they are received rather than waiting for the subsequent period to expire. In the Merger Agreement, the Purchaser has agreed that it will not, without the Company's consent (which must be approved by the Special Committee) (a) accept tendered Shares unless at least 51% of the Shares neither the Company nor BR Holdings owns or has agreements to purchase when the tender offer expires are properly tendered and not withdrawn, (b) decrease the number of Shares it is offering to purchase, (c) reduce the Purchase Price, (d) modify or add to the conditions described in Section 11, (e) change the form of consideration it is offering, or (f) extend the Offer, except as required or permitted by the Merger Agreement (which is described below). The Purchaser reserves the right, at any time and from time to time (except as limited by the Merger Agreement), to extend the period during which the Offer is open, by giving oral or written notice of the extension to the Depositary and by making a public announcement of it as described below. The Merger Agreement permits the Purchaser to extend the Expiration Time until up to 60 days after the date the Purchaser files the Schedule TO with the Securities and Exchange Commission (the "SEC"). During any extension, all Shares previously tendered and not withdrawn will remain tendered in response to the Offer, subject to the rights of a tendering shareholder to withdraw tendered Shares. See Section 10. Subject to the Merger Agreement and the applicable regulations of the SEC, the Purchaser reserves the right, at any time and from time to time, to (i) delay acceptance for payment of, or, regardless of whether Shares were already accepted for payment, payment for, Shares pending receipt of any regulatory or third-party approval described in Section 18 or in order to comply in whole or in part with any other applicable law, (ii) terminate the Offer and not accept for payment any Shares if any of the conditions described to in Section 11 has not been satisfied or upon the occurrence of any of the events described in Section 11 or (iii) waive any condition or otherwise amend the Offer in any respect, in each case, by giving oral or written notice of the delay, termination, waiver or amendment to the Depositary and by making a public announcement of it, as described below. The Purchaser acknowledges that (i) Rule 14e-1(c) under the Exchange Act requires the Purchaser to pay the consideration offered or return the tendered Shares promptly after the termination or withdrawal of the Offer and (ii) the Purchaser may not delay acceptance for payment of, or payment for (except as provided in clause (i) of the first sentence of the preceding paragraph), any Shares upon the occurrence of any of the events described in Section 11 without extending the period of time during which the Offer is open. The Purchaser will make a public announcement of any extension, delay, termination, waiver or amendment as promptly as practicable after it takes place. In the case of an extension, the Purchaser will make a public announcement no later than 9:00 a.m., New York City time, on the business day after the day of the previously scheduled Expiration Time. Subject to applicable law (including Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act, which require that material changes be promptly disseminated to shareholders in a manner reasonably designed to inform them of the changes), the Purchaser will have no obligation to publish, advertise or otherwise communicate any public announcement other than by issuing a press release. If the Purchaser makes a material change in the terms of the Offer or the information concerning the Offer or if it waives a material condition to the Offer, the Purchaser will extend the Offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act. Consummation of the Offer is conditioned upon 10 satisfaction of the conditions set forth in Section 11. The Purchaser reserves the right (but will not be obligated) to waive any or all of those conditions, except that the Purchaser requires the Company's consent to waive the condition that at least 51% of the Shares which neither the Company nor BR Holdings owns or has agreements to purchase when the tender offer expires be properly tendered and not withdrawn. The Company has given the Purchaser a shareholder list and security position listings for the purpose of enabling the Purchaser to disseminate the Offer to holders of Shares. This Offer to Purchase and the related Letter of Transmittal and other relevant materials will be mailed to record holders of Shares and to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the Company's shareholder list, or who are listed as participants in a clearing agency's security position listing for subsequent transmittal to beneficial owners of Shares. 8. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES. On the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of the extension or amendment), the Purchaser will purchase, by accepting for payment, and will pay for, all Shares which are validly tendered (and not properly withdrawn in accordance with Section 10) prior to the Expiration Time. Shares will be accepted as soon as practicable after the later to occur of (i) the Expiration Time and (ii) the satisfaction or waiver of the conditions set forth in Section 11. Any determination concerning the satisfaction of the terms and conditions of the Offer will be made by the Purchaser. See Section 11. The Purchaser expressly reserves the right, in its sole discretion, to delay acceptance for payment of, or, subject to the applicable SEC rules, payment for, Shares in order to comply in whole or in part with any applicable law. See Section 18. In all cases, payment for Shares which are tendered in response to the Offer and accepted for payment will be made only after timely receipt by the Depositary of (a) the certificate(s) representing the tendered Shares (the "Share Certificates"), or timely confirmation of a book-entry transfer (a "Book-Entry Confirmation") of the Shares into the Depositary's account at The Depositary Trust Company ("DTC"), as described in Section 9, (b) a properly completed and duly executed Letter of Transmittal (or facsimile of one), or an Agent's Message in connection with a book-entry transfer, and (c) any other documents required by the Letter of Transmittal. An "Agent's Message" is a message, transmitted by DTC to, and received by, the Depositary and forming a part of the Book-Entry Confirmation, which states that the Book-Entry Transfer Facility has received an express acknowledgment from a participant in the Book-Entry Transfer Facility which is tendering Shares that the participant has received, and agrees to be bound by the terms of, the Letter of Transmittal and that the Purchaser may enforce that agreement against the participant. For purposes of the Offer, the Purchaser will be deemed to have accepted for payment, and thereby purchased, tendered Shares when the Purchaser gives oral or written notice to the Depositary of the Purchaser's acceptance of the Shares for payment. Payment for Shares which are tendered prior to the Expiration Time and accepted will be made by deposit of the aggregate purchase price for all the Shares which are accepted for payment with the Depositary, which will act as agent for tendering shareholders for the purpose of receiving payment from the Purchaser and transmitting payment to the tendering shareholders. Shares which are tendered during a period subsequent to the Expiration Time, if the Offer is extended for a period subsequent to the Expiration Time, will be made by deposit of the purchase price of particular Shares with the Depositary promptly those Shares are received. UNDER NO CIRCUMSTANCES WILL THE PURCHASER PAY INTEREST ON THE OFFER PRICE BY REASON OF ANY DELAY IN PAYING FOR SHARES. Upon the deposit of funds with the Depositary for the purpose of making payments to tendering shareholders, the Purchaser's obligation to pay for Shares will be satisfied and tendering shareholders must look solely to the Depositary for payment of amounts owed to them by reason of the acceptance of their Shares pursuant to the Offer. If, for any reason, acceptance for payment of or payment for any Shares tendered in response to the Offer is delayed, or the Purchaser is prevented from accepting for payment or paying for Shares which are tendered in response to the Offer, the Depositary may, nevertheless, retain tendered Shares on behalf of the Purchaser and those Shares may not be withdrawn, except to the extent the tendering shareholder exercises withdrawal rights as described in Section 10. The Purchaser will pay any stock transfer taxes incident to the 11 transfer to it of validly tendered Shares, except as otherwise provided in Instruction 6 of the Letter of Transmittal, as well as the charges and expenses of the Depositary and the Information Agent. If any tendered Shares are not accepted for payment for any reason, or if certificates which are submitted evidence more Shares than are tendered, certificates representing Shares which are not tendered or otherwise are not purchased will be returned or sent, without expense to the tendering shareholder (or, in the case of Shares tendered by book-entry transfer into the Depositary's account at the Book-Entry Transfer Facility, Shares which are not purchased will be credited to an account at that Book-Entry Transfer Facility), as promptly as practicable following the expiration or termination of the Offer. The Purchaser reserves the right to transfer or assign, in whole, or in part from time to time, to one or more of its affiliates the right to purchase all or any portion of the Shares which are tendered in response to the Offer, but such a transfer or assignment will not relieve the Purchaser of its obligations under the Offer and will in no way prejudice the rights of tendering shareholders to receive payment for Shares which are validly tendered in response to the Offer and accepted for payment. 9. PROCEDURES FOR TENDERING SHARES. Valid Tender of Shares. Except as set forth below, in order for Shares to be validly tendered in response to the Offer, (a) a Letter of Transmittal or a facsimile of one, properly completed and duly executed, with any required signature guarantees, or an Agent's Message in connection with a book-entry delivery of Shares, and any other required documents, must be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase prior to the Expiration Time and (b) either (i) the certificates representing the tendered Shares must be received by the Depositary along with the Letter of Transmittal, (ii) the Shares must be tendered using the procedure for book-entry transfer described below, and the Book-Entry Confirmation must be received by the Depositary prior to the Expiration Time, or (iii) the tendering shareholder must comply with the guaranteed delivery procedures described below. THE METHOD OF DELIVERY OF SHARE CERTIFICATES, THE LETTER OF TRANSMITTAL, AND OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH DTC, IS AT THE OPTION AND RISK OF THE TENDERING SHAREHOLDER. ITEMS WILL BE DEEMED DELIVERED ONLY WHEN THEY ARE ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. Book-Entry Transfer. The Depositary will establish an account with respect to the Shares at DTC for purposes of the Offer within two business days after the date of this Offer to Purchase, and any financial institution that is a participant in the Book-Entry Transfer Facility's system may make book-entry delivery of Shares by causing DTC to transfer the Shares into the Depositary's account at DTC. Although delivery of Shares may be effected through book-entry transfer at DTC, a Letter of Transmittal or a facsimile of one, with any required signature guarantees, or an Agent's Message in connection with a book-entry delivery of Shares, and any other required documents, as well as the Book Entry Confirmation relating to the Shares, must be transmitted to and received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase prior to the Expiration Time (or the end of any subsequent period during which the Offer remains open) or the guaranteed delivery procedures described below must be followed. REQUIRED DOCUMENTS MUST BE TRANSMITTED TO AND RECEIVED BY THE DEPOSITARY AT ONE OF ITS ADDRESSES SET FORTH ON THE BACK COVER PAGE OF THIS OFFER TO PURCHASE. DELIVERY OF DOCUMENTS TO DTC OR TO THE PURCHASER DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. Signature Guarantees. Signatures on Letters of Transmittal need not be guaranteed, unless, in the case of the Letter of Transmittal, the Shares to which they relate are being tendered by a registered holder of Shares who has completed either the box entitled "Special Delivery Instructions" or the box entitled "Special Payment Instructions" on the Letter of Transmittal. Signatures on Letters of Transmittal on which either of those boxes has been completed must be guaranteed by a firm which is a bank, broker, dealer, credit union, savings association or other entity that is a member in good standing of the Securities Transfer Agents Medallion 12 Program, the Stock Exchange Medallion Program or the New York Stock Exchange Medallion Signature Program (each, an "Eligible Institution"). See Instruction 1 of the Letter of Transmittal. If a Share certificate is registered in the name of a person other than the signer of the Letter of Transmittal, or if payment is to be made, or certificates representing Shares which are not tendered or are not accepted for payment are to be returned, to a person other than the registered holder(s), then the Share certificate must be endorsed or accompanied by appropriate stock powers, in either case, signed exactly as the name(s) of the registered holder(s) appear on the Share certificate, with the signature(s) on the Share certificate or stock powers guaranteed. See Instructions 1 and 5 of the Letter of Transmittal. If Share certificates are delivered to the Depositary at different times, a properly completed and duly executed Letter of Transmittal (or facsimile of one) must accompany each delivery. Guaranteed Delivery. If a shareholder wishes to tender Shares in response to the Offer but the Share certificates are not immediately available or time will not permit all required documents to reach the Depositary prior to the Expiration Time, or the procedure for book-entry transfer cannot be completed on a timely basis, the Shares may nevertheless be tendered as follows: (i) the tender must be made by or through an Eligible Institution; (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided with this Offer to Purchase, must be received by the Depositary before the Expiration Time; and (iii) the Share certificates representing all the tendered Shares, in proper form for transfer, or the Book-Entry Confirmation, together with a properly completed and duly executed Letter of Transmittal (or facsimile of one), with any required signature guarantees (or, in the case of a book-entry transfer, an Agent's Message) and any other documents required by the Letter of Transmittal must be received by the Depositary within three Nasdaq National Market trading days after the date of execution of the Notice of Guaranteed Delivery. A Notice of Guaranteed Delivery may be delivered by hand or transmitted by telegram, facsimile transmission or mail to the Depositary, but must include a guarantee by an Eligible Institution in the form set forth in the Notice of Guaranteed Delivery distributed with this Offer to Purchase. Payment for Shares which are accepted for payment will be made only after (i) timely receipt by the Depositary of Share certificates for, or of Book-Entry Confirmation with respect to, the Shares, (ii) a properly completed and duly executed Letter of Transmittal (or facsimile of one), together with any required signature guarantees (or, in the case of a book-entry transfer, an Agent's Message) and (iii) any other documents required by the Letter of Transmittal. Accordingly, it is possible that payment will not be made to all tendering shareholdersat the same time. Backup United States Federal Withholding Tax. Under the United States Federal income tax laws, the Depositary may be required to withhold 31% of the amount of any payments made to certain shareholders.To prevent backup Federal income tax withholding, each tendering shareholder must provide the Depositary with the shareholder's correct taxpayer identification number, or certify that the shareholder is exempt from backup Federal income tax withholding, by completing the Substitute Form W-9 included in the Letter of Transmittal. See Instruction 10 of the Letter of Transmittal. Appointment as Proxy. By executing a Letter of Transmittal, a tendering shareholder irrevocably appoints designees of the Purchaser as the tendering shareholder's attorneys-in-fact and proxies, in the manner set forth in the Letter of Transmittal, each with full power of substitution, to the full extent of the shareholder's rights with respect to the Shares tendered by the shareholder and accepted for payment by the Purchaser (and with respect to any other securities issued in respect of those Shares on or after the date of this Offer to Purchase). That proxy is considered coupled with an interest in the tendered Shares. This appointment will be effective if, when and to the extent that the Purchaser accepts the tendered Shares for payment pursuant to the Offer. When tendered Shares are accepted for payment, all prior proxies given by the shareholder with respect to the tendered Shares and any other securities issued in respect of them will, without further action, be revoked, and no subsequent proxies may be given. The designees of the Purchaser will, with respect to the tendered Shares and any other securities for which the appointment is effective, be empowered to exercise all voting and other rights of the tendering 13 shareholder as they, in their sole discretion, deem proper at any annual, special, adjourned or postponed meeting of the Company's shareholders, and the Purchaser reserves the right to require that in order for Shares or other securities to be deemed validly tendered, immediately upon the Purchaser's acceptance for payment of the Shares, the Purchaser will be able to exercise full voting rights with respect to the Shares. Proxies are effective only as to Shares accepted for payment pursuant to the Offer. The Offer does not constitute a solicitation of proxies, absent a purchase of Shares, for any meeting of the Company's shareholders. Any solicitation of proxies will be made only with separate proxy soliciting materials which comply with the Exchange Act, if it is applicable. Determinations Regarding Tenders. All questions as to the validity, form, eligibility (including time of receipt) and acceptance for payment of Shares using any of the procedures described above will be determined by the Purchaser, and the Purchaser's determination will be final and binding on all parties. The Purchaser reserves the absolute right to reject any or all tenders of Shares which it determines were not in proper form or if the acceptance for payment of, or payment for, the Shares may, in the opinion of the Purchaser's counsel, be unlawful. The Purchaser also reserves the absolute right, in its sole discretion, to waive any of the conditions of the Offer (except to the extent it has agreed in the Merger Agreement not to do so) or any defect or irregularity in any tender with respect to Shares of any particular shareholder, whether or not similar defects or irregularities are waived in the case of other shareholders. No tender of Shares will be deemed to have been validly made until all defects and irregularities have been cured or waived. The Purchaser's interpretation of the terms and conditions of the Offer (including the Letter of Transmittal and the instructions to it) will be final and binding. None of the Purchaser, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defects or irregularities in tenders or will incur any liability for failure to give any such notification. Binding Agreement. The Purchaser's acceptance for payment of Shares tendered in response to the Offer will constitute a binding agreement by the tendering shareholder to sell, and by the Purchaser to purchase, the tendered Shares on the terms and subject to the conditions of the Offer. 10. WITHDRAWAL RIGHTS. Except as otherwise provided in this Section 10, tenders of Shares made in response to the Offer are irrevocable. Shares tendered in response to the Offer may be withdrawn at any time prior to the Expiration Time and, unless they have been accepted for payment by the Purchaser, may also be withdrawn at any time after August 17, 2000. If the Offer is extended for a period following the Expiration Time, Shares tendered during the subsequent period may not be withdrawn and will be accepted for payment promptly after they are received. If the Purchaser extends the Offer, is delayed in accepting Shares for payment or is unable to accept Shares for payment for any reason, the Depositary may, nevertheless, retain tendered Shares on behalf of the Purchaser, and those Shares may not be withdrawn except to the extent that tendering shareholders are entitled to withdraw them as described in this Section 10. Any such delay will be accompanied by an extension of the Offer to the extent required by law. For a withdrawal to be effective, a written or facsimile transmission of a notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase. A notice of withdrawal must specify the name of the person who tendered the Shares to be withdrawn, the number of Shares to be withdrawn and (if Share certificates have been tendered) the name of the registered holder, if different from that of the person who tendered the Shares. If Share certificates evidencing Shares to be withdrawn have been delivered or otherwise identified to the Depositary, then prior to the release of those Share certificates, the serial numbers shown on the particular Share certificates to be withdrawn must be submitted to the Depositary, and the signature(s) on the notice of withdrawal must be guaranteed by an Eligible Institution, unless the Shares have been tendered for the account of an Eligible Institution. If Shares have been tendered pursuant to the procedure for book-entry transfer, any notice of withdrawal must also specify the name and number of the account at DTC to be credited with the withdrawn Shares. Withdrawals of Shares may not be rescinded. After Shares are properly withdrawn, they will be deemed not to have been validly tendered for purposes of the Offer. However, withdrawn Shares may be retendered at any time prior to the Expiration Time (or the expiration of a subsequent period during which the Offer is open) using one of the procedures described in Section 9. 14 All questions as to the form and validity (including, without limitation, time of receipt) of notices of withdrawal will be determined by the Purchaser, in its sole discretion, and its determination will be final and binding. None of the Purchaser, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defects or irregularities in any notice of withdrawal or will incur any liability for failure to give any such notification. 11. CONDITIONS OF THE OFFER. The Purchaser will not be required to accept for payment or, subject to any applicable SEC rules, including Rule 14e-1(c) under the Exchange Act (relating to the Purchaser's obligation to pay for or return tendered Shares promptly after termination or withdrawal of the Offer), pay for, the Shares which are tendered in response to the Offer if: (a) The Shares which are properly tendered and not withdrawn are less than 51% of the outstanding Shares which the Purchaser or BR Holdings do not own or have agreements to purchase when the Offer expires. (b) The number of Shares which are properly tendered and not withdrawn, together with the number of Shares owned by the Purchaser or BR Holdings immediately before the Offer expires, totals less than 53.5% of the outstanding Shares. (c) Any statute, rule, regulation, order or injunction has been enacted, promulgated, entered or enforced by any national or state government or governmental authority or by any United States court of competent jurisdiction, that would make the acquisition of the Shares by the Purchaser illegal or otherwise prohibit consummation of the Offer or the Merger; or (d) There has been (i) a general suspension of trading in, or limitation on prices for, securities on the New York Stock Exchange or Nasdaq National Market which continued for at least three business days, (ii) the declaration of a banking moratorium or any suspension of payments in respect of banks in the United States (whether or not mandatory) which continued for at least three business days, (iii) the commencement of a war or armed hostilities or any other international or national calamity directly or indirectly involving the United States, which has a significant adverse effect on the functioning of financial markets in the United States, (iv) any limitation (whether or not mandatory) by any United States governmental authority or agency on the extension of credit by banks or other financial institutions which would have a material adverse effect on the Purchaser's ability to pay for all the Shares which are tendered in response to the Offer and to carry out the Merger on the terms contemplated by the Merger Agreement or (v) there is a material acceleration or worsening of any of the conditions described in clauses (i) through (iv) which exists at the date of the commencement of the Offer. (e) Any of the representations and warranties of the Company set forth in the Merger Agreement is not true and correct as of the date of the Merger Agreement, except failures to be true and correct which would not, in the aggregate, have a material adverse effect upon the Company or adversely affect the Purchaser's legal ownership of the Shares, the Purchaser's legal ability to consummate the Merger as contemplated by the Merger Agreement, or the ownership of the surviving corporation after the Merger by the persons which own the stock of the Purchaser immediately before the Merger; (f) The Purchaser, BR Holdings, Holdings, Inc. or the Three Cities Fund learn that the Company's Annual Report on Form 10-K for the year ended October 31, 1999, or Quarterly Report on Form 10-Q for the three months ended January 31, 2000, was misleading in a material respect or omitted to state a material fact required to be stated therein (other than with regard to matters which are the subject of the Shareholder Suits); (g) The Company has not performed all the obligations it is required to have performed under the Merger Agreement by the Expiration Time, except failures which (i) would, in the aggregate, not materially impair or delay the ability of the Purchaser to consummate the purchase of the Shares which are tendered in response to the Offer or the ability of the Purchaser and the Company to effect the Merger, (ii) have been caused by or result from a breach of the Merger Agreement by the Purchaser; or (iii) do not, and are not reasonably expected to, have a material adverse effect on the Company; 15 (h) The Merger Agreement has been terminated in accordance with its terms; or (i) The Board of Directors of the Company withdraws or modifies in a manner adverse to the Purchaser the Board's approval or recommendation of the Offer or the Merger. The conditions set forth above are for the sole benefit of the Purchaser, and may be waived by the Purchaser, in whole or in part, except that the Purchaser cannot waive the condition in paragraph (a) regarding at least 51% of the shares not owned by the Purchaser or BR Holdings without the consent of the Company. Any delay by the Purchaser in exercising the right to terminate the Offer because any of the conditions are not fulfilled will not be deemed a waiver of its right to do so. However, acceptance of the tendered shares will, in effect, waive any conditions which have not been satisfied before the shares are accepted. If the Company were to consent to waiver of the condition in paragraph (a), or the Company were to waive any other material condition to its obligations, the Offer might have to be extended so it would be open for a reasonable period after the waiver. 12. PRICE RANGE OF SHARES. The Shares trade on the Nasdaq National Market under the symbol "BRGP." The following table sets forth, for the periods indicated, the high and low sales prices per Share on the Nasdaq National Market as reported by the Nasdaq National Market and the Dow Jones News Retrieval Service:
SALES PRICE ------------------- HIGH LOW ------ ------- FISCAL YEAR ENDED OCTOBER 31, 1998 First Quarter.................................................................. $3.75 $3 Second Quarter................................................................. 3.75 3.0625 Third Quarter.................................................................. 3.375 2.1875 Fourth Quarter................................................................. 3.25 1.125 FISCAL YEAR ENDED OCTOBER 31, 1999 First Quarter.................................................................. $3.75 $2.25 Second Quarter................................................................. 3.75 2.5 Third Quarter.................................................................. 3.875 2.6875 Fourth Quarter................................................................. 4.25 3 FISCAL YEAR ENDED OCTOBER 31, 2000 First Quarter.................................................................. $6.5 $3.1875 Second Quarter................................................................. 9 5.125 Third Quarter, through July 7, 2000............................................ 8.5 5.5
On July 7, 2000, the last full day of trading before the day on which the Offer and the Merger were publicly announced, and the Offer was commenced the last sale price of the Shares reported on the Nasdaq National Market was $6.75 per Share. SHAREHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES. 13. CERTAIN INFORMATION CONCERNING THE COMPANY. The information concerning the Company contained in this Offer to Purchase, including financial information, has been taken from or is based upon publicly available documents and records on file with the Securities and Exchange Commission and other public sources. None of the Purchaser, BR Holdings, Holdings, Inc. or the Three Cities Fund assumes any responsibility for the accuracy or completeness of the information concerning the Company contained in those documents and records or for any failure by the Company to disclose events which may have occurred or may affect the significance or accuracy of that information of which none of the Purchaser, BR Holdings, Holdings, Inc. or the Three Cities Fund is aware. The Company is a California corporation with its principal executive offices located at 2150 North First Street, Suite 101, San Jose, California 95131. According to the Company's Annual Report on Form 10-K for the year ended October 31, 1999 (the "Company 10-K"), the Company is a provider of workspace products and services to businesses. At October 31, 1999, the Company had locations in five states, primarily in the southern United States. 16 The following selected consolidated financial data relating to the Company and its subsidiaries has been taken or derived from the audited financial statements contained in the Company 10-K and the unaudited financial statements contained in the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended April 30, 2000 and April 30, 1999 (the "Company 10-Q's"). More comprehensive financial information is included in the Company 10-K and the Company 10-Q's and the other documents filed by the Company with the SEC, and the financial data set forth below is qualified in its entirety by reference to those reports and other documents. They may be examined and copies may be obtained from the SEC's offices in the manner set forth below. BUSINESS RESOURCE GROUP SELECTED CONSOLIDATED FINANCIAL DATA
SIX MONTHS ENDED FISCAL YEARS ENDED OCTOBER 31, APRIL 30, ------------------------------------------------ ----------------- 1995 1996 1997 1998 1999 1999 2000 ------- ------- ------- ------- -------- ------- ------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) INCOME STATEMENT DATA: Total net revenues................................ $40,628 $78,280 $72,701 $93,565 $124,974 $55,387 $88,388 Total cost of net revenues........................ 30,784 62,371 57,430 73,234 97,302 43,163 68,098 ------- ------- ------- ------- -------- ------- ------- Gross Profit...................................... 9,844 15,909 15,271 20,331 27,672 12,224 20,290 Selling, general and administrative expenses...... 8,143 12,870 16,622 17,498 22,449 10,297 15,811 ------- ------- ------- ------- -------- ------- ------- Operating income (loss)........................... 1,701 3,039 (1,351) 2,833 5,223 1,927 4,479 Other Income (expense)............................ 17 124 66 (264) (663) (350) (528) ------- ------- ------- ------- -------- ------- ------- Income (loss) before income taxes................. 1,708 3,163 (1,285) 2,569 4,560 1,577 3,951 Income taxes...................................... 122 1,309 (523) 1,066 1,885 653 1,634 ------- ------- ------- ------- -------- ------- ------- Net income (loss)................................. 1,586 1,854 (762) 1,503 2,675 924 2,317 ======= ======= ======= ======= ======== ======= ======= Net income (loss) per common share: Basic........................................... 0.26(2) 0.38 (.16) 0.30 0.52 0.18 0.44 Diluted......................................... 0.26(2) 0.38 (.16) 0.30 0.52 0.18 0.40 BALANCE SHEET DATA: Current assets.................................... 9,470 10,063 9,279 9,075 10,187 41,836 45,792 Total assets...................................... 16,053 22,560 20,760 27,978 50,813 50,813 56,785 Total long-term debt (excluding current portion)........................................ 120 -- -- 733 1,552 1,552 2,616 Total shareholders' equity........................ 11,020 13,002 12,452 14,396 17,455 17,445 20,163 Shareholders' equity per share(1)................. -- -- -- -- 3.38 -- 3.81
- ------------------ (1) Based on 5,170,524 and 5,295,079 Shares issued and outstanding as of October 31, 1999 and April 30, 2000, respectively, as reported in the Company's Report on Form 10-K for the year ended October 31, 1999 and its Report on Form 10-Q for the six months ended April 30, 2000. (2) Pro Forma Net Income and Net Income Per Basic and Diluted Shares--Through June 1995, the Company was not subject to federal and most state income taxes since its shareholders elected that the Company be taxed as an S Corporation pursuant to the Internal Revenue Code. Therefore, no provision for federal income taxes has been included in the summary financial data for fiscal 1994 and the portion of fiscal 1995 during which the Company was an S Corporation. Although the S Corporation election is recognized for California income tax purposes, the State of California requires S Corporations to pay a tax of 1.5% of taxable income. Effective June 1995, in conjunction with the Company's initial public offering of its common stock, the Company's status as an S Corporation was terminated and the Company became subject to federal and state income taxes. The Company is subject to the informational and reporting requirements of the Exchange Act and is required to file reports and other information with the Commission relating to its business, financial condition and other matters. Information, as of particular dates, concerning the Company's directors and officers, their remuneration, stock options granted to them, the principal holders of the Company's securities, any material interests of those persons in transactions with the Company and other matters is required to be disclosed in proxy statements distributed to the Company's shareholders and filed with the Commission. These reports, proxy statements and other information can be inspected and copied at the public reference facilities of the Commission 17 located at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the following regional offices of the Commission: Seven World Trade Center, 3rd Floor, New York, New York 10048; and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of this material may be obtained by mail, upon payment of the Commission's customary fees, from the Commission's principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission also maintains an Internet site on the world wide web at http://www.sec.gov that contains reports, proxy statements and other information. Reports, proxy statements and other information concerning the Company should also be available for inspection at the offices of NASDAQ, 1735 K Street, N.W., Washington, D.C. 20006. All of the information with respect to the Company and its affiliates set forth in this Offer to Purchase has been derived from publicly available information. In connection with its efforts to evaluate a possible acquisition of the Company, TCR was provided with materials about the Company which included (a) pro forma information about what the results of the Company and its subsidiaries would have been if three companies the Company acquired during fiscal 1999 had been owned by the Company during the entire fiscal year, and (b) projections of the Company's operating results during 2000, 2001 and 2002. The projections assumed the Company would make at least three acquisitions during those fiscal years. The projections showed that between fiscal 1999 and fiscal 2002 (i) revenues would grow at a compound annual rate of 22.8% (from pro forma 1999 revenues of $145.7 million to projected 2002 revenues of $270.0 million) and earnings before interest, taxes, depreciation and amortization would grow at a compound annual rate of $50.3% (from pro forma 1999 EBITDA of $7.6 million to projected 2002 EBITDA of $26.7 million). In addition to resulting in part from anticipated benefits of acquisitions during the next three years, the projected increases resulted in part from an assumption that the Company would increase its gross profit margin from 22.5% in 1999 to 26.7% in 2002. The materials also projected that during the third quarter of fiscal 2000 (ending July 31, 2000), the Company would have revenues of $39.7 million and EBITDA of $2.1 million. 14. INFORMATION CONCERNING THE PURCHASER, HOLDINGS, INC., BR HOLDINGS AND THREE CITIES FUND III. The Purchaser. The Purchaser is a Delaware corporation organized in order to enter into the transactions which are the subject of the Merger Agreement (including the Offer). The principal executive offices of the Purchaser are located at the offices of Three Cities Research, Inc., 650 Madison Avenue, New York, New York 10022. The Purchaser is wholly owned by Holdings, Inc., which is wholly owned by BR Holdings. The Purchaser does not have any significant assets or liabilities and has not engaged in activities other than those incidental to its formation and capitalization, its execution of the Merger Agreement and preparation for the Offer and the Merger. Because the Purchaser is newly formed and has minimal assets and capitalization, no meaningful financial information regarding the Purchaser is available. Holdings, Inc. Holdings, Inc. is a Delaware corporation organized in order to enter into the transactions which are the subject of the Merger Agreement (including the Offer). Holdings Inc. is wholly owned by BR Holdings. The principal executive offices of Holdings, Inc. are located at the offices of Three Cities Research, Inc., 650 Madison Avenue, New York, New York 10022. Holdings, Inc. does not have any significant assets or liabilities and has not engaged in activities other than those incidental to its formation and capitalization and preparation for the Offer and the Merger. Because Holdings, Inc. is newly formed and has minimal assets and capitalization, no meaningful financial information regarding Holdings, Inc. is available. BR Holdings. BR Holdings is a Delaware limited liability company organized in order to enter into, through a subsidiary (the Purchaser), the transactions which are the subject of the Merger Agreement (including the Offer). The principal executive offices of Holdings are located at the offices of Three Cities Research, Inc., 650 Madison Avenue, New York, New York 10022. Immediately before the Purchaser accepts the Shares which are tendered in response to the Offer, BR Holdings will acquire from two members of the management of the Company approximately 6% of the outstanding Shares in exchange for interests in BR Holdings. In addition, it issued interests to the Three Cities Funds, primarily for notes evidencing obligations to provide funds to be used in connection with the Offer and the Merger. BR Holdings will transfer all Shares it acquires prior to the expiration of the Offer and the notes to the Purchaser. Because BR Holdings is newly formed, no meaningful financial information regarding BR Holdings, is available. The Three Cities Fund. Three Cities Fund III, L.P. and two affiliated investment funds own 100% of BR Holdings. Three Cities Fund III, L.P. is a Delaware limited partnership. It is principally engaged in investing in 18 securities selected by its investment committee. The principal executive offices of Three Cities Fund III are located at the offices of Three Cities Research, Inc., 650 Madison Avenue, New York, New York 10022. During the last 5 years none of the Purchaser's, Holdings, Inc., BR Holdings' or any of Three Cities Fund III's officers, directors or general partners was (1) convicted in a criminal proceeding or (2) party to a civil proceeding of a judicial or administrative body and as a result of the proceeding was or is subject to a judgment enjoining future violations of or prohibiting activities subject to, Federal or state securities laws or finding any violation of such laws. None of the Purchaser Entities is subject to the informational and reporting requirements of the Exchange Act. Therefore, none of them files reports or other information with the Commission relating to its businesses, financial condition or other matters. The name, citizenship, business address, principal occupation or employment and five-year employment history for each of the directors and executive officers of the Purchaser, Holdings, Inc., BR Holdings and Three Cities Fund III are set forth in Schedule I. Except for the 319,168 Shares BR Holdings expects to acquire immediately prior to the expiration of the Offer and transferred by it, through Holdings, Inc., to the Purchaser, none of the Purchaser, Holdings, Inc., BR Holdings, Three Cities Fund III or, to the best of their knowledge, any of the persons listed on Schedule I or any associate or majority owned subsidiary of any of those persons beneficially owns any equity security of the Company, and none of the Purchaser Entities or, to the best of their knowledge, any of the other persons referred to above, or any of their respective directors, executive officers or subsidiaries, has effected any transaction in any equity security of the Company during the past 60 days. Except as described in this Offer to Purchase, none of the Purchaser Entities or, to the best of their knowledge, any of the persons listed on Schedule I has any contract, arrangement, understanding or relationship with any other person with respect to any securities of the Company, including, without limitation, any contract, arrangement, understanding or relationship concerning the transfer or the voting of any securities of the Company, joint ventures, loan or option arrangements, puts or calls, guarantees of loans, guarantees against loss or the giving or withholding of proxies. Except as described in this Offer to Purchase, none of the Purchaser Entities or, to the best of their knowledge, any of the persons listed on Schedule I has had any transactions with the Company or any of its executive officers, directors or affiliates that would require reporting under the rules of the Commission. Except as described in this Offer to Purchase, there have been no contacts, negotiations or transactions between the Purchaser Entities or their respective subsidiaries, or, to the best of their knowledge, any of the persons listed in Schedule I, on the one hand, and the Company or its executive officers, directors or affiliates, on the other hand, concerning a merger, consolidation or acquisition, tender offer or other acquisition of securities, election of directors or a sale or other transfer of a material amount of assets. 15. SOURCE AND AMOUNT OF FUNDS. If all the outstanding Shares (including shares issuable on exercise of options) not owned by the Purchaser, Holdings, Inc., BR Holdings or the Three Cities Fund were tendered in response to the Offer, the Purchaser would be required to pay a total of approximately $59,000,000 to purchase the tendered Shares and pay the fees and other expenses related to the Offer. See Section 19. The Purchaser expects to obtain the funds required to consummate the Offer through payments by Three Cities Fund III of notes it gave in payment for interests in BR Holdings which were transferred by BR Holdings, through Holdings, Inc., to the Purchaser in exchange for common stock, preferred stock and subordinated notes of the Purchaser. After the Merger, the Company will obtain funds through borrowings from Comerica Bank--California ("Comerica") which are the subject of a commitment dated July 7, 2000. Some of those funds may be used to pay costs of the Offer and the Merger. The commitment provides that Comerica will lend up to an aggregate of $45,000,000 to the Company (as successor to the Purchaser) pursuant to revolving credit and secured loan facilities. All advances made pursuant to these facilities will mature five years from the date of the loan agrement and will be secured by the property of the Company and a pledge of all the stock of the subsidiaries of the Company. Borrowings will bear interest at (at the Company's option) Comerica's base rate or its eurodollar rate plus applicable margins. 19 16. THE MERGER. The Merger Agreement. The Merger Agreement requires that if the Purchaser accepts the Shares which are tendered in response to the Offer and not withdrawn, following the satisfaction or waiver of the conditions described below under "Conditions to the Merger" (which, with one exception, will be within the Purchaser's control), the Company will be merged into the Purchaser, which will be the surviving corporation of the Merger (the "Surviving Corporation"). As a result of the Merger (i) BR Holdings (the indirect sole shareholder of the Purchaser) will become the indirect sole shareholder of the Company, and (ii) all the pre-Merger shareholders of the Company, other than the Purchaser and BR Holdings, will receive cash equal to the Offer Price (i.e., $9.25 per share). Under the California General Corporation Law, a company may not merge with an entity which (directly or through affiliates) owns more than 50% but less than 90% of the outstanding shares of the company, unless holders of nonredeemable stock of the company receive in the merger nonredeemable common shares of the surviving corporation or its parent. This would prevent the Purchaser from paying cash in the Merger unless following completion of the Offer, the Purchaser owned at least 90% of the outstanding Shares, or the Purchaser subsequently increased its ownership to that level. In order to be sure the Company's shareholders can receive cash as a result of the Merger, if the Purchaser does not own at least 90% of the outstanding Shares after the Offer is completed, the Purchaser will vote in favor of the Company's changing its state of incorporation to Delaware, and therefore to cause the Merger to take place entirely under Delaware law (which permits cash to be issued in a merger regardless of the number of shares one party may own of the other). The Company would change its state of incorporation to Delaware by forming a wholly owned Delaware corporation and merging into that Delaware corporation in a transaction in which each share of stock of the Company would become an identical share of stock of the Delaware corporation. The Purchaser would be required to vote for, and otherwise support, that reincorporation merger to the same extent it is required to vote for and otherwise support the Merger. Because the reincorporation would not have any effect on the Merger other than requiring an extra step to cause it to take place (which could delay it), the discussion below assumes the Merger will take place without the need for the Company to reincorporate in Delaware. Recommendation. The Merger Agreement states that the Special Committee of the Company's Board of Directors has determined that the Merger Agreement and the transactions contemplated by it are fair to and in the best interests of the Company and its shareholders and that based upon the recommendation of the Special Committee, the Board of Directors has resolved to recommend that the Company's shareholders accept the Offer, tender their Shares in response to the Offer and, if required to permit the Merger to take place, adopt and approve the Merger Agreement and the Merger. The Board may, upon recommendation of the Special Committee, withdraw, modify or amend its recommendation if it determines, based upon advice of the Company's legal counsel, that its failure to do so could reasonably be expected to be a breach of the directors' fiduciary duties under applicable law. Each of the directors and executive officers of the Company has agreed to tender and sell his or her shares in response to the Offer, except that directors and executive officers whose sales might result in liability under Section 16(b) of the Exchange Act have agreed that if they do not tender and sell their Shares in response to the Offer, they will vote their Shares in favor of the Merger. Stock of the Company. AT THE EFFECTIVE TIME, (A) EACH COMMON SHARE WHICH IS NOT OWNED BY THE PURCHASER WILL BECOME THE RIGHT TO RECEIVE $9.25 IN CASH, OR ANY OTHER PRICE PER SHARE PAID WITH REGARD TO THE SHARES TENDERED IN RESPONSE TO THE OFFER (WHICH MAY NOT BE LESS THAN $9.25 PER SHARE) AND (B) EACH SHARE OWNED BY THE PURCHASER OR ITS SHAREHOLDERS, INCLUDING BR HOLDINGS, OR BY THE COMPANY OR ITS SUBSIDIARIES, WILL BE CANCELLED AND NO PAYMENT WILL BE MADE WITH RESPECT TO THOSE SHARES. Stock of the Purchaser. At the Effective Time, each share of stock of the Purchaser which is outstanding immediately before the Effective Time will be converted into and become one share of the same class of stock of the Surviving Corporation. Therefore, BR Holdings, which is the sole shareholder of the Purchaser, will become the sole shareholder of the Company. Company Options and Warrants. At the Effective Time, each outstanding option or warrant issued by the Company will become the right to receive (i) the amount, if any, by which the Offer Price exceeds the exercise price of the option or warrant, times (ii) the number of Shares issuable upon exercise of the option or warrant in full. 20 Shareholder Vote Required to Approve Merger. Under the California General Corporate Law (the "CGCL"), the affirmative vote of holders of a majority of the outstanding Shares (including any Shares owned by the Purchaser) is required to approve the Merger. Immediately before the Purchaser accepts the Shares which are tendered in response to the Offer, the Purchaser expects to own approximately 6% of the outstanding Shares and the Merger will not be presented to the shareholders unless the Purchaser has acquired through the Offer at least 51% of the remaining Shares. Therefore, if the Merger is presented to the shareholders for approval, the Purchaser and its affiliates will be able to cause the Merger to be approved, even if no other shareholders vote for it. If the Purchaser acquires at least 90% of the outstanding shares, under Section 1110 of the CGCL, shareholder approval will not be required. Shareholders Meeting. If approval by the Company's shareholders is required in order to consummate the Merger, and if the Purchaser purchases the Shares which are properly tendered in response to the Offer, the Company will hold a special meeting of its shareholders as soon as practicable after the Expiration Time for the purpose of adopting the Merger Agreement and approving the Merger. Conditions to the Merger. If the Purchaser acquires the Shares which are properly tendered in response to the Offer and not withdrawn, the Purchaser and BR Holdings will be contractually obligated to vote in favor of the Merger. The obligations of the Company to carry out the Merger will be conditioned on the Merger's being approved by the holders of a majority of the outstanding Shares. In addition, the obligations of the Company and of the Purchaser to complete the Merger each are subject to the conditions that: (a) either of them will have fulfilled in all material respects all its obligations under the Merger Agreement required to have been fulfilled on or before the Merger Date; (b) no order will have been entered by any court or governmental authority and be in force which invalidates the Merger Agreement or restrains the Company or the Purchaser from completing the transactions contemplated by the Merger Agreement; and (c) if shareholder approval of the Merger is required by applicable law or by the rules of the Nasdaq National Market (if they are applicable), the Merger will have been approved by the holders of at least a majority of the outstanding Shares. Termination of the Merger Agreement. The Merger Agreement may be terminated at any time prior to the Effective Time of the Merger, whether before or after approval of the terms of the Merger Agreement by the shareholders of the Company: (1) by mutual consent of the Company and the Purchaser; (2) by the Company if (i) any of the representations and warranties of the Purchaser contained in the Merger Agreement was not complete and accurate in all material respects on the date of the Merger Agreement or (ii) any of the conditions to the Company's obligations to complete the Merger are not satisfied or waived by the Company prior to or on the date of the Merger; (3) by the Purchaser if (i) any of the representations or warranties of the Company contained in the Merger Agreement was not complete and accurate in all material respects on the date of the Merger Agreement, or (ii) any of the conditions to the Purchaser's obligations to complete the Merger are not satisfied or waived by the Purchaser prior to or on the date of the Merger; (4) by the Company if after the date of the Merger Agreement and before the Purchaser accepts the Shares which are properly tendered and not withdrawn, (A) it receives an Acquisition Proposal or a potential acquiror commences a cash tender offer for all the Company's outstanding stock (other than that already owned by potential acquiror), (B) within 10 business days after the Company receives a Firm Proposal or the tender offer is commenced, the Company's Board of Directors determines the Firm Proposal or the tender offer is a Superior Proposal and resolves to accept the Superior Proposal unless the Purchaser will increase the Tender Offer Price to an amount at least as great as that offered in the Superior Proposal or to recommend that shareholders tender their shares in response to the Superior Proposal, and (C) the Company has given the Purchaser at least 10 business days' prior notice (i) of the terms of the Superior Proposal (including the consideration per Share, valuing non-cash consideration as provided in the Merger Agreement, the Company's shareholders would receive as a result of the Superior Proposal), and (ii) that unless the Purchaser increases the Tender Offer Price to an amount per share at least as great as the consideration per share the Company's shareholders would receive as a result of the Superior Proposal, the Merger Agreement will terminate as set forth in the notice and (E) the Company has paid the Purchaser 21 $750,000, and reimbursed or agreed to reimburse the Purchaser for its out of pocket expenses (up to $500,000) incurred in connection with the Merger Agreement and the transactions contemplated by it. A "Superior Proposal" is an Acquisition Proposal which (A) would result in the Company's shareholders receiving consideration which is at least 10% greater than the Offer Price, (B) is not subject to the outcome of due diligence or any other form of investigation, (C) is not subject to a financing contingency and is from a proposed acquiror which the Board determines in good faith, after consultation with its independent financial advisor, has the financial resources necessary to carry out the transaction and (D) the Board determines in good faith after consultation with its independent financial advisor, to be more favorable to the Company's shareholders than the Offer and the Merger. The Company will not be able to withdraw a notice that it will terminate the Merger Agreement which it gives as described in condition (4) unless the Purchaser consents to the withdrawal. Effect of Termination of the Merger Agreement. If the Merger Agreement is terminated, neither the Company nor the Purchaser will be required to complete the Merger. Termination of the Merger Agreement will not relieve either party of liability for any breach of the Merger Agreement which occurs before the Merger Agreement is terminated. If the Merger Agreement is terminated after the Purchaser has accepted Shares tendered in response to the Offer, the termination will not affect the Purchaser's purchase of the Shares it has accepted or its obligation to pay for those Shares. Acquisition Proposals. The Merger Agreement contains prohibitions against the Company's soliciting, or authorizing its officers, directors, employees or agents to solicit, acquisition proposals, and regarding what the Company may do if it receives unsolicited acquisition proposals. It permits the Company to furnish non-public information (after receiving a Confidentiality Agreement) to, and to enter into discussions and negotiations with, a person who submits an unsolicited proposal which the Special Committee determines, after consultation with its financial advisor would, if consummated, result in the shareholders' receiving consideration which is greater than the Offer Price and would be more favorable to the shareholders than the Offer. Board of Directors. The members of the Board of Directors of the Purchaser immediately before the Effective Time will be the members of the Board of Directors of the Surviving Corporation after the Effective Time and will hold office in accordance with the by-laws of the Surviving Corporation. Representations and Warranties. The Merger Agreement contains various customary representations and warranties. Other Provisions. The Merger Agreement also contains provisions (i) requiring the Company to operate its business in the ordinary course, including maintaining the goodwill of its business and maintaining its assets in good condition, limiting the Company's borrowings and commitments for capital expenditures, precluding the Company from amending or entering into employment or severance agreements, and precluding the Company from paying dividends (other than payments by subsidiaries of the Company to the Company or to other wholly owned subsidiaries of the Company) or taking other steps regarding its stock, until the Effective Time and (ii) requiring the Purchaser (and the Surviving Corporation) to indemnify present and former directors, officers or employees of the Company and its subsidiaries against liability rising out of their service as directors, officers or employees of the Company or its subsidiaries. Appraisal Rights. 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 Shares unless 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 CGCL will be entitled to receive the appraised value of their Shares, which may be more or less than what they would receive as a result of the Merger, regardless of how many Shares are held by persons who seek appraisal of their 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 this Offer to Purchase. 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 DGCL 22 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 this Offer to Purchase. 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 ATTACHED TEXT OF THE RELEVANT PORTIONS OF THE CGCL AND THE DGCL IF YOU ARE CONSIDERING DISSENTING AND SEEKING THE APPRAISED VALUE OF YOUR SHARES. 17. DIVIDENDS AND DISTRIBUTIONS. The Merger Agreement prohibits the Company from paying any dividends or making other distributions with regard to its stock or from issuing any Shares, until the Effective Time of the Merger. 18. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS. General. Except as otherwise disclosed in this Offer to Purchase, based on the Company's representations and warranties in the Merger Agreement and a review of publicly available filings by the Company with the Commission, the Purchaser is not aware of (i) any license or regulatory permit that appears to be material to the business of the Company and its subsidiaries, taken as a whole, that might be adversely affected by the acquisition of Shares by the Purchaser pursuant to the Offer or by the Merger or (ii) any approval or other action by any governmental, administrative or regulatory agency or authority, domestic or foreign, that would be required for the Purchaser to acquire and own Shares. Going Private Transactions. The Commission has adopted Rule 13e-3 under the Exchange Act, which is applicable to certain "going private" transactions. This Offer to Purchase contains information required by Rule 13e-3. Also, the Purchaser, BR Holdings and Three Cities Fund III have filed with the Commission a Transaction Statement on Schedule TO. The Schedule TO and any exhibits or amendments to it may be inspected at, and copies obtained from, the places described in Section 13 (except that they will not be available at the regional offices of the Commission). Antitrust Compliance. The Company and Three Cities Fund III will make a filing with the United States Federal Trade Commission (the "FTC") under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"). The HSR Act requires that, before an acquisition involving companies which exceed specified sizes can take place, information must be provided to the FTC and to the Antitrust Division of the United States Department of Justice, and specified waiting periods must expire or be terminated by the FTC or the Antitrust Division. The waiting period with regard to a tender offer is ten days, but if during the ten day period, either of those agencies requests further information, the waiting period will be extended until ten days after the additional information is provided. State Takeover Statutes. A number of other states have adopted laws and regulations applicable to attempts to acquire securities of corporations which are incorporated, or have substantial assets, shareholders, principal executive offices or principal places of business, or whose business operations otherwise have substantial economic effects, in such states. In 1982, in Edgar v. MITE Corp., the Supreme Court of the United States invalidated on constitutional grounds the Illinois Business Takeover Statute, which, as a matter of state securities law, made takeovers of corporations meeting certain requirements more difficult. However, in 1987, in CTS Corp. v. Dynamics Corp. of America, the Supreme Court held that the State of Indiana may, as a matter of corporate law, and, in particular, with respect to those aspects of corporate law concerning corporate governance, constitutionally disqualify a potential acquiror from voting on the affairs of a target corporation without the prior approval of the remaining shareholders. The state law before the Supreme Court was by its terms applicable only to corporations that had a substantial number of shareholders in the state and were incorporated there. 19. FEES AND EXPENSES. Except as set forth below, none of the Purchaser, Holdings, Inc., BR Holdings or the Three Cities Fund will pay any fees or commissions to any broker, dealer or other person for soliciting tenders of Shares pursuant to the Offer. 23 The Purchaser has retained D.F. King & Co., Inc. to act as the Information Agent in connection with the Offer. The Information Agent may contact holders of Shares by mail, telephone, facsimile, telegraph and personal interviews and may request brokers, dealers and other nominee shareholders to forward materials relating to the Offer to beneficial owners of Shares. The Information Agent will receive reasonable and customary compensation together with reimbursement for its reasonable out-of-pocket expenses and will be indemnified against certain liabilities and expenses, including certain liabilities under the federal securities laws. In addition, the Purchaser has retained American Stock Transfer and Trust Company as the Depositary. The Depositary has not been asked to make solicitations or recommendations in its role as Depositary. The Depositary will receive reasonable and customary compensation for its services, will be reimbursed for certain reasonable out-of-pocket expenses and will be indemnified against certain liabilities and expenses. Brokers, dealers, commercial banks and trust companies will be reimbursed by the Purchaser for customary mailing and handling expenses incurred by them in forwarding offering material to their customers. 20. MISCELLANEOUS. The Purchaser is not aware of any jurisdiction where the making of the Offer is prohibited by any administrative or judicial action or pursuant to any state statute. If the Purchaser becomes aware of any state statute prohibiting the making of the Offer or the acceptance of the Shares which are tendered in response to the Offer, the Purchaser will make a good faith effort to comply with that state statute. If, after a good faith effort the Purchaser cannot comply with any state statute, the Offer will not be made to (nor will tenders be accepted from or on behalf of) the holders of Shares in that state. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION ON BEHALF OF THE PURCHASER WHICH IS NOT CONTAINED IN THIS OFFER TO PURCHASE OR IN THE LETTER OF TRANSMITTAL. IF ANYONE GIVES ANY INFORMATION OR MAKES ANY REPRESENTATION WHICH DIFFERS FROM WHAT IS SAID IN THIS OFFER TO PURCHASE OR IN THE LETTER OF TRANSMITTAL, AND IF GIVEN OR MADE, THAT INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE PURCHASER. The Purchaser, Holdings, Inc., BR Holdings and Three Cities Fund III have filed with the Commission a Tender Offer Statement on Schedule TO, as amended (the "Schedule TO"), together with exhibits, pursuant to Rule 14d-3 of the Rules under the Exchange Act, containing information with respect to the Offer in addition to what is contained in this Amended Offer to Purchase, and they may file amendments to the Schedule TO. The Schedule TO and any amendments to it, including exhibits, may be inspected at, and copies may be obtained from, the places described in Section 13 (except that they will not be available at the regional offices of the Commission). BRG ACQUISITION CORPORATION August 4, 2000 24 SCHEDULE I CERTAIN INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE OFFICERS OF THE THREE CITIES FUND, BR HOLDINGS AND THE PURCHASER 1. Directors and Executive Officers of the Three Cities Fund. Set forth below is the name, current business address, citizenship and the present principal occupation or employment and material occupations, positions, offices or employments for the past five years of each managing director of Three Cities Research, Inc., the advisor to the Three Cities Fund. The principal address of the Three Cities Fund and, unless otherwise indicated below, the current business address for each individual listed below is c/o Three Cities Research, Inc., 650 Madison Avenue, New York, New York 10022. Unless otherwise indicated, each such person is a citizen of the United States.
PRINCIPAL OCCUPATION OR EMPLOYMENT DURING PAST FIVE YEARS, POSITIONS NAME WITH THE THREE CITIES FUND AND CERTAIN DIRECTORSHIPS - ------------------------------------------ --------------------------------------------------------------------- J. William Uhrig.......................... Mr. Uhrig is a Director and is the Secretary of Three Cities Research, Inc. Mr. Uhrig has been Director of Three Cities Research, Inc. since 1991. Mr. Uhrig joined Three Cities Research, Inc. in 1984. From January 1993 to January 1998, Mr. Uhrig served on the Board of Directors of MLX Corp., a holding company which was a predecessor of Morton Industrial Group. From January 1997 to October 1998, Mr. Uhrig served on the Board of Directors of Family Bargain Corporation. Willem F.P. de Vogel...................... Mr. de Vogel is a Director and is the President of Three Cities Research, Inc. Mr. de Vogel has been the President of Three Cities Research, Inc. since 1982. Mr. de Vogel is a Director of Computer Associates International and Morton Industrial Group. Mr. de Vogel is a citizen of The Netherlands. Thomas G. Weld............................ Mr. Weld is a Director and is the Treasurer of Three Cities Research, Inc. which he joined in 1993. From 1988 until 1993, Mr. Weld was an associate with McKinsey and Company, a management consulting firm. Mr. Weld was a director of Family Bargain Corporation from January 1997 to December 1998.
2. Directors and Executive Officers of BR Holdings. Set forth below is the name, current business address, citizenship and the present principal occupation or employment and material occupations, positions, offices or employments for the past five years of each director and executive officer of BR Holdings. The principal address of BR Holdings and, unless otherwise indicated below, the current business address for each individual listed below is c/o Three Cities Research, Inc., 650 Madison Avenue, New York, New York 10022. Unless otherwise indicated, each such person is a citizen of the United States.
PRINCIPAL OCCUPATION OR EMPLOYMENT DURING PAST FIVE YEARS, POSITIONS NAME WITH THE THREE CITIES FUND AND CERTAIN DIRECTORSHIPS - ------------------------------------------ --------------------------------------------------------------------- W. Robert Wright II....................... Mr. Wright is a Director and is the Secretary of the Purchaser. Mr. Wright has been employed by Three Cities Research, Inc. since 1992, except for a period from July 1993 to August 1995 when he was in a graduate program at Harvard University. He has been a Principal of Three Cities Research, Inc. since 1998. Before joining Three Cities Research, Inc., Mr. Wright worked for Marriott International in its strategic planning department. He is a Director of Family Bargain Corporation.
I-1 J. William Uhrig.......................... Mr. Uhrig is a Director and is the Vice-President of the Purchaser. Mr. Uhrig's biographical information is set forth above. Jeanette Welsh............................ Ms. Welsh is a Director and is the Secretary of the Purchaser. Ms. Welsh has been employed by Three Cities Research, Inc. since October 1999. From April 1998 to October 1999, Ms. Welsh practiced law at the law firm of Epstein, Becker & Green, P.C. Ms. Welsh was the Administrative Officer at Societe Generale Securities Corporation from November 1992 to March 1998.
3. Directors and Executive Officers of Holdings, Inc. Set forth below is the name, current business address, citizenship and the present principal occupation or employment and material occupations, positions, offices or employments for the past five years of each director and executive officer of Purchaser. The principal address of Purchaser and, unless otherwise indicated below, the current business address for each individual listed below is c/o Three Cities Research, Inc., 650 Madison Avenue, New York, New York 10022. Unless otherwise indicated, each such person is a citizen of the United States.
PRINCIPAL OCCUPATION OR EMPLOYMENT DURING PAST FIVE YEARS, POSITIONS NAME WITH THE THREE CITIES FUND AND CERTAIN DIRECTORSHIPS - ------------------------------------------ --------------------------------------------------------------------- W. Robert Wright II....................... Mr. Wright is a Director and is the President of the Purchaser. Mr. Wright's biographical information is set forth above. J. William Uhrig.......................... Mr. Uhrig is a Director and is the Vice-President of the Purchaser. Mr. Uhrig's biographical information is set forth above. Jeanette Welsh............................ Ms. Welsh is a Director and is the Secretary and Treasurer of the Purchaser. Ms. Welsh's biographical information is set forth above
4. Directors and Executive Officers of Purchaser. Set forth below is the name, current business address, citizenship and the present principal occupation or employment and material occupations, positions, offices or employments for the past five years of each director and executive officer of Purchaser. The principal address of Purchaser and, unless otherwise indicated below, the current business address for each individual listed below is c/o Three Cities Research, Inc., 650 Madison Avenue, New York, New York 10022. Unless otherwise indicated, each such person is a citizen of the United States.
PRINCIPAL OCCUPATION OR EMPLOYMENT DURING PAST FIVE YEARS, POSITIONS NAME WITH THE THREE CITIES FUND AND CERTAIN DIRECTORSHIPS - ------------------------------------------ --------------------------------------------------------------------- W. Robert Wright II....................... Mr. Wright is a Director and is the President of the Purchaser. Mr. Wright's biographical information is set forth above. J. William Uhrig.......................... Mr. Uhrig is a Director and is the Vice-President of the Purchaser. Mr. Uhrig's biographical information is set forth above. Jeanette Welsh............................ Ms. Welsh is a Director and is the Secretary and Treasurer of the Purchaser. Ms. Welsh's biographical information is set forth above
I-2 SCHEDULE II California General Corporation Law, ss.ss.1301-1305 ss. 1301. Notice to holder of dissenting shares of reorganization approval; Demand for purchase of shares; Contents of demand (a) If, in the case of a reorganization, any stockholders of a corporation have a right under Section 1300, subject to compliance with paragraphs (3) and (4) of subdivision (b) thereof, to require the corporation to purchase their shares for cash, such corporation shall mail to each such stockholder a notice of the approval of the reorganization by its outstanding shares (Section 152) within 10 days after the date of such approval, accompanied by a copy of Sections 1300, 1302, 1303, 1304 and this section, a statement of the price determined by the corporation to represent the fair market value of the dissenting shares, and a brief description of the procedure to be followed if the stockholder desires to exercise the stockholder's right under such sections. The statement of price constitutes an offer by the corporation to purchase at the price stated any dissenting shares as defined in subdivision (b) of Section 1300, unless they lose their status as dissenting shares under Section 1309. (b) Any stockholder who has a right to require the corporation to purchase the stockholder's shares for cash under Section 1300, subject to compliance with paragraphs (3) and (4) of subdivision (b) thereof, and who desires the corporation to purchase such shares shall make written demand upon the corporation for the purchase of such shares and payment to the stockholder in cash of their fair market value. The demand is not effective for any purpose unless it is received by the corporation or any transfer agent thereof (1) in the case of shares described in clause (i) or (ii) of paragraph (1) of subdivision (b) of Section 1300 (without regard to the provisos in that paragraph), not later than the date of the stockholder's meeting to vote upon the reorganization, or (2) in any other case within 30 days after the date on which the notice of the approval by the outstanding shares pursuant to subdivision (a) or the notice pursuant to subdivision (i) of Section 1110 was mailed to the stockholder. (c) The demand shall state the number and class of the shares held of record by the stockholder which the stockholder demands that the corporation purchase and shall contain a statement of what such stockholder claims to be the fair market value of those shares as of the day before the announcement of the proposed reorganization or short-form merger. The statement of fair market value constitutes an offer by the stockholder to sell the shares at such price. ss. 1302. Stamping or endorsing dissenting shares Within 30 days after the date on which notice of the approval by the outstanding shares or the notice pursuant to subdivision (i) of Section 1110 was mailed to the stockholder, the stockholder shall submit to the corporation at its principal office or at the office of any transfer agent thereof, (a) if the shares are certificated securities, the stockholder's certificates representing any shares which the stockholder demands that the corporation purchase, to be stamped or endorsed with a statement that the shares are dissenting shares or to be exchanged for certificates of appropriate denomination so stamped or endorsed or (b) if the shares are uncertificated securities, written notice of the number of shares which the stockholder demands that the corporation purchase. Upon subsequent transfers of the dissenting shares on the books of the corporation, the new certificates, initial transaction statement, and other written statements issued therefor shall bear a like statement, together with the name of the original dissenting holder of the shares. ss. 1303. Dissenting stockholder entitled to agreed price with interest thereon; When price to be paid (a) If the corporation and the stockholder agree that the shares are dissenting shares and agree upon the price of the shares, the dissenting stockholder is entitled to the agreed price with interest thereon at the legal rate on judgments from the date of the agreement. Any agreements fixing the fair market value of any dissenting shares as between the corporation and the holders thereof shall be filed with the secretary of the corporation. (b) Subject to the provisions of Section 1306, payment of the fair market value of dissenting shares shall be made within 30 days after the amount thereof has been agreed or within 30 days after any statutory or contractual conditions to the reorganization are satisfied, whichever is later, and in the case of certificated securities, subject to surrender of the certificates therefor, unless provided otherwise by agreement. II-1 ss. 1304. Action by dissenters to determine whether shares are dissenting shares or fair market value of dissenting shares or both; Joinder of stockholders; Consolidation of actions; Determination of issues; Appointment of appraisers (a) If the corporation denies that the shares are dissenting shares, or the corporation and the stockholder fail to agree upon the fair market value of the shares, then the stockholder demanding purchase of such shares as dissenting shares or any interested corporation, within six months after the date on which notice of the approval by the outstanding shares (Section 152) or notice pursuant to subdivision (i) of Section 1110 was mailed to the stockholder, but not thereafter, may file a complaint in the superior court of the proper county praying the court to determine whether the shares are dissenting shares or the fair market value of the dissenting shares or both or may intervene in any action pending on such a complaint. (b) Two or more dissenting stockholders may join as plaintiffs or be joined as defendants in any such action and two or more such actions may be consolidated. (c) On the trial of the action, the court shall determine the issues. If the status of the shares as dissenting shares is in issue, the court shall first determine that issue. If the fair market value of the dissenting shares is in issue, the court shall determine, or shall appoint one or more impartial appraisers to determine, the fair market value of the shares. ss. 1305. Duty and report of appraisers; Court's confirmation of report; Determination of fair market value by court; Judgment, and payment; Appeal; Costs of action (a) If the court appoints an appraiser or appraisers, they shall proceed forthwith to determine the fair market value per share. Within the time fixed by the court, the appraisers, or a majority of them, shall make and file a report in the office of the clerk of the court. Thereupon, on the motion of any party, the report shall be submitted to the court and considered on such evidence as the court considers relevant. If the court finds the report reasonable, the court may confirm it. (b) If a majority of the appraisers appointed fail to make and file a report within 10 days from the date of their appointment or within such further time as may be allowed by the court or the report is not confirmed by the court, the court shall determine the fair market value of the dissenting shares. (c) Subject to the provisions of Section 1306, judgment shall be rendered against the corporation for payment of an amount equal to the fair market value of each dissenting share multiplied by the number of dissenting shares which any dissenting stockholder who is a party, or who has intervened, is entitled to require the corporation to purchase, with interest thereon at the legal rate from the date on which judgment was entered. (d) Any such judgment shall be payable forthwith with respect to uncertificated securities and, with respect to certificated securities, only upon the endorsement and delivery to the corporation of the certificates for the shares described in the judgment. Any party may appeal from the judgment. (e) The costs of the action, including reasonable compensation to the appraisers to be fixed by the court, shall be assessed or apportioned as the court considers equitable, but, if the appraisal exceeds the price offered by the corporation, the corporation shall pay the costs (including in the discretion of the court attorneys' fees, fees of expert witnesses and interest at the legal rate on judgments from the date of compliance with Sections 1300, 1301 and 1302 if the value awarded by the court for the shares is more than 125 percent of the price offered by the corporation under subdivision (a) of Section 1301). II-2 SCHEDULE III Delaware General Corporation Law ss. 262. Appraisal rights (a) Any stockholder of a corporation of this State who holds shares of stock on the date of the making of a demand pursuant to subsection (d) of this section with respect to such shares, who continuously holds such shares through the effective date of the merger or consolidation, who has otherwise complied with subsection (d) of this section and who has neither voted in favor of the merger or consolidation nor consented thereto in writing pursuant to ss. 228 of this title shall be entitled to an appraisal by the Court of Chancery of the fair value of the stockholder's shares of stock under the circumstances described in subsections (b) and (c) of this section. As used in this section, the word "stockholder" means a holder of record of stock in a stock corporation and also a member of record of a nonstock corporation; the words "stock" and "share" mean and include what is ordinarily meant by those words and also membership or membership interest of a member of a nonstock corporation; and the words "depository receipt" mean a receipt or other instrument issued by a depository representing an interest in one or more shares, or fractions thereof, solely of stock of a corporation, which stock is deposited with the depository. (b) Appraisal rights shall be available for the shares of any class or series of stock of a constituent corporation in a merger or consolidation to be effected pursuant to ss. 251 (other than a merger effected pursuant to ss. 251(g) of this title), ss. 252, ss. 254, ss. 257, ss. 258, ss. 263 or ss. 264 of this title: (1) Provided, however, that no appraisal rights under this section shall be available for the shares of any class or series of stock, which stock, or depository receipts in respect thereof, at the record date fixed to determine the stockholders entitled to receive notice of and to vote at the meeting of stockholders to act upon the agreement of merger or consolidation, were either (i) listed on a national securities exchange or designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc. or (ii) held of record by more than 2,000 holders; and further provided that no appraisal rights shall be available for any shares of stock of the constituent corporation surviving a merger if the merger did not require for its approval the vote of the stockholders of the surviving corporation as provided in subsection (f) of ss. 251 of this title. (2) Notwithstanding paragraph (1) of this subsection, appraisal rights under this section shall be available for the shares of any class or series of stock of a constituent corporation if the holders thereof are required by the terms of an agreement of merger or consolidation pursuant to ss. ss. 251, 252, 254, 257, 258, 263 and 264 of this title to accept for such stock anything except: a. Shares of stock of the corporation surviving or resulting from such merger or consolidation, or depository receipts in respect thereof; b. Shares of stock of any other corporation, or depository receipts in respect thereof, which shares of stock (or depository receipts in respect thereof) or depository receipts at the effective date of the merger or consolidation will be either listed on a national securities exchange or designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc. or held of record by more than 2,000 holders; c. Cash in lieu of fractional shares or fractional depository receipts described in the foregoing subparagraphs a. and b. of this paragraph; or d. Any combination of the shares of stock, depository receipts and cash in lieu of fractional shares or fractional depository receipts described in the foregoing subparagraphs a., b. and c. of this paragraph. (3) In the event all of the stock of a subsidiary Delaware corporation party to a merger effected under ss. 253 of this title is not owned by the parent corporation immediately prior to the merger, appraisal rights shall be available for the shares of the subsidiary Delaware corporation. (c) Any corporation may provide in its certificate of incorporation that appraisal rights under this section shall be available for the shares of any class or series of its stock as a result of an amendment to its certificate of incorporation, any merger or consolidation in which the corporation is a constituent corporation or the sale of all or substantially all of the assets of the corporation. If the certificate of incorporation contains such a provision, III-1 the procedures of this section, including those set forth in subsections (d) and (e) of this section, shall apply as nearly as is practicable. (d) Appraisal rights shall be perfected as follows: (1) If a proposed merger or consolidation for which appraisal rights are provided under this section is to be submitted for approval at a meeting of stockholders, the corporation, not less than 20 days prior to the meeting, shall notify each of its stockholders who was such on the record date for such meeting with respect to shares for which appraisal rights are available pursuant to subsection (b) or (c) hereof that appraisal rights are available for any or all of the shares of the constituent corporations, and shall include in such notice a copy of this section. Each stockholder electing to demand the appraisal of such stockholder's shares shall deliver to the corporation, before the taking of the vote on the merger or consolidation, a written demand for appraisal of such stockholder's shares. Such demand will be sufficient if it reasonably informs the corporation of the identity of the stockholder and that the stockholder intends thereby to demand the appraisal of such stockholder's shares. A proxy or vote against the merger or consolidation shall not constitute such a demand. A stockholder electing to take such action must do so by a separate written demand as herein provided. Within 10 days after the effective date of such merger or consolidation, the surviving or resulting corporation shall notify each stockholder of each constituent corporation who has complied with this subsection and has not voted in favor of or consented to the merger or consolidation of the date that the merger or consolidation has become effective; or (2) If the merger or consolidation was approved pursuant to ss. 228 or ss. 253 of this title, each consitutent corporation, either before the effective date of the merger or consolidation or within ten days thereafter, shall notify each of the holders of any class or series of stock of such constitutent corporation who are entitled to appraisal rights of the approval of the merger or consolidation and that appraisal rights are available for any or all shares of such class or series of stock of such constituent corporation, and shall include in such notice a copy of this section; provided that, if the notice is given on or after the effective date of the merger or consolidation, such notice shall be given by the surviving or resulting corporation to all such holders of any class or series of stock of a constituent corporation that are entitled to appraisal rights. Such notice may, and, if given on or after the effective date of the merger or consolidation, shall, also notify such stockholders of the effective date of the merger or consolidation. Any stockholder entitled to appraisal rights may, within 20 days after the date of mailing of such notice, demand in writing from the surviving or resulting corporation the appraisal of such holder's shares. Such demand will be sufficient if it reasonably informs the corporation of the identity of the stockholder and that the stockholder intends thereby to demand the appraisal of such holder's shares. If such notice did not notify stockholders of the effective date of the merger or consolidation, either (i) each such constitutent corporation shall send a second notice before the effective date of the merger or consolidation notifying each of the holders of any class or series of stock of such constitutent corporation that are entitled to appraisal rights of the effective date of the merger or consolidation or (ii) the surviving or resulting corporation shall send such a second notice to all such holders on or within 10 days after such effective date; provided, however, that if such second notice is sent more than 20 days following the sending of the first notice, such second notice need only be sent to each stockholder who is entitled to appraisal rights and who has demanded appraisal of such holder's shares in accordance with this subsection. An affidavit of the secretary or assistant secretary or of the transfer agent of the corporation that is required to give either notice that such notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein. For purposes of determining the stockholders entitled to receive either notice, each constitutent corporation may fix, in advance, a record date that shall be not more than 10 days prior to the date the notice is given, provided, that if the notice is given on or after the effective date of the merger or consolidation, the record date shall be such effective date. If no record date is fixed and the notice is given prior to the effective date, the record date shall be the close of business on the day next preceding the day on which the notice is given. (e) Within 120 days after the effective date of the merger or consolidation, the surviving or resulting corporation or any stockholder who has complied with subsections (a) and (d) hereof and who is otherwise entitled to appraisal rights, may file a petition in the Court of Chancery demanding a determination of the value of the stock of all such stockholders. Notwithstanding the foregoing, at any time within 60 days after the effective date of the merger or consolidation, any stockholder shall have the right to withdraw such stockholder's demand III-2 for appraisal and to accept the terms offered upon the merger or consolidation. Within 120 days after the effective date of the merger or consolidation, any stockholder who has complied with the requirements of subsections (a) and (d) hereof, upon written request, shall be entitled to receive from the corporation surviving the merger or resulting from the consolidation a statement setting forth the aggregate number of shares not voted in favor of the merger or consolidation and with respect to which demands for appraisal have been received and the aggregate number of holders of such shares. Such written statement shall be mailed to the stockholder within 10 days after such stockholder's written request for such a statement is received by the surviving or resulting corporation or within 10 days after expiration of the period for delivery of demands for appraisal under subsection (d) hereof, whichever is later. (f) Upon the filing of any such petition by a stockholder, service of a copy thereof shall be made upon the surviving or resulting corporation, which shall within 20 days after such service file in the office of the Register in Chancery in which the petition was filed a duly verified list containing the names and addresses of all stockholders who have demanded payment for their shares and with whom agreements as to the value of their shares have not been reached by the surviving or resulting corporation. If the petition shall be filed by the surviving or resulting corporation, the petition shall be accompanied by such a duly verified list. The Register in Chancery, if so ordered by the Court, shall give notice of the time and place fixed for the hearing of such petition by registered or certified mail to the surviving or resulting corporation and to the stockholders shown on the list at the addresses therein stated. Such notice shall also be given by 1 or more publications at least 1 week before the day of the hearing, in a newspaper of general circulation published in the City of Wilmington, Delaware or such publication as the Court deems advisable. The forms of the notices by mail and by publication shall be approved by the Court, and the costs thereof shall be borne by the surviving or resulting corporation. (g) At the hearing on such petition, the Court shall determine the stockholders who have complied with this section and who have become entitled to appraisal rights. The Court may require the stockholders who have demanded an appraisal for their shares and who hold stock represented by certificates to submit their certificates of stock to the Register in Chancery for notation thereon of the pendency of the appraisal proceedings; and if any stockholder fails to comply with such direction, the Court may dismiss the proceedings as to such stockholder. (h) After determining the stockholders entitled to an appraisal, the Court shall appraise the shares, determining their fair value exclusive of any element of value arising from the accomplishment or expectation of the merger or consolidation, together with a fair rate of interest, if any, to be paid upon the amount determined to be the fair value. In determining such fair value, the Court shall take into account all relevant factors. In determining the fair rate of interest, the Court may consider all relevant factors, including the rate of interest which the surviving or resulting corporation would have had to pay to borrow money during the pendency of the proceeding. Upon application by the surviving or resulting corporation or by any stockholder entitled to participate in the appraisal proceeding, the Court may, in its discretion, permit discovery or other pretrial proceedings and may proceed to trial upon the appraisal prior to the final determination of the stockholder entitled to an appraisal. Any stockholder whose name appears on the list filed by the surviving or resulting corporation pursuant to subsection (f) of this section and who has submitted such stockholder's certificates of stock to the Register in Chancery, if such is required, may participate fully in all proceedings until it is finally determined that such stockholder is not entitled to appraisal rights under this section. (i) The Court shall direct the payment of the fair value of the shares, together with interest, if any, by the surviving or resulting corporation to the stockholders entitled thereto. Interest may be simple or compound, as the Court may direct. Payment shall be so made to each such stockholder, in the case of holders of uncertificated stock forthwith, and the case of holders of shares represented by certificates upon the surrender to the corporation of the certificates representing such stock. The Court's decree may be enforced as other decrees in the Court of Chancery may be enforced, whether such surviving or resulting corporation be a corporation of this State or of any state. (j) The costs of the proceeding may be determined by the Court and taxed upon the parties as the Court deems equitable in the circumstances. Upon application of a stockholder, the Court may order all or a portion of the expenses incurred by any stockholder in connection with the appraisal proceeding, including, without limitation, reasonable attorney's fees and the fees and expenses of experts, to be charged pro rata against the value of all the shares entitled to an appraisal. III-3 (k) From and after the effective date of the merger or consolidation, no stockholder who has demanded appraisal rights as provided in subsection (d) of this section shall be entitled to vote such stock for any purpose or to receive payment of dividends or other distributions on the stock (except dividends or other distributions payable to stockholders of record at a date which is prior to the effective date of the merger or consolidation); provided, however, that if no petition for an appraisal shall be filed within the time provided in subsection (e) of this section, or if such stockholder shall deliver to the surviving or resulting corporation a written withdrawal of such stockholder's within 60 days after the effective date of the merger or consolidation as provided in subsection (e) of this section or thereafter with the written approval of the corporation, then the right of such stockholder to an appraisal shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery shall be dismissed as to any stockholder without the approval of the Court, and such approval may be conditioned upon such terms as the Court deems just. (l) The shares of the surviving or resulting corporation to which the shares of such objecting stockholders would have been converted had they assented to the merger or consolidation shall have the status of authorized and unissued shares of the surviving or resulting corporation. III-4 Facsimile copies of the Letter of Transmittal, properly completed and duly signed, will be accepted. The Letter of Transmittal, certificates for Shares and any other required documents should be sent by each shareholder of the Company or the shareholder's broker, dealer, commercial bank, trust company or other nominee to the Depositary as follows: The Depositary for the Offer is: AMERICAN STOCK TRANSFER AND TRUST COMPANY By Registered or Facsimile Certified Mail: Transmission: By Hand: By Overnight Courier: --------------------------- --------------------------- --------------------------- American Stock Transfer (for Eligible American Stock Transfer American Stock Transfer and Trust Company Institutions Only) and Trust Company and Trust Company 40 Wall Street (718) 234-5001 40 Wall Street 40 Wall Street 46th Floor 46th Floor 46th Floor 46th Floor New York, NY 10005 New York, NY 10005 New York, NY 10005
For Confirmation Telephone: (718) 921-8200 Any questions or requests for assistance or additional copies of the Offer to Purchase, the Letter of Transmittal or the Notice of Guaranteed Delivery may be directed to the Information Agent at the telephone numbers and location listed below. You may also contact your broker, dealer, commercial bank or trust company or other nominee for assistance concerning the Offer. The Information Agent for the Offer is: D.F. KING & CO., INC. 77 Water Street New York, New York 10005-4495 Banks and Brokerage Firms Call Collect: (212) 269-5550 All Others Call Toll Free: (800) 628-8528 EX-99.(B) 2 0002.txt COMERICA COMMITMENT LETTER [LOGO] - -------------------------------------------------------------------------------- Comerica Bank July 7, 2000 Wm. Robert Wright II Three Cities Research, Inc. 650 Madison Avenue New York , NY 10022 Re: Loan Facilities ("Faci1ities") to be provided for BR Acquisition Corp. (a corporation to be formed for the acquisition of Business Resource Group) by Comerica Bank - California or its affiliates ("Comerica") as Agent Dear Mr. Wright: This letter shall constitute the commitment of Comerica to provide the loan facilities described in the attached Summary of Terms and Conditions, subject to the terms and conditions described in the Summary of Terms and Conditions, the enclosed Agency Fee Letter and the general conditions described in Exhibit "A" to this letter. This commitment may be accepted by your execution and return to me of the enclosed copies of this letter and related Agency Fee Letter, together with your payment of the initial $150,000 insta1lment on the Arrangement Fee described in the Agency Fee Letter. Unless this commitment is so accepted before close of business, Monday, July 10, 2000, this letter shall (unless extended by Comerica, in its sole discretion) automatically expire by its terms and shall no longer be subject to acceptance. COMERICA BANK - CALIFORNIA By: /s/Allen G. Williams ----------------------------- Its: Executive Vice President ----------------------------- Accepted: THREE CITIES RESEARCH. Inc. And BR ACQUISITION CORP. By: /s/ Wm. Robert Wright --------------------------------------- Wm. Robert Wright Its: Authorized Officer of Each of Them EXHIBIT "A" GENERAL CONDITIONS The following General Conditions are specifically incorporated within and form a part of the commitment letter to which they are attached. Fulfillment and discharge of the following General Conditions are preconditions to Comerica's obligation to consummate the proposed Financing. 1. Co-Ordination with Comerica's Counsel. David K. McLeod of Miller, Canfield, Paddock and Stone (313-496-7564) will act as our counsel in connections with this transaction. After your acceptance of this commitment letter, you are requested to have your counsel contact the attorney for the purpose of arranging the ordering of Uniform Commercial Code searches, the preparation of closing documents and the coordination of the respective obligations. 2. Delivery of Obligor's Documents. All documentation to be provided to Comerica by you should be provided as soon as possible after the acceptance of this commitment letter. 3. Conditions to Financing. The willingness of Comerica to provide the Financing and the closing of the Financing shall be subject to the satisfaction, on or before the date of closing under this Commitment ("Closing"), of each of the following conditions. A. Execution of Loan Documents: The negotiation, execution and delivery of a loan agreement, promissory notes, guaranties, security agreements, stock pledges, mortgages and collateral and other documentation reasonably satisfactory to Comerica and its counsel, containing, subject to the Summary of Terms and Conditions, customary conditions, covenants, warranties, remedies and other provisions including, without limitation, the conditions, covenants, warranties and provisions described herein and in the Summary of Terms and Conditions. B. Merger: Comerica's receipt of satisfactory evidence confirming that concurrently with the initial funding of the Financing, BR Acquisition Corp. and Business Resource Group will be merged. C. Pro Forma Financial Information and Projections: Comerica' s receipt of a pro forma unaudited consolidated balance sheet and statement of the operations of the Company, the guarantors mentioned in the Summary of Terms and Conditions ("Guarantors") and their respective subsidiaries as of the Closing, which shall not differ in any material adverse respect from the information previously delivered to Comerica and projections in form reasonably acceptable to Bank ("Projections"). D. Fairness Opinion: Comerica's receipt of a fairness opinion with respect to BR Acquisition Corp.'s purchase of the stock of Business Resource Group (the "Stock Purchase"), in form satisfactory to Comerica and prepared by a reputable firm satisfactory to Comerica and its counsel. E. Other Closing Documents: Comerica's receipt of satisfactory evidence of (1) all governmental, third party and/or other approvals, permits, registrations and the like, necessary or appropriate in connection with the Financing or any transaction contemplated thereby, (2) the corporate approvals by the Company, its subsidiaries and the Guarantors as applicable, of the loan agreement, guaranties and other loan and collateral documents, instruments and transactions contemplated hereby, (3) confirmation that the respective amounts of the sources and uses for the Financing and the Stock Purchase are substantially consistent with the information previously provided to Comerica, (4) customary opinions of legal counsel for Company, the Guarantors and their respective subsidiaries, covering the Financing, the Stock Purchase and such other matters as reasonably required by, and otherwise in form and content satisfactory to, Comerica and its counsel and (5) such additional information, reports and other requirements reasonably requested by Comerica. F. Material Adverse Change: There shall have been no material adverse change in the condition (financial or otherwise), properties, business results or operations of Company the Guarantors and their respective subsidiaries from the condition shown in the financial information delivered to Comerica prior to the date hereof; nor shall any omission, inconsistency, inaccuracy, or any change in presentation or accounting standards which renders such financial statements materially misleading have been determined by Comerica to exist. G. Material Change in Markets: There shall not have occurred after the date of this Commitment, a material adverse change in the market for syndicated bank credit facilities or a material disruption of, or a material adverse change in, financial, banking or capital market conditions (domestic or foreign), in each case as determined by Comerica, in its sole discretion. H. Payment of Fees and Expenses: Company or Three City Research, Inc. ("Three Cities") shall have paid to Comerica all fees and expenses required to be paid on or before the Closing under the terms of this Commitment or any separate agency fee or other fee letter ("Fee Letter") in effect between Company, Three Cities and Comerica, from time to time. 4. Right to Syndicate: Company Obligations. Comerica reserves the right, before the Closing under this Commitment (but without reducing its obligations hereunder) or subsequent to the Closing to syndicate the Financing by a1lot:ating or assign1ng percentages of the Financing (including its rights and obligations under this Commitment) thereof to other banks or financial institutions (collectively, with Comerica, the "Banks") selected by Comerica and approved by Three Cities and the Company, such approval not to be unreasonably withheld, conditioned or delayed. Three Cities and the Company agree to exercise good faith, diligent efforts to cooperate with Comerica in such syndication efforts, including without limitation providing financial and other information to prospective Banks, and responding to inquiries and other requests received from prospective Banks, providing assistance in the preparation of a confidential information memorandum and other syndication material and hosting, with Comerica, of one or more meetings with prospective lenders. Company and Three Cities further agree to refrain from engaging in any additional or other financing (except as described in this letter or in the Summary of Terms and Conditions or as specifically identified in any materials previously furnished to Cormerica) during such syndication process unless otherwise agreed to by Comerica. 5. Control of Syndication. It is understood and agreed that Comerica, after consultation with you, will manage and control all aspects of the syndication, including decisions as to the selection of proposed lenders and any titles offered to proposed lenders, when commitments will be accepted and the final allocations of the commitments among the lenders. It is understood that no other lender participating in the Financing will receive compensation -2- from you outside the terms of this letter in order to obtain commitment. It is also understood and agreed that the amount and distribution of the fees among the lenders will be at the sole discretion of Comerica, and that any syndication prior to execution of definitive documentation will reduce the commitment of Comerica. 6. Successful Syndication. Comerica shall be entitled, after consultation with you, to change the pricing (subject to the limitations set forth in the Agency Fee Letter), terms and/or structure of the Financing if Comerica determines, in its reasonable discretion, that such changes are necessary or advisable to insure a successful syndication of the Financing; provided, however, that the total amount of the Financing remains unchanged. It is understood that Comerica's commitment hereunder is expressly subject to the agreements in this paragraph, and that such agreements (and any similar agreements in the Fee Letter) shall survive the Closing. 7. Reliance on Financial Information. Three Cities and the Company hereby represent and warrant that (a) all information other than the Projections (the "Information") that has been or will be made available to Comerica by it or any of its representatives (in each case, with respect to Information furnished to Comerica prior to the date of commencement of the syndication of the Financing, as supplemented from time to time prior to such date) is or will be complete and correct in all material respects and does not or will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make such statements contained therein not materially misleading in light of the circumstances under which such statements are made and (b) the Projections that have been or will be made available to Comerica have been or will be prepared in good faith based upon assumptions you believe to be reasonable. It is understood that, in arranging and syndicating the financing, Comerica may use and rely on the information and Projections without independent verification. 8. Comerica's Fees and Expenses: Whether or not the closing of the Financing occurs under this Commitment, Three Cities and the Company shall pay to Comerica, in addition to the fees required under any Fee Letter in effect from time to time, all of Comerica's costs and expenses, including, by way of description and not limitation, reasonable attorney fees and advances, appraisal and accounting fees, lien search fees, environmental audit fees, and required travel costs, incurred by Comerica in connection with this Commitment, and the negotiation, consummation and/or closing of the loans contemplated hereby. This paragraph shall survive the expiration or termination of the Commitment. 9. Indemnification. The Company shall indemnify and hold Comercia, and its shareholders, directors, agents, officers, employees, attorneys, subsidiaries and affiliates (collectively, the "Indemnified Parties"), harmless from and against any and all damages, losses, settlement payments, obligations, liabilities, claims, actions or causes of action, and reasonable costs and expenses (including reasonable attorneys fees) incurred, suffered, sustained or required to be paid by reason of or resulting from the transactions contemplated hereby or which otherwise result from the Financing, other than as a result of Comerica's gross negligence or willful misconduct. 10. Non-assignability; Termination. This Commitment is provided for the sole benefit of Three Cities and the Company, is not intended to create any rights in favor of and may not be relied upon by any third party, and shall not be transferable or assignable by Three Cities or the Company by operation of law, or otherwise, and may be terminated at the option of Comerica if Three Cities or the Company shall fail to comply with any of the terms and -3- conditions hereof, or in the event at any time prior to the Closing of the Financing of a filing by or against Three Cities or the Company or any of their respective subsidiaries, of a petition in bankruptcy or insolvency or for reorganization or for the appointment of a receiver, trustee or custodian or the making by Three Cities or the Company or any of their respective subsidiaries, of an assignment for the benefit of creditors or the filing of a petition for arrangement, or other similar proceedings. 11. No Effect on Loan Documents. Until the closing hereunder, this Commitment shall not amend, modify or otherwise affect, in any manner whatsoever, any existing loan agreements, loan documents, any existing credit facilities provided by Comerica (with or without any other party) to Three Cities or the Company (or any of their respective subsidiaries or affiliates), or any loan, collateral or other document or instrument executed in connection therewith. 12. Entire Agreement; Amendment. This Commitment (including the Summary of Terms and Conditions) and the Fee Letter contain the entire agreement of Comerica as of the date hereof with respect to the Financing and are not subject to or supplemented by any previous correspondence or communications (verbal or written) between Three Cities or the Company, and Comerica or any other document not expressly referenced herein. No change in this Commitment sha11 be binding upon the parties unless expressed in writing and signed by them. 13. Termination of Commitment. This Commitment may be terminated at Comerica's option, without further liability by Comerica, upon the failure by either Borrower, Company or any Guarantor to comply with any of the terms and conditions of the commitment letter, or if any representation or warranty made by or on behalf of any of the aforementioned persons should be or become untrue or misleading in any material respect or if any event occurs which, under the terms of the commitment letter, would constitute a Default if the transaction has closed. Upon such termination, any fees paid or to be paid to Comerica under this Commitment shall constitute liquidated damages. In addition, at Comerica's election, Three Cities and Company shall pay to Comerica, upon demand, the full amount of all costs and expenses (including without limit in-house or outside attorney charges) incurred by the Bank in connection with the Commitment and the proposed Financing. 14. Cancellation for Failure to Close. This Commitment may, in all events, be canceled at Comerica's option, communicated to the Borrowers in writing, in the event that the loan proposed to be made pursuant to the Commitment is not closed on or before November 6, 2000. 15. Waiver or Modification. The provisions of this Commitment (including without limit these General Conditions) cannot be waived or modified except in a further written instrument signed by Comerica. -4- CONFIDENTIAL BUSINESS RESOURCE GROUP SUMMARY OF TERMS AND CONDITIONS $40,000,000 Secured Revolving Credit Facility $8,000,000 Secured Term Loan Facility $8,000,000 Secured Acquisition Term Loan Facility for BR Acquisition Corp. July 7, 2000 I. GENERAL PROVISIONS Agent and Arranger: Comerica Bank-California or its affiliate(s) ("Comerica" or "Agent"), to be Structuring, Documentation, and Administrative Agent. Commitment Amount: Agent to underwrite and syndicate, as indicated in the Agency Fee Letter, a $40,000,000 Secured Revolving Credit Facility, $8,000,000 Secured Term Loan Facility, and a $8,000,000 Secured Acquisition Term Loan Facility. Total outstandings under these facilities shall not at any time exceed $45,000,000 (the "Total Usage Limitation"). Agency Fee: As set forth in the Agency Fee Letter and Administrative Agency Fee Letter. Lenders: Syndicate of Lenders acceptable to Comerica (the "Banks" or "Bank Group"). Lenders' Minimum Commitment Amount: $10,000,000 II. LOAN FACILITY; SPECIFIC TERMS Facility A: $40,000,000 Secured Revolving Credit Facility. ("Revolving Credit Facility") Borrower: The survivor of the merger of BR Acquisition Corporation and Business Resource Group ("Company"), or other corporation acceptable to Comerica Bank in its sole discretion. Facility Description: Secured Revolving Credit Facility with advances and re-advances available based on an Advance Formula which also allows for the issuance of up to $5,000,000 in Standby Letters of Credit. Purpose: Purchase of the stock and options issued by Business Resource Group, refinance debt, working capital, and general corporate purposes. Maturity Date: Five years from date of closing. Security: First security interest in accounts, notes, contracts receivable, inventory, general intangibles, machinery and equipment, and all other tangible and intangible personal property now owned, and hereafter acquired by Company and each guarantor. Pledge of 100% of stock of all Subsidiaries now owned or hereafter acquired. Advance Formula: Availability for all advances under the Facility shall under a Borrowing Base which shall be limited to 80% of Eligible Gross Accounts Receivables aged up to 120 days from invoice date, and either(a) 30% of Eligible Inventory or (b) 65% of Billable - -------------------------------------------------------------------------------- Comerica Bank, as Agent (i) [LOGO] CONFIDENTIAL BUSINESS RESOURCE GROUP Eligible Inventory, (but as yet unbilled inventory), such advance on unbilled inventory to be limited to a maximum of $4,000,000 declining to a maximum of $2,000,000 on July 31, 2001 and $0 on October 31, 2001. Total inventory reliance limited to 40% of Accounts Receivable availability. Furthermore, $5,000,000 shall be reserved (the "Reserve") under this Borrowing Base (but not the facility) until the amount outstanding under the $8,000,000 Secured Term Loan (the "Term Loan"), is reduced to $5,000,000 at which time, the Reserve reduces to an amount equal to the amount then outstanding under the Term Loan so long as the Borrower is in compliance with the loan agreement. Letters of Credit: Availability under the Revolving Credit Facility to include up to $5,000,000 in the aggregate in Standby Letters of Credit issued by the Agent, with pro-rate risk participation from the Banks. The aggregate amount of all Letters of Credit issued shall reduce availability under the Revolving Credit Facility. Maturity of individual Letters of Credit will not exceed 12 months or, if earlier, the maturity of the Revolving Credit Facility. Nonrefundable letter of credit fee (calculated on a per annum basis) payable quarterly in advance, in accordance with Applicable Margin Grid I, plus a Facing Fee on each Letter of Credit, as indicated in the Agency Fee Letter attached. Swing Line: Comerica will provide from time-to-time up to $5,000,000 of the Revolving Credit Facility under a Swing Line available to the Company. The Swing Line is provided as an accommodation to the Company and the additional Banks to handle daily activity with minimum draws and payments of $50,000. Advances under the Swing Line shall be at the Base Rate plus the Applicable Margin, (See attached Applicable Margin Grid I for Applicable Margin) and shall reduce availability under the Revolving Credit Facility. Borrowing Options: Borrowing Options to Company for advances under the Revolving Credit shall include a Eurodollar Rate and a Base Rate plus the Applicable Margins adjusted quarterly, but within 5 Business Days upon receipt of quarterly and annual financial statements and compliance certificates. (See attached Applicable Margin Grid I for Applicable Margin). Base Rate shall refer to the higher of i) Agent's prime rate, or ii) the federal funds rate plus 100 basis points. Eurodollar Rate means Comerica Bank's Eurodollar rate which will be adjusted for reserves and other regulatory requirements, plus the Applicable Margin. See attached Applicable Margin Grid I for Applicable Margin. Interest Periods Eurodollar Rate - Interest periods of 1, 2, 3 and 6 months. Interest Payments Interest payable on the first day of each quarter for Base Rate Advances in respect of the prior quarter's advances and on the last day of each interest period for other Advances (and every three months for six month interest periods). Customary provisions protecting Banks in the event of unavailability of funding, illegality, increased costs, breakage and funding losses and indemnification. Drawdowns: Base Rate - Minimum draws of $250,000 with same day notice. Eurodollar rate - Minimum draws of $1,500,000 with three (3) business days notice. - -------------------------------------------------------------------------------- Comerica Bank, as Agent (ii) [LOGO] CONFIDENTIAL BUSINESS RESOURCE GROUP Prepayment: Base Rate loans may be prepaid on same day notice. Eurodollar Rate loans are subject to prepayment compensation if repaid before the end of the respective Interest Period. Commitment Fee: A Commitment Fee based on the unused portion of the Revolving Credit Facility as shown on Applicable Margin Grid I, payable quarterly in arrears. Termination or Reduction of Commitment: The Company may terminate the Revolving Credit commitment in amounts of at least $1,000,000 at any time on five (5) business days notice. Facility B: $8,000,000 Secured Term Loan Facility, ("Term Loan"). - ---------- Borrower: Company Facility Description: Secured Term Loan Facility which amortizes over a five year period. Purpose: Purchase of the stock and options issued by Business Resource Group, refinance debt, working capital, and general corporate purposes. Maturity Date: Five years from date of closing. Amortization Payments: Equal ($400,000) quarterly principal payments due on the last day of each fiscal quarter end, commencing at the end of the first full fiscal quarter following the close. Security: Same as Facility A. Reserve: $5,000,000 shall be reserved (the "Reserve") under the borrowing Base, above, (but not the facility) until the amount outstanding is reduced $5,000,000 at which time, the Reserve reduces to an amount equal to the amount then outstanding under the Term Loan so long as the Borrower is in compliance with the loan agreements. Borrowing Options: Same as Facility A Facility C: $8,000,000 Secured Acquisition Term Loan Facility. - ---------- ("Acquisition Facility"). Borrower: Company Facility Description: Secured Acquisition Term Loan Facility which permanently reduces with each drawdown for a Permitted Acquisition. Interest only for the first six months from the drawdown date, then amortizes in equal quarterly amounts over a five year period. Purpose: Finance Permitted Acquisitions. Availability: The Acquisition Facility shall be available for permitted Acquisitions for a period up to two years from the date of close. Drawdown Conditions: 1. Bank Group approval required for all acquisitions requiring Borrower's consideration greater than or equal to $5,000,000. 2. The amount drawn for any acquisition shall not exceed the lesser of x) 40% of the acquisition price, or y) Two times the target's most recent four quarters' adjusted EBITDA. Maturity Date: Five years from date of Close. - -------------------------------------------------------------------------------- Comerica Bank, as Agent (iii) [LOGO] CONFIDENTIAL BUSINESS RESOURCE GROUP Amortization Payments: Interest only for the first six months from the Drawdown date, then amortization at the rate of 5% of the Drawdown amount in each subsequent quarter with any remaining amount due at maturity. Security: Same as Facility A, plus 100% of the stock of the Acquired Company within 60 days of the close of the acquisition. Borrowing Options: Same as Facility A Drawdowns: Base Rate - Minimum draws of $250,000 with same day notice. Eurodollar Rate - Minimum draws of $1,500,000 with three (3) business days notice. Commitment Fee: A Commitment Fee based on the remaining commitment amount of the Acquisition Term Loan Facility after permanent reductions for each Drawdown as shown on Applicable Margin Grid I, payable quarterly in arrears. Termination or Reduction of Commitments: The Company may terminate any unfunded portion of the Acquisition Facility in amounts of at least $1,000,000 at any time on five (5) business days notice. III. OTHER STANDARD PROVISIONS Guaranties: Indebtedness of the Company shall be guaranteed by OFN Inc., ReNu Office Systems, Inc., MOI Acquisition Corp., Baquet Pastirjak, Team Office, Inc. and any subsidiaries hereafter formed or acquired by the Company. Indebtedness of the Company shall also be guaranteed by Business Resource Holdings, Inc. ("BRH"), the immediate parent corporation of the Company and by BR Holdings, LLC ("LLC"), BRH's controlling owner. It is anticipated that BRH and LLC shall be single purpose entities. Total Usage Limitation: Total outstandings under Facility A (including Letters of Credit), Facility B, and Facility C shall not at any time exceed $45,000,000. Subordination Agreements: Permitted Subordinated Indebtedness shall be defined as 12% fixed interest subordinated debt with no amortization during the term of this Financing. The interest will be paid in cash quarterly provided the Company is in compliance with loan documents and has provided a pro-forma compliance certificate showing post payment compliance with the Financial Covenants. If such compliance is not shown, the interest will be paid in kind for such quarter. Each quarterly test will apply to such quarter's interest only and compliance in a given quarter will not allow prior PIK interest to be paid. The payment in kind of any or all interest will not be a cause for default or acceleration of the Permitted Subordinated Indebtedness. Furthermore, Permitted Subordinated Indebtedness shall be on terms and conditions satisfactory to Comerica Bank. Initial Capitalization: An initial capitalization for Company on a consolidated basis of $49,900,000 million is to be required of which up to $15,000,000 million can be in the form of Permitted Subordinated Indebtedness and the balance in form of Common Stock and/or preferred stock all on terms and conditions satisfactory to Comerica Bank. - -------------------------------------------------------------------------------- Comerica Bank, as Agent (iv) [LOGO] CONFIDENTIAL BUSINESS RESOURCE GROUP Key Management/ Management Compensation: Company agrees to pay compensation to Jack Peth, John Palmer, Brian McNay and Jeff Tuttle ("Key Management"), shareholders and affiliates pursuant to Management Agreements which have terms and conditions acceptable to Comerica. In addition, Key Management's initial Equity Contribution must be at least $3.9 million and account for at least 5% of the voting stock with options for at least an additional 5% during the next 5 years. Representations and Warranties: Customary for credit agreements of this nature, with respect to BRH, LLC and the Company and its subsidiaries including but not limited to 1. Corporate existence 2. Corporate and governmental authorization; no contravention; binding effect 3. No encumbrances except permitted leases 4. Accuracy of information 5. No material adverse change 6. Environmental matters 7. Compliance with laws, including ERISA 8. No material litigation 9. Existence, incorporation, etc. of subsidiaries 10. Payment of taxes 11. Full disclosure Conditions to Closing: Customary in credit agreements of this name, including but not limited to: 1. Absence of default 2. Accuracy of representations and warranties 3. Negotiation, execution and delivery of a loan agreement, promissory notes, guaranties, security agreements, stock pledged and collateral and other documentation reasonably satisfactory to Comerica and its counsel, containing, subject to Summary of Terms and Conditions, customary conditions, covenants, warranties, remedies and other provisions including, without limitation, the conditions, covenants, warranties and provisions described herein in the Summary of Terms and Conditions. 4. Delivery to the Agent of a pro forma Borrowing Base and Covenant Compliance Certificate as of the date of close. 5. Comerica's receipt of historical financial information to include April, May and June 2000 results. Comerica's receipt of a pro forma unaudited consolidated opening balance sheet, giving effect to the stock purchase by TCR's affiliate for $9.25 all of the shares of stock of Business Resource Group and the closing of any Permitted Subordinated Indebtedness and/or Preferred Stock together with projected financial information acceptable to Comerica Bank. 6. Receipt of Management Agreement(s) between Company and management, shareholders and affiliates (or any other Agreement(s) with its affiliates of officers) which have terms and conditions acceptable to Comerica. 7. Fairness opinion, and any such other opinions required that are related to the Facilities and the transaction, at the discretion of Comerica Bank to be provided prior to closing by party acceptable to Comerica Bank. 8. Company (to be renamed Business Resource Group, Inc.) shall be the surviving entity of the merger of Business Resource Group and BR Acquisition Corp. and direct owner of all its subsidiaries. 9. Three Cities Research, Inc., Three Cities Fund III, L.P., its affiliate(s) (collectively "TCR") and Key Management shall be direct owners of 100% of the units of BR Holdings, LLC which shall be the direct owner of 100% of the capital stock of Business Resource Holdings, Inc. which shall be the direct owner of 100% of the capital stock of the Company. - -------------------------------------------------------------------------------- Comerica Bank, as Agent (v) [LOGO] CONFIDENTIAL BUSINESS RESOURCE GROUP Collateral Reporting: Company must provide consolidated monthly borrowing base certificates, monthly accounts receivable agings, inventory reports, fixed asset reports, and accounts payable agings report in detail acceptable to Agent within 20 days of the month end. Additionally, the Agent will conduct up to two collateral audits annually, at Company's expense. Covenants: Customary in credit agreements of this nature, with respect to the Company and its subsidiaries, including but not limited to: 1. Annual year end audited (by a CPA firm acceptable to the Agent) consolidated and consolidating financial statements providing detail acceptable to Agent within 90 days of the fiscal year end. Quarterly (Agent reserves the right to require monthly) company prepared consolidated and consolidating financial statements and compliance certificate, with covenant calculations, providing detail acceptable to Agent, and quarterly backlog reports within 45 days of the end of each fiscal quarter. Annual audited financial statements of BRH and LLC within 90 days of their fiscal year end. Additional information including but not limited to annual financial projections acceptable to the Agent (to include balance sheets, income statements, statements of cash flows and underlying assumptions). The agent reserves the right to assess a late reporting fee of $500 per day, per report, including the collateral reports above. 2. Payment of obligations 3. Maintenance of property; insurance coverage 4. Conduct of business; maintenance of existence 5. Compliance with laws, including ERISA and environmental regulations 6. Inspection of property, books and records at Company's expense 7. Restrictions on liens and other indebtedness 8. Limitations on Guaranties 9. Limitations on consolidations, mergers, and sales of assets 10. Limitations on investments, loans and advances 11. Limitations on cash dividends. 12. Limitations on management compensations, fees and rents per Management Agreements 13. Limitations on use of proceeds 14. Capital Expenditures limited to $2.0 million per annum, exclusive of acquired companies. 15. Negative pledge of Company capital stock, no further negative pledges 16. Prohibition on Mergers or Acquisitions, except for Permitted Acquisitions. Permitted Acquisitions shall include those which meet the following requirements: (1) total purchase price (including seller notes and potential earnouts, but excluding reasonable transaction fees) shall not exceed $5,000,000, (ii) immediately before and after giving effect to such acquisition, the Pro Forma Total Funded Debt to Pro Forma Consolidated EBITDA and Pro Forma Senior Funded Debt to Pro Forma Consolidated EBITDA shall be at least 0.25 below the level required under the Agreement on a pro forma basis acceptable to Agent (iii) both before and after giving effect to such merger or acquisition, the Company is able to borrow at least $5,000,000 of availability under the Revolving Credit Facility, (iv) the target of such merger or acquisition is in the same line of business as the Company (v) the target of such merger or acquisition shall not be or ever have been in any bankruptcy proceeding. (vi) No default or Event of Default shall exist immediately before and after giving effect of such merger or acquisition (vii) Company shall be the surviving entity (vii) as soon as available but prior to the consummation of such merger or acquisition, the Company shall have provided to the Agent an opinion of counsel - -------------------------------------------------------------------------------- Comerica Bank, as Agent (vi) LOGO CONFIDENTIAL BUSINESS RESOURCE GROUP that such merger or acquisition complies with this Agreement, all laws and regulations and that any other conditions under this Agreement relating to such transaction have been satisfied, such certificate shall contain such other information and certifications as requested by the Agent and be in form and substance satisfactory to the Agent (ix) at least 10 Business days prior to the consummation of such merger or acquisition, the Company shall have delivered all acquisition documents and other agreements and documents or information relating to such merger or acquisition reasonably requested by Agent in form and substance satisfactory to Agent, and a certificate of the Chief Financial Officer or Treasurer of the Company together with pro forma computations acceptable to Agent which demonstrate compliance with all financial covenants hereunder from the consummation date of the acquisition through expiration of the Credit Facility and the Agent shall have completed a satisfactory review thereof and completed such other due diligence satisfactory to the Agent. Major Financial Covenants with respect to Company: 1. Minimum Current Ratio of .75:1.0, tested quarterly 2. Maximum Total Funded Debt Ratio, tested quarterly, as follows: 4.00:1.0 from closing through July 31, 2001 3.50:1.0 from October 31, 2001 through July 31, 2002 3.0:1.0 thereafter 3. Maximum Senior Funded Debt Ratio, tested quarterly, as follows: 2.75:1.0 from closing through July 31, 2001 2.50:1.0 from October 31, 2001 through July 31, 2002 2.00:1.0 thereafter 4. Minimum Senior Fixed Charge Coverage Ratio, tested quarterly, as follows: 1.20:1.0 from closing through October 31, 2003 1.40:1.00 thereafter. 5. Minimum Total Fixed Charge Coverage Ratio, tested quarterly, as follows: 1.25:1.0 from closing and thereafter. 6. Minimum Consolidated Net Worth of $47,400,000 closing, increasing by 75% of Consolidated Net Income plus 100% of the net proceeds of any sale of equity. 7. Minimum Tangible Effective Net Worth of $3,000,000 at closing, increasing to $5,000,000 at October 31, 2000 and thereafter, tested quarterly. 8. Total Senior Funded Debt under these Facilities shall not exceed $45,000,000 at any time. Definitions Total Funded Debt Ratio is defined as the ratio of Total Debt to Consolidated EBITDA where Total Debt is defined as all consolidated interest bearing obligations including outstandings under the Facility, letters of credit, seller notes, Permitted Subordinated Indebtedness, captial lease obligations, any obligation secured by a lien, guaranties or other contingent liabilities. Senior Funded Debt Ratio is defined as the ratio of Total Senior Debt to Consolidated EBITDA where Senior Debt is defined as all consolidated interest bearing obligations including outstandings under the Facility, letters of credit, seller notes, capital lease obligations, any obligation secured by a lien, guaranties or other contingent liabilities. - -------------------------------------------------------------------------------- Comerica Bank, as Agent (vii) [LOGO] CONFIDENTIAL BUSINESS RESOURCE GROUP Consolidated EBITDA shall be defined as earnings before interest expense, income tax expense, depreciation expense and amortization expense on a consolidated basis calculated for the preceeding four quarters. Prior to closing, EBITDA shall be 200% of the actual EBITDA for the previous 6 months. For the quarter ending October 31, 2000 Consolidated EBITDA shall be 133-1/3% of actual Consolidated EBITDA for the previous nine month period. Solely for the purpose of calculating Senior or Total Funded Debt Ratios during any four quarter period which a Permitted Acquisition has occurred (x) EBITDA determined for the entity or business acquired shall be included in the calculation hereof, as if such Permitted Acquisition occurred on the first day of such four quarter period and (y) any Permitted Adjustments related to a Permitted Acquisition shall be added back during the rolling four quarter period which includes the date of the Permitted Acquisition. Permitted Adjustments shall be determined by Agent prior to closing of acquisition. Senior Fixed Charge Coverage Ratio is defined as the ratio of Consolidated EBITDA to Consolidated Senior Fixed Charges. Total Fixed Charge Coverage Ratio is defined as the ratio of Consolidated EBITDA to Consolidated Total Fixed Charges. Consolidated Senior Fixed Charges shall be defined as Consolidated Senior Interest Expense plus scheduled payments of all Debt (including the principal portion of scheduled payments of Capital Lease obligations), plus all accrued/paid earnouts plus tax expense, for the preceding four quarters. Consolidated Total Fixed Charges shall be defined as Consolidated Senior Interest Expense plus interest expense paid on Permitted Subordinated Indebtedness, scheduled principal payments of all Debt (including the principal portion of scheduled payments of Capital Lease obligations), plus all accrued/paid earnouts, plus tax expense, for the preceding four quarters. Consolidated Senior Interest Expense is defined as interest expense on senior credit facilities, plus interest expense on capital lease obligations, capitalized interest, and all facility or recurring fees associated with the Facility for the preceding four quarters. Consolidated Net Worth shall be as defined in accordance with GAAP plus Permitted Subordinated Indebtedness. Tangible Effective Net Worth is defined as the consolidated Net Worth (plus Permitted Subordinated Indebtedness), less all intangibles including, but not limited to goodwill, capitalized organizational and financing costs, patants, copyrights, loans to officers and employees, and investments in businesses not 100% owned or related to the Borrower's current business activities. The Current Ratio is defined as Current Assets divided by Current Liabilities, where Current Liabilities include outstandings under the Revolving Credit Facility, but excluding outstanding Letters of Credit. Other current assets and liabilities per GAAP. All loan documents shall be prepared by and satisfactory in form and substance to Agent and Agent's counsel and will be consistent with this Term Sheet. Pricing adjustments (based on grids) will be prospective only, with no rebate or drawback. - -------------------------------------------------------------------------------- Comercia Bank, as Agent (viii) [LOGO] CONDIDENTIAL BUSINESS RESOURCE GROUP Events of Default: Customary in credit agreements of this nature, including but not limited to the following: 1. Failure to pay any interest, fees or principal, under the Agreement when due 2. Failure to meet covenants 3. Representations or warranties false in any material respect when made 4. Cross default to other Indebtedness of the Company 5. Change of ownership or control whereby TCR ownership is less than 51% of the capital or voting stocks, or TCR does not maintain a majority control of the Board of Directors. 6. Other usual defaults after applicable grace periods, with respect to the Company or its subsidiaries, including but not limited to insolvency, bankruptcy, ERISA and judgment defaults. Assignment and Participation Banks will have the right to sell participations in their loans or commitments with the transferability of voting rights limited to changes in principal, rate, fees and term. Assignments, which must be in amounts of at least $5,000,000 (or their entire remaining amount), will be allowed (subject to administrative fee payable by assigning bank) with the consent of Company and Agent, such consent not to be unreasonably withheld or delayed. No consent of the Company will be required after an Event of Default. Participations and assignments will also be allowed within the Bank Group and to a banks' affiliates without Company consent. Indemnification and Expenses: Company will idemnify the Banks, including but not limited to, following any event of default, against all losses, liabilities, claims and damages relating to their loans, the Company's use of loan proceeds or the commitments, including reasonable attorney's fees, except as such result from the indemnitiees' gross negligence or willful misconduct. All fees and costs, including reasonable attorney fees, incurred by Agent in connection with negotiation of the credit facility, preparation of loan documents and closing and funding of the credit facility, and in connection with any amendments, revisions, consents, waivers or any enforcement, preservation or protection of rights will be paid by the Company subject to the terms outlined in the Agency Fee Letter, and Administrative Agency Fee Letter. Majority Banks: Any amendment, consent or waiver will require approval of 60% of the Banks' aggregate commitments unless the commitments have been terminated in which case it will be based on the Bank's aggregate loans outstanding, except that approval of all Banks shall be required for changes in the amount of any bank's commitment, extensions of maturity, reductions of interest, principal, fees or release of collateral, or any guaranties and certain specified matters. Governing Law: State of California or Michigan at sole discretion of Comerica Bank Agent reserves right to determine final allocations and when to close syndicate offering. Closing on loan facility subject to prior receipt by Agent of all necessary legal options, and government and third party permits, licenses and approvals. - -------------------------------------------------------------------------------- Comerica Bank, as Agent (ix) [LOGO] CONFIDENTIAL Business Resource Group BR Acquisition Corp. APPLICABLE MARGIN GRID $40,000,000 Revolving Credit Facility $8,000,000 Term Loan Facility $8,000,000 Acquisition Term Loan Facility (basis points per annum)
Basis for Pricing LEVEL I LEVEL II* LEVEL III ----------------- ------- --------- --------- Senior Funded Debt Ratio Less than 2.00:1.0 Greater than 2.00:1.0 Greater than 2.50:1.0 But less than 2.50:1.0 Commitment Fee-R/C 37.50 37.50 37.50 Eurodollar Margin-R/C 225.00 275.00 325.00 Commitment Fee-Acquisition T/L 50.00 50.00 50.00 Eurodollar Margin-T/L and Acquisition T/L 275.00 325.00 375.00 Base Rate Margin-R/C 0.00 0.25 0.50 Base Rate Margin-T/L and Acquisition T/L 0.50 0.75 1.00 ------- ------ ------ Letters of Credit Issuance Fees 225.00 275.00 325.00 ======= ====== ======
* Level II is anticipated to be in effect at closing. - -------------------------------------------------------------------------------- Comerica Bank, as Agent (x) [LOGO] EX-99.(C)(2) 3 0003.txt MERRILL LYNCH BOARD PRESENTATION Strictly Confidential Presentation to the Special Committee of the Board of Directors of Business Resource Group July 6, 2000 [MERRILL LYNCH LOGO] - -------------------------------------------------------------------------------- Page 1 Transaction Summary - -------------------------------------------------------------------------------- o Two-Step Structure Cash tender offer at $9.25 per share (the "Transaction Price") of Business Resource Group (the "Company") common stock (the "Shares") by a newly formed affiliate corporation ("Purchaser") of Three Cities Research ("TCR"), followed by a back-end cash merger at $9.25 per Share o Commencement of Tender Offer Tender offer to commence within five business days of public announcement o Tender Offer Schedule Initial expiration date for tender offer will be 20-25 business days following commencement; may be extended until 60 days following commencement to permit satisfaction of closing conditions o Principal Tender Offer Closing Conditions o Tender of at least 51% of the outstanding Shares not owned by TCR affiliates (or as to which TCR has a binding agreement to acquire) o Tender of at least 53.5% of the outstanding Shares o No material disruptions in US capital markets o Representations and warranties of Company remaining true o Compliance by Company with its obligations under the Plan and Agreement of Merger (the "Merger Agreement") o No withdrawal or adverse modification of Company board's recommendation of transaction o Absence of Financing Condition Need to obtain third-party financing is not a condition to consummation of transaction o Reincorporation Merger If the number of Shares tendered exceeds the minimum tender condition described above, but is less than 90% of the Shares outstanding, as an interim step, Company will reincorporate into the State of Delaware and then, as the final step, merge with Purchaser [MERRILL LYNCH LOGO] - -------------------------------------------------------------------------------- Page 2 Transaction Summary - -------------------------------------------------------------------------------- o No solicitation During pendency of transaction, Company and its advisors will be prohibited from soliciting additional third-party interest in the acquisition of the Company; however, they will be permitted to fully respond to any unsolicited communication, and if deemed appropriate in light of the board's fiduciary duties, the Company's board will be permitted to withdraw its recommendation of the transaction o Antitrust filing Transaction will be subject to review by US federal government under HSR Act o Principal Termination Rights o Breach of representation or warranty under Merger Agreement or failure of a closing condition o By Company, in order to accept a Superior Proposal (as defined in the Merger Agreement) o Termination Fees If Company terminates to accept a Superior Proposal, Company will be required to pay a termination of $750,000 to Purchaser and reimburse Purchaser for its expenses (up to $500,000) in connection with transaction o Organization of Acquisition Corporation TCR will form a limited liability company ("Holdings") which will indirectly hold 100% of the equity of Purchaser o Contributions by Company Management Two members of Company management, Brian McNay and Jeffrey Tuttle, will enter into agreements with Holdings pursuant to which they will contribute a total of approximately 320,000 Shares to Holdings in exchange for equity units in Holdings. Two other members of management, John Peth and John Palmer, will acquire units of Holdings in consideration of the cancellation of a portion of their Company stock options or the contribution of cash [MERRILL LYNCH LOGO] - -------------------------------------------------------------------------------- Page 3 Transaction Summary - -------------------------------------------------------------------------------- o TCR Financing One or more TCR funds will contribute, or arrange for the contribution of, at least $31 million, in the form of cash or demand notes, to Purchaser. Affiliates of TCR will also commit to at least $15 million in subordinated, mezzanine debt financing for the acquisition. And finally, Purchaser will receive a commitment of $45 million in senior debt financing from Comerica Bank--California Transaction Summary Source: Outside counsel to the Special Committee of the Board of Directors of the Company [MERRILL LYNCH LOGO] - -------------------------------------------------------------------------------- Page 4 Valuation Analysis - -------------------------------------------------------------------------------- Historical Stock Performance [GRAPHIC OMITTED] Source: Factset Research Systems [MERRILL LYNCH LOGO] - -------------------------------------------------------------------------------- Page 5 Valuation Analysis - -------------------------------------------------------------------------------- Premium Analysis Per Share Share Price Premium --------- ----------- ------- Transaction Price $9.25 NA 7/5/00 Price $6.50 42% 52 Week High $9.00 3% 52 Week Low $2.87 222% Source: Price information from Factset Research Systems [MERRILL LYNCH LOGO] - -------------------------------------------------------------------------------- Page 6 Valuation - -------------------------------------------------------------------------------- Historical Financial Summary Sales [BAR GRAPH] Adjusted EBITDA [BAR GRAPH] EPS [BAR GRAPH] Source: 1997-1999, Company Form 10K for the year ended October 31, 1999; LTM 3/31/00, unaudited financial statements for March 31, 1999 and March 31, 2000 provided by Company management; Confidential Offering Memorandum prepared by Huntington Holdings, Inc. [MERRILL LYNCH LOGO] - -------------------------------------------------------------------------------- Page 7 Valuation - Discounted Cash Flow - -------------------------------------------------------------------------------- Summary of Financial Projections
Key Assumptions 2000 2001 2002 2003 2004 --------------- ---- ---- ---- ---- ---- Sales Growth 56.5% 25.1% 22.0% 10.5% 10.5% EBITDA margins 6.6% 8.6% 8.6% 8.6% 8.6% EBIT margins 5.6% 7.8% 7.5% 7.4% 7.4% Adjusted working capital (% Rev) 13.1% 13.1% 13.1% 13.1% 13.1% Capital expenditures $1.3 $1.0 $2.0 $2.3 $2.5 Cash paid in acquisitions $6.7 $5.7 $6.9 $8.4 $11.1
Forecast 2000E 2001E 2002E 2003E 2004E -------- ----- ----- ----- ----- ----- Sales $195.6 $244.7 $298.5 $329.8 $364.3 EBITDA (a) $13.0 $21.1 $25.7 $28.4 $31.3 EBIT (a) $11.0 $19.1 $22.3 $24.4 $27.0 (a) Excludes special items
Source: Confidential Offering Memorandum prepared by Huntington Holdings, Inc.; Revised Forecast of Fiscal 2000 and Fiscal 2001, dated May 15, 2000 provided by Company management; discussions with Company management. [MERRILL LYNCH LOGO] - -------------------------------------------------------------------------------- Page 8 VALUATION ANALYSIS - -------------------------------------------------------------------------------- Selected Comparable Company Analysis
Market Value Market Cap. as a Multiple of: as a Multiple of: ----------------- ----------------- LTM LTM Price Shares Market Market Net to Cash LTM LTM Companies (07/05/00) (millions) Value Can. (a) Common Flow (b) EBITDA EBIT --------- ---------- ---------- ----- -------- ------ -------- ------ ---- Hon Indlistries $ 24.81 60.15 $ 1,492.5 $ 1,731.7 14.9x 8.6x 7.4x 10.4x Kimball International -C1 B $ 15.00 40.20 $ 603.0 $ 510.9 12.2x 6.7x 4.5x 7.2x Miller (Herman) Inc $ 27.36 78.57 $ 2,149.6 $ 2,323.7 15.5x 9.4x 7.7x 10.3x Mity-Lite Inc $ 12.75 4.82 $ 61.4 $ 55.3 13.5x 10.7x 7.4x 8.3x Open Plan Systems Inc $ 1.88 4.40 $ 8.3 $ 11.6 5.2x 6.7x 6.Ox 12.9x Steelcase Inc $ 17.31 151.16 $ 2,616.9 $ 2,995.1 15.3x 8.4x 7.lx 10.6x Reconditioned Systems Inc $ 2.80 1.33 $ 3.7 $ 2.8 4.Ox 3.7x 2.6x 2.9x -------------------------------------- Maximum 15.5x 10.7x 7.7x 12.9x Mean 11.5 7.7 6.1 8.9 -------------------------------------------------- Median 13.5 8.4 7.1 10.3 -------------------------------------------------- Minimum 4.0 3.7 2.6 2.9
(a) Market Capitalization = Market Value + Preferred Equity at Liquidation Value (Incl. Redeemable) + Short-Term Debt + Long-Term Debt + Minority Interest - Cash & Marketable Securities (b) Cash Flow = Income Available to Common Shareholders + Depreciation, Depletion & Amortization + Deferred Taxes - Unremitted Earnings of Unconsolidated Subsidiaries [MERRILL LYNCH LOGO] - -------------------------------------------------------------------------------- Page 9 VALUATION ANALYSIS - -------------------------------------------------------------------------------- M&A Transaction Analysis
Effective Offer Enterprise Date Target Acquiror Value Value Consideration (c) - --------- ---------------------------- ----------------------------- ------- ---------- ------------------------ 11/9/99 Baquet-Pastrijak Inc. Business Resource Group $4.4 $4.4 Cash, debt stock; earnout 8/3/99 Modern Office Interiors Business Resource Group 0.9 1.4 Cash, debt stock; earnout 2/2/99 Re'Nu Office Systems Inc. Business Resource Group 4.1 5.1 Cash, debt stock; earnout 5/26/98 Office Furniture Networking Business Resource Group 3.5 3.3 Cash, stock; earnout Pending DO Group, Inc. Mity-Lite Inc. 5.8 6.8(a) Cash and assumed debt 4/9/99 The CenterCore Group, Inc. Mity-Lite Inc. 5.3 7.3 Cash and assumed debt 4/26/99 Steelcase Strafor S.A. Steelcase Inc. 225.2 325.2 Cash 11/4/99 Knoll Inc. Warburg, Pincus Ventures Inc. 1,147.7 1,200.6(b) Cash Offer Value As a Enterprise Value a Multiple Of: As a Multiple Of: ---------------- ----------------- LTM Effective Net To LTM LTM Date Common EBITDA EBIT - --------- ---------------- ------- ---- 11/9/99 8.3 x N/A x 5.0 x 8/3/99 12.2 N/A 11.2 2/2/99 16.5 N/A 10.8 5/26/98 12.8 7.8 8.2 Pending N/A N/A N/A 4/9/99 NM NM NM 4/26/99 12.6 N/A 9.8 11/4/99 12.5 5.8 6.9 ----------------------------------------- Max 16.5 x 7.8 x 11.2 x Mean 12.5 x 6.8 x 8.6 x ------------------------------------------------ Median 12.5 x 6.8 x 9.0 x ------------------------------------------------ Min 8.3 x 5.8 x 5.0 x
(a) Acquisition of 50.1% interest in DO Group, Inc. not already owned by Mity-Lite Inc. (b) Acquisition of 40% interest not alreadv owned by Warburg, Pincus Ventures Inc. (c) The PV of the maximum potential earnout payments were included in the transaction values indicated. [MERRILL LYNCH LOGO] - -------------------------------------------------------------------------------- Page 10 Valuation Analysis - -------------------------------------------------------------------------------- Valuation Summary Methodology Equity Value per Share ----------- ---------------------- Discounted Cash Flow Analysis $7.29 - $8.87 Market Comparable Analysis $6.23 - $7.49 M&A Transaction Analysis $6.80 - $7.20 [MERRILL LYNCH LOGO] - -------------------------------------------------------------------------------- Page 11 -----END PRIVACY-ENHANCED MESSAGE-----