CrossFit Anthos Greg Equity Loans TRO excerpt
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Transcript of CrossFit Anthos Greg Equity Loans TRO excerpt
EFiled: Sep 19 2012 11:22A Transaction ID 46521214 Case No. 7717-VCG
EXHIBIT 15
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Blair Connelly
Direct Dial: +1.212.906.1658
LATHAM&WATKINS LLP
July 30, 2012
VIA FACSIMILE AND FEDERAL EXPRESS
Eff Martin Anthos Capital 707 Menlo Avenue, Suite 210 Menlo Park, CA 94025 Phone:(650)212-4100 Fax:(650)212-2798
Thomas Healey Anthos Capital 310 South Street Morristown, NJ 07960 Phone:(973)656-1818 Fax:(973)656-1880
Re: CrossFit Inc.
Dear Messrs. Martin and Healey:
I am writing on behalf of my client CrossFit, Inc. ("CrossFit" or the "Company") regarding an email sent by one of your managing partners, Mr. Bryan Kelly, on June 20, 2012 to Greg Glassman, the CEO and President of CrossFit. By way of background, in case you do not know, Mr. Glassman and his wife Lauren Jenai Glassman, a co-owner of the Company, are in the middle of a divorce proceeding that has been pending for some time now.
Mr. Kelly's email referenced a "definitive agreement" for Anthos Capital ("Anthos") to purchase 50% of Crossfit from Lauren Jenai. However, Ms. Jenai does not have the unilateral right to sell any portion of the Company. Moreover, as explained below, we have serious concerns regarding Anthos' dealings with Ms. Jenai.
First, Ms. Jenai and Mr. Glassman own CrossFit as community property. It is an indivisible asset and neither Mr. Glassman nor Ms. Jenai has a unilateral right to sell any portion of it. That is particularly true given the pendency of divorce proceedings between them. Indeed, a Preliminary Injunction (attached hereto as Exhibit A) enjoining the "transferring, encumbering, concealing, selling or otherwise disposing o f Mr. Glassman's and Ms. Jenai's community property has been entered in that case. If in fact Anthos has entered into an agreement to purchase shares of CrossFit from Ms. Jenai, that proposed transaction and any encumbrance already imposed on CrossFit's shares would appear to violate the Preliminary Injunction.
July 30, 2012 Page 2
LATHAM&WATKINS^
It is equally important to note that since last June, Mr. Kelly has made repeated offers on behalf of Anthos to make an equity investment in CrossFit. During that time, CrossFit's senior management met with Mr. Kelly on a number of occasions, discussed the Company's operations with him in broad terms, offered to educate him on CrossFit, and tried to help Mr. Kelly and Anthos understand the Company's ethos and business plan. Mr. Kelly repeatedly asked to see confidential business information, including significant contracts with third parties. While CrossFit management did not provide Mr. Kelly with any confidential materials, it welcomed his interest in the Company and engaged in a frank and open exchange of ideas. CrossFit, however, repeatedly made clear to Mr. Kelly that it was not seeking any additional equity investors, that his persistent suggestions regarding CrossFit's operations were inconsistent with the Company's established model and its core values, and that going forward with those suggested plans would be extremely damaging to the Company and its brand.
During the course of Mr. Kelly's discussions with CrossFit's senior management and strategic advisors, he gave express assurances that Anthos would not seek to engage in any hostile efforts to acquire an interest in the Company, and, more specifically, would not exploit the dissolution of Mr. Glassman's and Ms. Jenai's marriage to that end. On June 22, 2011, Mr. Kelly wrote an email to Brian Mulvaney (a strategic advisor to CrossFit's Chief Executive Officer) stating, "The last situation you want to find yourself in is one in which an investor/company you do not trust convinces Lauren to sell her share (while I will never approach Lauren out of respect for you, don't expect others to hesitate to do so) and then you are stuck in a 50-50 ownership structure with a 3rd party who possesses the ability to create gridlock." It now appears that Anthos has done exactly what Mr. Kelly gave his word, in writing, that it would not do.
Mr. Kelly's duplicity of course heightens our concerns regarding Anthos' conduct in its attempt to acquire an equity stake in CrossFit. We are particularly concerned that Ms. Jenai may have provided Anthos with confidential CrossFit information (without CrossFit's consent or even knowledge) in the course of her negotiations with Anthos, including confidential contracts with third parties. Such conduct could expose the Company to potential liability, and also raises serious fiduciary duty issues. Mr. Kelly's solicitation of such materials from Ms. Jenai could constitute tortious interference with contract and/or aiding and abetting breach of fiduciary duty.
Moreover, we have been informed,that Mr. Kelly, acting on behalf of Anthos, has already compromised the Company in several ongoing business initiatives with third parties by announcing a "partnership" and contacting CrossFit staff. Such assertions are obviously false and constitute improper interference with the Company's ongoing and prospective business.
In light of the present circumstances, we formally request that you provide us with an inventory of any documents and information that Anthos has received from Ms. Jenai or her representatives so that we may assess more fully whether Ms. Jenai and Anthos have caused any breach of CrossFit's contractual obligation.s, and how best to cure or mitigate any such breaches. We also hereby demand that you take immediate steps to retain all documents (both written and electronic, including email and audio or video recordings, or other means of securing and storing such data) in anticipation of that litigation. We further demand that Anthos cease and desist
NYN3644180.4
July 30, 2012 Page 3
LATHAM&WATKINS"p
from any further false statements regarding CrossFit and from any further interference with CrossFit's business. By copy of this letter to her counsel, we make the same requests to Ms. Jenai.
CrossFit reserves all of its rights and remedies.
Sincerely,
cc: Brian Kelly (via email only) Daniel J. Bergeson, Esq. (via email and Federal Express) Grace Y. Park, Esq. (via email and Federal Express)
NYY3644180.4
EXHIBIT 16
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Harvey S. Brown, Bar No. 002780 AYERS & BROWN, P.C. 4227 North 32nd Street First Floor Phoenix, Arizona 85018 Phone # 602/468-5700 [email protected] Our Tile # 3625.001
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SEP 2012 yt\
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RECEIVED CSH <sj
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Attorneys for Respondent
m THE SUPERIOR COURT OF THE STATE OF ARIZONA
IN AND FOR THE COUNTY OF YAVAPAI
In re the Marriage of
LAUREN J. GLASSMAN,
Petitioner,
vs.
GREGORY A. GLASSMAN,
Respondent.
No. P1300-DO201000275
RESPONSE TO CROSSFIT, INC.'S MOTION TO
INTERVENE AND/OR JOIN IN OPPOSITION TO WIFE'S
MOTION TO ALLOW SALE OF WIFE'S FIFTY PERCENT
SHARE OF CROSSFIT. INC.
Qexti\ ctuo <\\A\\z (Assigned to Hon. Kenton Jones)
Gregory A. Glassman, Respondent/Husband in the above-captioned matter,
by and through his attorney, Harvey S. Brown, respectfully requests that the Court
permit CrossFit, Inc. to intervene in this litigation. The basis of the Response is as
follows:
1. CrossFit, Inc. is a Delaware corporation that has a separate legal
identity from that of its shareholders.
2. The entity is managed by a team which provides separate identifiable
expertise in various areas of CrossFit's business.
3. The team devotes substantial time, effort and energy in conducting
CrossFit's affairs and was promised by Lauren J. Glassman and Gregory A.
Glassman that their business model would always include them in CrossFit's
decisions.
PL,
o
I 5
4. Since the filing of the Petition for Dissolution of Marriage in March
2010, which terminated the community, and the resignation of Lauren J. Glassman
as an employee of CrossFit, Inc., Respondent/Husband may have a sole and
separate lien upon it as a result of his efforts after the service of the Petition.
5. The Petitioner/Wife has filed a separate action in the State of
Delaware against CrossFit, Inc. Clearly, the filing of such an action demonstrates
her adversarial interest to CrossFit. This action was filed without even an attempt
to follow the corporate bylaws or requesting a stockholder/director meeting in order
to attempt to challenge Mr. Glassman's authority.
6. CrossFit needs a voice separate and apart from its stockholders and
that voice should be heard by the Court. If the Court determines that CrossFit Inc.
should not be joined in the present action, then Respondent/Husband can protect
CrossFit's separate legal identity by purchasing Wife's interest therein for
$16,092,000.00 which is the net sum Petitioner would receive if the sale to Anthos
was approved. This sum would be payable in cash. Attached "Exhibit 1" is
evidence of Respondent/Husband's financial worthiness which would ensure
payment to Petitioner upon entry of the Decree. The Respondent/Husband asserts
that this is consistent with the policy set forth in Biddulph v, Biddulph, 147 Arizona
571, 71 lP2d 1244 (1985).
WHEREFORE, it is respectfully submitted that the Court should permit
CrossFit, Inc. to intervene in this litigation and should consider CrossFit's position
prior to entering an Order relative to Petitioner's Motion for Sale of her interest in
this entity.
DATED this "^ day of September, 2012.
AYERS & BROWN, P.C.
larvey S. Brown torneys for Respondent
2 -
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Original filed and a copy delivered this " J day of September, 2012 to:
Honorable Kenton Jones Yavapai County Superior Court
Copy mailed this * y day of September, 2012
to:
Christina Hamilton The Cavanagh Law Firm 1850 N. Central Ave. Suite 2400 Phoenix, AZ 85004 Attorney for Petitioner
Jeffrey Sparks Law Offices of Jeffrey W. Sparks 125 Grove Ave. Prescott,AZ 86301 Attorney for Petitioner
Mitchell Reichman Jaburg & Wilk, P.C. 3200 N. Central Ave., Suite 2000 Phoenix, AZ 85012 Attorney for Intervenor CrossFit, Inc.
By M < ^ i (V7*n5^
-3
EXHIBIT 1
It
Confidential Preliminary Indication of Interest
September 4,2012
Greg Glassman Chief Executive Officer CrossFit, Inc. 1250 Connecticut Avenue* NiW., Suite 200 Washington, DC20036 Re: CrossFit, Inc.
Dear Greg,
Based on the materials you have shared with us and our review to date, we are pleased to provide you with the attached preliminary proposal ("Term Sheet"; terms used herein and not otherwise defined shall have the meanings ascribed to them in the Term Sheet) for financing the .acquisition by you of CrossFit, Inc. (the "Transaction").
As outlined in the Term Sheet, THL Credit Advisors LLC ("THL Credit"), or affiliates thereof (collectively, "We", "us" or "our") are interested, ip investing up to. $17-0 million of senior secured term Joan debt (our "Potential Inyestmenf), representing
~|as of Closing.
Please note that our Term Sheet is subject, to our investment committee's approval of our Potential Investment as well as business, firtahei'ai, legal and other diligence items that have yet to be performed. Please give me a call at 617-790-6015 If you would like to discuss further.
Regards,
Christopher J. Flynn Managing Director THL Credit Advisors LLC 100 Federal Street, 31.stFloor Boston, MA 02110
feiWIifc EQUITY September 5,2012
CONFIDENTIAL Greg Glassman
Chief Executive. Officer Crossfit, Inc.
1250 Connecticut Avenue, N.W., Suite 200 Washington, DC 20036
Dear Mr. Glassman:
Level Equity Management, LLC, together with their affiliates (collectively "Level" or "Level Equity") is pleased to submit this non-binding proposal to provide financing to Crossfit, Inc. ("Crossfit" or the "Company").
We appreciate the opportunity to have reviewed financial and operational information relating to the historical and projected performance of Crossfit and to have discussed the business, its history and prospects with several members0f your senior teart^ Based on our review, we rernain Jiighly confident̂ that we will be able to provide financing to the business in a rapid time frame. Level currently has $130 million in' committed capital with over $90 million of available funds.
The attached proposal summarizes the primary terms of our proposed investment.
Sincerely,
LEVEL EQUITY MANAGEMENT, LLC
Name: • Benjamin S. Levin Title: Co-CEO
Level Equity Management, LLC 140 East 45* Street, 14th Floor, New York, NY 10017
EXHIBIT 17
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IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
LAUREN GLASSMAN,
Plaintiff,
vs .
CROSSFIT, INC., a Delaware corporation, and GREG GLASSMAN,
Defendants.
Civil Action No. 7717-VCG
Chancery Court Chambers Court of Chancery Courthouse 34 The Circle Georgetown, Delaware Wednesday, September 5, 2012 10:00 a.m.
BEFORE: HON. SAM GLASSCOCK, III, Vice Chancellor
TELEPHONIC ORAL ARGUMENT AND THE COURT'S RULING
CHANCERY COURT REPORTERS 34 The Circle
Georgetown, Delaware 19947 (302) 856-5645
APPEARANCES: (via telephone)
PHILIP TRAINER, JR., ESQ. Ashby & Geddes, P.A.
-and-GRACE Y. PARK, ESQ. of the California Bar Bergeson, LLP
for Plaintiff
RAYMOND J. DICAMILLO, ESQ. KEVIN M. GALLAGHER, ESQ. Richards, Layton & Finger, P.A.
-and-BLAIR G. CONNELLY, ESQ. KYLE L. WALLACE, ESQ. of the New York Bar Latham & Watkins LLP
for Defendants
75
was a breach of fiduciary duty or some other issue, if
that is the case, then there can't be irreparable
harm, and we should simply go forward to a
determination of the legal issues. And I don't need a
preliminary injunction hearing.
So I expect both sides to get
together. Mr. DiCamillo, you are obviously going to
have to demonstrate those two things. I don't think
the letter itself has done it. But it seems to me
likely that, if that's the case, we are not going to
need a preliminary injunction hearing at the end of
September. So that changes the whole structure of
this matter it seems to me.
Second, I would appreciate some
briefing on the issue of choice of law and the
application of these two doctrines under California
law, if that proves to be the case. I also think I
need a privilege log in order to resolve these
questions in a reasonable manner. So I am going to
direct you to do both of those things on a schedule
that I am going to let you set.
Let me say two preliminary things. It
seems to me unlikely that the common interest doctrine
is going to prevent the production of documents that
CHANCERY COURT REPORTERS
/b
were circulated before there was an agreement when
there was still an adversary position between the
parties, number one, and number two, I have the
authority -- and I intend to exercise it -- to prevent
the production of documents where it appears to me the
primary purpose of that production is to give one of
the parties, Mr. Glassman, a leg up in the litigation.
He certainly is entitled to documents to prosecute in
his cross claims, but not in his position as a bidder
for Miss Glassman's shares. I am concerned about that
issue. And I intend to use my inherent power to
prevent that from happening. I am telling you this
before you do the additional work because it seems to
me that there should be an agreement between the
parties or among the parties as to what is producible.
This case is generating a lot of
motion practice, and it seems to me that it's not
helpful motion practice for the most part. I
understand that there are legitimate issues between
the parties that have to be resolved, some of them
have to be resolved by the Court, but issues such as
the timing of depositions it seems to me, if those are
all referred to the Court, then the process breaks
down and it grinds to a halt.
CHANCERY COURT REPORTERS
CHANCERY COURT REPORTERS
77
My broader point is this, this is, at
its heart, a divorce matter and distribution of assets
between these two individuals. I don't know if there
is any possibility of settlement. I don't know what
is going on in the Arizona Family Court litigation.
But this is turning into a litigation where there is
more litigation than I think is probably warranted.
So I would urge you to get together, try to resolve
the underlying issues if you can. If you can't, try
to resolve the discovery issues, and to the extent you
can't, I am going to require and ask you to put your
heads together and come up with a schedule,
supplemental briefing, and a privilege log on the
common interests and the business strategy doctrines.
But I have given you kind of how I am
looking at the issue now in the hopes that it will aid
your settlement. So I am going to ask you for a time
table, Mr. DiCamillo, within which you can have
affidavits submitted that would tend to obviate the
need for the preliminary injunction hearing.
MR. DiCAMILLO: Certainly, Your Honor.
I think we could get those promptly. As you know,
there is stuff going on in Arizona today. So I
probably can't get them today, but you know,
78
Mr. Connelly can correct me if I am wrong, I don't see
any reason why we can't provide them by the end of the
week .
MR. CONNELLY: I agree.
THE COURT: All right. What I am
going to do is this: If you have your calendars
ready, let me set up another telephone conference in
two weeks, and we can discuss the scheduling going
forward. Two weeks from today would be the 19th. I
can do it in the afternoon of the 19th if that would
suit you.
MR. TRAINER: That's fine by
plaintiff, Your.Honor.
MR. DiCAMILLO: Mr. DiCamillo. It
works for me.
THE COURT: All right. Let's say
1:00, September 19th, we will get back together. In
the meantime, obviously, discuss the discovery issues.
If you can't resolve them promptly, give me a letter
telling me under what schedule you are going to submit
privilege logs and the supplemental briefing, and I
will decide -- as soon as I get those, I will decide
that promptly, I promise you.
Anything else we can do here this
CHANCERY COURT REPORTERS
79
morning?
MR. DiCAMILLO: Not from the
defendants, Your Honor. I think all parties
appreciate the time and patience you've had with us on
this matter.
MR. TRAINER: Absolutely, Your Honor,
for plaintiff, appreciate it.
THE COURT: All right. Well, I
appreciate your willingness to work together. It
sounds like some of these issues may fall away. And,
of course, I am anxious to hear what happens in the
Arizona litigation if I don't talk to you before. If
you need me, obviously, you know how to get a hold of
me. Otherwise, I will talk to you at 1:00 on
September 19th. Thank you very much, counsel.
Good-bye.
(Teleconference concluded at 11:40 a.m.)
CHANCERY COURT REPORTERS
80
CERTIFICATE
I, CHRISTINE L. QUINN, Official
Court Reporter for the Court of Chancery of the State
of Delaware, do hereby certify that the foregoing
pages numbered 3 through 79 contain a true and correct
transcription of the proceedings as stenographically
reported by me at the hearing in the above cause
before the Vice Chancellor of the State of Delaware,
on the date therein indicated.
IN WITNESS WHEREOF I have hereunto set
my hand this 14th day of September, 2012.
/s/ Christine L. Quinn
Official Court Reporter of the Chancery Court
State of Delaware
Certificate Number: 123-PS Expiration: Permanent