<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
CB RICHARD ELLIS SERVICES, INC.
---------------------------------------------
(Name of Issuer)
COMMON STOCK, $0.01 PAR VALUE
---------------------------------------------
(Title of Class of Securities)
12489L108
---------------------------------------------
(CUSIP Number)
FREDERIC V. MALEK
C/O THAYER CAPITAL PARTNERS
1455 PENNSYLVANIA AVENUE, N.W., SUITE 350
WASHINGTON DC, 20004
(202) 371-0150
---------------------------------------------
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
NOVEMBER 10, 2000
---------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
<PAGE> 2
CUSIP No. 12489L108
--------------------------------------------------------------------------------
1. NAME OR REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSON (ENTITIES ONLY)
FREDERIC V. MALEK
--------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X]
(b) [ ]
--------------------------------------------------------------------------------
3. SEC USE ONLY
--------------------------------------------------------------------------------
4. SOURCE OF FUNDS*:
PF
--------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e)
[ ]
--------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION:
United States of America
--------------------------------------------------------------------------------
7. SOLE VOTING POWER
-0-
-----------------------------------------------------------------
NUMBER OF 8. SHARED VOTING POWER
SHARES
BENEFICIALLY 8,929,436 **
OWNED BY -----------------------------------------------------------------
EACH 9. SOLE DISPOSITIVE POWER
REPORTING
PERSON -0-
WITH -----------------------------------------------------------------
10. SHARED DISPOSITIVE POWER
8,929,436 **
-----------------------------------------------------------------
--------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
8,929,436 **
--------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
--------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11):
40.4%**
--------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON
IN
--------------------------------------------------------------------------------
*See Instructions Before Filling Out!
**See Item 5 below
<PAGE> 3
CUSIP No. 12489L108
ITEM 1. SECURITY AND ISSUER
This statement relates to the Common Stock, $.01 par value (the "Common
Stock"), of CB Richard Ellis Services, Inc., a Delaware corporation (the
"Issuer"), having its principal executive offices at 200 North Sepulveda
Boulevard, Suite 300, El Segundo, California 90245.
ITEM 2. IDENTITY AND BACKGROUND.
This Schedule 13D is being filed by Frederic V. Malek ("Malek" or the
"Reporting Person").
Malek is a United States citizen and a Director of the Issuer. His
principal business occupation is Chairman of Thayer Capital Partners. His
business address is Thayer Capital Partners, 1455 Pennsylvania Avenue, N.W.,
Suite 350, Washington DC 20004.
During the past five years, the Reporting Person has not been convicted
of any criminal proceeding (excluding traffic violations or similar
misdemeanors), nor been a party to a civil 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 future
violations of, or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violation with respect to such laws.
As described in Items 3 and 4 below, BLUM CB Corp., ("Newco") submitted a
merger proposal to the Issuer pursuant to which it would, subject to the
conditions set forth in such proposal, merge into the Issuer and the holders of
the Common Stock (other than certain holders described in Item 4 below) would
receive consideration of $15.50 per share in cash in exchange for their shares
of Common Stock. As further described in Items 3 and 4 below, RCBA Strategic
Partners, L.P., a Delaware limited partnership ("Strategic"), FS Equity Partners
III, L.P., a Delaware limited partnership ("FSEP III"), FS Equity Partners
International, L.P. ("FSEP International"), Raymond E. Wirta ("Wirta"), W. Brett
White ("White"), Malek and The Koll Holding Company, a California corporation
("Koll Holding") have entered into a letter agreement, dated as of November 10,
2000 (such letter, the "Letter Agreement") (attached hereto as Exhibit A),
pursuant to which, among other things, the parties to the Letter Agreement other
than Strategic have agreed to certain terms with respect to the their ability to
vote or to dispose of the shares of Common Stock beneficially owned by them. As
a result of the Letter Agreement, the Reporting Person, together with Newco,
BLUM Capital Partners, L.P., a California limited partnership ("BLUM L.P."),
Richard C. Blum and Associates, Inc., a California corporation ("RCBA Inc."),
RCBA GP, L.L.C., a Delaware limited liability company ("RCBA GP"), Richard C.
Blum, the Chairman and a substantial shareholder of RCBA Inc. and a managing
member of RCBA GP (collectively with BLUM LP, RCBA Inc., Strategic, RCBA GP and
Newco, the "BLUM Parties"), FSEP III, FS Capital Partners, L.P., a California
limited partnership ("FS Capital"), FS Holdings, Inc., a California corporation
("FS Holdings"), FSEP International, FS&Co. International, L.P., a Cayman
Islands exempted limited partnership ("FS&Co. International"), FS International
Holdings Limited, a Cayman Islands exempted company limited by shares
("International Holdings"), Bradford M. Freeman ("Freeman"), Ronald P. Spogli
("Spogli"), William M. Wardlaw ("Wardlaw"), J. Frederick Simmons
<PAGE> 4
CUSIP No. 12489L108
("Simmons"), John M. Roth ("Roth"), Charles P. Rullman, Jr. ("Rullman", and
together with FSEP III, FS Capital, FS Holdings, FSEP International, FS&Co.
International, International Holdings, Freeman, Spogli, Wardlaw, Simmons and
Roth, the "FS Parties"), Wirta, White and Koll Holding (collectively with Wirta
and White, the "Other Parties") may be deemed to constitute a group within the
meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended
(together with the rules and regulations promulgated by the Securities and
Exchange Commission thereunder, the "Exchange Act").
The Reporting Person has been advised by the BLUM Parties of the
following information with respect to the BLUM Parties as set forth below:
Newco is a Delaware corporation newly formed by Strategic. The principal
business of Newco is to engage in the Proposed Transaction described in Items 3
and 4 below. The principal business office address of Newco is 909 Montgomery
Street, Suite 400, San Francisco, California 94133.
Strategic is a Delaware limited partnership whose principal business is
investing in securities and whose principal office is 909 Montgomery Street,
Suite 400, San Francisco, California 94133.
RCBA GP is a Delaware limited liability company whose principal business
is acting as the sole general partner of Strategic. The principal business
office address of RCBA GP is 909 Montgomery Street, Suite 400, San Francisco,
California 94133. The names of the managing members and members of RCBA GP,
their addresses, citizenship and principal occupations are as follows:
<TABLE>
<CAPTION>
-------------------------- ---------------------------- ------------- ---------------------------
Principal Occupation or
Name and Office Held Business Address Citizenship Employment
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Richard C. Blum 909 Montgomery Street USA President and Chairman,
Managing Member Suite 400 BLUM LP
San Francisco, CA 94133
-------------------------- ---------------------------- ------------- ---------------------------
Nils Colin Lind 909 Montgomery Street Norway Managing Partner,
Managing Member Suite 400 BLUM LP
San Francisco, CA 94133
-------------------------------------------------------------------------------------------------
Marc T. Scholvinck 909 Montgomery Street USA Partner and Chief
Member Suite 400 Financial Officer,
San Francisco, CA 94133 BLUM LP
-------------------------- ---------------------------- ------------- ---------------------------
Murray A. Indick 909 Montgomery Street USA Partner and General
Member Suite 400 Counsel, BLUM LP
San Francisco, CA 94133
-------------------------- ---------------------------- ------------- ---------------------------
John C. Walker 909 Montgomery Street USA Partner, BLUM LP
Member Suite 400
San Francisco, CA 94133
-------------------------- ---------------------------- ------------- ---------------------------
Kevin A. Richardson, II 909 Montgomery Street USA Partner, BLUM LP
Suite 400
San Francisco, CA 94133
-------------------------- ---------------------------- ------------- ---------------------------
Jeffrey A. Cozad 909 Montgomery Street USA Partner, BLUM LP
Suite 400
San Francisco, CA 94133
-------------------------- ---------------------------- ------------- ---------------------------
Jose S. Medeiros 909 Montgomery Street Brazil Partner, BLUM LP
Suite 400
San Francisco, CA 94133
-------------------------- ---------------------------- ------------- ---------------------------
</TABLE>
<PAGE> 5
CUSIP No. 12489L108
BLUM LP is a California limited partnership whose principal business is
acting as general partner for investment partnerships and providing investment
advisory services. BLUM LP is a registered investment adviser with the
Securities and Exchange Commission. The sole general partner of BLUM LP is RCBA
Inc. The principal business office address of BLUM LP and RCBA Inc. is 909
Montgomery Street, Suite 400, San Francisco, California 94133. The names of the
executive officers and directors of RCBA Inc., their addresses, citizenship and
principal occupations are as follows:
<TABLE>
<CAPTION>
-------------------------- ---------------------------- ------------- ---------------------------
Principal Occupation or
Name and Office Held Business Address Citizenship Employment
-------------------------- ---------------------------- ------------- ---------------------------
<S> <C> <C> <C>
Richard C. Blum 909 Montgomery Street USA President and Chairman,
President, Chairman and Suite 400 BLUM LP
Director San Francisco, CA 94133
-------------------------- ---------------------------- ------------- ---------------------------
Nils Colin Lind 909 Montgomery Street Norway Managing Partner,
Managing Partner and Suite 400 BLUM LP
Director San Francisco, CA 94133
-------------------------- ---------------------------- ------------- ---------------------------
Claus J. Moller 909 Montgomery Street Denmark Managing Partner,
Managing Partner and Suite 400 BLUM LP
Director San Francisco, CA 94133
-------------------------- ---------------------------- ------------- ---------------------------
Marc T. Scholvinck 909 Montgomery Street USA Partner and Chief
Partner, Chief Financial Suite 400 Financial Officer,
Officer, Assistant San Francisco, CA 94133 BLUM LP
Secretary and Director
-------------------------- ---------------------------- ------------- ---------------------------
Murray A. Indick 909 Montgomery Street USA Partner and General
Partner, General Counsel Suite 400 Counsel, BLUM LP
and Secretary San Francisco, CA 94133
-------------------------- ---------------------------- ------------- ---------------------------
John C. Walker 909 Montgomery Street USA Partner, BLUM LP
Partner Suite 400
San Francisco, CA 94133
-------------------------- ---------------------------- ------------- ---------------------------
Kevin A. Richardson 909 Montgomery Street USA Partner, BLUM LP
Partner Suite 400
San Francisco, CA 94133
-------------------------- ---------------------------- ------------- ---------------------------
Jeffrey A. Cozad 909 Montgomery Street USA Partner, BLUM LP
Suite 400
San Francisco, CA 94133
-------------------------- ---------------------------- ------------- ---------------------------
Jose S. Medeiros 909 Montgomery Street Brazil Partner, BLUM LP
Suite 400
San Francisco, CA 94133
-------------------------- ---------------------------- ------------- ---------------------------
</TABLE>
<PAGE> 6
CUSIP No. 12489L108
The Reporting Person has been advised by the FS Parties of the following
information with respect to the FS Parties as set forth below:
FS Holdings is the general partner of FS Capital, which is the general
partner of FSEP III. International Holdings is the general partner of FS&Co.
International, which is the general partner of FSEP International.
FSEP III, FS Capital and FS Holdings each has its principal business
address and its principal office at 11100 Santa Monica Boulevard, Suite 1900,
Los Angeles, California 90025. FSEP III was formed to make private equity
investments. FS Capital and FS Holdings were each formed to organize and manage
the transactions in which FSEP III is the principal investor.
FSEP International, FS&Co. International and International Holdings each
has its principal business address and its principal office at c/o Paget-Brown &
Company, Ltd., West Winds Building, Third Floor, P.O. Box 1111, Grand Cayman,
Cayman Islands, B.W.I. FSEP International was formed to make private equity
investments. FS&Co. International and International Holdings were each formed to
organize and manage the transactions in which FSEP International is the
principal investor.
Freeman, Spogli, Wardlaw, Simmons, Roth and Rullman are the directors,
executive officers and sole shareholders of FS Holdings and International
Holdings. The principal occupation of each of Freeman, Spogli, Wardlaw, Simmons,
Roth and Rullman is to serve as the directors and executive officers of Freeman
Spogli & Co. Incorporated, a Delaware corporation formed to make private equity
investments ("FS&Co."). Each of Freeman, Spogli, Wardlaw, Simmons and Rullman
has his principal business address and his principal office at 11100 Santa
Monica Boulevard, Suite 1900, Los Angeles, California 90025. Roth has his
principal business address and his principal office at 599 Lexington Avenue,
18th Floor, New York, New York 10022.
The Reporting Person has been advised by the Other Parties of the
following information with respect to the Other Parties as set forth below:
Wirta is a United States citizen whose principal occupation is Chief
Executive Officer and a Director of the Issuer. His business address is CB
Richard Ellis Services, Inc., 200 North Sepulveda Boulevard, El Segundo,
California 90245-4380.
White is a United States citizen whose principal occupation is Chief
Operating Officer and a Director of the Issuer. His business address is CB
Richard Ellis Services, Inc., 200 North Sepulveda Boulevard, El Segundo,
California 90245-4380.
Koll Holding is wholly-owned by The Koll Company ("Koll Co."), which is a
California corporation wholly-owed by the Don Koll Separate Property Trust u/d/t
April 8, 1999 ("Koll Trust"), a trust for which Donald M. Koll ("Koll") is sole
trustee. Koll is a United States citizen and a Director of the Issuer. Koll
Holding was formed to acquire and hold equity in Koll Real Estate Services,
which was acquired by the Issuer on August 28, 1997 (as further described in
Item 4 hereto). The principal office and business address of Koll Holding, Koll
Co., Koll Trust and Koll is 4343 Von Karman Avenue, Newport Beach, California
92660.
<PAGE> 7
CUSIP No. 12489L108
The BLUM Parties, the FS Parties and the Other Parties have advised the
Reporting Person that, during the last five years, to the best knowledge of the
BLUM Parties, the FS Parties and the Other Parties, respectively, none of the
BLUM Parties, the FS Parties or the Other Parties has been (i) convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors) or
(ii) a party to any civil 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 any future violations of, or
prohibiting or mandating activities subject to, federal or state securities laws
or finding any violations with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
The Proposed Transactions (as defined in Item 4 below) would be funded
through a combination of equity and debt financing. Pursuant to, and subject to
the terms and conditions of, the Letter Agreement, Strategic and/or its
affiliates are prepared to provide up to approximately $118.1 million of equity
to Newco for the Proposed Transaction. In addition, Newco has had discussions
with Credit Suisse First Boston to provide debt financing to consummate the
Proposed Transaction; however, Newco has not yet entered into a commitment
letter with respect to the debt financing for the Proposed Transactions, and
there is no assurance that one will be successfully obtained. In addition, the
proposed financing of the Proposed Transactions may change based on availability
of such financing and other facts and circumstances with respect to such
Proposed Transactions or financing.
The Reporting Person has not contributed any funds or other consideration
toward the purchase of the shares of Issuer Common Stock that may be deemed to
be beneficially owned by the BLUM Parties, the FS Parties or the Other Parties
as described in Item 5.
The transactions contemplated by the Letter Agreement are subject to a
number of terms and conditions set forth therein, including, among others, the
approval of the Issuer's Board of Directors, the execution of mutually
acceptable documentation and the satisfaction of the conditions set forth in the
Proposal Letter (as defined in Item 4 below). All decisions regarding the
Proposed Transaction will be made by the BLUM Parties. The information set forth
in response to this Item 3 is qualified in its entirety by reference to the
Letter Agreement (attached hereto as Exhibit A), which is expressly incorporated
herein by reference.
ITEM 4. PURPOSE OF TRANSACTION.
As described in a letter, dated November 10, 2000, from Newco to the
Issuer (the "Proposal Letter") (attached hereto as Exhibit B), as amended by a
certain letter, dated as of December 1, 2000, from Newco to the Board of
Directors of the Issuer (the "Amendment") (attached hereto as Exhibit C), Newco
has made a proposal with respect to a transaction in which Newco would merge
with and into the Issuer (the "Proposed Transaction"). Pursuant to the terms of
the Proposed Transaction, among other things, (i) each of Malek, Strategic, FSEP
III, FSEP International and the Other Parties will contribute all of the shares
of Common Stock beneficially owned by such person to Newco in exchange for
newly-issued shares of Newco, and (ii) immediately following completion of the
foregoing contributions, Newco will be merged into the Issuer. Pursuant to the
merger, all shares of the Common Stock (other than the shares held by Newco)
will be converted into the right to receive consideration of $15.50 per share,
all
<PAGE> 8
CUSIP No. 12489L108
shares of Common Stock held by Newco will be cancelled and all shares of common
stock of Newco will be converted into shares of the Common Stock. In connection
with the Proposed Transaction, the Common Stock would be delisted from the New
York Stock Exchange. The Reporting Person has been advised by Newco that it
currently does not intend to deregister the Common Stock under the Exchange Act
but may do so in the future, to the extent permitted under the Exchange Act.
Annex B of the Letter Agreement provides that the Board of Directors of
the Issuer after consummation of the Proposed Transaction will consist of six
directors, including three directors designated by Strategic, one director
designated by the FS Parties and Wirta and White (each for so long as he remains
an employee of the Issuer). Strategic will be entitled to designate one
additional director at any time. In addition, Malek and Donald M. Koll each will
continue to assist the Company in an advisory capacity for so long as he
beneficially owns Common Stock.
The Proposal Letter provides that the Proposed Transaction would be
subject to a number of conditions, including, among others, (i) approval by the
Issuer's Board of Directors and stockholders pursuant to the requirements of
Delaware law and the rules of the New York Stock Exchange, (ii) receipt of any
material governmental and third party approvals (including expiration of all
applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended), (iii) receipt of consents from the holders of a
majority of the Issuer's outstanding 8-7/8% Senior Subordinated Notes due 2006,
(iv) completion of the financing arrangements necessary to consummate the
Proposed Transactions, (v) completion of confirmatory due diligence and (vi) the
negotiation and execution of definitive agreements providing for the Proposed
Transactions and the transactions described in the Letter Agreement and the
satisfaction of the conditions set forth therein, including a mutually
satisfactory definitive merger agreement which would contain customary
covenants, representations, warranties, conditions and other provisions normal
to such agreements.
The terms of the Proposal Letter extended the deadline for responding to
the Proposed Transaction until 5:00 p.m. Pacific Standard Time on December 31,
2000, after which time, unless earlier accepted, Newco may terminate the
proposal at any time. All decisions regarding the Proposed Transaction will be
made by the BLUM Parties. The Reporting Person has been advised by Newco that it
expects to evaluate on an ongoing basis the Issuer's financial condition,
business, operations and prospects, market price of the Common Stock, conditions
in securities markets generally, general economic and industry conditions and
other factors. The Reporting Person has further been advised by Newco that it
reserves the right to change its plans and intentions at any time, as it deems
appropriate, and may or may not submit a revised proposal or extend the
expiration date of the proposal contained in the Proposal Letter and reserves
the right to terminate, modify or withdraw the proposal contained in the
Proposal Letter. The Reporting Person may at any time and from time to time
acquire shares of Common Stock or securities convertible or exchangeable for
Common Stock or, subject to terms of the Letter Agreement, dispose of shares of
Common Stock. Any such transactions may be effected at any time and from time to
time subject to any applicable limitations of the Securities Act of 1933, as
amended, and the Exchange Act.
The Reporting Person originally acquired 312,873 shares of Common Stock
upon the initial public offering of the Company in November of 1996 ("IPO")
based on a conversion of shares of the Company the Reporting Person owned prior
to the IPO. On March 6, 1997, the
<PAGE> 9
CUSIP No. 12489L108
Reporting Person gifted 20,000 shares of Common Stock to the Malek Family
Charitable Trust (the "Trust"), of which the Trust sold 2,000 shares on
September 16, 1997, and on June 29, 1998, the Reporting Person gifted 80,000
shares of Common Stock to the Trust. During the period beginning August 23, 1999
and ending August 29, 1999, the Reporting Person purchased 50,000 shares of
Common Stock on the open market. Additionally, during the period beginning
November 8, 1999, and ending November 10, 1999, the Reporting Person purchased
37,000 shares of Common Stock on the open market. The Reporting Person also
holds 12,110 shares of Common Stock underlying stock options that are currently
exercisable.
Frederic V. Malek serves on the Issuer's Board of Directors.
The Reporting Party has been advised that the BLUM Parties originally
acquired the shares of Common Stock beneficially owned by them through open
market purchases of the Common Stock.
Richard C. Blum serves on the Issuer's Board of Directors.
The Reporting Person has been advised that each of the FS Parties
originally acquired the shares of Common Stock beneficially owned by them
pursuant to the terms and conditions of an Agreement and Plan of Reorganization,
dated as of May 14, 1997 (the "Merger Agreement") by and among the Issuer, CBC
Acquisition Corporation ("Acquisition Corp."), Koll Real Estate Services
("KRES"), FSEP III, FSEP International, AP KMS Partners, L.P., AP KMS II, LLC,
The Koll Holding Company, Koll, William S. Rothe and Wirta. On August 28, 1997,
Acquisition Corp. was merged with and into KRES (the "Merger") and KRES became a
wholly-owned subsidiary of the Issuer. In the Merger, FSEP III received
3,278,448 shares of Common Stock and warrants to acquire 351,585 shares of
Common Stock (the "FSEP Warrant") and FSEP International received 124,015 shares
of Common Stock and warrants to acquire 13,299 shares of Common Stock (the "FSEP
Warrant", and collectively with the FSEP Warrant, the "FS Investor Warrants").
The Letter Agreement provides, among other things, that upon completion
of the Proposed Transaction, the FS Investor Warrants will be cancelled and the
Issuer will issue a new warrant to each of FSEP and FSEP International, which
warrants will expire on August 27, 2007 and, collectively, be exercisable for a
number of shares of Common Stock equal to the number that represents the same
percentage of the total outstanding shares of Common Stock immediately after the
consummation of the Proposed Transaction as the FS Investor Warrants were
entitled to immediately prior to the consummation of the Proposed Transaction.
Freeman serves on the Issuer's Board of Directors.
The Reporting Person has been advised that each of the Other Parties
originally acquired the shares of Common Stock beneficially owned by each of
them in their respective capacities as officers, directors and/or founders of
the Issuer or its predecessors, as the case may be.
Other than as described above in Item 3 and this Item 4, the Reporting
Person does not have, and the Reporting Person has been advised by the BLUM
Parties, the FS Parties and the Other Parties that none of the BLUM Parties, the
FS Parties or the Other Parties, respectively, have, any plans or proposals
which relate to or would result in any of the matters described in
<PAGE> 10
CUSIP No. 12489L108
subparagraphs (a) through (j) of Item 4 of Schedule 13D (although they reserve
the right to develop such plans).
The information set forth in response to this Item 4 is qualified in its
entirety by reference to the Letter Agreement (attached hereto as Exhibit A),
the Proposal Letter (attached hereto as Exhibit B) and the Amendment (attached
hereto as Exhibit C), each of which is expressly incorporated herein by
reference.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a), (b) The Reporting Person believes that there are currently
21,213,928 shares of Common Stock outstanding. Based on such number of
outstanding shares, the Reporting Person reports direct beneficial ownership of
409,983 shares of Common Stock, which includes 12,110 shares of Common Stock
underlying stock options which are currently exercisable or which become
exercisable within 60 days after November 8, 2000. Based on the assumption that
there are 21,213,928 shares of Common Stock outstanding, these holdings
constitute approximately 1.9% of the Common Stock.
As a result of the matters described in Items 2, 3 and 4 above, the
Reporting Person together with the BLUM Parties, the FS Parties and the Other
Parties may be deemed to constitute a group within the meaning of Section
13(d)(3) of the Exchange Act and the Reporting Person may be deemed to have
acquired beneficial ownership of the shares of Common Stock owned or deemed to
be beneficially owned by the BLUM Parties, the FS Parties and the Other Parties.
The Reporting Person has been advised that based on the assumption that
there are 21,213,928 shares of Common Stock outstanding, (i) Strategic reports
direct holdings of 2,345,900 shares of the Common Stock (11.1%), and (ii) BLUM
LP and RCBA Inc. report holdings of 1,077,986 shares of the Common Stock (5.1%)
owned directly by BLUM LP or the limited partnerships for which BLUM LP serves
as the general partner and BLUM LP's investment advisory accounts.
The Reporting Person has been advised that among the shares set forth in
clause (ii) in the immediately foregoing paragraph, because BLUM LP has voting
and investment power with respect to 63,800 of such shares that are legally
owned by The Common Fund for the account of its Equity Fund ("The Common Fund"),
those shares are reported as beneficially owned by BLUM LP. The Common Fund is
principally engaged in the business of managing investments for educational
institutions. The principal administrative office of The Common Fund is located
at 450 Post Road East, Westport, Connecticut 06881-0909. The Common Fund
disclaims membership in a group with the Reporting Person, and disclaims
beneficial ownership of any shares held by the Reporting Person.
The Reporting Person has been advised that voting and investment power
concerning the shares described in the second preceding paragraph are held
solely by BLUM LP and RCBA GP. Strategic, BLUM LP and RCPA Inc. therefore may be
deemed to be members in a group, in which case each of them would be deemed to
have beneficial ownership of an aggregate of 3,423,886 shares of the Common
Stock, which is 16.1% of the outstanding shares of Common
<PAGE> 11
CUSIP No. 12489L108
Stock. As the sole general partner of BLUM LP, RCBA Inc. is deemed the
beneficial owner of the securities over which BLUM LP has voting and investment
power. As Chairman, director and a substantial shareholder of RCBA Inc., Richard
C. Blum might be deemed to be the beneficial owner of the securities
beneficially owned by RCBA Inc. Mr. Blum may also be deemed to be the beneficial
owner of the securities over which RCBA GP has voting and investment power. In
addition, Mr. Blum, as a member of the Issuer's Board of Directors, has sole
beneficial ownership of 15,205 shares of the Common Stock, consisting of options
currently exercisable or exercisable within 60 days after November 8, 2000. The
Reporting Person has been advised that, accordingly, Mr. Blum reports beneficial
ownership of 3,439,091 shares of the Common Stock, which is 16.2% of the total
Common Stock shares outstanding. None of the beneficial ownership information in
this paragraph includes any Common Stock beneficially owned by the FS Parties or
the Other Parties.
The Reporting Person has been advised that based on the assumption that
there are 21,213,928 shares of Common Stock outstanding, (i) Freeman, Spogli,
Wardlaw, Simmons, Roth and Rullman each is deemed to beneficially own 3,767,347
shares (17.5%) of the Common Stock, which includes 364,884 shares of Common
Stock underlying warrants which are currently exercisable or which become
exercisable within 60 days after December 1, 2000,(ii) FSEP, FS Capital and FS
Holdings each is deemed to beneficially own 3,630,033 shares (16.8%) of the
Common Stock, which includes 351,585 shares of Common Stock underlying warrants
which are currently exercisable or which become exercisable within 60 days after
November 8, 2000, and (iii) FSEP International, FS&Co. International and
International Holdings each is deemed to beneficially own 137,314 shares (less
than 1%) of Common Stock, which includes 13,299 shares of Common Stock
underlying warrants which are currently exercisable or which become exercisable
within 60 days after November 8, 2000. The Reporting Person has been further
advised that with respect to the shares of Common Stock beneficially owned by
the FS Parties, each FS Investor has shared power to vote or to direct the vote
of the shares beneficially owned by such FS Investor and shared power to dispose
of or to direct the disposition of the shares beneficially owned by such FS
Investor.
The Reporting Person has been advised that Wirta beneficially owns
647,526 shares of Common Stock, which includes (i) 35,000 shares of Common Stock
underlying stock options which are currently exercisable or which become
exercisable within 60 days after November 8, 2000, and (ii) an option to
purchase 521,590 shares of Common Stock, and warrants to acquire 55,936 shares
of Common Stock, from Koll Holding. These holdings constitute approximately 3.0%
of the Common Stock.
The Reporting Person has been advised that White beneficially owns
125,200 shares of Common Stock, which includes 66,600 shares of Common Stock
underlying stock options which are currently exercisable or which become
exercisable within 60 days after November 8, 2000. These holdings constitute
less than one percent of the Common Stock.
The Reporting Person has been advised that Koll directly owns 319,983
shares of Common Stock, all of which represent shares of Common Stock underlying
options and warrants which are currently exercisable or become exercisable
within 60 days of December 4, 2000 (the "Koll Options"). Koll Holding directly
owns 813,036 shares of Common Stock (the "Koll Holding Shares" and collectively
with the Koll Options, the "Koll Shares"), which include
<PAGE> 12
CUSIP No. 12489L108
78,746 shares of Common Stock underlying stock warrants which are currently
exercisable. As described below, Koll Holding has granted an option and warrant
to Wirta exercisable for up to 577,526 shares of the Koll Holding Shares (the
"Wirta Option"). Under the option agreement, Koll Holding presently has no right
to dispose of the shares subject to the Wirta Option, although it retains voting
power over the shares.
Koll has sole voting and investment power over the shares subject to the
Koll Options. Koll Holding is wholly owned by Koll Co., which is wholly owned by
Koll Co., which is wholly owned by the Koll Trust, of which Koll is the sole
trustee. Except for the aforementioned restriction on dispositive power with
respect to the shares subject to the Wirta Option, each of Koll, the Koll Trust
and Koll Co. shares the power to vote or to direct the vote of, and to dispose
or direct the disposition of, the Koll Holding Shares. As such, Koll is deemed
to beneficially own the Koll Shares, which total 1,133,109 shares. The Koll
Trust, Koll Co., and Koll Holding are deemed to beneficially own the Koll
Holding Shares, which total 813,036 shares. Based on the assumption that there
are 21,213,928 shares of Common Stock outstanding, the Koll Holding Shares
constitute approximately 5.1% of the outstanding Common Stock.
The Reporting Person has been advised that each of the Other Parties has
sole power (and does not share any power) to vote or direct the vote of all
shares of Common Stock beneficially owned by him or it and has sole power (and
does not share any power) to dispose or to direct the disposition all shares of
Common Stock beneficially owned by him or it.
Other than as set forth above, the Reporting Person has been advised by
the BLUM Parties, the FS Parties and the Other Parties that, as of November 8,
2000, none of the BLUM Parties, the FS Parties or the Other Parties,
respectively, beneficially owns any shares of any class of capital stock of the
Issuer.
(c) The Reporting Person has not effected any transactions in any shares of
Common Stock during the 60-day period ended November 9, 2000, except as
disclosed in this Schedule 13D.
The Reporting Person has been advised by the BLUM Parties, the FS Parties
and the Other Parties that none of the BLUM Parties, the FS Parties or the Other
Parties, respectively, has effected any transactions in any shares of Common
Stock during the 60-day period ended November 9, 2000, except as disclosed in
this Schedule 13D.
(d) No one other than the Reporting Person has the right to receive, or the
power to direct the receipt of, dividends from, or the proceeds from the sale
of, any of the securities of the Issuer acquired by the Reporting Person as
described in Item 5. The Reporting Person has been advised that no person other
than the BLUM Parties, the FS Parties and the Other Parties has the right to
receive or the power to direct the receipt of dividends from, or the proceeds
from the sale of, the shares of Common Stock beneficially owned by the BLUM
Parties, the FS Parties or the Other Parties, respectively, as described above.
(e) Not applicable.
<PAGE> 13
CUSIP No. 12489L108
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER.
As described in Item 3 of this Schedule 13D, the Letter Agreement
(attached hereto as Exhibit A) sets forth certain understandings among
Strategic, FSEP, FSEP International and the Other Parties with respect to the
Proposed Transaction including, among other things, the negotiation of the
Proposed Transaction, the contribution of equity, a stockholders agreement,
agreements with management and employees, exclusivity and voting and fees and
expenses. The consummation of the equity contributions and the entering into of
a stockholders agreement and the agreements with management and employees are
conditioned upon the prior negotiation and execution of a definitive merger
agreement for the Proposed Transaction and other definitive documentation.
Annex B to the Letter Agreement sets forth the understandings between
such persons with respect to their ownership of Common Stock in the event that
the Proposed Transaction is consummated, including without limitation as to
restrictions on transfer, co-sale/tag along rights, right of first offer,
preemptive rights, sale of Issuer, an initial public offering of the Issuer,
registration rights, voting, representation on the Issuer's Board of Directors,
advisory assistance, general consent rights, consent rights of FSEP III and FSEP
International, information and inspection rights and indemnification.
As described in Item 4 of this Schedule 13D, the Proposal Letter
(attached hereto as Exhibit B), as amended by the Amendment (attached hereto as
Exhibit C), contains the proposal by Newco to the Issuer with respect to the
Proposed Transactions, including with respect to the Issuer a discussion of,
among other things, the purchase price, the equity financing, the debt
financing, the structure, the treatment of existing indebtedness, the employees,
the headquarters and the legal documentation and conditions regarding the
Proposed Transaction.
The descriptions of the Letter Agreement, the Proposal Letter and the
Amendment contained in this Schedule 13D are qualified in their entirety by
reference, respectively, to the Letter Agreement (attached hereto as Exhibit A),
the Proposal Letter (attached hereto as Exhibit B) and the Amendment (attached
hereto as Exhibit C).
The Reporting Person has been advised that in connection with the Merger,
Koll Co., Koll Holding and KRES entered into an Amended and Restated Option
Agreement ("Option Agreement") with Wirta, pursuant to which an option
previously granted to Wirta to purchase 672,000 shares of KRES common stock was
converted into (i) an immediately-exercisable option ("Option") to purchase up
to 521,590 shares of the Common Stock from Koll Holding at an exercise price of
$5.84 and (ii) the right to obtain in connection with each exercise of such
Option .1072413 warrants per share of Common Stock rounded to the nearest
warrant, for a maximum of 55,936 shares of the Common Stock. The exercise period
for the Option and warrants currently extends to May 30, 2004. Under the Option
Agreement, Koll Holding may not sell any shares of the Common Stock or exercise
or transfer any warrants to acquire the Common Stock if as a result of such
sale, exercise or transfer Koll Holding will not retain a sufficient number of
shares of Common Stock and warrants to permit Wirta to exercise his rights in
full under the Wirta Option Agreement. There are no voting restrictions on the
shares prior to exercise of the Option and warrant.
<PAGE> 14
CUSIP No. 12489L108
Neither the Reporting Person nor, to the best knowledge of the Reporting
Person, the BLUM Parties, the FS Parties, the Other Parties or other persons
named in Item 2, is a party to any contract, arrangement, understanding or
relationship with respect to any securities of the Issuer, including but not
limited to the transfer or voting of any securities of the Issuer, finder's
fees, joint ventures, loan or option arrangements, puts or calls, guarantees of
profits, division of profits or loss, or the giving or withholding of proxies,
except as previously disclosed.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
A. Letter agreement dated November 10, 2000 among the Reporting
Person, Strategic, FSEP III, FSEP International and the Other
Parties.
B. Proposal Letter dated November 10, 2000.
C. Letter agreement dated December 1, 2000.
<PAGE> 15
CUSIP No. 12489L108
SIGNATURES
After reasonable inquiry and to the best of our knowledge and belief, the
undersigned certify that the information set forth in this statement is true,
complete and correct.
Dated: December 13, 2000
By: /s/ Frederic V. Malek
--------------------------
Frederic V. Malek
<PAGE> 16
CUSIP No. 12489L108
Exhibit A
RCBA STRATEGIC PARTNERS, L.P.
C/O BLUM CAPITAL PARTNERS, L.P.
909 MONTGOMERY STREET, SUITE 400
SAN FRANCISCO, CALIFORNIA 94133
(415) 434-1111
November 10, 2000
FS Equity Partners III, L.P.
FS Equity Partners International, L.P.
11100 Santa Monica Boulevard, Suite 1900
Los Angeles, California 90025
Attention: J. Fredrick Simmons
Gentlemen:
This letter outlines the general terms and conditions under which
RCBA Strategic Partners, L.P. ("BLUM"), which is an affiliate of BLUM Capital
Partners, L.P., FS Equity Partners III, L.P. and FS Equity Partners
International, L.P. (together with their affiliates other than the Company,
"FS") and the other signatories hereto (the "OTHER INVESTORS") would propose to
acquire all of the Common Stock, par value $0.01 per share (the "COMMON STOCK"),
of CB Richard Ellis Services, Inc. (the "COMPANY"). Such acquisition would be
structured as a proposed merger of BLUM CB Corp. ("NEWCO") with and into the
Company (the "PROPOSED TRANSACTION").
1. Proposal to the Board; Negotiation of Proposed Transaction.
Attached hereto as Annex A is a letter from Newco to the Board of Directors of
the Company (the "BOARD") proposing the Proposed Transaction (the "PROPOSAL
LETTER"). The parties hereto agree that Newco will submit the Proposal Letter to
the Board. The specific terms and conditions of the Proposed Transaction
(including, without limitation, the financing thereof and the agreement and plan
of merger (the "MERGER AGREEMENT")), except as specifically provided in Sections
2, 3 and 4 of this letter, will be determined by BLUM in its sole discretion and
BLUM will determine whether Newco will enter into the Merger Agreement and
proceed with the Proposed Transaction; provided, however that if either the
amount of consideration payable per share of Common Stock or any other material
economic terms of the Proposed Transaction (including, without limitation, the
material economic terms of the financing thereof) are changed without the prior
consent of FS, then FS will thereafter no longer be bound by the terms of
Sections 2 and 3 of this letter if FS objects in writing to such revised terms
within three business days of being notified of such terms (in which event FS
will no longer have the right to invest in the Proposed Transaction or receive
the New FS Warrant as contemplated by Section 2 below).
<PAGE> 17
CUSIP No. 12489L108
FS Equity Partners III, L.P.
FS Equity Partners International, L.P.
November 10, 2000
Page 2
In addition, with respect to all material terms of the Proposed Transaction
(including, without limitation, the financing thereof), BLUM will use its good
faith efforts to (i) promptly communicate such terms to the other parties
hereto, (ii) permit the other parties hereto to participate in the negotiation
of such terms and (iii) consider the views of the other parties hereto in the
negotiation of such terms.
2. Equity Contributions. (a) In furtherance of the Proposed
Transaction, on the closing date of the Proposed Transaction, (x) BLUM would
contribute to Newco all of the Common Stock beneficially owned by it as of the
date hereof (which is equal to 2,345,900 shares) and receive in exchange
therefor an equivalent number of shares of Newco common stock, (y) FS would
contribute to Newco all of the Common Stock beneficially owned by it as of the
date hereof (which is equal to 3,402,463 shares) and receive in exchange
therefor an equivalent number of shares of Newco common stock, and (z) the Other
Investors would contribute to Newco all of the outstanding Common Stock
beneficially owned by them as of the date hereof (which shares are set forth
opposite the names of such Other Investors on Schedule I hereto) and receive in
exchange therefor an equivalent number of shares of Newco common stock. In
addition, on the closing date of the Proposed Transaction, BLUM and its
affiliates would purchase from Newco between approximately $64.3 million and
$116.9 million (depending upon the extent that employees of the Company decide
to purchase equity of the Company anticipated to be made available on the
closing date of the Proposed Transaction) (the "ADDITIONAL EQUITY CONTRIBUTION")
of newly issued common stock of Newco for a cash price per share of common stock
equal to the cash price per share of Common Stock paid to the stockholders of
the Company in the Proposed Transaction. In connection with the consummation of
the Proposed Transaction, each outstanding share of Newco common stock would be
converted automatically into one share of Common Stock. Each of the parties
hereto agrees to negotiate in good faith and use all reasonable efforts to enter
into definitive documentation with respect to the matters set forth in this
paragraph (the "INVESTMENT DOCUMENTATION") prior to the execution of the Merger
Agreement. The Investment Documentation will be drafted by Simpson Thacher &
Bartlett (counsel to Newco and BLUM).
(b) On the closing date of the Proposed Transaction, the warrant
currently held by FS to acquire Common Stock (the "OLD FS WARRANT") will be
cancelled and the Company will issue to FS a new warrant to acquire Common Stock
(the "NEW FS WARRANT") at an exercise price of $30 per share and that is
substantially similar to the Old FS Warrant, with the following exceptions: (i)
the New FS Warrant will expire on August 27, 2007, (ii) the New FS Warrant will
be a warrant to acquire a number of shares of Common Stock equal to the number
that represents the same percentage of the total outstanding shares of Common
Stock immediately after consummation of the Proposed Transaction as the Old FS
Warrant entitled FS immediately prior to the consummation of the Proposed
Transaction, and (iii) the New FS Warrant will not be exercisable unless and
until (x) a merger, sale or other acquisition of the Company, (y) an
underwritten initial public offering of the Common Stock or (z) August 26, 2007,
and upon the occurrence of any event specified in clause (x) or (y) the New FS
Warrant will automatically be exercised in a cashless manner.
<PAGE> 18
CUSIP No. 12489L108
FS Equity Partners III, L.P.
FS Equity Partners International, L.P.
November 10, 2000
Page 3
3. Stockholders Agreement. Attached hereto as Annex B is a
summary setting forth the principal terms governing the ownership of Common
Stock by the parties hereto subsequent to the consummation of the Proposed
Transaction. Each of the parties hereto agrees to negotiate in good faith and
use all reasonable efforts to enter into a definitive stockholders agreement
with terms reflecting those set forth in Annex B to this letter (the
"STOCKHOLDERS AGREEMENT") prior to the execution of the Merger Agreement. The
Stockholders Agreement will be drafted by Simpson Thacher & Bartlett.
4. Management and Employee Arrangements. Each of the parties
hereto agrees to negotiate in good faith and, to the extent a party thereto, use
all reasonable efforts to enter into, mutually agreeable definitive agreements
(the "MANAGEMENT AND EMPLOYEE AGREEMENTS") prior to the execution of the Merger
Agreement that set forth the employment terms of, and the receipt of
equity-based and other compensation by, certain of the Other Investors and other
employees of the Company subsequent to the consummation of the Proposed
Transaction. Such definitive agreements will be drafted by Simpson Thacher &
Bartlett.
5. Representation and Warranty. Each of the parties hereto
represents and warrants to each of the other parties hereto that the total
number of shares of Common Stock beneficially owned by such first party and its
affiliates as of the date hereof is accurately set forth on Schedule I to this
letter.
6. Exclusivity; Voting. (a) During the Exclusivity Period (as
defined below), each of the parties hereto other than BLUM (in their individual
capacities as stockholders of the Company and not in their capacities as
officers or directors of the Company, if applicable) will (i) not, directly or
indirectly, make, participate in or agree to, or initiate, solicit, encourage or
knowingly facilitate any inquiries or the making of, any proposal or offer with
respect to, or a transaction to effect, a merger, reorganization, share
exchange, consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving the Company or any of its
subsidiaries, or any purchase or sale of 20% or more of the consolidated assets
(including without limitation stock of its subsidiaries) of the Company and its
subsidiaries, taken as a whole, or any purchase or sale of, or tender or
exchange offer for, the equity securities of the Company that, if consummated,
would result in any person or entity beneficially owning securities representing
20% or more of the total voting power of the Company (or of the surviving parent
entity in such transaction) or any of its subsidiaries (any such proposal, offer
or transaction (other than the transactions contemplated by this letter) being
hereinafter referred to as a "COMPETING ACQUISITION PROPOSAL"), (ii) vote or
consent (or cause to be voted or consented), in person or by proxy, any shares
of Common Stock beneficially owned or held by record such party hereto or to
which such party has, directly or indirectly, the right to vote or direct the
voting (the "SUBJECT SHARES") against any Competing Acquisition Proposal at any
meeting (whether annual or special and whether or not an adjourned or postponed
meeting) of stockholders of the Company, (iii) not, directly or indirectly,
sell, transfer or otherwise dispose of any shares of Common Stock beneficially
owned by such party and (iv) not enter into any agreement, commitment or
arrangement that is inconsistent with any of the foregoing. Notwithstanding
anything to the contrary stated herein, each of the parties hereto other than
BLUM may undertake any of the acts otherwise not permitted by this Section 6(a)
to the extent such act is part of the Proposed Transaction.
<PAGE> 19
CUSIP No. 12489L108
FS Equity Partners III, L.P.
FS Equity Partners International, L.P.
November 10, 2000
Page 4
(b) During the Exclusivity Period, each of the parties hereto
agrees to vote or consent (or cause to be voted or consented), in person or by
proxy, any Subject Shares in favor of the Proposed Transaction and the approval
and adoption of the Merger Agreement and any related transactions at any meeting
(whether annual or special and whether or not an adjourned or postponed meeting)
of stockholders of the Company.
(c) For purposes of this letter, the "EXCLUSIVITY PERIOD" shall
be defined as the period beginning upon execution of this letter and ending upon
the earliest to occur of the following events: (i) 6 months after the date
hereof, (ii) if Credit Suisse First Boston ("CSFB") notifies BLUM that CSFB will
be unable to arrange or provide the debt financing necessary to consummate the
Proposed Transaction at the expected closing date, (iii) the date that the Board
enters into a binding agreement to effect a Competing Acquisition Proposal, (iv)
30 days after the date the Board rejects the Proposed Transaction in writing and
(v) Newco's proposal to enter into the Proposed Transaction is terminated;
provided, however that, in the case of clause (iv), if the process implemented
by the Board to consider the Proposed Transaction and/or a Competing Acquisition
Proposal is continuing and BLUM in good faith is continuing to pursue the
Transaction in a manner consistent with such process, then the duration of the
period set forth in such clause shall continue for so long as such process and
BLUM's good faith pursuit continue.
(d) Notwithstanding anything to the contrary in this Section 6,
Section 6(a) and (b) of this letter shall terminate and be of no further force
and effect in the event that any of the following shall occur: (i) BLUM or BLUM
Capital Partners, L.P. ("BLUM CAPITAL") sells, transfers or otherwise disposes
of, or agrees to sell, transfer or otherwise dispose of, any shares of Common
Stock beneficially owned by BLUM or BLUM Capital other than in connection with
the Proposed Transaction, or (ii) BLUM or BLUM Capital votes or agrees to vote
in favor of, or sells or agrees to sell any shares of Common Stock beneficially
owned by BLUM or BLUM Capital pursuant to, a Competing Acquisition Proposal.
BLUM agrees to provide reasonable prior notice to each of the other parties
hereto of any intention by BLUM or BLUM Capital to undertake any of the acts set
forth in this Section 6(d).
(e) During the Exclusivity Period, without the prior consent of
FS, BLUM will not make a Competing Acquisition Proposal other than the Proposed
Transaction; provided, however that for purposes of this clause (e), the
"Exclusivity Period" shall be determined without regard to clause (c)(v) of this
paragraph 6.
(f) The obligations of the parties hereto under paragraphs 2, 3
and 4 will terminate immediately upon expiration of the Exclusivity Period.
<PAGE> 20
CUSIP No. 12489L108
FS Equity Partners III, L.P.
FS Equity Partners International, L.P.
November 10, 2000
Page 5
7. Fees and Expenses. (a) Except to the extent otherwise set
forth in the Merger Agreement, all costs incurred by any party hereto in
preparing this letter and the annexes hereto and in pursuing and negotiating the
transactions contemplated hereby (including all attorneys' fees and costs
relating thereto) ("Transaction Expenses") will be paid by the party incurring
such Transaction Expenses; provided, that the parties hereto agree that if a
Merger Agreement is executed it shall provide for the reimbursement of all such
Transaction Expenses by the Company at the time of the consummation of the
Proposed Transaction.
(b) Any break-up fee or similar payment made to Newco in
connection with the Proposed Transaction that is not required to be paid to the
debt financing sources for the Proposed Transaction shall be distributed to BLUM
and, if and to the extent as may be agreed pursuant to paragraph 4 above, to
Raymond E. Wirta and W. Brett White.
(c) In the event that the Proposed Transaction is consummated,
the parties hereto agree that RCBA GP, L.L.C. and FS Holdings, Inc. shall be
entitled to receive from the Company at closing a transaction fee of $3 million
and $2 million, respectively.
8. Confidentiality. Except as otherwise required by law or
paragraph 1 above or as may be required to be disclosed by any party in any
Schedule 13D filing, the terms of the Proposed Transaction and this letter will
be kept strictly confidential by the parties hereto regarding persons other than
their attorneys and accountants (under duties of confidentiality) unless each of
the other parties hereto releases or consents to the release of any such
information.
9. Governing Law; Jurisdiction. This letter agreement shall be
governed by and interpreted and enforced in accordance with the laws of the
State of New York as applied to contracts made and fully performed in such
state. Each of the parties hereto hereby submits to the exclusive jurisdiction
of any state or federal court sitting in the Borough of Manhattan in the City of
New York. The parties hereto waive all right to trial by jury in any action,
suit or proceeding brought to enforce or defend any rights or remedies under
this Agreement.
10. Legal Effect. The consummation of the transactions
contemplated by Sections 2, 3 and 4 of this letter are conditioned upon the
negotiation and execution of the Merger Agreement and of definitive Investment
Documentation, a definitive Stockholders Agreement and definitive Management and
Employee Agreements, respectively, that are consistent with the terms of
Sections 1, 2, 3 and 4 of this letter (and any Annexes referred to therein) and
such other terms as the parties thereto may agree among themselves.
Remainder of Page Intentionally Left Blank
<PAGE> 21
CUSIP No. 12489L108
FS Equity Partners III, L.P.
FS Equity Partners International, L.P.
November 10, 2000
Page 6
If this letter agreement correctly sets forth our agreements with
respect to the matters described herein, please so indicate by signing this
letter in the space provided below for that purpose.
Very truly yours,
RCBA STRATEGIC PARTNERS, L.P.
By: RCBA GP, L.L.C., its general partner
By: /s/ Claus J. Moller
---------------------------------
Name: Claus J. Moller
Title: Managing Partner
ACCEPTED AND AGREED TO AS OF
THE DATE FIRST SET FORTH ABOVE:
FS EQUITY PARTNERS III, L.P.
By: FS Capital Partners, L.P., its general
Partner
By: FS Holdings, Inc., its general
partner
By: /s/ James F. Simmons
------------------------------
Name: James F. Simmons
Title:
FS EQUITY PARTNERS INTERNATIONAL, L.P.
By: FS&Co. International, L.P., its general
Partner
By: FS International Holdings Limited,
its general partner
By: /s/ James F. Simmons
-----------------------------
Name: James F. Simmons
Title:
<PAGE> 22
CUSIP No. 12489L108
FS Equity Partners III, L.P.
FS Equity Partners International, L.P.
November 10, 2000
Page 7
OTHER INVESTORS:
/s/ Raymond E. Wirta
---------------------------------
Raymond E. Wirta
/s/ W. Brett White
---------------------------------
W. Brett White
/s/ Fredric V. Malek
--------------------------------
Frederic V. Malek
THE KOLL HOLDING COMPANY
/s/ Donald M. Koll
---------------------------------
By: Donald M. Koll
<PAGE> 23
CUSIP No. 12489L108
SCHEDULE I
<TABLE>
<CAPTION>
TOTAL SHARES OF TOTAL SHARES OF
OUTSTANDING COMMON COMMON STOCK
STOCK OWNED BENEFICIALLY OWNED(1)
----------- ---------------------
<S> <C> <C>
BLUM and its affiliates 3,423,886 3,439,091
FS and its affiliates 3,402,463 3,402,463
Raymond E. Wirta 35,000 647,526(2)
W. Brett White 58,600 125,200
Frederic V. Malek 397,874 409,984
Donald M. Koll 734,290 555,360(2)
</TABLE>
-----------------------
(1) Except as set forth in footnote 2, as determined in accordance with Rule
13d-3 promulgated by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended.
(2) The shares listed as beneficially owned by Raymond E. Wirta include
currently exercisable options (the "Wirta-Koll Options") granted by The
Koll Holding Company (which is the wholly-owned subsidiary of The Koll
Company, which is wholly-owned by the Don Koll Separate Property Trust,
a trust for which Donald M. Koll is trustee) to Mr. Wirta with respect
to 521,590 shares of Common Stock held by The Koll Holding Company and
warrants to acquire 55,936 shares of Common Stock, which warrants are
also held by The Koll Holding Company. The shares listed as beneficially
owned by Donald M. Koll do not include the Wirta-Koll Options.
<PAGE> 24
CUSIP No. 12489L108
ANNEX A
BLUM CB CORP.
C/O BLUM CAPITAL PARTNERS, L.P.
909 MONTGOMERY STREET, SUITE 400
SAN FRANCISCO, CALIFORNIA 94133
(415) 434-1111
November 10, 2000
Board of Directors
CB Richard Ellis Services, Inc.
200 North Sepulveda Boulevard
El Segundo, California 90245-4380
Attention: James J. Didion
Chairman of the Board of Directors
Dear Sirs:
BLUM CB Corp., a Delaware corporation ("NEWCO"), is very pleased to
present its all-cash proposal ("PROPOSAL") to purchase all of the common stock
of CB Richard Ellis Services, Inc. (the "COMPANY") not owned by the Offering
Group identified below at a price of $15.50 per share (the "TRANSACTION"). The
purchase price we are offering your stockholders represents a premium of 29.4%
to the average closing price of the Company's common stock on the New York Stock
Exchange for the three-month period ended on November 9, 2000. Newco has been
formed by RCBA Strategic Partners, L.P. ("BLUM"), an affiliate of BLUM Capital
Partners, L.P., for the purpose of effecting the Proposal. The Offering Group
includes (i) BLUM and other entities affiliated with BLUM, (ii) Freeman Spogli &
Co. Incorporated through its affiliates FS Equity Partners III, L.P., a Delaware
limited partnership, and FS Equity Partners International, L.P., a Delaware
limited partnership (collectively, "FREEMAN SPOGLI"), and (iii) certain
directors and senior management of the Company, including Mr. Ray Wirta. The
Offering Group presently owns or controls approximately 38% of the outstanding
common stock of the Company.
We believe that the Proposal constitutes an excellent opportunity for the
stockholders of the Company to realize full value for their shares to an extent
not available to them in the marketplace, and that they will find this value
compelling. In addition, we believe the financing needed to complete the
Transaction can be obtained in a timely manner and the conditions to the
Transaction will be limited. As a result, we believe we have the ability to
complete the Transaction quickly and provide near-term liquidity for your
stockholders.
<PAGE> 25
CUSIP No. 12489L108
CB Richard Ellis Services, Inc.
November 10, 2000
The terms of the Proposal are summarized below:
Purchase Price
Our cash purchase price of $15.50 per share for the Company's common
stock places a total value on the Company's common stock of approximately $340
million (including for each option to acquire the Company's common stock the
difference between the purchase price and the exercise price). The Proposal
represents a substantial premium to the Company's current stock price and prior
averages. The offer represents a 24.0% premium to the Company's closing stock
price of $12.50 on November 9, 2000; a 29.4% premium to the Company's
three-month average of $11.98 per share for the period ending November 9, 2000;
and a 37.1% premium to the Company's six-month average of $11.31 per share for
the period ending November 9, 2000. In addition, the Company's "public float" is
extraordinarily limited with an average of 17,114 shares traded each market day
during the 3-month period ending November 9, 2000. In other words, we believe
the Proposal gives the Company's public stockholders an opportunity to obtain
liquidity at a full and fair valuation.
Equity Financing
It is contemplated that the 8,052,113 outstanding shares of the Company
common stock currently owned by the Offering Group effectively will be converted
into shares of common stock of the Company after the closing of the Transaction.
In addition, BLUM will provide approximately an additional $47.6 million of
equity to the Company, as well as up to approximately an additional $52.6
million to the extent that the employees of the Company do not subscribe for all
of the common stock that we anticipate making available to them for purchase at
the closing of the Transaction.
BLUM Capital Partners, L.P., which together with its affiliates currently
beneficially owns approximately 16.1% of the Company's outstanding common stock,
is a leading private equity and strategic block investment firm with
approximately $3.8 billion of equity capital under management, including through
affiliates. BLUM Capital was founded 25 years ago and has invested in a wide
variety of businesses in partnership with management teams to create long-term
value.
The proposal contained in this letter has received all necessary internal
approvals from BLUM and no other internal approvals are required. A description
of the terms relating to the Equity Financing is contained within the letter
agreement (and related term sheet) attached hereto as Exhibit A.
<PAGE> 26
CUSIP No. 12489L108
CB Richard Ellis Services, Inc.
November 10, 2000
Debt Financing
We have had discussions with Credit Suisse First Boston ("CSFB")
regarding debt financing totaling $600 million dollars to support the
Transaction. This debt would be comprised of funded senior term loans of up to
$275 million and $225 million of subordinated indebtedness. In addition, a
revolving credit facility of $100 million would be provided for ongoing working
capital purposes post-closing. The contemplated debt structure is structured to
allow for the consummation of the Proposal and provide ample capital for the
Company' future growth and working capital needs.
As is customary for transactions of this nature, consummation of the
Transaction is subject to receipt of the required debt financing. We intend to
execute commitment letters for all of the required debt financing at the time a
definitive merger agreement is executed. We anticipate that definitive
documentation for the debt financing would be finalized in the period prior to
the vote of the Company's stockholders with respect to the Transaction.
CSFB is prepared to devote the necessary resources to close the
transaction expeditiously. Should you wish to discuss any aspect of the proposed
financing with CSFB, we would be happy to arrange an opportunity for you to meet
with appropriate representatives.
Structure
We currently contemplate that the Transaction will be consummated in two
steps. In the first step, each of the members of the Offering Group will
contribute all of the shares of common stock of the Company beneficially owned
by such member to Newco in exchange for newly-issued shares of Newco.
Immediately following completion of the first step of the Transaction, Newco
will be merged into the Company. Pursuant to the merger, all shares of the
Company's common stock (other than the shares held by Newco) will be converted
into the right to receive the Purchase Price, all shares of common stock of the
Company held by Newco will be cancelled and all shares of common stock of Newco
will be converted into shares of the common stock of the Company. At the
conclusion of the Transaction, assuming the Company's employees agree to
purchase the full amount of the common stock that we make available to them, the
outstanding equity ownership of the Company would approximately be as follows:
BLUM and affiliates, 45%; management and employees of the Company, 25%; Freeman
Spogli, 23% and other investors, 7%. We and our representatives are prepared to
discuss our proposed acquisition structure with you in detail at your request.
Treatment of Existing Indebtedness
At the closing of the Transaction, the Company's existing bank credit
facility would be refinanced with the proceeds of the debt financing. In
addition, prior to the closing we would tender for all of the outstanding 8-7/8%
Senior Subordinated Notes of the Company. We would also seek consents from the
holders of the 8-7/8% Senior Subordinated Notes to the deletion of substantially
all of the negative covenants contained within the indenture relating to such
notes.
<PAGE> 27
CUSIP No. 12489L108
CB Richard Ellis Services, Inc.
November 10, 2000
Employees
We are keenly aware of the importance of the Company's employees, in
particular, sales professionals, and we believe the Transaction will benefit the
employees of the Company. Our capital structure is designed to enable the
Company to grow and thereby enhance the opportunities available to its
employees. In addition, the employees will be given the opportunity to own a
significant amount of equity in the Company going forward. At the closing of the
Transaction, we anticipate taking the following actions with respect to certain
of the compensation and benefit programs available to the Company's employees:
- Deferred Compensation Plan. We will allow each participant in the
Deferred Compensation Plan who has invested his or her own funds in the
stock fund alternatives under the DCP to (i) convert the value of that
investment (based upon the purchase price paid to the Company's
stockholders in the Transaction) into any of the insurance mutual fund
alternatives now provided under the Deferred Compensation Plan, (ii)
receive a cash payment equal to the value of that investment (based upon
the purchase price paid to the Company's stockholders in the
Transaction), which payment may at the option of such participant be used
to purchase shares of the common stock of the Company that the Offering
Group intends to make available after the closing of the Transaction
(which shares are included in the approximate aggregate 12% made
available to employees as discussed below), or (iii) continue that
investment in Company stock after the closing of the Transaction as part
of the approximate aggregate 12% to be made available to employees. After
the closing of the Transaction, future deferrals under the DCP will only
be invested in the insurance mutual fund alternatives under the DCP.
- Capital Appreciation Plan (401(k)). For legal reasons, it is impractical
for the Company's 401(k) plan to hold stock of a private company.
However, we will purchase all of the stock held in that plan at the price
paid to the Company's stockholders in the Transaction and permit
participants to invest the proceeds in any of the other funds available
under the 401(k) plan.
- Stock Options and Equity Incentive Plan Awards. Each outstanding employee
option and equity incentive plan award will be purchased for a cash
amount equal to the difference between the price paid to the Company's
stockholders in the Transaction and such option's exercise price or such
award's purchase price, which amount may be used to purchase part of the
approximate aggregate 12% to be made available to employees.
- Stock Ownership in the New Private Company. We will make available up to
approximately 12% of the outstanding common stock of the Company for
purchase by employees at a purchase price equal to the price paid to the
Company's stockholders in the Transaction.
We also intend to maintain the Company's training and performance
recognition programs for its sales professionals going forward, including CBRE
University, the annual recognition event and the Las Vegas World Conference.
<PAGE> 28
CUSIP No. 12489L108
CB Richard Ellis Services, Inc.
November 10, 2000
In addition, we intend to enter into agreements with certain members of
senior management of the Company allowing them to purchase, and to receive
options to purchase, common stock of the Company. We also anticipate entering
into employment agreements with certain members of senior management of the
Company.
Legal Documentation/Conditions
The Proposal is subject to the following conditions: (i) approval by the
board of directors of the Company and stockholders pursuant to the requirements
of the Delaware General Corporate Law and the rules of the New York Stock
Exchange, (ii) receipt of any material governmental and third party approvals
(including expiration of all applicable waiting periods under
Hart-Scott-Rodino), (iii) receipt of consents from the holders of a majority of
the outstanding 8-7/8% Senior Subordinated Notes as described above, (iv)
receipt of the necessary debt financing as described above and (v) the
negotiation and execution of definitive agreements providing for the merger and
the transactions outlined in Exhibit A to this letter, including a mutually
satisfactory definitive merger agreement which would contain customary
covenants, representations, warranties, conditions and other provisions. While
we have devoted a great deal of time and effort to studying the Company and have
completed substantially all of our business and financial due diligence, our
Proposal is also subject to completion of confirmatory legal due diligence to be
conducted by BLUM and its legal advisors. Given the familiarity of BLUM with the
Company, this diligence would be completed expeditiously and should not delay
consummation of a definitive merger agreement.
Our Proposal is based on our understanding that the Company's
capitalization consists of: (i) 21,213,928 common shares issued and outstanding,
(ii) 1,345,587 "phantom shares" outstanding under the Company's Deferred
Compensation Plan, (iii) 902,918 options to purchase common stock outstanding
that have exercise prices at or below $15.50 per share with an unweighted
average exercise price of $5.81 and (iv) 2,439,299 additional options and
warrants outstanding with exercise prices in excess of $15.50 per share.
We are prepared to negotiate a definitive merger agreement immediately
and would be delighted to provide a draft of such agreement at your request. If
the Company determines to promptly accept our Proposal, the Transaction could be
completed as early as February 2001.
<PAGE> 29
CUSIP No. 12489L108
* * *
We believe the Board of Directors should feel confident that this
Proposal represents a fair and attractive price for the Company. The Proposal
provides liquidity at a significant premium for the current stockholders. We
have no intention of attempting to acquire the Company other than in a
transaction approved by the Board of Directors. Unless earlier accepted, the
Proposal will terminate at 5:00 PM (PST) on December 1, 2000.
We are prepared to discuss this offer with you immediately. In
responding to us or in seeking further information concerning our Proposal, or
for any other matter, please call Claus Moller, Managing Partner, BLUM Capital
Partners, L.P. at 415-288-7262 or 212-521-4192.
Sincerely yours,
BLUM CB CORP.
By:
----------------------------
Name: Claus J. Moller
Title: President
<PAGE> 30
CUSIP No. 12489L108
ANNEX B
STOCKHOLDERS AGREEMENT
Outline of Material Terms
All capitalized terms not otherwise defined herein shall have the
meanings given such terms in the letter agreement dated as of November 10, 2000
to which this term sheet is attached.
Restrictions on Transfer Except as described under "Co-Sale/Tag Along Right"
and "Right of First Offer" below, no holder (each a
"Stockholder") of Common Stock may transfer such
Common Stock except (a) in the case each of FS,
Frederic V. Malek and The Koll Holding Company, to
its or his affiliates or, in the case of FS,
commencing on or after April 12, 2003, pro rata to
its partners, provided that each such transferee
agrees to be bound by the terms of the Stockholders
Agreement, (b) in the case of each of Raymond E.
Wirta and W. Brett White, to the members of such
Stockholder's immediate family or a trust for the
benefit of such Stockholder's immediately family
members, provided that such transferee agree to be
bound by the terms of the Stockholders Agreement, or
(c) as provided by, and in compliance with, the
other sections hereof.
The restrictions on transfer set forth in the prior
paragraph shall terminate upon the earlier of (x)
ten years after the closing, and (y) the first date
on which Common Stock has been sold in an
underwritten public offering registered under the
Securities Act of 1933 (the "Initial Public
Offering"). Each Stockholder (including BLUM) will
agree to a 180 day lock-up period on transfers in
connection with an Initial Public Offering.
In addition, no Common Stock may be transferred
prior to its registration under applicable
securities laws unless the transferring Stockholder
(x) delivers to the Company an opinion of counsel
reasonably satisfactory to the Company indicating
that the proposed transfer is exempt from applicable
securities laws and (y) causes the transferee(s) to
execute and deliver to the Company a counterpart to
the Stockholders Agreement.
Co-Sale/Tag Along Right BLUM may transfer its Common Stock in its sole
discretion; however, prior to the Initial Public
Offering, each Stockholder may elect to participate
pro-rata in any such transfer (other than transfers
to affiliates of BLUM who agrees in writing to be
bound by the Stockholders Agreement).
<PAGE> 31
CUSIP No. 12489L108
Right of First Offer Beginning on the third anniversary of the closing of
the Merger Agreement, each of FS, Frederic V. Malek
and The Koll Holding Company may transfer the shares
of Common Stock it or he beneficially owns to any
unaffiliated entity if prior to such transfer (i)
such Stockholder has offered to transfer such shares
to BLUM pursuant to a written notice of offer (which
notice shall include the per share offer price and
any other material terms of the offer), (ii) BLUM
has refused to purchase such shares on the terms of
such offer notice and (iii) such shares are
transferred to the proposed transferee within 120
days of BLUM's refusal on terms no more favorable to
the proposed transferee than those identified to
BLUM in the offer notice, provided that such
transferee (A) is acceptable to BLUM (such
acceptance to not be unreasonably withheld; it is
understood that if the proposed transfer is to a
nationally-recognized private equity sponsor or
institutional equity investor such consent will not
be withheld unless BLUM's decision to withhold
consent results from BLUM's direct experience with
such proposed transferee in connection with another
actual or proposed transaction), and (B) agrees to
be bound by the terms of the Stockholders Agreement.
Preemptive Right Prior to the Initial Public Offering, if the Company
issues any shares of capital stock of the Company or
any options, warrants, convertible securities or
other right to acquire such capital stock, the other
Stockholders will be entitled to purchase a pro rata
portion of such securities upon the same terms in
order to maintain their percentage ownership of the
capital stock of the Company, provided that such
preemptive right will be subject to customary
exceptions, including, without limitation, issuances
(i) to Company employees, outside directors and
consultants and (ii) to customers, venders, lenders
and other non-equity financing sources, lessors of
equipment and other providers of goods or services
to the Company.
Sale of the Company If BLUM sells to a third party a majority of the
Common Stock beneficially owned by BLUM, BLUM will
have the right to require that all other
Stockholders sell a pro rata portion of their shares
of Common Stock on the same terms as BLUM.
<PAGE> 32
CUSIP No. 12489L108
Initial Public Offering Each Stockholder will vote for, consent to, raise no
objections against and participate in any
reorganization of the Company effectuated to
facilitate an Initial Public Offering, provided that
such reorganization may not have a disproportionate
impact upon any of the Stockholders.
Registration Rights Subsequent to an Initial Public Offering, each
Stockholder (including BLUM) will be entitled to one
demand registration right for each 7.5% of the
Common Stock owned by such Stockholder at the
closing of the merger (rounded down to the nearest
whole number of demands). Such demand rights may be
exercised beginning 180 days after an Initial Public
Offering and will be subject to customary
restrictions and limitations.
Subsequent to an Initial Public Offering, whenever
the Company proposes to register any of its
securities under the Securities Act of 1933 and the
form to be used may be used for the registration of
a Stockholder's Common Stock, such Stockholder may
elect to participate in the registration, subject to
customary priorities, cutbacks and other terms and
conditions.
All of the reasonable costs and expenses of
registering such Common Stock pursuant to the
foregoing paragraphs (other than any underwriters
discounts and commissions) will be paid by the
Company.
Voting In addition to the voting requirements otherwise set
forth in this term sheet, each Stockholder other
than BLUM shall vote all shares beneficially owned
by such Stockholder in the manner directed by BLUM,
except with respect to the following matters:
- any transaction with BLUM and its affiliates,
other than a transaction with another
portfolio company of BLUM that has been
negotiated on arms-length terms in the
ordinary course of business between the
managements of the Company and such other
portfolio company
- any amendment to the certificate of
incorporation or bylaws of the Company that
adversely affects any Stockholder, other than
an increase in the authorized capital stock
of the Company.
<PAGE> 33
CUSIP No. 12489L108
Board Representation Each Stockholder agrees to vote all shares
beneficially owned by such Stockholder at any
meeting of the stockholders of the Company (or to
consent in any written consent in lieu thereof) in
favor of the election of the following directors of
the Company:
- 3 directors designated by BLUM
- Raymond E. Wirta and W. Brett White (each for
so long as remaining an employee of the
Company)
- 1 director designated by FS
The Stockholders further agree, upon the request of
BLUM at any time, to vote all shares beneficially
owned by such Stockholder at any meeting of the
stockholders of the Company (or to consent in any
written consent in lieu thereof) in favor of the
election of 1 additional director designed by BLUM.
FS shall have the additional right to designate up
to two non-voting observers to the Board.
Advisory Assistance Frederic V. Malek and Donald M. Koll each will
continue to assist the Company in an advisory
capacity for so long as he beneficially owns Common
Stock.
<PAGE> 34
CUSIP No. 12489L108
General Consent Rights Prior to an Initial Public Offering, without the
approval of a majority of the directors that are not
appointed by BLUM, the Company will not do any of
the following:
- enter into any transaction with BLUM and its
affiliates, other than a transaction with
another portfolio company of BLUM that has
been negotiated on arms-length terms in the
ordinary course of business between the
managements of the Company and such other
portfolio company
- amend its certificate of incorporation or
bylaws in a manner that adversely affects any
Stockholder, other than an increase in the
authorized capital stock of the Company
- repurchase or redeem, or declare or pay a
dividend with respect to or make a
distribution upon, any shares of capital
stock of the Company beneficially owned by
BLUM unless (x) all other holders of such
class of capital stock of the Company are
given the same right and (y) if such capital
stock is not Common Stock, such repurchase,
redemption or dividend is required by the
terms of such capital stock
<PAGE> 35
CUSIP No. 12489L108
FS Consent Rights Prior to an Initial Public Offering, without the
approval of the director designated by FS, the
Company will not do any of the following:
- acquire by purchase or otherwise any business
or assets for a purchase price in excess of
$75 million
- sell or dispose of assets which have an
aggregate fair market value in excess of $75
million
- incur indebtedness, unless such indebtedness
would (i) be permitted pursuant to the terms
of the debt financing entered into in
connection with the Proposed Transaction or
(ii) not cause the Company to exceed a 4.5:1
ratio of total outstanding indebtedness to
normalized EBITDA for the trailing 12-month
period
- issue to Company employees, directors or
consultants capital stock, or options,
warrants or other securities to acquire
capital stock if such other issuances, in the
aggregate, on a fully diluted basis, exceed
5% of the total amount of outstanding capital
stock of the Company immediately after the
closing of the Merger Agreement, other than
(i) issuances pursuant to the Management and
Employee Agreements or (ii) issuances in
amounts equal to the capital stock
repurchased from, or the options, warrants or
other securities to acquire capital stock
cancelled with respect to, Company employees,
outside directors or consultants
Information Rights/ Prior to an Initial Public Offering, any group of
Inspection Rights affiliated Stockholders beneficially owning greater
than 10% of the Common Stock will be entitled to (i)
receive the annual, quarterly and monthly financial
statements of the Company that are prepared for the
Board of Directors of the Company, and (ii) exercise
customary inspection rights with respect to the
books, records and employees of the Company.
Indemnification The Company would agree to indemnify each
Stockholder in its or his capacity as such, and,
with respect to BLUM, FS and The Koll Holding
Company, its officers, directors, members, partners
and affiliates, against all third party claims
arising from the operation of the Company or the
ownership of Common Stock, unless such loss resulted
from such party's (or such party's representative's)
committing fraud, gross negligence, or willful
misconduct.
<PAGE> 36
CUSIP No. 12489L108
Exhibit B
BLUM CB CORP.
C/O BLUM CAPITAL PARTNERS, L.P.
909 MONTGOMERY STREET, SUITE 400
SAN FRANCISCO, CALIFORNIA 94133
(415) 434-1111
November 10, 2000
Board of Directors
CB Richard Ellis Services, Inc.
200 North Sepulveda Boulevard
El Segundo, California 90245-4380
Attention: James J. Didion
Chairman of the Board of Directors
Dear Sirs:
BLUM CB Corp., a Delaware corporation ("NEWCO"), is very pleased to
present its all-cash proposal ("PROPOSAL") to purchase all of the common stock
of CB Richard Ellis Services, Inc. (the "COMPANY") not owned by the Offering
Group identified below at a price of $15.50 per share (the "TRANSACTION"). The
purchase price we are offering your stockholders represents a premium of 29.4%
to the average closing price of the Company's common stock on the New York Stock
Exchange for the three-month period ended on November 9, 2000. Newco has been
formed by RCBA Strategic Partners, L.P. ("BLUM"), an affiliate of BLUM Capital
Partners, L.P., for the purpose of effecting the Proposal. The Offering Group
includes (i) BLUM and other entities affiliated with BLUM, (ii) Freeman Spogli &
Co. Incorporated through its affiliates FS Equity Partners III, L.P., a Delaware
limited partnership, and FS Equity Partners International, L.P., a Delaware
limited partnership (collectively, "FREEMAN SPOGLI"), and (iii) certain
directors and senior management of the Company, including Mr. Ray Wirta. The
Offering Group presently owns or controls approximately 38% of the outstanding
common stock of the Company.
We believe that the Proposal constitutes an excellent opportunity for the
stockholders of the Company to realize full value for their shares to an extent
not available to them in the marketplace, and that they will find this value
compelling. In addition, we believe the financing needed to complete the
Transaction can be obtained in a timely manner and the conditions to the
Transaction will be limited. As a result, we believe we have the ability to
complete the Transaction quickly and provide near-term liquidity for your
stockholders.
<PAGE> 37
CUSIP No. 12489L108
CB Richard Ellis Services, Inc.
November 10, 2000
The terms of the Proposal are summarized below:
Purchase Price
Our cash purchase price of $15.50 per share for the Company's common
stock places a total value on the Company's common stock of approximately $340
million (including for each option to acquire the Company's common stock the
difference between the purchase price and the exercise price). The Proposal
represents a substantial premium to the Company's current stock price and prior
averages. The offer represents a 24.0% premium to the Company's closing stock
price of $12.50 on November 9, 2000; a 29.4% premium to the Company's
three-month average of $11.98 per share for the period ending November 9, 2000;
and a 37.1% premium to the Company's six-month average of $11.31 per share for
the period ending November 9, 2000. In addition, the Company's "public float" is
extraordinarily limited with an average of 17,114 shares traded each market day
during the 3-month period ending November 9, 2000. In other words, we believe
the Proposal gives the Company's public stockholders an opportunity to obtain
liquidity at a full and fair valuation.
Equity Financing
It is contemplated that the 8,052,113 outstanding shares of the Company
common stock currently owned by the Offering Group effectively will be converted
into shares of common stock of the Company after the closing of the Transaction.
In addition, BLUM will provide approximately an additional $47.6 million of
equity to the Company, as well as up to approximately an additional $52.6
million to the extent that the employees of the Company do not subscribe for all
of the common stock that we anticipate making available to them for purchase at
the closing of the Transaction.
BLUM Capital Partners, L.P., which together with its affiliates currently
beneficially owns approximately 16.1% of the Company's outstanding common stock,
is a leading private equity and strategic block investment firm with
approximately $3.8 billion of equity capital under management, including through
affiliates. BLUM Capital was founded 25 years ago and has invested in a wide
variety of businesses in partnership with management teams to create long-term
value.
The proposal contained in this letter has received all necessary internal
approvals from BLUM and no other internal approvals are required. A description
of the terms relating to the Equity Financing is contained within the letter
agreement (and related term sheet) attached hereto as Exhibit A.
<PAGE> 38
CUSIP No. 12489L108
CB Richard Ellis Services, Inc.
November 10, 2000
Debt Financing
We have had discussions with Credit Suisse First Boston ("CSFB")
regarding debt financing totaling $600 million dollars to support the
Transaction. This debt would be comprised of funded senior term loans of up to
$275 million and $225 million of subordinated indebtedness. In addition, a
revolving credit facility of $100 million would be provided for ongoing working
capital purposes post-closing. The contemplated debt structure is structured to
allow for the consummation of the Proposal and provide ample capital for the
Company' future growth and working capital needs.
As is customary for transactions of this nature, consummation of the
Transaction is subject to receipt of the required debt financing. We intend to
execute commitment letters for all of the required debt financing at the time a
definitive merger agreement is executed. We anticipate that definitive
documentation for the debt financing would be finalized in the period prior to
the vote of the Company's stockholders with respect to the Transaction.
CSFB is prepared to devote the necessary resources to close the
transaction expeditiously. Should you wish to discuss any aspect of the proposed
financing with CSFB, we would be happy to arrange an opportunity for you to meet
with appropriate representatives.
Structure
We currently contemplate that the Transaction will be consummated in two
steps. In the first step, each of the members of the Offering Group will
contribute all of the shares of common stock of the Company beneficially owned
by such member to Newco in exchange for newly-issued shares of Newco.
Immediately following completion of the first step of the Transaction, Newco
will be merged into the Company. Pursuant to the merger, all shares of the
Company's common stock (other than the shares held by Newco) will be converted
into the right to receive the Purchase Price, all shares of common stock of the
Company held by Newco will be cancelled and all shares of common stock of Newco
will be converted into shares of the common stock of the Company. At the
conclusion of the Transaction, assuming the Company's employees agree to
purchase the full amount of the common stock that we make available to them, the
outstanding equity ownership of the Company would approximately be as follows:
BLUM and affiliates, 45%; management and employees of the Company, 25%; Freeman
Spogli, 23% and other investors, 7%. We and our representatives are prepared to
discuss our proposed acquisition structure with you in detail at your request.
Treatment of Existing Indebtedness
At the closing of the Transaction, the Company's existing bank credit
facility would be refinanced with the proceeds of the debt financing. In
addition, prior to the closing we would tender for all of the outstanding 8-7/8%
Senior Subordinated Notes of the Company. We would also seek consents from the
holders of the 8-7/8% Senior Subordinated Notes to the deletion of substantially
all of the negative covenants contained within the indenture relating to such
notes.
<PAGE> 39
CUSIP No. 12489L108
CB Richard Ellis Services, Inc.
November 10, 2000
Employees
We are keenly aware of the importance of the Company's employees, in
particular, sales professionals, and we believe the Transaction will benefit the
employees of the Company. Our capital structure is designed to enable the
Company to grow and thereby enhance the opportunities available to its
employees. In addition, the employees will be given the opportunity to own a
significant amount of equity in the Company going forward. At the closing of the
Transaction, we anticipate taking the following actions with respect to certain
of the compensation and benefit programs available to the Company's employees:
- Deferred Compensation Plan. We will allow each participant in the
Deferred Compensation Plan who has invested his or her own funds in the
stock fund alternatives under the DCP to (i) convert the value of that
investment (based upon the purchase price paid to the Company's
stockholders in the Transaction) into any of the insurance mutual fund
alternatives now provided under the Deferred Compensation Plan, (ii)
receive a cash payment equal to the value of that investment (based upon
the purchase price paid to the Company's stockholders in the
Transaction), which payment may at the option of such participant be used
to purchase shares of the common stock of the Company that the Offering
Group intends to make available after the closing of the Transaction
(which shares are included in the approximate aggregate 12% made
available to employees as discussed below), or (iii) continue that
investment in Company stock after the closing of the Transaction as part
of the approximate aggregate 12% to be made available to employees. After
the closing of the Transaction, future deferrals under the DCP will only
be invested in the insurance mutual fund alternatives under the DCP.
- Capital Appreciation Plan (401(k)). For legal reasons, it is impractical
for the Company's 401(k) plan to hold stock of a private company.
However, we will purchase all of the stock held in that plan at the price
paid to the Company's stockholders in the Transaction and permit
participants to invest the proceeds in any of the other funds available
under the 401(k) plan.
- Stock Options and Equity Incentive Plan Awards. Each outstanding employee
option and equity incentive plan award will be purchased for a cash
amount equal to the difference between the price paid to the Company's
stockholders in the Transaction and such option's exercise price or such
award's purchase price, which amount may be used to purchase part of the
approximate aggregate 12% to be made available to employees.
- Stock Ownership in the New Private Company. We will make available up to
approximately 12% of the outstanding common stock of the Company for
purchase by employees at a purchase price equal to the price paid to the
Company's stockholders in the Transaction.
We also intend to maintain the Company's training and performance
recognition programs for its sales professionals going forward, including CBRE
University, the annual recognition event and the Las Vegas World Conference.
<PAGE> 40
CUSIP No. 12489L108
CB Richard Ellis Services, Inc.
November 10, 2000
In addition, we intend to enter into agreements with certain members of
senior management of the Company allowing them to purchase, and to receive
options to purchase, common stock of the Company. We also anticipate entering
into employment agreements with certain members of senior management of the
Company.
Legal Documentation/Conditions
The Proposal is subject to the following conditions: (i) approval by the
board of directors of the Company and stockholders pursuant to the requirements
of the Delaware General Corporate Law and the rules of the New York Stock
Exchange, (ii) receipt of any material governmental and third party approvals
(including expiration of all applicable waiting periods under
Hart-Scott-Rodino), (iii) receipt of consents from the holders of a majority of
the outstanding 8-7/8% Senior Subordinated Notes as described above, (iv)
receipt of the necessary debt financing as described above and (v) the
negotiation and execution of definitive agreements providing for the merger and
the transactions outlined in Exhibit A to this letter, including a mutually
satisfactory definitive merger agreement which would contain customary
covenants, representations, warranties, conditions and other provisions. While
we have devoted a great deal of time and effort to studying the Company and have
completed substantially all of our business and financial due diligence, our
Proposal is also subject to completion of confirmatory legal due diligence to be
conducted by BLUM and its legal advisors. Given the familiarity of BLUM with the
Company, this diligence would be completed expeditiously and should not delay
consummation of a definitive merger agreement.
Our Proposal is based on our understanding that the Company's
capitalization consists of: (i) 21,213,928 common shares issued and outstanding,
(ii) 1,345,587 "phantom shares" outstanding under the Company's Deferred
Compensation Plan, (iii) 902,918 options to purchase common stock outstanding
that have exercise prices at or below $15.50 per share with an unweighted
average exercise price of $5.81 and (iv) 2,439,299 additional options and
warrants outstanding with exercise prices in excess of $15.50 per share.
We are prepared to negotiate a definitive merger agreement immediately
and would be delighted to provide a draft of such agreement at your request. If
the Company determines to promptly accept our Proposal, the Transaction could be
completed as early as February 2001.
<PAGE> 41
CUSIP No. 12489L108
CB Richard Ellis Services, Inc.
November 10, 2000
* * *
We believe the Board of Directors should feel confident that this
Proposal represents a fair and attractive price for the Company. The Proposal
provides liquidity at a significant premium for the current stockholders. We
have no intention of attempting to acquire the Company other than in a
transaction approved by the Board of Directors. Unless earlier accepted, the
Proposal will terminate at 5:00 PM (PST) on December 1, 2000.
We are prepared to discuss this offer with you immediately. In
responding to us or in seeking further information concerning our Proposal, or
for any other matter, please call Claus Moller, Managing Partner, BLUM Capital
Partners, L.P. at 415-288-7262 or 212-521-4192.
Sincerely yours,
BLUM CB CORP.
By: /s/ Claus J. Moller
-----------------------
Name: Claus J. Moller
Title: President
<PAGE> 42
CUSIP No. 12489L108
EXHIBIT A
See Exhibit A of Schedule 13D
<PAGE> 43
CUSIP No. 12489L108
Exhibit C
BLUM CB CORP.
C/O BLUM CAPITAL PARTNERS, L.P.
909 MONTGOMERY STREET, SUITE 400
SAN FRANCISCO, CALIFORNIA 94133
(415) 434-1111
December 1, 2000
Board of Directors
CB Richard Ellis Services, Inc.
200 North Sepulveda Boulevard
El Segundo, California 90245-4380
Attention: Stan Anderson and Paul Leach
Dear Sirs:
Reference is made to our letter to you dated November 10, 2000 containing
a proposal by the undersigned (the "PROPOSAL") to purchase all of the common
stock of CB Richard Ellis Services, Inc. not owned by the offering group
identified therein for consideration of $15.50 in cash per share (the
"TRANSACTION") on the terms and subject to the conditions set forth therein. We
hereby extend the Proposal until 5:00 p.m., San Francisco time, on December 31,
2000, after which time, unless earlier accepted, we reserve the right to
terminate the Proposal at any time. Other than this extension, the terms and
conditions of the Proposal remain the same. Please contact Claus J. Moller
(415-288-7262 or 212-521-4190) to respond to our offer, or if you or your
counsel require any additional information.
We look forward to discussing our offer with you as soon as possible and
entering into a definitive merger agreement and consummating the Transaction on
an expedited basis.
Sincerely yours,
BLUM CB CORP.
By: /s/ Claus J. Moller
---------------------
Name: Claus J. Moller
Title: President
